From: Steven Sinofsky

From: Steven Sinofsky To: Jeffrey Epstein <[email protected]> Subject: Fwd: MSFT risk reduction Date: Fri, 12 Sep 2014 20:23:09 +0000 Attachments: 20140908_Collar.pdf; MSF_Delta_Shi 8_9_8_1 4.pdf What do you think of this approach? 547,515 shares with a cost basis of about 27.50 averaged Forwarded message From: Goodspeed, Matthew X Date: Fri, Sep 12, 2014 at 12:12 PM Subject: MSFT risk reduction To: Steven Sinofsky Cc: "Irwin, Don X" , "Dunn, Ashley P" We investigated quite a few strategies for hedging your MSFT position given your input/preferences. These strategies included (but were not limited to) the following: Long Put A 1 year put option (90% of spot price) cost about 5.8% out of pocket and a 1 year option 80% of spot still required around 3.15%. This seemed expensive to us so we looked for ways to cheapen the cost. Put Spread Collar Selling a 110% call option to help finance a 90% put option results in a more amenable 2.45% out of pocket cost. If you were to sell a put to help fully offset the cost of purchasing the 90% put, the put strike would have to be set at 83%. That limits the total downside protection to only 7% while fully capping upside after 110%. Again, this tradeoff seemed less than amenable. Laddered Strategy After pricing other "options", we developed the following strategy that we recommend you consider. An illustration of this recommendation has been attached above: • Collar 25% of the MSFT position for 1 year by selling a 105% call to finance a 90% put — cost is approximately 1.3% of notional (or $79,598) • Collar 25% of the MSFT position for 1 year by selling a 110% call to finance a 90% put — cost is approximately 2.45% of notional (or $150,012) EFTA00681295 • Collar 25% of the MSFT position for 1 year by selling a 115% call to finance an 85% put — cost is approximately 2.25% of notional (or 137,767) • Write actively-managed covered calls on 25% of the position leaving upside (and downside) uncapped (and unhedged) — anticipated net premiums assuming no change in stock price of 1.94% or $118,302. Please see the second attachment for details. Using the above laddered strategy as our recommended baseline approach, we would welcome any thoughts/feedback. We can then incorporate this feedback to further refine our strategy and recommendations. As always, don't hesitate to call/e-mail with any questions! Best, --goodspeed EFTA00681296