"We believe the probability of o 5%+ dip is high this summer and our tactical call remains Down given the S&P now at an even higher PE than a year ago, heightened uncertainty in 10yr yields, weak earnings growth and continued soft economic data. We haven't had a 5%+ dip this year. Historically 595+ dips ore common and happen at least once a year since 1960, except 1964, 1993 & 1995. It has been 916 trading days (3.6 years) since a 10% correction. Selloff triggers could be o further rise in 10yr yields especially if UE keeps falling amidst slow economic growth and Fed remains unclear on first hike timing, or a jump in the dollar upon the Fed expressing firm intentions to hike in Sept." With that said, we looked at OTC equity put spreads contingent on higher rates. We priced in-the-money versions which would obtain its maximum payout (over 5x premium) with a 5% sell-off in SPX and higher l0y US swap rates (CMS, 25bps over its forward level). Indicative transaction terms (as of 06/03/2015): Client buys: OTC SPX 105%/95% Put Spread contingent on l0y USD CMS > atmf+25bps at expiry Notional: USD50mm Expiry: 18 Dec 2015 Offer (mid): 2.00% (1.60%) Ref vanilla: 4.30% Ref SPX future: 2115 Ref l0y fwd: 2.54% SPX Implied volatility levels close to historical lows GRAB O 12 riActiOns 9trremplatei, Hide 9$ Table DO/ Spotadabsolut9) 024kt-2010 0200.2.15 "EA los o% tar CI MECO Mall "CA *" Hi_ 74 Lore 101:7 Lyle t-7 7r Y2nn~ r on-7..a. 'so- s IMO • (1.) 6M 105% Mny 12.104 ■ (2.) 6M 95% Mny 16.839 Vinci Sp88 IMS) S4krSVPYA .) I.Iny -4 735 Low ID 35 4.30 25 • 20 0-15 10 -4.00 2011 2012 2013 2014 2015 m/Stroll* 61 2 1777 8600 Orossi 5511 Zr" 9000 ruropt, 44 20 :Sao rsoo 88emorsy 45 69 9204 1210 Hong Kan 812 2977 64O0 Japan 81 3 3201 8900 SuKI8P4n 65 6212 200,3 U.9. 1 222 318 20O3 topurtrt 2015 Dloceberg Finance L P 58 793879 4919-4343-2 02-Jun-15 10 11 2‘ EDT CM-4 00 Please let us know if you would like to discuss.