Confidential
Project Jetstar
Discussion with APAC Management
Executive Summary
 Small-cap market in Australia is important to many of CS’s institutional clients (source of alpha generating trade
Background
Solution
ideas), however servicing this market effectively and profitably is challenging:
− Requires broad & deep small-cap research platform  expensive to cover; however, content strongly linked
to commissions
− Trading volumes are light (activity outside the ASX 100 represents 10% of total Australian turnover) while
commission rates are equivalent  overall lower commission wallet
− Lacks alignment with CS IBD coverage  no incremental revenues; small-cap not a core area of focus for CS
 Australia Equities business PTI challenged ($[X]m, $[X]m, $[X]m of PTI in ‘11A,’12A and ‘13B), and considering
actions to improve profitability
 Pilot cost-efficient alternative Research/Sales model that extends strategic benefits to CS clients
 Move Research/Sales coverage of Small-cap Australia Corporates to 50/50 JV setup w/ FNZC
− Reduces CS Australia’s research coverage by one third while retaining full capability for both our clients and
IBD
Strategic
benefit for CS
Financial
Impact
 Allows CS to rationalize EQ Research footprint without disruption to business
 Maintains highly valued small-cap research service to important institutional equities clients
 Potential for IBD Advisory deal flow and PB referral through introductions to a broader client base as FNZC builds
small cap small cap capabilities in Australia to augment NZ franchise
 Both CS staff and street perception of CS improved through commitments with investment in greater capabilities
 Leverages and extends relationship with FNZC, an established and successful partner for CS
 P&L impact to CS initially neutral (reduces both expenses and revenue by ~$[X]m)
− Estimated JV revenue of A$[X]m and PTI of A$[X]m by 2016 – of which CS share 50%
− CS JV share and ancillary business impact of ~A$[X]-[X]m PTI by 2015
 Defends leading position (McLagan rank 5) with institutional clients and protects $[X]m of CS global commission
in 2012A from accounts that value Australia small cap coverage
 Expect $[X]m B3 RWA from equity investment in Jetstar
1
Jetstar Proposal
Governance
 Equal board representation, with 4-6 directors in
CS AG
FNZC
CS AUS EQ
50%
50%


total with equal voting rights
CS too propose the initial Chair (no casting vote)
Board may also consider having an Advisory Board
to support Jetstar in covering its target market
Economics / Equity Sharing
Jetstar
 50% / 50% ownership
 Pro-rata capital contributions
Exit / Break-up Provision
 Evergreen structure; certain events (including
Partner Contributions
Credit Suisse
 8 FTE transferred from research and S&T from
People
Intellectual Property
Infrastructure/
Support
Capital










Risk
Business
Agreements
Australia
FID and ECM specialists made available by CS to
support JV deal activity as required
CS brand for JV research
Access to global CS Research & HOLT
Transition EQ Research coverage of 56 companies
breach) cause a sale at book value by the triggering
party
FZNC
 1 FTE seconded to act as CEO
 1 FTE transferred from Research
 Access to FNZC research
Execution and settlement all secondary activity
Premises and IT systems in existing CS facility
Support functions as agreed by Jetstar board
 Support functions as agreed by Jetstar board
Initial capital of A$[X]-[X]m
Ongoing regulatory capital sourced from initial
capital (requirements based on 90 days operating
costs)
Underwriting and more substantial risks will be
taken at the CS level through standard risk approval
protocol
 Initial capital of A$[X]-[X]m
 Ongoing regulatory capital sourced from initial
capital (requirements based on 90 days operating
costs)
 PB revenue/referral agreement, service level agreement (as required)
 AFS License registration & requirements
2
Jetstar Strategy
Jetstar LoBs
Research
coverage
Research sales
IBD services
Scope of Business Activities
 Transfer CS Equity research coverage of 56 companies with a combined market cap of US$55bn
representing 4% of the current ASX market cap to JV; see Appendix for list of names
 Expand corporate coverage by 2015 – see Appendix for list of names
 Focus coverage on domestic dedicated small cap fund managers
 Provide specialist assistance to Australian large cap fund managers and offshore fund managers as required
 Leverage CS research analysts/ FNZC analysts to ensure consistency of service




Focus on advisory, capital market activity to small-cap corporates
Leverage CS GMSG team (5 FTEs) for product expertise and execution
Target companies outside the top 115 listed on the ASX
Out of scope – oil & gas and mining sectors (to be conducted by CS directly)
Strategic Ambition
Aspiration: To build the preeminent small cap business in
Australia
 Create a business model that generates profits throughout the
cycle
 Target #1 panel rankings across 50% of priority clients
 Target #1 SOW in Banking Fees for companies in scope
Immediate Priorities
Expect 2-3 month timeline to obtain license; order and
timing of other key approvals to be determined in
conjunction with New Business:
 New Business process kick-  Completion of New Business
process
off




Execution of term-sheet
CS CFO approval
Formation of company
Submission of ASIC license
application
 Execution of shareholder’s
agreement
 Client notification
 Transfer of staff
3
Strategic Rationale
Strategic Benefit
Benefits for Credit Suisse
Cost Reduction
and alignment with IBD
 8 FTEs transferred 3.5 TW FTEs
− $[x]m of direct comp saves p.a.
− 2 DIR, 3 VP, 3 ASO
− 2 Research Sales, 6 EQ Research (1 Assistant)
 Facilitates reduction of headcount by a further 2 FTEs

- $[x]m direct comp saves p.a.
Reduce CS Australia cost/footprint research coverage
from 190 to 140 stocks covering ~95% of ASX 200
 Important institutional clients demand mid/small-cap
Institutional
Equities
Accounts

IBD Deal Flow/
Trading
Volume
PB Referrals
Benefits for FNZC
 Reduces Australia Equities footprint
 Facilitates reorganization of EQ Research department
Impact
research coverage, because it generates alpha
− Across domestic & international long only
− Trading predominantly Cash equities
CS perception improved through investment in market
 Defends meaningful small cap commissions – clients
with meaningful small-cap allocation pay CS >US$[x]m
in commissions p.a.
 IBD deal-flow through collaboration in mid cap
 Continuous trading volumes across the JV names
 Est. revenues within Equity Derivatives of ~A$[x]m–
 Potential for PB revenue through introductions to a
 Target NNA of 10% of executed IBD deal flow generating
broader client base (small cap Australian business
owners also potential HNW clients)
A$[x]m p.a. from Collar and Executive Share Option
deals

75bp to 100bp of revenue p.a. – $[x]m in Rev; $[x]m AUM
in ‘15
Implement a 3 year referral program for NNA transferring
30/20/10bp per annum to Jetstar – $[x]m in Rev in ‘15
 Opportunity to expand outside home market,
Business
Expansion
Extend
Relationship
with CS
leveraging existing expertise in the small cap space
− FNZC growth prospects currently limited given
size of NZ market and relative position
 Ability to generate attractive returns
 Leverage and extend relationship with CS, an
established and successful partner for FNZC
4
Significance of Small Cap Coverage to CS Clients
Top Clients w/ Meaningful Small Cap Commissions
('000)
('000)
('000)
KeyClients
Clients
Key
Key Clients
EleyGriffiths
GriffithsGroup
GroupPty
PtyLtd
Ltd
1 1 Eley
1 Eley Griffiths Group Pty Ltd
EvergreenCapital
Capitalpartners
partners
2 2 Evergreen
2 Evergreen Capital partners
PerpetualTrustees
TrusteesAustralia
AustraliaLtd
Ltd
3 33 Perpetual
Perpetual Trustees Australia Ltd
RenaissanceAsset
AssetManagement
Management
4 44 Renaissance
Renaissance Asset Management
BennelongAustralian
AustralianEquity
EquityPartners
Partners
5 55 Bennelong
Bennelong Australian
Equity Partners
WilsonAsset
AssetManagement
Management
6 66 Wilson
Wilson Asset Management
ColonialFirst
FirstState
State(Core)
(Core)
7 77 Colonial
Colonial First
State (Core)
GoldmanSachs
SachsAsset
AssetMgmt
Mgmt
8 88 Goldman
Goldman Sachs Asset Mgmt
ColonialFirst
FirstState
StateGrowth
Growth
9 99 Colonial
Colonial First State Growth
10Paradice
ParadiceInvestment
InvestmentMgmt
Mgmt
10
10 Paradice
Investment Mgmt
11Kosmos
KosmosAsset
AssetManagement
ManagementPty.
Pty.Ltd.
Ltd.
11
11 Kosmos Asset Management Pty.
Ltd.
12Acorn
AcornCapital
CapitalLtd
Ltd
12
12 Acorn Capital Ltd
13Souls
SoulsFunds
FundsManagement
ManagementPty
PtyLtd.
Ltd.
13
13 Souls
Funds Management
Pty Ltd.
14Perennial
PerennialValue
ValueManagement
Management
14
14 Perennial Value Management
15Bell
BellAsset
AssetManagement
ManagementLimited
Limited
15
15 Bell
Asset Management
Limited
16Macquarie
MacquariePrivate
PrivatePortfolio
PortfolioManagement
Management
16
16 Macquarie Private Portfolio Management
17Tribeca
TribecaInvestment
InvestmentPartners
PartnersPty
PtyLtd.
Ltd.
17
17 Tribeca Investment Partners Pty
Ltd.
18Kinetic
KineticInvestment
InvestmentPartners
Partners
18
18 Kinetic Investment Partners
19Laketon
LaketonInvt
InvtMgmt
Mgmt
19
19 Laketon
Invt Mgmt
20Dimensional
DimensionalFund
FundAdvisors
Advisors
20
20 Dimensional Fund
Advisors
Total
Total
Total
2012Commission
Commission
2012
2012 Commission
AttributedtotoSmall
SmallCap
Cap 2012
2012US$
US$Commissions
Commissions(Eq
(EqSecondary)
Secondary)
Attributed
Attributed to Small Cap 2012 US$ Commissions (Eq Secondary)
Global
%%ofofGlobal
% of Global
Comm
AU$
Australia
APAC
Global
Comm
AU$
Australia
APAC
Global
Comm
AU$
Australia
APAC
Global
96% 285.0
285.0
295.9
295.9
295.9
96%
295.9
295.9
295.9
96%
285.0
295.9
295.9
295.9
100% 239.3
239.3
224.3
224.3
224.3
100%
224.3
224.3
224.3
100%
239.3
224.3
224.3
224.3
8% 228.5
228.5
2,406.7
2,407.4
3,040.1
8%
2,406.7
2,407.4
3,040.1
8%
228.5
2,406.7
2,407.4
3,040.1
81% 172.7
172.7
190.5
190.5
214.5
81%
190.5
190.5
214.5
81%
172.7
190.5
190.5
214.5
29% 164.5
164.5
573.4
573.4
573.4
29%
573.4
573.4
573.4
29%
164.5
573.4
573.4
573.4
96% 144.7
144.7
151.5
151.5
151.5
96%
151.5
151.5
151.5
96%
144.7
151.5
151.5
151.5
14% 136.6
136.6
643.5
650.9
960.4
14%
643.5
650.9
960.4
14%
136.6
643.5
650.9
960.4
1% 116.5
116.5
479.7
1,245.3 18,290.2
18,290.2
1%
479.7
1%
116.5
479.7 1,245.3
1,245.3
18,290.2
11% 107.1
107.1
898.5
959.9
971.3
11%
898.5
959.9
971.3
11%
107.1
898.5
959.9
971.3
12% 102.4
102.4
876.8
876.8
876.8
12%
876.8
876.8
876.8
12%
102.4
876.8
876.8
876.8
97% 100.2
100.2
103.7
103.7
103.7
97%
103.7
103.7
103.7
97%
100.2
103.7
103.7
103.7
92%
92.5
100.7
100.7
100.7
92%
100.7
100.7
100.7
92% 92.5
92.5
100.7
100.7
100.7
68%
80.1
117.4
117.4
117.4
68%
117.4
117.4
117.4
68% 80.1
80.1
117.4
117.4
117.4
11%
78.0
695.8
695.8
695.8
11%
695.8
695.8
695.8
11% 78.0
78.0
695.8
695.8
695.8
53%
78.0
147.7
147.7
147.7
53%
147.7
147.7
147.7
53% 78.0
78.0
147.7
147.7
147.7
96%
62.3
65.0
65.0
65.0
96%
65.0
65.0
65.0
96% 62.3
62.3
65.0
65.0
65.0
8%
61.7
797.8
797.8
797.8
8%
61.7
797.8
797.8
797.8
8%
61.7
797.8
797.8
797.8
96%
51.8
53.9
53.9
53.9
96%
53.9
53.9
53.9
96% 51.8
51.8
53.9
53.9
53.9
9%
51.3
328.0
328.0
554.9
9%
51.3
328.0
328.0
554.9
9%
51.3
328.0
328.0
554.9
14%
43.8
110.8
110.8
320.5
14%
110.8
110.8
320.5
14% 43.8
43.8
110.8
110.8
320.5
8% 2,397.0
2,397.0
9,261.4 10,096.6
10,096.6 28,555.8
28,555.8
8%
9,261.4
8% 2,397.0
9,261.4
10,096.6
28,555.8
Commentary
Prime/EQD
Prime/EQD
Prime/EQD
Revenue
Revenue
Revenue
Global
Global
Global
1.3
1.3
1.3
22.8
22.8
22.8
9,460.3
9,460.3
9,460.3
15.5
15.5
15.5
9,499.9
9,499.9
9,499.9
ClientType
Type
Client
Client Type
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Long-Only
Location
Location
Location
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Global
Global
Global
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Strong Relevance of Content to Clients
 Most commissions generated in secondary revenues
in 2012
− Top 20 clients with meaningful small cap
commissions generated AU$[x]m in 2012 and
US$[x]m in global commissions
 Research content, Corporate Access and Primary
Deals are highly valued by Australia-active
institutional clients
− 78% allocation of panel vote
5
JV Revenue Projections dependent on banking fees
(AUD$ 000,000)
Implementation
2013 H2
Revenues
Secondary Commissions
Banking Fees (100%)
Referral Fees
Total Revenue
Expenses
Direct Comp & Benefits
Fixed Non Comp
Total Expenses
Plan
2014
1.7
0.6
0.0
0.6
3.4
4.8
0.1
4.8
Scenarios
2015
4.5
8.1
0.1
8.2
2016 L
5.2
10.6
0.2
10.8
2016 H
6.3
15.5
0.4
15.8
Assumptions
Revenues
 Secondary Commissions: current stable run-rate
commissions of $[x]m grows as a result of
improved product offering through expanded
breadth of coverage
 Banking Fees
− M&A: Jetstar captures [x]% market share with
average deal size of A$[x]m
1.9
1.6
3.5
3.8
3.2
6.9
5.4
3.5
8.8
6.1
3.7
9.8
6.1
3.7
9.8
Performance
Contribution
IPB
Pre-Tax Income
(2.9)
0.4
(3.3)
(2.1)
(1.1)
(1.1)
(0.6)
(0.3)
(0.3)
1.0
0.5
0.5
6.1
3.0
3.0
Pre-Tax Margin
-557%
-22%
-4%
5%
5%
19%
19%
 Direct Compensation: Based on current CS salary
bands
Tax
Post-Tax Income
0.0
(3.3)
0.0
(1.1)
0.0
(0.3)
0.2
0.4
0.9
2.1
 Office Rent: US$[x]m p.a.
Headcount
14.0
14.0
20.0
25.0
25.0
 Market Data: US$[x]m p.a.
0.0
8.0
-41%
0.3
8.0
-13%
0.4
8.0
-4%
0.4
8.0
5%
0.6
8.0
27%
− ECM (incl. IPO): Jetstar captures [x]% of ECM
market share retaining [x]% of gross fees (CS will
retain [x]% through fee split based on
involvement
 Referral Fees
− CS Private Bank to pay referral fees for trailing
three years
Expenses
 Business Development: T&E recoveries of US$[x]k
p.a. recovered from clients; T&E of US$[x]m p.a.
 IPB: based on [x]% of contribution
Revenue per FTE
Shareholder Equity
ROE
6
CS Financial Impact
(AUD$ 000,000)
Implementation
2013 H2
Jetstar
Present Value of Jetstar
Foregone Revenues - Cash Equities
Foregone Revenues - IBD Fees (100%)
Foregone Expenses - Direct Comp
Foregone Expenses - Non Comp
Total Jetstar Impact to CS
Plan
2014
Scenarios
2015
2016 L
2016 H
Jetstar
(1.6)
(1.7)
(1.0)
3.1
0.4
(0.9)
(0.5)
(3.4)
(2.0)
3.1
0.4
(2.5)
(0.2)
(3.3)
(2.0)
3.1
0.4
(2.0)
0.2
(3.2)
(2.0)
3.1
0.4
(1.6)
1.1
(3.1)
(2.0)
3.1
0.4
(0.6)
Incremental Synergies
Revenue
Equity Derivatives
IBD (100%)
Private Bank
Total Incremental Revenue
0.7
0.2
0.0
0.9
1.7
1.4
0.1
3.2
2.2
2.3
0.3
4.9
3.0
2.9
0.7
6.6
3.7
4.4
1.0
9.1
Expenses
Incremental IPB (@ 30%)
PTI from Synergies
0.3
0.6
1.0
2.3
1.5
3.4
2.0
4.6
2.7
6.3
(0.3)
(0.2)
1.4
3.0
5.8
1.5
(12.0)
(1.4)
10.0
-164%
19.4
(12.0)
(1.1)
10.0
-54%
32.9
(12.0)
(1.0)
10.0
-15%
120.1
(12.0)
(1.0)
10.0
18%
133.7
(12.0)
(0.7)
10.0
106%
Total PTI Impact
Key Performance Indicators
NNA
Headcount
ROI
RWA
ROE
Assumptions
 Foregone expenses - Direct Comp: based
on current salaries/ benefits paid to CS
employees transferring to Jetstar
 Commission: modeled to show CS
foregoing A$[x]m per annum (2011-2013
YTD average)
 IBD Fees: modeled to show CS foregoing
A$[x]m (two-thirds of three year average
run-rate)
Incremental Synergies
 IBD: CS earns [x]% of M&A fees and [x]%
of ECM fees based on role played in
execution of deals
 PB: CS retains NNA based on [x]%
retention of executed IBD deal flow
7
Key Issues & Considerations
 CS JVs have limited success, why is this different?
− FNZC is a logical strategic partner given CS’ long-standing relationship and existing alignment across compliance and controls
− FNZC has created substantial value for CS ($[X]m rev since 2002) from partnership in NZ market
 Why should CS be a JV partner in small-cap IB business?
− Small-cap Research coverage relevant to CS institutional accounts
− CS continues to benefit from any potential IBD/Brokerage upside as FNZC grows NZ franchise
 Why does CS needs an equity stake in this JV?
− JV equity stake with BoD seat helps CS has manage JV activity and support leading EQ and IBD franchises in Australia
 What protection does CS have as a 50% partner?
− Reputational Risk approval to be obtained prior to execution of shareholder’s agreement
− Term sheet will be negotiated with FNZC with an eye towards appropriate contractual protections including: super majority vote for capital
infusions, approval for key management hires, and clear definition of business scope
 What is the anticipated perception / reaction from clients?
− Institutional equities clients appreciative of expanded small-cap coverage; overall improved Street perception of CS improved though
commitment and investment in greater capabilities
− Seamless transaction, with no adverse impact to clients expected: 1) FNZC will white label research, 2) trades will be executed by CS, and
3) IBD JV coverage list will be very specific and complement CS coverage
 Has CS fully considered other alternatives; how does Jetstar compare in terms of return and execution risk?
− The key objective of delivering incremental revenues at a lower cost base is unlikely to be met through other structures
 Neither an exit from this segment of the market nor retaining the status quo are sustainable models
 We have considered a range of partners, but given the long-standing successful relationship with FNZC together with their aligned
culture and compliance practices it was determined they were the most appropriate
 A management buyout/ staff JV was discounted given small absolute size of operation and associated risks
8