HBZ Investment Quarterly

Q4 2012

Poor fundamentals – unlimited liquidity

2

Table of contents

Editorial 3

The macro backdrop: Central banks at the helm 4

Investment strategy: Don‘t get carried away 5

Fixed income: Reduced tail risk 6

Equity: ‘Risk trade‘ on hope 7

FX and commodities: Rally with negative side effects 8

Key markets: No place to hide 9

Dividend investing: Not just about dividends 10

Market data summary 11

Disclaimer 16

3

Dear Reader,

Thanks to the announcement of extraordinary new measures from both the Fed (to prop up the ailing US economy) and the ECB (to con-tain the eurozone debt crisis), the summer quarter ended with a bang. Both decisions are clear signs – as if any were needed – that we are living through an exceptional period, but only time will tell whether these latest actions will be successful. As the strong rally of the gold price suggests, fear of a sharp rise in inflation at some point further down the road is beginning to return to the markets.

From a strategy perspective, short of a full-blown investor strike, risk assets such as equities and corporate bonds should continue to bene-fit from the central banks’ renewed commitment to supporting the economy and markets at almost any price. Unsurprisingly given these extraordinary times, however, uncertainty remains high and we thus continue to advise against being fully invested in risk assets.

This issue’s special topic highlights how dividend investing, though a more complex undertaking than many people think, is an entirely worthwhile strategy when properly implemented.

I hope this and the other texts in our HBZ Investment Quarterly will help you navigate the financial markets over the last quarter of the year.

As always, I look forward to your feedback and our discussions.

Yours sincerely,

Dr. David Wartenweiler, CFAChief Investment Officer

Editorial

Dr. David Wartenweiler

4

2011 2012E 2013EShort-term

trend

United States 1.7 2.2 2.1 �Eurozone 0.7 -0.5 0.4 �Germany 3.0 0.9 1.1 �United Kingdom 0.7 -0.4 1.2 �Japan -0.7 2.3 1.2 �

China 9.2 7.7 8.0 �India 8.2 7.8 7.8 �Russia 4.3 3.9 3.7 �Brazil 2.8 1.9 4.1 �

2011 2012E 2013EShort-term

trend

United States 3.2 2.0 2.0 �Eurozone 2.7 2.4 1.9 �Germany 2.5 2.0 1.9 �United Kingdom 4.5 2.7 2.0 �Japan -0.3 0.0 0.2 �

China 5.4 2.8 3.3 �India 7.5 6.9 6.9 �Russia 8.5 5.1 6.5 �Brazil 6.6 5.2 5.3 �

The macro backdrop: Central banks at the helm

Fundamentals still shaky The economic situation in many parts of the developed world remains stagnant at best as economies continue to battle the after-effects of the Great Financial Crisis of 2008. The eurozone will remain mired in recession for some time and growth in the US has been losing steam over recent quarters. With the uncertainties surrounding the so-called ‘fiscal cliff‘ – a massive fiscal contraction posited for the beginning of 2013 that we think politicians may yet be able to avoid despite the elections – the risk of recession has increased. The recovery in Japan also appears to be fragile, also due to weakening export demand.

Extraordinary measures for extraordinary timesAs many governments are unable or unwilling to add more stimulus, key central banks have concluded that extraordinary new measures are necessary to avert further economic backsliding. With its latest decisions, the US Federal Reserve has thus committed itself to unlimi-ted asset purchases until the outlook for the labor market improves substantially. The policy rate is expected to stay exceptionally low ‘at least through mid-2015‘. The ECB has made clear that it is willing to make unlimited secondary market purchases of sovereign bonds in order to contain the festering eurozone debt crisis. Country-specific conditions will be attached to ECB purchases in an effort to maintain pressure on certain member states. The Bank of Japan, too, has announced a further round of asset purchases. Whether all of these measures will ultimately have the desired effect remains to be seen, but in the short term they should at least help to boost confidence and silence speculation about an imminent break-up of the eurozone.

China’s struggle to change its growth model Emerging markets, even those in Asia, are not necessarily immune from sluggish economic momentum in the developed world and some of them are grappling with challenges of their own. China in particular is facing strong headwinds as it attempts to transition from an export-led to a domestic consumption-based growth model. The bottoming-out of China’s economic slowdown, already anticipated for earlier this year, has yet to materialize. The bottom line is that the developed world cannot count on China, or for that matter any other emerging market, to lift it out of the economic doldrums.

Global growth has decelerated over the past quarter and there are no signs of any improvement in the short term. Small wonder, then, that many central banks have been redoubling their efforts to stimulate economic activity, in some cases resorting to extraordinary measures.

Table1: Real GDP growth (y/y in %)

Source: Bloomberg, IMF, HBZ

Table 2: Consumer price inflation (y/y in %)

Key points • Economicoutlookremainsvery

challenging• Centralbanksextendnewmeasures

to reflate economies• Emergingmarketswillnotliftworld

economy on their own

5

Investment strategy: Don’t get carried away

Market distortions challenge investment decisionsSigns of faltering growth and persistent investor fears about financial stability have prompted the US Fed and the ECB to dig even dee-per into their toolbox. As a result, risk assets experienced favorable momentum during the third quarter. Equities, emerging market, cor-porate and high-yield bonds joined commodities in benefiting from the prospect of a new wave of liquidity and central bank asset buying. While these are welcome developments from a performance perspec-tive, investors should not lose sight of the fundamental backdrop. Growth is weak or at best slowing in many countries, and there are no signs of an imminent turnaround. Moreover, central bank interventi-ons continue to distort interest rates – the most important economic signal – making the valuation of investments an extremely tricky busi-ness. Determining whether or not they are being fairly compensated for the risks they are taking has thus become even more difficult than usual for investors.

Current positioning During the course of the third quarter we increased investment-grade corporate bond exposure in our portfolios but otherwise left our positioning unchanged; we are not currently planning any major shifts for the reasons outlined above – weak economic trends and concerns about proper compensation for risk. We are well aware that our above-average cash holding represents a drag on performance, especially in times of negative real rates, but we believe a more constructive view is not yet warranted given the many uncertainties on the horizon. In short, we are happy to let our investments run for the time being and we do not intend to increase overall risk exposure.

What to watch We believe the recent central bank actions will continue to create a reasonably favorable market environment. Nevertheless, there are several key downside risks, some of which stem from generally poor fundamentals, others from the eurozone debt crisis (which has yet to be comprehensively resolved) and others still from the US, where the risk of a sharp reversal of the current fiscal stance is looming. Until fundamentals improve on a sustained basis, we would prefer to err on the side of caution.

The latest aggressive central bank actions have created a favorable tailwind for risk assets. However, investors should be aware that liquidity alone cannot create value. A cautious positioning is warranted as long as fundamentals remain weak.

Chart 1: A sea of liquidity and more to come

Source: Bloomberg, HBZ

Key points • Centralbankactionsupportrisk

assets• Fundamentalsremainpoor• Manipulatedinterestrateschallenge

valuations

100

150

200

250

300

350

Jan 07 Sep 07 Jun 08 Feb 09 Nov 09 Jul 10 Apr 11 Dec 11 Sep 12

Ass

ets

inde

xed

(100

= Ja

nuar

y 1,

200

7)

Assets - Federal Reserve Assets - ECB

6

Fixed income: Reduced tail risk

Yields to remain low in developed marketsThe recent central bank actions have reduced tail risk for bond inve-stors. Unlimited quantitative easing in the US will ensure that yields do not spike any time soon and the ECB has committed to capping yields for the most vulnerable eurozone member states. Although countries will first have to request support – and none has at the time of writing – the announcement alone seems already to have had some impact. Inflation expectations also remain well behaved for the time being and are unlikely to exert undue pressure on yields as long as there is plenty of slack in the economies.

Be selective with corporate and high-yield bonds Due to exceptionally low interest rates, government bonds are unat-tractive across most of the developed world and have been so for some time, in our view. Credit spreads have tightened considerably as well, and yields on many corporate bonds are thus also very low. In many cases, investors are actually no longer being fairly compensated for the risk they are taking. Investors therefore need to be selective. In the investment-grade segment, for example, we still see some value in solid but unjustly punished companies from some peripheral European countries (Spanish telecoms, for example) and in some financials (especially insurers or national champions in the banking sector). The corporate high-yield sector also continues to look promising despite slowing economic momentum. However, we would be reluctant to add to existing exposure at this point. For reasons of diversification, we recommend fund structures for investments in this segment.

Options in emerging markets Emerging-market bonds remain attractive, but here too, investors need to be selective. For example, we still see some value in Russian financials, which are more than 50% government-owned. Bonds and sukuk from the Middle East offer another option with attractive yields. Many corporates in other emerging-market regions are also of inte-rest, but here too, prudence is advised. With growth slowing in many economies, fundamentals of hitherto sound companies may deterio-rate. An alternative may be found in sovereign bonds in local currency, which should benefit from the generally higher level of interest rates. Investors nonetheless need to be aware that such investments expose them to currency risks.

The recent central bank interventions reduced tail risk in the bond market and ensured that the world will remain awash with liquidity. As a result, yields will stay low for the foreseeable future.

Chart 2: Low corporate bond yields (in %)

Source: Barclays Capital

Key points • Centralbankshavereducedtailrisk

in the bond market• Beselectivewithcorporatebonds• ValueinMiddleEasternbondsand

sukuk

2.8

3.0

3.2

3.4

3.6

3.8

4.0

4.2

4.4

4.6

09/0

9 11

/09

01/1

0 03

/10

05/1

0 07

/10

09/1

0 11

/10

01/1

1 03

/11

05/1

1 07

/11

09/1

1 11

/11

01/1

2 03

/12

05/1

2 07

/12

Barclays Global Aggregate Corporate Index (USD)

7

Equity: ‘Risk trade‘ on hope

On shaky ground Financials, energy and materials stocks gained most in a global equi-ty market rally and stabilization efforts by the central banks clearly encouraged investors to increase holdings of banking and insurance stocks. As the immediate contagion risk from peripheral eurozone countries faded, depressed financial stocks became a safer bet. However, despite the highly visible political efforts to manage the debt crisis, banks will remain under pressure from weak fundamental data and escalating restructuring needs. Rising oil prices once again lifted energy stocks, helping them to uphold their multi-year record level of relative strength compared with the broad market. However, weak global demand also took its toll on energy stocks, as reflected in dece-lerating earnings, operating margins and dividend yield levels since Q2. The discrepancy between underlying earning power and short-term price increases has been even more pronounced for materials stocks – not only are their volatile earnings suffering from falling industrial production in China, but rising concerns about the end of the commo-dity super-cycle are also threatening the sector’s long-term outlook. Defensive sectors (utilities, staples, health care) lost some ground in the ongoing sector reshuffle.

Emerging markets out of favor Interestingly, investors continue to pay only limited attention to emer-ging-market stocks despite their current ‘risk-on‘ mode. Emerging-market indices have been trailing their developed peers for almost two years, and even the sector’s Q3 performance shows that investors favor more stable stocks (health care, energy, telecoms and consumer) over cyclical sectors in these regions. Several factors seem to have interrupted the traditional risk trade. Firstly, declining absolute and relative economic momentum in many emerging countries, combined with high inflation levels, make massive central bank stimulus unlike-ly; and secondly, broader economic and political transformations in China create uncertainty for global investors. After several quarters of anticipation, investors are wondering if the bottoming-out of China will ever materialize. Ultimately, growth is likely to be notably lower in China and it will be generated in different sectors. Given all of these obstacles, undervalued and depressed but established corporations in developed markets are regarded as more lucrative risk trades.

Equity markets rebounded significantly in the third quarter, driven by recent central bank interventions. The rally could sustain further despite overbought signals. Stocks in developed countries have gained most, while emerging-market equities still lack momentum.

Source: Bloomberg

Chart 3: Global equities: Rising on hope and liquidity

Key points • EquitiesralliedsubstantiallyinQ3due

to stimulus measures, not fundamen-tals

• Itisprematuretoanticipateaturna-round in the global economy

• Emergingmarketsdisappointedagainbecause of lower growth, high inflati-on and structural issues

90

95

100

105

110

115

120

125

08/1

1

09/1

1

10/1

1

11/1

1

12/1

1

01/1

2

02/1

2

03/1

2

04/1

2

05/1

2

06/1

2

07/1

2

08/1

2

MSCI World Index

8

-1.3

1.0

4.0

11.6

11.7

11.9

13.5

15.1

17.8

20.7

24.1

25.6

31.1

-10 -5 0 5 10 15 20 25 30 35

Sugar

Natural gas

Co�on

Gold

Aluminum

Copper

Soybean

WTI Crude

Wheat

Brent Crude

Silver

Corn

Gasoline

FX and commodities: Rally with negative side effects

Precious metals still the preferred playThe Fed’s ultra-loose policy stance is critical for commodity investors – mostly hedge funds – that channel funds into speculative trades and drive up commodity prices. A broad-based price appreciation, of the kind we are currently witnessing, has a restraining influence on global demand. The US consumer in particular is still vulnerable to swings in energy prices. The current trend is an unwanted side-effect of central bank liquidity provision and may have a negative impact on the busi-ness cycle in the short term.

Silver leads the top performers in metals, gaining over 20% in Q3. The precious metal is expected to continue its rise as the economy is refla-ted. Gold also broke out of the downtrend after the ECB outlined its bond-purchase program. Its performance is in line with base metals, but gold is widely thought to have further upside potential. Energy prices showed a steady increase as speculation and political tensions re-emerged. An oil price around USD 100 is likely for some time. The top performers in Q3 were various agricultural commodities (wheat, corn and soybeans), which rallied considerably in response to the severe drought in the US. It is however unlikely that these trends will continue as soil moisture projections and planting conditions improve. Ambiguous response of currenciesCurrencies reacted less acutely than many other assets. The propensity of individual central banks to mitigate currency appreciation limits the potential for gains. Traditional winners of ‘risk-on‘ trades such as the AUD, ZAR, EUR or liquid EM-currencies lagged the SEK, NOK and CAD this time around. The gloomy outlook for China and export growth is also putting a damper on demand for commodity currencies. The EUR/CHF exchange-rate peg will not be lifted, as the Swiss economy con-tracted in Q2. Major European currencies such as the EUR, GBP and CHF gained against the USD in response to marginal improvements in the debt crisis. At this point, we are neutral on the USD and expect the greenback to fluctuate but in general trend sideways. Depreciation pressure on the USD will abate again as structural problems in the EU and recessionary trends are set to persist. If the recession worsens, we expect investors to shift back into the USD on a large scale.

Most commodity prices gained on central bank intervention; hedge funds in particular have scaled up their bullish bets. While liquidity injections are aimed at stimulating the economy, they may have adverse effects in the short term as higher commodity prices curb demand.

Source: Bloomberg, HBZ

Chart 4: Price return for selected commodities (3 months, in %)

Key points • Commoditiesbenefitfromnew

central bank liquidity• Risingenergypricesmayhavea

short-term negative effect on the economy

• Responseofcurrenciesismuted, USD likely to remain strong in the mid-term

9

Key markets: No place to hide Last quarter we highlighted the benefits of being located on the periphery. We still think that at least some of our key markets will continue to enjoy respectable growth, but in a globalized world, no one expects to remain unaffected by the general slowdown.

Source: Bloomberg, HBZ

Chart 5: UK growth: No recovery before 2013 at best

Key points • Theglobalslowdownwilleventually

slow growth in our key markets• TheUAEisholdingupwell,thanksto

its safe-haven status in the region• MoreassetpurchasesbytheBoE

should lift sentiment for UK bonds and stocks

Bloomberg median forecasts for quarterly growth

Pakistan: Slowly getting into election moodPakistan stocks and bonds performed well during the past quarter. One of the main reasons for this was a surprise rate cut by the State Bank of Pakistan. The rate decision was triggered by lower-than-expected inflation but it also had a political dimension considering that gene-ral elections will have to be held during the first half of 2013. Strong remittance inflows (and the release of USD1.2bn linked to the re-opening of NATO supply routes) have helped to ease pressure on the currency. Given the balance of payments situation, however, further depreciation is on the cards. Despite the expected slowdown of eco-nomic growth during the current fiscal year, the possibility of further rate cuts combined with positive sentiment ahead of the elections continue to provide a favorable backdrop for stocks. UAE: Improving credit pictureEconomic activity continued at a decent clip throughout the summer months. GDP growth for 2012 is expected to peak at 3-4%; less than last year, but still respectable. The UAE is benefiting not only from higher oil prices and rising public spending but also from its status as a safe haven in a region rife with political turmoil. Dubai’s residential property market continues to recover, although price gains have slo-wed lately. The local financial markets had a good summer quarter, especially the credit sector, where credit spreads tightened in the wake of a number of repayments and successful restructurings as well as some well-received new issues. We remain constructive but the global slowdown is likely to impact the UAE at some stage. UK: Living in recessionUK economic growth almost certainly contracted during the past quarter and will stay flat in Q4 at best. Weak domestic and external demand accounts for the continuing recession. Given this negative growth backdrop, and despite inflation concerns, we expect the Bank of England (BoE) to follow other major central banks with more asset purchases, and maybe even a rate cut, at its policy meeting in November. This action should support financial markets, in particular bonds, but also boost confidence – at least in the short term. Unless we experience another bout of global risk aversion, UK stocks will pro-bably continue to underperform most of their developed peers. The GBP should lose some ground against the USD after the recent rally.

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Q3 11

Q4 11

Q1 12

Q2 12

Q3 12F

Q4 12F

Q1 13F

Q2 13F

Q3 13F

Q4 13F

GD

P Y/

Y in

%

Realized Forecast

10

Dividend investing: Not just about dividends

Dividend investing requires a long-term viewHigh-dividend stocks in particular gain in attractiveness among inve-stors after recessions and other crises that reveal the vulnerability of equities. In the long term, however, dividends are also a significant component of total equity returns. S&P500 companies have yielded about 3.5% over the last decade (4.2% for the MSCI World), alt-hough the actual yield is only about 1% when adjusted for inflation. Moreover, dividends are subject to taxation, thus reducing the yield further by a sometimes considerable amount. The question is: How can a stable income stream be secured from dividends and positive performance, and how can high volatility and high risk – features of many top dividend payers – be avoided?

A host of quantitative research suggests that strategies based on the dividend yield alone are not successful. Strategies involving dividends therefore usually include other criteria. A high cash flow, a reaso-nably low dividend payout ratio and solid earnings are all required to secure a dividend. Some companies lure investors with high divi-dends paid out from the firm’s asset base, a policy that is not sustai-nable. Corporations with a long history of stable dividend increases – regardless of the absolute level – can also be a good investment. It signals to the market that their growth trajectory is solid and that they are able to distribute wealth to shareholders on a regular basis. A study in the US also shows that dividend strategies incorporating a high repurchase yield (dividend yield augmented by the cash share repurchase) are a viable approach. What do these insights mean for investors?Investors clearly have to assess, in one way or another, the fundamen-tal value and security of dividend payments in their strategy. While many dividend-payers are in mature and defensive sectors (telecoms, utilities), companies showing profitable growth should also be inclu-ded in a portfolio. Many solid financials (mainly REITs) pay a high dividend, as do some energy stocks. Cyclical companies can also offer a convincing combination of growth and high dividends, however. In order to mitigate sector risk and benefit from a long-term rise in the equity market, investors should diversify the dividend portfolio into different sectors. Balancing a portfolio may require sacrificing some nominal yield, but it is likely to generate higher total returns.

A good stock performance is comprised of dividends plus a price increase (total return). Income-seeking or defensive investors in particular favor stocks with a high dividend yield. However, they often neglect the price component and the soundness of the underlying business model.

Source: Bloomberg, HBZ

Chart 6: Dividend aristocrats beat the market

Key points • Dividendsareanimportantcompo-

nent of long-term equity returns• Ahighyieldaloneisoftenmisleading

and can signal fundamental problems • Successfulstrategiesincorporatefun-

damentals and diversification

Glossary The S&P 500® Dividend Aristocrats index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 conse-cutive years.

50

100

150

200

250

08/0

2

03/0

3

10/0

3

05/0

4

12/0

4

07/0

5

02/0

6

09/0

6

04/0

7

11/0

7

06/0

8

01/0

9

08/0

9

03/1

0

10/1

0

05/1

1

12/1

1

07/1

2

S&P 500 Dividends Aristocrats TR S&P 500 Index

11

Market data summary

As of September 26, 2012

Equity indices Last -3M YTD -3YR Bond indices Last -3M YTD -3YR

% % % % % %

MSCI World USD 3,330.4 10.6 12.8 25.3 Citi US Gov 1,387.19 0.6 2.2 16.7S&P 500 1,433.3 7.6 14.0 37.2 Citi US HY 1,822.08 3.8 8.8 29.8EuroStoxx 50 2,510.5 15.9 8.4 -11.4 Citi US Corp 739.05 4.7 11.4 42.7FTSE 100 5,789.3 4.8 3.9 13.9 Citi Euro Gov 186.69 3.9 7.0 12.9SMI 6,565.5 9.5 10.6 5.3 Citi Euro Corp 198.29 4.1 9.5 20.0

Nikkei 8,949.9 2.5 5.8 -12.8 Citi EM Sov 656.57 6.9 13.3 40.4

MSCI EM USD 394.3 10.0 10.6 17.2 DB EM Local USD 171.56 7.2 10.8 24.4Sensex 30 18,660.3 10.0 20.7 11.8KSE 100 15,356.2 11.3 35.3 58.9Hang Seng 20,791.2 8.4 12.8 -1.1Russia RTS 1,467.7 12.3 6.2 19.8Brazil Bovespa 60,478.1 13.9 6.6 0.2

Currencies Last -3M YTD -3YR Interest rates 3M interbank 10YR government

% % % % %

DXY 79.89 -3.5 -0.6 3.8 USD 0.36 1.64EUR/USD 1.29 3.3 -0.6 -12.3 EUR 0.15 1.46USD/CHF 0.94 2.6 -0.1 9.4 GBP 0.61 1.70GBP/USD 1.62 4.0 4.2 1.5 CHF 0.04 0.57USD/JPY 77.75 2.6 -1.0 15.4 JPY 0.19 0.78AUD/USD 1.04 3.2 1.9 19.9 AUD 3.90 3.02USD/CAD 0.99 4.3 3.9 11.0 CAD 1.27 1.75USD/ZAR 8.23 3.1 -1.2 -9.5 ZAR 5.08 6.87

USD/INR 53.52 7.2 -0.4 -9.9USD/PKR 94.70 -0.2 -5.1 -12.5Gold oz 1,752.75 11.7 12.5 77.4

12

For your notes

13

For your notes

14

For your notes

15

Authors • Dr. David Wartenweiler, Chief Investment Officer (d.wartenweiler@habibbank.com)• Angelika Stückler, Senior Portfolio Manager, Equities (a.stueckler@habibbank.com)• Stefan Wüthrich, Senior Portfolio Manager, Fixed Income (s.wuethrich@habibbank.com)

Contact for UK • Shahzad Shahid (s.shahid@habibbank.com)

Contact for UAE • Kamran Ahmed Suhrwardy, Private Banking (k.suhrwardy@habibbank.com)

Layout • Pascale Manga, Communications Support (p.manga@habibbank.com)

Printing • Theiler Werbefabrik GmbH, Rütenenstrasse 6, CH-8102 Oberengstringen (werbefabrik@bluewin.ch,

www.werbefabrik.ch)

Editing • MOTIF Executive Communications, Kämbelgasse 4, CH-8001 Zurich (www.motif.ch)

Price data as of September 24, 2012

16

Disclaimer

Habib Bank AG ZurichPrivate BankingWeinbergstrasse 59P.O. Box 225CH-8042 ZurichTel: +41 44 269 45 00Fax: +41 44 269 45 18

This report is for distribution only under such circumstances as may be permitted by applicable law. It is expressly not intended for persons who, due to their nationality or place of residence, are not permitted access to such information under local law. Neither this report nor any copy thereof may be sent, taken into or distributed in the United States or to any U.S. person. The information contained herein has been prepared from sources believed reliable but is not guaranteed by Habib Bank AG Zurich (HBZ) and is not a complete summary of statements of all avai-lable data. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial and/or tax situation or specific needs of investors. Employees of HBZ or its affiliates may, at times, release written or oral commentary, technical analysis or trading strategies that differ from the opinions expressed within this report. HBZ and/or its employees involved in the preparation or the issuance of this report may have positions in the securities or options of the issuer/s discussed or recommended herein. Securities identified herein are subject to availability and changes in price. They may not be eligible for sale in all jurisdictions or to certain categories of investors. For additional information on investment risks (including, but not limited to, market risks, credit ratings and specific securities provi-sions), contact your HBZ financial advisor. The information and material presented in this research note are provided for information only and are not to be used or considered as an offer or solicitation to buy, sell or subscribe to any securities or other financial instruments. This note does not take into consideration the specific investment objectives, financial situation or particular needs of any person who may receive

this note and invest in any financial instrument. HBZ has not taken any steps to ensure that the securities referred to in this document are sui-table for any particular investor. This brochure is not to be relied upon in substitution for the exercise of independent judgment. HBZ strongly recommends to interested investors to independently assess, with a pro-fessional advisor, the specific financial, legal, regulatory, credit, tax and accounting consequences prior to any investment decision. The value and income of any of the securities or financial instruments mentioned in this document can go up as well as down. The market value may be affected by changes in economic, financial or political factors, time to maturity, market conditions and volatility, or the credit quality of any issuer or reference issuer. Many factors may affect the value of a finan-cial instrument, and accordingly, investors effectively assume all risk and may receive back less than they had originally invested. Any investors interested in buying a financial instrument should conduct their own investigation and analysis of the instrument as to the risks involved with transactions on such instruments. Past performance should not be taken as an indication or guarantee for future performance. In Switzerland, this report is distributed by Habib Bank AG Zurich, authorized and regulated by the Swiss Financial Market Supervisory Authority (FINMA). In United Arab Emirates, this report is distributed by Habib Bank AG Zurich, UAE Branches, authorized and regulated by the Central Bank of the United Arab Emirates. In the United Kingdom, HBZ is Authorized and Regulated by the Financial Services Authority and appears in the FSA Register under reference number 113991 and is registered in England under number FC 007990.