JP Omega Ltd.

Discussion Document

Berlin,

April 8, 2015

JP Omega Ltd.

JP Omega Ltd.

Portfolio Analysis

Franklin Mutual European Fund

Name Franklin 231Currency EURAuM 3.244MioInceptionBenchmark STOXX 600 Europe TR

206

Philippine Brugere-Trelat: USAKatrina Dudley, CFA: USA

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD Bench2015 4,7% 7,5% 2,0% 14,8% 16,8%2014 -0,5% 2,9% -2,5% 0,3% 2,4% -1,5% -3,1% 1,7% -0,2% -2,2% 2,9% -1,4% -1,4% 7,8%

Undervalued stocks 2013 1,9% 0,3% 1,1% 1,7% 3,3% -3,6% 6,2% -0,2% 4,4% 4,4% 1,6% 1,6% 24,8% 21,5%Takeover Arbitrage 2012 3,5% 4,3% -0,2% -1,3% -6,5% 5,3% 3,4% 2,0% 0,9% 1,2% 1,8% 2,7% 18,0% 19,0%Turn-around-situations 2011 2,8% 1,9% -4,0% 2,8% 0,0% -2,2% -3,5% -8,8% -5,4% 7,9% -0,8% 1,8% -8,2% -8,1%Cash 2010 -1,7% 0,3% 6,8% 0,8% -4,0% 1,2% 2,3% -1,7% 1,9% 2,3% -0,7% 4,3% 11,8% 12,2%

2009 -3,0% -6,0% -0,1% 8,9% 3,4% 0,0% 6,8% 4,7% 3,6% -3,5% 0,3% 5,1% 21,0% 33,3%2008 -9,9% -0,2% -3,1% 4,2% 1,7% -10,4% -2,4% 2,3% -8,5% -11,8% -5,7% -1,3% -37,9% -43,4%2007 3,3% -2,2% 3,7% 3,5% 3,5% -0,2% -3,0% -0,3% 0,7% 1,6% -3,1% -0,3% 7,0% 2,8%

Price/Earnings ratio 2006 2,3% 2,6% 2,9% 0,3% -4,3% 0,4% 1,0% 2,7% 1,7% 2,6% 0,3% 4,1% 17,8% 21,3%Book-to-Market 2005 2,0% 3,1% -0,2% -0,5% 4,3% 3,3% 3,1% 0,6% 3,2% -1,6% 2,8% 3,4% 25,9% 27,2%Cashflow-to Market ratio 2004 2,2% 3,7% 0,4% 0,6% -0,7% 2,2% -0,4% -0,3% 0,7% 0,9% 2,6% 1,8% 14,4% 12,7%

2003 -3,8% -4,0% 0,4% 5,8% 2,4% 1,5% 2,7% 3,2% -1,0% 3,8% 1,7% 1,5% 14,7% 17,2%2002 4,1% 1,2% 2,5% 0,2% -1,2% -6,3% -6,6% 0,2% -6,0% 0,0% 0,7% -2,9% -13,7% -30,8%2001#### JP Omega Ltd.

Long-term capital gains through investment in corporations having their headquarter in Europe. Stocks qualify for investment if investment manager considers company as undervalued. The fund is eligible to invest up to 10% of NAV in ex-European countries.

31. Dez 01

Basic Information, Performance Chart & Table Franklin Mutual European FundFund Info Performance & Exposure Chart Start: End:31-Dec-01 31-Mar-15

6,06

http://www.franklintempleton.de/downloadsServlet?docid=hfc2qy0u

1,91%0,62%

Fund Characteristics20,241,28

Investment Philosophy

Fund Management

Portfolio Split89,61%

7,86%

Monthly Returns

0

50

100

150

200

250

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 Dec-14

Franklin Benchmark

Franklin Benchmark Magnitude t-stat Franklin Benchmark

Return comp. ann. 6,5% 5,6% Mean Exc. Return ann. 0,4% 0,22 worst -11,37% -14,06%

Volatility ann. 12,1% 15,6% Tracking Error ann. 6,4% na 2nd worst -11,02% -13,18%

Skewness 0,53 -0,64 Jensen Alpha ann. 1,7% 1,34 3rd worst -10,94% -11,57%

p-value 11% 5% Market Beta 0,72 30,00 4th worst -8,60% -11,03%

Kurtosis 3,16 2,79 5th worst -12,57% -10,29%

p-value 0,8% 0,6% 5th best 1,00% 7,72%

Downside Deviation ann. 13,2% 17,4% 4th best 3,18% 9,41%

Magnitude 46,1% 54,0% 1. Higher annualized compounded return 3rd best 1,50% 9,46%

Peak 31-May-07 31-May-07 2. Lower Volatility 2nd best 9,01% 11,16%

Trough 31-Mar-09 27-Feb-09 3. No significant outperformance: 58,84% Confidence Level best 10,08% 14,52%

Recovery 54 56 4. Positive Skewness of Strategy

5. Lower downside deviation

6. Lower max Drawdown Estimation: Mean (6 months) Stdev (12 months)

Franklin Benchmark 7. Higher Sharpe, Sortino , Calmar Ratio Franklin Benchmark

Sharpe 0,43 0,31 8. Positive Treynor Ratio 0,1% -11,61% -10,83%

Sortino 0,40 0,28 9. Skill: Weakly significant Jensen Alpha: 90,92% CL 1,0% -6,83% -5,92%

Calmar 0,14 0,10 10. No Luck: Returns not generated through excessive exposure. 2,5% -4,89% -4,02%

Treynor 0,5% 11. Performed 4 times better in 5 worst months 5,0% -3,37% -2,59%

Information 0,06 12. Performed 0 times better in 5 best months 10,0% -1,79% -1,12%

Maximum Exp. Gain 7,7% 9,8% 50,0% 2,66% 2,98%

Maximum Exp. Loss -9,8% -9,1% 90,0% 1,22% 1,34%

Gain vs. Loss Ratio 0,79 1,08 95,0% 5,80% 6,25%

Call (Upside) 2,3% 2,6% 97,5% 6,51% 7,17%

Put (Downside) 0,6% 0,5% 99,0% 7,09% 7,99%

Omega 3,77 5,71 99,9% 7,71% 9,01%

JP Omega Ltd.

Confidence Level

Advanced

Traditional

Performance Ratios

Franklin Mutual European Fund

Best/Worst Benchmark vs Strategy

Probabilities for Min. Expected Returns

Best Months

Maximum Drawdown

Worst MonthsReturn and

Moments

Comments & Portfolio Highlights

Excess Returns

Market Model

Absolute Performance Measures Relative Performance Measures

Detailed Performance Measurement - Entire Period

10 Y since 31-Mar-05 5 Y since 31-Mar-10 3 Y since 30-Mar-12 1 Y since 31-Mar-14

Portfolio Franklin Benchmark Franklin Benchmark Franklin Benchmark Franklin Benchmark

Return comp. ann. 6,9% 7,9% 10,2% 12,5% 15,7% 18,8% 13,4% 22,8%

Volatility ann. 12,8% 14,9% 11,2% 11,8% 10,0% 10,0% 10,7% 10,5%

Skewness -0,86 -0,63 -0,50 -0,61 -0,34 -0,32 0,63 0,75

p-value 0% 4% 6% 5% 18% 16% 5% 2%

Kurtosis 1,35 1,78 0,71 1,08 0,53 0,57 0,10 -0,15

p-value 0,9% 0,2% 12,9% 11,3% 20,1% 14,8% 44,6% 43,7%

Downside Deviation ann. 13,8% 16,0% 10,9% 11,1% 7,9% 7,4% 6,2% 3,9%

Magnitude 46,1% 54,0% 19,6% 18,9% 7,7% 7,2% 5,3% 2,1%

Peak 31-May-07 31-May-07 28-Feb-11 31-May-11 30-Mar-12 30-Mar-12 30-May-14 30-May-14

Trough 31-Mar-09 27-Feb-09 30-Sep-11 30-Sep-11 31-May-12 31-May-12 31-Oct-14 31-Jul-14

Recovery (Months) 54 56 14 12 2 2 3 2

Mean Exc. Return ann. -1,3% -2,1% -2,7% -8,1%

t-stat -0,98 -1,43 -1,47 -2,80

Tracking Error ann. 4,1% 3,3% 3,2% 2,9%

Jensen Alpha ann. -0,1% -1,1% -1,8% -7,6%

t-stat -0,09 -0,71 -0,86 -2,17

Market Beta 0,84 0,91 0,95 0,98

t-stat 42,10 25,89 17,49 11,33

Sharpe 0,45 0,48 0,89 1,02 1,50 1,77 1,22 2,01

Sortino 0,43 0,45 0,91 1,08 1,90 2,40 2,12 5,44

Calmar 0,15 0,15 0,52 0,66 2,03 2,61 2,51 10,85

Treynor -1,5% -2,3% -2,9% -8,2%

Information -0,31 -0,64 -0,85 -2,80

Max Gain vs. Loss 0,79 1,08 1,09 1,10 1,25 1,43 4,09 8,41

Omega 3,31 5,06 2,66 3,90 1,87 2,78 1,50 2,28

JP Omega Ltd.

Maximum Drawdown

Return and Moments

Absolute Performance

Measures

Franklin Mutual European FundPerformance Measurement - Subperiods

Relative Performance

Measures

Advanced

Excess Returns

Market Model

Performance Ratios

Traditional

MeanVolatilit

ySkewnes

sKurtosis (Excess)

Call (Upside)

Put (Risk)

Johnson Omega

Comment on Risk-Adjusted Return Characteristics

STOXX EUROPE 600 AUTO & PARTS 3,59% -0,38% 1,20 -1,00 1,74% -1,84% 1,89Excellent attribution in traditional mean-variance sense. Furthermore bending distribution towards upside, while reduction of tail fatness. Overall, massive increase of upside potential and reduction of downside risk.

STOXX EUROPE 600 FINANCIAL SVS 1,66% 0,78% 0,10 -0,21 1,18% -0,47% 0,87Bending distribution towards upside. Reducing 'tail fatness'. Increasing 'upside potential'. Reducing 'downside risk'. Increasing 'Johnson Omega'.

STOXX EUROPE 600 TRAVEL & LEIS 1,61% 0,43% -0,27 0,84 0,99% -0,62% 0,84Bending distribution towards downside. Increasing 'tail fatness'. Increasing 'upside potential'. Reducing 'downside risk'. Increasing 'Johnson Omega'.

STOXX EUROPE 600 MEDIA 1,27% 0,49% 0,07 -1,58 0,93% -0,34% 0,67Massive reduction of tail fatness jointly with distribution bended towards upside controls for increase of volatility. Overall upside potential increases almost by factor 3 in comparison to downside.

STOXX EUROPE 600 RETAIL 1,08% 0,18% 0,01 -0,18 0,65% -0,43% 0,57Bending distribution towards upside. Reducing 'tail fatness'. Increasing 'upside potential'. Reducing 'downside risk'. Increasing 'Johnson Omega'.

STOXX EUROPE 600 CHEMICALS 0,99% 0,44% -0,22 0,13 0,70% -0,29% 0,52Bending distribution towards downside. Increasing 'tail fatness'. Increasing 'upside potential'. Reducing 'downside risk'. Increasing 'Johnson Omega'.

STOXX EUROPE 600 INSURANCE 0,80% 0,48% 0,30 2,56 0,47% -0,33% 0,42Substantial increase of volatility, and massive increase of tail fatness, which is mitigated by a positive impact on skewness (asymmetry).

STOXX EUROPE 600 CON & MAT 0,74% 0,55% 0,30 0,79 0,55% -0,19% 0,39Bending distribution towards upside. Increasing 'tail fatness'. Increasing 'upside potential'. Reducing 'downside risk'. Increasing 'Johnson Omega'.

STOXX EUROPE 600 PERS & H/H GDS 0,73% 0,52% -0,21 0,00 0,60% -0,13% 0,39Bending distribution towards downside. Increasing 'tail fatness'. Increasing 'upside potential'. Reducing 'downside risk'. Increasing 'Johnson Omega'.

STOXX EUROPE 600 TELECOM 0,53% -1,06% -0,20 -1,05 -0,06% -0,60% 0,28Improvement in traditional mean-variance space. Bending distribution towards downside. Reducing 'tail fatness'. Reducing 'upside potential'. Reducing 'downside risk'. Increasing 'Johnson Omega'.

STOXX EUROPE 600 TECHNOLOGY 0,24% 0,00% 0,35 0,37 0,09% -0,15% 0,13Improvement in traditional mean-variance space. Bending distribution towards upside. Increasing 'tail fatness'. Increasing 'upside potential'. Reducing 'downside risk'. Increasing 'Johnson Omega'.

STOXX EUROPE 600 INDS GDS & SVS -0,07% 0,87% -0,46 1,10 0,27% 0,34% -0,04Largest impact on portfolio volatility increase. Furthermore, a fattening tail bended towards the downside. Upside increases, but downside risk increases even more.

STOXX EUROPE 600 HEALTH CARE -0,07% -1,34% -0,24 -0,99 -0,49% -0,42% -0,04Bending distribution towards downside. Reducing 'tail fatness'. Reducing 'upside potential'. Reducing 'downside risk'. Reducing 'Johnson Omega'.

STOXX EUROPE 600 FOOD & BEV -0,14% -0,84% -0,37 -0,84 -0,34% -0,20% -0,08Bending distribution towards downside. Reducing 'tail fatness'. Reducing 'upside potential'. Reducing 'downside risk'. Reducing 'Johnson Omega'.

STOXX EUROPE 600 BANKS -1,68% 0,28% 0,70 2,56 -0,94% 0,73% -0,88Largest increase of tail fatness, albeit bending of distribution towards positive. Strong down-trend and increasing volatility identify portfolio also inferior in traditional Markowitz sense. Upside decreases and vice versa.

STOXX EUROPE 600 UTILITIES -3,10% -0,14% -0,71 0,48 -1,68% 1,41% -1,63Bending distribution towards downside. Increasing 'tail fatness'. Reducing 'upside potential'. Increasing 'downside risk'. Reducing 'Johnson Omega'.

STOXX EUROPE 600 BASIC RESOURCE -3,12% -0,47% 0,16 -1,32 -1,78% 1,34% -1,64Bending distribution towards upside. Reducing 'tail fatness'. Reducing 'upside potential'. Increasing 'downside risk'. Reducing 'Johnson Omega'.

STOXX EUROPE 600 OIL & GAS -5,05% -0,76% -0,51 -1,63 -2,87% 2,19% -2,65Strong negative trend, not compensated by reduced volatility. Also tail bended towards downside albeit reduced in magnitude. Strong decline of upside potential, while massive increase of downside risk.

JP Omega Ltd.

Expected Marginal Attribution (EMA) of constituents to benchmark portfolio

Portfolio Analysis as of 31-Mar-2015 Franklin Mutual European Fund

Franklin BenchJohnson Omega

Franklin BenchJohnson Omega

STOXX EUROPE 600 AUTO & PARTS 2,7% 5,6% 23,1% Mean 2,90% 3,13% 4,95%

STOXX EUROPE 600 BANKS 9,6% 5,6% 0,0% Volatility 3,30% 3,23% 3,81%

STOXX EUROPE 600 BASIC RESOURCE 8,3% 5,6% 0,0% Skewness -0,42 -0,53 -0,31

STOXX EUROPE 600 CHEMICALS 2,7% 5,6% 0,0% p-value 11,1% 3,4% 18,7%

STOXX EUROPE 600 CON & MAT 16,9% 5,6% 0,0% Kurtosis (Excess) 1,69 1,48 1,40

STOXX EUROPE 600 FINANCIAL SVS 9,6% 5,6% 23,1% p-value 0,5% 0,3% 2,3%

STOXX EUROPE 600 FOOD & BEV 1,2% 5,6% 0,0% Call (Upside) 0,47% 0,50% 1,46%

STOXX EUROPE 600 HEALTH CARE 3,1% 5,6% 0,0% Put (Risk) 2,52% 2,32% 1,46%

STOXX EUROPE 600 INDS GDS & SVS 2,7% 5,6% 0,0% Johnson-Omega 0,19 0,22 1,00

STOXX EUROPE 600 INSURANCE 9,6% 5,6% 0,0% Sharpe 3,03 3,36 4,49

STOXX EUROPE 600 MEDIA 2,7% 5,6% 7,7% 0,1% -11,6% -11,1% -11,1%

STOXX EUROPE 600 OIL & GAS 6,8% 5,6% 0,0% 1% -6,2% -5,9% -5,3%

STOXX EUROPE 600 PERS & H/H GDS 1,2% 5,6% 0,0% 2,5% -4,2% -3,9% -3,1%

STOXX EUROPE 600 RETAIL 2,7% 5,6% 23,1% 5% -2,7% -2,5% -1,5% Franklin versus Benchmark:

STOXX EUROPE 600 TECHNOLOGY 2,7% 5,6% 0,0% 10% -1,2% -0,9% 0,2% a) Franklin slightly lower expected return and inferior Sharpe Ratio.

STOXX EUROPE 600 TELECOM 10,8% 5,6% 0,0% 50% 3,1% 3,3% 5,1% b) Franklin slightly improved tail properties

STOXX EUROPE 600 TRAVEL & LEIS 2,7% 5,6% 23,1% 90% 6,8% 6,9% 9,5% c) Cumulative Density shows slightly better upside tail behavior.

STOXX EUROPE 600 UTILITIES 2,1% 5,6% 0,0% 95% 7,9% 8,0% 10,9% Johnson Omega versus Benchmark:

Remark: Franklin weights approximated under usage of term sheet 97,5% 9,0% 8,9% 12,2%

99% 10,4% 10,1% 13,8%

99,9% 14,0% 13,0% 18,1%

JP Omega Ltd.

a) Improved expected performance w.r.t. traditional mean-variance, skewness, kurtosis and risk-adjusted performance measures.

1. Portfolio Weights

Client, Benchmark and Optimized Portfolio as of 31-Mar-2015 Franklin Mutual European Fund3. Expected Johnson Densities

Prob

abili

ty to

be

belo

w R

etur

n

2. Expected Performance

4. Interpretation

b) Overall similar downside but clearly improved upside potential as can be inferred from the logarithmic density.

1,E-04

1,E-02

1,E+00

1,E+02

-20,2% -10,1% 0,0% 10,1% 20,2%

John

son

Den

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FranklinBenchJohnson Omega

0

5

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-20,2% -10,1% 0,0% 10,1% 20,2%

John

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Den

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FranklinBenchJohnson Omega

1. Return (ann., comp.): Return per anno including compounding (profits reinvested)

2. Volatility (ann.):

3. Skewness (p-value): Asymmetry of distribution: Negative/positive indicates a tendency for extreme returns to downside/upside. P-value indicates the significance.

4. Kurtosis (p-value):

5. Downside Deviation:

6. Maximum Drawdown:

7. Excess Returns:

8. Market Model:

JP Omega Ltd.

Relative Performance Measures

A) Jensen Alpha (SKILL) is the intercept from a regression line for strategy excess returns w.r.t. riskfree on benchmark excess returns w.r.t. riskfree. It is a measure for the skill inherent in a strategy. Significance indicates whether Jensen Alpha was not generated by chance.

Excess returns from strategy versus benchmark. It is required that those are significant. Necessary, but not sufficient to evaluate a strategy as significant excess returns generated in a bull market might be simply generated by plain leverage. Here Jensen Alpha required for complete picture.

B) Beta (LUCK) is the slope of the regression line and the explanatory variable for returns in this simple factor model. Returns explained by beta are considered to be generated by luck, supposed market timing is impossible.

Tail fatness of distribution: Large indicates fat tails (whether to upside/downside or neutral depends on skew). P-value indicates the significance of excess kurtosis with respect to kurtosis equals 3 of Normal distribution.

Standard Deviation of returns below mean of excess returns with respect to risk-free rate. To be compared with plain volatility can shown asymmetry in returns and is supplementary to skewness. Remark: Whereas volatility may also discriminate upside risk, downside volatility exclusively measures downside risk.

Worst possible loss from investing at highest level and selling at subsequent lowest level. Peak is start date for decline. Trough is date of highest loss. Recovery is the time until prior peak was reached again.

Monthly volatility (stdev) of absolute returns multiplied by sqrt(12). Basic risk measure for fluctuation of returns. Does not distinguish between upside and downside risk.

Glossary I

Absolute Performance Measures

Jensen Alpha(mthly, i.e. intercept)

=0.7%

Market Beta(i.e. Slope)=0.75

-10%

-5%

0%

5%

10%

15%

-10% -8% -6% -4% -2% 0% 2% 4% 6% 8%

JP O

meg

a St

rate

gy E

xces

s Ret

urn

vers

us

Risk

free

Rat

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Equally Weighted HFRI Indices Excess versus Riskfree Rate

Market Model

7. Sharpe:

8. Sortino:

9. Calmar:

10. Treynor:

11. Information:

12. JP Gain vs Loss:

13. JP Omega:

Portfolio Moments:Strategy Benchmark

Mean 0,26% -0,79%

Volatility 1,19% 1,97%

Skew 0,33 -0,65

Kurtosis (Excess) 0,22 3,06

-> Both better upside potential and risk protection.

-> Preferred by any rational investor, irrespective utility.

JP Omega Ltd.

Definition of "First Order Stochastic Dominance": Strategy CDF stricly below benchmark CDF.

Please note: Minimum Expected Returns at any confidence level (CL) can be drawn from the CDF.

Glossary II

Minimum Expected Returns of Strategy and Benchmark subject to given Confidence Levels

Performance Ratios (upside per risk)

Excess returns mean over excess returns volatility (excess returns w.r.t. Risk free rate). Does not distinguish between up-/downside risk. Ignores asymmetry and fat tails. Annualized by multiplying monthly Sharpe by sqrt(12)

Excess returns mean over excess returns downside volatility (excess returns w.r.t. Risk free rate). Distinguishes between up-/downside risk. Ignores asymmetry and fat tails. Annualized by multiplying monthly Sortino by sqrt(12)

The portfolio moments (mean, variance, skewness and kurtosis) uniquely determine the Johnson distribution. The minimum expected returns at given confidence levels can then be drawn directly from the Johnson distribution. The JP Omega optimized portfolio of a hedge fund strategy is compared to the equally weighted benchmark portfolio.

Returns p.a. compounded over maximum drawdown. This can be interpretet as recovery speed, e.g. Calmar ratio of 1 indicates that the maximum drawdown took in average 1 year to be recovered).

Excess returns mean over market beta. Market beta only covers market risk. In contrast volatility in addition covers specific risk. Does not distinguish between up-/downside risk. Ignores specific risk, asymmetry and fat tails. Annualized by multiplying monthly Treynor by 12.

Excess returns mean over excess returns volatility (i.e. tracking error; excess returns w.r.t. benchmark). Does not distinguish between up-/downside risk. Ignores asymmetry and fat tails. Annualized by multiplying monthly Information Ratio by sqrt(12)

Ratio of max. exp. gain over max. exp. loss, i.e. the implied strike of call (upside) over the implied strike of a put (downside) ratio, where the strike is implied by imposing JP call and JP put, accounting for tail fatness, are "costfree", in the sense that the price of an option is 0.5 basispoints.

Ratio of entire upside potential (JP Call) over entire downside risk (JP Put). In contrast to the JP Gain vs Loss ratio the strike equals the equally weighted portfolio mean, and is therefore not in the tails. The pricing reflects the overall ratio and not only the asymmetry of (un-)likely extrem events.

CDF indicates a 5% likelihood that Strategy and Benchmark will undershoot -4,1% and -1,6%; respectively.

5% CL

95% CL

0%

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75%

100%

-6% -3% 0% 3% 6%

Johnson Cumulative Densities

Strategy

Benchmark

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-6% -3% 0% 3% 6%

Johnson Densities

Strategy

Benchmark