EFTA01385542.pdf

Deutsche Bank Risks ■ ABB - ABBN.S: Key downside risks include continued M&A at high ■ AstraZeneca - AZN.L: Risks include lower sales from the growth platforms multiples, accelerated Chinese competition in T&D in overseas markets and given pressure on respiratory/diabetes, failure of key pipeline drugs and failure prolonged macro weakness. to deliver expected margin improvements from new launches. ■ ArcelorMittal - MT.AS: Key risks are related to macro, steel prices, raw ■ B&M - BMEB.L: Downside risks relate to B&M's ability to open profitable new material costs, project development and FX rates. Should the improving stores, eg rising rents and success in the relatively untested Southern England. leading indicators not translate into a recovery in economic performance as Other risks include a response from grocers to a loss of price-leadership, which expected by DB, this provides a risk to demand for steel. Deviating could impact B&M's margins, and negative leverage from slowing LFLs. CD&R commodity prices and/or a steel price shock provide further risks to margins owns 11% of shares and may reduce its stake in the future. assumptions. Also, the rising protectionism could cause disruptive changes ■ BAE Systems Plc - BAES.L: A key downside risk would be if the UK to steel markets, depending on the outcome. Lastly, ArcelorMittal has a government halted arms sales to Saudi Arabia. A second key risk would be a large growth appetite, and a stronger-than-expected ramp up of the capex change in the UK government, as this might see a change in direction when it budget, ability to deliver on projects or M&A provide further risks. comes to the current equipment plan. The direction of defence budgets globally ■ Aroundtown Properties — AT1.DE: 1/ Corporate governance; the change offers both upside and downside risks. FX (USD/GBP) fluctuations. of the domicile from Cyprus to Luxembourg could serve as a catalyst; we ■ Banco Santander - SAN.MC: Key downside risks include: 1) a weaker capital also see key man risk. 2/ Capex backlog. The company is pursuing a "light" build-up than expected; 2) macroeconomic deterioration in the bank's core capex model despite the value add character of their business model. 3/ markets, particularly Brazil, the UK or Spain; 3) a potentially stricter regulatory Dilutive equity issues to fund external growth 4/ Non-accretive acquisitions stance. 4) Adverse movement in interest rates; 5) Adverse exchange rates diluting shareholder returns movements in the bank's core markets. ■ AXA - AXAF.PA: Like most European life assurers, the shares are sensitive ■ British American Tobacco - BATS.L: Investing in tobacco carries sector- to investment markets in both directions with an above average exposure in specific risks regulation, duty increases, volume declines in high-margin AXA's case to sovereign spreads. Sentiment, earnings and economic markets, etc). In addition to these general sector downside risks, BAT is solvency are negatively impacted by lower US and European bond yields potentially exposed to adverse currency movements, unexpected adverse US and vice versa. Other downside risks include execution risk around M&A and Canadian litigation developments and possible overpayment for an strategy; regulatory risk surrounding GSII (Globally Systematically Important acquisition. Insurers) capital requirements; and failure to deliver on its five-year targets. 43 CONFIDENTIAL - PURSUANT TO FED. R. GRIM. P. 6(e) DB-SDNY-0086828 CONFIDENTIAL SDNY_GM_00233012 EFTA01385542