23 August 2013 US Equity Insights Figure 6: S&P 500 trailing PE and implied equity risk premium: PE is now close to long-term historical average but ERP is still 200bps higher than its average of 390bps. 35 30 25 20 15 10 5 OverstatedEl:Shorn inflationdistothons ri grtigRginiii§EFEAm . LTM RE LW Sant se FRA Drada Br* — Inv( odERP trhs • —AvgPE -15 9 Treasury yields now exceed the dividend yield. but dividends should grow double.digit for the next tew years as the payout ratio rises from :33% now. Dividend yields like earnings yields represent real yields. Expected inflation must be added to these observed yields in order to compare them to nominal interest rates. The 10yr TIPS yield provides a comparable real interest rate, which at 0.75% suggests that EPS and DPS yields remain very attractive. The S&P's indicated dividend yield is 2.1°/0 and we expect long-term DPS growth to be -15% next year with at least 6% growth thereafter. This suggests an offered long-term nominal return on S&P ownership over 8% with the ability of that offered nominal return to adjust for inflation variations over the long term. [Figure ' 7: S&P Dividend yield. I 0yr Tsy and TIPS yield 16% / 16% 14% 14% 12% 12% 10% 10% 8% 8% 6% I 8% 4% 4% -10% • 2% 014 Y •• .63 0% -2% §MAI r:2 S&P Divulencl Yield 10f r TIPS yield San .5 rif: MA Dwarfs BUM L — 10,u Treasury Yield Deutsche Bank S00010100 Inc. A —15 forward PE wouldn't be threatened until 10yr yields we well over 4% or 10yr TIPS exceed 2% (Figure 8: S&P 500 dividend growth (yfy chg) 25% 20% .1 15% 10% 5% 0% f 25% • g g O1 CO I,- 1,- O1 Recession •••••Trairrig 4-car DPS growth (yhr % Chr2) Sans SSA Doureetro awe Page 3 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0 104637 CONFIDENTIAL SDNY_GM_00250821 EFTA01449293