EFTA01454254.pdf

Stepartia Guptaklbral iv Date: 04/08/2014 01:42 PM Subject Canada: $10-15rnm Total Return Swap on Cash Return On Capital Invested (CROCI), anIASSbps ICI 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 it's 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% p.a.,x Notional compounded quarterly CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0 112254 CONFIDENTIAL SDNY_GM_00258438 EFTA01454254