EFTA Document EFTA01460452

European Recovery: The combination of external demand and reduced fiscal austerity should promote slow but positive GDP growth. § Credit-Linked Note on European "Distressed" Nations - See attached presentation § Issuer: TBD, Currency: USD, Maturity: 5 years, Underlying: Portugal, Spain, Italy, and Ireland, Coupon: 3 month LIBOR + 400 bps § Each credit event will cause a reduction on the note's notional of 25%, which will also affect subsequent coupon payments and the redemption at maturity. If all four countries default, the redemption value with be zero § Peripheral sovereign spreads are still relatively wide § iTraxx Main, Europe's IG Index, is trading at 87 bps; the x-over (High Yield) is trading at 352 bps § The average 5 year spread of these 4 countries is 228 bps § with the European economic recovery under way, the risk that the peripheral countries default is increasingly lower § DB X-Trackers - Exposure to European recovery without currency risk (we are long-term bullish USD) § Be aware of liquidity risk, especially for funds with a short track record § MSCI Germany Hedged Equity Fund (DBGR) - Expense ratio: 0.5%, 1-year return: 11.04% § MSCI EAFE Hedged Equity Fund (DBEF) - Expense ratio: 0.35%, 1-year return: 29.76% § MSCI Europe Hedge Equity Fund (DBEU) - Expense ratio: 0.45%, Inception: 10/1/13 § Blackstone Dislocation Opportunities Fund § Call on October 22 will provide more information Real Estate/RE Linked: Price upside because of low U.S. supply (limited construction over the last four years), plus low correlation to other asset classes and strong inflation hedge. Monetizing cyclicality and opportunistic dislocations. § RREEF Property Trust (RTP) § Up to 80% direct U.S. real estate, 15% in publicly-traded REITs (liquidity), 5% in real estate debt § New Bond Street (KCC Only) Tail Risk Hedging: Protect against U.S. government default concerns - This is no longer a pressing theme because an agreement was reached to raise the debt ceiling until February 7. This theme can be re-explored in February. § sell vix calls to buy crash protection in gold, the Euro stoxx 50, and U.S. financials https://ger.gm.cib.intranet.db.com/ger/document/pdf/0900b8c08761blee.pdf § option premiums on vIx and GLD fell on 10/16 (Nov-13 VIX 22 call fell 0.56, Nov-13 GLD 108 put fell 0.21) in the wake of Washington debt deal announcement. Concerns over a U.S. default (however remote the possibility) dissipated, causing a drop in volatility. § Original trade with updated pricing § Sell Nov-13 VIX 22 calls for 0.55 (current: 14.71, 6-month closing high: 20.49) § Buy Nov-13 GLD 108 puts for 0.16 (current: 123.54) § Buy Nov-13 FEZ 31 puts for 0.15 (current: 40.02) § Buy Nov-13 XLF 17 puts for 0.03 (current: 20.68) [attachment "Euro Curve Steepener Trade.pptx" deleted by Chip Packard/db/dbcom] [attachment "CLN on Peripheral European Sovereigns.pptx" deleted by Chip Packard/db/dbcom] [attachment "Borrow in JPT, Invest in USD.pptx" deleted by Chip Packard/db/dbcom] Kind regards, Tim Shields (Embedded image moved to file: pic24913.gif) CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0121717 CONFIDENTIAL SDNY_GM_00267901 EFTA01460452