EFTA01455447.pdf

Hedge fund portfolio leverage Area of expertise: Structured finance and lending Theme: Structural solutions Overview — Portfolio of diversified hedge fund shares serves as collateral for a leverage facility — Additional capital through leverage boosts investor returns and allows for flexibility of capital deployment — Risks: leverage may enhance losses and covenant breaches may result in the sale of the portfolio Financing Costs Typical financing terms Client'. — Diversified across strategies Drawn Amount °. Portfolio — 20+ individual managers — >$50mm aggregate AUM DB takes — 10-50% LTV (typical notional is $20mm+, with pledge Loan to Value capacity at $1bn) over Custody Funded Fund Investments Account er. Aar .‘or — —I• Custodian — Variable funding note (VFN) — Usually structured as a minimum usage facility 1 ; ' (-80% of total size) Custody Account Structure — If the outstanding borrowing amount is less — Flexible drawdown and repayment — cash movement usually within 2 than the minimum usage threshold, the business days of notice borrower must make whole on the minimum — Collateral for the facility is typically secured through a pledge of the amount Custody Account. No need for transfers or change of ownership of underlying fund shares, thus retaining original investment (e.g. fees, — 3M Libor +250bps (on the greater of the lockups, high watermarks) outstanding borrowing and the minimum — Dynamic haircutting process allows our clients to maintain a more flexible usage), depending on characteristics of the investment process. Haircut will be based on pre-agreed investment Pricing portfolio and creditworthiness of the borrower guidelines — Either undrawn fee or minimum usage — Investment guidelines are easily quantifiable rules and are set based on — Upfront structuring fee concentration limits, strategy diversification and liquidity profile Deutsche Asset & Wealth Management For Internal Use Only 23 CONFIDENTIAL — PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0114212 CONFIDENTIAL SDNY_GM_00260396 EFTA01455447