EFTA Document EFTA01455447

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