Investment Views - VP Bank

Investment Views
June 2011

Published by
Economics & Investment Office
Verwaltungs- und Privat-Bank Aktiengesellschaft
Aeulestrasse 6
LI-9490 Vaduz
Tel +423 235 65 44
Fax +423 235 61 39
investmentviews@vpbank.com
Editors and contributors
Dr. Jörg Zeuner, Chief Economist, Head of Economics & Investment Office
Bernd Hartmann, Senior Investment Strategist
Bernhard Allgäuer, Senior Investment Strategist
Martina Honegger, Senior Asset Manager Fixed Income
Pascal Tschütscher, Senior Investment Advisor
Oliver Schlumpf, Investment Strategist
Rolf Kuster, Investment Strategist
Monja Camponovo, Junior Investment Advisor
Dennis Huber, Career Starter Wealth Management
Richard Schlup, Senior Advisor Fund Selection
Patrick Volkart, Head of Fund Selection & Funds of Funds
Pascal Imboden, Head of Portfolio Management & Funds
Marcel Fleisch, Head of Product Management
Marco Lüchinger, Senior Product Manager
Periodicity
Monthly
Publication date
June 1, 2011
This publication was finalized on
May 18, 2011
Closing prices as at
May 17, 2011, unless otherwise stated
Sources for charts and statistics
Bloomberg, Reuters, Thomson Financial Datastream,
unless otherwise stated
Photos
Marc Wetli, Zurich (portraits)
Roland Korner, Triesen (illustrations)
Printed by
BVD Druck+Verlag AG, Schaan

Contents
Foreword 4
Current Market Assessment 5
1. Focus 7
Top Issue of the Month 8
Economic Outlook 10
2. Asset Classes 13
Money Markets (Currencies, Key Interest Rates) 13
Bonds 19
Equities 29
Alternative Investments 43
(Commodities, Real Estate, Private Equity,
Convertible Bonds, Hedge Funds)
3. Investment Management Mandates 51
4. VP Bank Interest-bearing and Financing Products 55
Interest-bearing Products 56
Financing Products 57
Contacts 58
Glossary 59
Disclaimer 60

Foreword
Monetary Policy drives the Markets
Dear Reader
The European Central Bank’s press conference in May sent tremors through world markets. When the dust
settled, the US dollar was stronger and commodity prices weaker. The equity markets escaped unscathed.
The storm has corrected a number of distortions. We deal with the reasons for the weaker euro in the Money
Market article, and in our Equities section we explain why the stronger dollar has failed to dent the stock
markets.
June will see an important adjustment in the US monetary landscape when the
Fed terminates its second program of quantitative easing. In the Top Issue of
the Month on pages 8–9, we examine possible repercussions on the US bond
market. In the present macroeconomic environment our fixed income
specialists recommend a continued exposure to credit risks.
Economic news during recent weeks has been in line with our
expectations. We are therefore devoting the Economic Outlook
section to Greece’s debt problem. We consider what shape a
solution should take and compare Greece’s predicament with that
of the Baltic states during the 2008/09 financial crisis.
In the upcoming summer issue of Investment Views we will present
our forecasts for the second half of the year.
Until then we wish you an enjoyable read.
Juerg W. Sturzenegger Dr. Jörg Zeuner
Head of Wealth Management Solutions & Services Head of Economics & Investment Office
Member of Group Executive Management Chief Economist

Current Market Assessment
The tables below summarize VP Bank's trend assessments for all asset classes in our investment universe. The arrows reflect
the forecasts of our investment strategists for the coming three to six months. The trends for currencies, equities and alternative
investments indicate expected percentage changes in value. The bond assessments indicate expected changes in yields,
expressed in basis points. The symbols are explained in the key at the bottom of the page.
Money Market (pages 13–17)
Currencies
EUR vs. USD
GBP vs. USD
JPY vs. USD
USD vs. CHF
EUR vs. CHF
GBP vs. CHF
JPY vs. CHF
Key Interest Rates
Switzerland
Europe (EMU)
US
Bond Yields (pages 19–27)
Investment Grade Government Bonds
Switzerland
Europe
US
Investment Grade Corporate Bonds
Switzerland
Europe
US
Emerging Market Bonds
High Yield Bonds
May 2011 June 2011
Currencies – Expected appreciation/depreciation:
> +5% +2% to +5% –2% to +2% –5% to –2% < –5%
Equities (pages 29–41)
Switzerland
Europe
North America
Pacific
Emerging Markets
Alternative Investments (pages 43– 49)
Commodities
Real Estate Stocks
Private Equity
Convertible Bonds
Hedge Funds
Equities, Alternative Investments – Upside/downside ranges indicated by our 3–6 month absolute performance assessments:
> +5% +2% to +5% –2% to +2% –5% to –2% < –5%
Bond Yields, Key Interest Rates – Upside/downside ranges indicated by our 3–6 month absolute performance assessments:
> +50 basis points +25 basis points No change –25 basis points

1. Focus

8 | June 2011 | Focus | Top Issue of the Month
Top Issue of the Month | Martina Honegger
End of QE2 – End of Low Interest Rates?
No QE3
The Fed’s second program of quantitative easing, consisting
of large-scale new purchases of Treasury securities, will
expire as planned in June. At Feds first press conference in
May, Chairman Bernanke virtually ruled out the possibility
that QE2, as the program has been dubbed, will be followed
by a QE3. Inflation worries and the risk to the Fed’s reputation
now outweigh the growth benefits that another dose of
quantitative easing might bring.
The Fed has bought up a total of USD 600 billion worth of
Treasuries since November 2010. In addition, as securities
bought under the first program have matured, the proceeds
have been reinvested in the Treasuries market. Maturing
assets will continue to be reinvested in this way, with the
result that the stock of Treasuries in the Fed’s balance sheet
will remain constant.
The end of the quantitative easing experiment raises a
number of questions. Will the Fed’s withdrawal from the
market cause a massive rise in interest rates? In other words,
has the Fed distorted the market to such an extent that private
investors will now demand a higher return? Does the
end of QE2 herald an era of monetary tightening? Have the
two Treasuries purchase programs achieved their objectives?
Yields Curbed by QE2
QE has certainly achieved its intermediate objective.
Most analysts (including the Fed itself) believe that yields on
10-year Treasuries after the Fed’s intervention have been
40–80 basis points below the market equilibrium level before
the Fed acted.
In considering what will happen after QE2, it is important to
note that the price manipulation effect of the Fed’s new
purchases (the “flow effect”) has become proportionately
smaller as the program has progressed. A greater effect is
now exerted by the reinvestment of maturing securities
(“stock effect”). The Fed’s balance sheet is now so large that
reinvestment will ensure that demand in the Treasuries
market remains sufficient. The Fed holds around 10% of
outstanding US government securities. That is roughly
equivalent to the federal budget deficit, i.e. the federal
government’s annual net new borrowing requirement. As
long as investors do not seriously reduce their holdings of
US Treasuries but reinvest them as they mature, demand
will therefore continue to cover supply.
Fed Balance Sheet (USD bn)
3,000
2,500
2,000
1,500
1,000
500
0
2008 2009
Mortgage-backed securities
Agency debt
Treasuries
2010 2011
Expiry of QE2 Will Have Minimal Impact
Thus, with the Fed’s balance sheet as it now is, the stock of
Treasuries held by the Fed has a greater impact on the yield
level than new purchases. Assuming no deterioration in
the budget deficit, continued economic growth and stable
inflation expectations, there is no reason for a third round of
quantitative easing. If the macro environment stays the same,
yields will hold steady. We believe, moreover, that institutional
investors could step into the breach. The size of the
QE2 program and the timing of its expiry have been known
from the outset. If some investors had decided to wait until
after June to raise their Treasuries holdings, that would have
prompted other investors to buy at once in order to sell afterwards
at a better price. It can therefore be assumed that all
relevant information has been priced into present yields.
The psychological impact of the end of QE2 is hard to gauge.
It appears, however, that many market players have already
taken short positions with the aim of profiting from higher

yields. The summer months are therefore likely to see
these operators buying Treasuries in order to close out
their positions.
Outlook Is Key
The impact of quantitative easing has not been confined to
Treasury yields. Prices in other asset classes too have been
stabilized or boosted, as was the program’s intention. The
equity market, for example, has advanced by around 30%
since Chairman Bernanke floated the idea of QE2 in Jackson
Hole in August 2010. This performance reflects the economic
recovery and booming corporate profits, which the
Fed has supported by its QE policy. The goal was to boost
consumption by creating additional wealth.
Thus the effect of QE2 on US Treasury yields is hard to
isolate and can quickly be overtaken by macroeconomic
developments. Growth and inflation expectations are stable
at present. Indeed, inflation expectations have recently
receded again, because higher oil and commodity prices
are now seen as a temporary phenomenon that will not have
a lasting inflationary impact. This has put a damper on rising
bond yields. On the other hand, the positive US growth
outlook could cause yields to resume the upward trend that
started in autumn 2010.
QE Is Not Deficit Financing (Monetization)
The Fed does not regard quantitative easing as a means of
deficit financing. It finances its Treasuries holdings with
money deposited with it by commercial banks – i.e. reserves,
which figure on the asset side of the commercial banks’
balance sheets. The banks, in turn, finance these assets with
customer deposits and other forms of borrowed money.
In the absence of quantitative easing they would have to
place this money elsewhere, for example by making direct
investments. That, at least, is the Fed’s interpretation.
Ultimately, however, the Fed does contribute to federal
financing, albeit indirectly. But its actions are not (yet) crowding
out private investors. Its interventions have therefore
been justified. The Fed now believes – as we do – that the
Legal notes on page 60.
economy is robust enough not to require stimulus from this
additional transmission mechanism, and it has recently reaffirmed
its optimistic growth forecast.
Monetary Policy Stays Expansive
The end of quantitative easing should not be seen as a tightening
of the monetary reins. On the contrary, the Fed’s rhetoric
signals a continued accommodative bias. Tighter policies
by other central banks mean that US interest rates have an
even more expansionary effect. The end of QE2 is merely
the first step towards normalization.
US Treasury Yields (by maturity)
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0%
Jun 10 Aug 10 Oct 10 Dec 10 Feb 11 Apr 11
10-year US Treasury yield
5-year US Treasury yield
2-year US Treasury yield
Conclusion
The absence of additional demand from the Fed will not by
itself have a disadvantageous effect on the US yield curve.
Even so, robust economic growth could cause the curve to
steepen again. The stock of Treasuries held by the Fed has a
greater effect on the yield level than purchases of new securities.
The expiry of QE2 will do no more than usher in a normalization
of monetary policy. It does not mark a tightening.
9 | June 2011 | Focus | Top Issue of the Month

10 | June 2011 | Focus | Economic Outlook
Economic Outlook | Dr. Jörg Zeuner
Greece Needs Carrot, Not Stick
Greece in the Debt Trap
Greece has fallen into the debt trap:
• The stagnating economy is stifling a recovery of tax
revenue, while government spending is likely to increase
as unemployment rises.
• Without economic growth, there is no additional income
to cover future interest costs and debt repayments.
• Market interest rates have climbed to a level that rules out
further financing on the capital market. New borrowing at
these rates would only plunge the country into even
deeper debt in the future.
The bond markets have recognized the situation. Greece is
now considered ripe for debt restructuring.
Austerity Not Enough
Additional austerity measures make sense. By themselves,
however, they will not be enough to dig the country out of
the debt trap, even if Greece shows the same sort of commitment
to the euro as inspired the Baltic nations during the
financial crisis. Latvia, for example, had to halve its budget
deficit within three years in order to defend its exchange rate
against the euro, resulting in a contraction of GDP by around
25% between 2008 and 2010. Wage cuts in the public sector
were a major part of this policy. In the present interest rate
Credit Spreads on 5-year Government Bonds (in basis points)
1,600
1,400
1,200
1,000
800
600
400
200
0
Nov 09 Mar 10 Jul 10 Nov 10 Mar 11
Spain
Greece
Italy
Portugal
Ireland
environment, the necessary public sector wage cuts in
Greece would have to be so severe that the economy would
be brought to its knees. How could any political system
survive the resulting scramble for shares of the country’s
dwindling national income?
Selling the Family Silver?
Greece’s predicament has prompted calls for massive privatization.
But the countless stabilization programs imposed by
the IMF show just how risky such a strategy can be. A sell-off
of profitable state enterprises would bring in the most cash.
But if the sale is rushed through as an emergency measure,
the government is unlikely to get an appropriate price, and
it would also forfeit future revenue from the profits of the
privatized enterprises. A privatization of weaker or lossmaking
enterprises would not fit the bill either, because the
proceeds are likely to be meager. In any case, the privatization
procedures under the European Union’s transparency
rules are very time-consuming – and time is something that
Greece does not have. Privatization is therefore unsuitable
as an emergency remedy. The efficiency gains that usually
result from a well-ordered privatization are often hard to
achieve when privatization is forced.
Necessary Wage Cuts in Latvia
0.5%
0.4%
0.3%
0.2%
0.1%
0%
–0.1%
–0.2%
–0.3%
2007 2008 2009 2010
Latvia public sector wages (% yoy)
Latvia GDP (% yoy, r-h scale)
15%
10%
5%
0%
–5%
–10%
–15%
–20%
–25%

Incentives, Not Punishment
Greece needs incentives that will assure its citizens of a
brighter future after years of belt-tightening and enable the
government to improve the competiveness of the Greek
economy by capital investment and education. The debtto-GDP
ratio has to come down after an appropriate period.
But penal interest rates have exactly the opposite effect.
They merely make the problem worse. Outstanding debt
needs to be refinanced on significantly more favorable terms
than are available at present. If the average interest rate falls
to 2%, Greece might even be able to stabilize its debt without
further austerity measures.
Restructuring Only with Flanking Measures
The clean-up of Greece’s public finances could be quickened
if the transfer of debt to public-sector facilities, i.e. the EFSF/
ESM and the IMF, at low interest rates were combined with a
partial debt waiver by creditors (a so-called “haircut”). Given
the structure of Greece’s debt, however, this approach
would only be successful if combined with appropriate flanking
measures to support the Greek private sector, including
banks and pension-providing insurance companies. The
holdings of Greek bonds in these sectors are so huge that
many banks and pension funds would probably have to be
Greek Debt-to-GDP Ratio at Various Refinancing Rates
200%
190%
180%
170%
160%
150%
140%
130%
120%
110%
100%
2008 2009 2010 2011 2012 2013 2014 2015
Market refinancing at 16.1%
Via EFSF at 5.0%
Legal notes on page 60.
Via EFSF at 8.0%
Via EFSF at 2.0%
Highlights
• Greece needs further financial support from
the Eurozone and IMF.
• Positive incentives to further stiffen budget
discipline are required.
• This includes lower interest rates and longer
maturities for new loans.
• Privatization is a risky strategy for bringing
down public debt.
recapitalized, and the
Greek government is
simply not in a position to
provide the wherewithal.
Unless there is agreement about
who will pick up the tab, a debt waiver would
lead to a run on the banks and a flight of capital into other
European countries. The integrity of Greece’s body politic
would again be severely tested, and a domino effect – as we
saw after the first Greek crisis – would be all too likely. A
comprehensive solution therefore has to include a carefully
managed debt waiver, but a convincing recipe is not yet in
sight.
Conclusion
Greece needs further financial support. A lasting solution
must include lower interest rates and longer maturities within
the context of a transfer of debt to the EFSF/ESM and the
IMF. A partial debt waiver must be embedded in a carefully
conceived overall solution.
Creditors of Greek Public Debt
23%
18%
4%
12%
Greek banks
Other Greek creditors
European Central Bank
23%
20%
Eurozone governments
Other foreign creditors
IMF
11 | June 2011 | Focus | Economic Outlook

2. Asset Classes
Money Market

14 | June 2011 | Asset Classes | Money Market
Money Market
Money Market – Overview
EUR/CHF and EUR/USD: Exchange rates since May 2010 EUR/GBP and USD/CHF: Exchange rates since May 2010
1.50
1.45
1.40
1.35
1.30
1.25
1.20
EUR/CHF EUR/USD (r-h scale)
GBP/CHF and GBP/USD: Exchange rates since May 2010 USD/JPY: Exchange rate since May 2010
1.75
1.70
1.65
1.60
1.55
1.50
1.45
1.40
1.15
M J J A S O N D J F M A M
GBP/CHF GBP/USD (r-h scale)
Key Interest Rates in Switzerland, Eurozone, US: since May 2008
5%
4%
3%
2%
1%
0%
1.50
1.45
1.40
1.35
1.30
1.25
1.20
1.70
1.65
1.60
1.55
1.50
1.45
1.40
M J J A S O N D J F M A M
M J S N J M M J S N J M M J S N J M M
Switzerland Eurozone US
0.90
0.88
0.86
0.84
0.82
0.80
96
94
92
90
88
86
84
82
80
78
0.85
M J J A S O N D J F M A M
EUR/GBP USD/CHF (r-h scale)
USD/JPY
Key Interest Rates in UK and Japan: since May 2008
6%
5%
4%
3%
2%
1%
M J J A S O N D J F M A M
0%
M J S N J M M J S N J M M J S N J M M
UK Japan
1.20
1.15
1.10
1.05
1.00
0.95
0.90

Money Market | Oliver Schlumpf
Market Outlook
ECB Holds Fire
As expected, the European Central Bank (ECB) did not raise
its key interest rate any further in May. The utterances of ECB
President Trichet indicate that there will be no tightening of
monetary policy in June either. The next Eurozone interest
rate hike will probably come in the summer at the earliest.
The euro reacted by shedding several percentage points
against the US dollar, and the Swiss franc followed suit. Many
market participants had apparently expected the ECB to act
more aggressively. The dollar was further boosted by the
prospect of a second bail-out for Greece.
Dollar Too Weak
Although the latest storm has cleared the air to some extent,
the dollar remains undervalued. Its real effective exchange
rate (i.e. trade-weighted and adjusted for inflation differentials)
is at an all-time low. Besides the uncertainty created by
the wriggles in ECB policy, we do not expect the dollar to
recover substantially until the Fed announces a major move
towards a normalization of monetary policy (see Top Issue
of the Month on page 8).
Dollar Undervalued in Real terms
140
130
120
110
100
90
80
70 74 78 82 86 90 94 98 02 06 10
Real effective exchange rate of USD
Trend
Legal notes on page 60.
Highlights
• The ECB will wait until the summer before
raising interest rates again.
• The upward trend in the euro’s exchange rate
against the US dollar has been halted, but a
sustained recovery of the dollar would require
a change in US monetary policy.
• The welcome correction on the commodity
markets has hit commodity currencies.
Change in US
Monetary Policy Not
in Sight
America’s unchanged monetary
stance will keep the dollar weak for
the time being:
• The Fed has not yet indicated any prospect of a key
interest rate hike.
• The end of quantitative easing in June will not lead to a
contraction of the Fed’s balance sheet (equivalent to a
tightening of monetary policy), because maturing assets
will be reinvested.
• The Fed has the option of making further interventions on
the bond market even after the end of quantitative easing.
• A sustained strengthening of the dollar would require a
change of course in US monetary policy, notably the announcement
of interest rate hikes. It could be several
months before that happens, and in the meantime higher
interest rate expectations in other currency areas will hold
the dollar down.
We are therefore sticking to our neutral assessment for the
time being. In the longer term, however, we expect to see
the EUR/USD rate move back within our target range of
1.30–1.40. Moderate inflation expectations in the US mean
that the dollar is eventually likely to recoup lost ground. We
also expect it to appreciate towards parity against the Swiss
franc in the long term.
The major risks to our assessment:
• A surprisingly steep increase in expected inflation in the
US could quickly push up US interest rate expectations
and boost the dollar earlier than anticipated.
• Speculation about US solvency or the monetization of
public debt by the Fed could put the dollar under pressure
again. Monetization would immediately be punished by
rising yields on the bond market and is therefore hardly in
America’s interest.
15 | June 2011 | Asset Classes | Money Market

16 | June 2011 | Asset Classes | Money Market
Commodity Currencies Weaken
Commodity currencies – notably the Australian, New Zealand
and Canadian dollars – react strongly to changes in commodity
prices. This explains their recent weakening. The major
commodity prices (gold, silver and crude oil) reacted violently
at times to the halt of the US dollar’s decline and the bursting
of the bubble on the silver market after the raising of margin
requirements for silver futures in Chicago. Many commodity
prices are now closer to the levels that we regard as fundamentally
appropriate.
General Correction of Commodity Currencies (indexed)
111
109
107
105
103
101
99
97
95
Mar 2011
AUD/USD
CAD/USD
NZD/USD
Apr 2011 May 2011
AUD Appreciation Over?
The strength of the Australian dollar is justified. Strong economic
growth, booming Chinese demand for Australian raw
materials and comparatively high interest rates in the context
of macroeconomic stability all make the Aussie a favored
currency.
But the Aussie has looked too dear against the greenback
for some time now. The correction in May was overdue and
has pushed the USD/AUD rate back towards an appropriate
level. We regard the upside potential of the AUD against the
USD, EUR and CHF over the next 3–6 months as limited.
Australia’s heavy dependence on Chinese growth involves
some risk. Any sign of a slowdown in China or a significant
tightening of Chinese monetary policy would increase the
downside risk for the Australian currency. The same goes for
the New Zealand dollar.
Only Slightly Better Outlook for the CAD
The Canadian economy’s tight correlation with the US has
limited the Canadian dollar’s appreciation despite rising
commodity prices. The outlook for the CAD is therefore now
somewhat better than for the AUD and NZD. The ongoing
recovery in the US has a positive impact on the, compared
to Australia and New Zealand, more broadly diversified
Canadian economy. But expectations of interest rate hikes
by the Bank of Canada are probably rather over-optimistic,
and in any case they are already largely priced into the CAD’s
exchange rate against the USD. We therefore regard the
CAD’s upside potential as likewise limited and are forecasting
only a sideways movement over the coming 3–6 months.
Key Interest Rates (LIBOR) June 2011
Switzerland
Europe (EMU)
US
Upside/downside ranges indicated by our 3–6 month interest
rate forecasts:
> +50 basis points +25 basis points No change
–25 basis points < –50 basis points

Money Market
Selected Products
Product Name Curr. ISIN NAV Date NAV Payout Curr. Hedged YTD Perf. %
VP Bank Funds
VP Bank Money Market Fund CHF CHF LI0004874199 05/16/2011 1,076.30 No – –0.18
VP Bank Money Market Fund EUR EUR LI0008943925 05/16/2011 1,309.84 No – 0.01
VP Bank Money Market Fund USD USD LI0004874231 05/16/2011 1,547.38 No – 0.23
Third Party Funds
Government Borrowers
LGT Mon Mkt Fd Gov CHF Hedged B CHF LI0036240179 05/16/2011 1,018.45 No Yes 0.04
JPM Euro Government Liquidity Fund A EUR LU0326548780 05/17/2011 10,391.22 No – 0.06
JPM US Dollar Treasury Liquidity Fund A USD LU0176037280 05/16/2011 11,448.21 No – 0.00
Corporate Borrowers
Swisscanto (LU) Money Market Fd CHF CHF LU0141249424 05/16/2011 148.82 No – 0.01
JPM Euro Liquidity Fund A EUR LU0070177232 05/17/2011 12,968.05 No – 0.12
JPM US Dollar Liquidity Fund A USD LU0011815304 05/16/2011 13,294.87 No – 0.00
Exchange Traded Funds (ETFs)
Product Name Underlying Provider Curr. ISIN Price YTD Perf. %
(indicative)
EONIA TR Index ETF EONIA Total Return Index Deutsche Bank EUR LU0290358497 138.94 0.24
US Dollar Money Market ETF FED Funds Effective Rate TR Index Deutsche Bank USD LU0356591882 170.89 –0.02
Certificates (open end)
Product Name Underlying Issuer Curr. ISIN Ratio Price YTD Perf. %
(indicative)
Money Market Note CHF CHF 6 Months Total Return Swap Vontobel CHF CH0020494354 1:1 106.70 0.09
Money Market Note EUR EUR 6 Months Total Return Swap Vontobel EUR CH0020494412 1:1 115.40 0.35
Money Market Note USD USD 6 Months Total Return Swap Vontobel USD CH0020494453 1:1 117.20 0.09
Legal notes on page 60.
17 | June 2011 | Asset Classes | Money Market

2. Asset Classes
Bonds

20 | June 2011 | Asset Classes | Bonds
Bonds
Bond Yields – Overview
Switzerland: Yields since May 2009 Emerging Markets (Hard Currency): Yields since May 2009
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
M J J A S O N D J F M A M J J A S O N D J F M A M
SBI Domestic Government SBI Foreign Corporate
2.0%
M J J A S O N D J F M A M J J A S O N D J F M A M
7%
6%
5%
4%
3%
2%
1%
Citigroup EMU GBI All Maturities Citigroup Euro BIG Corporate
M J J A S O N D J F M A M J J A S O N D J F M A M
Citigroup US GBI All Maturities Citigroup BIG Corporate
8.5%
8.0%
7.5%
7.0%
6.5%
6.0%
5.5%
5.0%
8.0%
7.5%
7.0%
6.5%
14%
13%
12%
11%
10%
9%
8%
7%
6%
M J J A S O N D J F M A M J J A S O N D J F M A M
JP Morgan EMBI Global Composite
Europe: Yields since May 2009 Emerging Markets (Local Currency): Yields since May 2009
US: Yields since May 2009
M J J A S O N D J F M A M J J A S O N D J F M A M
JP Morgan GBI-EM Global
High Yield: Yields since May 2009
M J J A S O N D J F M A M J J A S O N D J F M A M
iBoxx $ Liquid High Yield Index

Bonds | Martina Honegger
High Yield Bonds
Superb Performance
High yield bonds have posted a phenomenal performance
since their nadir during the financial crisis. At that time the
high yield sector went into meltdown, and new issues were
at times completely impossible. In the following two years,
however, volume on the primary market exploded, partly
because the banks were reluctant or unable to provide
credit. For many companies with a sub-investment grade
rating the capital market became the only source of finance –
and a very generous one at that. High yield bonds posted
double-digit advances in 2009 and again in 2010. This year
too has seen a handsome performance of 3.7 %, even though
yields have now slipped below 7%. Can this positive performance
trend be maintained? Is an investment in high yield
bonds still attractive?
High Yield Index Compared with Citi US Global Bond Index
80%
60%
40%
20%
0%
–20%
–40%
1995 1997 1999 2001 2003 2005 2007 2009 2011
JP Morgan HY Global Index (% yoy)
Citi US GBI All Maturities (% yoy)
Favorable Environment for High Yield Bonds
The environment remains supportive for high yield bonds.
Various factors still argue for an investment in this sector,
although investors should not expect a repetition of the last
two years’ double-digit performance, which was due mainly
to capital gains:
• The macro situation and the fundamentals are favorable,
and companies’ credit quality is improving continuously.
Standard & Poor’s are forecasting a default rate of 1.6%.
Legal notes on page 60.
Highlights
• High yield bonds combine an attractive
performance and favorable fundamentals.
• The high yield sector provides a useful
alternative investment opportunity in an
environment of rising interest rates.
The current rate is
2.46%, the lowest
since June 2008.
• Liquidity is sufficiently high.
Companies have taken advantage
of strong investor demand to optimize
their maturity profiles. Many more companies are being
upgraded by the rating agencies than downgraded.
• The high yield sector is still being supported by a favorable
supply-and-demand situation as investors seek higher
returns and short durations.
Net supply in the high yield sector has been rising steadily
since the low point in 2008. This year, too, new issues are
expected to significantly outweigh maturing bonds. At the
same time, however, demand looks set to stay high. Inflows
into high yield investment funds are holding up well. The
Fed’s expansive monetary policy supports asset classes that
offer an extra return.
Attractive Alternative against a Background of
Rising Interest Rates
High yield bonds naturally have a short duration. In view
of the non-negligible risk of default, investors are mostly
only prepared to buy paper with a relatively short period to
maturity. Moreover, the higher the coupon, the lower the
duration. High yield bonds are therefore an ideal way of safeguarding
at least partly against capital losses in a rising interest
rate environment. They also have a negative correlation
with US Treasuries. As only a small part of the yield consists
of the underlying interest rate (around 25% at present; the
rest is the credit spread), the capital losses that arise if the
underlying rate moves up are limited. Indeed, it can happen
that the spread moves in the opposite direction to the
general level of interest rates. Economic growth tends to
reduce the credit risk. This makes it very likely that the total
yield will continue to fall and generate further capital gains.
On the other hand, high yield bonds react sensitively to an
aggressive tightening of monetary policy.
21 | June 2011 | Asset Classes | Bonds

22 | June 2011 | Asset Classes | Bonds
Appropriate Valuation
A large part of the performance achieved in 2009 and 2010
was due to capital gains. The slashing of credit spreads from
almost 2,000 basis points in December 2008 to something
over 500 now produced an enormous rise in value. Credit
spreads are still slightly above their historical average and are
over 200 basis points above their low point in 2007. The
default rate implied by current spreads is 7.9%, well above
expectations. We have seen that the fundamentals are still
favorable for high yield bonds. Credit spreads can therefore
be expected to continue to narrow; they have a tendency to
undershoot.
High Yield Index – Spread-to-Yield Ratio
100%
90%
80%
70%
60%
50%
40%
30%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Average +/– one standard deviation
Average
JPM HY Glob. – spread-to-yield ratio
The spread-to-yield ratio shows the percentage of the total
yield that is attributable to the credit spread. It therefore
serves as a measure of the attractiveness of a corporate
bond versus government bonds that carry no credit risk.
At present around 75% of the high yield index is attributable
to the credit spread. This of course partly reflects the current
low interest rate environment. Thus investors are still being
adequately compensated for the credit risk. Indeed, this
measure is still a long way from the historical average, lying
only just within one standard deviation on the upside.
Conclusion
The performance of high yield bonds over the last two years
or so has been nothing less than extraordinary. Favorable
fundamentals, sustained strong demand and current valuation
levels continue to support this sector. Huge capital gains are
no longer on the cards, but the extra yield is attractive and
there is little reason at present to expect credit spreads to
widen. Moreover, the short duration of these bonds makes
them a suitable investment in a potentially rising interest rate
environment. In view of the not inconsiderable default risk,
we recommend investing exclusively via collective vehicles
rather than in individual bonds.
Benchmark June 2011 % YTD
Inv. Grade Gov. Bonds Switzerland –0.57
Inv. Grade Gov. Bonds Europe (EUR) 0.12
Inv. Grade Gov. Bonds US 2.01
Inv. Grade Corp. Bonds Switzerland 1.21
Inv. Grade Corp. Bonds Europe (EUR) 1.31
Inv. Grade Corp. Bonds US 3.88
High Yield Bonds 5.97
Em. Mkt. Bonds (Hard Currency) 3.67
Upside/downside ranges indicated by our 3–6 month
absolute performance assessments:
> +3% +1% to + 3% –1% to +1%
–3% to –1% < –3%

Bonds
Selected Bond Funds
Product Name Curr. ISIN NAV Date NAV Payout Curr. Hedged YTD Perf. %
VP Bank Funds
VP Bank Bond Fund CHF CHF LI0008127321 05/16/2011 1,057.49 No – 0.40
VP Bank Bond Fund EUR EUR LI0008127339 05/16/2011 1,525.70 No – 0.11
VP Bank Bond Fund USD USD LI0008127347 05/16/2011 1,797.71 No – 2.30
Third Party Funds: Investment Grade
Government Bonds
Robeco Lux-o-rente D CHF CHF LU0239949760 05/16/2011 112.45 No Yes –0.10
Robeco Lux-o-rente D EUR EUR LU0084302339 05/16/2011 117.26 No – 0.27
Robeco Lux-o-rente D USD USD LU0239949414 05/16/2011 123.54 No Yes 0.02
Corporate Bonds
Swisscanto (CH) Bond Fund Corporate H CHF CH0000700903 05/16/2011 103.80 Yes – 2.07
Pimco GIS Global Inv. Grade Credit Fund EUR EUR IE00B11XZ434 05/17/2011 13.47 No Yes 3.86
Pimco GIS Global Inv. Grade Credit Fund USD USD IE00B3K7XK29 05/17/2011 13.22 No Yes 3.69
Third Party Funds: High Yield
Global
Schroder Intl. Selection Global High Yield
Third Party Funds: Emerging Markets
Hard Currency
USD LU0189893018 05/17/2011 32.52 No Yes 6.10
HSBC GIF SICAV – Global Emerging Markets Bond
Local Currency
USD LU0164943648 05/17/2011 28.35 No – 3.52
JB Multibond – Local Emerging Bond Fund B USD LU0107852195 05/16/2011 309.74 No – 3.97
Legal notes on page 60.
23 | June 2011 | Asset Classes | Bonds

24 | June 2011 | Asset Classes | Bonds
Bonds
Selected Bond ETFs
Product Name Underlying Provider Curr. ISIN Payout Price YTD
(indicative) Perf. %
Government Bonds
CS ETF (CH) on SBIDG 1–3 Swiss Bond Dom. Government 1–3 Credit Suisse CHF CH0102530786 Yes 96.29 0.03
CS ETF (CH) on SBIDG 3–7 Swiss Bond Dom. Government 3–7 Credit Suisse CHF CH0016999846 Yes 95.72 –0.13
IBOXX EUR Inflation Linked ETF IBOXX EUR Inflation Linked Deutsche Bank EUR LU0290358224 No 169.71 3.05
IBOXX EUR Sovereigns TR IBOXX EUR Sovereigns Deutsche Bank EUR LU0290355717 No 166.43 0.21
IBOXX EUR Sovereigns 1–3 IBOXX EUR Sovereigns Deutsche Bank EUR LU0290356871 No 153.60 –0.01
IBOXX EUR Sovereigns 3–5 IBOXX EUR Sovereigns Deutsche Bank EUR LU0290356954 No 164.02 –0.49
IBOXX EUR Sovereigns 5–7 IBOXX EUR Sovereigns Deutsche Bank EUR LU0290357176 No 171.04 –0.05
US Treasury 1–3 years US Treasury 1–3 years BlackRock USD IE00B14X4S71 Yes 131.45 1.09
US Treasury 7–10 years US Treasury 7–10 years BlackRock USD IE00B1FZS798 Yes 177.89 3.93
USD TIPS Inflation TIPS Inflation Linked BlackRock USD IE00B1FZSC47 No 175.53 4.57
iShares FTSE UK All Stocks Gilt FTSE Actu. UK Gilts Sec. All Stocks BlackRock GBP IE00B1FZSB30 Yes 10.56 1.40
Corporate Bonds
Lyxor ETF Euro Corporate Bond Markit iBoxx EUR Liquid Index Lyxor EUR FR0010737544 No 115.78 0.46
iShares eb.rexx Jumbo Pfandbriefe eb.rexx Jumbo Pfandbriefe BlackRock EUR DE0002635265 Yes 104.22 –0.38
iShares USD Corporate Bond iBoxx USD Investment Grade Top 30 BlackRock USD IE0032895942 Yes 106.35 4.18
High Yield Bonds
iShares Markit iBoxx Euro HY Bond Markit iBoxx Euro Liquid HY Index BlackRock EUR IE00B66F4759 Yes 104.57 3.97
Emerging Markets
Hard Currency
iShares JPM USD EM Bond Fund JP Morgan EMBI Global Core Index BlackRock USD IE00B2NPKV68 No 107.69 3.44

Bonds
Selected Government Bonds and
Bonds of Public-sector Bodies
Coupon Issuer ISIN Maturity Duration Price Yield Moody's S&P D/Swap
(ind.)
CHF Bonds
2.125 KOMMUNALBANKEN AS CH0020578594 03/04/2013 1.75 102.70 0.60 Aaa AAA –8
1.125 CITY OF VIENNA CH0110950356 01/07/2014 2.57 100.85 0.80 – – –11
1.000 LAND NORDRHEIN-WESTFALEN CH0129059058 02/02/2015 3.59 99.76 1.07 Aa1e AA–e –13
1.500 AKADEMISKA HUS CH0130107292 04/20/2016 4.63 100.15 1.47 – AAe –4
1.750 OEKB OEST. KONTROLLBANK CH0130420539 06/14/2017 5.65 100.34 1.69 Aaae AAAe –5
2.500 EUROPEAN INVESTMENT BANK CH0028608856 02/08/2019 6.94 104.45 1.87 Aaa AAA –12
2.125 KOMMUNEKREDIT CH0124470904 10/09/2020 8.40 101.19 1.98 Aaa AAA –19
EUR Bonds
2.125 LAND NORDRHEIN-WESTFALEN DE000NRW0B20 03/28/2013 1.79 100.01 2.12 Aa1 AA– –16
3.125 KINGDOM OF SWEDEN XS0426626312 05/07/2014 2.81 102.80 2.14 Aaa AAA –42
2.500 EUROPEAN INVESTMENT BANK XS0495347287 07/15/2015 3.80 99.23 2.70 Aaa AAA –10
3.000 CAISSE D'AMORT DETTE SOC FR0011008366 02/25/2016 4.34 99.94 3.01 Aaa AAA 13
3.200 REPUBLIC OF AUSTRIA AT0000A0GLY4 02/20/2017 5.15 100.91 3.02 Aaa AAA –3
2.750 FREISTAAT BAYERN DE0001053395 01/17/2018 5.93 97.72 3.13 – AAA –3
3.750 FRANCE (GOVT OF) FR0010776161 10/25/2019 7.02 103.15 3.31 Aaa – –1
3.500 NETHERLANDS GOVERNMENT NL0009348242 07/15/2020 7.52 101.76 3.27 Aaa – –11
2.500 BUNDESREPUBL. DEUTSCHLAND DE0001135424 01/04/2021 8.28 95.24 3.08 Aaa – –34
3.000 EUROPEAN INVESTMENT BANK XS0544644957 09/28/2022 9.19 93.85 3.67 Aaa AAA 14
USD Bonds
5.500 KOREA DEVELOPMENT BANK US500630BF41 11/13/2012 1.42 105.77 1.52 A1 A 80
1.625 BK OF ENGLAND EURO NOTE XS0494555187 03/18/2013 1.79 101.97 0.53 Aaa AAA –19
2.375 CANADIAN GOVERNMENT US135087ZA58 09/10/2014 3.16 104.00 1.14 Aaa AAA –18
1.250 REPUBLIC OF FINLAND XS0550739535 10/19/2015 4.26 98.24 1.67 Aaa AAA –12
2.500 ASIAN DEVELOPMENT BANK US045167BZ51 03/15/2016 4.50 102.98 1.85 Aaa AAA –9
5.000 NORDIC INVESTMENT BANK US65562QAF28 02/01/2017 4.95 114.48 2.27 Aaa AAA 2
4.375 KFW US500769CR31 03/15/2018 5.89 110.88 2.62 Aaa AAA 3
3.875 INTER-AMERICAN DEVEL. BANK US4581X0BG29 09/17/2019 7.08 106.85 2.94 Aaa – 2
2.875 EUROPEAN INVESTMENT BANK US298785FH49 09/15/2020 8.03 96.80 3.28 Aaa AAA 18
4.375 BK NEDERLANDSE GEMEENTEN XS0592582653 02/16/2021 7.84 104.80 3.78 Aaa AAA 62
Our 3–6 month assessments of bond performance refer to yields; prices move in the opposite direction:
> +50 basis points +25 basis points No change –25 basis points

26 | June 2011 | Asset Classes | Bonds
Bonds
Selected Corporate Bonds
Coupon Issuer ISIN Maturity Duration Price Yield Moody's S&P D/Swap
(ind.)
CHF Bonds
3.250 MCDONALD'S CORP CH0035582110 12/12/2012 1.51 104.11 0.58 A2 A –6
2.000 HYUNDAI CAPITAL SERVICES CH0129638364 11/27/2013 2.42 100.48 1.80 Baa2 BBB+ 93
2.625 TOTAL CAPITAL SA CH0026887239 10/06/2014 3.18 104.73 1.18 Aa1 AA– 7
3.375 SANOFI CH0035703070 12/21/2015 4.21 107.98 1.55 A2 AA– 13
1.625 DANSKE BANK A/S CH0128250518 06/09/2016 4.76 99.70 1.69 Aaae AAAe 15
2.500 ADP CH0108785053 01/27/2017 5.22 102.73 1.99 – A+ 32
2.625 NESTLÉ HOLDINGS INC CH0028644646 02/14/2018 6.11 105.21 1.80 – AA –6
3.625 RABOBANK NEDERLAND CH0101589353 07/02/2019 6.85 109.56 2.32 Aaa AAA 27
1.750 DEUTSCHE BAHN FINANCE BV CH0120096398 06/03/2020 8.18 97.57 2.05 Aa1 AA –10
EUR Bonds
3.375 LVMH MOET-HENNESSY FR0010206284 06/22/2012 1.03 101.52 1.94 – A– –23
3.250 ROYAL BANK OF CANADA XS0240544113 01/18/2013 1.59 101.81 2.12 Aa1 AA– –13
3.000 PACCAR FINANCIAL EUROPE XS0627082984 05/19/2014 2.82 100.39 2.86 A1e A+e 30
3.375 UNILEVER NV XS0230663196 09/29/2015 3.93 102.63 2.72 A1 A+ –11
4.500 SHELL INTERNATIONAL FIN XS0412968876 02/09/2016 4.19 106.41 3.02 Aa1 AA 15
3.375 CARLSBERG BREWERIES A/S XS0548805299 10/13/2017 5.51 96.95 3.92 Baa2 – 81
4.375 SHELL INTERNATIONAL FIN XS0428147093 05/14/2018 5.98 105.97 3.40 Aa1 AA 21
4.125 SANOFI XS0456451771 10/11/2019 6.87 104.03 3.56 A2 AA– 24
4.125 RABOBANK NEDERLAND XS0478074924 01/14/2020 7.05 99.93 4.13 Aaa AAA 78
USD Bonds
5.150 ABBOTT LABORATORIES US002819AA88 11/30/2012 1.45 107.04 0.49 A1 AA –23
2.250 BANK OF NOVA SCOTIA US064149A567 01/22/2013 1.63 102.52 0.73 Aa1 AA– 0
3.125 GENERAL ELECTRIC CAP CORP XS0494562639 03/12/2014 2.67 103.78 1.73 Aa2 AA+ 63
3.200 RABOBANK NEDERLAND US74977SCE00 03/11/2015 3.55 103.20 2.32 Aaa AAA 78
2.800 WAL-MART STORES INC US931142DC40 04/15/2016 4.55 102.27 2.31 Aa2 AA 33
3.125 STATOIL ASA US85771PAB85 08/17/2017 5.58 100.51 3.03 Aa2 AA– 61
5.800 E.ON INTL FINANCE BV USN3033QAT96 04/30/2018 5.75 111.26 3.93 A2 A 131
5.125 NOVARTIS SECS INVEST LTD US66989GAA85 02/10/2019 6.35 111.08 3.47 Aa2 AA– 67
4.375 SHELL INTERNATIONAL FIN US822582AM49 03/25/2020 7.29 105.79 3.60 Aa1 AA 58
Our 3–6 month assessments of bond performance refer to yields; prices move in the opposite direction:
> +50 basis points +25 basis points No change –25 basis points

Bonds
Yield Curves – Overview
CHF
Maturity Present Yield Yield at 01/01/2011 Difference
1 year 0.38 0.29 0.09
2 years 0.64 0.42 0.22
3 years 0.81 0.64 0.16
4 years 0.96 0.85 0.11
5 years 1.25 1.07 0.18
7 years 1.56 1.41 0.15
8 years 1.68 1.51 0.18
9 years 1.77 1.57 0.20
10 years 1.91 1.71 0.20
15 years 2.15 1.96 0.19
EUR
Maturity Present Yield Yield at 01/01/2011 Difference
1 year 1.44 0.60 0.84
2 years 1.74 0.86 0.89
3 years 1.98 1.13 0.85
4 years 2.25 1.59 0.66
5 years 2.47 1.98 0.49
7 years 2.78 2.58 0.20
8 years 2.90 2.79 0.11
9 years 2.98 2.89 0.09
10 years 3.09 2.97 0.12
15 years 3.58 3.46 0.12
USD
Maturity Present Yield Yield at 01/01/2011 Difference
1 year 0.18 0.27 –0.09
2 years 0.56 0.59 –0.04
3 years 0.93 1.03 –0.10
4 years 1.38 1.52 –0.13
5 years 1.86 2.02 –0.16
7 years 2.52 2.72 –0.20
8 years 2.74 2.92 –0.18
9 years 2.98 3.15 –0.17
10 years 3.26 3.38 –0.12
15 years 3.82 4.06 –0.24
Legal notes on page 60.
CHF: Yield Curve on Government Bonds
2.5%
2.0%
1.5%
1.0%
0.5%
0%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0%
1 y 2 y 3 y 4 y 5 y 6 y 7 y 8 y 9 y 10 y 11 y 12 y 13 y 14 y 15 y
Present yield Yield at 01/01/2011
EUR: Yield Curve on Government Bonds – Germany
1 y 2 y 3 y 4 y 5 y 6 y 7 y 8 y 9 y 10 y 11 y 12 y 13 y 14 y 15 y
Present yield Yield at 01/01/2011
USD: Yield Curve on Government Bonds
1 y 2 y 3 y 4 y 5 y 6 y 7 y 8 y 9 y 10 y 11 y 12 y 13 y 14 y 15 y
Present yield Yield at 01/01/2011
27 | June 2011 | Asset Classes | Bonds

2. Asset Classes
Equities

30 | June 2011 | Asset Classes | Equities
Equities
Equity Indices – Overview
Switzerland: Index Movement since May 2009 Pacific: Index Movement since May 2009
1,700
1,600
1,500
1,400
1,300
1,200
5,500
5,000
4,500
4,000
3,500
3,000
3,800
3,400
3,000
2,600
2,200
M J J A S O N D J F M A M J J A S O N D J F M A M
MSCI Switzerland TR Index (Net)
M J J A S O N D J F M A M J J A S O N D J F M A M
MSCI Europe TR Index (Net)
M J J A S O N D J F M A M J J A S O N D J F M A M
MSCI North America TR Index (Net)
4,500
4,000
3,500
3,000
2,500
500
450
400
350
300
250
200
M J J A S O N D J F M A M J J A S O N D J F M A M
MSCI Pacific TR Index (Net)
Europe: Index Movement since May 2009 Emerging Markets: Index Movement since May 2009
North America: Index Movement since May 2009
M J J A S O N D J F M A M J J A S O N D J F M A M
MSCI Emerging Markets TR Index (Net)

Equities | Bernd Hartmann
Market Outlook
The equity markets are still in fine fettle and have recently
proved their resilience. Various factors can cause bouts of
uncertainty, but the markets have quickly picked up again
after setbacks.
Positive Sentiment Permeates the Markets
The positive mood on the equity markets is reflected not
only in capital gains but also in expectations regarding future
price fluctuations. Implied volatilities (measured by option
contracts) are lower than at any time since four years ago, i.e.
just before trouble in the US real estate market caused the
first tremors in the hedge fund sector. Low volatilities are an
expression of high investor confidence. A further sign of this
confidence is the growing volume of initial public offerings
(IPOs). The IPO of the world’s biggest commodities dealer
Glencore shows that even mammoth IPOs are now possible
again. Growing activity in the M&A sector also testifies to
bullish sentiment. The only fly in the ointment is the fact that
a buoyant mood among investors actually makes the market
more vulnerable, because negative news tends to cause
bigger setbacks than in a market where investors are already
on the back foot.
More Positive Surprises ...
Moderate valuations and the lack of genuine investment
alternatives should safeguard the market from a major
correction. Meanwhile, rising corporate profits create further
upside potential. It is still a fact that equity prices follow
corporate profits, and these continue to grow. In the first
quarter of this year three-quarters of US firms and 70% of
European companies posted better profits than in the same
period last year. Aggregate corporate earnings in the US
were up by 17%, and over 70% of companies beat analysts’
expectations. Such figures are usually seen only at the start
of an upswing and show that analysts had been underestimating
companies’ operating earnings potential. In Europe,
too, corporate performance has been convincing, albeit not
as good as in America.
Legal notes on page 60.
Highlights
• Investor sentiment is more positive than it
has been for a long time.
• Corporate profits have continued to grow
but with widening regional differences.
• Further earnings growth will be based on
rising sales. Increased input prices will make
it difficult to achieve wider margins.
... but not
Everywhere
Companies in the emerging
markets have put in a comparatively
disappointing performance.
Most of them have achieved positive profit
growth, but one in two has done worse than expected. This
is probably due partly to the fact that companies in these
countries are more dependent on raw materials and have
been unable to pass on higher raw material costs in full to
their customers. In Japan around 60% of companies failed to
perform as well as expected. Here the impact of the earthquake
and tsunami disaster and the nuclear crisis will only be
fully felt in the quarters to come. The catastrophe happened
just two weeks before the end of the Japanese fiscal year.
Analysts have cut their Japanese profit growth forecasts
for 2011 as a whole from 14.2% to 5.1% but have raised
their forecasts for 2012 when reconstruction programs are
expected to kick in. Forecasts for the US, by contrast, have
been revised substantially upwards. At the start of the year
earnings growth in 2011 was forecast at 13.4%, but this has
been raised to 17.2% in reaction to the buoyant first quarter
results and good macro data.
Conclusion
The rebound in profits during the last two years has
enhanced companies’ room for maneuver. This should
lead to higher investment, more takeovers and increased
dividend payments. Profit growth is being sustained by
rising sales, though higher input prices make it increasingly
difficult to achieve wider margins.
31 | June 2011 | Asset Classes | Equities

32 | June 2011 | Asset Classes | Equities
Equities
Equity Markets and ETFs – Overview
Product Name Underlying Provider Curr. ISIN Price YTD
(indicative) Perf. %
Global 5.10*
iShares MSCI World MSCI World Index BlackRock USD IE00B0M62Q58 28.31 4.59
Switzerland 3.01*
CS ETF (CH) on SMI Swiss Market Index (SMI) Credit Suisse CHF CH0008899764 66.11 4.28
UBS-ETF SLI Swiss Leader Index Swiss Leader Index (SLI) UBS CHF CH0032912732 104.44 2.19
CS ETF (CH) on SMIM Swiss Market Index Mid (SMIM) Credit Suisse CHF CH0019852802 144.51 –0.10
Europe 2.03*
iShares MSCI Europe MSCI Europe Index BlackRock EUR DE000A0M5X28 17.74 0.94
Lyxor ETF MSCI EMU MSCI EMU Index Lyxor EUR FR0007085501 37.66 3.57
db x-trackers EURO STOXX 50 EURO STOXX 50 Index Deutsche Bank EUR LU0274211217 29.98 3.45
iShares DAX DAX Index (Germany) BlackRock EUR DE0005933931 66.80 4.31
iShares FTSE 100 FTSE 100 Index (UK) BlackRock GBp IE0005042456 590.00 0.13
Lyxor ETF CAC 40 CAC 40 Index (France) Lyxor EUR FR0007052782 40.17 4.90
Lyxor ETF IBEX35 IBEX 35 Index (Spain) Lyxor EUR FR0010251744 104.57 6.33
North America 5.90*
iShares MSCI North America MSCI North America Index BlackRock USD IE00B14X4M10 26.65 5.89
Dow Diamonds Dow Jones Index (US) StateStreet USD US78467X1090 124.81 8.64
iShares S&P 500 S&P 500 Index (US) BlackRock USD IE0031442068 13.32 5.72
PowerShares EQQQ Fund Nasdaq Composite Index (US) PowerShares USD IE0032077012 57.08 4.12
UBS-ETF MSCI Canada MSCI Canada Index (Canada) UBS CAD LU0446734872 34.22 0.06
Pacific –3.60*
ComStage ETF MSCI Pacific TRN MSCI Pacific Index ComStage USD LU0392495023 40.74 –1.94
iShares MSCI Japan MSCI Japan Index (Japan) BlackRock JPY IE00B02KXH56 822.00 –7.54
db x-trackers MSCI Pacific ex-Japan MSCI Pacific ex-Japan Index Deutsche Bank USD LU0322252338 45.96 2.73
Tracker Fund of Hong Kong Hang Seng Index (China) StateStreet HKD HK2800008867 23.30 0.11
SPDR S&P/ASX 200 Fund S&P/ASX 200 Index (Australia) StateStreet AUD AU000000STW9 44.82 0.20
Emerging Markets –0.70*
iShares MSCI Emerging Markets MSCI Emerging Markets Index BlackRock USD IE00B0M63177 45.41 –1.65
db x-trackers MSCI EM Asia MSCI Emerging Markets Asia Index Deutsche Bank USD LU0292107991 39.63 0.82
db x-trackers MSCI EM LATAM MSCI Emerging Markets Latin America Index Deutsche Bank USD LU0292108619 63.54 –1.27
db x-trackers MSCI EM EMEA MSCI EM Europe, Middle East and Africa Deutsche Bank USD LU0292109005 36.89 0.16
* Figures refer to the respective MSCI index

Equities | Bernd Hartmann
Regions and Themes
“Sell in May.” Really?
“Sell in May and go away” says the old stock market adage.
At first glance the historical record seems to confirm the
advice that the summer months are best avoided. Average
figures since 1969 show that the US market has trodden
water in the period from May to September, compared with
an average advance of 2.8% in the first four months and
3.2% in the last quarter. But how reliable is the adage? And
is there a reason for these seasonal variations?
Dividends Hit the Indices
The return on equities has two components: the change in
capital value and the dividend yield (including the return on
reinvested dividends). Most indices, e.g. the S&P 500 in the
US and the Stoxx 600 in Europe, are so-called price indices.
They only reflect the change in equity prices and disregard
dividend payments. Investors often underestimate dividends
as a component of equity returns, but various studies testify
to their importance.
In continental Europe dividends are usually paid out once
a year, and the commonest payout month is May. Theoretically,
equity prices then fall by the amount paid out. This
impairs the performance of indices in which the payout is
ignored. May, together with September, has been the
weakest month for equities since 1969, with an average
return of –1.0%.
But if dividends are included in the return calculation, the
seasonal differences become less pronounced. Moreover,
performance fluctuations are much less noticeable in the US
than in Europe. This difference is likewise related to dividend
payments. Dividends in the US are usually paid quarterly
rather than annually.
Market Phase is Decisive
A large part of the seasonal differences in equity market
performance has to do with the phase in which the market
finds itself. In a bull market, gains are only slightly weaker
during the summer than early or late in the year. In a bear
market, however, the summer losses tend to be heavy.
Legal notes on page 60.
Highlights
• “Sell in May and stay away” is a stock market
cliché suggesting that the markets perform
weakly in the summer months.
• But pronounced summer weakness mostly
occurs only when the market is in a bear
phase. Dividend payments are also a factor.
• The strong Swiss franc is squeezing the
profit margins of Swiss firms but provides
an opportunity for relatively low-priced
In any case, equity
corporate acquisitions abroad.
markets appear to be
especially susceptible to
correction in the late summer.
US Equity Market Performance (1969–2010)
8%
6%
4%
2%
0%
–2%
–4%
–6%
–8%
3.9%
6.1%
–2.3%
1.4%
4.4%
4.0%
6.1%
–1.7%
Jan – Apr
All periods
Bull market
Bear market
–6.9%
May – Sep Oct – Dec
Alongside dividend payments, the phase in which the market
finds itself therefore explains a large part of the performance
differences. A further reason for slack summer performance
is probably the general dearth of company-specific news.
This has not been the case, however, in the last two years.
The markets were driven more strongly than usual by macroeconomic
developments, and trading was extremely eventful.
This was reflected in performance. Anyone who invested in
the European equity market at the start of 2009 and followed
the “Sell in May” rule achieved a paltry return of just 1% over
the subsequent two years, compared with a whacking 47%
pocketed by an investor who stayed invested. Investors
should be guided by the fundamentals rather than by stock
market clichés.
Switzerland: Impact of Strong Swiss Franc
The export sector traditionally plays an essential role in the
Swiss economy. Around 57% of the country’s GDP is generated
by foreign sales of goods and services. For Swiss com-
33 | June 2011 | Asset Classes | Equities

34 | June 2011 | Asset Classes | Equities
panies exports are even more important. The Swiss franc’s
exchange rate is therefore watched very keenly.
The trade-weighted value of the Swiss franc has climbed by
23% over the last two years. In the past a 10% rise in export
prices has depressed demand by 3%–5% in the short to
medium term. This time, however, the sales and profits
of Swiss companies have climbed significantly.
Trade-weighted Swiss Franc
150
140
130
120
110
100
90
80
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
In the short term the state of the world economy outweighs
the exchange rate as a factor affecting demand for Swiss
products. Companies are now profiting from buoyant demand
in Germany, which is Switzerland’s most important
trading partner. Moreover, Swiss firms offer high-quality
products, often in highly specialized niches. In these sectors,
it is not easy for buyers to switch to an alternative supplier,
and prices are not necessarily the clincher.
Even so, the prolonged strengthening of the franc has not
left companies unscathed. This is especially true of manufacturers
of more readily interchangeable products. Sales
can be maintained only at the expense of narrower profit
margins. Hence analysts have been gradually trimming
back their profit forecasts. They now expect profit growth
of 7.3%, compared with over 13% just six months ago.
But the high-flying Swiss franc presents opportunities as well
as challenges. Acquisitions of foreign businesses have never
been so cheap. Swiss companies are still being cautious
about major transactions. There have only been two deals
exceeding the one billion mark so far this year. Clariant has
strengthened itself by taking over the German firm Süd-
Chemie, and Zurich Financial Services has acquired the
insurance arm of Banco Santander, thereby enhancing its
presence in the emerging markets of Latin America. Given
companies’ high cash holdings, favorable financing conditions
and attractive corporate valuations, other firms are
likely to follow suit. A positive side effect of foreign acquisitions
is that they reduce the company’s exposure to the
Swiss franc, which looks set to remain strong in the long
term.
Benchmark June 2011 % YTD
MSCI Switzerland 3.01
MSCI Europe 2.03
MSCI North America 5.90
MSCI Pacific (incl. Japan) –3.60
MSCI Emerging Markets –0.70
Upside/downside ranges indicated by our 3–6 month
absolute performance assessments:
> +5% +2% to +5% –2% to +2%
–5% to –2% < –5%

Equities
Selected VP Bank Equity Funds
VP Bank Directly Investing Equity Funds
Product Name Curr. ISIN NAV Date NAV Payout Curr. Hedged YTD Perf. %
Global
VP Bank Top 50 World Equity Fund* USD LI0013873661 05/16/2011 1,302.43 No – 5.28
Switzerland
VP Bank Swiss Equity Fund CHF LI0008127297 05/16/.2011 962.55 No – 3.93
Europe
VP Bank Equity Fund Europe EUR LI0008127305 05/16/2011 745.69 No – 4.21
VP Bank Top 50 European Equity Fund* EUR LI0013873448 05/16/2011 505.57 No – 4.36
North America
VP Bank Equity Fund North America USD LI0008127313 05/16/2011 709.91 No – 5.58
VP Bank Top 50 US Equity Fund* USD LI0013873828 05/16/2011 931.94 No – 2.35
VP Bank Best-in-class Funds of Funds (Open Architecture)
Product Name Curr. ISIN NAV Date NAV Payout Curr. Hedged YTD Perf. %
Regions
Switzerland
VP Bank Fund Selection Equities Switzerland CHF LI0014803295 05/13/2011 1,718.09 No – 1.95
Europe
VP Bank Fund Selection Equities Europe EUR LI0014803386 05/13/2011 1,449.97 No – 1.88
North America
VP Bank Fund Selection Equities North America USD LI0014803543 05/13/2011 1,205.80 No – 5.53
Pacific
VP Bank Fund Selection Equities Pacific JPY LI0015826295 05/13/2011 87,212.00 No – –2.74
VP Bank Fund Selection Equities Emerging Asia USD LI0014803600 05/13/2011 2,594.98 No – 2.62
Emerging Markets
VP Bank Fund Selection Equities Emerging Markets USD LI0020062001 05/13/2011 1,935.28 No – –1.30
Themes
VP Bank Fund Selection Aktien Natural Resources USD LI0020062068 05/13/2011 1,812.44 No – –3.21
* Units of these funds may not be offered, sold or delivered in Switzerland.
Legal notes on page 60.
35 | June 2011 | Asset Classes | Equities

36 | June 2011 | Asset Classes | Equities
Equities
Selected Third Party Equity Funds
Product Name Curr. ISIN NAV Date NAV Payout Curr. Hedged YTD Perf. %
Switzerland
LO Swiss Leaders P CHF CH0011786628 05/16/2011 104.14 Yes – 4.35
Europe
BGF – European Fund EUR LU0011846440 05/17/2011 76.06 No – 1.36
North America
Franklin Templeton U.S. Equity Fund USD LU0098860363 05/17/2011 16.55 No – 4.02
Emerging Markets
Global
Thames River Global Emerging Markets Fund B USD IE00B1FGDG68 05/16/2011 15.93 No – –1.91

Equities | Rolf Kuster
Sectors
Strong Growth in Cyclical Sectors
The reporting season is coming to a close. A majority of
companies in North America and Europe have exceeded
their targets, in some cases by a substantial margin (see
Equity Market Outlook on page 31). The most vigorous
growth is still being achieved in cyclical sectors – notably
materials, industrials and discretionary consumer goods –
with above-average growth in both sales and profits.
This has caused little surprise among analysts, given the
continuing positive macro data and higher prices in the
commodity markets. The big surprises were in defensive
sectors, above all pharmaceuticals. To date, 90% of firms in
the North American pharmaceutical sector have beaten
analysts’ consensus forecasts.
Risks of an Excessive Cyclical Bias
The reporting season has shown that profit targets for cyclical
companies are already at a high level. Weaker growth in Asia
and stagnating commodity prices will make it increasingly
difficult to continue to exceed expectations and provide
positive stimulus for equity prices. Cyclically oriented
investors should therefore move towards a more balanced
Consumer Discretionary
Consumer Staples
Energy
Materials
Industrials
Telecoms
IT
Utilities
Healthcare
Financials
Highlights
• The reporting season has been mostly positive.
Growth rates (sales and earnings) are high.
• Slower economic growth and stagnating
commodity prices argue for a balanced sector
allocation.
• In this context preference should be given to
sectors with attractive valuations that will help
cushion negative profit revisions.
allocation and favor
cheaper sectors.
Expensive sectors like
consumer discretionary and
industrials imply high growth rates.
Even mild negative adjustments could result
in significantly lower share prices. The situation is quite
different in sectors where valuations are more favorable
(compared with other sectors and historically). Their
generally stable volume of business reduces the risk of
negative profit revisions, and low valuations provide a
useful cushion.
VP Bank Positioning
We continue to favor a balanced positioning. In North
America we are still recommending IT, which stands to
benefit from positive profit revisions and attractive valuations.
In Europe we currently favor financials. This sector
suffers from regulatory uncertainties, but these are already
reflected in low valuations. We expect to see an increased
focus on operating results.
MSCI Europe Performance Assessment MSCI North America Performance Assessment
(weighting, %) % YTD (EUR) Europe (weighting, %) % YTD (USD) North America
Within the equity allocation we recommend the following sector weightings in Europe and North America:
Strongly overweight Overweight Neutral Underweight Strongly underweight
Legal notes on page 60.
8.8
12.5
10.7
10.3
11.4
6.4
3.1
5.4
10.1
21.2
1.8
2.8
–1.0
–4.4
2.4
2.0
8.1
2.8
7.7
2.8
10.4
9.9
13.6
5.3
10.2
3.1
16.8
3.2
10.9
16.6
6.8
10.0
5.9
–3.4
7.1
5.6
3.0
9.8
16.0
2.0
37 | June 2011 | Asset Classes | Equities

38 | June 2011 | Asset Classes | Equities
Equities
Equity Selection List
Switzerland
Sector/Company Industry Group Curr. Market Cap. Price P/E Div. Yield YTD
(millions) (indicative) 2011E 1 2011E 1 Perf. %
Consumer Discretionary
Cie Financiere Richemont SA Textiles, clothing and luxury goods CHF 32,040 55.80 20.9 1.2 1.5
Kuoni Reisen Hotels, restaurants and leisure CHF 1,230 374.75 13.6 1.7 –10.1
Consumer Staples
Nestlé SA Food CHF 188,669 54.45 16.6 3.6 3.0
Aryzta AG Food CHF 4,031 47.40 12.3 1.1 11.1
Lindt & Sprüngli Food CHF 6,891 2,778.00 24.7 1.8 –0.1
Energy
Transocean Ltd. Energy equipment & services CHF 19,082 59.80 14.9 3.9 –5.5
Materials
Holcim Ltd. Construction materials CHF 22,226 67.95 16.8 2.3 –1.8
Clariant AG Chemicals CHF 5,306 17.94 9.6 1.4 –4.7
Industrials
ABB Ltd. Electrical equipment CHF 53,056 22.98 17.2 2.6 13.2
Meyer Burger Technology AG Machinery CHF 1,836 40.25 12.4 0.0 38.1
Flughafen Zürich AG Transport infrastructure CHF 2,315 377.00 14.5 2.0 0.6
Telecoms
Swisscom AG Misc. telecommunications services CHF 20,353 392.90 10.5 5.7 0.7
IT
Austriamicrosystems AG Semiconductors and related products CHF 513 46.40 10.9 1.7 3.7
Utilities
– – – – – – – –
Healthcare
Novartis AG Pharmaceuticals CHF 147,165 53.60 10.9 4.1 1.7
Roche Holding – GS Pharmaceuticals CHF 129,732 148.40 11.3 4.7 13.6
Synthes Inc. Instruments/products CHF 17,698 149.00 19.8 1.2 19.7
Tecan Group AG Life science instruments and solutions CHF 781 68.25 18.2 1.5 –11.2
Financials
UBS AG Capital markets CHF 61,768 16.12 8.6 0.2 5.0
Credit Suisse Group AG Capital markets CHF 43,861 36.52 7.9 3.8 0.3
Zurich Financial Services AG Insurance CHF 33,530 227.80 9.4 7.3 0.6
Swiss Life Holding AG Insurance CHF 4,523 141.00 8.0 3.4 4.3
1 Expected Bloomberg consensus

Europe ex-Switzerland
Sector/Company Industry Group Curr. Market Cap. Price P/E Div. Yield YTD
(millions) (indicative) 2011E 1 2011E 1 Perf. %
Consumer Discretionary
Christian Dior SA Textiles, clothing and luxury goods EUR 19,454 107.05 15.6 2.2 0.1
Peugeot SA Automobiles EUR 6,978 29.82 5.5 3.6 4.9
Consumer Staples
Anheuser-Busch InBev SA Beverages EUR 67,790 42.23 15.9 1.9 0.5
Imperial Tobacco Group PLC Tobacco GBp 22,298 2,190.00 11.3 4.4 14.9
Delhaize Group Food and other staples EUR 5,906 58.16 10.4 2.8 5.2
Energy
Total SA Oil, gas, consumer fuels EUR 94,785 40.34 7.3 5.8 1.7
Royal Dutch Shell PLC Oil, gas, consumer fuels EUR 151,875 24.20 8.1 4.9 –1.0
Aker Solutions ASA Energy equipment & services NOK 32,113 117.20 14.6 2.9 20.9
Materials
Rio Tinto PLC Metals and mining GBp 84,501 4,100.50 6.7 1.8 –7.8
BASF SE Chemicals EUR 57,313 62.40 9.6 3.8 8.0
Svenska Cellulosa AB Paper and forest products SEK 67,796 96.15 10.4 4.4 –5.8
Industrials
Siemens AG Industrial conglomerate EUR 84,207 92.11 11.5 3.5 2.2
Vinci SA Construction and engineering EUR 23,918 42.98 12.3 4.1 5.7
Rolls-Royce Group PLC Aviation and defense GBp 11,879 634.50 14.4 2.7 3.4
Telecoms
BT Group PLC Misc. telecommunications services GBp 15,123 194.80 9.6 3.8 7.7
Belgacom SA Misc. telecommunications services EUR 8,400 24.85 10.8 8.8 5.3
IT
Infineon Technologies AG Semiconductors and related products EUR 8,549 7.87 13.3 1.7 14.4
Utilities
Centrica PLC Mixed utilities GBp 16,286 315.40 11.8 4.8 –1.8
Scottish and Southern Energy PLC Electricity supply GBp 12,461 1,330.00 12.4 5.6 10.6
Healthcare
Sanofi-Aventis Pharmaceuticals EUR 69,559 53.03 7.8 4.9 16.0
Bayer AG Pharmaceuticals EUR 47,136 57.00 12.1 2.9 5.7
Smith & Nephew PLC Instruments/products GBp 6,027 675.50 14.3 1.6 0.8
Financials
Banco Santander SA Commercial banking EUR 67,556 8.00 7.7 7.3 3.7
Barclays PLC Commercial banking GBp 32,932 270.25 8.3 2.5 4.5
Allianz SE Insurance EUR 43,650 96.04 8.2 5.0 12.8
Aviva PLC Insurance GBp 12,285 435.60 7.6 6.2 14.9
Legal notes on page 60.
39 | June 2011 | Asset Classes | Equities

40 | June 2011 | Asset Classes | Equities
North America
Sector/Company Industry Group Curr. Market Cap. Price P/E Div. Yield YTD
(millions) (indicative) 2011E 1 2011E 1 Perf. %
Consumer Discretionary
DIRECTV Media USD 37,844 49.29 15.4 0.0 23.4
Gap Inc. Specialized retailing USD 13,437 22.99 12.4 1.7 4.8
Consumer Staples
Philip Morris Intern. Inc. Tobacco USD 121,981 68.59 14.9 4.0 18.4
Tyson Foods Inc. Food USD 6,547 18.56 9.1 0.9 8.0
CVS Caremark Corp. Food and staples retailing USD 52,366 38.62 13.9 1.2 11.9
Energy
Exxon Mobil Corp. Oil, gas, consumer fuels USD 396,107 80.41 9.2 2.3 11.2
Chevron Corp. Oil, gas, consumer fuels USD 201,568 100.41 7.8 3.0 11.7
Diamond Offshore Drilling Inc. Energy equipment & services USD 9,822 70.65 10.9 5.0 8.2
Materials
Freeport McMoRan Copper & Gold Inc. Metals and mining USD 44,363 46.83 7.6 3.5 –20.5
PPG Industries Inc. Chemicals USD 13,826 87.42 13.3 2.6 5.3
Industrials
Union Pacific Corp. Road and rail transport USD 48,949 99.79 15.3 1.6 8.1
General Dynamics Corp. Aviation and defense USD 27,342 73.50 10.3 2.4 4.8
CSX Corp. Road and rail transport USD 27,132 73.81 14.3 1.5 14.7
Telecoms
Sprint Nextel Corp. Wireless communications services USD 15,459 5.11 n.a. 0.0 20.8
IT
Cisco Systems Inc. Communications equipment USD 91,986 16.64 10.4 0.7 –17.5
Intel Corp. Semiconductors and related products USD 124,862 23.55 10.3 3.2 13.8
Applied Materials Inc. Semiconductors and related products USD 18,881 14.31 9.5 2.0 2.3
Research In Motion Ltd. (RIM) Communications equipment CAD 22,273 42.50 6.9 0.0 –26.8
Utilities
Ameren Corp. Mixed utilities USD 7,191 29.82 12.8 5.2 7.3
Healthcare
Johnson & Johnson Pharmaceuticals USD 182,012 66.40 13.4 3.4 8.3
Gilead Sciences Inc. Biotechnology USD 31,852 40.47 10.2 0.0 11.7
Humana Inc. Installation/services USD 13,078 77.66 11.1 0.5 41.9
Financials
JP Morgan Chase & Co. Diversified financial services USD 174,087 43.81 8.8 2.1 4.0
Travelers Companies Inc. Insurance USD 26,209 62.57 9.8 2.5 13.0
Capital One Financial Corp. Private financial services USD 25,193 54.87 8.2 0.5 29.1
Aflac Inc. Insurance USD 25,186 53.85 8.7 2.3 –3.5

Asia-Pacific
Sector/Company Industry Group Curr. Market Cap. Price P/E Div. Yield YTD
(millions) (indicative) 2011E 1 2011E 1 Perf. %
Consumer Discretionary
Fast Retailing Co. Ltd. Specialized retailing JPY 1,277,127 12,040.00 20.8 1.5 –6.2
Parkson Holdings Miscellaneous retailing MYR 6,343 5.80 17.8 1.9 7.6
Consumer Staples
Amorepacific Corp. Cosmetics KRW 6,775,339 1,159,000.00 23.2 0.5 1.8
Indofood CBP Food IDR 30,320,960 5,200.00 16.2 2.1 11.2
Energy
Adaro Energy TBK PT Oil, gas, consumer fuels IDR 75,167,010 2,350.00 15.3 1.5 –7.8
Materials
AIR WATER Inc. Chemicals JPY 191,300 975.00 11.6 2.3 –5.0
POSCO Metals and mining KRW 40,105,940 460,000.00 8.9 2.1 –5.5
Industrials
Neptune Orient Lines Ltd. Shipping SGD 4,782 1.85 11.6 2.1 –13.1
Cosco Pacific Transport infrastructure HKD 42,467 15.66 13.5 3.1 17.2
Beijing Enterprises Holdings Ltd. Industrial conglomerate HKD 47,835 42.05 15.4 2.6 –12.8
Telecoms
PT Telekomunikasi Indonesia Misc. telecommunications services IDR 156,240,000 7,750.00 12.5 4.5 –2.5
IT
ZTE Corp. Communications equipment HKD 91,554 26.40 19.5 1.2 3.6
LG Display Co. Ltd. Electronic components and instruments KRW 13,811,690 38,600.00 11.0 1.3 –3.0
Lenovo Group Ltd. Computers and peripherals HKD 41,958 4.21 19.3 2.8 –15.5
Utilities
PT Perusahaan Gas Negara Gas utilities IDR 96,966,040 4,000.00 13.2 3.9 –9.6
Healthcare
China Shineway Pharmaceutica Pharmaceuticals HKD 15,779 19.08 13.9 2.6 –14.4
CSL Ltd. Biotechnology AUD 18,157 34.11 19.0 2.4 –5.1
Financials
DBS Group Holdings Ltd. Commercial banking SGD 33,949 14.70 11.9 4.1 4.6
Shinhan Financial Group Commercial banking KRW 23,046,100 48,600.00 8.3 2.3 –8.1
Macquarie Group Ltd. Capital markets AUD 12,007 34.62 12.8 5.1 –3.8
China Life Insurance Co. Ltd. Insurance HKD 695,053 26.85 16.7 1.9 –14.0
Sumitomo Mitsui Fin. Group Inc. Commercial banking JPY 3,484,233 2,464.00 6.5 4.1 –13.2
1 Expected Bloomberg consensus
Within the equity allocation we recommend the following sector weightings for MSCI Switzerland, Europe and North America:
Strongly overweight Overweight Neutral Underweight Strongly underweight
Legal notes on page 60.
41 | June 2011 | Asset Classes | Equities

2. Asset Classes
Alternative
Investments

44 | June 2011 | Asset Classes | Alternative Investments
Alternative Investments
Alternative Investments – Overview
Commodities: Performance since May 2010 (indexed) Private Equity: Performance since May 2010 (indexed)
150
140
130
120
110
100
90
80
150
140
130
120
110
100
90
80
150
140
130
120
110
100
90
80
M J J A S O N D J F M A M
DJ UBS Commodity TR Index (USD)
M J J A S O N D J F M A M
Gold (USD)
M J J A S O N D J F M A M
S&P Global Property TR Index (USD)
150
140
130
120
110
100
90
80
150
140
130
120
110
100
90
80
150
140
130
120
110
100
90
80
M J J A S O N D J F M A M
LPX 50 TR Index (EUR)
Gold: Performance since May 2010 (indexed) Convertible Bonds: Performance since May 2010 (indexed)
Real Estate: Performance since May 2010 (indexed)
M J J A S O N D J F M A M
UBS Convertible Global (USD)
Hedge Funds: Performance since May 2010 (indexed)
M J J A S O N D J F M A M
HFRX US Global HF Index (USD)

Alternative Investments | Bernhard Allgäuer, Rolf Kuster
Market Outlook
Real Estate: No Improvement in Sight in
US Home Market
With unemployment stuck obstinately at around 9% despite
the economic recovery, US home prices are continuing to
drop. According to the real estate information provider
Zillow, the average price of an owner occupied home in the
US fell by around 3% in the first quarter of 2011, representing
a year-on-year drop of 8.2%. This is the steepest rate of
decline since the worst days of the housing recession in
2008. The cumulative loss of value since the market’s peak
now comes to 29.5%. The figures vary greatly, however,
depending on quality and region. The value of bottom tier
homes came down by 13.9% year on year, while luxury
properties fell by only 4.3%. The downward move has also
become more generalized. 74.5% of all home prices showed
a decline in the year to 2011 Q1, compared with 69.2% in
the previous four quarters.
A major problem is negative equity, i.e. homes being worth
less than the owner’s mortgage debt. This now applies to
28.4% of all homes, which means more foreclosure liquidations
in the pipeline. Unlike in Europe, there is no personal
liability for mortgage loans in the US. The borrower can
escape the debt by simply handing the keys back to the bank.
Even the Bank of America (BoA) no longer believes in a rapid
recovery of the housing market. It has pulled the emergency
brake and now intends to halve its portfolio of troubled home
loans (currently USD 850 billion) over the next three years
by running them off, modifying them or selling them at a
discount. BofA’s management admits that it has lost the
biggest bet in its history. When the financial crisis was boiling
over in 2008 it paid a symbolic USD 4 billion for the purchase
of beleaguered Countrywide Financial, which was the biggest
mortgage financing company in the US. BofA lost around
USD 2.4 billion on its real estate services business in the first
quarter of 2011, after a loss of USD 2.1 billion in 2010.
A further risk for the real estate market is the regulatory
environment. The biggest revamping of mortgage loan
legislation since 1930 is now being planned. The aim is to
Legal notes on page 60.
Highlights
• US home prices are in retreat again.
• In the commercial real estate sector the
capital market is functioning without
government intervention.
• Commodity markets remain under
pressure.
• Private equity is trading at a substantial
discount against intrinsic value.
securitize good mortgages
(i.e. mortgages
with adequate equity cover)
on the capital market. In the
view of the Mortgage Bankers
Association, this would put up the cost of all
other mortgages by around 3% to 8.8%. Some
research suggests that every one per cent increase in mortgage
interest rates causes four million foreclosures. In this
scenario the hoped-for market recovery in 2012 would
retreat further into the future.
The situation in the commercial real estate market is somewhat
different. Here the capital market functions without
government intervention. The credit squeeze has relaxed,
despite a large volume of delinquent loans. Hedge funds,
private equity firms and sound real estate companies
are availing themselves of forced liquidations to acquire
attractive properties that will offer good returns. A worrying
aspect is that credit spreads have now fallen below their
pre-crisis level. This sector’s performance of +160% since
hitting rock bottom in the spring of 2009 also sounds a
cautionary note.
Commodities: Prices under Pressure
Past weeks have been turbulent on many commodity markets.
Precious metals, in particular, are under pressure – a trend
that could intensify over the weeks ahead. Investors would
be unwise to regard today’s lower price level as a buy
opportunity.
Until the end of April the rise of the silver price seemed
unstoppable. A weak US dollar, inflation anxiety and fear
of missing out on a big win opportunity caused the price of
silver to climb almost threefold in the space of 18 months.
This meteoric ascent came to an abrupt end at the start of
May. The pin that pricked the bubble was a toughening of
margin requirements on the Chicago Mercantile Exchange
(CME), which unleashed a wave of selling. Major positions
in physically covered investment products were soon being
45 | June 2011 | Asset Classes | Alternative Investments

46 | June 2011 | Asset Classes | Alternative Investments
liquidated. Within a few days the supply of silver on the
market rose by an amount equivalent to almost 10% of
annual industrial demand.
Investors who are tempted to move into the market after this
setback should be very careful. A further retreat is likely. In
the present environment precious metal prices will only rise
if the dollar weakens further or if financial investors decide
to bet on rising prices. Both are unlikely. The US dollar is
undervalued, and European monetary policy provides no
incentive for a long term dollar depreciation. Investor demand
is weakening in reaction to possible interest rate hikes
and continuing low inflation. Reduced investor interest has
been visible in the gold market for some time. Gold funds
have registered no further growth since last September. The
rise in the gold price was mainly a dollar-linked phenomenon.
In Swiss franc terms, gold is currently trading at the same
level as in May 2010.
Financial Investors Cause Heightened Volatility
The bubble on the silver market shows how strongly the
precious metal markets depend on the price expectations
of just a few major financial investors, who are then followed
by a huge troupe of small investors. Futures dealing can
cause prices to decouple dramatically from the fundamentals,
leading to massive overshooting. When the market
eventually recoils, the resulting selling pressure can create
more supply than commercial buyers can absorb. These
dangers exacerbate the risk of commodity investments.
Notwithstanding their volatility, however, precious metals
are still a useful addition to an investment portfolio. Gold is
especially appropriate in this context. Gold’s role as a safe
haven means that it provides stability in a balanced portfolio
in times of economic stress.
Private Equity: Enlivened by M&A
Private equity firms are currently profiting from a sharp
expansion of merger and acquisition activity. According to
figures gathered by Bloomberg, private equity deals in the
first quarter of 2011 amounted to a total of USD 81 billion.
This was an increase of around 65% compared with the same
period last year and almost three times as high as the low
point in 2009. This improvement represents a normalization
rather than a bout of excessive exuberance.
The private equity sector is still weighed down by huge idle
cash reserves, which can erode margins and/or tempt
companies into less profitable investments. In the search
for buyout opportunities private equity firms can find themselves
competing with financially strong companies that
are pursuing a strategy of growth through acquisition.
Despite this tougher competitive environment, however,
private equity firms still offer upside potential. The discount
against intrinsic value now stands at an historically aboveaverage
18%.
Benchmark June 2011 % YTD
Commodities –2.10
Gold 4.65
Crude Oil 6.05
Commercial Real Estate 4.13
Private Equity 3.50
Convertible Bonds 4.48
Hedge Funds –0.94
Upside/downside ranges indicated by our 3–6 month absolute
performance assessments:
> +5% +2% to +5% –2% to +2%
–5% to –2% < –5%

Alternative Investments
Commodities – Selected Products
Commodity Funds
Product Name Curr. ISIN NAV Date NAV Payout Curr. Hedged YTD Perf. %
Third Party Funds
GS DJ – UBS TR Enhanced Strategy Portfolio USD LU0397155895 05/16/2011 13.61 No – 0.43
Exchange Traded Funds (ETFs)
Product Name Underlying Provider Curr. ISIN Price (indicative) YTD Perf. %
JB (CH) Physical Gold – CHF Gold Bank Julius Bär CHF CH0044781232 1,629.80 4.47
JB (CH) Physical Gold – EUR Gold Bank Julius Bär EUR CH0044781174 1,132.81 4.39
JB (CH) Physical Gold – USD Gold Bank Julius Bär USD CH0044781141 1,460.75 4.82
Exchange Traded Commodities (ETCs)
Product Name Underlying Issuer Curr. ISIN Curr. Ratio Price YTD
Hedged (indicative) Perf. %
UBS ETC CMCI UBS CMCI Composite UBS AG USD CH0031794263 No* 1:1 1,365.00 1.94
UBS ETC Agriculture UBS CMCI Agriculture UBS AG USD CH0033726370 No* 1:1 1,677.00 –2.95
UBS ETC Energy UBS CMCI Energy UBS AG USD CH0042990041 No* 1:1 1,123.00 12.75
UBS ETC WTI Crude Oil UBS CMCI Components WTI Crude Oil UBS AG USD CH0033333326 No* 1:1 1,327.00 2.79
UBS ETC Industrial Metals UBS CMCI Industrial Metals UBS AG USD CH0035657417 No* 1:1 1,250.00 –0.87
UBS ETC Precious Metals UBS CMCI Precious Metals UBS AG USD CH0042990108 No* 1:1 2,227.00 17.21
UBS ETC Gold UBS CMCI Components Gold UBS AG USD CH0036991427 No* 1:1 2,145.00 6.98
* Currency-hedged tranches in CHF and EUR also available.
The following should be noted with regard to futures-based investment products in the commodity markets:
As spot market transactions are not feasible for most commodities, investments generally take the form of futures transactions. This means that investors must
consider not only the spot price but also the "roll yield". The roll yield is generated by the difference between the price of an expiring futures contract and the price
of the new contract into which the position is rolled. It can be negative as well as positive.
If the market is in "contango", i.e. if the futures price is higher than the spot price, the new contract will cost more than the expiring one, producing a negative roll
yield even if the price of the underlying commodity is unchanged.
Contango and its opposite ("backwardation") can therefore have a substantial impact on the performance of investment products. Before making any transaction,
please consult your client advisor to ascertain whether the purchase of one of the listed products makes sense in the context of the price situation and your return
expectations.
Legal notes on page 60.
47 | June 2011 | Asset Classes | Alternative Investments

48 | June 2011 | Asset Classes | Alternative Investments
Alternative Investments
Real Estate / Private Equity – Selected Products
Real Estate Funds
Product Name Curr. ISIN NAV Date NAV Payout Curr. Hedged YTD Perf. %
Third Party Funds
Henderson Global Property Equities Fund USD LU0209137388 05/17/2011 14.44 No – 3.00
Exchange Traded Funds (ETFs)
Product Name Underlying Provider Curr. ISIN Price (indicative) YTD Perf. %
Global
Global Property Yield Fund FTSE EPRA/NAREIT Global Div.+Index BlackRock USD IE00B1FZS350 20.48 6.66
Europe
European Property Index Fund FTSE EPRA/NAREIT Europe ex UK Div.+Ind. BlackRock EUR IE00B0M63284 28.08 5.40
North America
US Property Yield Fund FTSE EPRA/NAREIT U.S. Div.+Index BlackRock USD IE00B1FZSF77 20.31 10.71
Pacific
Asia Property Yield Fund FTSE EPRA/NAREIT Asia Div.+Index BlackRock USD IE00B1FZS244 24.36 –2.11
Private Equity Funds
Product Name Curr. ISIN NAV Date NAV Payout Curr. Hedged YTD Perf. %
Third Party Funds
Partners Group Listed Private Equity USD LU0196152861 05/17/2011 110.38 No – 10.94
Exchange Traded Funds (ETFs)
Product Name Underlying Provider Curr. ISIN Price (indicative) YTD Perf. %
LPX MM Private Equity ETF LPX Major Market TR Index Deutsche Bank EUR LU0322250712 24.89 2.34

Alternative Investments
Convertible Bonds / Hedge Funds – Selected Products
Convertible Bond Funds
Product Name Curr. ISIN NAV Date NAV Payout Curr. Hedged YTD Per. %
Third Party Funds
Global
Man Convertibles Global EUR EUR LU0245991913 05/16/2011 123.16 No Yes 1.84
Hedge Funds
Product Name Curr. ISIN NAV Date NAV Payout Curr. Hedged YTD Perf. %
VP Bank Funds
VP Guardian Fund* EUR LI0105120179 03/31/2011 1,056.03 No Yes 1.57
* Units of this fund may not be offered, sold or delivered in Switzerland.
Third Party Funds
Please contact your personal advisor for our recommendations for third party funds in the hedge fund sector.
Exchange Traded Funds (ETFs)
Product Name Underlying Provider Curr. ISIN Price (indicative) YTD Perf. %
db Hedge Fund Index ETF db Hedge Fund Index Deutsche Bank EUR LU0328476337 11.07 –0.45
Legal notes on page 60.
49 | June 2011 | Asset Classes | Alternative Investments

3. Investment
Management
Mandates

52 | June 2011 | Investment Management Mandates | Your Strategy – Our Solution
Investment Management Mandates | Pascal Imboden, Aurelia Schmitt, David Kaufmann
Your Strategy – Our Solution
Return
Features Fixed Income Conservative Balanced Growth
Equities
Equity allocation
Investment horizon
Liquidity requirement
Expected return
Classic Mandate
Fund Mandate
Special Mandate
Portfolio Management
Enhanced Mandate
Strategy Funds
0% 10–30% 20–50% 30–70% 80–100%
3 years 5 years 7 years 10 years 15 years
Investment Solutions Fixed Income Conservative Balanced Growth
Equities
For detailed information on our investment management mandates, please contact your personal advisor.
Risk
Money Market
Bonds
Equities
Alternative Investments
from CHF 1 mn
or equivalent
from CHF 250,000
or equivalent
from CHF 2 mn
or equivalent
from CHF 5 mn
or equivalent
1 unit

Your Success – Our Philosophy
In this era of mass information, picking out and evaluating
the facts and figures that are relevant to the pricing
and performance of financial assets is no easy business.
But today's rapidly expanding range of products makes it
all the more important to find the best instruments for
the effective implementation of investment ideas. We at
VP Bank are ready to perform this demanding task on
your behalf. Our approach is firmly centered on your needs
and aspirations. The starting point is a personal meeting
in which we discuss your risk/return preferences, liquidity
needs and investment horizon and draw up an optimal
long-term strategy for your assets. On the basis of this personalized
strategic allocation, we then generate added value
by means of a disciplined investment process. Clearly
defined procedures and efficient decision-making enable us
to guarantee the utmost professionalism in the formulation,
implementation and monitoring of investment decisions.
Our range of investment management mandates offers
dedicated solutions for the discretionary management of
your assets. By entrusting us with this important task, you
gain freedom and time for other activities while profiting
from a professional and disciplined implementation of your
individual investment strategy.
Legal notes on page 60.
Current Investment Tactics
Your chosen strategy provides us with a benchmark from
which we make short-term deviations with the aim of
exploiting movements in the financial markets on your
behalf.
Rising corporate profits should continue to generate
attractive returns on equity investments this year. At the
same time, moderate valuations reduce the danger of market
setbacks. We are keeping our overall equity weighting above
benchmark, with preference for Europe and North America
versus the Pacific. We have terminated our overweighting of
Asia within the emerging markets allocation. Thus Asia, Latin
America and the EMEA are now neutrally weighted. At the
sector level, we are maintaining our previous positioning.
In Europe we favor financials at the expense of consumer
staples. In North America we continue to expect an outperformance
by IT companies, which we are favoring at
the expense of the high-debt utilities sector.
Our government bond weighting is being kept below benchmark
in reaction to low yields, uncertainties in Europe and
asymmetrical interest rate risks. We prefer corporate bonds.
Duration is well below benchmark. We still regard the credit
risks on high yield bonds as attractive. Here, too, we are
focusing on short maturities to limit interest rate risks.
Our positioning in alternative investments is unchanged,
with a slight overweighting in hedge funds and neutral
allocations in commodities, real estate, listed private equity
and convertibles.
Major currency risks are hedged in all portfolios. We
expect the EUR/CHF and EUR/USD exchange rates to
move bumpily sideways over a 3–6 month horizon. Positions
in our major currencies (EUR, CHF, GBP, USD and JPY)
remain hedged against the base currency of the portfolio
concerned.
53 | June 2011 | Investment Management Mandates | Your Strategy – Our Solution

54 | June 2011 | Investment Management Mandates | Your Strategy – Our Solution
Allocation (CHF Mandates)
Fixed Income
Strategic Tactical
Strategic Tactical
Strategic Tactical
Strategic Tactical
Strategic Tactical
10%
40% 1
40% 2
3% 3
7% 4
8%
29% 1
47% 2
9% 3
7% 4
1 Government bonds
2 Corporate bonds
3 High yield bonds
4 Emerging market bonds
VP Bank Strategy Funds
Product Name Curr. ISIN NAV Date NAV Payout Curr. Hedged YTD Perf. %
VP Bank Strategy Fund Conservative (CHF)* CHF LI0017957502 05/16/2011 982.32 No Yes –0.12
VP Bank Strategy Fund Conservative (EUR)* EUR LI0017957528 05/16/2011 1,220.05 No Yes –0.20
VP Bank Strategy Fund Conservative (USD)* USD LI0100145379 05/16/2011 1,193.10 No Yes 1.81
VP Bank Strategy Fund Balanced (CHF)* CHF LI0014803709 05/16/2011 1,397.61 No Yes –0.31
VP Bank Strategy Fund Balanced (EUR)* EUR LI0014803972 05/16/2011 849.81 No Yes –1.41
VP Bank Strategy Fund Balanced (USD)* USD LI0014804020 05/16/2011 1,320.32 No Yes 0.90
* Units of these funds may not be offered, sold or delivered in Switzerland.
Legal notes on page 60.
Conservative Balanced Growth Equity
5%
58%
20%
17%
6%
54%
21%
19%
5%
41%
35%
6%
36%
37%
19% 21%
5%
25%
50%
20%
5%
20%
53%
22%
5%
40% 1
10% 2
19% 3
10% 4
16% 5
2%
40% 1
14% 2
22% 3
6% 4
16% 5
1 Switzerland
2 Europe
3 North America
4 Pacific
5 Emerging markets
Money Market
Bonds
Equities
Alternative Investments

4.VP Bank Interestbearing
and Financing
Products

56 | June 2011 | VP Bank Interest-bearing and Financing Products | Interest-bearing Products
Interest-bearing Products
Fixed-term Deposits 1
1 Month 3 Months 6 Months 1 Year
CHF 0.125% 0.125% 0.125% 0.250%
EUR 0.250% 0.500% 0.850% 1.125%
USD 0.125% 0.125% 0.125% 0.250%
Minimum amount 25,000 (deposit currency)
Higher rates for larger amounts; details on request
Fiduciary Placements – VP Bank (Luxembourg) S.A.
1 Month 3 Months 6 Months 1 Year
CHF 0.10% 0.20% 0.20% 0.20%
EUR 1.00% 1.10% 1.25% 1.60%
USD 0.20% 0.32% 0.37% 0.47%
Minimum investment 200,000 for placements in CHF, EUR, USD
Minimum investment 100,000 for placements in GBP
The interest rates listed above are before commission fees (between 0.125%
and 0.500%, minimum CHF 250).
CHF and EUR Medium-term Notes*
Maturity Interest Rate CHF Interest Rate EUR
2 years 1.000% 1.500%
3 years 1.250% 1.750%
4 years 1.500% 2.000%
5 years 1.750% 2.250%
6 to 10 years On request On request
Denomination: CHF 1,000 / EUR 1,000 or multiple thereof
* Only for clients of Verwaltungs- und Privat-Bank Aktiengesellschaft.
Variable-rate CHF Term Deposit 1
Interest Rate Guaranteed Maturity-based Interest Premium
Adjustment Interest Rate 2 years 3 years 4 years
Every 3 months Libor 3M CHF +0.25% +0.35% +0.45%
Every 6 months Libor 6M CHF +0.25% +0.35% +0.45%
Every 12 months Libor 12M CHF +0.25% +0.35% +0.45%
Minimum deposit: CHF 5,000.
1 Only for clients of Verwaltungs- und Privat-Bank Aktiengesellschaft and
VP Bank (Schweiz) AG.
At purchase 0.6‰ p.a. stamp duty is charged.
The stated interest rates and interest rate premiums may change in response
to the market situation and are therefore merely indicative. Please consult your
client advisor for further information.
Interbank 3-month Interest Rates
6%
5%
4%
3%
2%
1%
0%
2006 2007 2008 2009 2010
CHF Interest Rates on Medium-term Notes
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0%
As at: 05/18/2011
3-month rate Switzerland (CHF)
3-month rate Europe (EUR)
3-month rate US (USD)
2007 2008 2009 2010 2011
2-year rate
3-year rate
4-year rate

Financing Products
The tables below show part of our range of financing products. For information about other forms of financing,
please contact our specialists in Commercial Banking.
Fixed-rate Mortgages, CHF
Maturity Interest Rate
2 years 1.500%
3 years 1.875%
4 years 2.125%
5 years 2.375%
6 years 2.750%
7 years 2.875%
8 to 10 years On request
Variable-rate Mortgages, CHF
Mortgage Interest Rate*
1 st mortgage 2.500%
2 nd mortgage 3.250%
* Interest rate applicable to new transactions
Money Market Mortgages
Interest Rate Fixing Interest Rate
Monthly 0.880%
Every 3 months 0.929%
Every 6 months 1.004%
Every 12 months 1.294%
Total duration: 3–5 years
Lombard Loans in Overdraft Form
Currency Interest Rate
CHF 3.000%
EUR 3.250%
USD 2.875%
GBP 3.000%
Plus 0.25% lending commission per quarter on the average amount drawn
The interest rates stated above may change in response to the market
situation and are therefore merely indicative. Please consult your client
advisor for further information.
Legal notes on page 60.
Interest Rate Swap Rates 3 and 5 Years*
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
* The swap rates serve as the basis for determining fixed-rate mortgages.
Interbank CHF 6-month Interest Rate (LIBOR)
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0%
As at: 05/18/2011
2008 2009 2010 2011
3-year CHF interest rate swap
5-year CHF interest rate swap
2006 2007 2008 2009 2010
6-month interest rate (CHF)
Mortgages for clients of Verwaltungs- und Privat-Bank Aktiengesellschaft
and VP Bank (Schweiz) AG are offered only in Liechtenstein and Switzerland.
57 | June 2011 | VP Bank Interest-bearing and Financing Products | Financing Products

58 | June 2011 | Contacts
Contacts
Many thanks for your interest in our Investment Views. We will be happy to advise you on how to implement
our recommendations in line with your individual requirements. Please feel free to contact us, so that together
we can build a bridge between this publication and your personal needs and aspirations.
Verwaltungs- und Privat-Bank Aktiengesellschaft,
Vaduz, Liechtenstein
Head of Private Banking Liechtenstein
Werner Wessner, Tel +423 235 66 25
werner.wessner@vpbank.com
Head of Private Banking Western Europe
Martin Engler, Tel +423 235 65 11
martin.engler@vpbank.com
Head of Commercial Banking
Rolf Jermann, Tel +423 235 66 58
rolf.jermann@vpbank.com
Head of Intermediaries Liechtenstein & Switzerland
Günther Kaufmann, Tel +423 235 62 55
guenther.kaufmann@vpbank.com
VP Bank (Schweiz) AG
Head of Private Banking & Intermediaries Switzerland
Marc Wallach, Tel +41 44 226 24 00
marc.wallach@vpbank.com
VP Bank (Luxembourg) S.A.
Head of Private Banking
Christoph Görgen, Tel +352 404 777 273
christoph.goergen@vpbank.com
VP Bank and Trust Company (BVI) Limited
Managing Director
Dr. Peter Reichenstein, Tel +1 284 494 12 2
peter.reichenstein@vpbank.com
VP Vermögensverwaltung GmbH
General Manager
Willi Heigl, Tel +49 89 21 11 38 16
willi.heigl@vpvv.de
VP Wealth Management (Hong Kong) Ltd.
Managing Director
Clare Lam, Tel +852 3628 99 33
clare.lam@vpbank.com
VP Bank (Singapore) Ltd.
Managing Director
Reto Isenring, Tel +65 6305 0055
reto.isenring@vpbank.com
VP Bank (Switzerland) Ltd. Moscow
Representative Office
Head of Representative Office Moscow
Walter Moretti, Tel +7 495 967 00 95
walter.moretti@vpbank.com
Wealth Management Solutions & Services
Economics & Investment Office
Tel +423 235 65 44
investment@vpbank.com
Wealth Management Solutions
Trading, Advisory & Distribution
Tel +423 235 69 69
advisory@vpbank.com

Glossary
Allocation
Strategic Long-term division of an investment portfolio into various asset classes (money
markets, bonds, equities, alternative investments) on the basis of a defined investment
strategy. The strategic allocation is reviewed twice a year and adjusted if appropriate.
Tactical Modification of the strategic allocation by short-term variations. The tactical allocation
is the portfolio mix implemented at any given time with the aim of achieving an aboveaverage
return.
Benchmark A standard, e.g. a market index or index-based portfolio, against which the
performance of a portfolio is measured.
Bond fund Investment fund investing chiefly in bonds of the currency stated in the fund's
name.
Commodity fund Investment fund investing chiefly in tradable commodities and
commodity-linked financial instruments.
Conversion premium Percentage difference between the price of a share acquired by
converting a convertible bond and the price of the same share bought directly on the stock
market.
Conversion price The price at which a convertible bond can be converted into shares or
participation certificates. The conversion price is fixed when the convertible bond is issued.
Convertible bond fund Investment fund investing chiefly in convertible bonds.
Currency hedging Technique whereby the value of an investment or debt denominated in a
foreign currency is protected against exchange rate movements. Investors and borrowers
achieve this by taking positions in the currency futures market. Hedging excludes the risk of
exchange losses but also rules out the possibility of exchange gains.
D/Swap (differential to swap) is the difference (spread) between a bond's yield to maturity
and the current swap rate. Swap rates are a recognized measure for assessing bond values.
The spread indicates the market's judgment as to the level of risk on a bond. A high positive
spread indicates a higher risk but also a higher yield.
Dividend yield A measure of the profitability of an equity investment, calculated by comparing
a company's dividend with its current share price. This figure can be used to make
yield comparisons with other types of capital market investment.
Duration A weighted average of the maturity of all income streams (principal repayment
and interest payments) from a bond or bond portfolio. In the case of coupon payments the
duration is shorter than the period to maturity. In the case of zero coupon bonds duration
and maturity are identical.
Equity fund Investment fund investing chiefly in equities of the country or region stated in
the fund's name.
Euribor (Euro Interbank Offered Rate) Interest rate at which first-class banks borrow from
each other at short term on the euro interbank market.
Exchange traded commodity (ETC) A secured debt instrument with an unlimited term
whose value is coupled to the value of one or more commodities.
Exchange traded fund (ETF) Investment fund whose composition mirrors that of an index
and which can be traded at any time without an issue commission.
Exchange traded notes (ETNs) are debt securities. Although distinct from investment
funds, they have similar characteristics. Like an ETF, they are traded on an exchange and
usually linked to the return on a benchmark index. Special types of ETN are exchange
traded certificates and exchange traded commodities.
Fiduciary deposit A money market transaction in which a bank places a deposit with a foreign
bank on a client's behalf. The deposit has a fixed term, fixed amount and fixed interest
rate, or it may take the form of call money with a 48-hour period of notice. Fiduciary deposits
can be made in various currencies. The deposit is in the name of the client's bank but for the
account and at the risk of the client.
Fixed-rate mortgage A mortgage loan that has an unchangeable interest rate for a period
agreed between the mortgage lender and borrower, usually between two and ten years.
Fixed-term deposit Money deposited by a client with a bank for a fixed term and at a
predetermined interest rate. Fixed-term deposits are subject to a minimum deposit amount
(frequently CHF 100,000) with terms ranging from one to twelve months.
Fund of funds Investment fund that invests exclusively in other investment funds.
Hedge fund Investment fund in which the manager can employ various alternative investment
techniques such as leverage, short-selling and derivatives.
Investment grade Credit ratings of BBB to AAA, indicating that the securities are of satisfactory
to very good quality.
Legal notes on page 60.
ISIN International Securities Identification Number.
LIBOR (London Interbank Offered Rate) Interest rate at which first-class banks borrow
from each other at short term on the interbank market in London.
LIBOR mortgage A mortgage with a variable interest rate that is adjusted every three or six
months on the basis of LIBOR.
Lombard loan Loan granted against a collateral pledge of securities, bank balances, precious
metals or claims under life insurance policies. Lombard loans can be granted for
private or commercial use and can take the form of a fixed loan or overdraft.
Medium-term note Debt security issued on tap by Swiss and Liechtenstein banks with a
maturity of two to eight years.
Money market fund Investment fund that invests only in assets with a very short remaining
life to maturity or with a very short duration.
NAV (net asset value) Value of a unit of an investment fund, calculated by taking the
market value of the fund on a specified date, deducting the fund's liabilities and dividing the
result by the number of units outstanding.
Open end An open end certificate is a certificate that has an unlimited life. The holder can
remain invested as long as he likes.
Price information / indicative prices The prices stated in this publication are closing prices
on the date indicated; see note on page 2. They are net prices, i.e. excluding purchasing
costs. The price of an asset when bought on the stock exchange or other market will usually
differ from the price stated in this publication because of changes in supply and demand.
Current prices are available from your advisor at VP Bank.
Private equity fund Investment fund investing chiefly in equity securities that are not (yet)
listed on an exchange. The liquidity of such funds can be very limited.
Real estate fund Investment fund that invests on a diversified basis in land and buildings
and sometimes also in equity or debt securities of real estate companies.
Strategy funds A family of strategic investment funds distinguished by different risk categories.
The portfolio mix of each fund is based on the corresponding asset allocation of
VP Bank.
Taxation (Bonds)*
EU Tax: EU Tax is the withholding tax introduced under European tax legislation effective
since July 1, 2005. Since that date, withholding tax has been chargeable on interest payments
to EU taxpayers. Bonds with "grandfathering status" are exempt from this tax until the
end of 2010 (regardless of the currency or domicile of the borrower). Grandfathered bonds
are bonds that were issued prior to March 1, 2001 and for which no subsequent tranches
have been issued since March 1, 2002. The following special rules apply to bonds with
subsequently issued tranches. If the borrower is a public-sector issuer, the issue of a further
tranche after March 1, 2002 results in the entire issue being subject to EU Tax. If the borrower
is a company, the issue of a further tranche after March 1, 2002 results in only the
additional tranche being subject to EU Tax.
WTax (Withholding Tax): WTax is a tax deducted at source on interest payments and other
investment income. It may refer to US WTax or to Swiss Anticipatory Tax (Verrechnungssteuer
/ Impôt anticipe).
Third party fund Investment fund issued on behalf of and managed by a third party.
Variable-rate mortgage Mortgage with a flexible interest rate and a short period of notice.
The short period of notice means that the rate can be adjusted rapidly to changed conditions
on the capital market.
Volatility The range of fluctuation of an interest rate or asset price (stock, bond, commodity,
investment fund unit, etc.) within a given period. It is a mathematical expression (annualized
standard deviation) of the overall risk on an investment. For example, to find the standard
deviation for changes in the price of an investment fund, one takes the average price of the
fund over a given period and then calculates how far the price has deviated from that average
during that period. The greater the range of fluctuation, the more volatile and therefore
more risky the fund is. Risk can also be expressed as maximum loss.
Yield The effective interest rate on a bond, as calculated by the ISMA (International Securities
Market Association) method. This internationally recognized method is the most
commonly used basis for yield calculations. It permits precise adjustments for fractional
periods and multiple coupon payments within a year.
YTD perf. % Year-to-date performance in per cent, i.e. performance from the start of the
current year to the present date.
59 | June 2011 | Glossary

60 | June 2011 | Disclaimer
Important Legal Information
(Disclaimer)
Principal sources of information / No warranty: This document was produced by Verwaltungs- und Privat-Bank Aktiengesellschaft (hereinafter
referred to as VP Bank) using sources that are believed to be reliable. The principal sources of information for this document were:
• secondary research (financial analyses by specialist brokers/analysts);
• information published in domestic and foreign media and by wire services (e.g. Bloomberg, Thomson Financial Datastream, Reuters, etc.);
• statistics in the public domain.
Although the utmost care has been taken in producing this document, VP Bank does not warrant that its contents are complete, up-to-date or
correct. In particular, the information in this document may not include all relevant information regarding financial instruments or their issuers.
The opinions expressed in this document reflect the opinions of VP Bank on the date stated in the document. It is possible that VP Bank and/or
its subsidiaries have published in the past or will publish in the future documents that contain information and opinions that do not accord with
those in this document. VP Bank and/or its subsidiaries are not obliged to provide recipients of this document with such documents offering
different information or opinions.
Suitability / Not an offer: The information contained in this document does not constitute a recommendation to buy, hold or sell the financial instruments
described herein, nor does it constitute advice on legal, financial, accountancy or taxation matters or any form of personal advice.
In particular, the financial instruments discussed in this document may be unsuitable for an investor on the basis of his/her investment objective,
time horizon, risk tolerance, risk capability, financial situation or other personal circumstances or because of sales restrictions applying to a particular
financial instrument. The information provided in this document is therefore in no way a substitute for individual advice by a specialist
qualified in the matters referred to or a substitute for perusal of the documents provided by the issuers and sellers of the financial instruments
(e.g. issue prospectuses, term sheets, full and simplified investment fund prospectuses). In particular, this document does not constitute an
offer, a solicitation to make an offer or a public advertisement inviting participation in transactions involving the financial instruments described
herein or an invitation to enter into any transaction. VP Bank and its subsidiaries expressly refuse to accept any liability for any detriment or loss
allegedly incurred as a result of the information contained in this document.
Notes on risk: The price and value of the investments mentioned in this document and the returns achieved on these investments may rise or
fall. Investments denominated in foreign currencies are also exposed to exchange rate fluctuations. No assurance can be given to investors
that they will recover the amounts that they invest. The past performance of an investment is not a reliable indicator of future performance. The
same remarks apply to performance forecasts. The performance shown does not take account of any commissions and costs charged when
subscribing to and redeeming units in investment funds. Such commissions and costs have a detrimental effect on performance. Any investment
mentioned in this document may involve the following risks (the list of these risks should not be regarded as exhaustive): issuer (creditworthiness)
risk, market risk, credit risk, liquidity risk, interest rate risk, currency risk, economic risk and political risk. Investments in emerging markets
are speculative and particularly strongly exposed to such risks.
Proprietary business: To the extent permitted by law, VP Bank and/or its subsidiaries and/or their employees may participate in other financial
transactions with the issuers of assets mentioned in this document. They may invest in these issuers or render services to them, acquire orders
from them, hold positions in their assets or in options on those assets, carry out transactions in these positions, or have other substantial interests
relating to the issuers of assets mentioned in this document. Such actions or situations may already have occurred in the past.
Core methods used in financial analysis: VP Bank has adopted the following core methods in its financial analysis:
• The stock selection list is based on a global, quantitative screening model. This classifies stocks according to factors that deliver the highest
performance levels over the long term.
• In each currency sector, bond selection considers only bonds without special clauses (bullet bonds). These tend to be Eurobonds with investment
grade ratings and no special risk premiums. Attention is also paid to the marketability factor before allocations are divided into the sovereign
and corporate segments.
• ETF selection is based on quantitative scoring and a qualitative analysis.
• Investment funds are selected according to the "best in class" method. Our multi-tiered analytical process includes both quantitative and qualitative
elements.
Investment horizon: Recommendations are based on well-diversified portfolios. The recommended investment horizons for balanced portfolios
are five to ten years, and for equity portfolios generally more than ten years.
Internal regulations and organizational measures to prevent conflicts of interest: VP Bank and its Group companies have implemented a
number of internal regulations and organizational measures to prevent potential conflicts of interest and to identify any such conflicts that arise.

Explanatory notes on conflicts of interest: Potential conflicts of interest are to be clarified by means of the following numbers appended to the
issuer's name. VP Bank and/or its Group companies
1. hold more than a 5% equity interest in the issuer;
2. have significant financial interests in relation to the issuer;
3. have within the past twelve months been involved in managing a consortium that issued the issuer's financial instruments by way of public
offering;
4. is a market maker in the issuer's financial instruments;
5. have within the past twelve months concluded an agreement relating to the provision of investment banking services with issuers subjected to
financial analysis (with regard to themselves or their financial instruments) or received a service or an undertaking to provide a service under
such an agreement;
6. have concluded with issuers subjected to financial analysis (with regard to themselves or their financial instruments) an agreement relating to
the conduct of that financial analysis.
Notes on the distribution of this document: Access to the information contained or financial instruments (especially investment funds) described
in this document may be restricted by national law. Accordingly, the information contained or financial instruments (especially investment
funds) described in this document are not intended for persons or corporations subject to any jurisdiction in which access to the information
contained or financial instruments (especially investment funds) described in this document is prohibited or made conditional on official
authorization (whether on account of the nationality of the persons concerned, their place of residence or any other reason). Persons who come
into possession of this document or wish to acquire financial instruments (especially investment funds) described in this document must therefore
acquaint themselves with local laws and restrictions and abide by them.
The contents of this document are protected by copyright, and any utilization other than private use requires the prior authorization of VP Bank.
British Virgin Islands: This information was distributed by VP Bank (BVI) Limited, P.O. Box 3463, 3076 Sir Francis Drake's Highway, Road Town,
Tortola, British Virgin Islands. VP Bank (BVI) Limited is subject to authorization and regulation by the British Virgin Islands Financial Services
Commission.
Germany: This information was distributed by VP Vermögensverwaltung GmbH, Theatinerstrasse 12, DE-80333 Munich. VP Vermögensverwaltung
GmbH is subject to authorization and regulation by the German Federal Financial Supervisory Authority (BaFin).
Hong Kong: This information was distributed by Verwaltungs- und Privat-Bank Aktiengesellschaft, Hong Kong Representative Office, Suites
1002-1003, Two Exchange Square, 8 Connaught Place, Central, Hong Kong.
Luxembourg: This information was distributed by VP Bank (Luxembourg) S.A., Avenue de la Liberté 26, LU-1930 Luxembourg. VP Bank
(Luxembourg) S.A. is subject to authorization and regulation by the Luxembourg Commission de Surveillance du Secteur Financier (CSSF).
Switzerland: This information was distributed by VP Bank (Schweiz) AG, Bahnhofstrasse 3, CH-8022 Zurich. VP Bank (Schweiz) AG is subject
to authorization and regulation by the Swiss Financial Market Supervisory Authority (FINMA).
USA/Canada: This document or copies thereof may not be delivered to persons who are resident in or citizens of the USA or Canada.
61 | June 2011 | Disclaimer

The VP Bank Group
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