Global families

Issue 01
January 2007
Expert know-how for Credit Suisse investment clients
Global Investor
Global families
Basics Finding answers in our genes,
21st-century clean energy homes, evolution of senior housing
Enrichment The hidden asset,
modern retailing in India, stocks with family influence
Switching Media for you and me, the new digital paradigm

Basics
In this segment, we are looking for answers in our genes, with significant
ramifications for science and medicine. We also focus on 21st-century
clean energy homes. A decentralized energy system may be one solution
for future energy issues. Evolution of senior housing, driven by demographic
trends, is another topic we are highlighting. See page 18
Enrichment
This segment deals with the role of women in the world economy and
shows their growing impact, although there are still obstacles for them
to fully participate in the production process. Foreign retailers have already
found a loophole in the law prohibiting their entry into India’s retail
sector by setting up joint ventures with large Indian businesses. We
also argue that stocks with a significant family influence tend to outperform
companies with a more diversified shareholder base. See page 36
Switching
Thanks to the ongoing digitization of the technology infrastructure,
minorities get increasingly better services from media, and become the
target audience for the advertising industry. Last but not least, digitization
enables people to communicate with each other on different
continents and allows them to shop for whatever they want all over the
globe. See page 52
Photo: Martin Parr/Magnum Photos, Photo Cover: Martin Parr/Magnum Photos
Photo: Martin Parr/Magnum Photos, Photo Cover: Martin Parr/Magnum Photos

What moves the world
Getting connected
The increasing degree of global interconnectedness is not only becoming a worldwide driver of
economic growth and prosperity, but is also supporting the wave of migration triggered by globalization.
As poverty decreases and the level of affluence rises in different countries, people in less
developed regions will also be able to afford new technologies. Lower costs for calling home and
wiring money, as well as the World Wide Web, make it easier for people to travel and change jobs
because they can still keep in constant touch with their families.
Lower tariffs lead to longer phone calls (average for the big four US wireless operators)
0.300
Q1 99
0.250
Q2 99
Q3 99
Mobile voice tariff (revenue/minute)
0.200
0.150
0.100
0.050
0.000
Q4 99
Q1 00
Q2 00
Q3 00
Q4 00
Q1 01
Q2 01
Q3 01
Q4 01
Q1 02
Q2 02
Q3 02
Q4 02
Q1 03
Q2 03
Q3 03
Q4 03
Q1 04
Q2 04
Q3 04
Q4 04
Q1 05
Q2 05
Q3 05
Q4 05
Source: Credit Suisse
100 200 300 400 500 600 700 800 900
Minutes of usage

Dramatic reduction in transfer costs (% of amount transferred)
Global connectivity
15
15
15
15
15
600
60
500
479
50
Source: Western Union, Women’s World Banking, International Organization for Migration
10
5
0
5
400
300
200
100
0
Source: Internet World Stats, Usage and Population Statistics, 11/ 2006
Mexico
4
El Salvador
8
40
30
20
10
0
Dominican
Republic
Guatemala
North America
Oceania/
Australia
Worldwide
6
Europe
Asia
Latin America
112
Middle
East
141
Africa
54.1
189
16.7
194
38.2
246
10.8
626
69.1
361
15.1
10.0
3.6
1990 2003 User growth 2000–2005 in % (l.h.s.)
Internet connections per 100 inhabitants 2006 (r.h.s.)

GLOBAL INVESTOR 1.07
Editorial — 0
Photo: Martin Parr/Magnum Photos

GLOBAL INVESTOR 1.07
Editorial — 0
The history of past millennia shows that as the world’s population
grows, people migrate to discover and unlock new sources of food
and raw materials. They look for new places to live and develop new
technologies to improve and enrich their lives. Families have always
been a crucial force in human migration, often travelling vast distances
to seize new opportunities, build businesses, and drive innovation.
Today, globalization opens up new horizons to them. Cheap
communication technologies enable next of kin to be dispersed
across the globe and yet maintain close ties to their relatives. Capital
markets allow families to retain close financial and management
involvement in companies, while spreading ownership through stock
markets. Innovations in the study of genetics let us track past
movements of peoples, while providing new insights into how illnesses
are passed down from one generation to the next.
In this issue of Global Investor, we explore these themes and
take a look at their investment implications. Families living apart
want to retain a common cultural and political heritage. We show
that this is creating a boom in media targeted at people whose
ethnicity or language is a minority in the communities in which they
live. We see how real estate investment trusts (REITs) providing
accommodation for senior citizens can address the issues arising
when young and old generations live separately. We argue that
companies with significant links to a single family possess many of
the advantages of the unity of ownership and control seen in private
equity, and we show that these companies have clearly outperformed
their peers in the last decade. We review how tailored medicine
is being used to develop customized drugs based on individuals’
genetic backgrounds, and we see how the Genographic Project
uses ancient genetic data to help understand human migration and
possibly reinterpret the course of history.
Globalization is a multifaceted force that evolves continuously.
We believe this process is critical for investment decisions, and are
committed to keeping you informed as it unfolds.
Photo: Credit Suisse
Walter Berchtold, Chief Executive Officer Private Banking

1.07
Photo: Royalty-Free/Corbis

GLOBAL INVESTOR 1.07
Content — 0
Lead article
10
Global families
Discussion with Giles Keating, Head of Research for Private Banking
and Asset Management, and Burkhard Varnholt, Head of Financial
Products & Investment Advisory
Basics
19
Finding answers in our genes
The Genographic Project and a discussion about tailored medicine with
Prof. Klaus Lindpaintner, Roche, and Prof. Michael Detmar, ETH Zurich
28
21st - century clean energy homes
A decentralized energy system may be the solution for future energy issues
32
Evolution of senior housing
Driven by demographic trends, rapid growth of the older generation has
evoked a greater sense of urgency for senior housing needs
Enrichment
37
The hidden asset
Women contribute roughly 50% to the world economy, and the share of
women in paid work is rising
43
Modern retailing in India
Interview with Kishore Biyani, founder and Managing Director of
Pantaloon Retail India Ltd.
48
Stocks with family influence
Recent evidence suggests that companies which still have a strong family
interest tend to outperform companies with a widely held shareholder base
Switching
53
Media for you and me
Tailoring media to individuals and small special groups is by no means
a new trend. In particular, this is a growing trend in countries with a high
proportion of immigrants
58
The new digital paradigm
People communicate with each other on different continents, by video, for free;
nearly everything they own is increasing in value, but at a lower cost
Services
62
Only the best is good enough
An international team of experts at Credit Suisse develops tailor-made
solutions for very wealthy clients
64
66
Authors
Disclaimer
Imprint

GLOBAL INVESTOR 1.07 Lead — 10
“Migration
has changed
its face.”Giles Keating
“I believe
there will be a
new sort of
implicit family
contract.”Burkhard Varnholt
Discussion with Giles Keating, Head of Research for Private Banking and
Asset Management, and Burkhard Varnholt, Head of Financial Products & Investment
Advisory. Interview Marcus Balogh, Senior Editor Bulletin Magazine

GLOBAL INVESTOR 1.07 Lead — 11
The impact of globalization manifests in virtually every aspect of
daily life. Sometimes, as with the impact on social contracts,
the effects can create enormous strains. But the challenges also
create opportunities – for families as well as for investors.
Marcus Balogh: Before we start on the focus of this interview,
do you think it’s possible to condense the impact of
globalization in a few words or point out the key areas where
globalization is going to take hold?
Giles Keating: Globalization is all about the spread of trade,
ideas and people. We can already see those things happening.
World trade is continuing to grow at a rapid rate. Very interestingly,
not just along historically more conventional lines, as for example
from America to Asia or vice versa, but along new pathways as
well, for example within Asia itself. Then there is the spread of
ideas. This development, which includes the spread of technology
and of intellectual copyrights, sometimes leads to tension between
companies that invest in production facilities abroad and
the locations that are being invested in. But there are precedents
in recent history for this as well.
Are you referring to what Japanese companies did in the 1950s
and 1960s when they were copying the products of their
competitors in the US?
Giles Keating: Copying has been taking place all through
human history. The US copied European technology in the 19th
century; Japan copied US technology in the 1950s and 1960s.
It is natural for individuals and for companies alike to want to lay
their hands on new technology – and then develop more of it
themselves. Now we are seeing the same in India and China. The
law needs to give a good balance between protecting intellectual
property rights, to encourage innovation, while also allowing
the reasonably rapid spread in the use of new ideas. For investors,
what is important when talking about this, is to note that reproduction
is only the first step in this industrial development. Both in
India and China there are companies that profited from – often
entirely legal – copying of products, and are now the drivers in the
research and development of new products.
Doesn’t the spread of ideas include more than technological
know-how?
Giles Keating: Of course, there is the spread of cultural,
political and religious ideas and concepts, as well.
And of course that also gives rise to a number of tensions.
What does the spread of people entail?
Giles Keating: We have seen migration on an astonishing
scale. Both within countries from the rural areas to the cities but
between countries, as well. Of course, what comes first to
mind is migration in the developing world. But we do not have to
look beyond Europe to find significant proof of this development.
For example, we have had 500,000 people from Poland immigrating
to the UK over the last several years. I think that there is
virtually no country around the world that is not feeling the
effects of migration in one way or another.
Do you think that we underestimate the effects of migration?
Burkhard Varnholt: I believe that Giles outlined a truly historical
development. And if you look at history, you will find that people
living in a period of change usually had the tendency to underestimate
the effect of the changes they were part of. I think that
the reason behind this has its roots in our tendency to apply linear
logic to the world around us. But if you really look at history, at
politics and economics, you find that linear logic explains very little.
Trends change the world in a nonlinear way. And the highly nonlinear
development we are experiencing now essentially boils
down to something that, in its implications, is comparable to previous
industrial revolutions. Only now they not only affect certain
countries or regions, but the whole world.
Sounds a bit threatening.
Burkhard Varnholt: There certainly is a dark side to globalization.
And we will have to talk about this side as well. But some
of the implications are quite positive – as with every single
industrial revolution. One thing they always had in common, by
the way, was the creation of more growth with less inflation
for a period much longer than textbook economics would think
is possible.
You enumerated the spread of trade, ideas and people.
These developments will have a significant effect on family ties,
won’t they?
Giles Keating: Absolutely. But, again, this is not happening
for the first time in human history. Clearly there were times when
you had not just nuclear families of parents and children, but
often three or even four generations staying together geographically
in the same place. But, throughout history, these periods
were interrupted by major migrations. Just think about the great
migration flows of the late 19th century and the beginning of
the 20th century, where a significant proportion of the European

GLOBAL INVESTOR 1.07 Lead — 12
Zurich
Son lives and works here
New Dehli
Mother lives and works here
Father lives and works here
Abu Dhabi
Grandparents live here
Cape Town
Singapore
Manila
Grandparents live here
Daughter lives and studies here
New forms of modern family relationships
Globalization does not mean families have to break ties, but rather leads to new forms of modern family relationships. Family members may find better
jobs in different parts of the globe, or children may go abroad to study in order to get the best possible education. In choosing the best solution
under the circumstances, family relationships are becoming increasingly flexible – helped by the growing number of services available in the modern world.

GLOBAL INVESTOR 1.07 Lead — 13
population shifted from Europe to the Americas or to Australia,
for example.
Burkhard Varnholt: Globalization could also be described
as a development in three phases. The first phase would be
the globalization of space and government, which started when
Columbus set off to discover America. In the wake of his discovery,
empires were created where the sun never set. The globalization
of governments was followed by the globalization of
companies, which started maybe about a century ago. Now we
are in the third phase, where we are seeing the globalization
of the individual. And the impact on the individual and on family
ties will be as far-reaching as the impact that the globalization
of companies has had on business.
Can you elaborate on the impact? Will the breaking up of family
ties take a different course in Asia or Africa than in Europe
or the US?
Burkhard Varnholt: Globalization does not mean you have
to break up family ties. If you go abroad to study to get the best
possible education, you don’t have to sever your ties with your
family. It just means you pick and choose what’s best. You pick
the best place for education; you pick the best place to live.
Giles Keating: I absolutely agree. If you go back over a hundred
years, in “Jude the Obscure”, Thomas Hardy describes the enormous
and ultimately tragic consequences in a family’s life as a man
travels from the depths of rural England to Oxford to study.
Then, even a short geographic distance meant enormous social
and personal upheaval. But, in this modern world, coming and
going has become a highly flexible process no matter where you
live.
But it does matter how much you earn, doesn’t it?
Giles Keating: Of course, people at the higher end of the income
scale can use modern communication technologies on
a larger scale and more easily. But as the price of communication
has collapsed, we are seeing the emergence of families who exist
across the globe in a way that was never conceivable before –
and I’m talking about the lower end of the income scale, as well.
Migration has changed its face. A construction worker in Dubai
who has come from India or from Pakistan, or a domestic worker
in Singapore who has come from the Philippines, will still keep in
touch with his or her family. They can communicate by telephone
or maybe e-mail and, also very importantly, it’s becoming much
cheaper to send money around the world so that they can support
Giles Keating is a Managing Director and
Head of Research for Private Banking and
Asset Management and Chairman of the
Global Economics and Strategy Group, which
brings together top macro analysts from all
divisions of Credit Suisse. Before that, he held
positions as Head of the Pensions Advisory
and Structuring Group, Head of Fixed Income
Research and Economics, and Chief Economist
at Credit Suisse Investment bank (formerly
Credit Suisse First Boston). He received
his BA in philosophy, politics and
economics from St. Catherine’s College,
Oxford University and his MSc in mathematical
economics and econometrics from the
London School of Economics.
Burkhard Varnholt is a Managing Director
and Head of Financial Products & Investment
Advisory and a member of the Global
Executive Council of Credit Suisse. Prior
to joining Credit Suisse, he held various
investment banking positions with Morgan
Stanley. Mr. Varnholt holds a PhD from
the University of St. Gallen (HSG), where he
also lectured on finance and investments.
He has also lectured at the Massachusetts
Institute of Technology (MIT) and Stern
School of Business, New York University.
He has published extensively and authored
four books.

GLOBAL INVESTOR 1.07 Lead — 14
80 years
70
childhood
10
education
60
retirement
20
working life
50
30
40
up to now
80 years
70
retirement
childhood
10
education
60
20
working life
50
30
40
now
Globalization and increasing life expectancy
Another fact that is closely interconnected with globalization is that people live much longer. Our aging society also has an enormous impact on family life as
we move toward a much more flexible set of life stages. Retired or semiretired people have more time and leisure, and increased interests. People of
all ages travel and expose themselves to new ideas and cultures, and the relationship between children, parents and grandparents is changing constantly.

GLOBAL INVESTOR 1.07 Lead — 15
their family. And, although flying is often expensive, leaving your
family in your hometown to go to work in another country
does not compare to the finality of migration in the 19th century.
Will globalization have a stronger influence on family ties than
we have thought possible in the last few years?
Burkhard Varnholt: I think so. I believe there will be a new
sort of implicit family contract. I think the relationship will change
between fathers and sons and daughters, and between wives
and husbands. By seeing more of the world, people will get more
educated. You could call it an emancipatory process involving
humankind. It’s just that as the world is getting better, it may be
that family contracts are going to get better, too.
Giles Keating: If we look back to the past, it was very much
“old teaches young.” There was a body of knowledge that was
passed from older people to younger people. Now that is still absolutely
crucial and vital, but with respect to technological development,
we are also in a phase of young teaches old, where
older people can learn an enormous amount from the young. This
passing of ideas becomes very much more two-way across the
generations. I think that is a very healthy development, and it clearly
has an effect on the way that families interact with one another.
Another fact that is closely interconnected with globalization is
that people live much longer. We live in an aging society, and this
also has an enormous impact on family life.
Are you referring to the issue of financing retirement?
Giles Keating: The change in life expectancy means that we
are moving away from the relatively conventional blocks of childhood
and education, then working life and after this block a
rather short retirement. This also changes the relationship between
children and their parents or their grandparents. We are
moving toward a much more flexible set of life stages, where
peo-ple at different times of life may move from full-time work to
some mixture of part-time work combined with other forms of
interaction with, for example, charity work, friends or family.
Today, many people start to travel when they get older, start to
learn new languages, expose themselves to new cultures. As a
result the relationship between family members goes through
many more complex phases than it did in that rather more preset
model of the past.
I think this also works not only across generations but across
gender frontiers as well. Don’t you think so?
Giles Keating: Of course. Thirty years ago, even in major
industrial economies, women played a relatively minor role in the
paid part of the economy, whereas they played a big role in the
unpaid part. Now, in some economies, we actually see female
employment levels that are even higher than the male employment
levels. And in those where female participation is still quite low,
we are seeing it rise very rapidly. Clearly this has a big impact on
family ties – some of them rather unexpected. One speaker that
we heard recently suggested that economies where women are
more involved in the paid economy tend to have a lower savings
ratio. He argued that this was because women are better at
spending money than men. It is certainly noticeable within Europe,
for example in Spain, where female participation has risen from a
rather low level rapidly to quite a high level. Of course, the economic
boom in Spain was helped partly by the boom in construction
– but it was also supported by strong consumption. In
Germany, on the other hand, we see the reverse: a rather low
participation of women and a high savings ratio.
You mentioned the dark side of globalization. Can you elaborate
on this side?
Giles Keating: Globalization does involve very drastic changes.
Some people are much better placed to cope with these changes
and the resulting disruptions because of their psychology or their
economic situation than others. But many of them are unprepared
to deal with such a severe disruption of their life – psychologically
or in terms of their skills or in terms of money. It is only natural
that they reflect these fractures in their political responses.
Governments need to take measures to address these issues, otherwise
some of the advantages of globalization could come under
threat. And rightly so, I think. In a liberal society, you can’t have
people’s expectations being suddenly dashed when problems arise.
They do need to be addressed, but I am convinced that those
issues can be dealt with over time.
Do you think that it will be easier for people and families in
the developed world to adapt to these changes?
Giles Keating: Not necessarily so. There is both the dark
and the bright side in the developing world and the developed
world. In the developing world the changes may seem more
radical, as some of the changes may have an impact on basic
structures. But, in the developed world, for example, you have
people who did have an apparently secure income stream,
perhaps in some of the heavy industrial sectors, who now may
find those jobs disappearing.

GLOBAL INVESTOR 1.07 Lead — 16
Burkhard Varnholt: I think Giles has made an extremely important
point: globalization may improve the lives of billions of people
– but it also disrupts the lives of billions of people. It can create
enormous strains, including strains on the family. But at the same
time, there are opportunities that are created, whether it is for
those individuals or for investors. It is not easy to deal with these
issues without sounding cynical. I am well aware of the pain
that these changes can cause – but, at the end of the day, I think
we are progressing toward a better place.
With this in mind, what are the areas in which investors should
take interest?
Burkhard Varnholt: Let me structure my answer along our
key investment themes “basics,” “enrichment” and “switching.” In
“basics” we see this incredible demand – exponential nonlinear
demand if you will – for basic goods that you and I take for granted:
water, security, infrastructure, food, achievable and accessible
health care, etc. The corollary to it is enrichment, which not only
deals with the wealthy, the rich G7/8 economies, but also with
the highly upward middle class and millionaires or billionaires you
find in emerging markets. China, for example, has not only
200,000 millionaires, but also a rapidly growing middle class with
an unsatisfied desire for luxury goods and premium goods. In
switching, we are faced with the healthy living story, driven by not
only the baby boomers retiring but also by longevity doubling up.
And finally, we are facing the challenges and opportunities of outsourcing,
and the emergence of potential new global leaders in
some of the emerging markets.
Giles Keating: It is clear that we are in a shifting cycle in
terms of which investment under those themes is the one that is
doing best at any given moment. For example, we have just
been through a period of several years where commodity prices
did incredibly well because they are the bedrock on which the
“People living in a period
of change usually had
the tendency to underestimate
the effect of the
changes.” Burkhard Varnholt
“It is clear that we
are in a shifting cycle in
terms of which
investment is the one
that is doing best at
any given moment.” Giles Keating
“basics” concept Burkhard has mentioned is built. We have now
seen prices of many commodities hit a plateau. Some of
them have even come well off their highs. I think that the trend
will resume, but in a sense the baton has now been passed
up to the next level, to the companies that make use of those
raw materials. Many of them show very, very strong performances.
Are those companies in the developed world or are they
in the emerging markets?
Giles Keating: Of course, within the company sector, we also
can see the push and pull between emerging markets and the
developed world. Clearly, there is a shift taking place here as well.
Many companies in the emerging markets tended to be rather
local. But gradually we will be seeing the emergence of new
global champions. For example, in Taiwan we have already seen
one or two technology companies that have become global players.
Should investors favor emerging-market companies over
developed-economy companies?
Giles Keating: In the longer term, companies with exposure to
the fast-growing emerging markets will tend to outperform. But
investors need to balance such long-term trends against shorterterm
economic cycles. Recently, in conjunction with the slightly
slower global economy over the last six months, we have seen
some of the developed-economy companies move ahead of some
of the emerging markets, for example. This can create a good
entry point into stocks exposed to emerging markets, to pick up
the long-term trend.
You mentioned commodities and long-term trends. What will be
the next key area under “basics” theme? And on which areas
should investors focus under the “enrichment” and “switching”
themes?

GLOBAL INVESTOR 1.07 Lead — 17
Burkhard Varnholt: In the “basics” area, I expect the whole
security market to take off. I think we are still fairly early into the
game. In the “enrichment” area I favor two themes: one is the
whole healthy living issue, which we have been talking about since
the beginning of this year. And, secondly, the consumer electronics
story. I believe that we can expect major changes in the
consumer electronics area, which of course will have an impact
on countries like Taiwan and Korea, where a significant part of
the world’s electronic components are manufactured. And in the
“switching” area, I am very interested in the topic of outsourcing
and in the re-rating of emerging markets.
Giles Keating: I strongly agree. Perhaps in the “basics” area I
would add the whole infrastructure complex. For example we
can look to some of the German companies that provide products
like power generation equipment, railway technology or construction
equipment. And, in the “enrichment” area I would also focus on
health care, wellness and beauty.
How important is the re-rating of countries or companies in
regard to globalization?
Burkhard Varnholt: It is definitely a major issue. The business
revolution of recent decades has entered a phase where developments,
such as the outsourcing of knowledge work, the emergence
of new global brands and the economic and political transformation
of whole countries will lead to a re-rating of certain
countries. There is no justification for penalizing certain markets
just because they happen to be part of the emerging-market
community. Their stocks should be valued along the same criteria
as stocks in developed economies. After all, we live in a world
where an emerging market like China has transformed itself into
one of the world’s largest creditors.
Giles Keating: What Burkhard said about the re-rating of countries
goes as well for certain companies. As I mentioned before,
in the near future we will see the emergence of new global leaders.
Right now, some Asian companies in China and India are buying
or building global brands and, as these develop, there would be no
reason at all for these to be lowly rated.
Health care seems to be a good example for the changes
that globalization has brought about – would you agree?
Burkhard Varnholt: Absolutely. For example, there is a new
kind of health care tourism. There are clinics in India that specialize
in heart or in hip transplants, and their clients come from the
United States. I see advertisements for dentists in Hungary and
Germany in the newspaper every day. Globalization is about getting
the best – any time, anywhere.
Giles Keating: Some of the developments we are seeing
now could be explained by some of the early economic theories
of Adam Smith and David Ricardo. It is about comparative
advantage, the idea that it makes sense for people to specialize
at what they’re best relative to others.
We have talked about the dark side that globalization can
entail for individuals or families. Is there a dark side for investors
too?
Burkhard Varnholt: I think it is more about risks than dark
sides. And an investor can take precautions against most of the
risks we have been talking about.
Giles Keating: Burkhard is right. It’s critical to use asset allocation
to deal with those great challenges – but also take into
account the great opportunities. For example, the political risks
are substantial and there are security concerns across the world.
A large part of the last Global Investor Focus was dedicated to
this question. But an investor can take precautions against these
risks by putting some part of his or her asset allocation into the
security field.
Burkhard Varnholt: To give another example: the production
of energy is going to be a critical challenge for the global village.
But, for an investor, this also creates the opportunity to invest
in companies that deal with this problem. The same goes for
climate change, which is, unfortunately, one of the very dark sides
to globalization and industrialization. Again, an investor can take
precautions by allocating some parts of his or her efforts into
the water industry, which is going to be most affected by climate
change.
Giles Keating: The challenges for the individual or a family
and the challenges for an investor may look different at first
sight. But they have one very important thing in common as well.
It may sound like a cliché, but it is true nonetheless: where
there are risks, there are opportunities, and where there are challenges,
there are solutions. Investors have to be ready to seize
those opportunities.

GLOBAL INVESTOR 1.07 Basics — 18
Basics
Finding answers in our genes Page 19
Evolution of senior housing Page 32
21st-century clean energy homes Page 28

GLOBAL INVESTOR 1.07 Basics — 19
Finding answers
in our genes
The science of understanding genes and heredity, called genetics, has far-reaching implications
in the life science industry. A number of scientists, many of whom received Nobel prizes for
their work, have contributed ground-breaking discoveries to the field of genetics, making it the
important science that it is today.
Dr. Carri Duncan, Equity Sector Analyst, Dr. Maria Custer Sigrist, Equity Sector Analyst, Tania Dimitrova, Equity Sector Analyst
In 1859, Charles Darwin published his controversial “The Origin of
Species,” in which he proposed his theory of evolution, a concept
that drastically changed our perception of animal evolution. Darwin’s
theory of natural selection proposed that all living things
evolve new traits and only the species that most fit to their environment
survive. This revolutionary idea was widely contested in an
era when most scientists fully accepted that each organism was
the distinct work of a divine creator. Genes were later found to
encode the instructions for any individual’s traits. As the name
suggests, classical genetics was an early field that examined the
science of heredity. In 1865, Gregor Mendel, known as the father
of genetics, published his classic paper “Experiments on Plant
Hybridization,” giving us the first proof that traits are inherited
through successive generations according to certain laws. Thus
classical genetics laid the foundation for the modern fields of
molecular genetics and molecular biology. Molecular biology has
opened new avenues to understanding how genes work. Major
milestones in molecular biology have propelled genetics, such as
when Hershey and Chase proved that DNA was the genetic material
by which traits were passed on through successive generations,
or when the structure of DNA, the fundamental element of our
genes, was discovered by Watson and Crick with the work of
Rosalind Franklin. These discoveries provided the framework for
molecular biology and the basis for understanding how information
is transferred through the genetic code. The above findings were
indispensable for the biotechnological revolution that began in
the 1970s, including the development of recombinant technology
methods to manipulate, clone and introduce new codes into DNA.
As the name implies, recombinant DNA is the result of combining
DNA sequences to develop a new protein or effect. The deliberate
recombining of DNA sequences, known as DNA recombinant technology,
has enabled the creation of new proteins and is accomplished
using a range of organisms – from plants and animals to
yeast and bacteria. This technique has significantly transformed
many industries.
DNA technology has revolutionized not only biology, but also forensic
science, agriculture, chemistry and a host of other disciplines.
Important leaps forward in medicine occurred with the production of
human proteins such as insulin and growth hormones to treat human
diseases. Without genetic recombination technology, these
achievements would not have been possible. The 20th century provided
ground-breaking discoveries related to understanding DNA
and the genetic information that it encodes. In this issue of Global
Investor, we focus on two aspects of how we can take advantage of
genetic information in the 21st century: the Genographic Project,
which uses population genetics to understand human migrations,
and tailored medicine, an advanced approach to developing customized
drugs tailored to fit an individuals genetic background.

GLOBAL INVESTOR 1.07 Basics — 20
Generating a human family
tree using DNA
The Genographic Project is a comprehensive effort using DNA to map the historical migration of humans. Scientists from
ten centers worldwide will analyze more than 100,000 DNA samples over the next few years. To learn more,
we turned to Dr. Spencer Wells, the scientist who directs the USD 40 million dollar program launched by National
Geographic and IBM. Dr. Carri Duncan, Equity Sector Analyst Health Care, Dr. Maria Custer Sigrist, Equity Sector Analyst Health Care
The Genographic Project was launched in
April 2005. By using DNA from volunteers,
its goal is to tell the story of how humans
migrated out of Africa. Field scientists aim
to gather as many as 100,000 DNA samples
from both public and indigenous (i. e. native)
populations on six continents within five years.
Scientists in Australia, Brazil, China, France,
India, Lebanon, Russia, South Africa, the
United Kingdom and the United States are
the principle investigators involved in coordinating
the voluntary collection of these samples.
IBM’s Computational Biology Center
will be the backbone for the computational
biology, through which data will be sorted for
analysis, thus enabling the discovery of new
relationships within the genetic data.
Dr. Wells not only co-founded the project
but also oversees the worldwide data collected.
So far these data have provided a
peek into the past. Studies suggest that all
existing humans actually descended from a
group of African ancestors who, roughly
60,000 years ago, began a remarkable journey
migrating to Asia, India, the Middle East
and Northern Europe. “We are all members
of an extended family,” says Dr. Wells, “and
the genetic data is there to support it. If anything,
the data should send a message to
people that perhaps we should not discriminate
against each other that much.”
But this is not all. The Genographic Project’s
research methodology can also address
questions raised today about historical
events. According to Dr. Wells, the Genographic
Project has the potential to add to
our knowledge of written history. “The reason
for doing this kind of work is to add something
to our knowledge of history, not only to
confirm what we already know now, but also
to show us new patterns that might lead to
new interpretations of the history book,”
Wells says. For example, Dr. Wells and his
team were recently in Tajikistan, a former
SSR located north of Afghanistan, where
people claim a link to Alexander the Great’s
armies. His work out of the project’s Eurasian
regional center in Moscow could help
identify a genetic marker that would verify
this assertion.
Glimpses into your personal history
In addition, the Genographic Project offers a
look into the personal history of every participant
and “an exciting opportunity to participate
in a real-time scientific endeavor,”
says Dr. Wells. The general public can take
part in the project by purchasing a Genographic
Project Public Participation Kit for
USD 100 on the project’s website (https://
www3.nationalgeographic.com/genographic)
and submitting their own cheek swab
sample, which will allow them to track the
overall progress of the project, as well as
learn their own migratory history. These personal
results are stored anonymously with a
password on the website to protect the privacy
of participants. Only a year and a half
into the project, Dr. Wells and his colleagues
have already managed to collect 17,600 DNA
samples from indigenous populations and
169,000 DNA samples from the general public
by selling public participation kits.
According to Dr. Wells, besides the difficulties
associated with compiling the data
from different sources and dealing with public
perception, the biggest challenge is “simply
getting the samples.” He continued, “It’s
not only to deal with logistically difficult
places like Tajikistan, where you have to take
many flights to get there and travel over land
for 20 hours across bumpy roads and all that,
but conducting the outreach that’s involved
in doing this; talking to indigenous people
and the general public around the world
about what we’re trying to do, and how we’re
doing it. The ethical framework for the project,
explaining what we will be doing, what
we won’t be doing, and the methods we’re
using, and then literally taking the samples:
that is probably the biggest challenge.”
Spencer Wells is the project’s director.
He developed the concept with National Geographic,
and together they approached
IBM for computational support. The Waitt
family was also interested in the project and
gave grant support to get field work underway.
Together, their efforts will offer us a peek
into the journey of our ancestors as written
in our genes. To find out more about this project
visit www3.nationalgeographic.com/
genographic.

GLOBAL INVESTOR 1.07 Basics — 21
Source: www3.nationalgeographic.com/genographic
Great-grandfather
Great-grandmother
Grandfather
Grandmother
Father
Mother
Son
Daughter
Mitochondrial DNA Y chromosome Other chromosomes
Understanding genes and heredity: Genetic recombination
Genetic recombination occurs after mating, generating diversity within a species. Each parent has different genetic information contained in their
chromosomes. The combination of different sections of the parental chromosomes leads to a child that is different from each parent, yet carrying
genes from each.

GLOBAL INVESTOR 1.07 Basics — 22
Interview with Prof. Klaus Lindpaintner, Research Head at Roche Genetics
& Roche Research Center for Medical Genomics Interview Dr. Carri Duncan
Tailored medicine:
A search for genes that fit
Despite the huge advances in medicine during the 20th century,
there is still a significant need to address unmet clinical needs.
Drug therapies often fail with many patients and, in some cases,
even cause negative effects. Recognition of the different drug responses
among individuals is essential in order to optimize medical
treatments.
Dr. Carri Duncan: We’re interested in understanding more
about tailored medicine and the role of Roche. To start, it would
be interesting to hear from you what the concept behind tailored
medicine is and how it compares to traditional therapeutics.
Can we assume that there is an advantage?
Prof. Lindpaintner: I think it’s actually wrong to make the assumption
that there’s traditional medicine and tailored medicine. I think
this is all a continuum. What we’re looking at is a consistent development
ever since eons ago toward more specific, targeted, therefore
presumably successful, medicine. This is not a new concept
whatsoever. What is somewhat new has to do with the progress in
basic cell biology, basic understanding of how life ticks, starting
with the DNA. Today, for example, we are able to analyze people’s
DNA and see whether certain enzymes work more actively or less
actively – as we can do with Roche’s AmpliChip Cyp 450, which is
very much personalized medicine using these new tools.
You mentioned this AmpliChiptest. Is this getting more into
the realm of looking at pharmacogenetics (i. e. examining genes
for drug candidates)?
Prof. Lindpaintner: Personalized medicine, or targeted medicine,
is to some extent very much the same thing as pharmacogenetics.
Now, pharmacogenetics, as the word suggests, looks primarily at
distinguishing characteristics on the level of the DNA. You could
apply basically the analogous principle to measurements that are
being done not on the level of DNA, but on the level of proteins or
on the level of some other small molecule as the case may be. Can
we identify a characteristic that we can measure in the blood of patients
or in the urine maybe, or some other body fluid, that would
help us make a better judgment call as to who will benefit most,
who will be more likely to benefit? So, the AmpliChip CYP 450 provides
a very specific application of pharmacogenetics. It measures
two enzymes, which are among those that are most commonly involved
in metabolizing or detoxifying medicines that are given to
people. If you take a medicine, your body has to get rid of that medicine
at some point again, because you don’t want to have it in your
system forever, and usually it’s enzymes in the body that break
down those medicines, and then they get eliminated through the
urine or the feces. The genes you have inherited from your parents
sometimes result in enzymes that are more active, sometimes less
active. So, if you happen to have inherited an enzyme that’s more
active, your body breaks down the medicine so fast that it never
reaches the kind of level in the bloodstream that is required for effective
treatment, i. e. the drug will not work when you take the
regular dose. What you would need is actually a higher dose of that
medicine. What the chiptest tells you is that you are likely to need
that higher dose, although it doesn’t tell you exactly what dose. It’s
very important to keep in mind that biology and medicine are never
black and white but rather shades of grey, always probability to
some extent.
The AmpliChip, is it Affymetrix? RNA- or SNP(DNA)-based?
Prof. Lindpaintner: This particular chip is SNP-based. We have
an alliance with Affymetrix in our diagnostics division, and they
have taken the technology and applied it very specifically to the
particular question.
I think it’s all very exciting in that there’s a lot of promising
development that can come out of this, but how well is Roche
positioned in this particular area?
Prof. Lindpaintner: I would say better than anybody else for a
number of reasons. First, the Roche Group, including Genentech,
has had by far the most experience in this field. Being the largest
in vitro diagnostics company in the world, and certainly by far the
largest molecular diagnostics company in the world, I think we have
a particular, deep understanding and a good grip on what it means
to develop, gain approval, then market and get the endorsement
and the acceptance of the medical community for such products.
Don’t think for a minute that taking the purely research-based Affymetrix
chip to where it has become a robust clinical tool was a
small feat. This was a major effort and a major success story. Then
for the next step, actually taking that tool and gaining, for the first
“It is a kind of silver bullet,
a heat-seeking missile that hones
in on just those cells that
over-express the oncogene.”

GLOBAL INVESTOR 1.07 Basics — 23
time ever, regulatory approval for that kind of diagnostic again was
no small feat. It was a real accomplishment for the company.
So, with your chip technology, let’s say you find a particular
gene that looks interesting for a particular disease, but then there
has been a professor or a group of people working in the field
for years. Would you then collaborate? Do you do academic collaboration
when you find new biomarkers?
Prof. Lindpaintner: The pharmaceutical industry lives and dies by
academic collaborations. There’s no two ways about it. We are completely
dependent on excellent relationships with academia for each
and every one of our clinical development studies and not only in
the clinical field, but also of course in the basic science field. So
this is very much a networking and partnering with both academicians
and small biotechnology companies.
Can you give any examples of a successful academic collaboration
and successful biomarker from which you have been able
to develop specific drugs for specific groups of people? Are there
any successful tailor-made drugs on the market today?
Prof. Lindpaintner: Yes, indeed. Herceptin is a monoclonal antibody
that is revolutionizing the treatment of breast cancer. This is a
drug where the story started in academia with the recognition that
some tumors behave differently than others. In other words, they’re
much more aggressive, they’re much more likely to kill their carriers
in a short period of time. Based on that, basic research demonstrated
that the majority of those very aggressive tumors have one characteristic
in common, and that is an overexpression, in other words
an exaggerated level, of a particular gene called Her 2, an oncogene,
or cancer-related gene. The gene product of Her 2 is a receptor on the
cell surface which binds a specific growth factor and signals the cell
to grow and divide. Now, the next leap of faith was then to say, well
what if we develop a drug that very specifically inhibits that particular
mechanism; it should help the patients in whom this mechanism
contributes to rapid tumor growth. And this was a time when it had
just recently become possible to actually produce specifically targeting
antibodies.
These are mouse monoclonals?
Prof. Lindpaintner: Yes. The next step was to actually make the
mouse monoclonal antibody into a “humanized” antibody, and then
clinical research over years was done demonstrating every step
along the way, that yes, this seems to work, yes this seems to be
promising, yes this is actually something that is a completely new
approach to treating cancers. This is not only a particularly effective
therapy because it specifically addresses the mechanism by which
these cancer cells grow, but also – and this is just as important for
these patients who in the past have had to endure the ravages of
conventional chemotherapy – it is a much better-tolerated form of
therapy. It is a kind of silver bullet, a heat-seeking missile that hones
in on just those cells that overexpress the oncogene. And it doesn’t
do collateral damage. This is a good example for a personalized,
targeted therapy. So this is a therapy that is specifically targeted to
those women – about 25% of all breast cancer patients – who have
the overexpression of Her 2 and the aggressive type of tumor. It’s
not tailored for each individual, but for a group of patients who now
benefit from a better treatment.
So you don’t believe in an individual drug? You don’t see this
as a trend that could evolve in the future, where each person has
their own personalized drug?
Prof. Lindpaintner: If you consider that it costs USD 1 billion to
develop one new medicine, and if we work to develop that specific
Klaus Lindpaintner, a native of Innsbruck, Austria,
graduated from the University of Innsbruck Medical
School with a degree in medicine and from Harvard
University with a degree in public health. After his postgraduate
training and specialization in internalmedicine,
cardiology and genetics in the USA and Germany,
he practiced cardiology and pursued research in the
area of cardiovascular disease, molecular genetics and
genetic epidemiology, most recently as an Asso-ciate
Professor of Medicine at Harvard Medical School in
Boston, Massachusetts. He joined Hoffman-La Roche
Pharmaceuticals in Basel in 1997 as Head of Preclinical
Research in Cardiovascular Diseases. Since 1998, he
has served as Head of Roche Genetics, and since 2001,
also as Director of the Roche Center for Medical
Genomics, coordinating the company’s efforts and
activities in genetics, genomics, proteomics and
associated disciplines.
Photo: Roche

GLOBAL INVESTOR 1.07 Basics — 24
Source: www3.nationalgeographic.com/genographic
Adam
Eve
55,000 B. C. 50,000 B. C. 45,000 B. C. 40,000 B. C. 35,000 B. C. 30,000 B. C. 25,000 B. C. 20,000 B. C. 15,000 B. C. 10,000 B. C.
Mapping the historical migration of humans
Using DNA from volunteers to tell the story of how humans migrated out of Africa: studies suggest that all existing humans actually descended from a group
of African ancestors who, roughly 60,000 years ago, began a remarkable journey migrating to Asia, India, the Middle East and Northern Europe.

GLOBAL INVESTOR 1.07 Basics — 25
medicine for each of the six billion individuals on this globe, you
multiply that billion by six billion, you’re talking about some pretty
big dollar numbers, which are just not realistic. What’s important,
though, is not that we have the perfect drug for one individual, but
that we have increasingly better drugs for most of our patients. To
use it in a metaphor: while today we may have to choose between
a size 40 and size 42 coat, we may in the future have a size 41 or
even a size 41 and a half that may fit us better, in as much as we
probably will never have a truly custom-tailored suit. Pharmacology
isn’t Savile Row.
Not realistic now?
Prof. Lindpaintner: Right, exactly. Plus from a conceptual scientific
standpoint, it cannot be done. Because you can’t do an experiment
in biomedicine on one individual to demonstrate. You have
to do experiments on groups of patients that you classify and characterize
by certain parameters and then you treat one with your
new drug, and one with the old, or with a sugar pill. This is what the
authorities demand from us to demonstrate that the medicine we’ve
discovered is actually better than the old one, and equally safe.
And they demand that we show this not in just one patient – because
that could be pure coincidence – but in a substantial number.
Only such a demonstration provides sufficient confidence that this
new medicine is actually progress. Before you do the experiment,
you never know this. And there are plenty of times, actually, where,
despite some very plausible arguments that the new medicine
should be better, and even having shown that it’s better in laboratory
animals, when you use it in humans, you find it’s not true. Human
nature is simply much too complicated to abide by reason and
scientific argument …
This brings me to the last question. Because you’re focusing
on subpopulations, you’ll end up with small subgroups of people?
Prof. Lindpaintner: Well, smaller groups.
Yes, fewer people. But these are still going to be people
within the population of, let’s say, cancer patients. Because
you’re targeting a segment of the same population, this
has a potential to cannibalize, or eat into a segment of the larger
market of cancer, in this example. How would pharma cope
with this trend?
Prof. Lindpaintner: I think that point in time is far away. I think as
our overall demands on life, on quality of life, our affluence, etc.
grows, we will continue to want medicines for those diseases that
are still underserved, that are still not being optimally treated and so
we’ll continue to want new medicines. Ultimately – how far we can
or will take this, I think is a question society will have to answer. Do
we continue to want improved medicines? Indeed, one of the promises
of personalized health care is actually to make treatments
more cost-effective: you can avoid treating patients who you already
know are unlikely to respond and save the cost of what ultimately
would be useless treatments. Still, even these more costeffective
treatments add to the overall bill, and society will have to
grapple with whether the added benefit is worth the incremental
cost. This is not for us as an industry to decide, all we can do is
point out that there are some underserved medical entities out
there and we could do something about them. But it also of course
comes at a price, because developing an effective and safe medicine
is one of the hardest things humans can do. We have new
innovative drugs or methods or technologies that we can use to help
these patients whom fate has dealt a bad card. It’s up to society to
decide whether we really want to do this, and can afford it.
Affymetrix: a US-based company developing technology
for analyzing genetic information for use in the biomedical
industry. This technology is commonly referred
to as “gene chip” or “gene array.”
DNA (deoxyribonucleic acid) contains genetic information
and is responsible for the transmission of inherited
traits. Encodes all information necessary for a cell’s
function.
Mouse monoclonal antibodies: identical antibodies
produced in mice, often “humanized” for use in human
therapies.
Pharmacogenetics* is the study of inherited differences
in drug metabolism leading to response variance.
Pharmacogenomics* is the general study of all of the
many different genes that determine drug behavior.
RNA (ribonucleic acid): DNA alone is only instructions.
RNA plays an important role, using DNA as a template to
translate these genetic instructions into cellular
functions.
SNP (single nucleotide polymorphism): a variation in
the DNA sequence that occurs when a single nucleotide
differs between members of the same species.
* The difference in definition between these two words is considered arbitrary and these
terms are often used interchangeably.

GLOBAL INVESTOR 1.07 Basics — 26
Interview with Michael Detmar, Professor of Pharmacogenomics at ETH Zurich
and Associate Professor at Harvard University Interview Dr. Carri Duncan
New technologies for the identification
of interindividual genetic variations
Dr. Carri Duncan: We hear a lot about tailored medicine,
personalized health care and pharmacogenomics. Could you explain
what’s new about this research and medical approach and
why it’s so exciting?
Prof. Detmar: It is becoming increasingly evident that there is a
large variability in an individual’s response to many of the currently
used pharmaceuticals. Some patients develop – sometimes severe
– adverse effects after receiving a drug, whereas other patients do
not seem to respond at all to the same drug. As an example, there
are great differences between individuals regarding the rate by
which they metabolize drugs that are widely used to treat hypertension
or depression. These drugs might show little or no beneficial
effect in “fast metabolizers,” whereas “slow metabolizers” might
develop unwanted adverse effects. Thus, a large proportion of a
drug’s therapeutic efficacy, or lack thereof, appears to arise from
the recipient’s genetic make-up. Genetic variation can also influence
the uptake of a drug into and its transport within the human
body, as well as the interaction with its cellular targets. The recent
completion of the Human Genome Project, with the successful sequencing
of the more than 3 billion individual building blocks (base
pairs) of the human DNA, has now enabled significant advances in
our understanding of the differential responses to drug therapies
among individuals.
Whereas it took more than ten years from the initiation of the
Human Genome Project to its successful completion. Novel, highspeed
technologies for the identification of interindividual genetic
variations have now become available, raising hope that customizing
therapy to an individual’s genomic signature (“personalized therapy”)
might become increasingly practical. The great hope is that this development
might help to ensure that only patients are treated with a
certain drug who will likely respond to it, and not those that develop
adverse effects or do not respond at all. This new field of research
is known as pharmacogenomics and is called by some “individualized
medicine.” One should keep in mind, however, that an individual’s
response to treatment is also influenced by many other,
non-genetic factors, including individual lifestyle. Therefore, a truly
“personalized health care” needs to take into account many more aspects
than only the individual genetic disposition. The increased
knowledge about the composition of the human genome has also
enabled rather dramatic advances in basic research into the molecular
mechanisms of disease. As an example, researchers can now
measure the activity of all of the approximately 30,000 human genes
in tissue samples obtained from patients, for example from different
types of cancer, and we therefore have the chance to identify more
of the genes that are responsible for certain diseases. Once these
genes are identified, “tailored therapies” can be developed that
specifically inhibit the diseased cells, but not the body’s normal cells.
Indeed, several of these “tailored drugs” have been approved within
the last few years for the treatment of certain types of cancer.
Your research focuses on determining disease susceptibility
and developing individualized therapeutic strategies using genomic
approaches. Could you provide us an example of how this is
done?
Prof. Detmar: A few years ago, when I was doing research at
Harvard Medical School in Boston, we discovered that certain
types of cancer, such as breast cancer and malignant melanoma,
can induce the growth of lymphatic vessels (that normally drain
fluids from our tissues), and that this leads to increased metastatic
spread to the draining lymph nodes and other organs. These findings
had sparked great hope that we might be able to predict early
whether or not a cancer will spread, and that we might be able to
block a cancer’s further metastasis. Currently we are investigating,
“Important issues for pharmacogenomics
are also the potential
ethical and social implications
of determining an individual’s
genomic information…”

GLOBAL INVESTOR 1.07 Basics — 27
in collaboration with hospitals throughout Europe, whether there
are genetic variations that are responsible for the fact that a cancer
leads to metastases in one patient but not in another, and we are
using genomic methods on cells isolated from tumor samples to
further characterize the responsible genes. At this time, we have
identified a small number of genes that are currently being studied
in more detail. We hope that specific inhibition of these genes might
lead to novel, “tailored” therapies to treat cancer.
This approach offers lots of advantages, which probably explains
why the field of medicine is awaiting this technology. What are
these advantages and how long will it be before tailor-made drugs
are commonly in use?
Prof. Detmar: In fact, the first “tailor-made drugs” have already
been approved for treating patients. Most of these target specific
genes that show increased activity in some cancer patients, for
example in breast cancer. Thus, only patients whose cancers have
an abnormal function of these genes will be treated, thereby avoiding
the unnecessary treatment of others who would not respond to
the therapy. Importantly, the first tests that determine whether or
not patients will metabolize certain drugs faster than others have
been approved for clinical use. These “gene chips” determine the individual
genetic variation regarding important enzymes that can
inactivate pharmaceuticals inside of our body and therefore allow
the adaptation of the dose of a drug to an individual patient’s needs.
In addition, several gene arrays are being developed to determine
the risk of cancer metastasis and therefore the potential need for
a more or less aggressive therapy for cancer patients.
What are the main difficulties related to the development of
tailored drugs?
Prof. Detmar: We have only just begun to use the enormous
amount of genetic information that has been provided by the Human
Genome Project and the related “HapMap” project that determines
the individual genetic differences between 270 individuals
from different populations around the world. The management and
evaluation of the enormous amount of data demands sophisticated
computer programs and bioinformatic tools (and specialists who
know how to use them) to help researchers find the “needle in the
haystack.” Once a potential new target molecule has been identified,
the process of experimental research, development of specific drugs
that inhibit the target, and clinical studies in patients still requires
many years and substantial investment by the pharmaceutical industry.
Important issues for pharmacogenomics are also the potential
ethical and social implications of determining an individual’s genomic
information, and the proper safeguards for keeping these
data confidential and restricted for medical use need to be in place.
Some of us might indeed prefer not to know about our genetic disposition
for developing certain diseases, despite the potential benefit
for the development of more efficient and less toxic therapies.
If you discovered highly promising biomarkers for a particular disease,
would you initiate industrial collaborations to rapidly develop
a treatment? Or would collaborative efforts be more of a twoway
street with your lab also developing ideas from companies?
Prof. Detmar: The first steps to characterize and validate the importance
of newly discovered disease markers are usually made within
our laboratory. However, due to the enormous costs involved, the
further development for potential clinical application can only be
made in collaboration with the pharmaceutical industry. In the past,
we have indeed initiated several collaborative projects in this regard
with companies.
Michael Detmar obtained his medical degree from
the University of Freiburg, Germany, in 1984.
He performed his clinical training in dermatology
at the Free University of Berlin, where he was
appointed Assistant Professor of Dermatology in
1991. He has been at Harvard Medical School in Boston,
Massachusetts (USA) since 1993. Since 1998, he
has been an Associate Professor of Dermatology at
the Massachusetts General Hospital and Harvard
Medical School, both in Boston. In 2004, he was appointed
Professor of Pharmacogenomics at the Swiss
Federal Institute of Technology Zurich. His interests are
in the areas of cancer metastasis, inflammation and
pharmacogenomics.
Photo: Gee Ly

GLOBAL INVESTOR 1.07 Basics — 28
Photo: Philip Gendreau/Bettmann/Corbis
The way of life
What was novel and exciting in the 1950s is fairly commonplace these days. Now families are beginning to see new and innovative devices aimed at
reducing energy consumption and enhancing the environment, as well as increasing the level of comfort. We believe clean energy homes using improved
solar, wind, geothermal and hydro technologies will make significant changes to family life around the globe in the 21st century.

GLOBAL INVESTOR 1.07 Basics — 29
21st-century
clean energy
homes
In the 21st century, one solution for families seeking to reduce CO 2 emissions is for them to
generate their own electricity at home, using environmentally friendly methods. This decentralized
system would also reduce power losses from long-distance transmission. A decentralized
energy system would see everyday buildings playing host to devices such as solar panels, small
wind turbines, geothermal heating and cooling systems, plus smart technologies in insulation / heat
conveyance in the family home.
Hervé Prettre, Head of Commodities and Equities Trading Research, Miroslav Durana, Trading Research Analyst
How will families live in the 21st century? Looking back over time,
the type of housing available has always played a major role in the
quality of family living. For instance, in the 1930s American families
were still used to living in tiny apartments, travelling by streetcar and
spending their weekends in public parks. After World War II, a new
type of housing emerged, based on cheap oil and easy access to
electricity. These new dwellings changed the way Americans lived:
large individual homes spread out over the suburbs became the
best vehicle for improving the quality of life. What will the housing
of tomorrow be like? What environment will the 21st-century family
live in? We believe that alternative energy will definitely be a significant
factor shaping life this century. In our view, oil, the most
important commodity affecting life today, will be at risk due to the
following factors: peak oil projections (35 to 50 years of oil left according
to the International Energy Agency), government aims to
reduce dependency on OPEC oil, as well as geopolitical risks with
regard to oil delivery to Western countries. What are the potential
consequences? We believe families will increasingly adopt a new
attitude toward energy consumption to include clean energy and
off-grid microgeneration.
Microgeneration is defined as the ability to generate electricity
close to where it is needed via miniature generation facilities. It can
be seen as decentralizing the electricity production process, contrary
to today’s centralized energy system. A decentralized energy
system would see everyday buildings playing host to devices such
as solar panels, small wind turbines, geothermal heating and cooling
systems. The electricity created would be used directly by the
house or workplace, and the surplus would be fed into a local network,
avoiding the significant loss that occurs when electricity is
transported long distances. All buildings could then become zero
emission centers. How is such a system possible? The answer is
thanks to improvements in alternative energy efficiency and costs.
The US Department of Energy (DOE) expects microgeneration
houses to become the norm over time, from a luxury today. By 2020,

GLOBAL INVESTOR 1.07 Basics — 30
Solar panels: Solar thermal collectors
are used to heat water, air or otherwise
collect energy. In recent years, solar
panels have been refined through improvements
in resin efficiency, conductivity
power, and the ability of new silicon to
capture the sun’s rays.
Solar thermal hot water: Solar water
heating systems can also reduce a home’s
hot water heating demand by 60 % – 90 %.
Designed to last at least 30 years, they
preheat water before it enters existing traditional
water heaters. The hot water
produced is stored in an insulated tank
until the home is ready to use it.
Windmills: Windmills benefit from more
resistant alloys, improved wing design
to react to wind patterns more quickly, and
better energy conservation devices.
Mini windmills have become efficient due
to technological improvements in the
field of mill strength and conductivity.
Hydro generators: Hydro generators
have been developed to run off flowing water,
e.g. a remote home located near a
fast-flowing stream can mount a hydro generator
and connect it to a battery bank
inside the house.
Combined heat and power boiler: When
burning fuels, a substantial amount of
heat is lost to the atmosphere. Condensing
boilers are high-efficiency modern
boilers using hot exhaust gases to preheat
the water in boiler systems.
Ground source heat pumps: Geothermal
systems use the heat retained by
the earth during the heating season and
return it during the cooling season by
using a conventional heat pump. This geothermal
process is possible since the
temperature of the soil one meter below
the ground is practically constant.
New attitudes toward energy consumption?
The US Department of Energy expects microgeneration houses to become the norm over time, from a luxury today. Over the coming years,
prices for microgenerators are expected to decline, driven by further technological improvements and mass production.

GLOBAL INVESTOR 1.07 Basics — 31
the DOE predicts that such houses could become the buildingindustry
standard. Today, anyone can have a zero-energy home, but
at a price: 10 % to 20 % more than the cost of a traditional home.
Over the coming years, however, prices for microgenerators are
expected to decline, driven by further technological improvements
and mass production.
Improved technology and mass production
In recent years, solar panels have been refined through improvements
in resin efficiency, conductivity power, and the ability of new
silicon to capture the sun’s rays. Windmills benefit from more resistant
alloys, improved wing design to react to wind patterns more
quickly, and better energy conservation devices. Ethanol efficiency
has improved and uses a lower share of sugar/corn than in the
1970s, making it more viable as an oil alternative. Finally, micro geothermal
heating systems have become a reality at cheaper prices,
following the implementation of new drilling and construction techniques.
Against the backdrop of rising oil prices in recent years, an
increasing number of projects have been implemented involving
alternative energy. As a result, many providers of microgeneration
clean energy devices have been able to significantly raise their production
capacity. Consequently, production costs have declined,
enabling providers to lower prices. This virtuous circle is likely to
continue as an increasing number of microgeneration projects are
being implemented. Thus, both the affordability and efficiency of
alternative energy microgenerators have improved and will likely
keep improving. Consider the following example for solar energy:
thirty years ago, US President Jimmy Carter had solar panels installed
on the top of the White House, which never worked! Twenty
years ago, one USD 5,000 solar panel would satisfy the lighting
requirement of a bedroom. Five years ago, it became possible to
fully power a US home using solar energy, but this still required
20 solar panels and an investment of USD 25,000. Today, according
to industry experts, 17 solar panels are enough, at a price tag
of USD 16,000. In less than a decade, mass production and R & D
should enable the widespread use of such “luxury items.”
Solar energy, geothermal heating and windmills
Solar air heating systems will likely register the strongest success.
Mounted on an exterior, southern-facing wall or on the roof, solar
air-heating collectors can reduce a home’s or business’ annual
heating costs by as much as 30 %. Costing far less than a new
conventional heating system, solar air heating systems usually break
even in three to six years. They will typically last for 18 to 35 years,
and require minimal maintenance. Solar water heating systems can
also reduce a home’s hot water heating demand by 60 % – 90 %.
Designed to last at least 30 years, they preheat water before it
enters existing traditional water heaters. The hot water produced is
stored in an insulated tank until the home is ready to use it. Geothermal
systems are modern renewable resource systems using the
earth’s capacity to store solar energy. Geothermal systems use the
heat retained by the earth during the heating season (the winter)
and return it during the cooling season (the summer) by using a
conventional heat pump. This geothermal process is possible since
the temperature of the soil one meter below the ground is practically
constant. The US Environmental Protection Agency (EPA)
found that geoexchange systems can reduce energy consumption
by over 70 % compared to electric heating systems with standard
air-conditioning equipment. Mini windmills have become efficient
due to technological improvements in the field of mill strength and
conductivity. Their mass production in several countries, such as
Germany and Spain, has led to a decline in prices. Current UK government
policy aims to generate 20 % of the nation’s energy from
green sources by 2020, replacing gas, coal and oil power stations
that create the carbon emissions blamed for climate change. Presently,
80,000 homes in the UK have some kind of home power
generation such as windmills and/or solar panels. This power is now
moving into the mass market and UK retailers such as B & Q (a subsidiary
of Kingfisher), the largest do-it-yourself retailer in Europe,
are selling rooftop windmills for GBP 1,500, including installation.
Other UK retailers such as Currys offer solar panels. Although local
windmills will probably not be able to generate the power necessary
for such energy-intensive functions as home heating or air
conditioning, they can generate power for less energy-intensive
appliances like lighting.
Investing in alternative energy
We believe that the implementation of the three microgeneration
sources mentioned above will likely see houses move toward zeroenergy
emission status. This microgeneration revolution should
have a positive effect on alternative energy stocks. We recommend
that long-term investors gain exposure to a whole universe of alternative
energy stocks, possibly via an index or a certificate to gain
access to smaller companies that are fully dedicated to some alternative
energy sources. As these companies have higher risks than
large diversified companies, an index or basket is required to limit
company-specific risks. Among the large cap companies, we have
selected General Electric (GE US, BUY), the world’s largest wind
power installer, for which renewable energies contributed around
10 % to 2005 sales figures, Siemens (SIE GY, BUY), for which total
sales in alternative energy represent 2 % of sales, but a much larger
share of the company’s operating earnings growth outlook, British
Gas (BG/ LN, BUY), world leader in liquid natural gas production,
Gaz de France (GAZ FP, HOLD), Vestas Wind Systems (VWS
DC, HOLD), the largest pure play in wind technology, Philips (PHIA NA,
BUY), producer of energy-saving lightbulbs (lighting represents
15 % of sales, but Philips does not report the share of energy-saving
lightbulbs), Cameco (CCO CN, BUY), the largest uranium producer,
and SolarWorld (SWV GR, BUY), a pure play in solar cells.

GLOBAL INVESTOR 1.07 Basics — 32
28.6% aged

GLOBAL INVESTOR 1.07 Basics — 33
Evolution of
senior housing
Driven by demographic trends, rapid growth of the older generation has evoked a greater
sense of urgency for senior housing needs. While often a difficult and financially burdensome
decision, seniors can elect several alternatives of living facilities depending on their required
level of care. While primarily a US phenomenon (although growing in Europe and Asia),
healthcare real estate investment trusts (REITs) that focus on senior housing can offer long-term
growth potential.
Gregory Siegel, CFA/CPA, Equity Sector Analyst
With the vast baby boom generation aging, demographic forces
are sizably shifting the composition and needs of the older generation.
According to US Census data, from 2000 to 2020, the
number of Americans aged 85 or older is expected to rise 70 %, far
surpassing the projected 19 % growth rate for the overall US population
during that period. Figure 1 shows the expected evolution of
the US population by age group through 2050. The aging population
has far-reaching ramifications, including the growing importance
of long-term care for seniors. Census data also indicates
that around 6.5 million older Americans require assistance with
their daily living activities, with the figure expected to double by
2020.
A wide array of facilities available
For those seniors who elect to move from their existing residences,
several types of facilities have been established to address the
level of care required (see Table 1). At one end of the spectrum are
independent living facilities, in which residents lead a generally
self-sufficient lifestyle with minimal assistance. At the other end
of the spectrum, for seniors with more acute needs, nursing facilities
offer round-the-clock care for those who find it increasingly
difficult to live independently. More specialized nursing facilities,
such as Alzheimer’s care/dementia facilities, have also become
increasingly prominent. Assisted living facilities (ALFs) are the likely
wave of the future in senior housing and include a mix of independent
living, nursing and Alzheimer’s care/dementia facilities.
These facilities are generally preferred by seniors who choose not
to live on their own, but who also do not require 24-hour care. ALFs
represent the fastest-growing type of housing for older Americans.
According to the Assisted Living Federation of America, more than
a million Americans live in approximately twenty thousand such facilities.
Finally, several hybrid alternatives have arisen due to varying
housing preferences. For example, “all-in-one” facilities, called
continuing care retirement communities (CCRCs), comprise a continuum
of choices, from private residences to independent living to
assisted living to nursing facilities, all in one primary venue.
Insight from an industry expert
For families of seniors, determining whether to enter a senior housing
facility, as well as the type of structure, is often a difficult and
emotional decision. To gain better insight into the issues involved,
we interviewed Stacey C. Maines, MSW, LSW, a US-based geriatric
care manager, long-time counselor and an expert in the senior
housing field.

GLOBAL INVESTOR 1.07 Basics — 34
Figure 2
Assisted living facility construction
After peaking in 1998 –1999, construction of assisted living facilities
has dropped off markedly. This phenomenon poses positive
valuation and cash flow implications, but also creates long waiting periods.
Source: American Seniors Housing Association
Number of units
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Table 1
Senior housing facility continuum
Depending on the level of care needed, various categories of
senior housing facilities are available. Many offer specialized care,
while others can offer more than one option on their premises.
Source: Assisted Living Federation of America, Credit Suisse
Type of facility
Independent living
Assisted living
1997 1998 1999 2000 2001 2002 2003 2004 2005
Low level
of assistance
provided
Moderate level
of assistance
provided
High level
of assistance
provided
Nursing
Alzheimer’s care/dementia
Continuing care retirement
communities
Gregory Siegel: What determines one’s decision to enter
a senior housing facility?
Stacey C. Maines: A senior’s decision to move is not always
clear. In concert with his or her family, he or she needs to assess,
among other things, his or her current living situation. The major
question is: “Are my needs being met?” As our older adult population
ages, their social support network begins to fade. A harsh reality
is that more and more of their friends are dying or moving into
alternative housing. In addition, health factors and decreased driving
independence makes it more difficult to get out of the home.
They become more and more isolated and, in some cases “prisoners
in their own home.” While there may be “at-home” solutions, for
many, a move is a strong possibility, if not the only option.
Beyond social needs, what other factors are involved?
Stacey C. Maines: Physical barriers often play a role. For example,
stairs may be more difficult to manage, a large empty home
may be more difficult to maintain, a bathroom is too far from the
bedroom, or rooms cannot easily accommodate wheelchairs. Also,
with age generally come more health-related issues. Older adults
may require more medication assistance, insulin coverage for diabetics,
dialysis, more frequent doctor visits, etc. From a family standpoint,
after one spouse dies, families often want their widowed
seniors closer to them.
It is well documented that, given the rapid increase in
US health care costs, senior housing is quite expensive.
How do seniors afford housing facilities?
Stacey C. Maines: Obviously, income and assets play a significant
role. If there is no home to sell and there are few assets, one
may be applying for Medicaid [the US publicly funded health program
for people that cannot afford medical care]. Unfortunately,
many programs do not accept Medicaid, including most independent
living facilities. Lack of financial resources may unfortunately
limit options.
There are certainly a number of types of housing alternatives.
How do seniors decide on which one is right for them?
Stacey C. Maines: I always ask my clients/families, “What are
your needs now and what are your needs going to be in the future?”
For example, if someone was deemed to be a classic candidate for
an assisted living facility, but was diagnosed with brain cancer, he
or she would likely require a great deal more care within a month or
two, not to mention anticipating the possible onset of dementia.
Overall, I would discourage making a move twice. The basic idea is
“aging in place.” If you are entering a facility and are borderline appropriate,
or already at the highest level of care, where do you go
from there? A move at any age is traumatic, and the impact on a
senior even more so. Moves should be as few as possible.
One last question. What are your views on the future of senior
housing?
Stacey C. Maines: Obviously, people will continue to have more
options and more say in where they can go. The current generation
of “super seniors” did not expect to live well into their nineties, and
often beyond a century. As adults, they thought they would retire
at 65 and have a few good years as an active adult. They did not
imagine living as long and with health problems. They were not
prepared to be paying for, in many cases, 20 years of some form of
care or assisted environment. Not too many years ago, nursing
homes were the only option if one could not live at home. Now,
with assisted living and independent living facilities on seemingly
every other corner, there are a few steps before a nursing home.

GLOBAL INVESTOR 1.07 Basics — 35
Often the stay in a nursing home is now less than a year. One other
trend is family involvement. There seems to be a resurgence of families
reuniting in later years. Also, the increase of cell phones make
“distant” family members more accessible and more involved in care
issues. We definitely see fewer and fewer “abandoned” seniors. If
nothing else, our generation will be better prepared.
Investment opportunities within senior housing
From an investment perspective, the long-term growth prospects
of the senior housing industry appear quite favorable. Demographics
are a major factor in this positive growth story, given the aforementioned
preponderance of the older generation. Supply and demand
dynamics are also attractive for the senior housing sector,
with limited new construction of facilities in recent years. Over the
past six years, according to the American Seniors Housing Association,
the number of additional assisted living facilities has declined
precipitously, from approximately 30,000 units developed in
1999 to just over 5,000 in 2005 (see Figure 2). From a real estate
valuation / cash flow perspective, these facilities should likely continue
to thrive, given the ongoing demand for assisted living care. In
fact, with robust demand and limited supply, occupancy rates have
risen in recent years, and according to the National Investment
Center, currently stand at 89 %. Occupancy rates are even higher in
independent living facilities and CCRCs, ranging in the low-nineties.
A noteworthy social downside to the high occupancy rates is longer
waiting periods (sometimes up to several months) for many seniors
who desire to enter a housing facility. Finally, as noted, the
rapid rise in health care costs also provides cash flow growth opportunities
for senior housing facilities. Amid the growth in senior
housing and long-term care, many health care REITs have proliferated.
While the sector is decidedly a US phenomenon, we expect
that such REITs will inevitably evolve in both Europe and Asia due
to overall REIT expansion in those regions, coupled with similar demographic
trends. With a limited supply of senior housing facilities,
most health care REITs also tend to operate other types of structures,
such as hospitals or related medical facilities.
Currently, there are 12 US-based health care REITs, with a total
market capitalization of USD 20 billion. Collectively, the health care
REIT sector is still somewhat small relative to overall REITs, comprising
only 5 % of the total REIT index (FTSE NAREIT index: USD
422 billion market cap). The largest health care REIT is Health Care
Property Investors, Inc., with a current market cap of USD 4.5 billion.
Based in Long Beach, California, Health Care Property has
approximately USD 4.4 billion of real estate holdings somewhat
evenly split among senior housing, hospitals, skilled nursing facilities
and medical office buildings. The company is geographically
dispersed within in the US, with 534 health care properties located
in 42 states. For pure senior housing specialization, Health Care
REIT, Inc., with a market cap of USD 2.6 billion, manages 477 facilities
focused solely in the senior housing sector.
In the US, independent living communities offer senior citizens a
buoyant lifestyle with common activities.
Photo: Nick White/Gettyimages
Stacey C. Maines, MSW, LSW, is a licensed social worker with more
than ten years experience in providing supportive counseling,
awareness and education to families in crisis. She holds a master’s
in social work from New York University. Ms. Maines has been in
private practice as a geriatric care manager and has worked in a variety
of long-term positions offering services to the institutionalized
elderly. She currently specializes in community-based education and
marketing.

GLOBAL INVESTOR 1.07 Enrichment — 36
Modern retailing in India Page 43
Stocks with family influence Page 48
The hidden asset Page 37
Enrichment

GLOBAL INVESTOR 1.07 Enrichment — 37
The hidden
asset
Women contribute more than 50% to the world economy and the share of women in paid work is rising.
While there are still obstacles for women to fully participate in the production process, women
are increasing their spending power. Demographics add to the picture, as more and more divorced
and widowed women will have to make their own financial decisions. This development is mirrored
in the developing world where the majority of immigrants are women.
Dr. Anja Hochberg, Head of Global Economics and Forex Research, Christine Schmid, Equity Sector Analyst
Women play an increasingly important role in the world economy,
contributing substantially to gross domestic product (GDP) via increased
consumption for goods and especially services but also via
enhanced productivity. According to official statistics, women in
paid work in developed countries contribute approximately 40% to
official GDP. Adding in their unpaid housework at an average home
help wage, this figure clearly jumps above the 50% mark. In addition,
the increasing participation of women in the labor market is
expected to add to potential growth, especially in the West. In most
developed countries, there are more female than male students in
higher education with numbers ranging from more than 50% to
nearly 70% (see Figure 2). Poland and the Slovak Republic have
exceptionally high rates (81% and 75%, respectively), mainly because
of the current employment opportunities as well as a dramatic
rise in the cost of living. In general, education strengthens
women’s attachment to the labor market by increasing their potential
earnings.
Potential shift in GDP per capita growth
Ultimately, this situation should lead to increased labor productivity
and employment performance, which in turn is bound to shift GDP
per capita growth upwards – especially in mature industrialized
countries, where we see a decline in male labor force participation
rates (see US participation rates in Figure 3). The extent to which this
would bring an increase in potential GDP varies in different countries
and is shaped by socioeconomic and political structures. In New
Zealand, for instance, an increase in female participation by women
aged 25 – 34 and adjusted for paid maternity leave to the average
of the five best-performing OECD countries would raise potential
GDP by one percentage point.
Obstacles to higher female participation
It appears, however, that there are still serious obstacles to taking
full advantage of one of the most underutilized sources of growth
worldwide. One is often associated with the role of working mothers.
On the one hand, it is feared that an increased female participation
rate will have negative effects on fertility rates. Academic
studies, however, show that, on the contrary, there seems to be a
positive correlation between fertility and the participation rate at
least for the developed world (see Figure 1). Country-specific differences
have a significant effect on the employment rate for women,
such as the tax treatment of second earners, childcare benefits/
subsidies, paid parental leave. For example, the Nordic countries
appear to show a higher level of full-time female participation.
In a very broad sense, the decision of women to join the labor
force is influenced by three factors: their economic situation, their
preferences and cultural habits, and the institutional framework in
their society. While cultural habits do not change easily, institutional
framework conditions can change more quickly and can also
foster a change in cultural habits. While there is no all-embracing

GLOBAL INVESTOR 1.07 Enrichment — 38
2.10
Sweden
Ireland
Hungary
1.90
Finland
Mexico
Denmark
1.70
Spain
South Korea
Belgium
1.50
Poland
Japan
France
1.30
Germany
Italy
Greece
Slovak Republic
New Zealand
Fertility rate
Portugal
1.10
35 37 39 41 43 45 47 49 51
Source: OECD
Women’s participation rate (%)
Figure 1: Fertility versus participation rates
A higher women’s participation rate is not associated with a lower fertility rate. On the contrary, as the Nordic countries show, tax incentives
for second earners and state childcare systems provide the basis for both a high female participation rate and a high fertility rate.

GLOBAL INVESTOR 1.07 Enrichment — 39
model for family-friendly institutional policies, some basic features
can be identified. They all aim at assisting parents with balancing
their workload within the family, and generally enhancing the participation
of women in the working world. According to a Credit Suisse
study 1 , family-friendly policies include tax incentives that encourage
women to earn a second income, childcare support systems and
the promotion of gender equality with regard to employment opportunities.
Besides shifting the potential rate of growth upward, an increase
in the female labor participation rate would change the economic
structure of a society, as it results in a different demand, e.g.
for services. Figure 4 illustrates how a higher participation of women
in paid work also seems to reduce countries’ savings quotas, i.e.
increasing the propensity to spend in those countries. This seems
to be of special importance for countries with a relatively high savings
ratio, such as Germany. With many of the home-related services
that have been provided by women in unpaid work having to
be outsourced, there is a greater potential to positively influence
economic growth in both the developed world, where the demand
is mainly created, and also in the emerging economies.
Figure 2
Percentage of women in higher education
In most developed countries, there are more female than male students
in higher education, which is defined as tertiary type B (minimum duration
of two years full-time) and first degree. Source: OECD
%
70
60
50
The global care chain
The feminization of migration is a fact. By the year 2005, there were
slightly more female than male immigrants in all regions of the world
except Africa and Asia (see Figure 5). North America is exceptional,
as female immigrants have outnumbered male immigrants since
1930 and still do in Canada and the United States. While most women
historically migrated for marriage or family reunification, recent
years have seen an increase in women on the move, drawn by the
challenges and opportunities of an increasingly globalized world. In
2006, the United Nations 2 reported that poverty is increasing at
twice the rate for women as for men. Over the last 20 years, the
number of rural women living in poverty in the developing countries
has increased by close to 50% to 565 million, while the number of
men living in poverty has grown by only 30%. Many women’s opportunities
are also limited by patriarchal traditions. All this helps to
drive female migration. In migrating, women often make the courageous
decision to enhance their families’ well-being by leaving their
country and families to work abroad. In the developed world, the
combination of women’s increased participation in the workforce
and the lack of family-friendly labor policies and childcare options
in many countries has led to a strong demand for migrant nannies,
e. g. Latin American nannies in Milan or Miami, Philippine nannies
in Bahrain. This phenomenon is well known as part of the “global
care chain” and is helping to build a foundation for worldwide GDP
growth. Another part of the global care chain refers to nursing services,
which have traditionally been provided by women. The excessive
burden of health care needs in poorer countries, low pay, few
opportunities for promotion and poor working conditions have led
many nurses to migrate to wealthier countries.
40
Figure 3
USA UK Germany Sweden Japan South Korea
Share of women in work increases
In the United States, the women’s relative share of labor participation
has increased, thus changing the landscape for consumption.
Source: Datastream, Credit Suisse
% in millions
70
160
65
60
55
50
45
40
35
140
120
100
80
60
40
20
Power of the purse
30
0
Overall, migration supports the home countries and can raise families
out of poverty. For example, of the more than USD 1 billion sent
back to Sri Lanka in 1999, 62% was from women. As they typically
receive less pay for equal work or are employed in sectors that offer
poorer remuneration, the total that women remit might be less in
comparison to men. But available data from the United Nations
show that women tend to send a higher proportion of their income
more regularly and consistently.
1960
1964
1968
1972
1976
US civilian employment (r.h.s.)
US civilian employment males
1980
1984
1988
1992
1996
2000
2004
US civilian employment
females

GLOBAL INVESTOR 1.07 Enrichment — 40
16.1
Finland
11.1
Ireland
Belgium
Germany
France
Hungary
Japan
Italy
6.1
Household savings rate in 2004 (%)
Greece
Denmark
South Korea
1.1
30 35 40 45 50 55 60 65 70 75
Source: OECD
Women’s participation rate in 2004 (%)
Figure 4: Working women spend more
A higher participation rate for women in paid work also seems to increase a country’s propensity to spend, thus affecting countries with a relatively high
savings ratio such as Germany.

GLOBAL INVESTOR 1.07 Enrichment — 41
In addition, roughly 56% of the money transferred is used for daily
needs, health care and education, thus supporting the long-term
prospects of the home countries’ economies as referred to above
in the developed world example. This is largely due to the fact that
women are generally more willing to invest in all of their children
than men, especially in traditional patriarchal societies.
According to the World Bank, global remittances in 2005 are
estimated to be USD 232.3 billion. The sheer size is opening an interesting
new business opportunity for banks willing to offer technologydriven,
simple and low-cost payment transfer solutions such as
BBVA or HSBC. 3 Potentially, today’s migrant might be tomorrow’s
regular retail banking client. Moreover, we think that know-how
transfer and the increased financial knowledge resulting from migration
should further support the demand for microfinance in the
emerging market world. In the developed world, meanwhile, women
are benefiting too. The rising proportion of women participating in
work is likely to shift the spending behavior and support GDP growth
in the developed world in the future, especially taking the aging
population into account. Women are increasingly dominant in product
categories that have not been specially marketed to them in the
past, including financial services, consumer electronics or home improvement.
More women are responsible for their own wealth
Marketing to women could become a major opportunity for financial
service companies. Not only the number of women earning their
own wealth, but also the number of wealthy divorced women and
widows will quickly rise, given the changes in lifestyle and the aging
of baby boomers: 90% of the women in the United States will
sooner or later be responsible for their own wealth. Women need to
save and invest more if they want to have enough money when they
retire. Owning real estate is also important in long-term financial
planning. According to the National Association of Realtors, single
women are today’s fastest-growing segment of homebuyers supporting
the market for condominiums. Financial institutions offering
broad advice including products with protection are well positioned
to serve this growing client segment.
In addition, we expect women’s luxury products like cosmetics
and wellness products, as well as clothes, accessories, jewelry and
watches to benefit further. Companies with strong global brand
names such as Swatch and LVMH could benefit. In general, companies
need to adapt to the changed consumer world or they could
risk missing 50% of the market.
For the overall macroeconomic policy makers, it is important to
highlight the differences in the behavior of men and women, especially
regarding macroeconomic aggregates such as private consumption,
saving and investment, as well as risk-taking behavior. Women
tend to devote a larger share of income to activities that benefit
the household. They are more oriented toward productive but less
risky savings and investments. According to the International Monetary
Fund (IMF), gender equalities enhance economic growth,
which in turn leads to lower gender disparities. To ensure economic
growth going forward, gender inequalities urgently need to be addressed
by policy makers and economic decision makers.
Figure 5
Trends in female migration
Women account for more than half of total migration to developed
countries. This movement is driven by job opportunities in the
so-called global care chain and worldwide demographic developments.
Source: UN Population Division 2006. Trends in Total Migrant Stock: The 2005 Revision
%
54
53
52
51
50
49
48
47
46
45
1960
1985
World
1965
1990
Europe Latin America North America Oceania
1970
1995
1975
2000
1980
2005
1
Credit Suisse Economic Research, Economic Briefing, Familienpolitik unter
neuen Vorzeichen, Nr. 40; Swiss-American Chamber of Commerce,
New York Chapter, October 2005
2
United Nations: State of the World Population 2006
3
For further information please refer to Global Investor 3.06: Banking for 7 billion
and for 7 million

GLOBAL INVESTOR 1.07 Enrichment — 42
The hidden asset
Women and work in Australia
For over 25 years, the percentage of female employees has risen steadily in Australia, while the share of male
employees has declined. A closer look suggests that the rising number of women in the workforce has
helped to increase output and GDP growth. Marcus Hettinger, Global Forex Strategist
How does a higher participation rate of women working in Australia
affect the country’s GDP growth? Since 1980, the percentage
of women in employment has steadily risen from around 35% to
45%, while the percentage of male employees has declined from
65% to around 55% (see Figure 1). Employment has increased continuously
over the past 25 years in Australia. Although the share of
part-time employment among the female labor force is larger, one
can clearly see by looking at the data that the share of full-time
female employment has also increased since 1980 from below 30%
to around 35%. In a global comparison, female migration into Oceania
(including Australia, see Figure 5, page 41) has grown the fastest
and laid the ground for a higher female participation rate.
Women can increase GDP growth
Theoretically, there is a strong relationship between growth in employment
and GDP growth (back tested, a significant correlation of
0.9802). An increase in the workforce leads to an increase in output.
So, how much did the participation of women in the employment
contribute to growth? To evaluate this effect is not a straightforward
task, but under certain assumptions still possible. In 1994,
the male workforce accounted for around 56% of total employment,
while the share of employed women was around 44%. Keeping
these percentages constant until today and assuming that total
employment grows by the same amount as male employment, one
can conclude that employment would be lower today. As there is a
very close relationship between employment and GDP, it is possible
to estimate the level of GDP in 2006 under the assumption that the
share of women in total employment has not risen, but has stayed
constant at around 44% from 1994 onward. This leads to a gap of
around 6% (see Figure 2), which would mean that growth in Australia
has been supported by an increase in the female workforce
of around 0.5% per year over the last 12 years.
In contrast to the example of the US in the 1960s and 1970s,
where increased female labor in the service sector was probably at
the expense of job losses of men in the industrial sector, the example
of Australia seems to show that the larger input of female labor
can increase GDP growth significantly. There might even be positive
growth effects going further. For example, as labor increases
relative to capital, labor productivity decreases because the existing
stock of capital is spread over a larger amount of workers. This
situation might induce new investment which, in the future, would
be another positive factor for growth.
Figure 1
Australian labor market
The percentage of men employed declined to 55%, while the female workforce
increased from 35% to 45%, supporting overall labor growth, including
a sharp increase in women’s part-time work. Source: Bloomberg, Credit Suisse
in %
65
60
55
50
45
40
35
Figure 2
79 81 83 85 87 89 91 93 95 97 99 01 03 05
Men as a % of employment
Employment (r.h.s.)
Impact on Australian GDP
Without the higher female employment rate, the rise in GDP would have
been 6% less over the last 12 years. Or in other words: higher female
participation increased GDP by 0.5% p.a. Source: Bloomberg, Credit Suisse
in thousands
240,000
220,000
200,000
180,000
160,000
140,000
120,000
100,000
in thousands
Female as a % of employment
80 82 84 86 88 90 92 94 96 98 00 02 04 06
GDP
GDP estimated
11,000
10,500
10,000
9,500
9,000
8,500
8,000
7,500
7,000
6,500
6,000

GLOBAL INVESTOR 1.07 Enrichment — 43
Modern retailing
in India
India probably provides the largest consumption opportunity in the world. However, the country has
been slow in letting foreign retailers into the domestic market. Those who want a piece of this cake
should do their homework first, as India is a country where standardized solutions don’t work. Global
Investor spoke to Kishore Biyani, founder and Managing Director of Pantaloon Retail India Ltd.
Arjuna Mahendran, Head of Asian Research, Ruth Yeoh, Global Research Trainee
Retailing in India has traditionally been dominated by several tens
of millions of small family-owned “mom and pop” shops in urban
and rural neighborhoods. But all that is starting to change, as modern
retailing grows rapidly from a low base. Contributing to 10% of
GDP and with a market size of USD 210 billion, the Indian retail
sector is growing at a healthy pace of 5% per annum. Key drivers
include rising per capita incomes, increased urbanization, higher
demand for greater product choice and quality, an increased supply
of quality retail property, regulatory changes and favorable demographics,
which include a growing middle class population and burgeoning
young professionals. India has yet to allow foreign retail
chains to operate in the country, due to strong opposition from leftwing
politicians and small-shop owners who fear that foreign retailers
will swamp local retail businesses. But foreign retailers have
already found a loophole in the law prohibiting their entry into India’s
retail sector. They are setting up joint ventures with large Indian
business groups to provide the logistical and wholesale trade backing
to retail chain stores wholly owned by their Indian partner company.
The following is an exclusive interview with Kishore Biyani, the
Chief Executive Officer of Future Group and Managing Director of
Pantaloon Retail India Ltd., and who has been a pioneer in introducing
the concept of mega retail stores to India.
Arjuna Mahendran, Ruth Yeoh: What made you start
Pantaloon Retail India Limited and how many years did it take
to become a profitable venture?
Kishore Biyani: India provides a huge consumption opportunity. A
young demographic profile, rising income levels, urbanization and
globalization are acting as catalysts in driving change and consumption
across the country. I think we were able to spot these trends
early and capitalized on them. When we opened our first fashion
store, Pantaloons, in Calcutta in 1997, it was based on the belief that
consumer preferences are changing fast in this country. The guilt that
was earlier attached with wealth creation and consumption in a socialist
economy had become a thing of the past. A boom in retailing
was almost inevitable. Depending upon the format and merchandise
mix, our stores typically take six to eighteen months to turn profitable.
Since we have a broad portfolio of different formats, at a company
level we have been able to post profits every year since 1997.

GLOBAL INVESTOR 1.07 Enrichment — 44
Source: Technopak Analysis, TiE, Credit Suisse
USD 637 bn
USD 427 bn
2015 E
USD 300 bn
2010 E
2006 E
Figure 1: India’s growing retail market
The chart shows growth forecasts for the years 2006, 2010 and 2015. Almost half of the retail market in 2006 is in rural India,
although the share of the urban market is increasing.

GLOBAL INVESTOR 1.07 Enrichment — 45
Did you tie up foreign brands from the outset or did that come
later? What are the most popular foreign brands?
Kishore Biyani: I think Indian brands are far better placed to
cater to the needs and aspirations of Indian consumers. When we
opened Pantaloons, more than 70% of the merchandise was private
labels and that figure remains the same to date. However, we do
recognize that there is a latent demand for foreign brands within
certain customer segments in India. We have been working on
filling these gaps in the market and have tied up with a number
of leading global brands. We have a 49% stake in Planet Retail, a
company that owns the franchisee of brands like Marks & Spencer,
Debenhams, Next and Guess. Through this company, we are setting
up formats for these brands in the large Indian cities. We also have
joint-venture companies with French retailers, ETAM and Lee Cooper.
While we bring to the table our understanding of the Indian consumer
and our retail reach, these foreign brands provide us with the global
expertise that they have.
India has been slow in letting foreign retailers into the domestic
market. China has allowed the likes of Carrefour, but still
domestic retailers have grown fast. Do you think India should
open up faster to foreign retailers?
Kishore Biyani: I think that the current government policy
on foreign direct investment (FDI) in modern retail is quite appropriate.
Retailing forms the last leg of a country’s economic activity
and the country needs to be cautious while opening up the sector to
foreign retailers. I fully appreciate that India today provides the
largest consumption opportunity in the world, and it hasn’t yet been
tapped into by multinational retailers. Probably, foreign retailers need
India more than India needs foreign retailers. Modern retail is still at
a very nascent stage. Modern retail forms only 3% of the entire retail
pie. At this stage the country will be able to attract only a few billion
dollars in foreign investment. However, once the market matures, it
will become far more attractive to a large number of foreign retailers.
Our country at that stage will be able to attract a far higher amount
of foreign investments into the country. Why should we open up the
sector at this stage, if our country stands to get far higher foreign
investment if it opens up the sector a few years later? The government
is keeping the larger picture in mind and I think that it is in the
best interest of the consumers and the country.
How would you characterize your target market in India,
in terms of income levels and tastes? How will this change in
the years to come?
Kishore Biyani: Every Indian who has some amount of aspirations
is a potential customer for us. We have divided this customer
segment into two: India One and India Two. India One is people
who live in urban areas, work in the organized sector and have high
disposable income. India Two consists of people who form the support
structure for the more affluent segment. These people typically
work as house help, barbers, car drivers, plumbers, etc. Modern
retail till now has largely catered to India One. Although India Two
has far less disposable income, their sheer size is double or triple
that of India One. They essentially form the masses. I think that the
next big opportunity will come as India Two embraces modern retail,
and we are already seeing that happening at our stores.
Do you source many of your products from overseas?
What proportion of your sales are made in India?
Kishore Biyani: Around 80% of the products that we sell are
manufactured in India. The remaining 20% is sourced from various
locations including China, Southeast Asia and Europe.
Kishore Biyani is the Chief Executive Officer of Future
Group and Managing Director of Pantaloon Retail India
Ltd., the group’s flagship enterprise. After starting with a
small apparels company in 1997, Mr. Biyani is now the
largest retailer in India, with stores in around
30 cities across the country dealing in food, fashion and
footwear, home solutions, consumer electronics,
books, music, health, wellness and beauty, general
merchandise, communication products, e-tailing,
leisure and entertainment. Mr. Biyani was born in August
1961 and is considered to be a pioneer of modern
retailing in India.
Photo: Rajat Ghosh

GLOBAL INVESTOR 1.07 Enrichment — 46
Figure 2
Organized retail channels
The chart shows country comparisons of traditional channels and
modern channels for the retail sector. India’s share of organized retail is
around 3% of the total retail market. Source: Technopak, TiE, Credit Suisse
Figure 4
Urbanization trends by country
Urbanization in India is expected to increase substantially by 2015 due to
factors which include an increasingly migrant workforce and the pursuit of
better career opportunities. Source: CLSA, Credit Suisse
%
100
90
80
85 81 55 40 36 30 20 20 3
%
120
100
70
60
80
50
60
40
30
40
20
10
20
0
0
USA
Taiwan
Malaysia
Thailand
Brazil
Indonesia
Poland
China
India
Thailand
Singapore
Philippines
Malaysia
Korea
Japan
Indonesia
India
Hong Kong
China
Traditional channel
Modern channel
1975 2001 2015 E
Figure 3
Growth in organized retail in India
Organized retailing is a beneficiary of rising consumerism, changing
demographics and changing preferences of the Indian consumer. Leisure,
convenience and entertainment are growing priorities.
Source: CLSA, Credit Suisse
USD bn %
40
10
35
30
25
20
8
6
15
10
5
0
4
2
0
1999 2002 2005
2010 E
Est. size of organized retail in India (l.h.s.)
Share of organized retail in India (r.h.s.)

GLOBAL INVESTOR 1.07 Enrichment — 47
How difficult is it to obtain planning permission and cope
with red tape to build malls in India’s crowded cities?
Kishore Biyani: Existing regulations are not very conducive to the
growth of modern retail in India. There are a huge number of laws and
bylaws promulgated by various government bodies. We are working
with industry associations and local governments on how these regulations
can be updated and streamlined. Existing regulations do pose a
constraint but we have to adhere to them. There are no other options.
The Reliance group of India is just starting out to compete
with your chain. Do you think there is room for more competitors
to emerge in Indian retailing?
Kishore Biyani: It’s good to see a lot of large business houses
entering retail. India provides a huge consumption market, and it is
still the early days for organized retail. The total retail market in
India is estimated to be around USD 220 billion and modern retail
has just a 3% share of this. With more players coming in, the size of
the retail market will grow. At the same time, the share of organized
retail will increase. India’s GDP is growing at over 8% annually and
the retail consumption opportunity is projected to grow from USD
220 billion to USD 400 billion in the next few years. The opportunity
is huge and I think there is ample room for multiple retailers to coexist
and grow.
What is your long-term vision for the Pantaloon group?
Kishore Biyani: We have recently redesigned our organization in
a way that we will be able to capture the entire Indian consumption
space in the country. We are operating across six verticals. Future
Retail includes our retail business and forms the nucleus for the
group. We have also set up Future Capital Holdings, which provides
asset management services. It has recently raised around USD 830
million in private equity funds for investments into the development
of retail real estate and a couple of consumer brands and companies.
Going forward, it will also offer consumer finance in order to catalyze
consumption across our retail businesses. The other verticals
are Future Brands (management of brands owned by group companies),
Future Space (management of retail real estate), Future
Logistics (management of supply chain and distribution) and Future
Media (development and management of retail media spaces).
Is the Wal-Mart model ideal for India? What key difference sets
your company apart from other global retail chains?
Kishore Biyani: We think that Western formats or delivery models
may not work in India at all locations, cities and geographies.
India is evolving in a way that has hardly any parallels in the world.
We are an extremely diverse country and a standardized solution
doesn’t work in India. Indian consumers demand ideas and solutions
that are uniquely Indian. We have developed a multiformat strategy
to capture every need and every section of Indian consumers. For
example, in Big Bazaar, our hypermarket chain, we have blended
the look, touch and feel of Indian bazaars with choice, convenience
and hygiene. The model is very different from what is seen anywhere
abroad. And it has worked amazingly well for us. It is today the
largest and fastest-growing retail format in the country.
What annual rate of growth of sales do you foresee over
the next 10 years?
Kishore Biyani: The pace of change is such in India that it
doesn’t allow us to predict what things will be a decade later. We
have chalked out our strategy till the 2010 – 11 financial year. We
ended the last financial year with a turnover of USD 450 million, and
we expect the group turnover will grow up to USD 6 billion by the
end of financial year 2010 – 11.
“The guilt that
was earlier
attached with
wealth
creation and
consumption
in a socialist
economy had
become a
thing of the
past.”

GLOBAL INVESTOR 1.07 Enrichment — 48
600
Family-influenced
500
400
300
Private equity
200
100
0
MSCI Europe
Source: Bloomberg, Credit Suisse
Q4 1996 Q4 1997 Q4 1998 Q4 1999 Q4 2000 Q4 2001 Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006
Index rebased (Q4 1996 = 100)
Figure 1: Comparison of indices
A comparison of the SSFI, MSCI Europe 600 and LPX Europe private equity index shows how stocks with a significant family influence have outperformed
both widely held stocks and the European private equity market over the past ten years.

GLOBAL INVESTOR 1.07 Enrichment — 49
Stocks with
family influence
Family-owned firms and companies with strong family holdings spearheaded European and
US industrial development at the turn of the past century. In the second half of the 20th century,
the size of companies increased and families sold their stakes. Recent evidence, however,
suggests that companies which still have a strong family interest tend to outperform companies
with a more diversified shareholder base.
Lars Kalbreier, Head of Global Equities and Alternatives Research, Hervé Prettre, Head of Commodities and Equities Trading Research,
Adrian Zürcher, Trading Research Analyst
According to our research, European stocks with a significant family
influence (SSFI) have outperformed in their respective sectors since
1996. We define these SSFI as stocks that had over 10 % family or
management capital in 1996. We shortlisted companies with a market
capitalization above EUR 500 million for liquidity reasons. On
average, we found that the SSFI outperformed their respective sectors
by 190 basis points on a quarterly basis in Europe (see Figure 2).
A similar outperformance has been observed in the USA. These
results are supported by academic research studies 1 and press
reports. Only recently, a noted German newspaper 2 offered evidence
that SSFI enjoy stronger growth than companies with a more
diversified shareholder base. Why do SSFI offer better returns than
widely held stocks? We highlight three key reasons that could explain
the outperformance observed; namely, a management focus
oriented to the longer term, better alignment between management
and shareholder interests, and a stronger focus on core business.
Longer-term management focus
Family shareholders usually require a long-term strategic focus
from their managers. Since most families tend to keep their holdings
in order to pass them on to their descendants, their focus
tends to be on the longer term. Unlike companies with a very diversified
shareholder base, companies with a strong family influence
tend to focus less on the next release of quarterly results and can
hence also implement strategies that are earnings-accretive, not
in the short term, but over a much longer time horizon. Toyota, the
Japanese carmaker, in which the founding family has maintained a
strong interest, offers a good example of this. In the late 1980s,
Toyota started developing hybrid engine technology, but was only
able to market its first hybrid-engine vehicle, the Toyota Prius, in
1997. On the other hand, General Motors, which has had a much
greater focus on managing quarterly results, decided against investing
in hybrid technology, judging that it would take too long
to generate a payback. Consequently, Toyota established a lead
in mass market engine technology, and started to enter license
agreements with competitors to supply them with hybrid engines.
Management and shareholder interests better aligned
Families usually have a limited number of companies under control
(in most cases a single one) and those assets represent a very high
share of their wealth. As a result, families tend to focus intensely on
the way a company is managed. In many cases, the families appoint
a watchdog, often a family member, who sits on the company board,
helping to improve corporate governance and contributing to the decisions
made concerning the company’s strategic orientation. This
can prevent management from pursuing targets that might not be
aligned with the long-term goals of the company. Indeed, there have
been many recent examples of companies where management has
focused on their own wealth creation, thus jeopardizing the company’s
longer-term interests (and sometimes survival). Continued on page 51

GLOBAL INVESTOR 1.07 Enrichment — 50
Interview with Hervé de Montlivault,
CEO of Credit Suisse (France) Private Banking Interview Hervé Prettre
“The long-term success of SSFI lies
in the right balance among the interests
of family members, shareholders and
the companies’ managers.”
Hervé Prettre: We have just demonstrated that stocks with
significantfamily influence (SSFI) offer better returns than widely held
stocks. What in your view are some of the risks specific to SFFI?
Hervé de Montlivault: I would mention two of them: the risk of an
overconcentration of shareholders’ assets and the risk of disputes
within the family. A lot of SFFI have become successful after taking
significant risks, including debt risk. Some families do not realize
that what contributed to success could drive them to ruin. The family
shareholder wishing to improve his/her living standard or invest in
a completely different project might thus become a seller at the
wrong point in time. Less extreme, another family shareholder, depending
on the company’s dividends, could face the risk of a dividend
cut, in the case of a profit slump or higher capital investiture
from the company. For instance, one family was puzzled when a
family member asked to sell his stake to the other members, as this
stake represented 95 % of the family’s net worth! The company had
to stop paying a dividend for the first time in 40 years.
What is the solution for you?
Hervé de Montlivault: Family members who have reserves at
their disposal to meet their lifestyle targets and who are able to make
some new investments are more stable and happier shareholders,
especially in difficult times.
Can you say a word about the other risk linked to SSFI,
disputes between family members?
Hervé de Montlivault: The lack of unity within the family, or even
conflicts between members, have sometimes caused some stakes
in well-performing companies to be sold, or even worse, had a negative
impact on the business. Families that have avoided this trap
have clear rules and practices in place.
Can you cite some of them?
Hervé de Montlivault: The most important is communication.
This cannot be created from scratch, it has to be designed from a
process and an organization deemed fair and transparent to all.
Some families have their own manager of family affairs (different
from the company’s manager), who is in charge of defending the
family’s interest and unity. Another key practice is good preparation
of the next generation. Some families commonly train the young
family members, and send them to internships within or outside the
company, in order to better prepare them for their future shareholder’s
role or manager’s role. Rules for admission for a new family
member in the company are clear and entail no surprises: for
instance, one family required an MBA degree, a minimum of 5 years’
working experience as a leader in the sector, or experience starting
up a new company and successfully managing it for five years. This
set-up requires time and thinking.
A word of conclusion?
Hervé de Montlivault: The long-term success of SSFI lies in the
right balance among the interests of family members, shareholders
and the companies’ managers. As private bankers, we are
often in a situation where we discuss and advise family members
in this area of family governance; we advise business leaders and
families in this field, particularly when we are aware of the family
situation.
Hervé de Montlivault obtained his master’s degree in business administration
from the Ecole Supérieure de Commerce de Paris, France, in
1978. He worked for Citibank Corporate Finance from 1983 to 1986 and
then joined JP Morgan as sales manager for securities services in Paris.
From 1991 to 1996, he was sales manager for Euroclear/JP Morgan
in Brussels. Back in Paris in 1996, Mr. de Montlivault became Managing
Director of JP Morgan Private Bank. In 2005, he was appointed CEO
of Credit Suisse (France) Private Banking.

GLOBAL INVESTOR 1.07 Enrichment — 51
A good example here is provided by Tyco, a large US industrial
conglomerate. Former CEO Dennis Kozlowski received performancelinked
shares based on year-over-year earnings growth and return
on equity (ROE) targets. He boosted earnings and ROE through
acquisitions, which were mostly financed by debt (USD 30 billion in
acquisitions between 1996 and 2000, of which USD 27 billion were
debt-financed). Although leveraging up the company provided
earnings increases and boosted ROE in the short term, the strategy
created a highly indebted company that almost collapsed under its
debt burden in 2002. Hence, having a family member as a watchdog
representing the long-term objectives of a company over the shortterm
goals of management can help keep management and the
company’s interests aligned.
Focusing on core activities
Finally, focusing on core business is a key asset for SSFI, which tend
to have a limited number of activities and focus on niche markets as
part of their long-term strategic focus. This limits acquisitions and
trendy short-term strategies. Meanwhile, influential families usually
limit their managers’ diversification endeavors in order to keep control
over the traditional business. This is a key difference between,
for example, Daimler-Benz (now DaimlerChrysler), which in the
1990s followed a diversification strategy in defense and aeronautics,
and BMW, where the Quandt family prevented management from
diversifying outside the car business. The same applies to Burberry’s
and LVMH. In the 1990s, Burberry’s switched from traditional
lines to a fashion line catering to younger customers (Thomas Burberry)
before expanding to new items like household textiles and
leather. They finally reversed course in 2002 and started to refocus
on traditional clothes. In the meantime, LVMH managed to become
a leading luxury brand by sticking to its roots, insisting on keeping
the famous “Louis Vuitton” on all of its products, and keeping a close
eye on the company’s core business – high-quality leather goods that
still represent a large percentage of the company’s operating profit.
Strong similarities between SSFI and private equity
The focus on long-term strategic goals, better alignment of management
and reduction of agent/principal problems are all beneficial
characteristics that can improve company management and
thus create higher value over the long run. This might explain the
outperformance of SSFI versus stocks with a more diversified shareholder
base. Furthermore, there are some striking similarities between
SSFI management and the way private equity managers run
companies. Indeed, often when companies are taken private, noncore
businesses are sold in order to focus on what a company does
best. Also, private equity managers have a longer-term focus, as
they typically invest for about five years in a company before selling
it. Lastly, private equity firms exercise tight control over management,
making sure that the longer-term value creation goals of a
company are implemented. The similarities between SSFI and private
equity funds help to explain the strong outperformance of
both investments versus stocks with a more diversified shareholder
base, as illustrated in Figure 1. We would therefore recommend
that investors consider taking long-term positions in companies
with a significant family influence, and have highlighted selected
stocks in Table 1.
Figure 2
Sector comparison in Europe
On average, SSFI have outperformed their respective sectors by 190 basis
points on a quarterly basis since 1996 in Europe. Source: Bloomberg
%
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
Table 1
Basic materials
Communications
Auto
Consumer
cyclicals
Financials
Food &
beverage
Selected SSFI stocks
Longer-term management focus, well-aligned management and shareholder
interests, and a stronger focus on core business could explain the attractive
performance of SSFI. Source: Credit Suisse
Sector Name (Bloomberg) Rating
Consumer discretionary LVMH (MC FP) BUY
Swatch (UHR VX)
BMW (BMW GR)
Puma (PUM GR)
BUY
BUY
BUY
Consumer staples L’Oréal (OR FP) HOLD
Inbev (INB BB)
Carrefour (CA FP)
BUY
HOLD
Health care Roche (ROG VX) BUY
Straumann (STMN SW)
Fresenius Medical Care (FME GR)
HOLD
BUY
Financials Bank Sarasin (BSAN SW) BUY
Julius Baer (BAER VX)
BUY
Industrials Atlas Copco (ATCOA SS) BUY
Schindler (SCHP SW)
HOLD
Materials Mittal Steel (MT NA) BUY
Syngenta (SYNN VX)
Holcim (HOLN VX)
BUY
BUY
Information technology Capgemini (CAP FP) BUY
SAP (SAP GR)
Ericsson (ERICB SS)
BUY
BUY
Media Lagardère (MMB FP) BUY
Mediaset (MS MI)
Industrial
Pharma
Retail
Technology
HOLD
Total
1
Morgan Stanley US Portfolio Strategy: “A Family Portrait, Taking a Closer Look
at Family-run Companies,” Henry McVey, 12 August 2005.
2
Handelsblatt (German financial newspaper), 13 November 2006, front page

GLOBAL INVESTOR 1.07 Switching — 52
Switching
The new digital paradigm Page 58
Media for you and me Page 53

GLOBAL INVESTOR 1.07 Switching — 53
Media for
you and me
Tailoring media to individuals and small special groups is by no means a new trend. In particular,
this is a growing trend in countries with a high proportion of immigrants. Besides established
companies like television and radio broadcasters, an increasing number of niche players are using
the Internet as an ideal distribution medium for reaching minority groups throughout the world,
and at the same time creating work further downstream for advertising agencies.
Ulrich Kaiser, Equity Sector Analyst, Patrick Matti, Equity Sector Analyst
In one sense, we could all consider ourselves to be minorities, as
there are so many ways to differ from others: gender, nationality,
language, hobbies, special interests, and so on. As a result of globalization,
we are seeing increased migration to different parts of
the world, and consequently an increase in the number of minority
groups (see also “The hidden asset” on page 37).
Minorities can be catered for in a variety of ways
The most familiar means of catering for minority groups is to feed
foreign television channels into a domestic cable network or make
them available via satellite. The disadvantage remains, however,
that minorities still have a limited selection and smaller ethnic
groups are still disregarded. This business model is successful
when applied to “large minority groups” such as the Turkish populace
in Germany, the Polish community in London or the high proportion
of Hispanics living in the United States (we enlarge on this
theme later in the article). In addition to the established television
broadcasters, an increasing number of niche providers are cropping
up using the Internet as an ideal distribution medium and able to
reach small minority groups around the world. A pioneer in this
regard is the Canadian company JumpTV, which already offers more
ethnic TV stations than the US broadcasting giants (see Figure 1)
and intends to broaden its programming range even further in the
coming years. Since late 2004, the company has expanded the
number of its television channels from 20 to a total of 223 at the
end of September 2006, a tenfold increase that now covers a total
of 65 countries. Accordingly, its client base has also grown sharply
during this phase.
Minorities benefit from interactive business models
Media companies are increasingly taking into account both demographic
developments and the growing number of immigrants. In
the past, it was mostly the case that only large target groups were
of significance to radio and television broadcasters because of the
related economies of scale. Today, there is increasing interest in
smaller target groups. For media companies, these smaller groups
have the advantage of being more “within reach,” a factor that cannot
be underestimated. This means that customers can be approached

GLOBAL INVESTOR 1.07 Switching — 54
with various products and services in a targeted fashion. Hence,
the new business model focuses more on revenue per customer
than on the number of subscribers.
The evolution of technological capabilities led by the Internet
and reinforced by broadband technology plays a decisive role in
this regard. The Internet enables access to individual households,
while broadband makes the transmission of enormous files possible,
e.g. in the form of videos and television programs. Minorities
are certainly among the target audience, but that audience is not
exclusively ethnic in nature, but can also be, for example, niche
groups that share a common, yet not-so-widely-based hobby like
fly-fishing. The World Wide Web is an ideal distribution channel,
where media providers and consumers can enjoy a distribution environment
that is totally independent from the limited range of a
television broadcaster. Internet Protocol Television (IPTV) is a solution
that best fits this particular business model. An IPTV provider
functions as a distributor for television or radio broadcasters by
contractually agreeing to feed broadcaster programming into the
Internet and offering it to authorized customers via the company’s
Internet portal. Because this business model is easy to imitate, the
“first-mover advantage” is of decisive significance. In this regard, it
is important that IPTV providers secure distribution rights that are
exclusive and as long-lasting as possible, and allow the TV or radio
broadcasters to participate in the revenues generated from customers
using the service. As a result, fixed costs can be held at a
relatively low level. Containing fixed costs is the most important
factor for providers during the start-up phase, when they need to
bond with as many broadcasters as possible. For broadcasters, this
additional business is a good way to earn additional revenue from
customers they normally cannot reach. Customers get the product
they want because they can enjoy a specific program wherever
they are in the world. For example, an Ethiopian citizen residing in
Europe or the US has the ability to watch TV broadcasts transmitted
from his or her home country.
Figure 1
TV stations target ethnic minorities
Television providers increase their ethnic television offerings. IPTV challenges
traditional ethnic television providers. Source: JumpTV, company data
250
200
150
100
50
0
JumpTV
DISH Network (US)
GlobeCast (US)
DirectTV (US)
Time Warner (US)
Channels pending implementation
Rogers (Canada)
Comcast (US)
Live channels
RKS (GER)
SKY Freesat (UK)
Adelphia (US)
Ad agencies benefit from IPTV and minority groups
Customers gain access to the TV broadcasters of their choice if, in
addition to the necessary basic equipment (a PC with a broadband
connection), they are prepared to spend extra for pay-per-view
(one-off costs charged for specific programs or films) or a subscription
to the service. The latter might include access to a specific
broadcaster or an entire package (bundling). The subscription fee
is ultimately dependent on how successful the IPTV provider is at
placing advertising on its platform (i.e. Internet portal). As was the
case of JumpTV in August 2006, the 500,000 visitors to its website
represented a great enticement for advertising agencies.
The distribution of television and radio broadcasts is only the
beginning when building active customer relationships, as the top
priority in this business model is to gain enough customers to make
the site attractive to advertisers. In a subsequent phase of expansion,
the Internet portal operator will broaden its platform, initially
by offering added content, such as video or music libraries, that
meets the needs of its mainly ethnic customer base and thereby
generates added demand. But the decisive success factor will be
the additional services that enable the Internet portal provider to
differentiate itself from the competition. One possibility is to use
forums as a means of strengthening the customers’ bond to the
special Internet site by giving them the opportunity to exchange
ideas with their “social community” and expand their network of

GLOBAL INVESTOR 1.07 Switching — 55
relationships (“social networking”). Another possibility is to place
targeted advertising tailored to the type of customer. In doing so,
the Internet portal operator with its “niche clientele” becomes an
eagerly sought business partner for advertising agencies. For
agencies such as WPP and Publicis the Internet is gaining more
and more significance as an advertising platform. The roughly 30 %
gain in outlays for advertising placed on the Internet in 2005 (see
Figure 2) speaks for itself.
In the future-oriented business model described above, attention
is generally centered on the customer. Due to the tailor-made
utilization possibilities, it is particularly suited to minority groups
because, in this instance, they are treated equally from an economic
point of view. Depending on their financial capacity, they make
their own decisions on what they wish to consume in the form of
media and other services. But because the business model is easy
to imitate, the operators of such websites will only remain competitive
over the long term if they can safeguard the exclusivity of
their content. Otherwise, when it is time to renew contracts with
content suppliers – in our case, mainly radio and television broadcasters
– website operators may find they have to sacrifice some of
their income because of the increasing competition. For customers,
however, increasing competition is good as it ultimately means
cheaper access to services, as well as a qualitative and quantitative
improvement in what is offered. Advertising agencies are likely
to benefit from this trend because they will have a greater opportunity
to place ads in an expanding market.
Larger ethnic groups get better standard services
Depending on the size of the group, the services available to minorities
are generally more established and embedded in the market.
For example, the US is traditionally a country of immigrants, with
several ethnic communities forming over the years, maintaining their
language and culture. Among them, the Hispanic community is the
largest. More importantly, it is also the fastest growing. Hence, it
is not surprising that US companies have a rising interest in tapping
into this customer base. The Hispanic community represents about
14 % of the total population in the US. Furthermore, it grew at the
fastest pace in 2005 at 3.3 % compared with 0.9 % for the entire US
population. In the long term, according to the US Census Bureau’s
projections, the US Hispanic population is expected to make up
more than 24 % of the total by 2050, having been growing at an
average rate of 2.1 % per year since 2000, compared to 0.8 % for
the total US population (see Figure 3).
With this impressive growth rate, advertising spending by media
targeting the Hispanic community increased 6.8 % year-on-year in
2005 to USD 3.4 billion, compared to a 3 % rise for all media (see
Figure 4). This still accounts for only a small part of the USD 271
billion in total advertising expenditures in the US, but we believe
this percentage may increase significantly going forward. For 2006,
about 81 % of marketers expect increased growth in Hispanic marketing.
Another advantage to media providers is the fact that the
Hispanic community is concentrated in a few locations. For instance,
the ten largest markets comprise about 80 % of the Spanish-speaking
population in cities like New York, Chicago, Los Angeles, Miami
and Houston, among others. Like the overall market, television
continues to receive the bulk of Hispanic advertising spending with
a combined USD 2.2 billion for network/national TV and local TV.
As to be expected, the top advertisers are still carmakers, telecoms,
consumer staples and retailers. Although they are not among
Figure 2
Digital media is set to rise
Growth in digital media comes at the expense of traditional media.
Advertising agencies will take advantage and benefit from this development.
Source: PWC/Internet Advertising Bureau, The Advertising Association/WARC
YoY growth in %
35
30
25
20
15
10
5
0
–5
–10
Press classified
Radio
Direct mail
Cinema
Press display
TV
Outdoor
Internet

GLOBAL INVESTOR 1.07 Switching — 56
Source: HispanTelligence, TNS, CS estimates
2006 E
4.9 % Total media
12.9 % Hispanic
2007 E
4 % Total media
9 % Hispanic
2008 E
5 % Total media
11 % Hispanic
Figure 4: Hispanics attract advertising agencies
We believe advertising spending on Hispanic media should continue to grow at least twice as fast as overall media.

GLOBAL INVESTOR 1.07 Switching — 57
the top 50 advertisers in the US, some of the companies that
specifically target Hispanic consumers include Lexicon Marketing,
Univision Communications, Cisneros Group and Grupo Televisa.
The advertising market benefits from ethnic groups
Given the size of this market, advertising agencies are now specifically
targeting the Hispanic population in terms of language and
cultural interpretation. For example, The Walt Disney Company hired
Hispanic agencies for the first time to create specific television
spots to target this group. Another example of the rising advertiser
interest in the Hispanic community was the unique commercials
featuring Latin American players during the last soccer World Cup
shown on Spanish-language TV channels.
As we mentioned, the Hispanic community represents about
14 % of the total US population, and yet less than 2 % of total US
advertising dollars is spent on Spanish-language media. Therefore,
we believe there may be some opportunities for revenue growth in
this segment, especially in television. For instance, if the Hispanic
community accounts for about 9 % of the buying power in the United
States, advertisers should have spent about USD 5.6 billion in
2005 for television to be in line with their potential customer base,
which is significantly higher than the actual USD 2.2 billion spent on
Spanish-language TV. However, this would imply that the Hispanic
community watches exclusively Spanish-language shows, which is
not the case. Polls indicate that 56 % of Hispanic households speak
Spanish exclusively at home and 26 % speak English and Spanish
equally. Applying these percentages to the audience of Spanishlanguage
television channels versus English-language channels,
advertisers should still have spent about USD 3.9 billion last year
just to meet their potential customer base.
Currently, the Spanish-language media sector is dominated by
a few players. For instance Univision, which is set to go private by
spring 2007, and Entravision are the largest pure players in the
television segment. In radio, both companies, along with Spanish
Broadcasting, operate leading stations in the US. Nonetheless,
with the potential demand depicted above, as well as a rising Hispanic
population and buying power, we believe the Hispanic media
market is likely to attract larger players. The Walt Disney Company
(ABC, ESPN), News Corp. (FOX) and General Electric (Telemundo)
already have a foothold in this market with some Spanish-speaking
channels. In our opinion, dubbing English-speaking shows into
Spanish may not be enough to attract and keep Hispanic viewers in
the long term. We believe entertainment companies will have to
produce more specialized shows in the future, as advertisers have
done with commercials. As this may turn out to be more expensive,
we believe that large US media companies such as Time Warner
(TWX US, BUY), News Corp. (NWS/A US, BUY) and Disney (DIS
US, BUY) are better positioned to increase their shares in the Hispanic
market as they generate high cash flows.
Figure 3
Rising US Hispanic population
The US Hispanic population is expected to represent more than 24 %
of the total US population by 2050, having grown at an average rate of
2.1 % per year since 2000. Source: US Census Bureau
Million %
450
400
350
300
250
200
150
100
50
0
2000 2010 E 2020 E 2030 E 2040 E 2050 E
Total US population
Hispanic population
Percentage of Hispanics in
total US population (r.h.s.)
30
25
20
15
10
5
0
Room in the market
Media for minorities is expanding. Television and radio have been
quick to identify opportunities of catering to communities in larger
markets and, in addition, the World Wide Web is proving to be an
ideal distribution channel enabling media providers to develop interactive
business models and target them to smaller groups and even
individuals. Hence there is room in the market for larger companies
as well as niche players. Finally, advertising firms should benefit
from wider audiences and competitive pricing.

GLOBAL INVESTOR 1.07 Switching — 58
The new digital
paradigm
Imagine the world this way: people communicate with each other on different continents, by video,
for free; nearly everything they own increasing in value, but at a lower cost. Digitization is
making these types of things reality today. Yesterday, they were fantasy. Tomorrow, they are likely
to be commonplace.
Steven Soranno, Equity Sector Analyst
Constant technological innovation has vastly improved economic
productivity over the past three decades. However, there have been
no obvious, major new technological innovations since the Internet’s
emergence in the late 1990s. Many investors have believed this lack
of a “next big thing” has signaled a slowdown in technological innovation.
We believe the Internet’s proliferation in the late 1990s and
early this decade marked the beginning of an economic paradigm
transition – a transition from mass market economics, with rules
established during the Industrial Revolution to, for lack of a better
term, niche market economics, with rules established during the
Digital Revolution (see Figure 1). If information is the world’s most
valuable resource, then digitization is revolutionizing the world’s
value flow.
Economic logic is changing: Investors’ opportunity
According to 20th-century economic logic, companies produce and
sell items that customers will likely buy in high quantities – sufficient
to cover selling costs and benefit from economies of production
scale. Advertising plays the vital role of influencing customers
to believe certain items have more value to them than they were
aware of. The economics of producing items for limited sale just
does not make sense in the 20th century. But the 20th century is
over, and digitization is turning traditional business models on their
heads. The Internet has no floor space limitation, no distribution
constraints, and exists outside the showroom window of the mass
market promotion machine. These freedoms strengthen as physical
items become digital: music, video games, movies, books, etc.
The costs of carrying an additional digital item is virtually zero, so
the sale of a low-volume item is just as good as that of a highvolume
one. Nearly every major retail chain has a strong Internet
sales operation. Several have invested heavily in additional online
tools, such as price comparison sites. Several others have either
gone out of business or are in dire financial situations. For example,
Tower Records, one of the largest record distributors in the US,
recently went out of business while Apple’s iTunes thrived – Blockbuster
Video, the world’s largest VHS/DVD distribution chain, has
lost over 80 % of its market value, while Internet-based distributor
Netflix rose more than fivefold.
Purchase decisions in the digital world
In the digital world, items do not need millions of dollars in advertising
support to become top sellers, they only need a few people to try
them and like them. Word spreads through online social networks
and Internet product reviews. While very few consumers may have
sampled a product within a certain location, when those consumers
are brought together in a world where geographic boundaries have
little weight, they can easily build a critical mass of opinion. Companies
relying on the laws of mass-market economics risk losing
the ability to influence customers, as these same consumers are
becoming aware of better items available elsewhere. The result:
lower prices and higher economic utility, translating into improved
economic efficiencies (see Figure 2).
In our view, the mass-market economic paradigm, based upon
corporate-controlled scarcity of choice, is giving way to a new paradigm,
based on largely uncontrolled abundance. We believe massmarket
retail chains will be forced to reinvent their competitive advantage.
The new paradigm should have a deflationary influence by
reallocating resources more efficiently and lowering economic
transaction costs. Most importantly, the younger generation will
grow up in a social economy vastly different from the one of their

GLOBAL INVESTOR 1.07 Switching — 59
parents. Amazon, Netflix and Apple revolutionized the book, DVD,
and music industries by using the Internet to pioneer new distribution
systems. In doing so, they brought significant disruption to
mature markets. We believe video is the next media market to undergo
similar change. Over the past year, there has been a striking
acceleration in video’s deployment to the Internet from media companies,
corporations and individuals. New Internet technologies
could provide consumers with thousands of video entertainment
choices, make that content increasingly interactive, and establish
the framework to readily prioritize by individual preferences. As the
Internet generation ages, eyeballs are shifting from TVs to PCs,
individual leisure time is becoming a scarcer commodity, and consumers
are demanding more interactivity with their visual media.
Recent video migration examples include feature film downloads,
television show downloads, feature event webcasting (sport
tournaments, etc.), corporate video webcasting and conference
calls, user-generated videos, video advertisements, video VoIP calls,
personal videos posted to social networking sites, video e-mails
and e-mail video attachments, and video blogs.
Demand driver I: Surging global broadband usage
Figure 1
Misunderstood innovation cycle
Investors pushed tech valuations steadily higher, in the 1980s and 1990s,
due to the sector’s constant innovation. Momentum stalled in recent years
with no clear “next big thing.” Source: Credit Suisse
NASDAQ
6,000
5,000
4,000
3,000
2,000
1,000
900
800
700
600
500
400
Microprocessors
Cell phones
Internet
Corporate networking
Paradigm transition
Content
digitization
The global broadband penetration rate is soaring. In emerging market
economies, wireless technologies are bringing broadband to
the masses. The Internet gives media companies a cost-effective
way to reach customers in high-growth rural areas. In developed
economies, digitization is having a vast impact on the way people
interact with information. Arbitron, one of the two leading US media
usage measurement firms, recently released a report titled
“Internet and Multimedia 2006: On-Demand Media Explodes.” It
found 51 million Americans had a “heavy preference” for on-demand
consumption, versus 27 million a year ago. If forced to choose between
television and the Internet, 40 % of Americans would do
without their TV.
300
200
100
80
PCs/workstations
82 84 86 88 90 92 94 96 98 00 02 04 06
Demand driver II: Aging PC/Internet generations
The Internet and PC generations are coming of age, sharing music,
video and personal thoughts with a similar normalcy to when people
a generation ago bought newspapers and listened to the radio.
This group, referred to in the US as Generation Y, is arguably the
world’s largest consumer demographic – old enough to have significant
wealth but still young enough to spend for today. Key US
industry magazine Advertising Age recently cited a study that
found TV viewing is only the fourth most popular activity for US
people aged 12 – 34. The Internet is first, followed by socializing
with friends – roughly one-quarter of the demographic cannot name
the major television networks. Mature global economies are moving
to more of a service base, driving higher female workforce participation,
a larger focus on higher education, a vastly increased
proportion of two-income households, and a trend to start families
later in life. A substantial decrease of individual leisure time is resulting,
and is a key secular force behind an emerging global media
structure that optimizes the “value” of media consumed by substantially
increasing the number of choices, thereby optimizing
product utility.
Tipping-point investing
At the San Francisco ITxpo in October, Cisco Systems’ CEO John
Chambers said, “We don’t compete against competitors. We compete
by spotting tipping points.” This is much the same approach

GLOBAL INVESTOR 1.07 Switching — 60
Source: Credit Suisse
Social networking web
World Wide Web
Client
Client
Hub
Client
Client
Server
Router
Server
Server
Client
Switch
Router
Server
Client
Router
Router
Client
Client
Server
Client
Figure 3: Digital network bottlenecks
Online networks have choking points. Within the Internet, these points are opportunities for infrastructure equipment suppliers.
Within the social network, they are opportunities for advertisers.

GLOBAL INVESTOR 1.07 Switching — 61
we recommend toward Digital Revolution investing. We intently
seek to identify areas where technological demand far exceeds
supply. At a meeting in April, we asked David Poltrack, a senior
executive at CBS’ online media division, what the biggest challenge
was to CBS’ pioneering online initiative. This meeting occurred very
soon after the company successfully streamed a popular basketball
tournament via Internet, completely free-to-view and advertisingsupported.
We mark this as the seminal event in video’s transition
to the Internet, before which there were very few such initiatives
and after which there have been a significant number. Mr. Poltrack
responded without hesitation: the most striking and immediate lesson
was that the Internet does not have the bandwidth support to
manage large video distribution initiatives (see Figure 3).
Tipping-point basics: There is much to come
We believe media’s/video’s rapid migration to the Internet recently
created a disequilibrium, as the demand for high-bandwidth content
far exceeded the supply of delivery-enabling infrastructure.
This migration is a secular trend, in our view, encompassing corporate
communications as well as consumer-generated and demanded
media. We believe the first investment phase is within the Internet’s
infrastructure – the bandwidth enablers – such as Cisco Systems,
Google, Adobe and Equinex, among others. These could also be
viewed as key technology suppliers to the data center, the primary
information repository in the digital age.
As a basic example, a person in Washington, DC who buys an
Apple iTunes or iMovies item does not download it from Apple’s
Cupertino, California head office. The request and response transmissions
likely route over Cisco equipment to and from an Equinex
data center located near the city, where an Akamai server, likely
involving substantial proprietary technologies, receives the request
and sends an efficient transmission back to Apple’s customer, who
likely views the video using Adobe-based flash technology and/or
on a website designed with Adobe’s tools. If the user chooses to
view a video on a handset, the chances are good that Adobe will
supply the enabling visual technology. This is how information – an
increasing part of economic value – flows in the digital age. As investors,
we want to identify the bottlenecks.
The next phase in this evolving process should come in the media
sector, as it becomes more apparent which content-generation
companies will adapt most effectively and which will not. We initially
published the investment strategy in May, and have tracked
the infrastructure, media and newspaper portfolios closely to decipher
signs of transition. At the time of writing, the newspaper group
has underperformed the broader market by 6 % through 9 November.
The media portfolio has been a strict market performer. The
bandwidth infrastructure portfolio has risen 38 %. To us, this data
suggests investors do not yet see clear winners among the media
group, but are rapidly coming around to the infrastructure theme.
We believe the infrastructure group could face a near-term pullback
during the challenging seasonal period from roughly mid-December
through mid-March, but maintain our positive structural view. In
our view, patient investors have an attractive risk/reward opportunity
in the early identification of media “winners.” The media group
is headlined by such companies as News Corp. and Disney.
Figure 2
The digital paradigm retail demand curve
The demand curve takes on new shape with vastly increased consumer
choice. Market potential shifts toward millions of tiny demand categories.
High-fixed-cost vendors could have increasing trouble. Source: Credit Suisse
Wal-Mart
Gap
Boots
Best Buy
Gus PLC
Staples
Target
Individual preferences Mass market Individual preferences
Google
Yahoo
Meetic
TNT NV
UPS
eBay
Netflix
Amazon
Deutsche Post
FedEx
YouTube
MySpace
Individual preferences Mass market Individual preferences

GLOBAL INVESTOR 1.07 Services — 62
Only the best is
good enough
Ultrahigh-net-worth clients are becoming more and more demanding, and their needs are
becoming increasingly complex. At the interface between private banking and investment banking,
Solution Partners, an internationally networked team of experts at Credit Suisse, develops
customized client solutions in close collaboration with the many different units of the bank, thereby
contributing to the provision of first-class customer service. CS Solution Partners
Who wouldn’t want to invest his or her money optimally?
Everyone surely desires a precisely tailored
portfolio allocation, entailing an individualized riskreturn
profile and the choice of an offensive or defensive
orientation. Everyone strives for a balance
between fixed and liquid assets and wants to invest
his or her money to be able to fulfill personal wishes.
But amid these common features, there is one major
difference: some people have less money and
others have more, and some are even immensely
wealthy. The very rich have a different set of issues
to confront than the average affluent person. Ultrahigh-net-worth
individuals are those people who
possess assets in excess of CHF 50 million. Entrepreneurs and
their families often fall in this category. Their needs run the gamut
from investment counseling, tax optimization planning and estate
planning, to real estate and trust formation.
Take, for example, an entrepreneur who would like to sell his
company or transfer ownership to his children. Questions pertaining
to the disposal of his business – “How do I find a buyer? How
do I ensure that the transfer of ownership properly complies with all
laws?” – are not the only questions he faces. If he decides in addition
to change his domicile to a low-tax jurisdiction, the timing of
the relocation comes into discussion: before or after the business
disposal? He must also consider how the proceeds should be invested,
which means determining the allocation mix between bonds,
stocks, hedge funds, private equity, structured products and real
estate that best suits his plans. If, after selling the business or taking
it public, he ends up holding a substantial equity stake in the
company, it needs to be clarified whether this position should be
hedged by derivatives or whether a loan can be secured against
the shares in order to diversify his exposure. For banks, clients with
such needs and whose assets exceed CHF 50 million hover around
the point of intersection between private banking and investment
The interdisciplinary team of
experts develops tailor-made
solutions for demanding
customers.
banking. On the one hand, the close intermingling
of personal and business assets falls outside the
traditional competencies of private banking. On the
other hand, the transaction volume is often too
small for investment banking.
At the interface between private banking and
investment banking, the interdisciplinary Solution
Partners team has thus made it its goal to provide
a broad array of services optimally geared to meeting
the needs of this customer segment. The globally
active team comprises more than 50 consultants,
all of them seasoned experts in areas such
as capital markets, corporate finance, private equity,
law and tax matters. To develop and execute customized solutions
for problems that are usually very specific and financially
complex, the specialists collaborate closely, not just within the
team, but they also tap the know-how of the entire bank and even
bring in external experts when necessary. “The intensive cooperation
across all areas illustrates the advantages of Credit Suisse’s
One Bank strategy,” explains John Zafiriou, Managing Director and
Head of Solution Partners. “Private Banking’s greater closeness to
Investment Banking and Asset Management facilitates creative solutions
and helps us to find the right people and bring them all to
one table.”
The challenge lies in the details
The Solution Partners team of experts stands at the ready assistance
of those employees who are in direct contact with clients. It
also provides support to wealthy clients’ personal financial advisors.
Very affluent families generally maintain their own team of consultants
– a so-called “family office” – that attends to their financial
affairs and acts as a liaison between bank and client. Solution Partners
understands the needs of family offices firsthand since it also
helps its clients to set up such organizations. When Credit Suisse’s

GLOBAL INVESTOR 1.07 Services — 63
internal specialists meet with family office advisors, it means they
are dealing with well-informed professionals. For the handling of
complex problems, a number of banks are usually consulted, and
the contract invariably goes to the one that presents the most innovative
solution. “This group of clients is becoming more and
more demanding,” Mr. Zafiriou emphasizes. “They are globally networked,
they are familiar with the range of financial instruments
available, and they know the prices for the various services. They
demand specific solutions to specific problems.”
The more affluent than average stratum of the population is
becoming an increasingly important target group for financial services
providers. The gap between rich and poor continues to widen.
The number of people worldwide with personal fortunes in excess
of CHF 1 million is growing particularly fast. According to the 2006
World Wealth Report 1 , the number of people with financial assets
of more than USD 30 million expanded by 10% in 2005, to approximately
85,000 now, and is bound to increase further in the future.
It costs a considerable amount of money to provide exclusive services
for this demanding clientele. Legal safeguarding alone, via
documentation and corresponding assistance from relevant departments
like Legal & Compliance, is continually becoming more timeintensive,
Mr. Zafiriou stresses. But once a bank has won a mandate,
substantial profits beckon, because fees and commissions are assessed
in relation to transaction volume.
Individualized service makes the difference
Case study 1: Education for
the populace
Using the investment
income of a foundation
to finance the education
of an entire population –
from kindergarten
to university – for the next 100 years: what
sounds like a utopian dream is in reality
an actual assignment with which a national
government approached Credit Suisse.
The specialists at Solution Partners, together
with asset managers, analysts, lawyers,
demographers and education experts, worked
out the precise investment return that could
and would have to be generated to cover the
school system’s ongoing operating costs.
Case study 2: Rich but
illiquid and not diversified
An entrepreneur successfully
takes her company
public on the stock market.
As the former owner, she
is now wealthy, but various
restrictions prevent her from immediately
selling her shares in the firm. Solution Partners
extends her a loan against this equity position
to enable her to diversify her portfolio.
Preferably, the new investment securities
will not correlate with the existing equity
position. Since there is no historical data on
the newly listed company, experts from the
asset allocation unit seek out data on comparable
companies and use that to derive a
selection of inversely correlated stocks for
the client’s portfolio.
Of course, it is not so easy to attract and retain such an affluent
clientele. The quality of personal service is crucial for winning a
long-term advisory mandate. The client’s direct contact person,
the relationship manager, plays a central role here. The relationship
manager knows the full range of services offered by the bank and
is proficient at routing client matters to the appropriate department.
The staff of the Solution Partners team, though they generally do
not cultivate direct contact with clients, also contribute to the provision
of comprehensive customer service. They are able to closely
support relationship managers, since the team operates in a number
of financial centers spanning the globe from Zurich, Geneva to
London, Hong Kong and Singapore, and since 2006, Dubai. The
Solution Partners team mobilizes all of the forces within the bank
to act in concert, even across various departments when the task
at hand is to formulate technically complex solutions. Mr. Zafiriou
knows from experience that “only when a client is confident that
solutions will be devised rapidly and orders will be executed efficiently,
and that everything possible will be done to present a satisfactory
proposal for even the toughest of problems,” will he or
she be willing to accept no for an answer in the rare event that a
customer wish cannot be fulfilled.
Certain services offered by Solution Partners have the added
function of opening up doors to new clients and demonstrating the
unit’s own competencies, for example via investment opportunities
such as exclusive private equity or private placements. Similar capabilities
are also provided in the area of art banking, which not only
deals with valuation appraisals and buying and selling, but also offers
the possibility to secure loans against valuable art collections.
Here, too, all clients need to do is entrust their various requests to
their contact person at Credit Suisse. From there, these requests
are transmitted around the world via Solution Partners – and clients
are provided with customized, technically creative solution proposals,
based on international expert knowledge. 1 World Wealth Report 2006, Capgemini/Merrill Lynch

GLOBAL INVESTOR 1.07 Services — 64
Authors
Giles Keating
Head of Research for
Private Banking
and Asset Management
Pages 10–17
Burkhard Varnholt
Head of Financial
Products & Investment Advisory
Pages 10–17
Marcus Balogh
Senior Editor Bulletin Magazine
Pages 10–17
Maria Custer Sigrist
Equity Sector Analyst
Health Care
Pages 19–27
Carri Duncan
Equity Sector Analyst
Health Care
Pages 19–27
Photos: Martin Stollenwerk, Johannes Kroemer, Cédric Widmer, Ying Yi
Tania Dimitrova
Equity Sector Analyst
Health Care
Pages 19–27
Hervé Prettre
Head of Commodities and
Equities Trading Research
Pages 28–31, 48–51
Miroslav Durana
Trading Research Analyst
Pages 28–31
Gregory Siegel
Equity Sector Analyst Financials
Pages 32–35
Dr. Anja Hochberg
Head of Global Economics
and Forex Research
Pages 37–41
Christine Schmid
Equity Sector Analyst Financials
Pages 37–41
Marcus Hettinger
Global Forex Strategist
Pages 42
Arjuna Mahendran
Head of Asian Research
Pages 43–47
Ruth Yeoh
Global Research Trainee
Pages 43–47
Lars Kalbreier
Head of Global Equities and
Alternatives Research
Pages 48–51
Adrian Zürcher
Trading Research Analyst
Pages 48–51
Ulrich Kaiser
Equity Sector Analyst
Technology and Media
Pages 53–57
Patrick Matti
Equity Sector Analyst
Industrials and Media
Pages 53–57
Steven Soranno
Equity Sector Analyst
Information Technology and
Media
Pages 58–61
John Zafiriou
Head of Solution Partners
Pages 62–63

GLOBAL INVESTOR 1.07 Services — 65
Global Research
Giles Keating, Managing Director, Head of Research
for Private Banking and Asset Management................................... +41 44 332 22 33
Research Switzerland
Bernhard Tschanz, Managing Director,
Head of Research Switzerland...................................................... +41 44 334 56 27
US Research
David A. Williamson, Director,
Head of Credit Suisse Research US LLC....................................... +1 212 317 67 01
Huong C. Belpedio, Vice President, Consumer Staples................... +1 212 317 67 05
Tania Dimitrova, Assistant Vice President,
Pharmaceuticals, Specialty, Health Care, Med Tech....................... +1 212 317 67 15
Etrita Ibroci, Director, Trading Strategy and Research..................... +1 212 317 67 04
Patrick Matti, Assistant Vice President, Industrials and Media......... +1 212 317 67 10
Gregory Siegel, Vice President, Financials.................................... +1 212 317 67 06
Steven Soranno, Vice President,
Information Technology and Telecom ............................................ +1 212 317 67 02
Equity Research
Lars Kalbreier, Managing Director,
Head of Global Equities & Alternatives Research............................ +41 44 333 23 94
Fundamental Analysis
Robin Seydoux, Director, Head of European Equity Sector Research,
Luxury Goods, Steel and Services................................................ +41 44 333 37 39
Beat Alpiger, Vice President, Chemicals, Utilities........................... +41 44 334 56 24
Dr. María Custer Sigrist, Director,
Pharmaceuticals, Biotechnology and Medical Technology............... +41 44 332 11 27
Dr. Carri Duncan, Pharmaceuticals,
Biotechnology and Medical Technology......................................... +41 44 334 56 37
Thomas Kaufmann, Health Care and Nanotechnology..................... +41 44 334 88 38
Daniel Fabry, Equity Sector Research........................................... +41 44 334 56 50
André Frick, Assistant Vice President,
Global Energy, European Basic Resources.................................... +41 44 334 66 71
Eric T. Güller, Vice President, Insurance, Real Estate...................... +41 44 332 90 59
Ulrich Kaiser, Vice President,
IT Hardware, IT Services and Software, Media .............................. +41 44 334 56 49
Markus Mächler, Vice President,
Automotive, Capital Goods, Transport........................................... +41 44 334 56 41
Dominik Christoph Müller, Technology and Nanotechnology............ +41 44 334 56 44
Olivier P. Müller, Vice President,
Italian and Nordic Banks, Consumer Staples.................................. +41 44 333 01 46
Uwe Neumann, Vice President,
Technology, Telecommunications.................................................. +41 44 334 56 45
Pascal Rohner, Equity Sector Research......................................... +41 44 334 56 88
Christine Schmid, Director, Banking ............................................. +41 44 334 56 43
Alternative Investment Research & Portfolio Analytics
Cédric Spahr, Vice President,
Head of Alternative Investment Research & Portfolio Analytics........ +41 44 333 96 48
Reto Meneghetti,
Alternative Investment Research & Portfolio Analytics.................... +41 44 334 12 93
Eliane Tanner,
Alternative Investment Research & Portfolio Analytics.................... +41 44 334 56 39
Commodities and Equities, Trading Research
Hervé Prettre, Director,
Head of Commodities and Equities Trading Research..................... +41 44 334 88 57
Miroslav Durana, Vice President, Trading Research........................ +41 44 335 10 66
Thomas Rauch, Vice President,
Trading Research, Construction & Building Materials...................... +41 44 334 73 95
Roger Signer, Commodities and Equities Trading........................... +41 44 335 72 98
Adrian Zürcher, Vice President, Trading Research.......................... +41 44 333 61 46
Market Analytics
Stefan Novak, Vice President, Head of Market Analytics Equity ...... +41 44 333 84 74
Asia Research
Arjuna Mahendran, Director, Head of Asian Research........................+65 6212 67 27
Cheuk Wan Fan, Director,
Head of Asian Equity Research.....................................................+852 2841 48 41
Equity Research Asia
Angelina Chang, Assistant Vice President,
Australia Equities and Commodities.................................................+65 6212 60 71
Dylan Cheang, Greater China and Korea Equities
and Asset Allocation Analyst...........................................................+65 6212 60 72
Irene Chow, Vice President, Greater China Equity Strategist............+852 2841 40 36
Timothy Fung, Vice President, Greater China Equity Strategist.........+852 2841 48 12
Marc-Antoine Haudenschild, Vice President,
Japan Equity Strategist...................................................................+65 6212 60 89
Soek Ching Kum, Vice President, Southeast Asia Equity Strategist.....+65 6212 60 65
Maggie Yeo, Japan Equities Analyst.................................................+65 6212 60 70
Fixed Income and Forex
Winston Chan, Equities Analyst.....................................................+852 3407 82 85
Wing-Son Cheng, Director, Emerging Market Bonds.......................+852 2841 48 16
Charlie Lay, Vice President, Forex Strategy......................................+65 6212 60 66
Shivani Tharmaratnam, Assistant Vice President, FX Analyst.............+65 6212 64 82
Technical Analysis
Rolf P. Bertschi, Managing Director, Head of Global Technical
Research, Global Technical Investment Strategy............................ +41 44 333 24 05
Beat Grunder, Assistant Vice President,
Swiss and Asian/Pacific Equities and Commodities........................ +41 44 333 53 58
Sigisbert Koch, Vice President,
European Equities (excl. Switzerland) and Fixed Income ................. +41 44 333 94 64
Mensur Pocinci, Vice President, American Equities and Forex......... +41 44 333 20 69
Fixed Income
Dr. Nannette Hechler-Fayd’herbe, Managing Director,
Head of Global Fixed Income and Credit Research......................... +41 44 333 17 06
Tekla Kopcsai, Fixed Income and Credit Research.......................... +41 44 334 56 67
Global Credit Research
Wolfgang Wiehe, Vice President,
Head of Global Credit Research................................................... +41 44 333 44 31
Juan Briceno, Vice President, Emerging Markets........................... +41 44 332 92 83
Dr. Jeremy J. Field, Vice President,
HG Sovereigns, Covered Bonds, Agencies.................................... +41 44 334 56 29
Stephen Garibaldi, Vice President, Industrials, Telecoms................ +41 44 333 29 77
Sylvie Golay, Assistant Vice President,
Credit Strategy, Telecoms............................................................ +41 44 333 57 68
Elena Guglielmin, Vice President, Banks....................................... +41 44 333 57 67
Cristian Maggio, Emerging Markets.............................................. +41 44 332 90 93
Christian Pfund, Energy............................................................... +41 44 333 57 97
Pauline Lambert, Vice President,
Insurance, Pharmaceuticals, Consumer Products, Retail................. +41 44 334 00 86
Swiss Credit Research
John M. Feigl, CFA, Director,
Head of Swiss Credit Research.................................................... +41 44 333 13 70
Alexandra Bossert, CFA, Assistant Vice President,
Financials, Public Issuers, Retail .................................................. +41 44 333 13 79
Michael Gähler, Assistant Vice President, Consumer, Industrials,
Capital Goods, Services, Utilities.................................................. +41 44 333 51 84
Rates Research
Dr. Karsten Linowsky, Assistant Vice President, Rates Strategy,
Duration, IL Bonds...................................................................... +41 44 333 24 15
Michael Markovic, Vice President, Rates Strategy, FI Derivatives..... +41 44 333 52 33
Global Economics and Forex Research
Dr. Anja Hochberg, Director,
Head of Global Economics and Forex Research............................. +41 44 333 52 06
Fabian Heller, Swiss Economy...................................................... +41 44 332 90 61
Thomas Herrmann, Assistant Vice President, Eurozone Economy.... +41 44 333 50 62
Marcus Hettinger, Director, Global Forex Strategy.......................... +41 44 333 13 63
Martin McMahon, Short-term Forex Analysis ................................. +41 44 334 56 91
Tobias Merath, Assistant Vice President, Commodities................... +41 44 333 13 62
Sven Schubert, Emerging Markets Forex Analysis.......................... +41 44 333 52 28
Zoltan Szelyes, Assistant Vice President,
Global Real Estate Analysis, Econometric Modeling........................ +41 44 334 83 22
Ratana Vann Tra, Global Economics.............................................. +41 44 332 78 49
Susanna Walter, Global Economics............................................... +41 44 332 09 69

GLOBAL INVESTOR 1.07 Services — 66
Disclosure appendix
Analyst certification
The analysts identified in this report hereby certify that views about the companies and
their securities discussed in this report accurately reflect their personal views about all of
the subject companies and securities. The analysts also certify that no part of their compensation
was, is, or will be directly or indirectly related to the specific recommendation(s)
or view(s) in this report.
Important disclosures
Credit Suisse policy is to publish research reports, as it deems appropriate, based on
developments with the subject company, the sector or the market that may have a material
impact on the research views or opinions stated herein. Credit Suisse policy is only to
publish investment research that is impartial, independent, clear, fair and not misleading.
For more detail, please refer to the information on independence of financial research,
which can be found at:
Company Rating Date (since)
ROY. PHILIPS ELECTR BUY 22/12/2005
(PHIA NA)
SAP (SAP GR) BUY 26/01/2006
BUY 08/09/2003
SCHINDLER HLDG PS HOLD 27/02/2004
(SCHP SW)
SIEMENS R (SIE GY) BUY 15/12/2004
HOLD 24/02/2004
SOLARWORLD (SWV GR) BUY 13/11/2006
HOLD 20/06/2006
STRAUMANN HLDG N HOLD 14/08/2006
(STMN SW)
BUY 27/04/2006
HOLD 22/04/2005
BUY 18/01/2005
Company
Rating Date (since)
HOLD 01/09/2003
SYNGENTA N (SYNN VX) BUY 05/04/2004
HOLD 16/09/2003
THE SWATCH GRP BUY 24/08/2006
(UHR VX)
HOLD 17/05/2006
TIME WARNER (TWX US) BUY 30/08/2005
HOLD 07/02/2005
HOLD 17/10/2003
VESTAS WIND SYSTEMS HOLD 20/06/2005
(VWS DC)
SELL 29/11/2004
HOLD 22/08/2003
WALT DISNEY (DIS US) BUY 11/02/2005
HOLD 13/10/2004
https://entry4.credit-suisse.ch/csfs/research/p/d/de/media/independence_en.pdf
The analyst(s) responsible for preparing this research report received compensation that
is based upon various factors including Credit Suisse total revenues, a portion of which
are generated by Credit Suisse Investment Banking business.
The Credit Suisse Code of Conduct, to which all employees are obliged to adhere, is
accessible via the website at:
https://www.credit-suisse.com/governance/en/code_of_conduct.html
Rating change history as of 15/12/2006
Company
Rating Date (since)
ATLAS COPCO -A- BUY 19/07/2005
(ATCOA SS)
HOLD 07/01/2005
BG GROUP (BG/ LN) BUY 24/07/2006
BUY 09/02/2006
BUY 28/09/2005
BUY 10/05/2005
BUY 18/02/2004
BK SARASIN N -B- BUY 10/11/2006
(BSAN SW)
BMW (BMW GR) BUY 13/04/2004
CAMECO (CCO CN) BUY 18/07/2006
CAPGEMINI (CAP FP) BUY 26/07/2006
HOLD 24/02/2006
BUY 29/09/2005
HOLD 06/05/2004
BUY 05/09/2003
CARREFOUR (CA FP) HOLD 12/01/2005
SELL 02/12/2004
HOLD 03/09/2003
ERICSSON -B- (ERICB SS) BUY 13/06/2006
HOLD 07/03/2006
BUY 09/06/2005
HOLD 22/04/2005
SELL 22/10/2004
HOLD 09/01/2004
FRESENIUS MED CARE BUY 07/06/2006
(FME GR)
HOLD 05/08/2005
BUY 06/05/2005
HOLD 02/11/2004
Company
Rating Date (since)
GAZ DE FRANCE (GAZ FP) HOLD 07/09/2005
GENERAL ELECTRIC BUY 08/02/2005
(GE US)
HOLCIM N (HOLN VX) BUY 09/11/2006
REST 20/10/2006
BUY 04/08/2006
REST 11/05/2006
BUY 27/04/2006
N/R 21/04/2006
BUY 01/03/2006
HOLD 21/10/2004
BUY 08/08/2003
INBEV (INB BB) BUY 28/02/2006
HOLD 26/04/2005
BUY 19/08/2003
JULIUS BAER HLDG N BUY 28/07/2006
(BAER VX)
HOLD 24/02/2004
BUY 19/08/2003
LAGARDÈRE SCA R BUY 31/07/2006
(MMB FP)
BUY 07/01/2004
L’ORÉAL (OR FP) HOLD 10/03/2003
LVMH (MC FP) BUY 08/03/2002
MEDIASET (MS IM) HOLD 10/01/2003
MITTAL STEEL (MT NA) BUY 22/08/2006
NEWS-A (NWS/A US) BUY 17/05/2006
PUMA (PUM GR) BUY 22/08/2005
ROCHE HLDG G (ROG VX) BUY 15/04/2005
HOLD 11/02/2005
BUY 26/04/2004
Fundamental and/or long-term research reports are not regularly produced for BK SARASIN
N -B-. Credit Suisse reserves the right to terminate coverage at short notice. Please
contact your Relationship Manager for the specific risks of investing in securities of these
companies.
Credit Suisse has managed or comanaged a public offering of securities for the subject
issuer BMW, CARREFOUR, FRESENIUS MED CARE, GENERAL ELECTRIC, HOLCIM N,
SAP, TIME WARNER, THE WALT DISNEY CO. within the past three years.
Credit Suisse has managed or comanaged a public offering of securities for the subject
issuer BMW, FRESENIUS MED CARE, GENERAL ELECTRIC, HOLCIM N, SAP, TIME
WARNER, THE WALT DISNEY CO. within the past 12 months.
Credit Suisse has received investment banking-related compensation from the subject
issuer MITTAL STEEL, BMW, CARREFOUR, FRESENIUS MED CARE, GENERAL
ELECTRIC, HOLCIM N, INBEV, LVMH, MEDIASET, ROCHE HLDG G, SAP, SIEMENS R,
SYNGENTA N, TIME WARNER, THE WALT DISNEY CO. within the past 12 months.
Credit Suisse expects to receive or intends to seek investment banking-related compensation
from the subject issuer MITTAL STEEL, ATLAS COPCO -A-, BG GROUP, BMW,
CAMECO, CAPGEMINI, CARREFOUR, ERICSSON -B-, FRESENIUS MED CARE, GAZ DE
FRANCE, GENERAL ELECTRIC, HOLCIM N, INBEV, L’ORÉAL, LVMH, LAGARDÈRE SCA
R, MEDIASET, NEWS-A, ROY. PHILIPS ELECTR, PUMA, ROCHE HLDG G, SAP, SIEMENS
R, SYNGENTA N, TIME WARNER, THE WALT DISNEY CO. within the next three months.
As at the date of this report, Credit Suisse acts as a market maker or liquidity provider in
the securities of the subject issuer ERICSSON -B-, GENERAL ELECTRIC, TIME WARNER,
THE WALT DISNEY CO..
Credit Suisse holds a trading position in the subject issuer MITTAL STEEL, ATLAS COPCO
-A-, BG GROUP, BMW, BK SARASIN N -B-, CAMECO, CAPGEMINI, CARREFOUR, ERIC-
SSON -B-, FRESENIUS MED CARE, GAZ DE FRANCE, GENERAL ELECTRIC, HOLCIM
N, INBEV, JULIUS BAER HLDG N, L’ORÉAL, LVMH, LAGARDÈRE SCA R, MEDIASET,
NEWS-A, ROY. PHILIPS ELECTR, PUMA, ROCHE HLDG G, SAP, SIEMENS R, SOLAR-
WORLD, STRAUMANN HLDG N, THE SWATCH GRP, SYNGENTA N, TIME WARNER,
VESTAS WIND SYSTEMS, THE WALT DISNEY CO., SCHINDLER HLDG PS.
As at the end of the preceding month, Credit Suisse beneficially owned 1% or more of a class
of common equity securities of CAPGEMINI, FRESENIUS MED CARE, SIEMENS R, TIME
WARNER.
Swiss American Securities Inc. disclosures
Swiss American Securities Inc. or its affiliates has managed or comanaged a public offering
of securities for the subject issuer BMW, FRESENIUS MED CARE, GENERAL ELEC-
TRIC, HOLCIM N, SAP, TIME WARNER, THE WALT DISNEY CO. within the past 12
months.
Swiss American Securities Inc. or its affiliates has received investment banking-related
compensation from the subject issuer MITTAL STEEL, BMW, CARREFOUR, FRESENIUS
MED CARE, GENERAL ELECTRIC, HOLCIM N, INBEV, LVMH, MEDIASET, ROCHE HLDG
G, SAP, SIEMENS R, SYNGENTA N, TIME WARNER, THE WALT DISNEY CO. within the
past 12 months.
Swiss American Securities Inc. or its affiliates expects to receive or intends to seek investment
banking-related compensation from the subject issuer MITTAL STEEL, ATLAS
COPCO -A-, BG GROUP, BMW, CAMECO, CAPGEMINI, CARREFOUR, ERICSSON -B-,
FRESENIUS MED CARE, GAZ DE FRANCE, GENERAL ELECTRIC, HOLCIM N, INBEV,
L’ORÉAL, LVMH, LAGARDÈRE SCA R, MEDIASET, NEWS-A, ROY. PHILIPS ELECTR,
PUMA, ROCHE HLDG G, SAP, SIEMENS R, SYNGENTA N, TIME WARNER, THE WALT
DISNEY CO. within the next three months.

GLOBAL INVESTOR 1.07 Services — 67
As of the date of this report, Swiss American Securities Inc. acts as a market maker or
liquidity provider in the equity securities of the subject issuer MITTAL STEEL, CAMECO,
FRESENIUS MED CARE, GENERAL ELECTRIC, ROY. PHILIPS ELECTR, SAP, SIEMENS
R, SYNGENTA N, TIME WARNER, THE WALT DISNEY CO..
As at the end of the preceding month, Swiss American Securities Inc. or its affiliates
beneficially owned 1% or more of a class of common equity securities of CAPGEMINI,
FRESENIUS MED CARE, SIEMENS R, TIME WARNER.
Swiss American Securities Inc. or its affiliates holds a trading position in the subject
issuer MITTAL STEEL, ATLAS COPCO -A-, BG GROUP, BMW, BK SARASIN N -B-,
CAMECO, CAPGEMINI, CARREFOUR, ERICSSON -B-, FRESENIUS MED CARE, GAZ DE
FRANCE, GENERAL ELECTRIC, HOLCIM N, INBEV, JULIUS BAER HLDG N, L’ORÉAL,
LVMH, LAGARDÈRE SCA R, MEDIASET, NEWS-A, ROY. PHILIPS ELECTR, PUMA, ROCHE
HLDG G, SAP, SIEMENS R, SOLARWORLD, STRAUMANN HLDG N, THE SWATCH GRP,
SYNGENTA N, TIME WARNER, VESTAS WIND SYSTEMS, THE WALT DISNEY CO.,
SCHINDLER HLDG PS.
Additional disclosures for the following jurisdictions
Hong Kong: Other than any interests held by the analyst and/or associates as disclosed
in this report, Credit Suisse Hong Kong branch does not hold any disclosable interests.
Qatar: Any securities included in this report are not being offered or sold publicly in Qatar,
and may not be offered or sold to the public generally in Qatar. Russia: The research
contained in this report does not constitute any sort of advertisement or promotion for
specific securities, or related financial instruments. This research report does not represent
a valuation in the meaning of the Federal Law On Valuation Activities in the Russian
Federation and is produced using Credit Suisse valuation models and methodology. United
Kingdom: For fixed income disclosure information for clients of Credit Suisse (UK)
Limited and Credit Suisse Securities (Europe) Limited, please call +41 44 333 12 11.
For further information, including disclosures with respect to any other issuers, please
refer to the Credit Suisse Global Research Disclosure site at:
https://entry4.credit-suisse.ch/csfs/research/p/d/de/disclosure_en.html
Corporate and emerging market bond recommendations
The recommendations are based fundamentally on forecasts for total returns versus the
respective benchmark on a 3 – 6-month horizon and are defined as follows:
BUY
HOLD
SELL
RESTRICTED
Expectation that the bond issue will be a top performer in its segment
Expectation that the bond issue will return average performance
in its segment
Expectation that the bond issue will be among the poor performers
in its segment
In certain circumstances, internal and external regulations exclude
certain types of communications, including e.g. an investment
recommendation during the course of Credit Suisse engagement
in an investment banking transaction.
Credit ratings definition
Credit Suisse assigns rating opinions to investment-grade and crossover issuers. Ratings
are based on our assessment of a company’s creditworthiness and are not recommendations
to buy or sell a security. The ratings scale (AAA, AA, A, BBB, BB) is dependent on our
assessment of an issuer’s ability to meet its financial commitments in a timely manner.
AAA
AA
A
BBB
BB
Best credit quality and lowest expectation of credit risks, including an
exceptionally high capacity level with respect to debt servicing. This
capacity is unlikely to be adversely affected by foreseeable events.
Obligor’s capacity to meet its financial commitments is very strong
Obligor’s capacity to meet its financial commitments is strong
Obligor’s capacity to meet its financial commitments is adequate,
but adverse economic/operating/financial circumstances are more
likely to lead to a weakened capacity to meet its obligations
Obligations have speculative characteristics and are subject to
substantial credit risk due to adverse economic/operating/financial
circumstances resulting in inadequate debt-servicing capacity
Guide to analysis
Rating allocation as of 15/12/2006
Relative performance
At the stock level, the selection takes into account the relative attractiveness of individual
shares versus the sector, market position, growth prospects, balance-sheet structure
and valuation. The sector and country recommendations are “overweight,” “neutral”, and
“underweight” and are assigned according to relative performance against the respective
regional and global benchmark indices.
Absolute performance
The stock recommendations are BUY, HOLD and SELL and are dependent on the expected
absolute performance of the individual stocks, generally on a 6–12-month horizon based
on the following cri
BUY
HOLD
SELL
RESTRICTED
TERMINATED
Overall
BUY 43.15% 43.30%
HOLD 52.23% 52.58%
SELL 4.28% 3.92%
RESTRICTED 0.34% 0.21%
Investment banking interests only
10% or greater increase in absolute share price
variation between –10% and +10% in absolute share price
10% or more decrease in absolute share price
In certain circumstances, internal and external regulations exclude
certain types of communications, including e.g. an investment
recommendation during the course of Credit Suisse engagement
in an investment banking transaction.
Research coverage has been concluded.
For the AA, A, BBB, BB categories, creditworthiness is further detailed with a scale of
High, Mid or Low, with High being the strongest subcategory rating. An outlook indicates
the direction a rating is likely to move over a two-year period. Outlooks may be positive,
stable or negative. A positive or negative rating outlook does not imply a rating change is
inevitable. Similarly, ratings for which outlooks are “stable” could be upgraded or downgraded
before an outlook moves to positive or negative if circumstances warrant such an
action.
Credit Suisse HOLT
The Credit Suisse HOLT methodology does not assign ratings to a security. It is an analytical
tool that involves use of a set of proprietary quantitative algorithms and warranted
value calculations, collectively called the Credit Suisse HOLT valuation model, that are
consistently applied to all the companies included in its database. Third-party data (including
consensus earnings estimates) are systematically translated into a number of default
variables and incorporated into the algorithms available in the Credit Suisse HOLT valuation
model. The source financial statement, pricing, and earnings data provided by outside data
vendors are subject to quality control and may also be adjusted to more closely measure
the underlying economics of firm performance. These adjustments provide consistency
when analyzing a single company across time, or analyzing multiple companies across
industries or national borders. The default scenario that is produced by the Credit Suisse
HOLT valuation model establishes the baseline valuation for a security, and a user then
may adjust the default variables to produce alternative scenarios, any of which could occur.
The Credit Suisse HOLT methodology does not assign a price target to a security. The
default scenario that is produced by the Credit Suisse HOLT valuation model establishes
a warranted price for a security, and as the third-party data are updated, the warranted
price may also change. The default variables may also be adjusted to produce alternative
warranted prices, any of which could occur. Additional information about the Credit Suisse
HOLT methodology is available on request.
For technical research
Where recommendation tables are mentioned in the report, “Close” is the latest closing
price quoted on the exchange. “MT” denotes the rating for the medium-term trend (3–6-
month outlook). “ST” denotes the short-term trend (3–6-week outlook). The ratings are
“+” for a positive outlook (price likely to rise), “0” for neutral (no big price changes expect-

GLOBAL INVESTOR 1.07 Services — 68
ed) and “–” for a negative outlook (price likely to fall). Outperform in the column “Rel perf”
denotes the expected performance of the stocks relative to the benchmark. The “Comment”
column includes the latest advice from the analyst. In the column “Recom” the date
is listed when the stock was recommended for purchase (opening purchase). “P&L” gives
the profit or loss that has accrued since the purchase recommendation was given.
For a short introduction to technical analysis, please refer to Technical Analysis Explained at:
https://entry4.credit-suisse.ch/csfs/research/p/d/de/techresearch/media/pdf/
trs_tutorial _en.pdf
Global disclaimer / important information
References in this report to Credit Suisse include subsidiaries and affiliates. For more
information on our structure, please use the following link:
http://www.credit-suisse.com/who_we_are/en/structure.html
The information and opinions expressed in this report were produced by Credit Suisse as
of the date of writing and are subject to change without notice. The report is published
solely for information purposes and does not constitute an offer or an invitation by, or on
behalf of, Credit Suisse to buy or sell any securities or related financial instruments or to
participate in any particular trading strategy in any jurisdiction. It has been prepared without
taking account of the objectives, financial situation or needs of any particular investor.
Although the information has been obtained from and is based upon sources that Credit
Suisse believes to be reliable, no representation is made that the information is accurate
or complete. Credit Suisse does not accept liability for any loss arising from the use of this
report. The price and value of investments mentioned and any income that might accrue
may fluctuate and may rise or fall. Nothing in this report constitutes investment, legal,
accounting or tax advice, or a representation that any investment or strategy is suitable or
appropriate to individual circumstances, or otherwise constitutes a personal recommendation
to any specific investor. Any reference to past performance is not necessarily indicative
of future results. Foreign currency rates of exchange may adversely affect the value,
price or income of any products mentioned in this document. Alternative investments,
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