30 September 2016 All terms and conditions are indicative and will be confirmed until the Issue Date, if and when issued. Indicative Selected Key Parameters Telephone Contact: +41 (0)44 335 76 00 Conversations on this line are recorded. We will assume your consent. Credit Suisse Structured Products 100% ProNote with Participation in USD on Credit Suisse Managed Multi-Asset USD Total Return Index (1) [28 October] 2016 until [28 October] 2022 The Complex Products do not constitute a collective investment scheme within the meaning of the Swiss Federal Act on Collective Investment Schemes (CISA). Therefore, the Complex Products are not subject to authorisation or supervision by the Swiss Financial Market Supervisory Authority (FINMA). Investors bear the issuer risk. The Complex Products are structured products within the meaning of the CISA. This simplified prospectus is only available in English. I. Product Description Risk Category: Product Category: Product Type: SSPA Code: Complex Product (2) Capital Protection Capital Protection Cert. with Participation 1100 (3) The Complex Products allow the holders to benefit from an unlimited participation in a percentage of any positive performance of the Underlying (net of an adjustment factor of [0.90%] p.a.). The potential return on the Complex Products is not capped. If the value of the Underlying has developed negatively as measured on the Final Fixing Date, the Payout Amount will be equal to zero and the holders will only receive the Final Redemption Amount, which is equal to the Protected Redemption Amount, on the Final Redemption Date. Underlying Bloomberg Ticker Licensor/Index Sponsor Index Calculation Agent Initial Level (100%) Credit Suisse Managed Multi-Asset USD Total Return Index (please see Index Description below) CSEAMMUT <INDEX> Credit Suisse Securities (Europe) Limited Credit Suisse International [ ] The Credit Suisse Managed Multi-Asset USD Total Return Index (the Index ) is an actively managed index that aims to offer long-term capital appreciation by applying a diversified approach to investing in a variety of asset classes, including government bonds, inflation-linked bonds, investment grade debt, high yield and emerging market bonds, developed market equities, emerging market equities commodities and hedge funds. The Index is rebalanced by the Index Rebalancing Entity in accordance with the applicable guidelines as set out in the index rules (the "Index Rules"). The Index Rules, the current composition of the Index as well as details on the method of calculation can be obtained free of charge from Credit Suisse AG, [VBDE 154], Fund Linked Products Group, Uetlibergstr. 231, 8070 Zurich, Switzerland. There is no obligation on the Issuer to use the net proceeds from an issue of Complex Products to invest in the Index. Indicative Issue Details Security Codes Swiss Sec. No.: 34 112 860 ISIN: CH 034 112 860 8 NAS: [ ] Issuer Credit Suisse AG, Zurich, acting through its Nassau Branch, Nassau (Moody's: A2 / S&P: A / Fitch: A) The Issuer is authorized and supervised by FINMA in Switzerland. Lead Manager Credit Suisse AG, Zurich Paying Agent Credit Suisse AG, Zurich Calculation Agent Credit Suisse International, London Issue Size up to USD [ ] (may be increased/decreased at any time) Denomination USD 1 000.00 Minimum Investment / USD 250'000.00 Subscription Amount Issue Price 100% Subscription Period Initial Fixing Date Issue/Payment Date Last Trading Date Final Fixing Date Final Redemption Date Listing Until [20 October] 2016, 15:00 CET (1) Herein called the Complex Products. (2) Investing in the Complex Products requires specific knowledge on the part of the potential investor regarding the Complex Products and the risks associated therewith. It is recommended that the potential investor obtains adequate information regarding the risks associated with the Complex Products before making an investment decision. (3) See Swiss Derivatives Map at www.sspa-association.ch. FLP [ ] 1/19 Strike (100%) [21 October] 2016, being the date on which the Initial Level and the Strike is fixed, and from which date the Complex Products may be traded. [28 October] 2016, being the date on which the Complex Products are issued and the Issue Price is paid. [20 October 2022], until the official close of trading on the SIX Swiss Exchange Ltd, being the last date on which the Complex Products may be traded. [21 October 2022], being the date on which the Final Level will be fixed. [28 October 2022], being the date on which each Complex Product will be redeemed at the Final Redemption Amount, unless previously redeemed, repurchased or cancelled. None [ ]
Trading/Secondary Market Early Exit Fee Under normal market conditions, Credit Suisse International, London, will endeavour to provide a secondary market, but is under no legal obligation to do so. Upon investor demand, Credit Suisse International, London, will endeavour to provide bid/offer prices subject to a spread of 1% of the Denomination [for up to [ ] Complex Products], depending on prevailing market conditions. There will be a price difference between bid and offer prices (spread). An Early Exit Fee will be subtracted from the bid price for any Complex Product sold back to Credit Suisse International, London before [29 October 2018]. The Complex Products are traded in percentage of the Denomination and are booked accordingly. Indicative trading prices not reflecting the Early Exit Fee may be obtained on Reuters CSZEQ00 and Bloomberg CSZE. The Early Exit Fee is equal to From the Issue Date to (and including) [30 October 2017] 2% From (but excluding) [30 October 2017] to (and including) [29 October 2018] 1% From (but excluding) [29 October 2018] onwards None Minimum Trading Lot USD 1 000.00 Clearing SIX SIS Ltd, Euroclear S.A., Clearstream Banking Form Uncertificated Securities Governing Law/Jurisdiction Swiss Law/Courts of Zurich 1 Publication Any amendment to the Complex Products will be published on www.credit-suisse.com/derivatives. Modifications regarding the composition of the index or changes in the formula or method of calculation of the index will generally not be published. Main Sales and Offering Restrictions U.S.A., U.S. Persons, Singapore, European Economic Area, Hong Kong, United Kingdom, Bahamas Further information as well as a non-exhaustive list of additional sales and offering restrictions are available in the Base Prospectus for the issuance by Credit Suisse AG of Complex Products with Full or Partial Capital Protection dated 23 June 2016 on www.credit-suisse.com/derivatives under Base Prospectuses. General: Except as set out in the documentation, no action has been or will be taken that would permit a public offering of Complex Products or possession or distribution of any offering material in relation to Complex Products in any jurisdiction where action for that purpose is required. No offers, sales, deliveries or transfers of Complex Products or the Underlying(s) (if any) to be delivered upon redemption of the Complex Products, or distribution of any offering material relating to Complex Products, may be made in or from any jurisdiction except in circumstances which will result in compliance with any applicable laws and regulations and will not impose any obligations on the Issuer or the relevant dealer(s). Indicative Description Index Rebalancing Entity Index Specific Strategy Index Level Index Rules Index Component Credit Suisse AG, Zurich The Index Rebalancing Entity is authorized and supervised by FINMA in Switzerland. The Index Rebalancing Entity is the entity responsible for composing, monitoring and rebalancing the Index in accordance with the Index Rules. The Index aims to achieve long-term capital appreciation through a long-only allocation to a range of indices, ETFs and/or mutual funds which provide exposure across asset classes, including government bonds, inflation-linked bonds, investment grade debt, high yield and emerging market bonds, developed market equities, emerging market equities commodities and hedge funds. A discretionary allocation to each Index Component will be determined by the Index Rebalancing Entity based on investment views generated by its investment committee. The Index Rebalancing Entity uses a proprietary optimisation methodology which processes the views of the investment committee to allocate Index Component weightings across equity regions, fixed income and alternative investments. The Index embeds a volatility control mechanism that automatically adjusts the exposure in order to maintain volatility of the Index at or below a target of 6%. The Index is denominated in US dollar (the Index Currency ) and is published net of (i) applicable access costs in respect of each Index Component and (ii) applicable transaction costs associated with changing the weight of each Index Component (please refer to pages 14-16 for more details); the aforementioned costs and fees are deducted from the Index on the Index Calculation Day on which they are notionally incurred. Each Index Component which is denominated in a currency other than the Index Currency is formulaically FX hedged, on a monthly basis as well as in respect of each Index Rebalancing Day at a cost of 0.02% per month, against currency fluctuations of the Index Currency from any Index rebalancing day to the next. Such hedging shall reduce but not eliminate the foreign exchange risk. The Index is constructed as an Total Return Index. Total Return means that all dividend payments are reinvested net of tax. On any scheduled trading day, the level of the Index for such day is calculated by the Calculation Agent on the basis of the following formula: Index Level = Index Value (1 Adjustment Factor) N(t) 360 where: Index Value means the value of the Index as published by the Licensor/Index Sponsor; Adjustment Factor means [0.90%] (p.a.); N(t) means the number of days from (but excluding) the Initial Fixing Date to (and including) the day, on which the Index Level is calculated. Comprising of Credit Suisse Managed Multi-Asset USD Total Return Index dated 10 June 2016 and the Master Index Rules of the Credit Suisse Multi-Asset Actively Rebalanced Indices dated 18 April 2016 (as may be amended from time to time). any share, security, rate, index or other component included in the Index, as determined by the Calculation Agent. Indicative Payout Payout Amount A cash amount equal to the Denomination multiplied by the greater of (x) zero (0) and (y) the product of (i) the Participation and (ii) the ratio of (A) the difference between the Final Level and the Strike, divided by (B) the Initial Level, calculated by the Calculation Agent in accordance with the following formula: Deno min ation Final Level Strike x max 0;Participation x Initial Level Participation [100%] Payout Date the Final Redemption Date, being the date on which the Payout Amount per Complex Product will be paid, unless previously redeemed, repurchased or cancelled. Initial Level Strike Final Level 100% of the Index Level at the Valuation Time on the Initial Fixing Date. 100% of the Initial Level. 100% of the Index Level at the Valuation Time on the Final Fixing Date 2/19
Valuation Time the time with reference to which the Licensor/Index Sponsor calculates the closing Index value. Indicative Redemption Final Redemption Amount Protected Redemption Amount 100% of the Denomination (i.e., the Protected Redemption Amount). 100% of the Denomination. Indicative Fees Distribution Fee up to [0.46%] per annum in percent of the Denomination. Swiss Taxation (Indicative) The following statements and discussions of certain Swiss tax considerations relevant to the purchase, ownership and disposition of the Complex Products are of a general nature only and do not address all potential tax consequences of an investment in the Complex Product under Swiss law. This summary is based on treaties, laws, regulations, rulings and decisions currently in effect, all of which are subject to change. It does not address the tax consequences of the Complex Products in any jurisdiction other than Switzerland. Tax treatment depends on the individual tax situation of each investor and may be subject to change. Potential investors will, therefore, need to consult their own tax advisors to determine the special tax consequences of the purchase, ownership and sale or other disposition of a Complex Product. In particular, the precise tax treatment of a holder of a Complex Product needs to be determined with reference to the applicable law and practice at the relevant time. The investors shall be liable for all current and future taxes and duties as a consequence of an investment in Complex Products. The income tax treatment as depicted below is applicable to individual persons with tax residence in Switzerland and private assets. Withholding tax and stamp taxes are applicable to all investors; however, specific rules apply with respect to certain types of investors and transactions. No withholding tax (Verrechnungssteuer). Secondary market transactions are subject to securities transfer stamp tax (0.15%) for Swiss resident investors. [TK-Code 22] The difference between the Protected Redemption Amount (100%) and its present value (bondfloor = [ ], IRR = [ ]) is subject to income tax for Swiss resident private investors. The Complex Products classify as transparent, IUP (Intérêt Unique Prédominant). This Complex Product is not subject to EU savings tax for Swiss paying agents. [TK-Code 2; out of scope ] The Issuer expressly disclaims all liability in respect of any tax implications. II. Profit and Loss Prospects Profit Prospects The Complex Products allow the holders to benefit from an unlimited participation in a percentage of any positive performance of the Underlying. The potential return on the Complex Products is not capped. Holders participate above average in such positive performance due to the Participation. Loss Prospects If the value of the Underlying has developed negatively as measured on the Final Fixing Date, the Payout Amount will be equal to zero and the holders will only receive the Final Redemption Amount, which is equal to the Protected Redemption Amount, on the Final Redemption Date. Calculation Examples of the Redemption Performance of the Underlying (net of the adjustment factor) on the Final Fixing Date: Redemption per Complex Product: + 30% 100% of the Denomination, plus a Payout Amount of [USD 300.00]. - 10% 100% of the Denomination, no Payout Amount. - 30% 100% of the Denomination, no Payout Amount. This table shows exemplary redemption scenarios regarding the Redemption as per the Final Redemption Date for illustrative purposes only and does not constitute a price indication for the Complex Products or the Underlying. During the term of the Complex Products, additional risks and other factors may influence the market value of the Complex Products. As a consequence, the pricing in the secondary market may differ significantly from the above table. III. Important Risks for Investors Important Risks Issuer Risk Investors bear the Issuer risk. The Complex Products retention of value is dependent not only on the development of the value of the Underlying(s), but also on the creditworthiness of Credit Suisse AG, which may change over the term of the Complex Products. Furthermore, the Issuer s ability to fulfill its obligations under the Complex Products may be affected by certain other factors, including liquidity risks, market risks, credit risks, cross-border and foreign exchange risks, operational risks, legal and regulatory risks and competition risks. The Complex Products are direct, unconditional, unsecured and unsubordinated obligations of Credit Suisse AG and are not covered by any compensation or insurance scheme (such as a bank deposit protection scheme). If Credit Suisse AG were to become insolvent, claims of investors in Complex Products would rank equally in right of payment with all other unsecured and unsubordinated obligations of Credit Suisse AG, except such obligations given priority by law. In such a case, investors in Complex Products may suffer a loss of all or a portion of their investment therein, irrespective of any favourable development of the other value determining factors, such as the performance of the Underlying(s). Credit Suisse AG is licensed as a bank pursuant to the Swiss Federal Act on Banks and Saving Banks and as a security dealer pursuant to the Swiss Federal Act on Stock Exchanges and Securities Trading and is subject to supervision by the FINMA. Product Risk Complex Products involve substantial risks and potential investors must have the knowledge and experience necessary to enable them to evaluate the risks and merits of an investment in Complex Products. Prospective investors should: ensure that they understand the nature of the risks posed by, and the extent of their exposure under, the Complex Products; make all pertinent inquiries they deem necessary without relying on the Issuer or any of its affiliates or officers or employees; 3/19
consider the suitability of the Complex Products as an investment in light of their own circumstances, investment objectives, tax position and financial condition; consider carefully all the information set forth in the legally binding Terms and Conditions as well as all other sections of the Prospectus (including any documents incorporated by reference therein); consult their own legal, tax, accounting, financial and other professional advisors to assist them determining the suitability of Complex Products for them as an investment. Risk of Total Loss Although the Complex Products provide for full capital protection, investors may lose some or all of their investment therein. Accordingly (but subject to the immediately succeeding sentence), an investor's risk of loss is limited to the difference between the Issue Price (or, if different, the price such investor paid for the relevant Complex Product) and the Protected Redemption Amount. Nevertheless, investors in the Complex Products may lose some or all of their investment therein (including the Protected Redemption Amount), in particular if Credit Suisse AG were to become insolvent or otherwise unable to fulfil all or part of its obligations under the Complex Products. In addition, if an investor acquires a Complex Product at a price that is higher than the Protected Redemption Amount, such investor should be aware that the Protected Redemption Amount does not fluctuate with the purchase price paid for the Complex Product. Furthermore, even though the Complex Products provide for a Protected Redemption Amount, this does not mean that the market value of a Complex Product will ever be, or that an investor in a Complex Product will ever be able to sell a Complex Product for an amount, equal to or above the Protected Redemption Amount. Investors should be aware that the Protected Redemption Amount is only payable by the Issuer on the Final Redemption Date. If the Complex Products are early redeemed or if an additional adjustment event occurs, investors may receive a redemption amount that is considerably lower than the Protected Redemption Amount that would have otherwise been received. Complex Products are unsecured obligations Complex Products are direct, unconditional, unsecured and unsubordinated obligations of Credit Suisse AG and are not covered by any compensation or insurance scheme (such as a bank deposit protection scheme). If Credit Suisse AG were to become insolvent, claims of investors in Complex Products would rank equally in right of payment with all other unsecured and unsubordinated obligations of Credit Suisse AG, except such obligations given priority by law. In such a case, investors in Complex Products may suffer a loss of all or a portion of their investment therein, irrespective of any favourable development of the other value determining factors, such as the performance of the Underlying. Unpredictable Market Value of the Complex Products The market value of, and expected return on, Complex Products may be influenced by a number of factors, some or all of which may be unpredictable (and which may offset or magnify each other), such as (i) supply and demand for Complex Products, (ii) the value and volatility of the Underlying, (iii) economic, financial, political and regulatory or judicial events that affect Credit Suisse AG, the Underlying or financial markets generally, (iv) interest and yield rates in the market generally, (v) the time remaining until the Final Redemption Date, (vi) the difference between the level of the Underlying and the relevant threshold, (vii) Credit Suisse AG s creditworthiness and (viii) dividend payments on the components of the Underlying, if any. Trading Market for Complex Products The trading market for Complex Products may be limited, or may never develop at all, which may adversely impact the market value of such Complex Products or the ability of a holder thereof to sell such Complex Products. Exposure to the Performance of the Underlying Complex Products represent an investment linked to the performance of the Underlying and potential investors should note that any amount payable, or other benefit to be received, under Complex Products will depend upon the performance of the Underlying. Potential investors in Complex Products should be familiar with the behaviour of the Underlying and thoroughly understand how the performance of the Underlying may affect payments (or any other benefit to be received) under, or the market value of, Complex Products. The past performance of the Underlying is not indicative of future performance. The market value of a Complex Product may be adversely affected by postponement or alternative provisions for the valuation of the level of the Underlying. Exchange Rate Risks The settlement currency may not be the currency of the home jurisdiction of the investor in the Complex Products. Therefore, fluctuations in exchange rates may adversely affect the market value of a Complex Product or the value of the Underlying. Broad Discretionary Authority of the Calculation Agent The Calculation Agent has broad discretionary authority to make various determinations and adjustments under Complex Products, any of which may have an adverse effect on the market value thereof or amounts payable or other benefits to be received thereunder. Any such discretion exercised by, or any calculation made by, the Calculation Agent (in the absence of manifest error) shall be binding on the Issuer and all holders of the Complex Products. Further Product Specific Risks Upon redemption, investors in the Complex Products will receive the Protected Redemption Amount and the Payout Amount, the amount of which is dependent upon the performance of the Underlying. Investors in the Complex Products should be aware that if the value of the Underlying has developed unfavourably (i.e., if the value of the Underlying has decreased during the term of the Complex Products), the Payout Amount will be equal to zero, and investors in such Complex Products will only receive the Final Redemption Amount, which is equal to the Protected Redemption Amount, at maturity. In such a case, an investment in a Complex Product may result in a loss upon redemption, if the price the relevant investor paid for such Complex Product is higher than the Protected Redemption Amount. Furthermore, even if the Payout Amount is greater than zero, an investment in a Complex Product may still result in a loss upon redemption, if the Payout Amount is less than the difference, if any, between the price the relevant investor paid for such Complex Product and the Protected Redemption Amount. Therefore, the risk associated with an investment in the Complex Products is linked to the negative performance of the Underlying. The latest version of the Risk Disclosure Brochure can be obtained, free of charge, from the head office of Credit Suisse AG in Zurich, by calling +41 44 333 2144 or via facsimile no: +41 44 333 8403, or accessed via Internet at the Swiss Bankers Association s website: www.swissbanking.org (under the following path: www.swissbanking. org/en/home/shop.htm). This risk disclosure notice cannot disclose all the risks. Therefore, potential investors in Complex Products should consult the latest version of the Special Risks in Securities Trading risk disclosure brochure (the Risk Disclosure Brochure ) and the Prospectus of which the Terms and Conditions of the Complex Products form a part. Index Specific Risks Historical or hypothetical performance of the Index is not an indication of future performance The historical or hypothetical performance of the Index should not be taken as an indication of the future performance of the Index. The level of the Index 4/19
may fluctuate significantly. It is impossible to predict whether the level, value or price of the Index will fall or rise during the term of your investment. Past performance is not a guarantee or an indication of future returns. No operating history The Index may have no operating history with no proven track record in achieving the stated investment objective. The Index will be weighted and rebalanced based on the Index Rebalancing Entity discretionary choices. No assurance can be given that the allocation will perform in line with market benchmark, and the Index could underperform market benchmark and/or decline. No assurance of performance No assurance can be provided that any strategy on which an Index is based will be successful or that the Index will outperform any alternative strategy that might be used in respect of the same or similar investment objectives. Notional Exposure The Index is constructed on notional investments and there is no actual portfolio of assets to which any person is entitled or in respect of which any person has any direct or indirect ownership interest. The Index simply reflects a rules-based proprietary trading strategy, the performance of which is used as a reference point for the purposes of calculating the level of the Index. Investors in products which are linked to the Index will not have a claim in respect of any of the components of the Index. Publication of the Index The Index Level, in respect of an Index Calculation Day, is scheduled to be published on the immediately following Index Calculation Day. In certain circumstances such publication may be delayed. The Index relies on external data The Index relies on data from external providers. While Credit Suisse intends to use well established and reputable providers, there is a risk that this data may be inaccurate, delayed or not up to date. There is also a risk that while the data is accurate, the data feed to Credit Suisse is impaired. Such impairment to either the data or the data feed could affect the performance or continued operability of the Index. The risk of such impairment may be borne by investors in products linked to the Index and Credit Suisse may decide not to subsequently revise the Index (except where such impairment is caused by CS s Fault). Fault means negligence, fraud or wilful default. There is also a risk to the continuity of the Index in the event that the Licensor/Index Sponsor ceases to exist. In the event that certain external data is not available, Credit Suisse as calculation agent for the Index may determine the necessary data in order to maintain the continuity of the Index. The Index relies on Credit Suisse infrastructure and electronic systems The Index relies on Credit Suisse infrastructure and electronic systems (including internal data feeds). Any breakdown or impairment to such infrastructure or electronic systems could affect the performance or continued operability of the Index. The risk of such breakdown or impairment shall be borne by investors in products linked to the Index unless except when caused by CS s Fault. Neither Credit Suisse nor its affiliates shall be under any liability to account for any loss or damage incurred by any person in connection with any change to, removal of or operational risks generated by the Index or its strategy except when caused by CS s Fault. Amendments to the Index rules; Index Component Substitution; Withdrawal of the Index The Licensor/Index Sponsor may in consultation with the Index Committee, supplement, amend (in whole or in part), revise, rebalance or withdraw the Index at any time if one of the following occurs, either (a) there is any event or circumstance that in the determination of the Licensor/Index Sponsor makes it impossible or impracticable to calculate the Index pursuant to the Index Rules; (b) a change to the Index Rules is required to address an error, ambiguity or omission in the determination of the Licensor/Index Sponsor; (c) the Licensor/Index Sponsor determines that an Extraordinary Event has occurred; or (d) the Licensor/Index Sponsor determines that an Index Component Disruption Event has occurred. Index Component Disruption Event means any of a Fund Disruption Event, an ETF Disruption Event, an Equity Index Disruption Event or a Commodity Index Disruption Event. Following any withdrawal of the Index as described above, the Licensor/Index Sponsor may, but is not obliged to, replace the Index with a successor index and/or replace the Strategy with a similar successor strategy or an entirely new strategy at any time, as it deems appropriate in its discretion. A supplement, amendment, revision or rebalancing may lead to a change in the way the Index is calculated or constructed. Such changes may include, without limitation, substitution or removal of an Index Component, or changes to the Strategy. Extraordinary Event includes (at a general level) any of the following events or circumstances, which in the case of (a) to (e) have had or will have, as determined by the Licensor/Index Sponsor, a material effect on the Index: a) change in either (i) the liquidity of any Index Component (including the application of any gating, side-pocketing or other similar arrangement), (ii) the form of payment of a transaction linked to any Index Component, or (iii) the trading volume, terms or listing of any Index Component; b) change in any applicable law or regulation, or any decision or promulgation of any change in the interpretation by any court, tribunal or regulatory authority of any applicable law or regulation; c) any event or circumstance that means the value of an Index Component is, in the determination of the Licensor/Index Sponsor, unreliable; d) an Index Component is permanently discontinued or otherwise unavailable; e) change in the method by which the value of an Index Component is calculated; f) any event that, in the determination of the Licensor/Index Sponsor, has a material adverse effect on the ability of a market participant to establish, maintain, value, rebalance or unwind a hedge position (which may include physical investments or entering into futures contracts or OTC derivatives) in relation to an investment product linked to the Index; g) any Additional Extraordinary Event specified in the relevant Index Specific Rules; h) any other event which, either (i) in the determination of the Licensor/Index Sponsor has a material adverse impact on the ability of the Index Calculation Agent, or Licensor/Index Sponsor to perform its duties, or (ii) in the determination of the Licensor/Index Sponsor, serves to frustrate or affect the purpose or aims of the Index Strategy (for example if the Licensor/Index Sponsor determines at any time that there is a material risk of an Index Value becoming negative), or (iii) in the determination of the Licensor/Index Sponsor, the overall notional amount of products linked to the Index falls to a size which renders the continuation of the Index economically unviable for the Licensor/Index Sponsor. For further details in relation to the Extraordinary Events, please refer to the Index Rules. Index Disruption Events Where, in the determination of the Licensor/Index Sponsor, an Index Disruption Event has occurred or is existing and subsisting in respect of any Index Calculation Day (a Disrupted Day ), the Licensor/Index Sponsor may in respect of such Disrupted Day (i) suspend the calculation and publication of an Index Value and/or (ii) determine an Index Value on the basis of estimated or adjusted data and publish an estimated level of an Index Value and/or, the Licensor/Index Sponsor may, following such Disrupted Day, take any action including but not limited to designation of alternative price sources, reconstitution of the Index or a temporary change of Weights or Volatility Control Weight. For these purposes, Index Disruption Event means a General 5/19
Disruption Event, or an Index Component Disruption Event. Where the Licensor/Index Sponsor uses estimated or adjusted data, it shall estimate or adjust such data with the primary intention of maintaining, so far as commercially reasonable, consistency of the exposure of the Index to the Strategy. Any estimate of the value of an Index Component in respect of a Disrupted Day shall be made by the Licensor/Index Sponsor using the methodology and calculations for determining the value of such Index Component last-in-effect prior to the occurrence of the Disrupted Day. Such Index Disruption Events are included to reflect the fact that the Index is an investible index and can be replicated by a hypothetical investor. General Disruption Events General Disruption Events include (at a general level) any of the following events and circumstances in the determination of the Licensor/Index Sponsor: a) an unscheduled closure of the money markets or a restriction or suspension in trading in these markets; b) the failure, suspension or postponement of any calculation within the Strategy, any event preventing the prompt or accurate determination of an Index Value or a determination by the Index Calculation Agent that the last reported Index Value should not be relied upon; and c) the disruption of trading on the relevant exchange or other trading facility of instruments referenced in the calculation of the Index or Index Components by the Index Calculation Agent or any other similar event. For further details in relation to the General Disruption Events, please refer to the Index Rules. Index Component Disruption Events Index Component Disruption Events include Fund Disruption Events, ETF Disruption Events, Equity Index Disruption Events and Commodity Index Disruption Events. Fund Disruption Events These events apply only in relation to Index Components which are of the Asset Type Mutual Fund (as set out in Table 1: Index Components Description) (each a Fund ) and include (at a general level) the following events, in the determination of the Licensor/Index Sponsor: a) a fund manager or any affiliate breached an agreement with the Licensor/Index Sponsor; b) a cross-contamination or other failure to segregate effectively assets between different classes, series or sub-funds of a fund; c) a fund or fund service provider becomes insolvent; d) a fund modification including (i) any change in a fund prospectus which could alter the value, right or remedies or investment strategy of such fund, (ii) any change to the legal constitution or management of a fund which materially alters the nature of the fund of the fund manager in relation to the fund, or (iii) the fund manager imposes fees or new dealing rules; e) a change to the aggregate net asset value of a fund; f) a change to the aggregate net asset value of a fund manager; g) a fund or its service provider loses its applicable license or authorisation; h) a regulatory action including (i) the cancellation, suspension or revocation of the registration or approval of a fund or service provider, (ii) any change in the legal, tax, accounting, or regulatory treatments of the fund or its fund manager, or (iii) the fund or any of its service providers becoming subject to any investigation, arbitration, regulatory action, government action, proceeding or litigation for any activities relating to or resulting from the operation of the fund or service provider; i) any event affecting a fund that would make it impossible or impracticable to determine the value or risk profile of such fund; or j) any breach or violation of any strategy or investment restriction, or a change in the risk profile of a fund. For further details in relation to the Fund Disruption Events, please refer to the Index Rules. ETF Disruption Events These events apply only in relation to Index Components which are of the Asset Type ETF (as set out in Table 1: Index Components Description) (each an ETF ) and include (at a general level) the following events, in the determination of the Licensor/Index Sponsor: a) An ETF manager or any affiliate breached an agreement with the Licensor/Index Sponsor; b) a cross-contamination or other failure to segregate effectively assets between different classes, series or sub-funds of an ETF; c) a change to the trading volume if an ETF; d) an ETF or ETF manager becomes insolvent; e) an ETF modification including (i) any change in a ETF prospectus which could alter the value, right or remedies or investment strategy of such fund, (ii) any change to the legal constitution or management of an ETF which materially alters the nature of the ETF or the ETF manager in relation to the ETF or (iii) the ETF manager imposes fees or new dealing rules; f) a change to the aggregate net asset value of an ETF; g) an ETF or its service provider loses its applicable license or authorisation; h) a regulatory action including (i) the cancellation, suspension or revocation of the registration or approval of an ETF or service provider, (ii) any change in the legal, tax, accounting, or regulatory treatments of the ETF or its manager, or (iii) the ETF or any of its service providers becoming subject to any investigation, arbitration, regulatory action, government action, proceeding or litigation for any activities relating to or resulting from the operation of the ETF or service provider; i) any event affecting an ETF that would make it impossible or impracticable to determine the value or risk profile of such ETF; j) any breach or violation of any strategy or investment restriction, or a change in the risk profile of an ETF. k) a suspension of or limitation imposed on trading in relation to an ETF or any event that disrupts the ability of market participants to effect transactions in any ETF; l) an unscheduled or early exchange closure; m) the Licensor/Index Sponsor or its affiliates is unable to borrow ETF shares in the amount needed to hedge the equity price risk in relation to transactions linked to the Index; or n) any event that disrupts or impairs (as determined by the Licensor/Index Sponsor) the ability of market participants (or the Licensor/Index Sponsor and/or its affiliates) to effect general transactions in, or obtain market values for, futures or options contracts referencing an ETF. For further details in relation to the ETF Disruption Events, please refer to the Index Rules. Equity Index Disruption Events These events apply only in relation to Index Components which are of the Asset Type Equity Index (as set out in Table 1: Index Components Description) (each an Equity Index ) and include (at a general level) the following events, in the determination of the Licensor/Index Sponsor: a) (i) a suspension of or limitation imposed on trading in respect of any components of an Equity Index and/or futures or options relating to the Equity Index, or (ii) any event that disrupts the ability of market participants to effect transactions in or obtain market values for components of an Equity Index or futures or options relating the an Equity Index; b) (i) an Equity Index is cancelled, (ii) the index sponsor fails to calculate and announce the Equity Index, or (iii) the Equity Index is materially modified; c) any event that disrupts or impairs (as determined by the Licensor/Index Sponsor) the ability of market participants (or the Licensor/Index Sponsor and/or its affiliates) in general to effect transactions in, or obtain market values for, futures or options contracts referencing an Equity Index. For further details in relation to the Equity Index Disruption Events, please refer to the Index Rules. 6/19
Commodity Index Disruption Events These events apply only in relation to Index Components which are of the Asset Type Commodity Index (as set out in Table 1: Index Components Description) and include (at a general level) the following events, in the determination of the Licensor/Index Sponsor: a) a material suspension of or limitation in trading any components of the Commodity Index, or any other event that disrupts or impairs (as determined by the Licensor/Index Sponsor), the ability of market participants in general to effect transactions in, or obtain market values on the principal trading market for a component, of the Commodity Index; b) a failure to commence, or the discontinuance of trading, or disappearance of, a component of the Commodity Index; c) an unscheduled or early exchange closure; d) a material change in the content, composition or constitution of the Commodity Index or a component of the Commodity Index; e) a material change in the formula or calculation method of the Commodity Index level or the price of a component of the Commodity; f) the failure by (i) the commodity index sponsor to announce the Commodity Index level, or (ii) the relevant price source to announce the price of the component of the Commodity Index or the permanent unavailability of the relevant price source; or g) a tax event that affects the price of a component of the Commodity Index. For further details in relation to the Commodity Index Disruption Events, please refer to the Index Rules. Potential Adjustment Events If the Licensor/Index Sponsor determines that a Potential Adjustment Event has occurred in respect of a Fund or an ETF, which (in respect of an ETF only) has not been handled through an Operational Corporate Action and/or Extraordinary Corporate Action, the Licensor/Index Sponsor will determine whether such Potential Adjustment Event has a diluting or concentrative effect on the theoretical value of the relevant Fund or ETF and, if so, the Licensor/Index Sponsor may (i) make the corresponding adjustment(s), if any, to the relevant Fund or ETF as the Licensor/Index Sponsor determines appropriate to account for that diluting or concentrative effect (provided that no adjustments will be made to account solely for changes in volatility, expected dividends, stock loan rate or liquidity relative to the relevant Fund or ETF), and (ii) determine the effective date(s) of the adjustment(s). The Licensor/Index Sponsor may (but need not) determine the appropriate adjustment(s) by reference to the adjustment(s) in respect of such Potential Adjustment Event made by an options exchange to options on the relevant Fund or ETF traded on such options exchange. In determination of the Licensor/Index Sponsor, with respect to an ETF or a Fund, a Potential Adjustment Event includes (at a general level) any of the following events or circumstances: a) A subdivision, consolidation or reclassification of the relevant Index Component, or a free distribution or dividend of any Index Component which is an ETF or a Fund to existing holders by way of bonus, capitalisation or similar issue; b) A distribution, issue or dividend to existing holders of the relevant Index Component; c) The declaration or payment of an extraordinary dividend; d) A call by the Stock Issuer in respect of shares that are not fully paid; e) An event that results in any shareholder rights being distributed or becoming separated from shares of common stock or other shares of the capital stock of the Stock Issuer pursuant to a shareholder rights plan or arrangement directed against hostile takeovers; f) a repurchase by the Stock Issuer, or any of its subsidiaries, of its shares whether out of profits or capital and whether the consideration for such repurchase is cash, securities or otherwise; g) a repurchase by any Fund of its shares the consideration for such repurchase is cash, securities or otherwise, other than in respect of a redemption of Fund shares initiated by an investor which is consistent with the relevant Fund documents h) A nationalisation, delisting, merger, insolvency of an Index Component or, tender offer to purchase or exchange an Index Component, as further described in the Index Rules; and i) Any other event that may have a diluting or concentrating effect on the theoretical value of the relevant Index Component. For further details in relation to the Potential Adjustment Events, please refer to the Index Rules. Economic proposition; Right to supplement, amend, revise, rebalance or withdraw the Index; Index Component Substitution; Substitution of the Index Rebalancing Entity The right of the Licensor/Index Sponsor to exercise its discretion to supplement, amend, revise, rebalance the Index including the right to substitute or remove Index Components, and the right to substitute or remove the Index Rebalancing Entity, are required to ensure the notional investments entered by the Index remain a viable investment proposition for a hypothetical investor seeking to replicate the Strategy. Where a supplement, amendment, revision, rebalancing of the Index or substitution or removal of an Index Component does not ensure the notional investments entered by the Index remain a viable investment proposition for a hypothetical investor seeking to replicate the Strategy, or the Licensor/Index Sponsor needs to withdraw the Index to meet its own risk management requirements, the Licensor/Index Sponsor has the right to exercise its discretion to withdraw the Index. This is integral to the ability of any market participant to offer products linked to the Index. For the occurrence of certain events may affect the investibility of the Index and could result in additional risks or costs for Credit Suisse, however, the Licensor/Index Sponsor may exercise its discretion to take one of the actions available to it under the rules of the Index in order to deal with the impact of these events. The exercise of such discretions has the effect of, amongst other things, transferring the risks and costs resulting from such events from Credit Suisse to investors in the products linked to the Index. Discretion of the Licensor/Index Sponsor The Index Rules provide Credit Suisse in its capacity as Licensor/Index Sponsor has the discretion to make certain calculations, determinations, and amendments from time to time (for example, on the occurrence of an Index Disruption Event as described below). While such discretion will be exercised in good faith and a commercially reasonable manner, and (where there is a corresponding applicable regulatory obligation) the Licensor/Index Sponsor shall take into account whether fair treatment is achieved by any such calculation, determination and exercise of discretion in accordance with its applicable regulatory obligations, it may be exercised without the consent of the investor and may have an adverse impact on the financial return of an investment linked to the Index. To the extent permitted by applicable regulation, Credit Suisse and its affiliates shall be under no liability to account for any loss or damage to any person arising pursuant to its exercise of or omission to exercise any such discretion except where such loss or damage is caused by CS s Fault. Determinations of the Stock Calculation Agent The Index Rules set out the basic principles which will be applied by the Stock Calculation Agent in determining the occurrence of corporate events in respect of an ETF and the adjustment to be implemented as a consequence of such corporate event. Neither the Licensor/Index Sponsor nor the Index Calculation Agent is responsible for the determination of the Stock Calculation Agent in terms of the occurrence or non-occurrence of such corporate action or the determination by the Stock Calculation Agent of any adjustment made to an ETF as a consequence thereof. In the event of any conflict or inconsistency between the information provided in relation to corporate events the Index Rules and the Corporate Actions Policy, the Corporate Actions Policy shall prevail. Such determinations will be made so as to ensure fair representation of the returns for a hypothetical investor holding such ETF in his portfolio before and after such event took place. With respect to Stock Removal, in certain circumstances, an ETF may be removed from the Index at a zero price, in recognition of constraints faced by investors in trading suspended ETFs. Such determinations may have an adverse effect on the value of the Index. Substitution of the Index Rebalancing Entity; Withdrawal of the Index 7/19
If the Licensor/Index Sponsor determines that an Index Rebalancing Entity Event has occurred, the Licensor/Index Sponsor may in consultation with the Index Committee (i) substitute the Index Rebalancing Entity, (ii) remove the Index Rebalancing Entity, in which case the Index shall stop being rebalanced, and the Weights shall remain equal to the Weights in respect of the Index Rebalancing Day preceding such removal, or (iii) withdraw the Index. Index Rebalancing Entity Events include any of the following events and circumstances: a) Any governmental, legal or regulatory body cancels, suspends or revokes the registration, licence, or approval of the Index Rebalancing Entity; b) The activities of the Index Rebalancing Entity (or any of its affiliates) are subject to investigation, arbitration, regulatory action, government action, proceeding or litigation; c) The Index Rebalancing Entity ceases to exist, or ceases to perform any of its obligations or duties; d) The Index rebalancing agreement terminates. Strategy Specific Risks The allocation performed by the Index Rebalancing Entity is a significant factor impacting the return of the Index The initial Weight allocated to each Index Component, in addition to any subsequent rebalancing is performed by the Index Rebalancing Entity in accordance with the Index Rebalancing Methodology. Although the Index includes Investment Restrictions, the Index Rebalancing Entity has total discretion over the allocation, both in terms of timing and in terms of the allocation of Weights amongst the Index Components. Any allocation to Index Components that subsequently decrease in value will result in a decline in the value and/or underperformance of the Index. Furthermore, although the Index Rebalancing Entity can allocate to a wide universe of assets, it may select a concentrated allocation of assets which may result in additional downside risk to the performance of the Index. As a result, the performance of the Index will be reliant on the allocation methodology of the Index Rebalancing Entity. There can be no assurance that the Index Rebalancing Entity will be successful in allocating to Index Components. Provided that a rebalancing request made by the Index Rebalancing Entity is compliant with the Investment Restrictions, the Licensor/Index Sponsor will typically accept and implement the relevant request. In certain limited circumstances (for example if the Index Rebalancing Entity fails to comply with the terms of its appointment), the Licensor/Index Sponsor may exercise its right to reject a rebalancing request made by the Index Rebalancing Entity, which may affect the performance of the Index. In certain circumstances, as set out in the Index Rules, the Index Rebalancing Entity may be removed or substituted, which may also affect the performance of the Index. The Index is sensitive to the volatility of the Base Index Due to the in-built volatility control mechanism, the exposure of the Index to the Base Index varies according to the volatility of the Base Index. As volatility rises, the Index reduces exposure to the Base Index and conversely, as volatility falls, the Index's exposure to the Base Index increases. Therefore the Index may underperform relative to the Base Index where high volatility followed by positive performance of the Base Index: here an investor would not benefit as greatly as an investor who had a direct exposure to the Base Index because the volatility control mechanism is likely to have reduced the exposure to the Base Index to a percentage below 100%. Volatility is observed with a lag The Index observes volatility 3 Index Calculation Days in arrears. This lag results in the exposure of the Index to the Base Index being adjusted 3 days in arrears. In the event there is a large movement in the price of the Base Index, the Index will not be recalibrated until 3 Index Calculation Days following, meaning that the Index could be exposed to a spike in volatility before any rebalancing due to the volatility control mechanism which may involve greater losses to investors. Measure of volatility Measuring volatility as the higher of (i) volatility over the preceding 21 Index Calculation Days and (ii) volatility over the preceding 84 Index Calculation Days is not the only way to measure volatility. For the purposes of assessing volatility, different time periods could have been used. Moreover, it is possible to measure volatility on a future basis (known as implied volatility ). Using any of: (i) implied volatility; (ii) a combination of implied and realised volatility and/or; (iii) a different time period(s) for measuring realised volatility could each produce a different (and potentially better) Index performance. Price of Index Components may be influenced by asymmetries in demand and supply The price of each Index Component may be influenced by external factors related to the demand and supply for exposure. For example, any purchases or disposals of the constituent assets underlying an Index Component may be contingent upon there being a market for such assets. In cases where there is not a ready market, or where there is only a limited market, the prices at which such assets may be purchased or sold may vary significantly (such variation between the prices at which the asset can be bought or sold is referred to as a bid-offer spread ). If trying to dispose of an asset in a limited market, the effect of the bid-offer spread may be that the value realised on a disposal is markedly less than the previously reported value of the asset. This will have an impact on the value of the Index Component and, consequently, the Index Value. This is one example of external factors which may affect the supply and demand for the component security, but other factors may also exist which may negatively impact the performance of the Index. The price of futures contracts may be delinked from the price of the underlying security or index Under certain market conditions, the prices of futures contracts may not maintain their usual relationship to the price of their underlying security or index. Such disparities could occur when the market for such futures contract is illiquid, when trading of the underlying security or index is suspended or when the security or index exchange is closed. Potential losses from rebalancing costs The Index is rebalanced by the Index Rebalancing Entity, and can be rebalanced daily under the volatility control mechanism. Costs associated with rebalancing may have an adverse impact on the performance of the Index. Use of derivative instruments The Index has exposure to derivative instruments in the form of futures/forward/cds contracts are used in two ways, (i) to obtain exposure to Index Components defined as Excess Return, and (ii) to FX hedge total return Index Components. These may represent significant investment risks and are only suitable for investors who understand the risks involved in trading in sophisticated and volatile markets. As a result of gaining exposure through derivatives, including in the form of futures/forward/cds contracts, relatively small price movements may result in magnified losses or gains. Total Return Index The term Total Return as used herein in respect of the Index shall refer solely to the reinvestment of net dividends and to the addition of a cash element to its performance, not to any element of capital protection. Potential conflicts of interest Credit Suisse expects to engage in trading activities related to constituents of the Index during the course of its normal business for both its proprietary accounts and/or in client related transactions. Such trading activities may involve the sale or purchase of index constituents, assets referencing the index constituents and/or derivative financial instruments relating to the constituents of the Index. These trading activities may present a conflict between the interests of investors with exposure to the Index and Credit Suisse s own interests. These trading activities, if they have an influence on the share prices or 8/19