Portfolio evaluation

1. JP Omega Ltd.
Discussion Document
Berlin,
April 8, 2015
JP Omega Ltd.
JP Omega Ltd.
Portfolio Analysis
Franklin Mutual European Fund

2. Name Franklin 231
Currency EUR
AuM 3.244Mio
Inception
Benchmark STOXX 600 Europe TR
206
Philippine Brugere-Trelat: USA
Katrina Dudley, CFA: USA
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD Bench
2015 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 Fund
Fund Info Performance & Exposure Chart Start: End:31-Dec-01 31-Mar-15
6,06
http://www.franklintempleton.de/downloadsServ
let?docid=hfc2qy0u
1,91%
0,62%
Fund Characteristics
20,24
1,28
Investment Philosophy
Fund Management
Portfolio Split
89,61%
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

3. 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
Months
Return and
Moments
Comments & Portfolio Highlights
Excess
Returns
Market
Model
Absolute Performance Measures Relative Performance Measures
Detailed Performance Measurement - Entire Period

4. 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

5. Mean
Volatilit
y
Skewnes
s
Kurtosis
(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% 1,89
Excellent 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% 0,87
Bending 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% 0,84
Bending 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% 0,67
Massive 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% 0,57
Bending 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% 0,52
Bending 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% 0,42
Substantial 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% 0,39
Bending 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% 0,39
Bending 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% 0,28
Improvement 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% 0,13
Improvement 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% -0,04
Largest 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% -0,04
Bending 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% -0,08
Bending 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% -0,88
Largest 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% -1,63
Bending 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% -1,64
Bending 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% -2,65
Strong 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

6. Franklin Bench
Johnson
Omega
Franklin Bench
Johnson
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 Fund
3. Expected Johnson Densities
ProbabilitytobebelowReturn
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%
JohnsonDensity
Franklin
Bench
Johnson Omega
0
5
10
15
-20,2% -10,1% 0,0% 10,1% 20,2%
JohnsonDensity
Franklin
Bench
Johnson Omega

7. 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
JensenAlpha
(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%
JPOmegaStrategyExcessReturnversus
RiskfreeRate
Equally WeightedHFRI Indices Excess versus Riskfree Rate
Market Model

8. 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%
25%
50%
75%
100%
-6% -3% 0% 3% 6%
Johnson Cumulative Densities
Strategy
Benchmark
0
10
20
30
40
-6% -3% 0% 3% 6%
Johnson Densities
Strategy
Benchmark