EFTA01197268.pdf

From: Tazia Smith To: jeevacationggmail.com Cc: Joe Hall , Paul Morris Vahe Ste , Vinit Sahni , Nay Gupta Subject: Consider: 510-15mm Total Return Swap on Cash Return On Capital Invested (CROCI), 3mL+85bps [C] Date: Tue, 08 Apr 2014 17:42:53 +0000 Attachments: FINAL I-34272-1_slimCROCI 12-31-13.pdf Inline-Images: unnamed; unnamed(1); unnamed(2); unnamed(3) Classification: Confidential " Prepared exclusively for Jeffrey Epstein, Key Client Partners (KCP) • " Jeffrey - Globally you are seeing the rotation from high-beta, small cap and growth stocks into large-cap value. This is inline with your early call for us to pull out a concentrated five names. Entry point here. Instead of those single stocks, consider a $10-15mm total return swap on Cash Return On Capital Invested (CROCI) index. Specifically, the CROCI sub-index focused on dividend paying/dividend-growing US equities. I've included my colleague, Joe Hall, who sits on the CROCI team and will gladly detail this stock-selection strategy with you directly at any point. Full presentation is attached, a few key points here: • Achieve benefits of active valuation for passive price • Bottoms-up valuation - DB CROCI Analyst team (60 people globally) assess each company in its global universe (800 stocks) from an Economic PE perspective, adjusting balance sheets to reconcile operating cash flow across sectors for comparable stock-valuation • Quantitative selection - stocks selected each month based on the lowest price-to-operating-earnings ratio, based on their valuation metrics (above) • Stock universe is ex-financials • Re-sets monthly • Transparent - pull up the CROCI indices on Bloomberg for mark-to-market (ex: DBUSSDUT = CROCI US Dividends) • Implementation can be customized via a separately managed account (SMA) of single stocks • Tax-efficient, liquid, levered exposure can be achieved via total-return swap (TRS) • 10 principal indices in the CROCI family: US, UK, Japan, Germany, Euro, World, World Ex-Japan, Sectors III, Global Dividends and US Dividends • CROCI Dividends targets companies with sustainable dividends AND attractive valuations (performance below and p 7 of the attached) Long only - TRS on CROCI US Dividends (DBUSSDUT): Underlying: CROCI Div (DBUSSDUT) Client Pays: 3mLibor + 0.85% Notional compounded quarterly Client Rcvs: Notional x [Final/Initial - 1] Initial Margin: 20% EFTA01197268 Long/short US Only - Long CROCI US Dividends vs. Short S&P 500 (two swaps): Underlying: CROCI Div (DBUSSDUT) and S&P 500 (SPTR) Client Pays: [SPTR Perf - (3mLibor + 0.20% I.)] x Notional Client Rcvs: [DBUSSDUT Perf - (3mLibor + 0.80% IMI.)] x Notional Initial Margin: 20% Index Perf = [(Final/Initial - 1)] Indicative levels as of 4/8/14. Source: DB GM Equity Derivatives. ' (Enterprise Value/Net Capital Invested)/(Cash Return on Capital Invested) 5-Year History of CROCI US DIVIDENDS vs. S&P 500 Inedex (source: Bloomberg. as of close 4/7/14) Used with permission of Bloomberg Finance LP EFTA01197269 Index performance since live date vs. benchmark indices Cl as of 1/31/14 Excess Index live Cumulative Compounded CROCI Index Benchmark index annualised date' growth annual growth retum2 US S&P 500 Index 7R 2/1/04 151.4% 9.7% 2.9 Euro EuroSTOXX 50 TR 2/1/04 102.6% 7.3% 3.7 Japan TOPIX 100 TR 2/1/04 42.7% 3.6% lA World USD MSCI World USD Net TR Index 11/25/10 47.9% 13.1% 2.0 Sectors III USD MSCI World USD Net TR Index 3/31/05 184.8% 12.6% 6.6 Germany DAX Index 7/29/05 123.2% 9.9% 2. UK FTSE 10D TR Index 2/1/07 92.5% 9.8% 5.5 World ex Japan MSCI Kokusai Net USD Index 8/31/10 78.0% 18.3% 3.2% Global Dividends USD MSCI World HDY Net USD Index 3/15/12 28.7% 14.3% 1.7 S&P High Yield Dividend US Dividends Net 5/28/12 43.6% 24.0% 3. Aristocnats TR Index sane: Deutsche Bars and Biccenterg as Cl U3Ina Performance la historical and does not guarantee Mire remits. Indices are &ppm/9day DB AG London. Performance Information for Indices wee not calculate:ley an Independent calanabon agent. Index rains asarne reinvestment of civiciencis rod donor reflect any tees a erpenses It is rot comae to nye& dimly hen index. Ins performance is ro: represertaVe of P4 perrcanan:e any OPM nvestment eara:ew a rnandae. Tors represents pen-mance or tne CROCI Endow. 0DM 4 not a party to Me management or putocalfon or nese molest V,Mie DMA expects to manage InvesOnenlstrateges based on CROCI and nese Me es. MU is not Mended to represent Tklt acv€ty. aeforr.rim of due maims do no: tate It accotn: the effect Cl management tees Ng oner transaGon costs wsn-Xeci ern :he msiagement 'rampant. accent saategy nwenemng me CROCI valuaacn process. These tees and expenses nu reciter an nstrs oven] return. ' index He date retws to Me nit dale Mat CROCI levels Yefe catura:ed ma rip has40.e.. not nacre:Vern, 'Dress annualaci rearn is the difference in me corrpoinclea an groan rate (CAGR) as parOcurar Index and mat alts henchman. U- Tazia Smith Director F Key Client Partners - US DB Securities Inc Deutsche Asset & Wealth Mona ement Paniowto-Perftron, This communication may contain confidential and/or privileged information. If you are not the intended recipient (or have received this communication in error) please notify the sender immediately and destroy this communication. Any unauthorized copying, disclosure or distribution of the material in this communication is strictly forbidden. Deutsche Bank does not render legal or tax advice, and the information contained in this communication should not be regarded as such. EFTA01197270