Market UpdateQ2 2009

Focus on Swiss Equities

Summary

Swiss GDP is expected to fall 0.6%.

Despite increasing unemployment, con-

sumer spending is forecast to rise 1.2%.

The decline in exports could be slowed by

export activities to emerging markets.

Financing costs are extremely low.

The Swiss equity market should benefit

from its defensive nature.

Our focus is on companies in the

pharmaceutical and food manufacturing

sectors with solid balance sheets and

stable cash flow.

It’s official – not even Switzerland is immune from the marked slowdown in globalgrowth. Swiss GDP is expected to fall 0.6% in 2009. The major cause is the declinein exports, which have been hit by falling global demand. Growth in capital investmentalso looks set to be negative as important operational investments in replacement andexpansion are put on the back burner due to more cautious sales forecasts. The onlyboost to the Swiss economy is expected to come from consumer spending. However,forecast growth here of 1.2% is far below that of the previous year, as the impact ofthe weaker labor market is increasingly felt. Our experts estimate that the number ofunemployed people will increase by around 35,000 in 2009, pushing theunemployment rate up from 2.6% in 2008 to 3.4%. This dampening of consumerspirits is only too understandable given the gloomy economic environment.

Thank Goodness for the Emerging Markets!Swiss companies are highly dependent on global trade in goods, but as the majority ofindustrial export markets are currently suffering a recession, these volumes are expectedto fall. Fortunately, however, a relatively high proportion of Swiss exports are to emergingmarkets (23% of exports between January and November 2008). This should make upin part for the lower exports elsewhere, as more resilient growth is expected in theemerging markets (for example, 8% growth in China in 2009).

As with many other global economies, Switzerland isfacing the prospect of negative GDP growth in 2009.However, interest rate policy and consumer spendingare expected to provide a boost. The defensivenature of Swiss equities should enable them tooutperform.

Market Update

SMI Sector Weighting

Source: Datastream, Credit Suisse/IDC, as at March 1, 2009

Favorable Financing CostsInterest rate policy could also provide support for the Swisseconomy. Unlike its European counterpart, the ECB, the SwissNational Bank has made aggressive interest rate cuts. It haslowered its interest rate target to 0.5% (compared with 2% inthe Eurozone), ensuring financing costs remain lower inSwitzerland.

A Defensive Stance is the Key…The outlook for global equity markets continues to be affectedby the fundamentally weak macroeconomic situation, despitethe fact that valuations appear attractive compared to averagevalues over the last 20 years. Given the mixed picture, we aremaintaining our overweight in Swiss equity indices.

We believe the Swiss equity market should benefit from itsdistinctly defensive nature. Equities in defensive sectors suchas consumer goods, healthcare and telecommunications, makeup around two-thirds of the market capitalization of the Swissshare index, the SMI. Defensive companies’ earnings areusually more robust than those of cyclical firms, making themless vulnerable to the current economic situation.

Focus on Solidity and Resilience …Within the Swiss equity market, we prefer companies with solidbalance sheets and stable cash flow. These companies usuallyhave more robust growth in periods of deflation or depressiondue to their lower refinancing costs and offer considerableupside potential in the event of a rapid recovery, as they areattractively valued by historical standards. Comparatively highdividend yields are often an indicator that a company has robustearnings and low balance sheet risk.

… and Defensive SectorsWe continue to favor defensive sectors such aspharmaceuticals and food. This view is also reflected in fundportfolios such as that of the Credit Suisse Equity Fund (CH)Swissac, which has an overweight in defensive sectors and anunderweight in financials. Defensive sectors such aspharmaceuticals are reaping the benefits of increasing riskaversion among investors. Their strong balance sheets (mosthave net cash positions) and low correlation to national GDPoutweigh the risks of patents expiring and competition fromgenerics. Food manufacturers benefit from solid financialprofiles and stable cash flow. Food is a basic human need and– in industrialized countries at least – accounts for only a smallportion of disposable income. Demand for foodstuffs could alsoincrease in the emerging markets with the arrival of a wealthymiddle class there.

As at end-February

Health Care35%

Consumer Staples20%

Financials19%

Industrials12%

Materials5%

ConsumerDiscretionary 3%

Telecommunication Services3%

Utilities3%

Information Technology0%

Energy0%

Swiss Equities

Fund domicile Switzerland

Portfolio manager Patrik Carisch, Zurich

Fund currency CHF

Benchmark SPI (RI)

Inception date 01.12.1982

Management fee p.a. 1.60%

Initial charge as per bank fees

Swiss security number Unit class A: 279375

ISIN Unit class A: CH0002793757

Investment OpportunitiesA large number of equities from a range of sectors are traded onthe Swiss stock market. These include shares in globally activecompanies that belong in any well-diversified portfolio.Nonetheless, there are some characteristics of the Swiss equitymarket that complicate stock selection within a particular sector.Four of the ten sectors represented in the Swiss PerformanceIndex (SPI) make up 85% of its market capitalization. A similarsituation is found within the individual sectors; thetelecommunications sector, for example, is represented by justone company. Moreover, some stocks are assigned to sectorsthat do not accurately reflect their characteristics and risks.Biotech firm Actelion, for example, is allocated to the healthcaresector (high cash flow, low volatility), but has completely different(and more aggressive) characteristics than Novartis or Roche.

In order to avoid these problems and ensure a consistentinvestment process in portfolio allocation, Credit Suisse does notgroup equities by sector. Instead, it divides them into six differentclusters (cyclical value, mid-cyclical, defensive, growth, banksand insurers), depending on their actual investmentcharacteristics. This innovative investment process provides asound basis for optimizing the composition of an equity portfolio.

Past trading patterns reveal that the Swiss stock market issubject to seasonal effects. There are periods when investors cangain from having maximum net exposure and others when theSwiss stock market is more likely to generate below-averagereturns. The Credit Suisse Equity Fund (CH) Swissac enablesinvestors to take advantage of these effects.

Fund Profile

The fund represents a well-diversified yet focused investment in

Swiss equities.

Clusters developed specifically for the Swiss equity market.

Variable net exposure ranging from 80% to 120% enables seasonal

effects to be efficiently exploited.

Investment team with many years’ experience in Swiss equities.

State-of-the-art risk monitoring.

Benefits

Credit Suisse Equity Fund (CH) Swissac

Fund Profile

Investment ObjectiveCredit Suisse Equity Fund (CH) Swissac invests in shares ofcompanies that are based in Switzerland or are included in theSPI. The fund also has the option of investing up to 10% inforeign equities to improve the risk/return profile. The broadlydiversified portfolio focuses on generating long-term assetgrowth. The aim is to achieve steady, long-term outperformanceof the SPI. Preference is given to stocks that are favorably valuedor expected to deliver above-average performance. The fund’sapproach was specially designed for the Swiss market and favorsstocks that are fundamentally undervalued. The fund is activelymanaged, with net exposure of 80% to 120% and a trackingerror of up to 4%. Credit Suisse Equity Fund (CH) Swissac issuitable for private and institutional investors seeking focusedexposure to fundamentally undervalued Swiss stocks.

Investment ProcessThe stock selection process is based primarily on fundamentalanalysis that takes account of the characteristics of the Swissequity market by using a special cluster approach. The fundprimarily invests in companies that are fundamentally undervaluedbased on a multi-level discounted cash flow (DCF) model. Thecompany’s positioning in terms of its products and competitors,the economic environment, and the quality of its managementare included in the analysis along with other criteria.

Besides a fundamental analysis, the shares are rated accordingto their technical trend and current market sentiment. The resultis a consistent portfolio of securities that have the best prospectsof outperforming the benchmark index in the medium to longterm.

Credit Suisse Equity Fund (CH):The broad-based Swiss equity fund

Source: Credit Suisse

This document was produced by CREDIT SUISSE (hereafter “CS”) with the greatest of care and to the best of its knowledge and belief. However, CS provides no guarantee withregard to its content and completeness and does not accept any liability for losses which might arise from making use of this information. The opinions expressed in this documentare those of CS at the time of writing and are subject to change at any time without notice. If nothing is indicated to the contrary, all figures are unaudited. This document isprovided for information purposes only and is for the exclusive use of the recipient. It does not constitute an offer or a recommendation to buy or sell financial instruments or bankingservices and does not release the recipient from exercising his/her own judgment. The recipient is in particular recommended to check that the information provided is in line withhis/her own circumstances with regard to any legal, regulatory, tax or other consequences, if necessary with the help of a professional advisor. This document may not bereproduced either in part or in full without the written permission of CS. It is expressly not intended for persons who, due to their nationality or place of residence, are not permittedaccess to such information under local law. Every investment involves risk, especially with regard to fluctuations in value and return. It should be noted that historical returns andfinancial market scenarios are no guarantee of future performance. Investments in foreign currencies involve the additional risk that the foreign currency might lose value againstthe investor’s reference currency. Historical performance indications and financial market scenarios are no guarantee for current or future performance. Performance indicationsdo not consider commissions levied at subscription and/or redemption. Furthermore, no guarantee can be given that the performance of the benchmark will be reached oroutperformed. The investment funds mentioned in this publication are domiciled in Switzerland. The fund management company is CREDIT SUISSE ASSET MANAGEMENTFUNDS AG, Zurich. The custodian bank is CREDIT SUISSE, Zurich. Subscriptions are only valid on the basis of the current sales prospectus and most recent annual report (orhalf-yearly report, if this is more recent). The prospectus, the fund agreement and the annual and half-yearly reports may be obtained free of charge from CREDIT SUISSE ASSETMANAGEMENT FUNDS AG, Zurich and from any Credit Suisse Group AG bank in Switzerland. © 2009 by CREDIT SUISSE

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www.credit-suisse.com

Credit SuisseEquity Fund(CH) SwissBlue Chips

Credit SuisseEquity Fund

(CH) S&MCap

Switzerland

CreditSuisse

Equity Fund(CH)

Swissac

Credit SuisseSelect Fund(CH) Swiss

Equities130/30

Tracking Error(ex ante)

< 2% < 7% < 4% < 8%

Benchmark SMI SPI Extra SPI SPI

Universe SMI + SPIMid

SPI S&MCap

SPI SPI

Able to exploitseasonaleffects

No No Yes,up to 120%

Yes,up to 125%

Short Positions No No No Yes

“My years ofexperience and ourinvestment approach,specially designed forthe Swiss market, helpus find the mostpromising stocks.”

Patrik Carisch, portfolio manager