EFTA Document EFTA01454215

Asset Allocation Advantage Compare a private placement portfolio that's diversified and one with only asset classes for the highest tax exemption multiples (TEMs) Asset Location Stategy Dilletence in Futile Values (S) Yen S 10 IdennailAketion n Pnete Pia went 1936.68174 5.4973656 11.344.4822 20292.400 Asset Nueva Wit TEM in ribytePixement 1904.459.*, 1232233501 30)69173J 62%01519 ASSUITTOCITS. • Itttle 171 Caplal gags lax ci tot VC,: cupw gauf tan cl (9%. ace in:or:etas kw 'ate> :enan • AS52I elms (teemand Istnew assucitAcns Into] n Class Assail:66(6as] Tax Cvteral Benda; a. 11 • An nitil Wise al 160 rata% ?A in a viral° olmelnern ble insuwnee (RAI)Ctettic rid /A in a wade mita°. • Assets are 'x telmaied [Hawn theKil and iamb% po4s ever the intal asset Axiom • letal awl allxition: US. live (ac Secar 70.25%. US SratetapEoutly18%. Etoopean runty IC.BA.spanese Wady 2.17). Paoli( X-/ftin Sealy 225%. Eirevsa casy S.86%.74.1w(crekrilstRunopels1/49%, H4e.Yeld 8445 la imager; Nalcel 84451.7%.1rosune tntlation litcteteU Steutoes LE'S. Me4. re oral wee fan.% SA%. Diagonal Hedge limas 3.6%. Rwie (elute 4%. Real (stale %%reamer( arts 6%. (tatne4to. la dila (»lila — Deutsche Asset k Wealth Management carrier's platform. A disadvantage is that the advisor would have to get the IDF added to the carrier's platform. In addition, the administrative costs of the custom 1DF usually make this approach feasible only at levels over $20 million. And, if the investor elects to allow others to invest in his IDF, it could limit his ability to change the mandate. As with any discussion of private placement, we should pause to consider the investor control doctrine. While an investor can design the broad allocation. select specific asset classes or themes for focus and even hire a specific manager, the investor should be certain not to participate (directly or indirectly) in security selection. Bottom Line It's broadly accepted in the wealth management and financial planning communities that certain asset class- es offer a greater benefit from the tax deferral or tax-exemption features of private placement insurance vehicles. We've explored how best to measure the rela- tive long-term tax deferral benefit of various asset classes and, in the process, have debunked some broadly held misconceptions. The TDM or TEM, is perhaps the best measure of tax deferral benefit. It incorporates return, turnover and the compounding effect of tax deferral when comparing asset classes. It can be used to execute a variety of asset location strategies, each of which has its own advantages and disadvantages. As with all investments, execution is key. We shown several ways to build and execute an optimal private place- ment portfolio. In all cases, it's essential that an investor partner with an advisor with specific expertise in private placement structures, asset location and proven invest- ment acumen to ensure that the portfolio is constructed with the goal of achieving the maximum future value. —This article is meant to serve as an overview, and is provided for informational purposes only. It does not take into consideration the recipient's specific circumstance and is not intended to be an offer or solicitation. or the basis for any contract to purchase or sell any security, or other instrument or service. or for Deutsche Bank Trust Company Americas ("DBTCA, to enter into or arrange any type of transaction as a consequence of any informa- tion contained herein. Deutsche Bank does not provide tax, legal or accounting advice. Endnotes 1 See eg, Edward FieleY and Michael litheskind, ' Pivate Matement Vari- atle Amities.' lfusls & Estates (December 20121. atoll Hie (ohn and Edikaid 1. Finey It 'An ktedors Guile to Wen (ash Value Life Insurance' Tracts & Estates (knuay 2014), at p14 2. RE a Awn/chile general tiegnpwft see Ckeed. "(Chaim Asset Alloca. inn Between Tax-Detene4lac-bempt and %fable Accounts." Aug. 28.2013 24 TRUSTS & ESTATES t (int SandeStateS.COM CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) CONFIDENTIAL JUNE 2014 DB-SONY-0112199 SDNY_GM_00258383 EFTA01454215