The document analyzes current economic conditions, highlighting ongoing deleveraging and contrasting monetary policies across different regions, particularly the U.S., Europe, and the U.K. It discusses the challenges investors face due to low bond yields and the potential for inflation or deflation affecting fixed income markets. The document also emphasizes the significance of corporate profitability and sector allocations in guiding investment strategies amid evolving economic landscapes.

1. Page 1 of 4
Page
The current economic environment
Page
Asset class analysis
Page
Current asset allocation
Page
Perfomance analysis
Our personal opinion
Watch bid-to-cover ration on
bond auctions.
Saving and austerity plans will
slow the consumption and
economic growth.
Deleveraging still going on.
Saving with individuals and
companies at record levels.
Printing more than expected
will cause USD to decline and
will boost risk investments.
Devaluation of one country
could help to stimulate the
economy. Until everyone
wants to use this as a last
resort…
In October, amongst the periodic reporting
season of companies, most investors were
focusing on how much stimulus could be coming
their way in the form of quantitative easing. That
the company results have surprised to the upside
did not cause too much deviation from this QE
quantity guessing focus.
It is clear that there are different approaches to
stimulate growth in the international economies.
Europe is focusing mainly on austerity plans and
is not inflating their economies, in fact on the
contrary. The German engine, fueled by the
weakness in the euro, has so far pulled all the
other countries along. The PIIGS-situation
remained calm until the last week of the previous
month, at which point the yields started to climb
again.
In the United States, money printing and
stimulating seems to be the economic modus
operandi. Saving and austerity has not been
much of a theme so far. Although politically
denied, devaluation of the US dollar against the
currencies of its major trade partners is a reality.
The island in between the two, the United
Kingdom, is applying both tactics, combining the
printing of money with one of the most severe
austerity plans since WWII.
As this is mostly unknown territory in modern
economic history, we will need to wait and see the
longer term impact of these drastic economic
measures. One thing is for sure: it will create new
long term cycles which will be with us a long
period of time. The two most likely outcomes lie on
opposites sides of the spectrum, deflation or
inflation, and will have a clear impact on the fixed
income markets.
With yields at this low level, more and more
investors are pushed towards taking more risk in
fixed income markets. There is only so much you
can do to increase your yield: invest in longer
duration bonds and/or decrease the quality of the
issuer. One thing is for sure: there is an
investment conflict to be found in the current
purchasing of long term bonds. Investors buy
because the Fed is pushing the prices higher,
bringing the yields down. They do know that this
could cause inflation over time and that this will
increase interest rates and negatively impact
bond prices. Whether we have reached this
tipping point is too early to tell. One thing to watch
very closely is the bid to cover ratio at the bond
auctions in the US. An increase in long term yields
will be caused by an investment buyers'strike.
Even the biggest buyer of them all, the Fed, will
not be able to counter this. Higher yields will come
at the most unwelcome moment in the economic
cycle as banks and credit to companies are only
now slowly starting to recovering from the Great
Recession.
QE* 2 is about to sail the financial seas
Nautilus Capital AG
Landstrasse 60 •FL-9490 Vaduz • Liechtenstein • www.nautilusag.com
T +423 232 1540 • info@nautilusag.com
Asset Allocation over last 3 months
0.0%
0.0%
0.0%
80.3%
70.1%
74.5%
19.7%
29.9%
25.5%
0.0%
25.0%
50.0%
75.0%
100.0%
Sep 10 Okt 10 No v 10
Cash
Fixed Inco me
Equities
November-2010
Content
1
2
3
4
* What is Quatitative Easing (QE)?
Quantitative easing is a monetary policy used by some central banks to increase the supply of money by increasing the excess reserves of
the banking system. This policy is mainly used when the normal methods to control the money supply have failed, i.e the bank interest rate,
discount rate and/or interbank interest rate are either at, or close to, zero.
A central bank implements quantitative easing by first crediting its own account with money it creates out of nothing. It then purchases
financial assets, including government bonds, agency debt, mortgage-backed securities and corporate bonds, from banks and other
financial institutions in a process referred to as open market operations. The purchases, by way of account deposits, give banks the
excess reserves required to create new money, and thus hopefully induce a stimulation of the economy, by the process of deposit
multiplication from increased lending in the fractional reserve banking system.QE is sometimes called “printing money,” but that is not
always the case, since the central bank acquires financial assets that it hopes to sell at some point without taking a loss.
That is one of the risks inherent to QE: inflation can rise sharply, purchased assets can yield losses, which taxpayers will have to cover
eventually, and currency values can be erode.

2. Page 2 of 4
General Market Returns
AssetAllocation
Cash (0%, no change): the return on cash is still close to zero and with
some inflationary pressure on the horizon, it is still more effective to
look at the yield curve and keep the flexibility on your side. The short
term interest rates will not be increased before the central banks stop
the liquidity flows.
Bonds (74%, +4%): a bit of profit taking on the equities meant an
increase in the fixed income part. At this stage of the economic
recovery and with potential inflation this asset class is a very
challenging one, but offers many opportunities at the same time. The
main challenge is to be at the right side of the duration. As long as
quantitative easing is continuing there will be price increases. The
main challenge the government has is to keep its credibility. This is a
highly diplomatic exercise towards financial markets. Buying too many
bonds will increase inflation, buying too little might cause
normalization of the yields. At one stage there will be profit taking and
increases on the yield. It will hurt the longest duration bonds most.
The most important in the allocation of fixed income is the duration
allocation. Compared to previous month there is a big decrease in the
20+ year bonds (-34%) in favor of the corporate bonds (+4%) and the
7-10 year (+30%).
The above graph shows that the 30-year yield is increasing. This
seems to be a trend change from the previous months. In previous
months there was always a parallel shift from the yield curve. This
needs to be monitored closely as the QE purchases will have an
impact on the complete yield curve. In the nearby future the bond
auctions will show how investors think about it.
Equity (26%, -4%): the international equity markets made a big jump in
September and continued on this momentum in October. Most
economists agree on what is different about this crisis compared to
previous ones: developed economies need to deleverage, and this
process is likely to produce sub-par growth for a long time. But there is
more to it. The post-crisis environment is marked by another
characteristic which compensates for the deleveraging: the absence of
broad corporate restructuring. In most other post-recession periods, the
consumer was relied on to be the engine of recovery, while ailing
companies nursed themselves back to health more slowly. But the
Global Financial Crisis hit at a time when most non-financial companies
were in excellent shape, after years of post-internet bubble reform in
which they evolved into profit machines of extraordinary efficiency and
adaptability. Today, corporate profit margins are reaching outstanding
levels. This is especially so in America -only a few months after the
economic trough, and Ebitda margins are at their highest in years.
Usually, the economy needs two to three years before corporate
profitability re-emerges. Not this time: corporate prosperity has never
been so apparent. In a period of intense debate about fiscal and
monetary policy, it is therefore useful to remember that: the true source
of sustainable economic growth-the corporate sector-has never been as
solid as it is now. This is more visible in some sectors, mainly the ones
that didn't use a lot of leverage.
SectorAllocation
These sectors are also the ones that kept their dividends stable or
revised it upwards. The other ones are using their cash for repurchasing
shares or for focused take-overs. We like the overweight in Technology
for this reason. Most IT firms start to use their cash for dividend
increases (Microsoft,..), repurchasing shares (IBM,...) or plan take-overs
(Apple,...).
The biggest overweight we have is in the basic materials. There is a
large wave of consolidation taking place in the sector. The consumer
growth inAsia is starting to take its toll in the resource area. The Chinese
are long term planning and start to integrate their production industries
vertically, from the resource over production to distribution.
Consumer services are the third biggest weight in the portfolio, although
the retail sector has been reduced versus last month.
GeographicalAllocation
The model reduced its allocation in Asia-Pacific almost completely,
together with Latin-America being reduced. Capital flows in Latin-
America are being restricted in order to avoid inflationary pressures.
This will cool down the equity markets as well.
The allocation is increased in the underperforming countries, which
have the capability of increasing Quantitative Easing, England and
Japan. Using their cheaper currencies will stimulate their economies.
NorthAmerican exposure comes from the sector allocation.
Nautilus Capital AG
Landstrasse 60 •FL-9490 Vaduz • Liechtenstein • www.nautilusag.com
T +423 232 1540 • info@nautilusag.comNovember-2010
Market Month-to-date Year-to-date
Performance Performance
3M Treasury Bill 0.0% 0.1%
Barclays US Agg. Bd Index 0.4% 8.3%
Barclays US Treasury 1-3Y Index 0.2% 2.8%
Barclays US Treasury 7-10Y Index -0.1% 14.2%
Barclays US Treasury 20+Y Index -4.6% 15.0%
Barclays Corp.Inv.Grade Index 0.1% 10.9%
Dow Jones World Index 3.7% 7.4%

3. Page 3 of 4
Current Asset Allocation
Nautilus Capital AG
Landstrasse 60 •FL-9490 Vaduz • Liechtenstein • www.nautilusag.com
T +423 232 1540 • info@nautilusag.com
Asset Allocation
0.0% 74.5% 25.5%
0.0%
20.0%
40.0%
60.0%
80.0%
Asset Classes
Cash
Fixed Income
Equity
Historical Asset Allocations
(Last 5 years)
0.0%
25.0%
50.0%
75.0%
100.0%
Nov 05 Nov 06 Nov 07 Nov 08 Nov 09 Nov 10
Cash
Fixed Income
Equity
Fixed Income Allocation: Sector
0.0% 52.5% 12.0% 10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
UST 1-3 Year UST 7-10 Year UST 20+Year US Corp.Inv
Equity Allocation: Regions
2.6%
12.0%
0.0%
3.9%
0.0%
4.7%
2.4%
0% 4% 8% 12% 16%
United Kingdom
North America
Latin America
Japan
Europe, Ex-UK (Eme)
Europe, Ex-UK (Dev)
Asia/Pacific, Ex-Japan
Equity Allocation: Industries
11.3%
1.7%
5.9%
0.1%
0.0%
0.1%
0.0%
6.1%
0.4%
0.0%
0% 2% 4% 6% 8% 10% 12%
Basic M aterials
Cons. Goods
Cons. Services
Financials
Health Care
Industrials
Oil & Gas
Technology
Telcos
Utilities
Equity Allocation: Under/Over Industries
-34.8%
0.0%
78.7%
-26.4%
-23.9%
-21.0%
-26.8%
23.6%
-12.1%
88.4%
-50% -25% 0% 25% 50% 75% 100%
Utilities
Telcos
Technology
Oil & Gas
Industrials
Health Care
Financials
Consumer Services
Consumer Goods
Basic M aterials
Fixed Income Allocation: Duration
0.0% 62.5% 12.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
<3 Years 7-10 Years 10-20 Years
Equity Allocation: Under/Over Regions
-6.6%
11.8%
-22.1%
26.6%
13.2%
4.7%
-12.6%
-50% -25% 0% 25% 50%
Asia/Pacific, Ex-Japan
Japan
Latin America
United Kingdom
United States
Europe, Ex-UK (Dev)
Europe, Ex-UK (Eme)
November-2010

4. Page 4 of 4
Performance Analysis
This publication is for your information only and is not intended as an offer, or a solicitation of an offer, to buy or sell any Investment or other specific product.Although all information and opinions expressed in this document were obtained from sources believed to be
reliable and in good faith, no representation or warranty, express or implied, is made as to its accuracy or completeness. All information and opinions as well as any prices indicated are subject to change without notice. At any time Nautilus Capital ("Nautilus") (or
employees thereof) may have a long or short position, in relevant securities. Some investments may not be readily realisable at times of illiquid market circumstances. Therefore valuing the investment and identifying the risk to which you are exposed may be difficult
to quantify. Futures and options trading is considered risky and past performance of an investment is not a guide to its future performance. Some investments may be subject to a decline in value and on realisation you may receive back less than you invested.
Changes in FX rates may have an adverse effect on the price, value or income of an investment. Each investment needs to be seen in the context of your particular investment objectives, financial situation and needs and we would recommend that you take financial
advice as to the tax implications of investing in any of the products mentioned herein.
Nautilus Capital AG
Landstrasse 60 •FL-9490 Vaduz • Liechtenstein • www.nautilusag.com
T +423 232 1540 • info@nautilusag.com
Cummulative Outperformance
-25%
0%
25%
50%
75%
100%
Dez
01
Dez
02
Dez
03
Dez
04
Dez
05
Dez
06
Dez
07
Dez
08
Dez
09
Current Month Performance Attribution
vs. Benchmark
-5.0%
-2.5%
0.0%
2.5%
5.0%
Asset Allocation Sector Rotation Total Value Added
-5.0%
-2.5%
0.0%
2.5%
5.0%
Cash
Fixed Income
Equities
Total
DRM US 3M US Aggregate Benchmark** Dow Jones
Treasury Bond Index Agg. World
Return Currency USD USD USD USD USD
Month Return (Oct-10) -0.6% 0.0% 0.4% 1.7% 3.7%
Year-to-date Return 3.9% 0.1% 8.3% 3.0% 7.4%
Last 12 Months Return 5.0% 0.1% 8.0% 4.6% 14.0%
Last 24 Months Return 3.5% 0.2% 10.9% 4.5% 17.3%
Total Annual Return * 9.1% 2.1% 5.9% 5.5% 5.2%
Standard Deviation (Volatility) * 7.6% 0.5% 3.8% 8.4% 16.9%
Semi-Standard Deviation (<0) * 7.2% NM 3.8% 10.0% 19.4%
Sharpe Ratio * ( rf = 2.09% ) 0.93 NM 1.00 0.40 0.18
Sortino Ratio * ( rf = 2.09% ) 0.97 NM 0.98 0.34 0.16
Positive Months * 67.9% 99.1% 69.8% 65.1% 59.4%
Average Monthly Return * 0.7% 0.2% 0.5% 0.4% 0.4%
All figures are annualized measures of returns.
* Period: Jan-02 to Oct-10.
** Benchmark = 5% UST 3M + 22.5% UST 1-3Y + 9% UST 7-10Y + 5.4% UST 20+Y
+ 8.1% US Corp. Inv. Grade Bonds + 50% Dow Jones Aggr. World Equity Index.
Cummulative Performance
50
100
150
200
250
Dez
01
Dez
02
Dez
03
Dez
04
Dez
05
Dez
06
Dez
07
Dez
08
Dez
09
DRM
Benchmark
Rew ard to Risk Analysis of Returns
DRM
3M -Treasury
BenchmarkUS Ag Bd
Index
Dow Jones
Agg. World
Index
0.0%
2.5%
5.0%
7.5%
10.0%
12.5%
0% 5% 10% 15% 20% 25%
Incurred Volatility (Risk)
RealizedReturn
(Reward)
November-2010