Global Research Private Banking Zurich

Research Monthly

March 2012

Buy

Hedge funds: Increase exposure With systemic risks easing, the market environment for hedge funds is improving. Key Credit Suisse Top 30 stock: Vodafone Resilient cash flow, attractive dividend Attractive pick up versus UK Gilts: GE CAPITAL 4.735% 7/2019 in GBP Backed by one of the strongest industrial business profiles. Sustainable water management: SABMiller The company is highly acclaimed for its managerial capability to handle water-related issues.

Buy

Buy

Buy

Investment Strategy

Equity rally may pause, but strategic outlook stays bullish

page 3

Economics

This months featured topic

Equities

Better indicators, better data

page 7

Lessons from Hitting new history the highs CS Investment Returns Yearbook 2012
page 14 page 9

Important disclosures are found in the Disclosure Appendix

28/02/2012

Credit Suisse - Research Monthly

Editorial
Giles Keating Head of Research for Private Banking and Asset Management giles.keating@credit-suisse.com, +41 44 332 22 33

In this issue
Investment Strategy

Equity rally may pause, but strategic outlook stays bullish

page 3

Investment summary
Economics

page 5

Better indicators, better data The deal on Greek debt has been widely criticized for not doing enough to stabilize the debt burden. Yet, following its announcement, global financial markets have broadly held on to their earlier large gains or advanced. Why is this? One reason is that US and global economic data have continued to be strong, and better economic growth is a key element in tackling debt. But perhaps most important is that the deal (if approved in the coming days) and associated banking developments virtually eliminate mechanical financial contagion risk from Greece at least over the next year. The deal requires that funds to pay all debt servicing costs over the next year must be set aside from the EUR 130 bn loan in an escrow account so they cannot be used for the general Greek budget. Also, Europes banks have now largely taken provisions to reflect the 75% haircut to net present value implied by the deal. In short, most of the privately held debt has been written off and what remains has a secure source of servicing. Important issues remain, notably whether the small number of private debt holders who refuse the voluntary debt deal will be forced to accept, probably triggering the credit default swaps (CDS). Eighteen months ago, the CDS holdings were a black hole of uncertainty, now the European Banking Authority has published an inventory of how much has been bought and sold by each European bank. This does not completely remove the risk of disruption from the CDS, but makes it much less likely. There is still a long haul over many years to sort out the Eurozone debt crisis, but the Greek deal, alongside other key steps, including the budgetary surveillance and penalties in the draft Treaty and the impressive initial steps taken by Mr. Montis government in Italy, do suggest that a turning point has been passed. The bigger risk probably now comes from growing instability in the Middle East.
This months featured topic

page 7

Lessons from history the CS Investment Returns Yearbook 2012 page 9

Investment theme

Revisiting the Eurozone scenarios

Credit Suisse Megatrends

page 10

Water efficiency
Fixed income

page 11

Favor selected corporate, bank, EM and euro-periphery credits page 12

Equities

Hitting new highs

Alternative investments

page 14

Easing systemic risks support alternative investments page 16

Foreign exchange

Hard currencies continue to get softer

page 17

Editorial deadline: 28 February 2012

Investment Strategy

28/02/2012

Credit Suisse - Research Monthly

Investment Strategy

Equity rally may pause, but strategic outlook stays bullish

Economic recovery, easy liquidity and improving sentiment should underpin equity, credit, cyclical commodities and hedge funds.

Biggest immediate risk to the outlook is no longer the Eurozone, but rather the Middle East.

Giles Keating Head of Research for Private Banking and Asset Management giles.keating@credit-suisse.com, +41 44 332 22 33

Global equity and credit markets have seen significant gains since the start of 2012, driven by improving economic data in the USA and to some extent elsewhere, as well as by clear progress in reducing the risk of imminent crisis in Greece, continued monetary easing in a number of countries, and the large amounts of cash still held by many investors and by companies. Our various regional equity focus lists show high single-digit absolute returns in just two months and some of our individual stock recommendations are up with double-digit returns. After such a rally, it would not be unusual for there to be a phase of consolidation and perhaps mild setback, but over the strategic time horizon (612 months+) that we focus on in Research Monthly, global stock markets (where we are overweight) and many parts of the credit markets as well as the more cyclical commodities should generally remain underpinned by improving sentiment, ongoing global economic growth and by the continuation of very easy monetary policy, which supports the economy and also helps stock markets directly by making low-yielding assets (cash, high-grade bonds) unattractive.

Investors who (in line with our recommendation) were already strategically overweight in equities at the start of this year will have seen their weightings increase even further as a result of the gains. They may wish to rebalance this by shifting into assets that have lagged, but which are now starting to appear attractive, notably into hedge funds, for which the outlook has improved according to our Barometer. Investors who have not yet established a strategic overweight in equities should be gradually building one, taking advantage of any market setbacks in particular. Benchmark government bonds (e.g. in the USA and Germany) are likely to underperform in this environment, but with central bank policy easy, the scale should be contained. Among currencies, we still see EUR/USD trading sideways within the broad range of the last 23 months, while EUR/CHF is trading within its recent rather narrower range. Our largest change in FX view being a more cautious view on JPY following the Bank of Japans recent aggressive easing. We also continue to favor selected Asian, Latin American and EMEA emerging currencies. In December, we published our ten key investment ideas and, as usual, we provide an update (see table). Already some of these ideas have performed well. We make no fundamental changes though in places where we alter some of the emphasis. In fixed income, while we would still include core corporates (bonds from selected blue chip issuers) as well as chosen EM bonds, we now feel comfortable adding certain lower-quality issuers as well as some bank senior unsecured bonds. Although yields in both cases are well down from the peaks, we believe they still offer value and we feel more comfortable recommending them in the improved investment environment. In equities, we retain our focus on dynamic dividend stocks (those with high dividends that we see as sustainable) as well as the more actively managed Top 30. In FX, the emphasis remains on diversifying from mainstream currencies into emerging units, while in Alternatives as well as retaining our earlier recommendations on value strategies in commodities and on commercial real estate, we now feel more comfortable adding hedge fund exposure. We believe that, for now, the biggest risk to this outlook is no longer from the Eurozone. Of course, major uncertainties remain not least from upcoming elections in France and Greece but we believe that clear political leadership and coherence has been demonstrated by the cumulation of events over recent months, including the rebuilding of bank balance sheets, the draft agreement on a new Treaty, the provisional deal on Greek debt and the European Central Banks liquidity injections. Instead, we now see the major risk coming from geopolitics in the Middle East, where events in Iran and Syria, as well as the US withdrawal from Iraq, could cause the instability that pushed oil prices up to a level that began to undermine global economic growth. This is a risk scenario, not a central case, but we believe that, as part of a broad portfolio, it is worth considering investments that perform well when oil prices rise sharply, such as out-of-the-money oil call options. (24/02/2012)

Investment Strategy

28/02/2012

Credit Suisse - Research Monthly

Forward prices for Brent until 2014 Heightened geopolitical risks in a low oil inventory environment have caused the steep backwardation of Brents forward curve. For investors, this offers attractive investment opportunities, such as out-of-the-money oil call options.
Brent crude oil futures, USD/bbl

125 120 115 110 105 100 Mar12 Jul12 Nov12 Mar13 Jul13 Nov13 Mar14 26.01.2012 16.02.2012
Source: Bloomberg, Credit Suisse / IDC

Strategic asset allocation (SAA) The neutral allocations serve as a guideline and represent the average weighting over an entire market cycle. Since the global strategy is based on a medium-term investment horizon, it deviates from the neutral position. We recommend an overweight in equities and alternative assets, particularly real estate, commodities and hedge funds. At the same time, we recommend underweighting fixed income assets and cash. In our view, investments in emerging market equities remain attractive. In addition, we recommend overweighting US equities versus the Eurozone countries.
Fixed Income
Benchmark (BM) SAA Cash Fixed Income Equity Alternative BM 5% 80% 0% 15% SAA 2% 80% 0% 18%

09.02.2012 23.02.2012

Income
BM Benchmark (BM) Cash SAA Fixed Income Equity Alternative 5% 55% 20% 20% SAA 2% 54% 21% 23%

Balanced
Benchmark (BM) SAA Cash Fixed Income Equity Alternative BM 5% 35% 40% 20% SAA 2% 34% 41% 23%

Capital Gain
Benchmark (BM) SAA Cash Fixed Income Equity Alternative BM 5% 15% 60% 20% SAA 2% 13% 62% 23%

Equities
Benchmark (BM) SAA Cash Fixed Income Equity Alternative BM 5% 0% 80% 15% SAA 2% 0% 81% 17%

Source: Credit Suisse

Investment Strategy

28/02/2012

Credit Suisse - Research Monthly

Investment summary
Short interest rates 3M LIBOR / 10-year government bonds
3M LIBOR Spot CHF EUR USD GBP JPY 0.09 1.01 0.49 1.07 0.20 3M 0.00.2 0.91.1 0.30.5 0.81.0 0.10.3 12 M 0.00.2 0.81.0 0.30.5 0.81.0 0.10.3 10Y bonds Spot 0.77 1.88 2.00 2.10 0.98 3M 0.81.0 2.0-2.2 2.2-2.4 2.1-2.3 0.91.1 12 M 1.31.5 2.4-2.6 2.5-2.7 2.4-2.6 1.0-1.2

Equities: Selected indices

Index S&P 500 SMI FTSE-100 Euro Stoxx 50 Nikkei 225 MSCI EM China H-Shares Price 1,365.74 6,184.13 5,935.13 2,523.69 9,647.38 1,067.56 11,689.84 MTD (%) 4.1 3.6 4.5 4.4 9.6 4.7 3.5 YTD (%) 8.6 4.2 6.5 8.9 14.1 16.5 17.6 12M target 1,343 6,231 6'031 2'571 9'800 1'077 12'000 12M outlook Neutral Neutral Overweight Underweight Neutral Overweight Overweight

Spot rates are closing prices as of 23/02/2012. Forecast date: 23/02/2012. Source: Bloomberg, Credit Suisse

Prices as of 24/02/2012; 12M target: scenario analysis available; 12M outlook: Relative to MSCI World Index (USD) Source: Bloomberg, Credit Suisse

Bonds: Selected indices

Index USD (CS LUCI) EUR (CS LEI) CHF (CS LSI) GBP (CS LEI) EM USD (JPM EMBI+) EM Local Markets (JPM ELMI+)* High Yield (CS HY Index) YTM (%) 3.24 3.06 1.13 4.34 5.34 3.43 7.34 Total return YTD (%) 2.48 3.63 1.10 2.20 3.84 6.27 4.41 Spread to benchmark (bp) 158 227 79 212 324 n.a. 639 12M spread outlook

Foreign exchange
Spot EUR/USD USD/CHF EUR/CHF USD/JPY EUR/JPY EUR/GBP GBP/USD EUR/SEK AUD/USD USD/CNY
Spot rates: London close 24/02/2012 Source: Credit Suisse Source: Bloomberg, Credit Suisse

3M 1.26-1.30 0.93-0.97 1.20-1.24 80-84 103-107 0.81-0.85 1.52-1.56 8.48-8.52 1.01-1.05 6.13-6.33

12M 1.24-1.28 0.96-1.00 1.21-1.25 78-82 99-103 0.80-0.84 1.51-1.55 8.28-8.32 0.97-1.01 6.00-6.20

1.34 0.90 1.21 81 109 0.85 1.59 8.82 1.07 6.30

* = outlook: absolute total return direction

Commodities
Spot Gold (USD) Silver (USD) Platinum (USD) Oil (USD)
Spot prices: London close 24/02/2012 Source: Bloomberg, Credit Suisse

Real GDP growth and inflation in %

3M 1,800 33 1,800 110 12 M 1,900 31 1,900 115 CH EMU USA UK Japan GDP growth 2011E 1.9 1.7 1.8 0.9 -0.8 2012E 0.5 -0.2 2.1 1.0 1.7 2013E 1.5 1.0 2.3 1.5 1.2 Inflation 2011E 0.3 2.7 3.2 4.5 -0.2 2012E 0.4 1.5 1.4 2.5 0.0 2013E 1.0 1.5 1.7 2.0 0.1

1,772.45 35.40 1,713.00 109.77

Source: Credit Suisse

Global Research asset category strategy

By region/strategy Fixed income We overweight Eurozone (Germany) and UK; underweight Switzerland and USA; neutral on Australia, Canada and Japan. EM and UK are our key overweights, Europe is our main underweight. Precious metals, gold, WTI oil and energy outperform. Industrial metals neutral. Agriculture should underperform the overall index. USA, Asia-Pacific overweight; Switzerland, Europe (excl. UK, CH), Japan, EM neutral; UK underweight. Focus on secondaries, natural resources, small/medium LBOs, emerging markets and distressed investments. We upgrade hedge funds to overweight and keep our positive stance on global macro. EUR/USD (down), USD/CHF (up), GBP/USD (down), USD/JPY (flat) Comments and comparison of weightings We keep our focus on shorter maturities, given the low benchmark yield levels. We look to add further exposure to credits. We remain strategically positive on equities as fundamentals are positive. Tactically, we are cautious as Eurozone risks are still unresolved. Tactical view is now positive (stabilizing economic growth and improving technicals). Longer-term, positive fundamentals and attractive valuations should result in higher commodity prices. Real estate equities: We see further upside but near-term risks consolidation likely. Direct real estate: We are positive strategically, given low interest rates. Select private equity themes are particularly suitable to take advantage of the current economic environment. We overweight tactical trading strategies. Within tactical trading, we favor global macro. We remain bearish EUR/USD due to further rate cuts by the ECB, but short positions may lead to squeezes.
Source: Credit Suisse Investment Committee

Tactical 16 M

Strategic 612+ M

Equities

Commodities

Real estate

Private equity Hedge funds Foreign exchange

Investment Strategy

28/02/2012

Credit Suisse - Research Monthly

The 10 investment ideas for 2012

Fixed income 1. Core Corporates Status Action Invest in a diversified basket of solid corporate bonds of short/medium maturities (70% investment grade 30% BB credits). Invest in A/BBB-rated quasi-government credits: A) From Korea for more conservative investors; B) From China, India, Indonesia and Russia for investors with risk appetite. Invest in stocks that pay high and stable dividends. The CS Top 30 Index offers a vehicle for investing in quality stocks with strong balance sheets and brand-driven sales. Covered call writing strategy either on an existing position or go long a Buy-Write Index. Strategies can also be implemented through investing in funds, structured products and ETF/ETNs. Diversify out of USD and EUR into selected Asian currencies, JPY. Go long renminbi or proxies for the renminbi. Rationale Corporates with strong debt servicing capacity in developed markets offer attractive long-term investment opportunity. In periods of high volatility, emerging market quasi-governments should remain more resilient than similarly-rated credits in developed markets. High cash balances of many companies could mean higher dividend payouts. Suitable for less risk-taking investors. The Top 30 portfolio reflects our key strategic and thematic ideas in addition to the bottom-up views of our stock analysts. Short position in options are especially attractive when implied volatility is high. The option premium cushions downside moves in a portfolio.

2. Emerging market quasigovernment credits (*) Equities 3. High Dividend Stocks 4. CS Top 30 Portfolio

5. Volatility Strategies

Foreign Exchange 6. Diversifiers Holding cash may avoid market risk, but it is not riskless in terms of purchasing power. We recommend following a multi-currency cash management approach. The renminbi is undervalued. Additionally, renminbi is becoming increasingly accessible, a trend we expect to continue. Industrial metals should benefit from the gradual improving economic sentiment and attractive valuations. Suitable indices could be CSCB China Index and DB Mean Reversion Index. Gold should perform well in a low interest rate environment.

7. Renminbi Commodities (**) 8. Value Strategies

Focus on attractively valued commodities, such as industrial metals. Gold should also offer positive returns. Physically backed products also offer protection against counterparty/creditworthiness risk. Investments can be implemented through funds, structured derivatives and ETFs. Selected stocks of property holding companies offer value, or funds for direct exposure. For specialist investors: Outright exposure to commercial real estate in Australia, Singapore, Germany, France, Canada and selected US and LatAm markets. Buy EUR puts/USD calls or buy EUR puts/JPY calls. Buy long-dated AUD sovereign bonds (currency hedged). Buy S&P puts or, if too expensive, establish a bear put spread strategy. Buy out-of-the money oil call options. Buy Italian and Spanish government bonds, sell German Bunds, US Treasuries and Swiss government bonds.

Real Estate 9. Income Generators Rental yield remains attractive. Selected investments in commercial real estate offer value and are relatively stable investments.

What if... 10. ...things go badly wrong ...or surprise positively A gradual worsening of the Euro debt crisis and recession in the Eurozone would weaken the EUR. AUD rates would rally sharply. If the crisis in the Eurozone is not contained, major banks could be undermined, possibly leading to US and even EM recession. Call options on oil should benefit if Middle East conflicts escalate, but also gain in case growth surprises to the upside. Valuations are less attractive but in case of a rapid resolution of the Euro crisis, e.g. the creation of a Eurobond market, bonds in high debt countries would perform strongly.

(*) We are also recommending selected high yield and senior bonds of the top European banks including from Italy and Spain. (**) Our Hedge Fund Barometer has improved and we have become strategically positive on hedge funds, with preference for global macro. Source: Credit Suisse

Economics

28/02/2012

Credit Suisse - Research Monthly

Economics

Better indicators, better data

ing (e.g. Greece and Portugal). However, the European Central Banks provision of unlimited amounts of liquidity to European banks for up to three years has been a game changer for Europes growth outlook. Banks funding conditions have been substantially improved and thus the risk of a major shock from a severe credit crunch has been removed. This has supported sentiment in financial markets and business survey measures in Europe and beyond. While we think the data should improve from here on, the adjustment process in the European banking industry and fiscal tightening should weigh on growth in several countries. Central banks remain in expansion mode In addition to the bold moves by the ECB, other central banks also remain very expansionary. The Bank of Japan announced an increase in its asset purchase program and will buy almost the entire issuance of government bonds this year and could announce bigger purchases to meet its newly defined inflation target of 1%. The Bank of England also increased asset purchases by another GBP 50 bn, but now looks less likely to do more. As we expected, emerging market central banks are also reacting to falling inflation numbers. China has lowered reserve requirements for banks and several other countries have either cut their policy rates or are likely to do this soon (e.g. India). Finally, the Fed may opt for more asset purchases in the coming months, targeted at financing conditions in the housing market, e.g. by buying mortgage-backed securities. (24/02/2012)

Business surveys point to stronger global momentum; oil a modest risk for now.

Global central banks continue to be very supportive.

Thomas Herrmann thomas.herrmann@credit-suisse.com, +41 44 333 50 62

Global growth improving The global backdrop looks much better than in the second part of 2011. Not only the surveys, but also the hard data releases are improving. US jobless claims are close to a fouryear low, global manufacturing output data has picked up and key demand indicators like car sales have also improved. If the trend in oil prices continues, this will pose a risk to the growth outlook, but our base case is that oil price pressure should recede again. ECB support significantly reduces downside risks With few exceptions, activity in several European economies declined in Q4 2011. Not surprisingly, the declines were especially pronounced in countries most affected by fiscal tighten-

US surveys and data improving US regional business surveys (e.g. Philly Fed) have continued to improve, which is reflected in better labor market conditions.
'000 Index

700 650 600 550

40 30 20 10 0

500 -10 450 -20 400 350 300 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 -30 -40 -50 Jan 12

US Initial Jobless Claims

Philadelphia Fed Index (rhs)

Source: Bloomberg, Datastream, Credit Suisse

Economics

28/02/2012

Credit Suisse - Research Monthly

Selected ideas from previous months

February 2012 (31/01/2012) Recommendation BUY Upside risk scenario basket: High beta companies that are trading over 40% below their 5-year average P/E multiple and stand to benefit from a spike in investor risk appetite. BUY Out-of-the-money call options for Brent oil: Brent for future delivery trades at a discount to current spot. The trade can be used as a hedge against a possible oil supply shock. BUY Samsung Electronics: Benefits from strong growth in the smartphone market. BUY Lenovo: Dominant position in Chinas fast-growing PC market. BUY Brasil Foods: Owns several popular brands in Brazil. Its subsidiary, Sadia, is one of the most recognized brands in the Middle East. BUY Nokia: Recent addition to the CS Top 30 an underperformer last year; there is scope to further restructure and build on the Microsoft relationship. BUY Mirvac Group: Australian REIT with attractive dividend yield. December 2011/January 2012 (29/11/2011) Recommendation BUY Roche: An innovation leader in pharma, frequently listed among the worlds top R&D spenders. November 2011 (25/10/2011) Recommendation BUY Casino 4.472% 04/16 in EUR. BUY Standard Chartered 3.875% 10/16 in EUR. BUY HeidelbergCement 9.5% 12/18 in EUR. BUY Sunrise 7% 12/17 in EUR. BUY Microsoft a CS Top 30 pick, defensive means of gaining exposure to IT sector growth. BUY Dynamic Dividends basket. HOLD Novozymes: Producer of commercial enzymes for turning agricultural waste into energy with strong ESG performance. BUY Hyflux: Leading provider of integrated water management with a strong presence in Asia. BUY Global macro hedge fund exposure.
FI Fixed income, EQ Equities, AI Alternative investments, FX Foreign exchange For further information, including disclosures with respect to any other issuers, please refer to the Credit Suisse Global Research Disclosure site at: http://www.credit-suisse.com/research/disclaimer Source: Credit Suise

Action to be taken EQ HOLD

AI

HOLD

EQ EQ EQ EQ AI

HOLD HOLD Add exposure. Add exposure. Add exposure.

Action to be taken EQ Keep adding exposure, especially on weakness

Action to be taken FI FI FI FI EQ EQ EQ EQ AI After a rally, move to HOLD. Restricted Add exposure. Add exposure. Add exposure. Add exposure. HOLD HOLD BUY a diversified portfolio of global macro hedge funds.

This months featured topic

28/02/2012

Credit Suisse - Research Monthly

This months featured topic

Lessons from history the CS Investment Returns Yearbook 2012

cently published CS Investment Returns Yearbook. With stock, bond and inflation data over 112 years and spanning 19 countries, the Yearbook is the most comprehensive source of investment returns, and provides a reassuring insight into how todays investment challenges can be resolved with the benefit of historical analysis. Eurozone crisis looms With the Eurozone crisis at the back of our minds, and together with Professors Paul Marsh and Elroy Dimson of the London Business School, we have addressed two specific topics that confront investors today. Simply put, the first of these topics is what assets perform best in periods of inflation and deflation. This issue is particularly relevant at this point for investors who, on the one hand, may worry that structural economic adjustments in Europe and in the USA could lead to temporary deflation, but also simultaneously expect central banks quantitative easing to increase long-term inflation risks. The Yearbook finds that equities have on average delivered double-digit returns in excess of inflation when inflation was below 2%, single-digit excess returns over inflation when inflation was between 2% and 8%, and failed to fully protect against a loss of purchasing power (negative total returns) when inflation was above 8%. Inflation-linked bonds (ILBs) and gold are the only asset classes in our study that have returns positively correlated with inflation and they usually outperform when it is high. They therefore provide partial inflation hedging. Conventional bonds have real returns that are negatively correlated to inflation and therefore do least well when inflation picks up. Currency hedging effective as a way to reduce volatility The second topic is whether or not to hedge currency risk across an investment portfolio. The Yearbook shows that cross-border investments help to reduce portfolio volatility for equities, while it increases volatility in bond portfolios. Over a 1-year horizon, currency hedging is found to be particularly effective in global bond portfolios as a way to reduce volatility. These results argue for a higher home bias in bond portfolios than in equity portfolios. Copies of the CS Investment Returns Yearbook are available upon request from relationship managers. (24/02/2012)

Gold, inflation linked bonds and to some extent equities are good hedges against inflation while it stays modest.

Over a 1-year horizon, currency hedging appears to be particularly effective as a way to reduce volatility.

Michael O'Sullivan Head of Portfolio Strategy & Thematic Research michael.o'sullivan@credit-suisse.com, +44 20 7883 8228

For investors who are wearily becoming used to the stress testing of the euro and who may now be accustomed to the dizzying swings in market outlook from deflation to inflation, one week not to mention one year is a long time. At the same time, it can be argued that the longer the time frame one considers, the better the sense of perspective an investor gets. In this respect, we highlight some of the key findings from the re-

10

Investment theme

28/02/2012

Credit Suisse - Research Monthly

Investment theme

Revisiting the Eurozone scenarios

Greek deal further reduces contagion risks In February 2012, after months of wrangling, all the parties concerned, i.e. the EU, IMF, ECB, Greek authorities and private creditors finally agreed on a new deal, which combines a further EUR 130 bn to fund Greek deficits and banks, with stricter conditions regarding Greek reforms and a significant write-down of the debt held by private creditors. While some details remain open at the time of writing, this deal significantly reduces the risk of an uncontrolled default by Greece and thereby renewed contagion to other borrowers. Core scenario 2012: Further stabilization with ECB support Our core scenario for 2012 foresees further stabilization in the Eurozone. The interventions by the ECB as well as the Greek deal have begun to reverse the financial shock of 2011 and thereby the risk of a severe credit crunch. Confidence of investors, companies and households has begun to recover. While economic activity will remain subdued, especially in the countries where credit costs are still high and fiscal tightening is severe, the risk of a negative economic spiral in the Eurozone has been significantly reduced. However, continued structural weaknesses of banks and public finances in many countries and the limited size of the financial support funds (EFSF, ESM) provided by strong countries imply that financial stability is not fully assured. It is therefore crucial that the ECB remains ready to provide support to banks and possibly sovereign bond markets when needed. Remaining risks: Portuguese restructuring, Greek exit There are still a number of risks associated with this fairly constructive core scenario. In the case of Portugal, which is already a recipient of financial assistance, it remains unclear whether debt sustainability can be achieved within the agreed time-frame and support program. Renegotiating the package might cause renewed uncertainty, especially if private creditors are once again asked to accept a haircut. Second, it is still far from clear whether Greece will actually achieve the targets set. If it once again fails to do so, opposition to a further bailout could increase. Pressure on Greece to leave the Eurozone could be the result. Paradoxically, the firewall provided by the ECB reduces the fear of a Greek exit and thus the potential pressure on Greece to depart. If that were to happen, financial turmoil might still, however, be substantial. (24/02/2012)

Oliver Adler Head of Global Economics & Real Estate Research oliver.adler@credit-suisse.com, +41 44 333 09 61 Thomas Herrmann thomas.herrmann@credit-suisse.com, +41 44 333 50 62

2011: Bond-and-bank run halted by the ECB The Euro crisis reached a climax in H2 2011. The failure of Greece to achieve its fiscal targets and the unwillingness of the Berlusconi government to implement reforms led to a severe sell-off in peripheral bonds: an added reason was the insistence of various governments to impose a larger haircut on private creditors of Greece. Owing to their heavy sovereign bond exposure, banks in southern Europe came under massive pressure. Depositors exacerbated the situation by withdrawing funds from the banks and shifting them to the north, forcing the banks to sell assets, including government bonds. This capital flight from the bonds and banks in the south was only halted by the decisive intervention of the European Central Bank (ECB) in December, where banks were offered huge loans at attractive rates and for an extended period.

11

Credit Suisse Megatrends

28/02/2012

Credit Suisse - Research Monthly

Credit Suisse Megatrends

Water efficiency

The scope of global water stress Global water stress is emerging as an immediate environmental risk. In its most recent Global Risk Report, the World Economic Forum (WEF) asserts that respondents to the Global Risks Survey consider a water supply crisis to be the most likely and most severe societal risk for the next ten years. According to the Food and Agricultural Organization (FAO) 2.8 billion people are currently at risk of water shortage and, with global demand expected to grow further, two thirds of the worlds population are expected to live under water-stressed conditions by 2025. Social and economic consequences of water scarcity and pollution The economic, social, and environmental impact of unsustainable water usage can hardly be ignored. First, access to water is at the heart of food security. Agriculture still accounts for over two thirds of global water withdrawal. While irrigation systems have made large areas accessible to production, the dependency on renewable water resources originating from outside sources renders water scarce countries vulnerable to conflict, e.g. between neighboring up- and downstream countries. Moreover, governments are increasingly acknowledging that unsustainable water usage constrains economic growth. In China, for instance, the World Bank estimates that water-related inefficiencies may curtail GDP by over 2% even today. The role of technology The market for water-related technologies is multi-faceted and still in its early life cycle stage. For instance, water obtained through desalination accounts for 0.13% of total water withdrawal, and even reused wastewater accounts for only 2.4%, according to the FAO. Given the multitude of water-related risks, we expect the markets for water infrastructure and treatment systems to grow significantly over the coming years. Hyflux is among the leaders in integrated water management and solutions. Companies with strong management capacity to handle water stress are likely to outperform There are so many water-intensive sectors (semiconductors, food producers, beverages, utilities) that investors cannot exclude them all simply on the grounds of water-related risks. Accordingly, we advise investors to focus on companies like SABMiller who have a proven management record of addressing water stress. (28/02/2012)

Global water stress represents a major environmental risk to society and business alike.

We favor producers of energy-efficient technologies for water treatment and companies with strong managerial capabilities to handle water-related issues.

Markus Stierli markus.stierli@credit-suisse.com, +41 44 334 88 57

Buy

Sustainable water management: SABMiller The company is highly acclaimed for its managerial capability to handle water-related issues. Water treatment: Hyflux

Hold Leading provider of integrated water management

and environmental solutions.

12

Fixed income

28/02/2012

Credit Suisse - Research Monthly

Fixed income

Favor selected corporate, bank, EM and euro-periphery credits

Credits should benefit from additional central bank accommodation (e.g. the European Central Banks next LTRO).

Market update and outlook The rally in credits continued in February, although uncertainties surrounding the Greek debt restructuring nourished market volatility. While the agreement on the second bailout removed fears of a disorderly default in the short term, it does not rule out a future credit event in light of the current austerity programs optimistic assumptions and is thus likely to remain a source of market concern. Nevertheless, the next 3-year longterm refinancing operation (LTRO) by the ECB should help to alleviate bank funding pressures further, leading to a further decrease in systemic risk. As the banking sector represents a contingent liability on sovereigns, further normalization in the sector should lead to lower sovereign spreads. Moreover, additional accommodation from other major central banks is likely to support the global economic recovery and as such risky assets. In this environment, benchmark government bond yields (i.e. on US Treasuries and Bunds) should increase, but only gradually. Still, the high carry on several EMU sovereign bonds (i.e. Italy, Spain) should keep total returns for European government bonds in positive territory. In credits, we expect spreads to tighten further, benefiting lower-rated and financial issuers in particular. Emerging market bonds are also likely to post attractive returns, in our view. Strategy In terms of duration, we are keeping our recommended maturities unchanged, favoring short-to-medium maturities. While we continue to prefer corporate bonds to government bonds, we still have selected BUY recommendations on Italian and Spanish sovereign bonds. Additionally, short-dated bank bonds from national champions in Italy and Spain also offer interesting investment opportunity, in our view (e.g. Intesa Sanpaolo 4% 08/2013 in EUR). While subordinated bank debt could benefit from a further decline in risk aversion, we maintain our relatively cautious stance on the asset class, with potential dividend cuts and enhanced extension risk likely to weigh on performance. In credits, we also continue to recommend a mix of investment grade and high-yield corporate bonds (please refer to our core corporate bond baskets, which we update regularly to take interesting new issues into account). In contrast, we remain negative on Portugal and would take the opportunity to exit after the recent rally. In emerging markets, our preferred countries are Peru, Poland, Russia, and among the high yielders Venezuela. (24/02/2012)

Financials and lower-rated corporate issuers set to outperform.

Sylvie Golay Markovich sylvie.golay@credit-suisse.com, +41 44 334 54 37

Buy

National champion from Italy: Intesa Sanpaolo 4% 08/2013 in EUR Systemically important financial institution. Attractive pick up versus UK Gilts: GE CAPITAL 4.735% 7/2019 in GBP Backed by one of the strongest industrial business profiles.

Buy

13

Fixed income

28/02/2012

Credit Suisse - Research Monthly

Selected bond recommendations

ISIN Curr. Issuer Rating Coup. Maturity Min. denomination/increment (in 1000) 5/5 5/5 5/5 5/5 2/2 1/1 200 / 1 200 / 1 100 / 100 1/1 100 / 1 1/1 100 / 1 100 / 100 1/1 1/1 1/1 2/2 1/1 200 / 10 2/1 10 / 10 10 / 10 5/5 5/5 5/5 5/5 100 / 1 50 / 50 2/1 150 / 1 1/1 0.1 / 0.1 Vol. (m) Ask price (1) YTM/ YTC (%) Benchmark spread Duration

CHF CH0126325502 CH0104007692 CH0149058163 CH0146796062 USD XS0705646452 US172967FY29 US02666RAW16 XS0742215568 EUR XS0742590739 XS0731679907 XS0683565476 XS0732496194 XS0740795041 XS0736488585 XS0234434222 Others XS0732930226 XS0739933421 XS0740772420 XS0741177595 AU3CB0188951 XS0752421585 XS0733013519 XS0752103530 EM/Below IG CH0142821377 CH0123431709 CH0140684512 CH0142132049 XS0548101723 XS0686703736 USU31434AB68 USG92903AA47 XS0451394331 MX0SGO000056 CHF CHF CHF CHF USD USD USD USD EUR EUR EUR EUR EUR EUR EUR GBP GBP GBP AUD AUD AUD SEK NOK CHF CHF CHF CHF EUR EUR USD USD MXN MXN LLOYDS TSB BANK PLC REPUBLIC OF POLAND METRO AG GENERAL ELEC CAP CORP BK NEDERLANDSE GEMEENTEN (3) CITIGROUP INC (3) AMERICAN HONDA FINANCE (3) WHARF FINANCE LTD (3) INTESA SANPAOLO IRELAND VOLKSWAGEN INTL FIN NV COMPAGNIE DE ST GOBAIN UBS AG LONDON LLOYDS TSB BANK PLC CRH FINANCE BV HENKEL AG & CO KGAA (5) VOLKSWAGEN INTL FIN NV (3) BMW FINANCE NV GE CAPITAL UK FUNDING RABOBANK NEDERLAND COMMONWEALTH BANK AUST (3) NATIONAL AUSTRALIA BANK DAIMLER CANADA FINANCE INTL BK RECON & DEVELOP GAZPROMBANK (EURBOND FIN VNESHECONOMBANK(VEB) HEIDELBERGCEMENT FINANCE (3) SWISS REINSURANCE CO LTD SUNRISE COMMUNICATIONS I (3) HEIDELBERGCEMENT FINANCE (3) FRESENIUS MED CARE II (2,3) UPCB FINANCE VI LTD (3) INTL BK RECON & DEVELOP MEXICAN UDIBONOS A/A1 A-/A2 n.a./Baa2e AA+/Aa2e AAA/Aaa n.a./A3e A+/n.a. n.a. BBB+/A2 A-/A3 BBB/Baa2 A/Aa3 A/A1 BBB/Baa1 A-/A3 A-/A2 AA+/n.a. AA/Aaa n.a./Aaa AA-/Aa2 A-/A3 n.a./Aaae BB+/Baa3 BBB/NR BB/(P)Ba2 AA-/A1 BB/Ba3 BB/Ba2 BB/Ba2 B+/Ba3 AAA/Aaa A-/Baa1 2.500 15/04/14 3.000 23/09/14 1.875 02/05/16 1.625 19/10/17 1.000 17/11/14 2.650 02/03/15 2.125 28/02/17 4.625 08/02/17 4.000 08/08/13 2.125 19/01/15 3.500 30/09/15 3.125 18/01/16 4.625 02/02/17 5.375 25/11/04 2.125 19/12/14 3.375 14/12/18 4.375 31/07/19 5.500 03/02/16 5.750 25/01/17 6.000 06/03/17 3.125 20/01/15 2.375 02/03/17 4.375 09/12/13 3.750 17/02/16 7.250 14/11/17 7.250 Perpetual 500 750 225 500 2'000 1'250 750 900 1'500 1'500 1'000 1'500 1'500 500 1'300 200 750 625 150 2'000 125 1'000 1'000 420 500 150 320 371 500 800 750 3'750 13,257 100.75 102.30 100.31 102.35 99.66 100.02 100.70 103.37 100.61 101.49 104.53 101.14 99.86 105.71 104.15 100.71 102.38 102.59 98.57 100.00 100.56 100.25 99.75 102.75 99.95 109.75 103.64 106.99 116.91 107.07 100.88 103.75 109.74 2.13 2.07 1.80 1.19 1.13 2.64 1.98 3.87 3.57 1.59 2.17 2.81 4.66 4.03 4.15 1.86 2.98 3.97 5.92 5.75 5.78 3.03 2.43 2.76 3.76 5.25 6.45 5.34 6.38 4.49 6.73 3.91 1.75 217 206 170 91 79 226 111 305 332 123 170 226 384 277 382 143 160 240 212 202 202 197 55 278 373 502 624 474 528 299 514 -79 -367 2.0 2.4 4.0 5.4 2.7 2.9 4.7 4.4 1.4 2.8 3.3 3.6 4.3 5.8 3.3 2.7 6.0 6.2 3.4 4.2 4.3 2.7 4.7 1.7 3.6 4.6 4.4 4.1 5.0 6.1 6.0 1.4 5.3

BBB+/Baa1 5.000 25/01/19

7.000 31/12/17 9.500 15/12/18 5.625 31/07/19 6.875 15/01/22 6.500 11/09/13 3.500 14/12/17

For the detailed analysis accompanying the recommendations listed, please refer to the latest Global Research Credit Updates and Investment Ideas. 1) Indicated prices as of 24 February 2012; 2) Subject to withholding tax; 3) Semi-annual coupon; 4) Quarterly coupon; 5) Subordinated debt, yield to call, duration to call; 6) Subordinated debt, Tier-1, yield to call, duration to call; 7) Subordinated debt, LT2; 8) e = Expected Rating, subject to final documentation / n.a. = not applicable / NR = not rated; 9) 3M-LIBOR in respective currency Source: Credit Suisse

14

Equities

28/02/2012

Credit Suisse - Research Monthly

Equities

Hitting new highs

To further support this view, our 12-month forward target for the S&P 500, which is driven by single-digit earnings growth in the next two years and a modest outlook for volatility, is 1343. Our experience is that markets typically spend little time close to fair value, but tend to over- and undershoot, depending on risk appetite and sentiment. For the time being, the markets tendency to overshoot toward our optimistic target of 1440 may be limited. Earnings season has been weak In particular, market volumes have waned, and the relative outperformance of riskier sectors compared to safer ones has looked stretched. Perhaps more importantly from a fundamental point of view, the US earnings season has proven to be the worst on record since 1998. With over 80% of the S&P 500 companies having reported Q4 earnings, only 64% have beaten estimates, which is well below the long-term average of 70%. Thus, in the short term, we would not be surprised to see some consolidation in equity markets, in particular as US and German bond yields have stubbornly remained at low levels, signaling a more conservative outlook.

Merger activity, central banks and risk appetite support strategic outlook.
Michael O'Sullivan Head of Portfolio Strategy & Thematic Research michael.o'sullivan@credit-suisse.com, +44 20 7883 8228

Buy

Key Credit Suisse Top 30 stock: Vodafone Resilient cash flow, attractive dividend

Since the beginning of the year, key equity indices such as the S&P 500 have returned as much as we would reasonably expect in a given year. Both the CS Investment Returns Yearbook and our Capital Market Assumptions forecasts pinpoint 8% as the level of return that US equities might on average achieve within a year. As such, this benchmark implies that the equity rally may be over-extended, at least in the short term.

Strategic view at a glance At the same time, there have been a number of new developments with a more strategic focus. The first is the pick-up in merger and acquisition activity this year with proposed deal reaching USD 212 bn globally to date. The second factor that continues to impress is the resilience of the US economy, and by extension corporate America. The housing market is stabilizing, the jobs market awakening and consumer spending is steady. Over half of the 30 companies in our CS Top 30 portfolio are US-based, and this allocation has helped to drive recent outperformance. Finally, with an eye on the rest of this quarter, we flag recent notes on the possible impact of politics on markets (Research Alert 2012 Year of the election, 31 January 2012). With Mr. Xi J Jinping, possibly the next Chinese leader, just back from a visit to the USA, and the French election campaign in full swing, the Republicans still debating their candidate and Vladimir Putin waiting patiently for the Russian election, the political process could have a decisive bearing on equity returns this year. (24/02/2012)

15

Equities

28/02/2012

Credit Suisse - Research Monthly

Global equity sector strategy and focus list

Sector (weight strategic) Industry (weight strategic) Europe (U) / UK (O) Switzerland (N) USA (N) Latin America (N) / Emerging Europe & Africa (N) Sasol*, Gazprom+*, Pacific Rubiales+* Mexichem*, SQM* Buenaventura* Naspers* AmBev* Brasil Foods*, Cosan* Asia ex Japan (O) / Japan (N) / Australia (U)

Energy (O)

Energy (O)

Royal Dutch Shell, BG Group+ BASF Rio Tinto BMW Adidas SAB Miller Danone British American Tobacco Henkel Preferred, Reckitt Benckiser Fresenius Pref Bayer

Chevron, Anadarko Petroleum, Halliburton Freeport+ General Electric, Deere & Co. Wal-Mart Coca-Cola Kraft Foods Philip Morris International Procter & Gamble Teva+, Merck & Co. -

Banpu+*, China Coal Energy+*, Origin Energy+, Petrochina+ Semen Gresik Rio Tinto Limited IJM, United Tractors*, Komatsu, Mitsui & Co.+ Air China+ Indofood Sukses+* Japan Tobacco -

Materials (N)

Chemicals (N) Construction Materials (N) Metals & Mining (N) Pulp & Paper (N)

Clariant Schindler PC Richemont Nestl, Lindt & Sprngli -

Industrials (U)

Capital Goods (N) Commercial Services & Supplies (U) Transportation, incl. Logistics (U)

Consumer discretionary (U)

Automobiles & Components (U) Consumer Durables & Apparel, Textiles, Apparel & Luxury (N) Hotels, Restaurants & Leisure (N) Media (N) Retailing (U)

Consumer staples (O)

Food & Staples Retailing (O) Beverages (O) Food Products (N) Tobacco (O) Household & Personal Products (N)

Healthcare (U)

Healthcare Equipment & Services (U) Biotechnology (N) Pharmaceuticals (U)

Tecan Roche (Genussscheine), Novartis UBS+

Financials (O)

Banks (N)

Barclays

Sberbank*, Banco Bradesco+*

ANZ Bank, BOC Hong Kong, HDFC Bank Limited*, Bangkok Bank+*, China Construction Bank+*, Sumitomo Mitsui Financial Group+ -

Diversified Financials (N) Insurance (O)

Allianz+

Zurich Financial Services, Swiss Re -

Real Estate (N) IT (O) Software & Services (O) Technology Hardware & Equipment (N) Semiconductors & Semiconductor Equipment (N) Telecom services (U) Utilities (N) Diversified Telecoms (U) Wireless Telecoms (N) Utilities (N)

SAP Nokia BT Group -

Microsoft, Google Apple Inc, Cisco -

Sun Hung Kai Properties, Frasers Centrepoint Trust Lenovo* -

Legend to weights: O: Overweight, N: Neutral, U: Underweight * = Emerging Markets focus list. This is our sector strategy and focus list as of 24 February 2012 recommended by Credit Suisse, Private Banking division. Our sector strategy shows our sector preferences with recommendations relative to regional benchmarks: Global: (MSCI World in USD), Europe (MSCI Europe in EUR), Switzerland (Swiss Market Index in CHF), USA (S&P 500 in USD), Asia/Pacific (MSCI AC Asia/Pacific in USD). An overweight (underweight) is a recommendation to invest more (less) than in a neutral position indicated by the market-cap weights of the respective benchmarks. The sector weights as well as the neutral positions in figures are available upon request; please contact your relationship manager. The Focus List is a selection of our favorite stocks within our coverage. The selection was made to reflect the sector and regional preferences. Updates are provided via our Research Monthly and Research Weekly publications as well as in our Equity Research reports. Additionally, we publish our adds and drops in our Research Equity Daily. The changes are marked with a plus sign (+). For further information, including disclosures with respect to any other issuers, please refer to the Credit Suisse Global Research Disclosure site at: http://www.creditsuisse.com/research/disclaimer. Please note that trading facilities in certain securities may be limited. Source: Credit Suisse

16

Alternative investments

28/02/2012

Credit Suisse - Research Monthly

Alternative investments

Easing systemic risks support alternative investments

vironment for hedge fund investments. We upgrade our strategic view to positive. On a style level, we remain positive on tactical trading, with a clear preference for global macro. Real estate equities: Further upside potential Real estate equities started well into 2012, with more volatile markets such as emerging markets and Asia ex-Japan regions outperforming. Valuations of property stocks have now become richer. But selected companies remain attractive strategically (612+ months) as they offer appealing income yields. Given the prospects for overall equity markets, we recommend moderate risk exposure, prefering property stocks in the USA and Australia. Commodities: Stabilizing growth is supportive Commodities also started the year well. Liquidity injections of central banks have eased funding stress. Combined with improving indicators for economic growth, this is supportive. We expect further gains, particularly for undervalued markets such as industrial metals. Given the commitment of central banks to keep yields low, gold also offers some upside potential. Oil prices are richly valued and upside seems limited. However, given elevated geopolitical risks, oil prices should be able to maintain current prices. Private equity: Opportunities in natural resources Over the last few years, producing commodities has become ever more capital intensive and commodity producers have turned to innovative ways of raising capital. Private equity is one way. Private equity investments in the natural resource segment have relatively high return multiples and projects tend to have large economies of scale. We see exploration and production, corporate carve-outs, asset acquisitions and companies in distress as particularly interesting. (23/02/2012)

Improving liquidity and stabilizing growth support alternative investments.

Hedge funds and commodities benefit the most.

Tobias Merath Head of Global Commodity Research tobias.merath@credit-suisse.com, +41 44 333 13 62

Buy

Hedge funds: Increase exposure With systemic risks easing, the market environment for hedge funds is improving.

The Hedge Fund Barometer has improved significantly Benefiting from easing monetary policy Systemic risks and waning liquidity were the main problems for alternative investments (AIs) in 2011. In the meantime policymakers have started to address these issues, and the financial system now looks much more stable than it did a few months ago. AIs also look set to benefit. For hedge funds and commodities, in particular, the environment is improving. Hedge funds: Easing headwinds Hedge funds had a positive start into the year, with the DJ CS Hedge Fund Index up 2.3% in January. The headwinds of 2011, such as high volatility, low liquidity and high cross asset correlations have eased substantially. Our Hedge Fund Barometer has improved significantly, now indicating a favorable en5.5 Dangerous Conditions 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 Favorable Conditions 1.0 Jul 94 Jul 96 Jul 98 Jul 00 Jul 02 Jul 04 Jul 06 Jul 08 Jul 10

Hedge Fund Barometer

Smoothed 13 weeks

Source: Credit Suisse / IDC

17

Foreign exchange

28/02/2012

Credit Suisse - Research Monthly

Foreign exchange

Hard currencies continue to get softer

positive outlook for commodity prices, the commodity-related currency bloc may outperform. Although we remain bearish on the Australian dollar strategically, due to its extremely rich valuation, the cyclical fundamental picture now appears more neutral than negative, as we no longer expect the Reserve Bank of Australia to cut interest rates. We thus use current AUD weakness to add a small tactical long position, alongside our favored exposure to the Canadian dollar. Among emerging markets, relative value in Asia, attractive yields in Latin America and highly selective opportunities in EMEA remain our key themes. We continue to expect LatAm currencies to outperform other EM currency blocs in 2012, but strong appreciation in recent weeks has increased intervention risks for CLP, COP and BRL. We think MXN will outperform due to its relative undervaluation and lesser apparent intervention risk. In EMEA, we reiterate our fundamentally positive views for PLN, CZK and ZAR. (23/02/2012)

JPY positions cut to underweight, as BoJ undermines real rate support for JPY.

USD-based model currency portfolio The portfolio is built from the center outwards. The base currency is shown in the middle, surrounded by the long-run Core Diversification to major liquid currencies and gold. The Strategic Allocation follows, diversified into preferred currencies based on our strategic currency views. The outer layer shows the Optimal Portfolio, which considers also our tactical views.
AUDXAU SGD XAU SGD JPY GBP SEK JPY GBP SEK
EUR

Among emerging markets, relative value in Asia, attractive yield in Latin America and selected opportunities in EMEA are our key themes.

Joe Prendergast Currency, Commodity and Alternative Investment Research joe.prendergast@credit-suisse.com, +41 44 332 83 18

JPY

USD base
USD

EUR EUR CAD CAD

USD USD

Positive economic surprises in the USA, rapid deterioration in Japans trade surplus and the introduction of an inflation target by the Bank of Japan are undermining the support of high Japanese real interest rates and lead us to downgrade our view on the Japanese yen. Our favored cash currency portfolio thus reduces core holdings in yen, now moving from overweight last month to underweight both strategically and tactically. With our US dollar view remaining neutral at this time, other currency positions are generally increased. While the euro may benefit from further bouts of short-covering, we remain cautious given its relatively rich levels of valuation and its fading rate support, preferring to spread European exposure to other, cheaper currencies such as the British pound or the Swedish krona, the latter of which also benefits from better interest rate support. We avoid the Swiss franc, where SNB commitment to 1.20 per euro floor remains solid. Amid stronger growth and a more

Core Diversification Americas USD EUR 62% 20%

Strategic Allocation USD CAD EUR SEK GBP CHF NOK 62% 3% 10% 6% 3% 0% 0% 9% 3% 0% 0% 4%

Tactical Overlay 0% 0% -2% -2% 0% 0% 0% -1% 3% 2% 0% 0%

Optimal Portfolio USD CAD EUR SEK GBP CHF NOK JPY SGD AUD NZD XAU 62% 3% 8% 4% 3% 0% 0% 8% 6% 2% 0% 4%

Europe

AsiaPacific

JPY

15%

JPY SGD AUD NZD

Gold

XAU

3%

XAU

Source: Credit Suisse

18

28/02/2012

Credit Suisse - Research Monthly

Disclosure Appendix
Analyst certification The analysts identified in this report hereby certify that views about the companies and their securities discussed in this report accurately reflect their personal views about all of the subject companies and securities. The analysts also certify that no part of their compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Knowledge Process Outsourcing (KPO) Analysts mentioned in this report are employed by Credit Suisse Business Analytics (India) Private Limited. Important disclosures Credit Suisse policy is to publish research reports, as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. The Credit Suisse Code of Conduct to which all employees are obliged to adhere, is accessible via the website at:
https://www.credit-suisse.com/governance/doc/code_of_conduct_en.pdf

Company

Rating HOLD

Date 11/02/2011 20/01/2012 05/12/2011 02/11/2011 11/08/2011 02/05/2011 21/01/2011 02/02/2012

NOVOZYMES (B SHARES) HOLD (NZYMB DC) HOLD HOLD HOLD HOLD HOLD ROCHE (GENUSSSCHEINE) (ROG VX) BUY

BUY BUY BUY BUY BUY BUY BUY BUY SABMILLER (SAB LN) BUY BUY BUY BUY BUY BUY BUY SAMSUNG ELECTRONICS HOLD (005930 KS) BUY BUY BUY BUY STANDARD CHARTERED PLC (STAN LN) HOLD BUY BUY BUY BUY BUY BUY BUY BUY BUY HOLD HOLD

01/02/2012 14/10/2011 13/10/2011 22/07/2011 21/07/2011 30/06/2011 14/04/2011 14/02/2011 09/02/2012 20/01/2012 18/11/2011 22/09/2011 24/05/2011 19/05/2011 18/11/2010 08/02/2012 28/11/2011 01/08/2011 04/05/2011 09/02/2011 06/02/2012 21/02/2012 13/02/2012 09/02/2012 09/11/2011 08/11/2011 29/07/2011 22/07/2011 07/07/2011 30/06/2011 18/05/2011 10/02/2011

For more detail, please refer to the information on independence of financial research, which can be found at:
https://www.credit-suisse.com/legal/pb_research/independence_en.pdf

The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which is generated by Credit Suisse Investment Banking business.

Equity rating history as of (28/02/2012)

Company BRASIL FOODS ADR (BRFS US) HYFLUX (HYF SP) Rating BUY BUY HOLD BUY BUY BUY LENOVO (992 HK) BUY BUY BUY BUY BUY MICROSOFT (MSFT US) BUY BUY BUY BUY BUY BUY BUY BUY MIRVAC GROUP (MGR AU) BUY BUY BUY NOKIA OYJ (NOK1V FH) BUY BUY HOLD HOLD HOLD HOLD HOLD Date 01/11/2011 12/08/2011 24/02/2012 10/11/2011 05/05/2011 22/12/2010 13/01/2012 22/08/2011 31/05/2011 01/03/2011 11/11/2010 24/01/2012 20/01/2012 21/10/2011 22/07/2011 11/05/2011 05/05/2011 29/04/2011 31/01/2011 23/02/2012 01/09/2011 23/02/2011 27/01/2012 05/01/2012 27/10/2011 21/07/2011 10/06/2011 31/05/2011 21/04/2011

VODAFONE (VOD LN)

The subject issuer (BRASIL FOODS ADR, LENOVO, MICROSOFT, NOKIA OYJ, ROCHE (GENUSSSCHEINE), SABMILLER, SAMSUNG ELECTRONICS, STANDARD CHARTERED PLC, VODAFONE ) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (BRASIL FOODS ADR, LENOVO, MICROSOFT, NOKIA OYJ, ROCHE (GENUSSSCHEINE), SABMILLER, SAMSUNG ELECTRONICS, STANDARD CHARTERED PLC, VODAFONE ) within the past 12 months. Credit Suisse provided non-investment banking services, which may include Sales and Trading services, to the subject issuer (MICROSOFT, NOKIA OYJ, ROCHE (GENUSSSCHEINE), STANDARD CHARTERED PLC) within the past 12 months. Credit Suisse has managed or co-managed a public offering of securities for the subject issuer (MICROSOFT, NOKIA OYJ, ROCHE (GENUSSSCHEINE), STANDARD CHARTERED PLC) within the past three years. Credit Suisse has managed or co-managed a public offering of securities for the subject issuer (STANDARD CHARTERED PLC) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject issuer (BRASIL FOODS ADR, LENOVO, MICROSOFT, ROCHE (GENUSSSCHEINE), SABMILLER, STANDARD CHARTERED PLC) within the past 12 months. Credit Suisse has received compensation for products and services other than investment

19

28/02/2012

Credit Suisse - Research Monthly

banking services from the subject issuer (MICROSOFT, NOKIA OYJ, ROCHE (GENUSSSCHEINE), STANDARD CHARTERED PLC) within the past 12 months. Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject issuer (BRASIL FOODS ADR, HYFLUX, LENOVO, MICROSOFT, MIRVAC GROUP, NOKIA OYJ, NOVOZYMES (B SHARES), ROCHE (GENUSSSCHEINE), SABMILLER, SAMSUNG ELECTRONICS, STANDARD CHARTERED PLC, VODAFONE ) within the next three months. As at the date of this report, Credit Suisse acts as a market maker or liquidity provider in the securities of the subject issuer (BRASIL FOODS ADR, MICROSOFT). Credit Suisse holds a trading position in the subject issuer (BRASIL FOODS ADR, HYFLUX, LENOVO, MICROSOFT, MIRVAC GROUP, NOKIA OYJ, NOVOZYMES (B SHARES), ROCHE (GENUSSSCHEINE), SABMILLER, SAMSUNG ELECTRONICS, STANDARD CHARTERED PLC, VODAFONE ). As at the end of the preceding month, Credit Suisse beneficially owned 1% or more of a class of common equity securities of (ROCHE (GENUSSSCHEINE)). The analyst(s) and/or a member of the analyst's household hold a position in the securities of (STANDARD CHARTERED PLC). Additional disclosures for the following jurisdictions Hong Kong: Other than any interests held by the analyst and/or associates as disclosed in this report, Credit Suisse Hong Kong Branch does not hold any disclosable interests. United Kingdom: For fixed income disclosure information for clients of Credit Suisse (UK) Limited and Credit Suisse Securities (Europe) Limited, please call +41 44 333 33 99. For further information, including disclosures with respect to any other issuers, please refer to the Credit Suisse Global Research Disclosure site at:
https://www.credit-suisse.com/research/disclaimer

TERMINATED

Research coverage has been concluded.

Absolute bond performance The bond recommendations are based fundamentally on forecasts for total returns versus the respective benchmark on a 3-6 month horizon and are defined as follows:

BUY HOLD

Expectation that the bond issue will outperform its specified benchmark Expectation that the bond issue will perform in line with the specified benchmark Expectation that the bond issue will underperform its specified benchmark In certain circumstances, internal and external regulations exclude certain types of communications, including e.g. an investment recommendation during the course of Credit Suisse engagement in an investment banking transaction.

SELL RESTRICTED

Credit Suisse HOLT With respect to the analysis in this report based on the HOLT(tm) methodology, Credit Suisse certifies that (1) the views expressed in this report accurately reflect the HOLT methodology and (2) no part of the Firm's compensation was, is, or will be directly related to the specific views disclosed in this report. The Credit Suisse HOLT methodology does not assign ratings to a security. It is an analytical tool that involves use of a set of proprietary quantitative algorithms and warranted value calculations, collectively called the Credit Suisse HOLT valuation model, that are consistently applied to all the companies included in its database. Third-party data (including consensus earnings estimates) are systematically translated into a number of default variables and incorporated into the algorithms available in the Credit Suisse HOLT valuation model. The source financial statement, pricing, and earnings data provided by outside data vendors are subject to quality control and may also be adjusted to more closely measure the underlying economics of firm performance. These adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national borders. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes the baseline valuation for a security, and a user then may adjust the default variables to produce alternative scenarios, any of which could occur. The Credit Suisse HOLT methodology does not assign a price target to a security. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes a warranted price for a security, and as the third-party data are updated, the warranted price may also change. The default variables may also be adjusted to produce alternative warranted prices, any of which could occur. Additional information about the Credit Suisse HOLT methodology is available on request. CFROI(r), CFROE, HOLT, HOLTfolio, HOLTSelect, HS60, HS40, ValueSearch, AggreGator, Signal Flag and "Powered by HOLT" are trademarks or registered trademarks of Credit Suisse or its affiliates in the United States and other countries. HOLT is a corporate performance and valuation advisory service of Credit Suisse. For technical research Where recommendation tables are mentioned in the report, "Close" is the latest closing price quoted on the exchange. "MT" denotes the rating for the medium-term trend (3-6 months outlook). "ST" denotes the short-term trend (3-6 weeks outlook). The ratings are "+" for a positive outlook (price likely to rise), "0" for neutral (no big price changes expected) and "-" for a negative outlook (price likely to fall). Outperform in the column "Rel perf" denotes the expected performance of the stocks relative to the benchmark. The "Comment" column includes the latest advice from the analyst. In the column "Recom" the date is listed when the stock was recommended for purchase (opening purchase). "P&L" gives the profit or loss that has accrued since the purchase recommendation was given. For a short introduction to technical analysis, please refer to Technical Analysis Explained at:
https://www.credit-suisse.com/legal/pb_research/technical_tutorial_en.pdf

Guide to analysis
Equity rating allocation as of (28/02/2012)
Investment banking interests only 45.39 % 48.36 % 4.93 % 1.32 %

Overall BUY HOLD SELL RESTRICTED 43.67 % 50.22 % 4.95 % 1.16 %

Relative stock performance At the stock level, the selection takes into account the relative attractiveness of individual shares versus the sector, market position, growth prospects, balance-sheet structure and valuation. The sector and country recommendations are "overweight," "neutral", and "underweight" and are assigned according to relative performance against the respective regional and global benchmark indices. Absolute stock performance The stock recommendations are BUY, HOLD and SELL and are dependent on the expected absolute performance of the individual stocks, generally on a 6-12 months horizon based on the following criteria:

BUY HOLD SELL RESTRICTED

10% or greater increase in absolute share price variation between -10% and +10% in absolute share price 10% or more decrease in absolute share price In certain circumstances, internal and external regulations exclude certain types of communications, including e.g. an investment recommendation during the course of Credit Suisse engagement in an investment banking transaction.

20

28/02/2012

Credit Suisse - Research Monthly

Global disclaimer / important information

References in this report to Credit Suisse include subsidiaries and affiliates. For more information on our structure, please use the following link:
https://www.credit-suisse.com/who_we_are/en/

The information and opinions expressed in this report were produced by the Global Research department of Division Private Banking at Credit Suisse as of the date of writing and are subject to change without notice. Views expressed in respect of a particular stock in this report may be different from, or inconsistent with, the observations and views of the Credit Suisse Research department of Division Investment Banking due to the differences in evaluation criteria. The report is published solely for information purposes and does not constitute an offer or an invitation by, or on behalf of, Credit Suisse to buy or sell any securities or related financial instruments or to participate in any particular trading strategy in any jurisdiction. It has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Although the information has been obtained from and is based upon sources that Credit Suisse believes to be reliable, no representation is made that the information is accurate or complete. Credit Suisse does not accept liability for any loss arising from the use of this report. The price and value of investments mentioned and any income that might accrue may fluctuate and may rise or fall. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to individual circumstances, or otherwise constitutes a personal recommendation to any specific investor. Any reference to past performance is not necessarily indicative of future results. Foreign currency rates of exchange may adversely affect the value, price or income of any products mentioned in this document. Alternative investments, derivative or structured products are complex instruments, typically involve a high degree of risk and are intended for sale only to investors who are capable of understanding and assuming all the risks involved. Investments in emerging markets are speculative and considerably more volatile than investments in established markets. Risks include but are not necessarily limited to: political risks, economic risks, credit risks, currency risks and market risks. Before entering into any transaction, investors should consider the suitability of the transaction to individual circumstances and objectives. In jurisdictions where Credit Suisse is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Credit Suisse recommends that investors independently assess, with a professional financial advisor, the specific financial risks as well as legal, regulatory, credit, tax and accounting consequences. A Credit Suisse company may, to the extent permitted by law, participate or invest in other financing transactions with the issuer of the securities referred to herein, perform services or solicit business from such issuers, and/or have a position or effect transactions in the securities or options thereof. Distribution of research reports Except as otherwise specified herein, this report is distributed by Credit Suisse AG, a Swiss bank, authorized and regulated by the Swiss Financial Market Supervisory Authority. Australia: This report is distributed in Australia by Credit Suisse AG, Sydney Branch (CSSB) (ABN 17 061 700 712 AFSL 226896) only to "Wholesale" clients as defined by s761G of the Corporations Act 2001. CSSB does not guarantee the performance of, nor makes any assurances with respect to the performance of any financial product referred herein. Bahamas: This report was prepared by Credit Suisse AG, the Swiss bank, and is distributed on behalf of Credit Suisse AG, Nassau Branch, a branch of the Swiss bank, registered as a broker-dealer by the Securities Commission of the Bahamas. Bahrain: This report is distributed by Credit Suisse AG, Bahrain Branch, authorized and regulated by the Central Bank of Bahrain (CBB) as an Investment Firm Category 2. Dubai: This information is distributed by Credit Suisse AG Dubai Branch, duly licensed and regulated by the Dubai Financial Services Authority (DFSA). Related financial products or services are only available to wholesale customers with liquid assets of over USD 1 million who have sufficient financial experience and understanding to participate

in financial markets in a wholesale jurisdiction and satisfy the regulatory criteria to be a client. France: This report is distributed by Credit Suisse (France), authorized by the Comit des Etablissements de Crdit et des Entreprises d'Investissements (CECEI) as an investment service provider. Credit Suisse (France) is supervised and regulated by the Autorit de Contrle Prudentiel and the Autorit des Marchs Financiers. Germany: Credit Suisse (Deutschland) AG, authorized and regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin), disseminates research to its clients that has been prepared by one of its affiliates. Gibraltar: This report is distributed by Credit Suisse (Gibraltar) Limited. Credit Suisse (Gibraltar) Limited is an independent legal entity wholly owned by Credit Suisse and is regulated by the Gibraltar Financial Services Commission. Guernsey: This report is distributed by Credit Suisse (Guernsey) Limited, an independent legal entity registered in Guernsey under under 15197, with its registered address at Helvetia Court, Les Echelons, South Esplanade, St Peter Port, Guernsey. Credit Suisse (Guernsey) Limited is wholly owned by Credit Suisse and is regulated by the Guernsey Financial Services Commission. Hong Kong: This report is issued in Hong Kong by Credit Suisse AG Hong Kong Branch, an Authorized Institution regulated by the Hong Kong Monetary Authority and a Registered Institution regulated by the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). India: This report is distributed by Credit Suisse Securities (India) Private Limited ("Credit Suisse India"), regulated by the Securities and Exchange Board of India (SEBI) under SEBI registration Nos. INB230970637; INF230970637; INB010970631; INF010970631, with its registered address at 9th Floor, Ceejay House, Plot F, Shivsagar Estate, Dr. Annie Besant Road, Worli, Mumbai 400 018, India, Tel. +91-22 6777 3777. Italy: This report is distributed in Italy by Credit Suisse (Italy) S.p.A., a bank incorporated and registered under Italian law subject to the supervision and control of Banca d'Italia and CONSOB. Jersey: This report is distributed by Credit Suisse (Guernsey) Limited, Jersey Branch, which is regulated by the Jersey Financial Services Commission. The business address of Credit Suisse (Guernsey) Limited, Jersey Branch, in Jersey is: TradeWind House, 22 Esplanade, St Helier, Jersey JE2 3QA. Luxembourg: This report is distributed by Credit Suisse (Luxembourg) S.A., a Luxembourg bank, authorized and regulated by the Commission de Surveillance du Secteur Financier (CSSF). Mexico: The information contained herein does not constitute a public offer of securities as defined in the Mexican Securities Law. This report will not be advertised in any mass media in Mexico. This report does not contain any advertisement regarding intermediation or providing of banking or investment advisory services in Mexico or to Mexican citizens. Qatar: This information has been distributed by Credit Suisse Financial Services (Qatar) L.L.C, which has been authorized and is regulated by the Qatar Financial Centre Regulatory Authority (QFCRA) under QFC No. 00005. All related financial products or services will only be available to Business Customers or Market Counterparties (as defined by the Qatar Financial Centre Regulatory Authority (QFCRA)), including individuals, who have opted to be classified as a Business Customer, with liquid assets in excess of USD 1 million, and who have sufficient financial knowledge, experience and understanding to participate in such products and/or services. Russia: The research contained in this report does not constitute any sort of advertisement or promotion for specific securities, or related financial instruments. This research report does not represent a valuation in the meaning of the Federal Law On Valuation Activities in the Russian Federation and is produced using Credit Suisse valuation models and methodology. Singapore: Distributed by Credit Suisse AG Singapore Branch, regulated by the Monetary Authority of Singapore. Spain: This report is distributed in Spain by Credit Suisse AG, Sucursal en Espaa, authorized under number 1460 in the Register by the Banco de Espaa. Thailand: This report is distributed by Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, with its registered address at 990 Abdulrahim Place Building, 27/F, Rama IV Road, Silom, Bangrak, Bangkok Tel. 0-2614-6000. United Kingdom: This report is issued by Credit Suisse (UK) Limited and Credit Suisse Securities (Europe) Limited. Credit Suisse Securities (Europe) Limited and Credit Suisse (UK) Limited, both authorized and regulated by the Financial Services Authority, are associated but independent legal entities within Credit Suisse. The protections made available by the Financial Services Authority for retail clients do not apply to investments or services

21

28/02/2012

Credit Suisse - Research Monthly

provided by a person outside the UK, nor will the Financial Services Compensation Scheme be available if the issuer of the investment fails to meet its obligations. UNITED STATES: NEITHER THIS REPORT NOR ANY COPY THEREOF MAY BE SENT, TAKEN INTO OR DISTRIBUTED IN THE UNITED STATES OR TO ANY US PERSON. JAPAN: Neither this report nor any copy thereof may be sent, taken or distributed in Japan. Local law or regulation may restrict the distribution of research reports into certain jurisdictions. This report may not be reproduced either in whole or in part, without the written permission of Credit Suisse. Copyright 2012 Credit Suisse Group AG and/or its affiliates. All rights reserved. 12C019A

Imprint
Subscription profile Publication Research Monthly Selected chapters Investment Strategy Economics This months featured topic Investment theme Credit Suisse Megatrends Fixed income Equities Alternative investments Foreign exchange Investment horizon: 6-12+ months

Publisher Giles Keating Head of Research for Private Banking and Asset Management +41 44 332 22 33 giles.keating@credit-suisse.com Nannette Hechler-Fayd'herbe Head of Global Financial Markets Research +41 44 333 17 06 nannette.hechler-fayd'herbe@credit-suisse.com

Editor Kevin Lyne-Smith Head of Global Equity Research +41 44 334 56 41 kevin.lyne-smith@credit-suisse.com

Information about other research publications Credit Suisse AG Editorial & Publications Uetlibergstrasse 231, P.O. Box 300, CH-8070 Zrich

E-Mail
publications.research@credit-suisse.com

Internet
http://www.credit-suisse.com/research

Intranet (for employees only)

http://research.csintra.net

Subscription (clients) Please contact your customer advisor to subscribe to this publication

Subscription (internal) For information on subscriptions please visit http://research.csintra.net/subscriptions

Authors
Giles Keating Head of Research for Private Banking and Asset Management +41 44 332 22 33 giles.keating@credit-suisse.com

22

28/02/2012

Credit Suisse - Research Monthly

Thomas Herrmann +41 44 333 50 62 thomas.herrmann@credit-suisse.com Michael O'Sullivan Head of Portfolio Strategy & Thematic Research +44 20 7883 8228 michael.o'sullivan@credit-suisse.com Oliver Adler Head of Global Economics & Real Estate Research +41 44 333 09 61 oliver.adler@credit-suisse.com Markus Stierli +41 44 334 88 57 markus.stierli@credit-suisse.com

Sylvie Golay Markovich +41 44 334 54 37 sylvie.golay@credit-suisse.com Tobias Merath Head of Global Commodity Research +41 44 333 13 62 tobias.merath@credit-suisse.com Joe Prendergast Currency, Commodity and Alternative Investment Research +41 44 332 83 18 joe.prendergast@credit-suisse.com

ROE