EFTA01479719.pdf

Deutsche Bank Corporate Banking & Securities Customized Loan Exposure through CLOs Deutsche Bank Market Overview Chris D'Auria Co-Head of CLO New Issue EFTA01479719 Disclaimer The information herein is believed to be reliable and has been obtained from sources believed to be reliable, but we make no representation or warranty, express or implied, with respect to the fairness, correctness, accuracy, reasonableness or completeness of such information. In addition we have no obligation to update, modify or amend this communication or to otherwise notify a recipient in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. We are not acting and do not purport to act in any way as an advisor or in a fiduciary capacity. We therefore strongly suggest that recipients seek their own independent advice in relation to any investment, financial, legal, tax, accounting or regulatory issues discussed herein. Analyses and opinions contained herein may be based on assumptions that if altered can change the analyses or opinions expressed. Nothing contained herein shall constitute any representation or warranty as to future performance of any financial instrument, credit, currency rate or other market or economic measure. Furthermore, past performance is not necessarily indicative of future results. This communication is provided for information purposes only. It is not an offer to sell, or a solicitation of an offer to buy, any security, nor to enter into any agreement or contract with Deutsche Bank AG or any affiliates. Any offering or potential transaction that may be related to the subject matter of this communication will be made pursuant to separate and distinct documentation and in such case the information contained herein will be superseded in its entirety by such documentation in final form. Securities and investment banking activities in the United States are performed by Deutsche Bank Securities Inc., member NYSE, FINRA and SIPC, and its broker-dealer affiliates. Lending and other commercial banking activities in the United States are performed by Deutsche Bank AG, and its banking affiliates. This communication and the information contained herein is confidential and may not be reproduced or distributed in whole or in part without our prior written consent. 0 2012 Deutsche Bank AG Deutsche Bank Corporate Banking & Securities 2 EFTA01479720 Contents Section 1 Overview 2 Leveraged Loan Overview 3 CLO Overview 4 Creating a CLO 5 8 14 25 Appendix I Modeling Assumptions 29 Deutsche Bank Corporate Banking & Securities EFTA01479721 Deutsche Bank Corporate Banking & Securities Overview Section 1 EFTA01479722 Executive Summary IIDeutsche Bank Securities Inc ("DB") is pleased to provide an overview of the Collateralized Loan Obligation ("CLO") market opportunity IIBank loans strategies have grown in popularity due to the unique features of the loan asset class (ie: senior secured status, attractive cash coupons and floating rate) IIAt present, these assets yield roughly 4-6%, with inherent downside protection arising from senior security. attractive risk-adjusted return IISome investors access loans on an unlevered basis through products such as mutual funds IIOther investors recognize that the yield and stability of bank loans offer a prime opportunity to apply leverage to generate higher absolute returns IIExperience shows that term, non-recourse, non-mark-to-market financing is the most secure way to leverage these assets IIThe most established method of attaining this type of leverage is via a structured financing or CLO structure, which has been employed for securitizing loans since the early 1990s IICLOs have performed well through the downturn delivering at least double digit returns in most cases(1)(2) IICLOs have gone from a niche part of the market to an accepted asset class for investors seeking risk adjusted returns and yield with an investment thesis which fits the current economic market and environment. As such, loans offer an Deutsche Bank Corporate Banking & Securities (1) Past performance is not indicative of future results. DB is not making any representation as to the profitability of any financial instrument or economic measure. Assumptions, opinions and estimates expressed constitute our judgment as of the date of this material and are subject to change without notice. An investment in this type of transaction may result in the loss of your entire investment. (2) Based on a subset of CLOs arranged by DB 5 EFTA01479723 The CLO Structure and Why it Exists Overview IIIn essence, a CLO is nothing more than a finance company set up to purchase and manage a pool of primarily senior secured bank loans IILike a finance company, the loan assets are financed by raising senior debt and junior capital or equity from investors in the capital markets IISenior debt tranches rated AAA-BB benefit from credit enhancement IIEquity benefits from term-non recourse, non mark-to-market financing rovided by senior tranches p rI All investors benefit from monthly reporting and 3rd party oversight from trustees, rating agencies and accountants IICLO equity can be an attractive alternative for today's market environment — Equity like returns generated by exposure to senior secured bank loans — Target returns of [10-15]%(1) delivered primarily through quarterly distributions — A CLO, by simply following a loss avoidance strategy, will allow term, non - recourse, non mark-to-market leverage to enhance the returns on a loan portfolio — Aggressive company growth, equity multiple growth, or even macro economic growth are not required to generate returns IIInvestors can customize their leverage profile by combining different classes of the CLO's notes Deutsche Bank Corporate Banking & Securities (1) Past performance is not indicative of future results. DB is not making any representation as to the profitability of any financial instrument or economic measure. Assumptions, opinions and estimates expressed constitute our judgment as of the date of this material and are subject to change without notice. An investment in this type of transaction may result in the loss of your entire investment. 6 EFTA01479724 Deutsche Bank Corporate Banking & Securities Leveraged Loan Overview Section 2 EFTA01479725 Loans — A Unique Asset Class Corporate Capital Structure Senior Secured Loans / Revolving Credit Facility Senior Secured Loans ■ The most senior debt obligation in the capital structure of non-investment grade companies, explicitly secured by claims on the company's assets to provide superior rights in the event of default Senior Unsecured Bonds ■ Interest is paid prior to bond coupons and stock dividends ■ Covenants can preserve cash to protect against credit deterioration ■ Generally shorter maturity than bonds ■ Benefit from — Floating rates — LIBOR floors ■ Over the long term, historical recovery rates have been 70% for senior secured loans Trailing 12-Month Recovery Rate 100 Subordinated Bonds Equity 10 20 30 40 50 60 70 80 90 0 US Senior Secured Loans US Senior Unsecured Bonds All Subordinated Bonds Deutsche Bank Corporate Banking & Securities Source: Moody's Monthly Default Report, Jan 2014 8 Feb-01 Jul-01 Dec-01 May-02 Oct-02 Mar-03 Aug-03 Jan-04 Jun-04 Nov-04 Apr-05 Sep-05 EFTA01479726 Feb-06 Jul-06 Dec -06 May-07 Oct -07 Mar -08 Aug-08 Jan-09 Jun-09 Nov -09 Apr -10 Sep -10 Feb-11 Jul-11 Dec -11 May-12 Oct -12 Mar -13 Aug-13 Jan-14 EFTA01479727 Large, Recognizable Companies Issuing Loans Deutsche Bank Corporate Banking & Securities 9 EFTA01479728 Active and Transparent Markets for Loan Collateral IILeveraged loans trade actively across the investment banks Deutsche Bank Corporate Banking & Securities 10 EFTA01479729 Speculative Grade Defaults (US Trailing 12-month Issuer-Weighted) IISpeculative grade defaults have dropped to near historical lows, and are projected to remain low based on positive fundamentals and technicals Moody's Default Rate (Quarterly)(1) 10.00% 12.00% 14.00% 16.00% 0.00% 2.00% 4.00% 6.00% 8.00% Moody's Default Rate (Quarterly) US Baseline Forecast Deutsche Bank Corporate Banking & Securities (1) Source: Moody's Monthly Default Report — Jan 2014 11 EFTA01479730 Corporate Balance Sheets Have Been Bolstered in Recent Years IIThe chart below shows the maturity wall as it appeared at the end of 2012 and 2014 as of 2/7 IIA substantial portion of the maturity wall has been refinanced and pushed out past 2016 U.S. Maturity Wall based on S&P LSTA Leveraged Loan Index — 2012 vs. 2014 $250 2014 as of 2/7 2012 YE $200 $150 $100 $50 $0 2014 Deutsche Bank Corporate Banking & Securities 2015 2016 2017 Source: S&P LLI Index Maturity Breakdown on February 7, 2014 2018 2019 2020 2021 2022 12 Billions EFTA01479731 Deutsche Bank Corporate Banking & Securities CLO Overview Section 3 EFTA01479732 Demystifying CLOs Collateral I Senior Secured Loans to [BB / B] rated corps Product Inception I Early 1990's Performance of Equity Classes I 17.5% average IRR on DB arranged US CLO equity (arranged between 2004 and 1st half 2007) 1 130% - 197% of dividends to equity holders Ratings Stability of Debt Classes I 79% of AAAs maintained rating of AA- or better (2005 - 2007 vintage) (2) Performance through the Crisis Diversification I Only six transactions out of the 650 US cash-flow CLOs outstanding in mid 2008 actually experienced events of default (three of which were subsequently cured) (2) II No losses for investors holding notes rated A and above(3) (4) —100 - 150 credits across 20 - 30 industries Transparency and Reporting Loans traded and priced Trustee reports with detailed collateral data Deutsche Bank Corporate Banking & Securities (1) Past performance is not indicative of future results. DB is not making any representation as to the profitability of any financial instrument or economic measure. Assumptions, opinions and estimates expressed constitute our judgment as of the date of this material and are subject to change without notice. An investment in this type of transaction may result in the loss of your entire investment. Based on a Subset of DB arranged CLOs. (2) US CLOs Benefit from improved Corporate Credit and Strengthened Deal Structures, Moody's, Sep 12, 2011. (3) Moody's and LSTA — Risk Retention and its Impact on CLOs via SEC. June 13, 2011. http://www.sec.gov/comments/s7-14-11/s71411-65.pdf. (4) "Collateral Crises" — Gary Norton, FDIC. http://www.fdic.gov/bank/- analytical/cfr/2011/sept/Gorton_Presentation.pdf 14 EFTA01479733 CLO - Simple and Transparent Structure Used Since Early 1990s IIIn essence, a CLO is nothing more than a finance company set up to purchase and manage a pool of primarily senior secured bank loans IILike a finance company, the loan assets are financed by raising senior debt and junior capital or equity from investors in the capital markets Senior debt tranches rated AAA — BB benefit from credit enhancement IIEquity benefits from term-non recourse, non mark-to-market financing rovided by senior tranches p rI All investors benefit from monthly reporting and 3rd party oversight from trustees, ratings agencies and accountants Assets Securitization Structure Liabilities $400 mm Asset Pool Collateral Manager Collateral Manager Portfolio 90% -100% Bank Loans Rated BB/B L + 325 - 425 coupon Initial Rating Ongoing Monitoring R Rating ating Agencies Deutsche Bank Corporate Banking & Securities Trustee Trustee Accountants Monitoring Function BBB 5% BB 4% B 2% Equity 8% 15 Periodic Audits AA 14% A 7% L + 220 bps L + 310 bps L + 415 bps L + 625 bps L + 725 bps EFTA01479734 Management CLO Issuer AAA 60% L + 158 bps Weighted Avg. Cost of Debt: L + 225bps EFTA01479735 CLO Issuance from 1999 to 2007 I Consolidation and regulatory change throughout the 1990's and 2000's caused the loan market to shift from a bank dominated market to a market where CLOs play a key role. CLO Issuance from 1999 — 2007 120 100 80 60 40 20 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 Deutsche Bank Corporate Banking & Securities Source: S&P LCD CLO Activity as of Feb 2014. S&P CLO Databank as of Feb 2014 CLO issuance for March 2008 excludes 3 Market Value vehicles restructured to cash flow. 16 Issuance ($bns) EFTA01479736 CLO Collateral Performance during the Crisis(1) CLO Managers Outperform with Lower Defaults 0% 2% 4% 6% 8% 10% 12% U.S. CLO Managed Defaults U.S. Loan Index Defaults 111% 114% 117% 120% 123% 126% 129% 132% CLO Senior OC Levels - Median CLO Caa Bucket Levels CLO WARF Levels 10.0% 12.0% 14.0% 0.0% 2.0% 4.0% 6.0% 8.0% 2200 2300 2400 2500 2600 2700 2800 2900 Deutsche Bank Corporate Banking & Securities Source: Moody's Global Structured Finance Collateral Performance Review & S&P LCD LLI Index Default Rates as of Jan 2014 (1) Past performance is not indicative of future results. DB is not making any representation as to the profitability of any financial instrument or economic measure. Assumptions, opinions and estimates expressed constitute our judgment as of the date of this material and are subject to change without notice. An investment in this type of transaction may result in the loss of your entire investment. 17 EFTA01479737 Life to Date Performance of Equity in DB Structured CLOs(1) I1 17.5% average IRR on DB arranged US CLO equity (arranged between 2004 and 1st half 2007) 11 130% - 197% of dividends to equity holders DB Structured CLO Equity Performance (Based on Current Trading Value of Equity)(2) As of January 31, 2014 35% 30% 25% 24.40% 22.10% 18.10% 20% 15% 12.84% 11.22% 10% 8.39% 5% 12.12% 13.37% 17.91% 16.10% 18.97% 17.55% 18.31% 15.79% 18.69% 18.75% 16.50% 16.34% 22.41% 29.65% 0% CLO Issue Date Deutsche Bank Corporate Banking & Securities Source: Intex, DB Trading — As of January 31, 2014. Each bar represents an individual CLO arranged by DB (1) Past performance is not indicative of future results. DB is not making any representation as to the profitability of any financial instrument or economic measure. Assumptions, opinions EFTA01479738 and estimates expressed constitute our judgment as of the date of this material and are subject to change without notice. An investment in this type of transaction may result in the loss of your entire investment. (2) IRRs based on realized cash distributions to equity plus an assumed sale price at the current equity mark to market 18 Life to Date IRR CLO 1 CLO 2 CLO 3 CLO 3 5 CLO 4 CLO 5 CLO 5 CLO 6 CLO 7 CLO 1 CLO 8 CLO 9 CLO 11 CLO 10 CLO 12 CLO 11 CLO 13 CLO 12 CLO 13 CLO 14 CLO 15 CLO 16 CLO 17 CLO 20 CLO 18 CLO 19 CLO 20 CLO 10 CLO 1 EFTA01479739 Post-Crisis CLO Issuance — Investors Recognize the Performance CLO Issuance 2008 - 2014 100 120 20 40 60 80 0 CLO Issuance Projection $97.01 $88.94 $82.60 $50.00 $52.59 $13.33 1 deal 1999 $14.56 1 deal 2000 $9.13 3 2001 $12.14 3 2002 1994 CLOs, Prime Funds, Hedge Funds & HY Funds 17% $12.14 10 2003 $25.49 50 deals 2004 $54.15 70 deals 2005 92 deals 2006 162 deals EFTA01479740 2007 $13.53 25 deals 2008 $0.83 2009 Composition of Buyers in the Leveraged Loan Market Securities Firms 1% Securities Firms 1% $4.05 10 2010 $12.33 28 deals 2011 Q412 118 deals 2012 172 deals 2013 $5.58 11 2014 Foreign/Domestic Banks 5% Finance Companies 1% Insurance Companies 5% Insurance Companies 6% Finance Companies 5% Foreign/Domestic Banks 71% Deutsche Bank Corporate Banking & Securities CLOs, Prime Funds, Hedge Funds & HY Funds 88% Source: S&P LCD CLO Activity as of December 31, 2012, S&P CLO Databank as of February 13, 2014. EFTA01479741 CLO issuance for March 2008 excludes 3 Market Value vehicles restructured to cash flow. 19 Issuance ($bns) EFTA01479742 New Issue CLOs — 2014 vs. 2007 Tranche Subordination Class / Rating A (AAA) B (AA) C (A) D (BBB) E (BB) Feb 2014 Deal 38.2% 25.8% 17.7% 12.2% 7.8% 2007 Deal 31.5% 24.0% 18.0% 13.0% 8.0% Covenant Non-Call Period Reinvestment Period Final Maturity Time Between Pricing and Closing Deal Specifics 2014 Range —2 years 4— 5 years 11 — 12 years 4 — 6 weeks 2007 Averages 3 — 5 years 6 — 7 years 14 - 16 years 4 — 6 weeks Deutsche Bank Corporate Banking & Securities Source: S&P LCD CLO Databank 2013 deal subordination refers to Ares XXVI which priced on March 1, 2013. 2007 deal subordination refers to Ares XII which priced in Fall of 2007. 20 EFTA01479743 Default Rates Moody's Default Rate (Quarterly)(1) 16.00% Moody's Default Rate (Quarterly) 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% US Baseline Forecast Deutsche Bank Corporate Banking & Securities (1) Source: Moody's Monthly Default Report — Jan 2014 21 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 EFTA01479744 Jan-11 May-11 Sep -11 Jan-12 May -12 Sep -12 Jan-13 May -13 Sep -13 Jan-14 May -14 Sep -14 Jan-15 EFTA01479745 CLO Assets: New Issue Loan Spreads I New Issue Loan Spreads are Relatively Wide S&P LCD New Issue B+/B Spreads(1) L+200 L+250 L+300 L+350 L+400 L+450 L+500 L+550 L+600 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Deutsche Bank Corporate Banking & Securities (1) Source: Standard & Poor's LCD Lending Quarterly 04-13. 22 EFTA01479746 CLO Funding: AAA CLO Spreads AAA Spreads L+100 L+110 L+120 L+130 L+140 L+150 L+160 L+170 L+164 L+160 L+152 L+150 L+147 L+142 L+132 L+125 L+134 L+125 L+116 L+132 L+152 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Deutsche Bank Corporate Banking & Securities Source: S&P LCD CLO Activity as of February 13, 2014. S&P CLO Databank as of February 13, 2014. 23 EFTA01479747 Deutsche Bank Corporate Banking & Securities Creating a CLO Section 4 EFTA01479748 Keys for Strategic CLO Equity Investors Investment Goals IIDesired Tenor / min non call period IIDesired leverage / risk return profile Portfolio / Structure Selection Portfolio / Structure Selection IIDesired borrower base /distribution- broadly syndicated vs. middle market loans I Industry and sector allocations I Portfolio diversification I Manager portfolio management style I Ability to reprice and or refinance liabilities Manager Selection Manager Selection Track record of delivering for equity investors Manager reputation with CLO debt investors Manager's experience and skill working within the CLO structure Manager's access to new issue assets Manager's ability to warehouse or work with trading desk to source assets CLOs and strategic investors are important to the manager Deutsche Bank Corporate Banking & Securities 25 EFTA01479749 Sample $400mm Broadly Syndicated CLO — Summary Capital Structure Class of Notes Class A Notes Class B Notes Class C Notes Class D Notes Class E Notes Class F Notes Equity TOTAL Initial Portfolio Assumptions 1st Lien Senior Secured Loans (%) 2nd Lien / Senior Unsecured Loans Senior Secured / Unsecured Bonds WAL WARF Diversity Weighted Average Spread Portfolio Price Deutsche Bank Corporate Banking & Securities Target(4) [98.5]% [1.5]% N/A [5.9] years [2650] [65] [3.95]%(5) [100.4]% (1) WAL calculated based on a 20% CPR, 0% CADR and run to maturity with reinvestments into 5.5-yr bullet maturity assets (2) From the Closing Date (3) Prepayments and sale proceeds from credit risk assets may be reinvested after the end of the Reinvestment Period, subject to certain conditions (4) Targeted levels are the expected Effective Date levels only and no representation is made that these targeted levels will equal the actual characteristics on the Effective Date (5) Excludes LIBOR Floors (6) 20% of cashflows over 12% IRR hurdle 26 [8.0] years [2700] [60] [3.90]% Rating (S&P/Moody's) [AAA]/[Aaa] [AA]/[A]/IBBB1/IBB1/[B1/NR EFTA01479750 Size($) [249,000,000] [55,000,000] [28,000,000] [20,750,000] [18,250,000] [6,400,000] [36,460,000] [413,860,000] Test Min. [90.0%] Max. [10.0%] Reinvestment Period(2)(3) Legal Final Maturity(2) Expected Ramp—Up Period(2) Payment Frequency Senior/Junior/Incentive Management Fees per annum [4.1] years [12.1] years [3] months [Quarterly] [0.20% / 0.25% /20%(6)] Size (%) [60.0]% [13.3]% [6.7]% [5.0]% [4.4]% [1.5]% [9.1]% [100.01% Transaction Assumptions(2) Expected Closing Non-Call Period(2) WAL (yrs)(1) [6.3] [7.41 [7.51 [8.11 [8.61 [8.91 N/A Coupon L + [1.50]% L + [2.00]% L + [2.80]% L + [3.50]% L + [4.85]% EFTA01479751 L + [5.55]% N/A L + [2.01]% Yield L + [1.58]% L + [2.20]% L + [3.10]% L + [4.15]% L + [6.25]% L + [7.25]% N/A L + [2.25]% Q1,2014 [2.1] years EFTA01479752 Sample BSL CLO — Equity Return Profile 20% Equity Returns Under 6 Year Call Scenario 15% 10% 5% 0% 0% -5% Per Annum Default Rate -10% Equity Returns Call Year Call at 4.0 Call at 5.0 Call at 6.0 Call at 7.0 Run till Maturity Deutsche Bank Corporate Banking & Securities 0.00% [14.5]% [16.0]% [16.8]% [16.5]% [15.3]% 1.00% [12.1]% Constant Annual Default Rate 2.00% [9.1]% [13.8]% [11.0]% 3.00% [5.7]% [7.6]% [14.6]% [12.0]% [8.5]% [14.3]% [11.7]% [13.2]% [10.4]% [8.1]% [6.5]% 4.00% [2.0]% [3.7]% [4.3]% [3.3]% [0.61% 5.00% 6.00% [-2.1]% [-6.7]% [-0.91% [-6.2]% [-0.81% [-6.9]% EFTA01479753 [-2.6]% [-10.1]% [-7.1]% [-18.0]% See Appendix for Modeling Assumptions (1) Past performance is not indicative of future results. DB is not making any representation as to the profitability of any financial instrument or economic measure. Assumptions, opinions and estimates expressed constitute our judgment as of the date of this material and are subject to change without notice. An investment in this type of transaction may result in the loss of your entire investment. 27 1% 2% 3% 4% 5% 6% IRR EFTA01479754 Deutsche Bank Corporate Banking & Securities Modeling Assumptions Appendix I EFTA01479755 Certain BSL Modeling Assumptions The targets, models and analyses contained herein are based on certain assumptions as to future events and conditions that are inherently uncertain, unpredictable and subject to substantial change. No representation is made by DB, the manager or any other person as to the reasonableness of the targets, models, analysis or assumptions contained herein. Furthermore, no representation is made as to, and investors should not rely on, the targets, models, analysis or assumptions provided herein as indicative of the actual performance of a CLO transaction. Actual results will vary, perhaps materially, from the targets, models, analysis and assumptions contained herein. Investors should consider the targets, models, analysis and information presented here in light of the underlying assumptions contained herein to reach their own conclusions as to the reasonableness of those assumptions and to evaluate the targets, models and analysis on the basis of those considerations. There is no assurance that all assumptions have been considered. Changes to and/or consideration of different or additional assumptions could have a material impact on the results indicated. Certain of the assumptions are as follows: a) [70]% recovery for senior secured 1st lien loans and [40]% recovery for 2nd lien loans. b) The initial target portfolio consists of [98.4]% senior secured first lien term loans, [1.6]% 2nd lien loans ([100.0]% floating-rate assets). c) Reinvestments in additional collateral during the reinvestment period are assumed to consist of [95.0]% 1st lien loans and [5.0]% 2nd lien loans with an average [3.75]% / [7.50]% spread, [1.00]% floor an d [99.50]% purchase price. d) After the end of the reinvestment period, prepayments are reinvested in additional collateral with the same characteristics as above in (c) with a WAL that is equal to or less than the WAL of the assets which prepaid. e) All reinvestments are assumed to be in [5.5]-year bullet maturity loans as long as WAL test ([8.0] years) is satisfied. Once WAL test limit is no longer satisfied, reinvestments are made in loans that maintain compliance with this test until the maturity date of such loans is less than [2.0] years, at which point all reinvestments are halted. An additional constraint prevents loans from having a maturity date beyond the legal final of the transaction. f) The portfolio is assumed to be [50]% ramped-up at closing (fully ramped within the first [3] months assuming a linear ramp). g) Annual management fees: Senior management fee: Subordinated management fee: Incentive management fee: [15]bps [30]bps EFTA01479756 [20]% of equity cashflows over a realized IRR hurdle of [12]% h) Assumed on-going annual administrative fees and expenses: [2]bps plus $[250,000] (administrative expenses cap). i) 1) Forward Libor curve as of [26-Feb-2014] close (1st period Libor of [0.2489]%). CADR stands for "Constant Annual Default Rate." The principal amount of defaulted obligations in any quarterly collection period is assumed to equal one-fourth of the stated CADR multiplied by the beginning balance of collateral. k) CPR stands for "Constant Prepayment Rate." The principal amount of prepayments in any quarterly collection period is assumed to equal one- fourth of the stated CPR multiplied by the ending balance of collateral (without regard to such prepayments). l) CPR of floating-rate collateral obligations is assumed to be [25]% per annum. Assets are assumed to prepay at par. m) Assumed [6] month default holiday on both initial and reinvested assets. Assumed instantaneous recoveries. n) Assets are assumed to be called at par. o) The floating rate assets within the target portfolio ramped as of the Effective Date are assumed to have the following Libor floor distribution: No Libor floor 0.75% Libor floor 1.00% Libor floor 1.25% Libor floor 1.50% Libor floor 1.75% Libor floor Deutsche Bank Corporate Banking & Securities [3.6]% [9.5]% [66.1]% [17.3]% [2.6]% [1.0]% p) Additional assumptions are available upon request. 29 EFTA01479757