Q&A Launch of the CSIF (CH) SPI Multi Premia Index Blue

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1 Questions & Answers For Internal use only Q&A Launch of the CSIF (CH) SPI Multi Premia Index Blue SIX Swiss Exchange launched the new SPI Multi Premia Index on September 13, Credit Suisse Index Solutions replicates the index with the new index fund CSIF (CH) SPI Multi Premia Index Blue. The fund is also approved for private investors and has daily liquidity. Key fund features First provider on the Swiss market: with the CSIF (CH) SPI Multi Premia Index Blue launched on August 31, 2016, Credit Suisse Index Solutions has replicated a multifactor index, the new SPI Multi Premia and is the first provider on the market to do so. The SPI Multi Premia Index comprises the 60 largest and most liquid SPI securities and combines seven SPI Single Premia indices. Stable excess return: the factor model aims to generate an excess return versus the overall market by harvesting premium factors 1. Significant diversification potential and broad risk distribution: the low level of correlation between the factors provides high potential for diversification and ensures broad risk distribution. Combination of active and passive approaches: the CSIF (CH) SPI Multi Premia Index Blue combines the benefits of an active factor approach with those of passive replication. Tried-and-tested CSIF fund range: the new fund is part of the proven CSIF fund range. Cost-efficiency: cost-efficient index fund subject to Swiss law. What are the special features of the multifactor index? Historically, combining SPI Single Premia indices has generated a robust excess return versus the market-weighted SPI. There is only a low level of correlation between the individual factors, meaning they provide high potential for diversification. The SPI Multi Premia Index combines the following seven SPI Single Premia indices: Value Reversal Size Low Risk Momentum Quality Residual Momentum The CSIF (CH) SPI Multi Premia Index Blue is an index fund that makes broadly diversified and cost-efficient investments in the Swiss market and in doing so aims to harvest seven factor premiums in a targeted manner. The fund replicates the SPI Multi Premia Index, an official multifactor index of SIX Swiss Exchange. The methodology for calculating the index has been developed by Finreon, a spin-off of the University of St.Gallen, and is based on the latest findings from the field of factor investing. Based on its robust approach, broad diversification and efficient implementation, the CSIF (CH) SPI Multi Premia Index Blue is ideal as an optimized core investment in the area of Swiss equities. 1 The expected excess return does not represent a projection, prediction or guarantee of future performance or the achievement of this performance. 1/6

2 Which factors does the SPI Multi Premia Index incorporate? Return drivers in equity markets Selection of companies with the following characteristics Example for key figures Value Favorable valuation Price-to-book ratio Size Small company size Market capitalization Momentum High return in the past (last 12 months) Annual return minus last month Residual Momentum High excess return versus the market in the past (last 12 months) Annual excess return minus last month Reversal Low return in the past (three to five years) Five-year return minus last year Low Risk Low risk Volatility Quality Solid and consistent corporate earnings Return on investment What characteristics do these factors have? The different return characteristics of the factors during different market phases offer high potential for diversification. Roughly speaking, the factors can be divided into three groups: anticyclical factors (value, size and reversal), procyclical factors (momentum, residual momentum) and defensive factors (quality, low risk). The relative performance of these factor groups differs during different market phases, as illustrated in the graphic below. Relative performance of factors in different market phases Procyclical factors Anticyclical factors Illustrative Defensive factors Market Anticyclical factors Contrary to the trend Excess return through anticipation of trend reversal Value Size Reversal Procyclical factors In line with the trend Excess return through trend participation Momentum Residual Momentum Defensive factors Risk reduction Excess return through the reduction of asset erosion Quality Low Risk The different return characteristics of the factors during different market phases provide high potential for diversification, thus making it possible to generate a robust excess return. Sources: SIX, Credit Suisse It is difficult to determine the best time to invest in a specific factor. For this reason, broad diversification across various factors with complimentary characteristics represents the most suitable approach. A balanced exposure to different factors allows for a robust excess return to be generated in most market phases. How is the index calculated from these factors? SIX calculates an index for each of these factors the SPI Single Premia Index. The universe that serves as the basis for each of the Single Premia indices is made up of the 60 largest and most liquid SPI securities. The factor scores of the securities are calculated for each of the SPI Single Premia indices based on defined key figures. In each case, the best 30 securities are selected as index components. The index components within the SPI Single Premia indices are weighted in accordance with the risk parity approach. This promotes a high level of diversification and good risk/return efficiency. The index weightings are defined here in such a way that each component contributes equally to the index s risk. 2/6

3 The SPI Multi Premia Index combines the seven SPI Single Premia indices. In order to harvest all seven premiums in a broadly diversified manner, the SPI Single Premia indices are weighted using the equal-contribution-to-tracking-error approach. The index weightings are determined here in a manner that ensures each of the SPI Single Premia indices contributes equally to the relative risk (tracking error) of the overall index. In order to avoid an accumulation of risk, care is taken to ensure that no individual security is weighted too heavily. The maximum individual security weighting within the portfolio is 8%. How is the index made investable? Credit Suisse Index Solutions physically replicates the index. Index funds pursue a passive investment approach that sees the reference index underlying the respective fund replicated as precisely as possible. This means that the investor is exposed to the index s fluctuations in value. SPI Multi Premia key figures SPI Multi Premia Swiss Performance Index (SPI ) Annualized return % 6.61 % 2016 ytd return 5.7 % 1.96 % Annualized risk % % Active return % Tracking error (ex-post) % Information ratio Maximum drawdown % % 2 Universe 60 of the largest SPI Swiss Performance Index Number of securities in the Upper limit per security 8% in Single Premia indices Shifting interval Quarterly Quarterly Shifting upper limit (unilateral) 1 Annualized from December 2003 to June 2016, gross returns in CHF. 2 From May 31, 2007, through February 27, 2009 (based on monthly data). Historical performance indications and financial market scenarios are not reliable indicators of current or future performance. What are the benefits and risks of the CSIF (CH) SPI Multi Premia Index Blue? Benefits: Investments in seven statistically significant sources of return mean than an outperformance can be expected in various market phases and offer high potential for diversification. The passive approach based on index replication creates transparency and is characterized by low costs. Risks: The fund is a pure equity fund with a corresponding level of volatility and the associated risk of loss. Weaknesses in the factor model that are as yet unknown or have not emerged may have an adverse effect on performance. When will the index be launched? The first official calculation date for the SPI Multi Premia is September 13, When will the fund be launched and when will it be tradable? Credit Suisse launched the CSIF (CH) SPI Multi Premia Index Blue on August 31, The fund can be traded daily; cut-off time is 2:00 p.m. (CET). 3/6

4 For which investors is the fund suitable? The CSIF (CH) SPI Multi Premia Index Blue is available to both institutional investors and private clients. It is suitable for all investors wanting to invest in the Swiss equity market. The fund is particularly suitable as a core investment in the area of Swiss equities. The FA share class is investable for private investors. The DA and QA share classes are exclusively available to qualified investors. Costs CSIF (CH) SPI Multi Premia Index Blue investors pay an all-in fee; the respective all-in fee for each share class can be found in the following table: Fund name Valor no. ISIN Costs* CSIF (CH) SPI Multi Premia Index Blue DA class CH % CSIF (CH) SPI Multi Premia Index Blue QA class CSIF (CH) SPI Multi Premia Index Blue FA class CH % CH % * The DA share class only includes administration fees, with management fees agreed on an individual basis (pursuant to a mandate agreement between the investor and Credit Suisse) and paid on a quarterly basis. The QA and FA share classes include administration and management fees and may be subscribed to independently of a mandate agreement. QA refers to the share class for qualified investors, while FA denotes the share class for private investors without restrictions on investor eligibility. Source: Credit Suisse What are index funds? Index funds adopt a passive investment approach and are thus also referred to as passive investment funds. They replicate the performance of the underlying reference index as precisely as possible. The investor receives a performance that is almost identical to that of the index. Index funds make the index investable. They thus have practically the same risk/return profile as the reference index (in contrast to actively managed funds, which in some cases diverge significantly from the index). What is the investment objective of index funds? Their objective is to replicate the fund s underlying index as precisely as possible. To this end, they invest the fund assets in the index s underlying securities in the same proportions or in very similar proportions. Investors are thus provided with simple access to long-term gains generated by their selected investment segment. Which investment approach does the CSIF (CH) SPI Multi Premia Index Blue follow? In principle, there are two investment approaches: full and approximate replication. The CSIF (CH) SPI Multi Premia Index Blue fully replicates the SPI Multi Premia Index. What is the difference between full replication and optimized sampling? In the case of full replication, the portfolio holds all of the index components in the same proportions as the index. This method allows for the lowest possible level of tracking error to be achieved. It is used, in particular, for liquid, narrow indices and large portfolios. In the case of optimized sampling, the portfolio holds a limited number of index components. Here, the aspects of tracking error and replication costs are carefully considered. These considerations are simulated accordingly in a risk-optimization tool in order to minimize the level of deviation while taking account of the defined restrictions. Optimized sampling is used for broad indices with illiquid securities and for small portfolios. 4/6

5 Is it possible for deviations from the reference index to arise? The risk of deviations from the reference index is measured using tracking error. The tracking error of the CSIF (CH) SPI Multi Premia Index Blue is generally under 0.05%. What is the risk risk/return profile? By definition, index funds move in line with their reference index. The fund s risk and return are thus directly dependent on the risk/return characteristics of the underlying index. The returns and key risk figures of the individual funds can be found in the fact sheets. What counterparty risks exist, and is securities lending practiced? Investment funds are deemed to represent special assets and are protected should the issuer go bankrupt this means that their investment assets are not included in the bankruptcy estate. Securities lending is handled differently by our funds. The CSIF (CH) SPI Multi Premia Index Blue includes the suffix Blue ; index funds with this suffix may not enter into securities lending. What value date is applied for CSIF (CH) SPI Multi Premia Index Blue settlements? The value date is two days (T + 2) after the subscription or redemption of fund units. Why are issue and redemption spreads used? In order to protect existing investors, spreads are applied to transactions to ensure that the buying/selling investors bear the transaction costs (dilution protection). The net asset value (NAV) is thus increased accordingly by the issue spread in the case of a purchase or reduced by the redemption spread in the event of a sale. The issue and redemption spread is 0.03%. How do Credit Suisse index funds differ from exchange-traded funds? Alongside index funds, exchange-traded funds (ETFs) also replicate a reference index. Our index funds, however, offer various benefits: They physically replicate their reference indices. The trade price of our index funds is based on the NAV plus a minimal spread that serves to cover the transaction costs within the fund (dilution protection). ETFs, however, are traded according to the bid and ask price so that the range of prices depends heavily on the trading volume. ETFs also entail broker and exchange commissions. For our index funds subject to Swiss law, no stamp duty whatsoever is levied for Swiss investors, while for our funds subject to Liechtenstein law, stamp duty is waived for the redemption of units (but not for subscriptions). ETFs, on the other hand, are traded on the stock exchange, meaning that stamp duty is levied for both purchases and sales. Contact Asset Management Wholesale Distribution CH/LI will be pleased to answer any questions you may have. 5/6

6 CREDIT SUISSE AG Asset Management Wholesale Distribution CH/LI Tel Important Informations The information provided herein constitutes marketing material. It is not investment advice or otherwise based on a consideration of the personal circumstances of the addressee nor is it the result of objective or independent research. The information provided herein is not legally binding and it does not constitute an offer or invitation to enter into any type of financial transaction. The information provided herein was produced by Credit Suisse AG and/or its affiliates (hereafter «CS») with the greatest of care and to the best of its knowledge and belief. The information and views expressed herein are those of CS at the time of writing and are subject to change at any time without notice. They are derived from sources believed to be reliable. CS provides no guarantee with regard to the content and completeness of the information and does not accept any liability for losses that might arise from making use of the information. If nothing is indicated to the contrary, all figures are unaudited. The information provided herein is for the exclusive use of the recipient. Neither this information nor any copy thereof may be sent, taken into or distributed in the United States or to any U. S. person (within the meaning of Regulation S under the US Securities Act of 1933, as amended). It may not be reproduced, neither in part nor in full, without the written permission of CS. The fund is domiciled and registered in Switzerland. The underlying indices are registered trademarks and have been licensed for use. The indices are compiled and calculated solely by licensors and the licensors shall have no liability with respect thereto. The products based on the indices are in no way sponsored, endorsed, sold or promoted by the licensors. The fund management company is Credit Suisse Funds AG, Zurich. The custodian bank is Credit Suisse AG, Zurich. The prospectus, the simplified prospectus and/or the Key Investor Information Document (KIID) and the annual and half-yearly reports may be obtained free of charge from Credit Suisse Funds AG, Zurich or from any branch of Credit Suisse AG in Switzerland. For Liechtenstein the document may only be distributed by licensed entities. The shares offered are exclusively offered to a limited group of investors. This document may not be reproduced or used for any other purpose, nor be furnished to any other person other than those to whom copies have personally been sent. This material and the transactions described therein are not nor have been subject to the review and supervision of the Liechtenstein Financial Market Authority. Copyright 2016 Credit Suisse Group AG and/or its affiliates. All rights reserved. CH/G/ /6