DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION®

Client-Driven Solutions, Insights, and Access

27 July 2016

Asia Pacific/Australia

Equity Research

Australian ESG/SRI Environmental, Social and Governance (ESG) Research

ESG-Alpha: I am a Material Girl

■ Frameworks present a new approach to materiality: Materiality has long

been central to ESG investing and disclosure. However, materiality can

increasingly be considered using explicit materiality frameworks, including

SASB's Materiality Map—completed in 2015.

■ Materiality matters: We assessed the importance of considering materiality

and the impact of different approaches to materiality by comparing a base

case with MSCI and SASB's frameworks, using MSCI data. We found that

considering materiality supported performance, with both frameworks

improving returns for our ESG strategy. Incorporating these materiality

frameworks improved performance in our long-short strategy by between

8.2 and 36.0 percentage points across the 2006-16 performance period. A

strategy based on SASB's framework out-performs MSCI's framework by

27.8 percentage points, but has more mixed results historically.

■ Materiality approach is important—choose your framework wisely:

Although this conclusion won't surprise many readers, what it highlighted to

us is the importance of framework choice. The two frameworks differed

significantly across the performance period in our long-short strategy. We

would stress the importance of having a systematic approach to materiality

and considering this approach explicitly. We have many conversations with

clients about the merits of materiality weights presented by different

providers. We suggest that given the importance of materiality approaches,

clients should interrogate and adapt materiality frameworks for their own

use rather than accepting them without question.

Figure 1: Considering materiality can improve performance

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MSCI Average Score MSCI Materiality SASB Materiality

36%

Note: Past hypothetical backtesting results are neither an indicator nor guarantee of future returns

Source: MSCI, SASB, Thompson Reuters, Credit Suisse research

Credit Suisse Environmental, Social

and Governance (ESG) research seeks

to focus on sustainability and

accountability factors that are then

integrated into the investment process.

ESG Research

Sandra McCullagh

61 2 8205 4729

sandra.mccullagh@credit-suisse.com

Zoe Whitton

61 2 8205 4613

zoe.whitton@credit-suisse.com

Quant Research

Richard Hitchens

61 2 8205 4467

richard.hitchens@credit-suisse.com

27 July 2016

Australian ESG/SRI 2

Incorporating materiality ■ Exploring quantitative ESG investment strategies: Environmental, social and

governance (ESG) information is increasingly considered and integrated by Australian

investors. With the availability of ESG data sets and their use on the rise, our ESG-α

Series examines different ways of incorporating quantitative ESG information into

investment strategies. We generally use the MSCI ESG data set in the ASX200 to

assess these approaches.

■ ESG-α identified in long-short portfolios: In our first ESG-α Series report, we found

that all five portfolios we constructed based on ESG data added long-short alpha over

the seven-year time horizon. We also found that strong management of Environmental

and Governance issues "pays" and weak management of these issues "costs" at the

portfolio level. For Social pillar data, we found that companies which have overall the

weakest management capabilities and highest exposure to social issues significantly

underperform all other companies, i.e., poor social performance "costs" at the portfolio

level. However, we also found that there is no benefit from a strong Social pillar score

at the portfolio level.

■ Performance observed from ESG Momentum, even following an event: In our

second ESG-α Series report, we found that companies with most improved ESG issue

management tend to outperform those companies that have least improved or

deteriorated their ESG issue management, over the long term. Our third ESG-α Series

report found that companies can turn around their fortunes by meaningfully addressing

their social issues management flaws (Figure 1, a copy of Figure 5), while those who

don't or can't are more likely to remain underperformers.

■ Materiality is key in ESG: Although ESG information is increasingly taken into

account by investors, not all ESG information is material for all sectors. Water security

will, for example, be more relevant for industries with significant water requirements

such as Resources, Agriculture and Materials, than in industries such as Finance. In

many cases, some information is less material simply because certain sectors have

less exposure to risk from those factors. These differences are often evident in our

sector reports, which feature industry-specific materiality assessments by our sector

analysts (see our latest in What keeps our energy analysts awake at night?, What

keeps our utilities analyst awake at night?, and What Keeps our Banks Analysts

Awake at Night?) and in our integrated research, which works to establish materiality

for valuation (Lake Wobegon: Brown coal remediation woes). Materiality is often a key

consideration in disclosure to investors and in disclosure law, including US Federal

securities law, and the materiality of various issues remains a key sticking point in

many running ESG controversies.

■ Considering materiality is increasingly popular: Determining materiality is a

perennial challenge for ESG analysts, and many analysts are well practiced at

determining materiality. However, assessing materiality has often been conducted on

an ad-hoc or stock-by-stock basis by experienced analysts. This has begun to change

recently, with explicit or codified approaches to materiality increasingly finding their

way into both company disclosures and investor tools. For example, the Sustainability

Accounting Standards Board (SASB) completed its first materiality framework in 2015

(Figure 2). The big four Australian banks now include materiality frameworks within

their sustainability disclosures (Figure 3). In our mind, this promising effort to codify

materiality indicates a growing understanding of its importance.

■ Assessing materiality—how much does it matter?: Our previous work incorporated

materiality considerations as a consequence of MSCI's weighting process, which

weighs the environmental, social and governance pillars according to industry

significance. However, as our previous work does not use un-weighted MSCI ESG

27 July 2016

Australian ESG/SRI 3

scores, materiality is implicit in all of it. In this note we set out to specifically test

whether materiality frameworks improved the results—would using another or different

materiality framework give us better performance?

Figure 2: SASB Materiality Map

Source: SASB – http://www.sasb.org/materiality

Figure 3: Westpac Materiality framework 2015

Source: Westpac Sustainability Reporting

27 July 2016

Australian ESG/SRI 4

■ The advantage of assessing materiality: Materiality frameworks present the

opportunity for improved returns—if codified approaches to materiality do improve our

analysis, we might find ourselves generating greater returns from our ESG strategies.

However, materiality frameworks such as SASB's present another opportunity:

efficiency. Across the board, SASB suggests that not all factors are material for each

industry. Of the ten industry groups outlined in SASB's framework, Financials present

the greatest opportunity for efficiency, with only 11 of 30 factors considered material,

and only four of these considered material for more than half of industry participants.

■ Materiality frameworks may reduce the cost of ESG: In If ESG Outperforms, why?

we note that collecting and interpreting ESG information is costly, and this is possibly a

key reason that ESG is not more widely considered. If codified materiality frameworks

improve our efficiency, they may help reduce this cost and make ESG accessible for a

wider group of investors.

27 July 2016

Australian ESG/SRI 5

Methodology Combining MSCI and SASB: In order to observe the impact of materiality frameworks on

performance from ESG strategies, we used MSCI data and SASB's Materiality Map to

assess the impact of materiality on ESG strategy performance in the ASX200. We

constructed a series of quintile portfolios based on company ESG scores, using three sets

of ESG data:

(1) MSCI unweighted scores,

(2) MSCI materiality-weighted scores, and

(3) MSCI unweighted scores using SASB's materiality weights.

This resulted in a methodology with two primary tasks. The first was mapping the ESG

risks and industries used by SASB against the risks and industries used by MSCI. The

second was building quintile portfolios and calculating their returns.

Mapping

■ Differing risks and sectors: SASB and MSCI both identify a wide range of ESG risks

—such as Greenhouse Gas Emissions, Air quality and Labour Relations—with 30

identified by SASB and 35 by MSCI (Figure 4). The two organisations also use

different industry classifications—with MSCI using GICS, and SASB using a unique

industry classification according to factors in addition to revenue sources (the

Sustainable Industry Classification System) (Figure 5). As such, ESG risks and

industry classification were both points of difference which needed to be reconciled in

order to use MSCI data alongside SASB's materiality framework.

■ Risk categories focused on different areas: MSCI and SASB ESG risk categories

differ not only in number but in focus. Both have a similar portion of risks under the

ESG pillars, but MSCI for example allocates more categories to climate change than

SASB, and has a number of categories specifically encompassing investment impact,

which are absent in SASB. As such, converting MSCI scores to SASB risk scores

results in the application of additional weights of our own. These are discussed in more

detail in Appendix 2.

■ SASB uses unique industry categorisation: MSCI and SASB industry classifications

also differ, with MSCI using the Global Industry Classification System (GICS) and

SASB using SICS. Where GICS uses sources of revenue as its basis for classifying

companies, SICS uses a more resources-focused screen to classify companies'

industry. SICS Industries include novel industry groupings such as Non-Renewable

Resources (including Energy, Iron & Steel, Metals & Mining and Construction

Materials) and Resource Transformation (including Chemicals, Aerospace & Defence,

Electrical Equipment, Industrial Goods, Containers & Packaging). As such, translating

SASB materiality information for use with company ESG data also requires mapping

across sectors.

■ Maps have material impact on the outcome: These maps directly contribute to our

ESG scores for the final MSCI/SASB scan, and as such represent key sets of

assumptions which have the ability to significantly change parts of the outcome.

Mapping was conducted by our ESG team, and matching across categories was not

always straight-forward. We would suggest that any client interested in undertaking the

same analysis conduct their own mapping, and stress-test these maps before making

investment decisions.

27 July 2016

Australian ESG/SRI 6

Figure 4: MSCI and SASB ESG categories Figure 5: MSCI (GICS) and SASB (SICS) sectors

MSCI Concentrated SASB Catergories

CARBON_EMISSIONS_SCORE GHG Emissions

ENERGY_EFFICIENCY_SCORE Air Quality

PROD_CARB_FTPRNT_SCORE Energy management

INS_CLIMATE_CHG_RISK_SCORE Fuel management

WATER_STRESS_SCORE Water and wastewater management

BIODIV_LAND_USE_SCORE Waste and hazardous materials management

RAW_MAT_SRC_SCORE Biodiversity impacts

FINANCING_ENV_IMP_SCORE Human rights and community relations

TOXIC_EMISS_WSTE_SCORE Access and affordability

PACK_MAT_WASTE_SCORE Customer welfare

E_WASTE_SCORE Data security and customer privacy

OPPS_CLN_TECH_SCORE Fair disclosure and labeling

OPPS_GREEN_BUILDING_SCORE Fair marketing and advertising

OPPS_RENEW_ENERGY_SCORE Labor relations

LABOR_MGMT_SCORE Fair labor practices

HLTH_SAFETY_SCORE Employee health, safety and wellbeing

HUMAN_CAPITAL_DEV_SCORE Diversity and inclusion

SUPPLY_CHAIN_LAB_SCORE Compensation and benefits

CONTROV_SRC_SCORE Recruitment, development and retention

PROD_SFTY_QUALITY_SCORE Lifecycle impacts of products and services

CHEM_SAFETY_SCORE Environmental, social impacts on assets & operations

PRIVACY_DATA_SEC_SCORE Product packaging

FIN_PROD_SAFETY_SCORE Product quality and safety

RESPONSIBLE_INVEST_SCORE Systemic risk management

INS_HLTH_DEMO_RISK_SCORE Accident and safety management

OPPS_NUTRI_HLTH_SCORE Business ethics and transparency of payments

ACCESS_TO_COMM_SCORE Competitive behavior

ACCESS_TO_HLTHCRE_SCORE Regulatory capture and political influence

ACCESS_TO_FIN_SCORE Materials sourcing

CORP_GOVERNANCE_SCORE Supply chain management

CORRUPTION_INST_SCORE

BUS_ETHICS_FRAUD_SCORE

ANTICOMP_PRACT_SCORE

FINANCIAL_SYS_INST_SCORE

IVA_RATING_TREND

SICS Sectors (SASB) GICS Sectors

Consumption Consumer Discretionary

Financials Consumer Staples

Healthcare Energy

Infrastructure Financials

Non-renewable Resources Health Care

Renewable Resources and Alternative Energy Industrials

Resource transformation Information Technology

Services Materials

Technology and Telcos Telecommunication Services

Transportation Utilities

Source: MSCI and SASB data Source: MSCI and SASB data

Portfolio methodology

■ Back-testing materiality: Secondly, to analyse whether materiality frameworks

produce additional alpha, we perform portfolio back-tests using the three data sets.

■ Testing period from 2006-16: In compiling this note we received a more extensive

data set from MSCI, allowing us to push the start of our time period back to late 2006.

■ Portfolio methodology: For each of our data sets we build portfolios based on ESG

scores, revised on a monthly basis.

o Ranking: At the end of each month we simply rank the S&P/ASX 200 stocks

under coverage by MSCI (i.e., without survivorship bias) from highest (best score)

to lowest numeric score across each of the three data sets.

o Categorising: Then for each set on the basis of these month-end ranks we split

the stocks out into five quintile portfolios, which hold around 40 stocks each.

o Quintiles 1-5: Accordingly, the top or first quintile portfolio holds the 40 or so best

ranked stocks, while the bottom or fifth quintile portfolio holds the 40 or so worst

stocks.

o Monthly return: We then hold the stocks in each quintile portfolio on an equal-

weighted basis for the following month and calculate the portfolio excess return or

alpha for the month as the average of the individual stocks' total returns (inclusive

of any dividends) less the accumulation return of the S&P/ASX 200 index.

o Monthly refresh: We rebalance each portfolio on a monthly basis, which enables

us to pick up intra-month updates to the MSCI dataset from either changes in the

coverage universe or individual company updates (which whilst only happening

27 July 2016

Australian ESG/SRI 7

around once a year per company are happening across the year based on MSCI's

coverage cycle).

o Observing quintile performance: From these results we firstly observe the

performance of quintiles compared to their peers. If higher quintiles in general

outperform lower quintiles we observe the strategy to be successful in producing

alpha. This is especially the case if these results are monotonic: that is, when Q5

underperforms Q4, Q4 underperformers Q3, and so on. Through this note we

observe this performance against market performance, such that our quintile

portfolio returns are Quintile Portfolio Return after adjusting for Market Return.

o Long-short portfolios: Finally, we then produce long-short portfolios using these

quintiles, by shorting Quintile 5 to buy Quintile 1, and observe long-short alpha

produced by the strategy.

■ Methodology mimics usable strategy: By constructing our portfolios using the

published ESG data known to the market in the previous month, we are following a

strategy that a portfolio manager could reasonably adopt, therefore avoid 'look ahead'

bias. However, SASB's materiality framework has only been available in its entirety

since 2015, and as such the strategy based on SASB Materiality wasn't available

historically.

■ Relatively stable ratings and frameworks support invest-ability: We also note the

turnover rates of each of the ESG factor portfolios are likely to be very low and hence

quite investable. MSCI generally updates its scores once a year for each stock, and

SASB has not updated its materiality framework to date. Also, there are likely to be

minimal changes to ratings and materiality frameworks on a year-on-year across the

universe, given the relatively stable nature of ESG issues and the long time horizon

with which they typically evolve.

■ Additive rather than compounded results: Finally, to calculate cumulative portfolio

performances in this report we simply add (rather than compound) the monthly

portfolio alphas through time. This simple methodology enables readers to directly

compare average rates of alpha returned though time and during different periods of

time.

■ Methodology is not market-cap weighted: We average returns across the 40 or so

stocks in each quintile portfolio, and as such our strategy is not weighted by market

capitalisation. We chose to do this because including market capitalisation weights will

add further signals to the mix—for example, if large-caps with high ESG scores tend to

outperform but small-caps do not, a weighted portfolio will show us greater

outperformance than actually exists across the population. We find it easier to assess

the impact of ESG information as factors in an unweighted portfolio.

■ ESG ranks are linear: We also use a linear ranking system when apportioning our

quintile portfolios, rather than apportioning them using a normal distribution. As such,

each quintile has an equal number of stocks.

27 July 2016

Australian ESG/SRI 8

Results We use the above methodology to back-test the impact on returns of using MSCI and

SASB's materiality frameworks compared to no materiality framework. We observe

improved results using both materiality frameworks over the base case.

Establishing a base case (MSCI Average)

■ Establishing a pre-materiality base case: For the purpose of this note our base case

against which we seek to observe additional performance is an ESG scan conducted

without view to materiality. For this base case we conduct the above-mentioned

portfolio back-testing using MSCI ESG scores without any materiality weighting. These

scores are the average of the E, S and G pillars, with each pillar being the average of

its components. This base case roughly mimics a scenario in which ESG information is

taken into roughly equal account—with a third dedicated to environmental, social and

governance issues respectively and the sub-issues of these pillars distributed evenly.

In this scenario, environmental risks (including carbon emissions and waste

management) are of equal consequence as social risks (labour issues, product safety,

customer wellbeing, and so on), for both the aluminium smelter and the high-street

retailer.

■ Weights exist here as a consequence of categories: MSCI's category system—

including the use of the E, S and G pillars and the categorisation of sub-risks into the

pillars—does effectively apply weights to different risks. For example, if ten issues are

clustered under the Social pillar, and three under Environmental, the environmental

issues will have higher individual weights. However, these weights are far less

nuanced than the eventual MSCI materiality weights, and do not differ by sector.

■ Alpha appears to be available without materiality: Our first observation from this

exercise is that interestingly, building portfolios using these relatively unweighted

scores still gives us an alpha story, although a slightly muddled one. Quintiles two and

three outperform quintile one on this scan, falling short of a monotonic outcome

(Figure 6). However, Q4 and Q5 still underperform markedly, and the performance gap

between quintile one and five is sufficient to deliver 52% cumulative return in the long-

short portfolio (Figure 7).

Figure 6: Quintile portfolios—MSCI average score (no

materiality)

Figure 7: Quintile long-short portfolio—MSCI average

score (no materiality)

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MSCI Average Score

Note: Past hypothetical backtesting results are neither an indicator nor

guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

Note: Past hypothetical backtesting results are neither an indicator nor

guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

27 July 2016

Australian ESG/SRI 9

MSCI Materiality vs Average

■ Our next step was to compare the above pre-materiality base case (using average

scores) with results produced by portfolios constructed using MSCI's materiality

weights. We used MSCI's weighted scores (the scores which contribute to the final

MSCI Rating) to undertake the same portfolio construction exercise.

■ Slightly clearer outperformance, and better long-short outcome: When we ran this

back-test we observed a slightly stronger performance signal across the portfolios.

Although Q2 and Q3 still outperform Q1, the three quintiles are more closely bunched.

Q4 and Q5 are also more closely correlated, and underperform by a significant margin.

As such, the long-short portfolio delivers 60.2% cumulative return over the period—8.2

percentage points more than the results produced using average scores.

■ MSCI materiality weights contribute alpha, raise further questions: Evidently, the

use of MSCI's materiality weights improves our strategy, demonstrating that materiality

frameworks can support returns from ESG strategies. This result may seem intuitive

given wide consideration of materiality, and we certainly came into the experiment

expecting to observe some impact from materiality. However, this result does suggest

that the materiality approach an investor chooses to use warrants systematic

appraisal. It is in the spirit of this appraisal that we turn our efforts to SASB's Materiality

framework.

Figure 8: Quintile Portfolios - MSCI Weighted Average

Score (Materiality)

Figure 9: Quintile Long-Short Portfolio – MSCI Weighted

Average Score (Materiality) vs. MSCI Average Scores

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MSCI Average Score MSCI Materiality

Note: Past hypothetical backtesting results are neither an indicator nor

guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

Note: Past hypothetical backtesting results are neither an indicator nor

guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

SASB Materiality

■ Building portfolios using the SASB Materiality Map: As outlined above, our second

strategy involved using SASB's materiality framework—the Materiality Map—to

undertake the same analysis. After mapping SASB ESG risks and sectors against

MSCI risks and sectors, we weighted MSCI scores using SASB's materiality weights.

We then undertook the same portfolio construction process used above and back-

tested our results across the 2006-16 period.

■ Very strong long-short results, and mixed quintile performance: Using SASB's

materiality weights produces portfolios with more monotonic returns than previous

scans, but less regular spread across quintiles. Quintile performance is almost

monotonic, except that Q2 just outperforms Q1. However, in contrast to previous scans

Q4 is more closely correlated with the higher quintiles than with Q5. As with other

scans quartiles 1 and 2 outperform quartiles 4 and 5 on average. Furthermore, Q1

comfortably outperforms Q5 such that the results of the long-short strategy are

stronger than any previous scan. Long-short cumulative performance is 88% across

27 July 2016

Australian ESG/SRI 10

the period, well above MSCI's materiality framework at 60% and the base case

average scores at 52%. SASB outperforms the other approaches we use here by 27.8-

36.0 percentage points.

■ Strong performance from improved Q1 and lower Q5: This strong long-short

performance is a consequence of both improved performance in Q1 (1.7% below

benchmark compared to 18.5% below in MSCI Average and 10.3% below benchmark

in MSCI Materiality) and significantly poorer performance in Q5 (-89.7% against

-70.5% and -70.4% for MSCI Average and Materiality respectively).

■ Better materiality, or China? In our view this poor performance in Q5 is partly due to

the prevalence of resources in this quartile, which is more prominent as a

consequence of the high priority SASB's framework affords to emissions (see

Appendix 4 for sector weights in our Q1 and Q5 portfolios across frameworks).

Underperformance in Q5 in all three sets seems to take hold around 2011 and is well

under way by 2012, roughly matching the trajectory of the resources boom. Some of

this fall is likely to reflect an accidental association with a non-ESG related trend.

However, the same period marked significant falls in coal—partly driven by ESG trends

(here we are thinking about a recent turn away from coal-fired energy, and ongoing

efficiency drives). To the extent that consumption has fallen for ESG-related reasons

this down-turn could be considered to be partially driven by an ESG trend. We also

note that until 2011 quintile portfolio scores are very mixed, and the SASB scan

underperforms even the MSCI average score until late 2013.

Figure 10: Quintile portfolios—SASB weighted average

score (materiality)

Figure 11: Quintile long-short portfolio—SASB weighted

average score (materiality)

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MSCI Average Score MSCI Materiality SASB Materiality

Note: Past hypothetical backtesting results are neither an indicator nor

guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

Note: Past hypothetical backtesting results are neither an indicator nor

guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

27 July 2016

Australian ESG/SRI 11

Marked difference in long-short strategies

■ Overall, our long-short strategy outcomes differ significantly across frame-

works, with the SASB materiality index outperforming MSCI materiality by 27.8

percentage points and no materiality framework by 36.0 percentage points (Figure 12).

Figure 12: Quintile portfolios—long-short portfolio (average vs. materiality)

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MSCI Average Score MSCI Materiality SASB Materiality

36%

Note: Past hypothetical backtesting results are neither an indicator nor guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

27 July 2016

Australian ESG/SRI 12

Discussion Materiality matters…

■ Materiality frameworks support performance: The results of our back-testing

suggest that materiality frameworks are indeed a useful part of an ESG strategy. We

note that both MSCI and SASB materiality frameworks produce improved performance

next to an average score approach—in particular improving long/short returns by 8.2

and 36.0 percentage points, respectively.

■ Although materiality-neutral approaches also perform: One point of interest in our

results is that strategies using average scores also provide alpha. These average

scores cannot be considered free of weighting, as they are already sorted into pillars.

Furthermore, a score is present for each category. In this respect these scores differ

significantly from both an ad-hoc approach and an approach in which all factors are

considered equally. However, this does provide a counter-point to the materiality

debate, indicating that raw ESG information may be valuable without the nuance of

materiality weighting.

■ Different results across approaches suggest different frameworks may support

different strategies: We also note that the two materiality frameworks we utilised

have varying results across the quintile portfolio and long/short approaches. MSCI's

materiality framework appears to be more supportive of clearly separated upper and

lower-quartile returns across history, with tightly clustered upper and lower quintiles.

However, SASB's framework supported a far superior long/short outcome—adding 36

percentage points on MSCI's framework. In our view, this suggests that different

approaches to materiality might be optimal for different strategies.

■ Frameworks may matter—try to pick the right one: Our results also highlight to us

the impact of using different frameworks. In our view, although materiality is regularly

considered, this consideration is often not systematic or alternatively implicit (as in

MSCI's ESG scores). Given the significance of materiality frameworks for our results,

we increasingly believe that a systematic approach to materiality is useful. We hear

much commentary surrounding materiality—often focused on MSCI's own weights. We

would suggest that where managers have strong views, generating materiality

frameworks based on the experience and view of in-house investment teams might be

a worthwhile investment.

■ Would SASB results be improved by using live frameworks? One explanation for

SASB's poor historical performance may be that although our approach uses MSCI

weighted scores with contemporary weights, SASB's materiality framework was

completed in 2015 and our approach applies the same weights across the entire back-

testing period. Arguably the materiality of certain issues changes over time (see If ESG

Outperforms, why? for discussion on this front), and materiality frameworks should too.

We suspect that our SASB results could be improved if conducted in real-time, with the

SASB materiality framework relevant for each year.

Caveats and regional focus

■ Separating sector effects is challenging: A key caveat to our analysis is that we do

not control for other factors. As such, as mentioned above, the differing fortunes of

sectors are included in the results. If it is the case that the resources sector has been

particularly challenged recently as a consequence of macro-economic factors, and

resource companies have on average lower ESG scores, the apparent under-

performance of Q4 and Q5 portfolios will be partly driven by this macro-economic

impact. Conversely, if financials have higher ESG scores on average and have

performed strongly, the stronger performance of Q1 and Q2 portfolios will partially

27 July 2016

Australian ESG/SRI 13

reflect this trend. ESG factors can of course contribute to the fortunes of a sector, but

as it stands our analysis also includes impacts from other factors.

■ Materiality likely differs by region: MSCI and SASB's materiality frameworks are

currently global frameworks, without evident regional differentiation. However,

materiality obviously differs by geography, particularly as a consequence of policy

variation. For example, we recently hypothesised that ESG integration supports

performance partly because it helps investors and companies pre-empt structural

change, and this structural change differs by region. A concrete example of this is

available in climate policy, which despite being a global priority shows significant

regional variation. In our view, investors may benefit from adjusting global frameworks

according to their regional conditions, or forming their in-house materiality frameworks

with a consideration to regional trends.

■ Mapping choices have significant impact on outcomes: It is worth highlighting

again that our mapping choices—the ways in which we translate risk to risk and sector

to sector across MSCI and SASB—are important for our outcomes. The conclusions

we have reached on these fronts are not clear-cut in many cases, and are included

and discussed in Appendix 2 for the sake of clarity. We would suggest that investors

review their mapping carefully when using materiality frameworks given the apparent

importance of materiality approach.

27 July 2016

Australian ESG/SRI 14

Conclusion ■ Materiality matters: The results of our analysis suggest that materiality frameworks

are indeed a useful part of an ESG strategy. Both MSCI and SASB materiality

frameworks produce improved performance next to an average score approach.

Performance improvements rendered by materiality frameworks in our long-short

strategies are 8.2 and 36.0 percentage points, respectively, over 2006-16.

Figure 13: Materiality analysis outcomes

Dataset Q1 Q2 Q3 Q4 Q5 Long/short

MSCI Average Score -18.5% 5.5% 5.1% -44.9% -70.5% 52.0%

MSCI Materiality -10.3% 0.8% 9.2% -52.9% -70.4% 60.2%

SASB Materiality -1.7% -0.4% -7.1% -19.5% -89.7% 88.0% Note: Past hypothetical backtesting results are neither an indicator nor guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

■ Different frameworks may support different strategies: Evidently, performance

differs across the two materiality approaches we considered. Results varied across our

quintile portfolios and long/short approaches. MSCI's materiality framework appears to

be more supportive of clearly separated upper and lower-quartile returns, with tightly

clustered upper and lower quintiles. However, SASB's framework supported a far

superior long/short outcome—adding 27.8 percentage points on top of results

produced using MSCI's framework. In our view, this suggests that different approaches

to materiality might be optimal for different strategies.

■ This preliminary analysis suggests that SASB's framework gives us stronger

results: Of the two frameworks used, SASB's framework gives us much stronger

back-tested performance in this analysis than MSCI's. Although we suspect this may

be thanks to a sector bias, it does at least initially recommend the SASB framework.

Given that both frameworks are provided by proprietors with a global outlook and are

based on a significant research base, we have no intrinsic preference for one or the

other framework. However, we note that the SASB framework is more heavily

weighted to social and customer welfare issues, while many environmental concerns

are bundled into one or two risk categories. For this reason, we might initially prefer

SASB's framework in industries or economies in which social concerns are viewed to

be more prominent and MSCI's in those with prominent environmental concerns.

■ Try to pick the right materiality framework (or DIY): In our view, although materiality

is regularly considered, this consideration is rarely systematic. Given the significant

performance difference between the two materiality frameworks we considered, we

believe that a systematic approach to materiality is useful. We hear much commentary

surrounding the accuracy of materiality approaches, much of this critical. Given the

experience and expertise present inside many investment houses, we would suggest

that if investors are sceptical of other materiality frameworks they should consider

building their own.

27 July 2016

Australian ESG/SRI 15

Appendix 1: SASB Materiality Map ■ SASB's Materiality Map assigns a materiality score for each risk in each sector and

sub-sector identifying sectors as having less or more than 50% of companies affected.

We reproduced this map for our analysis using the values of 0, 1 and 2 for no impact,

<50% impacted and >50% impacted, respectively. The entire map including sub-

sectors is available on SASB's website.

Figure 14: SASB Materiality Map—sectors

Source: SASB

27 July 2016

Australian ESG/SRI 16

Appendix 2: MSCI/SASB ESG Risk Mapping ■ Mapping MSCI to SASB: In order to test SASB's Materiality Map using MSCI data we

had to map MSCI ESG risk categories onto their SASB equivalents. The two sets of

ESG risks have a different total number of risks and also different focuses, with SASB

having more social and customer welfare categories, and MSCI having more

environmental categories.

■ Mapping with minimal double-counting: We initially used a one-to-many map, with

a number of MSCI categories assigned to each SASB category. However, this left us

with a significant number of unattended SASB categories, and we chose to instead

utilise a many-to-many map in which MSCI categories are used against more than one

SASB category. Nonetheless, we tried to be as sparing as possible in our use of MSCI

categories, with toxic emissions and waste, energy efficiency, labour management,

health and safety and anticompetitive practice categories the only categories used

twice.

■ Weights introduced in mapping: If SASB categories (which are not presented with

weights) are considered to be equally weighted, our mapping process results in final

'weights' for MSCI's original category shown in Figure 16. Because some SASB

categories have more than one MSCI category assigned to them, MSCI categories

make up varying portions of the total SASB category split. If we were able to map

MSCI and SASB categories one-for-one, these weights would be equal.

■ Mapping isn't perfect: We often found ourselves unable to clearly map MSCI and

SASB categories against one another, with many topics overlapping and some (such

as fair marketing and advertising) mostly absent in one framework. We have erred on

the side of clarity, choosing to include only the category we found most relevant.

■ Fair marketing and advertising, diversity left out: We decided not to force an MSCI

category fit onto Fair disclosure and labelling, Fair marketing and advertising, and

Diversity and inclusion. This is because in our view, none of the MSCI categories are

sufficiently aligned with the SASB categories. A more sophisticated many-to-many

map may address this, but we have erred on the side of simplicity for this note.

Figure 15: MSCI/SASB category mapping SASB-MSCI ESG Risk Category Map

SASB categories MSCI Category 1 MSCI Category 2 MSCI Category 3 MSCI Category 4 MSCI Category 5

GHG Emissions CARBON_EMISSIONS_SCORE

Air Quality TOXIC_EMISS_WSTE_SCORE

Energy management ENERGY_EFFICIENCY_SCORE

Fuel management ENERGY_EFFICIENCY_SCORE

Water and wastewater management WATER_STRESS_SCORE

Waste and hazardous materials management TOXIC_EMISS_WSTE_SCORE

Biodiversity impacts BIODIV_LAND_USE_SCORE

Human rights and community relations CORRUPTION_INST_SCORE

Access and affordability ACCESS_TO_COMM_SCORE ACCESS_TO_HLTHCRE_SCORE ACCESS_TO_FIN_SCORE

Customer welfare OPPS_NUTRI_HLTH_SCORE FIN_PROD_SAFETY_SCORE

Data security and customer privacy PRIVACY_DATA_SEC_SCORE

Fair disclosure and labeling

Fair marketing and advertising

Labor relations LABOR_MGMT_SCORE

Fair labor practices LABOR_MGMT_SCORE

Employee health, safety and wellbeing HLTH_SAFETY_SCORE

Diversity and inclusion

Compensation and benefits CORP_GOVERNANCE_SCORE

Recruitment, development and retention HUMAN_CAPITAL_DEV_SCORE

Lifecycle impacts of products and services RAW_MAT_SRC_SCORE E_WASTE_SCORE PROD_CARB_FTPRNT_SCORE OPPS_RENEW_ENERGY_SCORE OPPS_CLN_TECH_SCORE

Environmental, social impacts on assets & operations FINANCING_ENV_IMP_SCORE RESPONSIBLE_INVEST_SCORE OPPS_GREEN_BUILDING_SCORE INS_CLIMATE_CHG_RISK_SCORE INS_HLTH_DEMO_RISK_SCORE

Product packaging PACK_MAT_WASTE_SCORE

Product quality and safety PROD_SFTY_QUALITY_SCORE CHEM_SAFETY_SCORE

Systemic risk management FINANCIAL_SYS_INST_SCORE

Accident and safety management HLTH_SAFETY_SCORE

Business ethics and transparency of payments BUS_ETHICS_FRAUD_SCORE

Competitive behavior ANTICOMP_PRACT_SCORE

Regulatory capture and political influence ANTICOMP_PRACT_SCORE

Materials sourcing CONTROV_SRC_SCORE

Supply chain management SUPPLY_CHAIN_LAB_SCORE Source: SASB, MSCI, Credit Suisse estimates

27 July 2016

Australian ESG/SRI 17

Figure 16: MSCI category weights when converted to SASB framework*

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%

CARBON_EMISSIONS_SCORE

ENERGY_EFFICIENCY_SCORE

PROD_CARB_FTPRNT_SCORE

INS_CLIMATE_CHG_RISK_SCORE

WATER_STRESS_SCORE

BIODIV_LAND_USE_SCORE

RAW_MAT_SRC_SCORE

FINANCING_ENV_IMP_SCORE

TOXIC_EMISS_WSTE_SCORE

PACK_MAT_WASTE_SCORE

E_WASTE_SCORE

OPPS_CLN_TECH_SCORE

OPPS_GREEN_BUILDING_SCORE

OPPS_RENEW_ENERGY_SCORE

LABOR_MGMT_SCORE

HLTH_SAFETY_SCORE

HUMAN_CAPITAL_DEV_SCORE

SUPPLY_CHAIN_LAB_SCORE

CONTROV_SRC_SCORE

PROD_SFTY_QUALITY_SCORE

CHEM_SAFETY_SCORE

PRIVACY_DATA_SEC_SCORE

FIN_PROD_SAFETY_SCORE

RESPONSIBLE_INVEST_SCORE

INS_HLTH_DEMO_RISK_SCORE

OPPS_NUTRI_HLTH_SCORE

ACCESS_TO_COMM_SCORE

ACCESS_TO_HLTHCRE_SCORE

ACCESS_TO_FIN_SCORE

CORP_GOVERNANCE_SCORE

CORRUPTION_INST_SCORE

BUS_ETHICS_FRAUD_SCORE

ANTICOMP_PRACT_SCORE

FINANCIAL_SYS_INST_SCORE

Overall Weight

* Assumes equal weighting across SASB categories

Source: MSCI, SASB, Credit Suisse estimates

27 July 2016

Australian ESG/SRI 18

Appendix 3: Top and bottom quartile constituents as of May 2016 Figure 17: Top and bottom quartile portfolio constituents as of May 2016—MSCI Materiality

Q1 Q5

Ticker Company Ticker Company

AMC.AX Amcor AAC.AX AACo

APA.AX APA Group ABC.AX Adelaide Brighton

BTT.AX BT Investment Management Limited ABP.AX Abacus Prop Grp

BXB.AX Brambles ALU.AX Altium

CCL.AX Coca-Cola Amatil BGA.AX Bega Cheese

CGF.AX Challenger Limited BHP.AX BHP Billiton

CMW.AX Cromwell Property Group BPT.AX Beach Energy

COH.AX Cochlear CIM.AX CIMIC Group

CVO.AX Cover-More Group CWY.AX Cleanaway Waste Management

DOW.AX Downer EDI EVN.AX Evolution Mining Limited

DXS.AX Dexus Property Group FXL.AX FlexiGroup Limited

FPH.AX Fisher & Paykel Healthcare Corp. GUD.AX G.U.D. Holdings

GMG.AX Goodman Group IGO.AX Independence Group NL

GPT.AX GPT Group IPL.AX Incitec Pivot

HGG.AX Henderson Group PLC IRE.AX IRESS

IFL.AX IOOF Holdings JHX.AX James Hardie Industries plc

IOF.AX Investa Office Fund MIN.AX Mineral Rsc

IVC.AX InvoCare Ltd MMS.AX McMillan Shakespeare

LLC.AX Lend Lease MPL.AX Medibank Private Limited

MGR.AX Mirvac Group MSB.AX Mesoblast

MQA.AX Macquarie Atlas MYR.AX Myer Holdings

MQG.AX Macquarie Group NST.AX Northern Star Resources Ltd

ORG.AX Origin Energy NWS.AX News Corporation

PPT.AX Perpetual Limited PRY.AX Primary Health Care

PRG.AX Programmed Maintenance Services PTM.AX Platinum Asset Management

SDF.AX Steadfast QAN.AX Qantas

SEK.AX Seek QBE.AX QBE Insurance Group

SGM.AX Sims Metal Management REA.AX REA Group

SGP.AX Stockland Group RFG.AX Retail Food Grup

SIP.AX Sigma Pharmaceuticals RIO.AX Rio Tinto

SKI.AX Spark Infrastructure Group RRL.AX Regis Resources Limited

SYD.AX Sydney Airport SAR.AX Saracen Mineral

TCL.AX Transurban SCP.AX SCA Property Group

TME.AX Trade Me Group Ltd SHL.AX Sonic Healthcare

WBC.AX Westpac SYR.AX Syrah Resources

WOR.AX WorleyParsons TPM.AX TPG Telecom

WPL.AX Woodside Petroleum WES.AX Wesfarmers

WHC.AX Whitehaven Coal Note: Past hypothetical backtesting results are neither an indicator nor guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse research

27 July 2016

Australian ESG/SRI 19

Figure 18: Top and bottom quartile portfolio constituents as of May 2016—SASB Materiality

Q1 Q5

Ticker Company Ticker Company

AGL.AX AGL Energy ABC.AX Adelaide Brighton

ALQ.AX ALS Limited AHG.AX Automotive Holdings Group Ltd

AMC.AX Amcor AHY.AX Asaleo Care Limited

ANN.AX Ansell Limited ALU.AX Altium

AOG.AX Aveo Grp BHP.AX BHP Billiton

BRG.AX Breville Group BPT.AX Beach Energy

BTT.AX BT Investment Management Limited CAR.AX carsales.com.au

BXB.AX Brambles CQR.AX Charter Hall Retail REIT

CCL.AX Coca-Cola Amatil CSR.AX CSR

CMW.AX Cromwell Property Group CWY.AX Cleanaway Waste Management

CVO.AX Cover-More Group EVN.AX Evolution Mining Limited

DOW.AX Downer EDI FXL.AX FlexiGroup Limited

DXS.AX Dexus Property Group GUD.AX G.U.D. Holdings

EHE.AX Estia Health IGO.AX Independence Group NL

GMG.AX Goodman Group IRE.AX IRESS

GPT.AX GPT Group ISD.AX Isentia Group

HGG.AX Henderson Group PLC MQA.AX Macquarie Atlas

IFL.AX IOOF Holdings MSB.AX Mesoblast

IOF.AX Investa Office Fund MYR.AX Myer Holdings

IVC.AX InvoCare Ltd MYX.AX Mayne Pharma

JHC.AX Japara Health NCM.AX Newcrest Mining

MGR.AX Mirvac Group NST.AX Northern Star Resources Ltd

PPT.AX Perpetual Limited NUF.AX Nufarm

PRG.AX Programmed Maintenance Services NWS.AX News Corporation

REG.AX Regis Healthcare ORA.AX Orora

RHC.AX Ramsay Health Care RIO.AX Rio Tinto

SCG.AX Scentre Group RRL.AX Regis Resources Limited

SDF.AX Steadfast S32.AX South 32

SEK.AX Seek SAR.AX Saracen Mineral

SGM.AX Sims Metal Management SBM.AX St Barbara Mining

SGP.AX Stockland Group SCP.AX SCA Property Group

SHL.AX Sonic Healthcare SFR.AX Sandfire Resources NL

TCL.AX Transurban SKC.AX SKYCITY Entertainment Group Ltd.

TME.AX Trade Me Group Ltd SRX.AX Sirtex Medical

TWE.AX Treasury Wine SYR.AX Syrah Resources

WFD.AX Westfield Corporation WHC.AX Whitehaven Coal

WOR.AX WorleyParsons WSA.AX Western Areas Note: Past hypothetical backtesting results are neither an indicator nor guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse research

27 July 2016

Australian ESG/SRI 20

Appendix 4: Sector contributions to top and bottom quintiles

MSCI Non-materiality Weighted

Figure 19: Sector contribution to quintile 1 portfolio—MSCI Non-Materiality weighted

0%

25%

50%

75%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Utilities

Telecommunications

IT

Financials

Healthcare

Consumer Staples

Consumer Discretionary

Industrials

Materials

Energy

Note: Past hypothetical backtesting results are neither an indicator nor guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

Figure 20: Sector contribution to quintile 5 portfolio – MSCI Non-Materiality weighted

0%

25%

50%

75%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Utilities

Telecommunications

IT

Financials

Healthcare

Consumer Staples

Consumer Discretionary

Industrials

Materials

Energy

Note: Past hypothetical backtesting results are neither an indicator nor guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

27 July 2016

Australian ESG/SRI 21

MSCI Materiality

Figure 21: Sector contribution to quintile 1 portfolio—MSCI Materiality

0%

25%

50%

75%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Utilities

Telecommunications

IT

Financials

Healthcare

Consumer Staples

Consumer Discretionary

Industrials

Materials

Energy

Note: Past hypothetical backtesting results are neither an indicator nor guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

Figure 22: Sector contribution to quintile 5 portfolio—MSCI Materiality

0%

25%

50%

75%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Utilities

Telecommunications

IT

Financials

Healthcare

Consumer Staples

Consumer Discretionary

Industrials

Materials

Energy

Note: Past hypothetical backtesting results are neither an indicator nor guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

27 July 2016

Australian ESG/SRI 22

SASB Materiality

Figure 23: Sector contribution to quintile 1 portfolio—SASB Materiality

0%

25%

50%

75%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Utilities

Telecommunications

IT

Financials

Healthcare

Consumer Staples

Consumer Discretionary

Industrials

Materials

Energy

Note: Past hypothetical backtesting results are neither an indicator nor guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

Figure 24: Sector contribution to quintile 1 portfolio—SASB Materiality

0%

25%

50%

75%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Utilities

Telecommunications

IT

Financials

Healthcare

Consumer Staples

Consumer Discretionary

Industrials

Materials

Energy

Note: Past hypothetical backtesting results are neither an indicator nor guarantee of future returns

Source: MSCI, SASB, Thomson Reuters, Credit Suisse estimates

27 July 2016

Australian ESG/SRI 23

Previous research Report name Published

Recent Australian ESG Research

Lake Wobegon: brown coal remediation woes 12-Jul-16

If ESG outperforms, Why? 29-Jun-16

What keeps our bank analysts awake at night? 24-Jun-16

WOW: Thoughts on performance incentives 31-Mar-16

Dipping our toes into carbon footprinting 11-Mar-16

Somersault with a twist – the deep(er) dive on carbon footprinting 11-Mar-16

What we look at on Boards and Remuneration 2-Mar-16

Questions to ask about Rehab 4-Feb-16

Australian Integrated Utilities – COP21 and the transition from coal generation 3-Feb-16

I'm stranded and off the rehab 14-Jan-16

ESG in the Mining Sector – Quantifying ESG opportunities 26-Oct-15

ESG-α Series: Can Social Engagement add Alpha? 23-Oct-15

ESG-α Series: Finding Alpha in ESG Momentum 28-Sep-15

El Niño in 2015? Implications and impact Jul-15

Key ESG risks and megatrends: What keeps our energy analysts awake at night? 30-Jun-2015

ESG-α Series: Finding Alpha in ESG 19-Jun-15

Key ESG risks and megatrends: What keeps our utilities analyst awake at night? 2-Jun-15

NVN-FDC merger: An ESG 101 8-May-2015

Australian Investment Strategy - The anatomy of activism in Australia 17-April-15

South32 demerger: An ESG 101 2-April -15

AGL: I can see clearly now 19-Mar-15

Risks in payday lending and goods rental 3-Mar-15

Relative TSR across oil and gas companies-punishing for the oil price or performance? 3-Mar-15

Australian Wagering Sector - Quantifying an adverse impact of Greyhounds 18-Feb-15

Safety: What gets measured gets managed 4-Feb-15

Quantitative ESG/SRI Research Optimal board member numbers produce the best shareholder returns 5-Sep-14

Companies respond: Why is discounted fair value used? 22-Jul-14

Use of discounted fair value in awarding long term incentives - is it fair? 11-Jun-14

Activist opportunities in Australia 18-Nov-14

Australian SRI/ESG Research – The banking sector: Resolving "too big to fail" 9-Sep-14

Santos - Social Licence to Operate Challenges leads to Project Risk Re-rating 3-Jul-14

ORG: The facts in a nutshell 13-Mar-14

AGK: What about the vocal minority? 11-Mar-14

AGK: Delays at Gloucester 26-Feb-14

AGK: Goings on at Gloucester 19-Feb-14

Initiations with integrated ESG analysis

Blackmores (BLK.AX) – Chinese retail – The remedy to reach $175 12-Jul-16

Northern Star Resources (NST.AX) – Fully priced for continued success 2-Jun-16

NextDC (NXT.AX) – Initiation of coverage: The price is right 12-May-16

FAR Limited (FAR.AX) – FAR out, Senegal sprout 20-Apr-16

Macquarie Atlas (MQA.AX) - Consolidate, liquidate or internalise 15-Apr-16

oOH! Media (OML.AX), APN Outdoor (APO.AX) Outdoor set for an extended time in the sun 11-Apr-16

Speedcast International (SDA.AX) – Initiation of coverage: High-octane growth 29-Mar-16

27 July 2016

Australian ESG/SRI 24

St Barbara Mining (SBM.AX) – Good company but fully priced 24-Mar-16

Clydesdale Bank (CYB.AX) – Making the most of a modest hand 4-Feb-16

Magellan Financial group (MFG.AX) – Retail to drive the next leg of growth 2-Feb-16

Virgin Australia (VAH.AX) – Free cash flow tagged for BS repair 14-Jan-16

Qantas (QAN.AX) – Flash cash-flow flood 22-Dec-15

SmartGroup (SIQ.AX) – Strong track record, strong momentum 7-Dec-15

Integrated Diagnostics (IDX.AX) – Image lacks short term visibility 4-Dec-15

Aconex (ACX.AX) – Best positioned in a land grab 26-Nov-15

TPG Telecom (TPM.AX) – NBN margin headwind too big to ignore 1-Oct-15

Transurban (TCL.AX) – Network advantage and investment horizon arb 9-Sep-15

Premier Investments (PMV): A fully valued growth story 4-Sep-15

AWE (AWE) - The one I love, belongs to someone else 7-Aug-15

Capitol Health (CAJ) – Scan reveals valuation upside 27-Jul-15

Ridley (RIC) – Growth potential in a pure-play agri-business 23-Jun-15

CIMIC (CIM) – Cost out, cash conversion and capital management 13-Jun-15

Eclipx (EXC) – Management-driven turnaround and transformation 1-Jun-15

South32 (S32) – Initiate at Neutral, target price $2.50 19-May-15

Aurizon (AZJ) – Ex-growth (for now), time to return capital 19-May-15

Tassal Group (TGR) - Good long term growth at a reasonable price 11 May-15

Brambles (BXB) – Social network coming to pallets 20-Mar-15

BWP Trust (BWP) – Overshooting valuation 27 Jan-15

Sirius Resources (SIR) – Fully priced, but a bright future 18-Dec-14

BigAir (BGL) – BigAir – Blue Sky 3 Dec-14

Seymour White (SWL) – Infrastructure upswing = 24% 3 years EPS CAGR 2 Dec-14

Huon Aquiculture (HUO) – Strong company, strong industry 2-Dec-14

ICars Asia (ICQ) – Substantial revenue opportunities 1-Dec-14

Medibank Private (MPL) – A healthy outlook is no insurance for a high PE 26-Nov-14

Asaleo (AHY) – Absorbs everything but cash 14-Nov-14

Mantra (MTR) – A Mantra that works 14-Nov-14

Drillsearch (DLS) – We found oil in a hopeless place 5-Nov-14

AIO, QUB, TOL, Fortunes in fragmented Aussie Transport 14-Oct-14

Healthscope (HSO) – Brownfield of dreams 3-Sep-14

Dulux (DLX) - Initiating with a $6.25 Target Price and Outperform rating 20-Aug-14

M2 (MTU) – A 16% organic growth story on 11.2x P/E; uncovering what the bears have missed 5-Aug-14

GWA Group (GWA) – Need more certainty in the growth profile 23-Jul-14

Dick Smith Holdings (DSH) – Initiating with a $2.08 per share target price 14-Jul-14

NIB Holdings (NHF) – Growth in a healthy industry 4-Apr-14

Sydney Airport (SYD) – Attractive fundamentals, but fully priced in 14-Mar-14

OceanaGold (OGC) – Strong cashflow, multi-asset gold company at fair value 7-Feb-14

Pact Group (PGH) – Diversified, defensive and inexpensive 28-Jan-14

GDI Property Group (GDI) – Initiate with an Outperform 27-Jan-14

2016 Australian AGM Series

AGM Series – ABC: Package steady, FY16 LTI grant out of the money 4-May-16

AGM Series – ALL: Increased LTI and new exclusions 9-Feb-16

AGM Series – ALQ: Performance measures improve, LTI grant in the money 5-Jul-16

AGM Series – AMP: Structure steady, maximum package up 11.4% 29-Apr-16

AGM Series – AST: One-offs impact EPS and ROIC 29-Jun-16

AGM Series – AWC: 81% of STI achieved 21-Apr-16

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Australian ESG/SRI 25

AGM Series – CCL: LTI EPS hurdle "out of the money" 28-Apr-16

AGM Series - CSR: Positive additions to LTI, EPS still out of the money 8-Jun-16

AGM Series – CTX: 20% payrise directed to STI 19-Apr-16

AGM Series - GPT: New CEO package down 6.7%, board discretion evident 19-Apr-16

AGM Series – HGG: Excellent Disclosure, high proportion of pay at risk 11-Apr-16

AGM Series – ILU: LTI ROE hurdle "out of the money" 4-May-16

AGM Series – MQG: 2016 LTI hurdle "out of the money" 11-Jul-16

AGM Series – ORI: FY15 ROC hurdle now "out of the money" 13-Jan-16

AGM Series – OSH: Tough love from the board 22-Apr-16

AGM Series – PMV: EGM called for CEO package changes 25-May-16

AGM Series – QBE: Max pay up 16%, ROE hurdle concerns 18-Apr-16

AGM Series – RIO: Relative EBIT margin LTI hurdle appears challenging 31-Mar-16

AGM Series - SCG: U Got the Look - Improved hurdles and performance period 22-Apr-16

AGM Series – SKI: Board ructions 5-May-16

AGM Series – STO: Concerns on 43% of Strategic Grant vesting; FY16 LTI concerns 19-Apr-16

AGM Series – SYD: LTI added for ~37% max pay rise 27-Apr-16

AGM Series - WFD: Package relatively steady, disclosure could improve 29-Apr-16

AGM Series – WPL: Structure consistent; Freeze into 2016 6-Apr-16

2015 Australian AGM Series

AGM Series - ABC: FY14 EPS hurdles "in the money" with considerable upside for CEO for beating consensus 4-May-15

AGM Series - AGL: Full vesting for departing CEO, new LTI for FY16 27-Aug-15

AGM Series - ALL: Significant increase in maximum salary 10-Feb-15

AGM Series - ALQ: EPS growth target range is "in the money" for FY16 grant 29-Jun-15

AGM Series - AMC: Outgoing CEO cash settled LTIs 25-Sep-15

AGM Series - AMP: Change to face value for FY15 LTI is positive 13-Apr-15

AGM Series – ANN: LTI EPS hurdles "out of the money" 8-Sep-15

AGM Express Series: - APA (available on request) 28-Sep-15

AGM Series - AST: EPS and ROIC targets for FY15 LTI grant "out of the money" 29-Jun-15

AGM Series - ASX: Increase in pay at risk; EPS hurdles out of the money 31-Aug-15

AGM Series- AWC: Focused on base pay and retention 21-Apr-15

AGM Series – AZJ: OR targets continue down to 70% 26-Oct-15

AGM Series – BEN: Focus on retention and Relative TSR 21-Oct-15

AGM Series – BHP: Special resolution impacts on franking credits 1-Oct-15

AGM Series – BLD: Increased ROFE hurdles a stretch 7-Oct-15

AGM Series - CAR: FY15 LTI may now be "out of the money" 30-Sep-15

AGM Series - CCL: Large increase in FY15 LTI 24-Apr-15

AGM Express Series: - CGF (available on request) 28 Sep-15

AGM Series - COH: Tough forfeiture of most LTI for departing CEO 24-Sep-15

AGM Series - CSL: increase in "at risk" pay with challenging EPS stretch 23-Sep-15

AGM Series - CSR : Rigid EPS target range "out of the money" for FY16 grant 19-Jun-15

AGM Series - CTX: Rewarding out-performance, though transparency could be improved 17-Apr-15

AGM Series – CWN: FY15 LTI hurdle reached 25-Sep-15

AGM Series – DOW: LTI EPS hurdles "out of the money" 7-Oct-15

AGM Series – EGP: Undisclosed EPS hurdles 7-Oct-15

AGM Series – FMG: ROE hurdles impacted by iron ore price 21-Oct-15

AGM Series – FXJ: No STI paid; focus is on the longer term 16-Oct-15

AGM Series - GPT: Total Return performance measure for long term incentive rewards out-performance 13-Apr-15

AGM Series - HGG : Major changes to FY15 LTI award 2-Apr-15

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AGM Series – HVN: small changes after first strike 28-Oct-15

AGM Express Series: - IAG (available on request) 12-Sep-15

AGM Express Series: - IPL (available on request) 3-Dec-15

AGM Series - ILU: Management feels the pain from depressed mineral sands prices 6-May-15

AGM Series: - JBH: Lower FY16 LTI hurdle "in the money" 30-Sep-15

AGM Series: - JHX: Board Succession Concerns 30-Jul-15

AGM Series – MPL: LTI hurdles "in the money" 24-Sep-15

AGM Series - MQG: Long vesting period enhances alignment 1-Jul-15

AGM Series – MTS: Concerns with incentives "out of the money" 11-Aug-15

AGM Series – NCM: Fatalities impact on STI 1-Oct-15

AGM Series - ORG: FY16 adds ROCE measure 24-Sep-15

AGM Series - ORI: Return on Capital hurdle is 'in the money' for the FY15 grant 21-Jan-15

AGM Series – OSH: Fatality reduces STI outcome for CEO 30-Apr-15

AGM Series - PPT: FY16 LTI hurdle seems a stretch 15 Oct-15

AGM Series - QBE: Larger FY15 maximum compensation, though less short-term focused 13-Mar-15

AGM Series - RHC: LTI of +500% of base salary 19-Oct-15

AGM Series - RIO: Incentivising out-performance for the longer term 16-Apr-15

AGM Series- SCG: LTI performance hurdles not disclosed in advance 21-Apr-15

AGM Series – SGM: Incentives rise from 400% to 615% of base 27-Oct-15

AGM Series – SKI: Move to four year performance period for FY14 LTI is positive 6-May-15

AGM Series - STO: Management are feeling the pain of the decline in oil price 7-Apr-15

AGM Series - SUN: Incoming CEO's pay lower 24-Aug-15

AGM Series - SYD: LTI added to the CEO's remuneration structure for FY15 29-Apr-15

AGM Series – TAH: Extra shares/rights post dilution 2-Oct-15

AGM Series – TCL: FCF hurdles depend on Express Lanes ramp up 18-Sep-15

AGM Series – TLS: FY16 LTI FCF hurdle raised substantially 18-Sep-15

AGM Series – TTS: incentives focussed on short term 6 Oct-15

AGM Series – TWE: New ROCE hurdle appears easily "in the money" 26 Oct-15

AGM Series - WFD: Performance hurdles not disclosed in advance 30-Apr-15

AGM Series – WOR: Awards even if share price falls 49% 2-Oct-15

AGM Series – WOW: No STI or LTI for outgoing CEO 28-Oct-15

AGM Series - WPL: Discounted fair value results in 100% higher FY14 LTI 26-Mar-15

Recent Global ESG Research

What's new in ESG? – Executive Panel - Brexit Special, UK National Living Wage 15-Jul-16

What's new in ESG? – Boardroom Diversity, Renewables 8-Jul-16

What's New in ESG? – Brexit Referendum In Pictures, If ESG Outperforms, Why? 1-Jul-16

What's New in ESG? - CRO Industry Primer; La Nina 24-Jun-16

What's New in ESG? - Samarco dam collapse, causes and costs 17-Jun-16

What's New in ESG? - Proposed APS Rates Could Cut Arizona Rooftop Solar Demand Significantly 10-Jun-16

What's New in ESG? – Climate change resolutions, China Water sector 6-Jun-16

LGBT: the value of diversity 15-Apr-16

What's New in ESG? - The Gender Pay Gap - the different value of a degree; The Demographics Of Frontier Economies 15-Apr-16

Drive Train to Supply Chain: Impacts from the changing autos industry 14-Apr-16

What's New in ESG? – Emerging Consumer Survey 2016; Volkswagen update 8-Apr-16

What's New in ESG: ESG Corporate and Investor Survey, Accounting & Tax 1-Apr-16

What's New in ESG? – Deep(er) Dive on carbon footprinting, La Nina and Zika virus update 18-Mar-16

What's New in ESG? – The Gender Pay gap, Post-Secondary Education 11-Mar-16

ESG Spotlight – Boards & Remuneration, Biofuels 4-Mar-16

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What's New in ESG? Brazilian Utilities, Corporate Boards 26-Feb-16

ESG Spotlight – China Wind Power, Aviation Emissions 19-Feb-16

ESG Spotlight – Global Investment Returns Yearbook 2016, Zika Virus Part 2 12-Feb-16

What's New in ESG? Overboarding in Europe, Spread of the Zika Virus 5-Feb-16

Overboarding in Europe 29-Jan-16

What’s New in ESG? Conservation finance, Outperformance of Diversity 29-Jan-16

What’s New in ESG? Family Businesses: Who's the CEO; IASB Financial Reporting Changes 22-Jan-16

Family Businesses: Who's the CEO? 19-Jan-16

What’s New in ESG? Stranded gas and rehabilitation; The next Ice Age postponed 15-Jan-16

What’s New in ESG? Brazil education: another brick in the wall; El Nino & La Nina 8-Jan-16

What’s New in ESG? COP21: who wins? Who loses? 18-Dec-15

ESG Spotlight: COP21: who wins? Who loses? 14-Dec-15

What’s New in ESG? Foreign Tax Risk – Profit Shifting Under Pressure, Smog in Beijing 11-Dec-15

What’s New in ESG? Solar Investment Tax Credit; COP21 update; Chocolate – the El Nino effect 8-Dec-15

What’s New in ESG? Alberta's Carbon Plans, COP21 30-Nov-15

What’s New in ESG? Healthy Living, Samarco dam part 2, Airline pollution 20-Nov-15

What’s New in ESG? Environmental Services, Brazilian Mine Disaster 13-Nov-15

What’s New in ESG? National Living Wage 6-Nov-15

What’s New in ESG? ESG in Mining, UK Diversity 30-Oct-15

What’s New in ESG? Global PharmaValues 2016 Strategic Conclusions 23-Oct-15

What’s New in ESG? China Environment – 2016 Outlook; The World's Top 100 CEOs 16-Oct-15

What’s New in ESG? US Pricing concerns favour unique drugs, Cruise Ships and pollution 9-Oct-15

What’s New in ESG? A Perspective on Migration, BHP Billiton and Climate Change 2-Oct-15

What’s New in ESG? Volkswagen emissions issue spreads to Europe, Corporate Governance 25-Sep-15

What’s New in ESG? Fat: the new health paradigm; overfishing and sustainable fisheries 18-Sep-15

Fat: the new health paradigm 17 Sep-15

What’s New in ESG? Impacts of plastics on seabirds; The complex world of LNG explained 11-Sep-15

What’s New in ESG? Global Population Forecasts; El Nino Update 4-Sep-15

What’s New in ESG? ESG: European Diversity Quotas, Urban Congestion 28-Aug-15

What’s New in ESG? ESG: The Family Business- Central European Utilities - Doom & Gloom Revisited, Oil & Gas in the Arctic 21-Aug-15

What’s New in ESG? ESG: French Environmental Services, Female Graduates 14-Aug-15

What’s New in ESG? ESG: The Family Business- The Value of Small Cap Family Companies 22-Jul-15

What’s New in ESG? Weekly Bulletin: Millennials & Driving; Global Life Insurance: Impact of DoL Fiduciary Rule 17-Jul-15

What’s New in ESG? Weekly Bulletin: The Family Business Model, Gender pay gap in UK academia 10-Jul-15

Research Institute - The Family Business Model Jul-15

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MSCI Disclaimer

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Companies Mentioned (Price as of 27-Jul-2016)

AACo (AAC.AX, A$2.06) AGL Energy (AGL.AX, A$20.15) ALS Limited (ALQ.AX, A$5.09) APA Group (APA.AX, A$9.72) Abacus Prop Grp (ABP.AX, A$3.18) Adelaide Brighton (ABC.AX, A$5.87) Altium (ALU.AX, A$7.22) Amcor (AMC.AX, A$15.25) Ansell Limited (ANN.AX, A$19.52) Aveo Grp (AOG.AX, A$3.48) BHP Billiton (BHP.AX, A$19.86) BT Investment Management Limited (BTT.AX, A$8.73) Beach Energy (BPT.AX, A$0.605) Bega Cheese (BGA.AX, A$5.7) Brambles (BXB.AX, A$13.43) CIMIC Group (CIM.AX, A$28.4) Challenger Limited (CGF.AX, A$9.33) Cleanaway Waste Management (CWY.AX, A$0.84) Coca-Cola Amatil (CCL.AX, A$9.04) Cochlear (COH.AX, A$129.62) Cover-More Group (CVO.AX, A$1.305) Cromwell Property Group (CMW.AX, A$1.09) Dexus Property Group (DXS.AX, A$9.59) Downer EDI (DOW.AX, A$4.15) Estia Health (EHE.AX, A$5.03) Evolution Mining Limited (EVN.AX, A$2.71) FlexiGroup Limited (FXL.AX, A$1.985) G.U.D. Holdings (GUD.AX, A$9.66) GPT Group (GPT.AX, A$5.6) Goodman Group (GMG.AX, A$7.51) Henderson Group PLC (HGG.AX, A$3.84) IOOF Holdings (IFL.AX, A$8.96) IRESS (IRE.AX, A$11.29) Incitec Pivot (IPL.AX, A$2.91) Independence Group NL (IGO.AX, A$4.08) Investa Office Fund (IOF.AX, A$4.52) Invocare Group (IVC.AX, A$14.37) James Hardie Industries plc (JHX.AX, A$22.18) Japara Health (JHC.AX, A$2.57) Lend Lease (LLC.AX, A$13.34) Macquarie Atlas (MQA.AX, A$5.74) McMillan Shakespeare (MMS.AX, A$14.34) Medibank Private Limited (MPL.AX, A$3.05) Mesoblast (MSB.AX, A$1.125) Mineral Rsc (MIN.AX, A$9.6) Mirvac Group (MGR.AX, A$2.18) Myer Holdings (MYR.AX, A$1.275) News Corporation (NWS.AX, A$17.8) Northern Star Resources Ltd (NST.AX, A$4.71) Perpetual Limited (PPT.AX, A$44.84) Platinum Asset Management (PTM.AX, A$5.93) Primary Health Care (PRY.AX, A$4.06) Programmed Maintenance Services (PRG.AX, A$2.03) QBE Insurance Group (QBE.AX, A$11.11) Qantas (QAN.AX, A$3.02) REA Group (REA.AX, A$63.01) Ramsay Health Care (RHC.AX, A$77.92) Regis Healthcare (REG.AX, A$4.91) Regis Resources Limited (RRL.AX, A$3.73) Retail Food Grup (RFG.AX, A$5.72) Rio Tinto (RIO.AX, A$49.6) SCA Property Group (SCP.AX, A$2.37) Saracen Mineral (SAR.AX, A$1.585) Scentre Group (SCG.AX, A$5.33) Seek (SEK.AX, A$16.44) Sigma Pharmaceuticals (SIP.AX, A$1.32) Sims Metal Management (SGM.AX, A$8.46) Sonic Healthcare (SHL.AX, A$22.8) Spark Infrastructure Group (SKI.AX, A$2.6) Steadfast (SDF.AX, A$2.09) Stockland Group (SGP.AX, A$5.0) Sydney Airport (SYD.AX, A$7.49) Syrah Resources (SYR.AX, A$4.69) TPG Telecom (TPM.AX, A$12.53) Trade Me Group Ltd (TME.AX, A$4.83) Transurban (TCL.AX, A$12.45) Treasury Wine (TWE.AX, A$9.86) Wesfarmers (WES.AX, A$42.5) Westfield Corporation (WFD.AX, A$10.83) Westpac (WBC.AX, A$30.92) Whitehaven Coal (WHC.AX, A$1.72) Woodside Petroleum (WPL.AX, A$27.13)

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WorleyParsons (WOR.AX, A$7.47)

Disclosure Appendix

Important Global Disclosures

I, Sandra McCullagh, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

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 are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neut rals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non -Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12 -month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Not Rated : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time.

Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 51% (43% banking clients)

Neutral/Hold* 35% (17% banking clients)

Underperform/Sell* 13% (38% banking clients)

Restricted 1%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underp erform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings a re determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdin gs, and other individual factors.

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Credit Suisse’s policy is to update 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's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

For a history of recommendations for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to https://rave.credit-suisse.com/disclosures/view/report?i=145566&v=-6yat1321au3jr7eyqel33yl76 .

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events.

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html.

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

This research report is authored by:

Credit Suisse Equities (Australia) Limited ............................................................................................................ Sandra McCullagh ; Zoe Whitton

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Credit Suisse Equities (Australia) Limited ............................................................................................................ Sandra McCullagh ; Zoe Whitton

Important MSCI Disclosures

The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, re-disseminated or used to create and financial products, including any indices. This information is provided on an "as is" basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI, Morgan Stanley Capital International and the MSCI indexes are services marks of MSCI and its affiliates.

The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor’s. GICS is a service mark of MSCI and S&P and has been licensed for use by Credit Suisse.

Important Credit Suisse HOLT Disclosures

With respect to the analysis in this report based on the Credit Suisse HOLT methodology, Credit Suisse certifies that (1) the views expressed in this report accurately reflect the Credit Suisse 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 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. The adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national

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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.

Additional information about the Credit Suisse HOLT methodology is available on request.

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 variable may also be adjusted to produce alternative warranted prices, any of which could occur.

CFROI®, HOLT, HOLTfolio, ValueSearch, AggreGator, Signal Flag and “Powered by HOLT” are trademarks or service marks or registered trademarks or registered service marks 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 Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

Backtested, Hypothetical or Simulated Performance Results

Backtested, hypothetical or simulated performance results have inherent limitations, some of which are described below. Unlike an actual performance record based on trading actual client portfolios, backtested, hypothetical or simulated results are achieved by means of the retroactive application of a backtested model itself designed with the benefit of hindsight. Backtested performance does not reflect the impact that material economic or market factors might have on an adviser's decision-making process if the adviser were actually managing a client’s portfolio. The backtesting of performance differs from actual account performance because the investment strategy may be adjusted at any time, for any reason, and can continue to be changed until desired or better performance results are achieved. The backtested performance includes hypothetical results that do not reflect the reinvestment of dividends and other earnings or the deduction of advisory fees, brokerage or other commissions, and any other expenses that a client would have paid or actually paid. No representation is made that any account will or is likely to achieve profits or losses similar to those shown. Alternative modeling techniques or assumptions might produce significantly different results and prove to be more appropriate. Past hypothetical backtest results are neither an indicator nor guarantee of future returns. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved. Actual results will vary, perhaps materially, from the analysis. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results. As a sophisticated investor, you accept and agree to use such information only for the purpose of discussing with Credit Suisse your preliminary interest in investing in the strategy described herein.

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This report is produced by subsidiaries and affiliates of Credit Suisse operating under its Global Markets Division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who-we-are This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates.The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. 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Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk.

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Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.