share Price ($) ESG MSCI rating

DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/ researchdisclosures or call +1 (877) 291-2683. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATIONTM

Client-Driven Solutions, Insights, and Access

27 September 2012

Asia Pacific/Australia

Equity Research

Macro

Australian ESG/SRI SOCIALLY RESPONSIBLE INVESTING

ESG overlay on key stock calls

■ MSCI analyst outlooks – more upside than downside. Our analysts have

reviewed the current MSCI Intangible Value Add (IVA) rating, which looks at

Environment, Social Governance (ESG) issues across Australian stocks.

MSCI publishes an IVA rating (AAA to CCC) on most of the stocks we cover.

Our analysts have formed an opinion based on ‘on the ground’ information

and stock views, and set a Positive, Neutral or Negative view on the current

MSCI rating. We have 30 Positive outlooks and 15 Negatives.

■ AAA rated outperformance: We have compared the performance of stocks

by their current MSCI rating. While this type of analysis does have issues,

our interest is drawn to the outperformance of the AAA (MSCI IVA rated)

stocks over the one-month–three-year period, compared to many lower

ratings and to the market. The AAA rated stocks are dominated by the

Australian banks, which have outperformed by ~20%–23%.

■ Outperformance of worse rated stocks: The outperformance of the MSCI

IVA B and CCC lower rated stocks over a three-year period is affected by

small cap resource stocks, such as AUT (rated B) and BTU (rated CCC),

where exploration and production success has been the driver. The challenge

here is to ensure issues in production do not affect future performance.

■ Key calls: We have taken key strategy team, sector analysts, and quant

calls and overlaid those with our ESG views. As a result, our key long calls

are BXB (strategy), RMD, TAH, WBC (sector analysts) and BOQ, ILU, PRU

(quant). Our key short call on ASX and TWE (both from sector analyst).

Figure 1: ESG overlay on key calls Ticker Company name Actual

share

price ($)

Target

Price ($)

Rating MSCI

ESG

Rating

View on

MSCI rating

Market cap Key call criteria

ASX.AX ASX 30.22 28.50 UNDERPERFORM BBB Negative 5,293 Analyst Negative view on ESG rating

plus Analyst key Short call

BOQ.AX Bank of

Queensland

7.62 8.00 OUTPERFORM BBB Positive 2,353 Analyst positive view on ESG rating

plus Quant call on Growth and Value

BXB.AX Brambles Limited 6.84 7.88 OUTPERFORM AAA Neutral 11,047 AAA rated (MSCI IVA) and Strategy

sector call on Global cyclicals

ILU.AX Iluka Resources 10.41 13.50 OUTPERFORM BBB Positive 4,359 Analyst positive view on ESG rating


PRU.AX Perseus Mining 2.70 3.10 OUTPERFORM B Positive 1,236 Analyst positive view on ESG rating


RMD.AX ResMed Inc. 3.84 3.93 OUTPERFORM BB Positive 6,206 Analyst positive view on ESG rating

plus Analyst key Long call

TAH.AX Tabcorp Holdings 2.83 3.30 NEUTRAL AAA Neutral 2,066 AAA rated (MSCI IVA) plus Analyst key

TWE.AX Treasury Wine 4.82 3.50 UNDERPERFORM B Neutral 3,120 Low MSCI IVA Rating of B plus Analyst

key Short call (paired with TAH)

WBC.AX Westpac 24.54 26.75 OUTPERFORM AAA Negative 75,587 AAA rated (MSCI IVA) and Analyst key Source: Company data, Credit Suisse estimates, MSCI IVA ratings

Research Analysts

Sandra McCullagh

61 2 8205 4729

[email protected]

27 September 2012

Australian ESG/SRI 2

MSCI IVA ratings – analyst views MSCI rating

■ MSCI IVA ratings: MSCI produces an Intangible Value Index (IVA) for many of the

listed Australian stocks. This IVA looks at Environmental, Social and Governance

(ESG) issues affecting each stock, scoring each of these three factors out of 10.

Combining these scores produces a rating for each stock ranging from AAA to D. In

the Australian space, most companies are rated in the A range (AAA to A) and B

range (BBB to B), with a handful rated CCC.

■ Analysts’ forward looking views on MSCI IVA ratings: Analysts have reviewed the

stocks under their coverage and formed a view on what MSCI has considered. Where

the analyst believes there have been subsequent material changes that are not

reflected the MSCI report, the analyst has flagged this through a Positive or Negative

watch/outlook on the MSCI rating. For a full discussion of the analyst views on ESG

for each stock, see our sector-by-sector commentary in our detailed report.

■ Banks and REITS dominate MSCI IVA top ratings: Our top rated companies (AAA)

include many of our banks (CBA, ANZ, WBC) and REITS (SGP, GPT, DXS) and

perhaps surprising some of our gaming stocks (CWN, TAH). Despite operating in more

high risk industries, some of our contractors scored AAA (WOR, EHL, IDL). Our analysts

had Negative outlooks on ANZ, WBC, IDL and PPT. The ANZ and WBC AAA ratings do

not consider headcount reductions and outsourcing initiatives currently underway, and

hence we place both of them on Negative watch. For PPT, we see downside from the

AAA rating from key man risk and strategic cost initiatives. For IDL, its initial AAA rating

does not match commentary of weak efforts in relation to key emissions and waste risks.

■ Outperformance of AAA-rated stocks: On a one-month or more basis, the AAA-

rated stocks have outperformed the XJO. Over the three-year period, this

outperformance was 23% and over a 12-month period it was 19.6%.

Figure 2: MSCI IVA AAA-rated stocks Ticker Company name Actual

share

price ($)

Target

Price ($)

Rating MSCI

ESG

Rating

View on

MSCI

rating

Date of

MSCI

rating

1 month

total return

6 months

total return

12 months

total return

3 year

performance Market cap

ANZ.AX Australia and New Zealand Bank 24.50 25.00 NEUTRAL AAA Negative 1/10/2011 -1.8% 8.2% 31.3% 16.6% 66,574

BXB.AX Brambles Limited 6.85 7.88 OUTPERFORM AAA Neutral 1/03/2012 3.1% -1.2% 12.2% -3.3% 11,029

CBA.AX Commonwealth Bank Australia 55.37 54.00 UNDERPERFORM AAA Neutral 1/10/2011 1.8% 14.5% 29.0% 27.0% 88,158

CPA.AX Commonwealth Property Office 1.04 1.03 UNDERPERFORM AAA Neutral 1/10/2011 -1.0% 8.8% 17.1% 27.9% 2,441

CWN.AX Crown 9.10 8.80 NEUTRAL AAA Neutral 1/02/2012 2.3% 6.9% 16.9% 14.8% 6,628

DXS.AX Dexus Property Group 0.97 1.00 NEUTRAL AAA Neutral 1/10/2011 0.0% 14.0% 21.3% 40.2% 4,670

EHL.AX Emeco Holdings 0.73 1.25 OUTPERFORM AAA Neutral 25/05/2012 -17.0% -29.2% -19.8% 15.8% 461

GPT.AX GPT Group 3.50 3.60 UNDERPERFORM AAA Neutral 1/10/2011 -1.4% 15.2% 14.9% 23.2% 6,184

IAG.AX Insurance Australia Group 4.37 4.00 NEUTRAL AAA Neutral 18/04/2012 7.9% 32.1% 48.9% 29.8% 9,085

IDL.AX Industrea Ltd 1.24 1.27 NEUTRAL AAA Negative 3/05/2012 -0.8% 21.0% 4.1% 5.3% 459

LLC.AX Lend Lease 7.70 8.48 NEUTRAL AAA Neutral 25/07/2012 -3.4% 6.0% 11.4% -4.0% 4,410

PPT.AX Perpetual 26.30 28.00 NEUTRAL AAA Negative 25/06/2012 -2.2% 5.2% 26.5% -16.7% 1,104

SGM.AX Sims Metal Management 9.60 11.00 OUTPERFORM AAA Neutral 1/12/2011 4.2% -34.6% -18.9% -53.2% 1,961

SGP.AX Stockland 3.33 3.30 NEUTRAL AAA Neutral 1/10/2011 6.1% 17.3% 21.4% 0.4% 7,337

TAH.AX Tabcorp Holdings 2.84 3.30 NEUTRAL AAA Neutral 1/02/2012 -2.7% 8.5% 18.5% 11.5% 2,074

WBC.AX Westpac 24.52 26.75 OUTPERFORM AAA Negative 1/10/2011 -1.4% 15.8% 26.6% 10.7% 75,525

WOR.AX WorleyParsons 27.75 27.55 NEUTRAL AAA Neutral 1/12/2011 7.9% -1.3% 11.9% 1.3% 6,720

AAA Weighted average 0.4% 12.2% 26.7% 16.7% 294,819

All Ords 4382.46 All Ords -0.1% -0.8% 6.9% -6.3%

Relative 0.5% 13.1% 19.8% 23.0% Source: MSCI IVA ratings, Credit Suisse estimates

■ Some upside for our worst rated stocks: Only a few companies are rated in the

CCC range. However, our analysts have Positive outlooks on ABC and BTU. We see

Positive upside for ABC, from reduced carbon emissions with the potential for ABC to

import cement, or use alternative fuels or cement substitutes. We believe the recent

announcement that one party has withdrawn their appeal against BTU’s Buller

Escarpment coking coal project in New Zealand is positive. BTU has revised its

construction plan to be more environmentally considerate.

27 September 2012


■ BTU outperformance dominates CCC rated stocks: Over a 12-month period, the

CCC-rated stocks have outperformed the XJO by 9.0%, much lower than the

outperformance of the AAA-rated stocks. Over a three-year period, the 65%

outperformance of the CCC-rated stocks is distorted by the ~500% return of BTU.

Figure 3: MSCI IVA CCC-rated stocks Ticker Company name Actual

share

price ($)

Target

Price ($)

Rating MSCI

ESG

Rating

View on

MSCI

rating

Date of

MSCI

rating

1 month

total return

6 months

total return

12 months

total return

3 year

performance

ABC.AX Adelaide Brighton 2.96 3.15 NEUTRAL CCC Positive 25/05/2012 0.0% 4.7% 21.1% 29.9%

BTU.AX Bathurst Resources 0.41 0.80 OUTPERFORM CCC Positive 1/12/2011 -1.2% -45.0% -42.3% 521.6%

PMV.AX Premier Investments Ltd 5.82 5.95 NEUTRAL CCC Neutral 8/06/2012 16.9% 7.5% 17.5% -8.1%

TRS.AX The Reject Shop 11.95 11.00 UNDERPERFORM CCC Neutral 1/06/2011 4.4% 0.9% 33.2% 2.4%

CCC Weighted average 4.8% 0.9% 15.9% 58.7%

All Ords 4382.46 All Ords -0.1% -0.8% 6.9% -6.3%


■ Positive outlooks on many BBB–B rated stocks: Across the universe of Credit

Suisse Australian stock coverage, analysts have a Positive outlook on the MSCI IVA

rating for 30 stocks and a negative outlook on 15 stocks (refer Figure 4 and Figure 179

in Appendix 1). The Positive outlooks were concentrated in the stocks rated in the B

range (BBB–B), while Negative outlooks were concentrated in the A range rated

stocks (AAA–A).

Figure 4: Stock ratings (MSCI IVAS) and analyst outlook

17 17

23

32

28

23

4

- 1 2

8

5

12

2 4

2 3 4

1 1 - -

5

10

15

20

25

30

35

AAA AA A BBB BB B CCC

Total Positives Negatives

Source: Credit Suisse estimates, MSCI IVA ratings

Performance by MSCI IVA rating

■ AAA-rated outperformance over the shorter term: We have compared the

performance of stocks by their current MSCI rating over a short term (one-month, six-

month and 12-month period) and longer term of three years. While this type of

analysis does have issues, our interest is drawn to the outperformance of the AAA

(MSCI IVA rated) stocks over the one-month–three-year period, compared to many of

the lower ratings and to the All Ordinaries index. The AAA-rated stocks are dominated

by the Australian banks, which have outperformed the market by ~25%–30%.

27 September 2012


■ Outperformance of worse rated stocks: Initially surprising is the outperformance of

the B and CCC (MSCI IVA) rated stocks. These categories are dominated by smaller

cap resource stocks, such as AUT (rated B) and BTU (rated CCC). AUT has moved

from exploration to production, delivering ~2150% upside over the past five years.

BTU is has moved into production with upside factored into the share price for the

possible approval of another project, delivering ~500% upside.

■ The challenge of junior resource companies: The challenge here is to ensure

issues in production do not affect the companies’ performance. MSCI raises issues on

lack of processes and disclosure for many junior resource companies. With many of these

companies focussed on advancing projects to production, the expectation is that the Board

and management will turn their attention to improved processes and disclosure.

Figure 5: Performance by MSCI IVA rating

MSCI

ESG

Rating

1 month

total return

6 months

total return

12 months

total return

3 year



AA Weighted average 0.5% 0.3% 6.3% -1.7% 322,627

A Weighted average 0.2% 1.6% 18.4% 11.2% 117,700

BBB Weighted average 1.1% -1.6% 6.0% 21.6% 258,130

BB Weighted average 1.7% 5.3% 14.6% 10.0% 149,812

B Weighted average 2.4% 2.8% 13.4% 128.0% 40,069

CCC Weighted average 4.8% 0.9% 15.9% 58.7% 3,388

Not rated Weighted average 1.3% 0.0% 15.2% 45.2% 17,375

Australian All ORDS -0.1% -0.8% 6.9% -6.3% - Source: MSCI IVA ratings, Credit Suisse estimates

Figure 6: Recent performance by MSCI IVA rating Figure 7: 3 year MSCI rating performance

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

1 month total return 6 months total return 12 months total return

AAA

AA

A

BBB

BB

B

CCC

Not rated

Australian All ORDS

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

140.0%

3 year performance

AAA

AA

A

BBB

BB

B

CCC

Not rated

Australian All ORDS

Source: MSCI IVA ratings, Company data, Credit Suisse estimates Source: MSCI IVA ratings, Company data, Credit Suisse estimates

Positive views

■ Positive upside in NAB: Of the AA-rated stocks, NAB has been placed on Positive

outlook by our analysts, with an expectation that this stock could move to the highest

AAA MSCI IVA rating when next reviewed by MSCI. For NAB, MSCI considers that its

reliance on wholesale funding warrants a lower Governance score than peers such as

CBA and WBC, leading to an AA score compared to AAA for WBC, CBA and ANZ. We

do not believe its wholesale funding proportion is significantly higher than peers so we

believe an upgrade may be warranted.

27 September 2012


Figure 8: Analyst POSITIVE views on MSCI IVA rating Ticker Company name Actual

share

price ($)

Target

Price

($)

Rating MSCI

ESG

Rating

View on

MSCI rating

Anlyst MSCI view

ABC.AX Adelaide Brighton 3.00 3.15 NEUTRAL CCC Positive We see upside risk to the MSCI rating given ABC's has flexibility to increase its cement/clinker import

capabilities, and hence reduce carbon emissions. Increasing the use of alternative fuels and cement substitutes

(slag) should further assist with reducing carbon emissions. This is not captured in the MSCI assessment.

AIO.AX Asciano Group 4.37 5.95 OUTPERFORM BBB Positive While staff engagement is a key concern at Patrick, the conclusion of negotiations and the signing of a new

workplace agreement should result in immediate productivity improvements and staff engagement. On this basis

we do not agree with the poor MSCI rating in this category and believe there is scope for a re-rating.

AQA.AX Aquila Resources 2.62 2.75 NEUTRAL B Positive AQA has sold its Isaac plains operations and we expect it to further reduce its coal exposure which should

improve environmental scores

AUT.AX Aurora Oil & Gas 3.50 4.02 NEUTRAL B Positive AUT ranks poorly due to weak disclosure on carbon management systems, no management strategy to mitigate

risks to the environment or safety risks. It would not take much to improve this ranking.

BEN.AX Bendigo and Adelaide Bank 7.67 8.75 NEUTRAL BBB Positive Rating does not consider environmental and community initiatives being undertaken by BEN.

BOQ.AX Bank of Queensland 7.54 8.00 OUTPERFORM BBB Positive Rating does not consider"green" initiatives being undertaken by BOQ.

BTU.AX Bathurst Resources 0.42 0.80 OUTPERFORM CCC Positive BTU recently announced that one party (the Fairdown Whareatea Residents) has withdrawn their appeal against

BTU's Buller Escarpment coking coal project and that it revised its construction plan to be more environmentally

considerate

CSR.AX CSR 1.58 1.17 UNDERPERFORM BB Positive We see upside to MSCI's 'BB' rating. CSR is invlolved in the manufacture of building products that facilitate the

construction of 6-star green rating homes (smart glass; insulation). This is not captured in the MSCI

commentary. CSR is also active in sourcing renewable energy for manufacturing purposes.

CTX.AX Caltex Australia 15.89 15.55 UNDERPERFORM A Positive The announcement to close the Kurnell refinery will likely see CTX improve on its Environmental score.

DJS.AX David Jones 2.51 2.20 UNDERPERFORM B Positive David Jones was recently downgraded to 'B' from 'BB' as the company lacks transparency on its ability to

manage issues such as product safety, supply chain labour standards, and carbon reductions in its operations.

We view these issues as being manageable, largely requiring more disclosure on their operations alone. With

this in mind and with no obvious additional MSCI risks surrounding the business we have a positive outlook for its

rating.

DUE.AX DUET Group 2.07 2.07 NEUTRAL BB Positive DUE has recently been downgraded from BBB to BB, with a lack of disclosure on environmental issues such as

biodiversity and land use, and Social issues such as Employee benefits and programs. We believe as DUE

moves to internalise management and acts more as an integrated company rather than as a manager of asset

companies, disclosure will improve.

EVN.AX Evolution Mining Limited 1.87 1.70 NEUTRAL B Positive Current 'B' rating would appear to be weighed down by Evolution only recently being formed (merger of Catalpa

Resources and Conquest Mining). We'd expect ESG policies to be gradually developed over time.

FLT.AX Flight Centre 23.71 26.35 OUTPERFORM BB Positive We believe the MSCI rating is not appropriate for FLT given that it highlights water stress as a key area of

exposure. FLT is a retail travel agent and we believe this risk has been miscategorised.

GBG.AX Gindalbie Metals Ltd 0.27 1.00 OUTPERFORM B positive MSCI notes environmental risks in monitoring water draw from borefield. However, potential positive social

influence on town of Geraldton through deliberate employment of local businesses and additional power security

as Government links Mid-West electrical distribution to Perth Area power for benefit of the mine.

HGG.AX Henderson group 1.66 1.47 OUTPERFORM A Positive Retention of both AuM and staff post Gartmore acquistion has been ahead of expectations.

HVN.AX Harvey Norman 1.96 2.15 NEUTRAL B Positive Harvey Norman was recently downgraded to 'B' from 'BB' as the company lacks transparency on its ability to

manage issues such as supply chain labour standards and in its handling of chemicals used by its electronics

suppliers. With the downgrading relating only to disclosure of issues we see a future upgrade as being relatively

inexpensive to achieve and so carry a positive outlook.

ILU.AX Iluka Resources 10.27 13.50 OUTPERFORM BBB Positive Rating primarily based on negative impact from carbon tax - CO2 numbers quoted were for all 4 kilns, whereas

only two are operational. Furthermore, Iluka expects to being eligible for assistance making the financial impact

small.

KAR.AX Karoon Gas 5.32 7.65 OUTPERFORM B Positive KAR ranks poorly due to weak disclosure on carbon management systems, no management strategy to mitigate

risks to corruption and instability from operating in Peru and Brazil. It would not take much to improve this

ranking.MDL.AX Mineral Deposits Ltd. 5.58 9.09 OUTPERFORM BBB Positive MDL has experience in Senegal through building the Sabodala gold mine. Recent political disturbance subsided

when President Wade accepted defeat after 2nd round presidential elections.

MMS.AX McMillan Shakespeare 12.27 13.55 OUTPERFORM B Positive We belive the MSCI rating is not appropriate for MMS given it highlights "operational losses related to labour

management" as key area of weakness. We believe that MMS's proactive approach to human capital and

rigorous internal/external audit and focus on risk management is not represented in its 0.6/10 "Labor

Management" score.

MSB.AX Mesoblast 6.79 7.40 NEUTRAL B Positive B' rating. MSB is penalised for not having programs in place to mitigate human capital loss. We believe the

report has overlooked the fact that MSB's senior employees are all granted equity options. MSB is also

penalised for its 2010 Angioblast acquisition, which is cited as having the potential to destabilise moral. In our

view this is not an issue. Further, it is noted that MSB does not have a strategy to improve healthcare in

emerging markets. Given MSB is still undertaking clinical studies into its products, this last point appears

misguided. We expect an upgrade to MSB's ESG rating, however whether this happens in the near or long term

is unknown.

NAB.AX National Australia Bank 25.53 26.00 NEUTRAL AA Positive Rating is based on a high proportion of wholesale funding reliance, however, it is comparable to major bank peers

and does not increase its financial instability.

NVT.AX Navitas Ltd 4.15 4.80 OUTPERFORM BB Positive We belive the MSCI rating is not appropriate for NVT given that the two areas of weakness highlighted are

"Human Capital Development" and "Carbon Emissions". We believe that NVT's internal human capital initiatives

and small carbon footprint are not representative of the ratings allocated.

PRU.AX Perseus Mining 2.82 3.10 OUTPERFORM B Positive Recent downgrrade to 'B' rating reflects poor biodiversity and land use, health & safety scores. Given the project

is in early stages, as production ramps up at Edikan in Ghana, we expect an increased focus by management

on addressing these issues in future.

QUB.AX Qube Logistics 1.47 1.90 OUTPERFORM B Positive Given the indirect environmental benefits of shifting up to 1 million containers from road to rail which the

Moorebank facility could provide, we believe the MSCI environment rating should be higher.

RMD.AX ResMed Inc. 3.85 3.93 OUTPERFORM BB Positive BB' rating. RMD's rating suffers as it does not disclose initiatives to improve healthcare in developing regions, nor

does it provide evidence of anti-corruption measures. RMD was also penalised for a lack of carbon emission

disclosures. In our view, RMD's disclosure on carbon should improve as the carbon tax legislation in Australia SFR.AX Sandfire Resources NL 8.28 7.20 UNDERPERFORM B Positive B rating (coverage just initiated) noted concerns over "a weak management approach to all key issues

assessed". Given SFR's operational mine has only just commenced production, risk is to the upside that focus

may, in time, gradually increasingly turn to improving ESG awareness.

SUN.AX Suncorp Group Limited 9.29 9.00 NEUTRAL BBB Positive SUN has a 'BBB' rating which will likely be revised up in the near term. SUN has been marked down due to

weather-related claims, whereas for IAG this was rated as a positive. We also consider SUN's low rating for

responsible investment to be addressed in the near term with the sale of their Brisbane head office. When these

issues are addressed SUN will likely move up to an 'A' or 'AA' rating in our view.

TLS.AX Telstra Corporation 3.93 4.00 NEUTRAL BBB Positive We see medium to long term upside risks to TLS ESG rating driven by 1) the reduction in unionised labor force

as NBN rolls out. This will reduce risks for industrial disputes going forward adding to TLS Social rating. 2)

Secondly after the NBN is rolled out TLS will not longer be in the business of fixed line access, this has been a

large source of regulatory disputes / fines historically. Hence we see upside risk to TLS governance rating as

regulatory disputes become a thing of the past as NBN progresses.

UGL.AX UGL Limited 10.65 13.00 OUTPERFORM BBB Positive UGL scores only 2.8 on corruption purely due to lack of policy. Track record is actually good. Hence formation of

anti corruption policies would see a sharp reversal in this indicator which is 38% of total weighting. Upside from

environment rating based on expected increase in property services earnings as % group.

Source: MSCI IVA ratings, Company data, Credit Suisse estimates

27 September 2012


Negative views

■ Downsides for AAA-rated stocks: Analysts have rated 15 stocks with negative

outlook on their MSCI IVA scores. Of the AAA-rated stocks, analysts have Negative

watches on the Financials: ANZ, WBC and PPT; as well as IDL.

Figure 9: Analyst NEGATIVE views on MSCI IVA rating Ticker Company name Actual

share

price ($)

Target

Price

($)

Rating MSCI

ESG

Rating

View on

MSCI rating

Anlyst MSCI view

AGO.AX Atlas Iron 1.42 2.70 OUTPERFORM B Negative Usage of highways for trucking iron ore to Port Hedland is ongoing which may expose the company to social

pressure from local community groups if the movements impact Port Hedland. It also increases risks of a road

accident involving passenger vehicles.

ANZ.AX Australia and New Zealand

Bank

24.50 25.00 NEUTRAL AAA Negative Rating is based on FY11 and does not consider the headcount reduction programs currently underway and push

for greater outsourcing.

ASX.AX ASX 29.85 28.50 UNDERPERFORM BBB Negative Negative watch reflects potential adverse impacts from change in regulatory environment (particularly in clearing

and settlement).

AWC.AX Alumina Limited 0.85 0.84 NEUTRAL AA Negative CO2 emmissions mainly from Victorian smelters is the main high profile environmental issue. Industry get 96.5%

protection in year 1, but AWAC smelters run on Victorian electricity generated by burning brown coal so subsidy

less than industry average.

AWE.AX AWE Ltd 1.34 1.75 OUTPERFORM BBB Negative Since the last rating review, AWE has invested in Indonesia which will most likely lower the company's score for

corruption and instability.

BHP.AX BHP Billiton 32.81 35.85 NEUTRAL AA Negative Labour disputes in Queensland could negatively impact social rating

CAB.AX Cabcharge Australia 5.37 6.40 NEUTRAL BBB Negative We believe the MSCI rating is not appropriate given it does not factor in CAB's various areas of regulatory risk.

Such as, credit card surcharging, taxi industry oversight and competition concerns.

DOW.AX Downer EDI 3.55 4.10 OUTPERFORM A Negative We see downside risk to DOW's MSCI rating based on social issues that could extend from NZ restructure. In

addition we note DOW has scored extremely well (9.6/10) for carbon emissions which are 18% of overall

weighting. We highlight potential downside risks to this given DOW's involvment in asphalt production (which

currently falls under the carbon tax threshold) and expansion of its contract mining operations.

ERA.AX Energy Resources of

Australia

1.35 1.65 NEUTRAL BB Negative Going underground increases health and safety risk. Operating in extremely sensitive Kakadu World Heritage

Area and political ambiguity around uranium.

IDL.AX Industrea Ltd 1.24 1.27 NEUTRAL AAA Negative We belive the MSCI rating is not appropriate given IDL's end market exposures in relation to carbon emissions

and waste management.

MQG.AX Macquarie Group 28.55 35.00 OUTPERFORM A Negative Rating is based on FY11 and does not consider the headcount reduction programs currently underway.

ORI.AX Orica 24.79 29.40 OUTPERFORM BBB Negative We see risks around ORI's 'BBB' rating. This follows a series of production issues at its Kooragang Island

ammonium nitrate facilities involving toxic chemical release. Implicit within the MSCI report is a section on "Toxic

Release" (33% weighting) and "Product Safety" (17% weighting) component. These sections make no

consideration for the recent toxic issues.

PPT.AX Perpetual 26.30 28.00 NEUTRAL AAA Negative Negative risk relates to key man risk as well as the implementation of strategic cost initiatives.

QBE.AX QBE Insurance Group 12.98 14.79 OUTPERFORM A Negative Recently downgraded from 'AA' to 'A' which is justified based on environmental risks, but we consider a further

downgrade likely as the CEO looks to retire and move on to the board later in 2012.

WBC.AX Westpac 24.52 26.75 OUTPERFORM AAA Negative Rating is based on FY11 and does not consider the headcount reduction programs currently underway and push

for greater outsourcing. Source: MSCI IVA ratings, Company data, Credit Suisse estimates

27 September 2012


Stock screening

■ ESG overlays on key calls: We have taken key strategy team, sector analysts, and

quant calls and overlaid those with our ESG views of AAA-rated (MSCI IVA) or

analysts’ Positive outlook on the MSCI IVA rating. As a result, our key long calls are

BXB (strategy), RMD, TAH, WBC (sector analysts) and BOQ, ILU, PRU (quant). Our

key short call on ASX and TWE (both from sector analyst).

■ RMD key Long call has a Positive outlook on its MSCI IVA rating: RMD is a key

call by our analyst, based on valuation and the defensive nature of the health care

sector.

■ TAH is a key Long call with an AAA MSCI IVA rating: TAH has the top AAA MSCI

IVA rating. Our analyst has selected it as a key Long call based on a preference for

the less risky domestic wagering businesses, with TAH representing better value than

TTS. Wagering revenue growth reached 7% in the June qtr and variable contribution

margin increased sequentially to 36.4% from 36.1%. We upgraded our revenue

projections. Customer growth and market share were solid in FY12. Strong growth in

fixed odds, sports bets and on-line bets which attract lower taxes and fees continue to

lift margins. These trends are likely to continue for a few years. The Victorian license

refund claim has been lodged. The payment could be as high as A$686mn before a

partial tax assessment. This is not in our valuation.

■ WBC – key long call has an AAA MSCI IVA rating: WBC is AAA rated (MSCI IVA)

with an analyst Outperform call. WBC is a key Long call and our top pick amongst the

major banks, based on asset quality defensiveness, domestic consumer banking

orientation, good cost restructuring potential and undemanding multiples. We note our

analyst has a Negative outlook on the MSCI IVA AAA rating for WBC, based on

concerns over the impact of headcount reductions (Negative Social concerns), which

paradoxically is also part of the upside thesis for the Key Long call (good cost

restricting potential).

■ BXB – fits our Global Cyclicals Strategy call: For BXB, our Strategy team has a

preference for Global Cyclicals over Domestic Cyclicals and prefers BXB. BXB is AAA

rated (MSCI IVA) with an analyst Outperform call. We continue to believe Brambles is

the highest quality name in the Australian Transport universe. While the business is

considered by some to be expensive, trading at a 30% premium to market on PE

basis, we believe the growth prospects and operating characteristics continue to justify

such a multiple. The business is highly leveraged to an FMCG volume and pricing

recovery in Western markets, particularly the US where we are starting to see

tentative signs of pricing increases. In addition the business continues to expand in

emerging markets like China and EMEA, where we see growth accelerating. Finally,

the business continues to earn very high margins and returns on capital, helped by

reasonably high barriers to entry and longstanding relationships with customers. For

ESG, BXB continues to improve its sourcing of sustainable lumbar for its CHEP

business, with 94% of lumbar coming from certified sources (up from 91%), with a

target of 100% certified sourcing (independently verified) by 2015. Its CHEP business

is also working on a carbon neutral pallet for customers.

■ Favour BOQ, ILU and PRU for our Quant theme of growth and value: BOQ, ILU

and PRU are stocks we have highlighted in our recent Quant note as providing growth

and value. All these stocks have a Positive analyst outlook on the MSCI IVA rating and

an Outperform analyst call.

o BOQ FY12 result upside: We believe BOQ could modestly beat

consensus at the 18 October FY12 result through lower-than-expected

bad debts (larger impaireds have been divested, underlying impaireds

are stabilising). BOQ also undertook strong provision restocking earlier in

the year.

27 September 2012


o ILU growth in FY13 volumes: We see ILU as undervalued, based on

mineral sands prices, with expected increases in sales volumes in FY13.

Operations are cash positive and high margin.

o PRU growth in FY13: PRU is our favoured pick amongst junior gold

exposures. It is leveraged to gold price, Tengrela construction and

primarily Edikan ramp-up to 8Mtpa. If Edikan reaches the guided to

8Mtpa by mid-2013, the current share price is supported by Edikan NPV

alone.

■ ASX – key Short call: Stocks that we have a Negative Outlook on the MSCI IVA

rating and an Underperform analyst rating are ASX and TWE. ASX is also on our Key

Short Call, based on weak volumes, lack of cost cutting initiative, new revenue

initiatives not hitting until FY14 and viewed as expensive (15x PE) with 0% EPS

growth and 20% premium to the ASX200.

■ TWE – short call and a low MSCI IVA rating: Our Analyst has a key Short call on

TWE (paired with a Long call on TAH) combined with a weak B ESG rating under the

MSCI IVA system. We continue to regard this stock as expensive relative to the

market, intrinsic value and its peers. It is trading on ~22x FY13 and 17x FY14. We

question if the low 2H12 overheads can be maintained in North America and Asia. For

FY13, management expects constant currency EBIT to grow less than the historic two-

year CAGR (16%) due to rising IT costs, rising grape costs and distributor destocking.

Figure 10: ESG overlay on key stock calls Ticker Company name Actual

share

price ($)

Target

Price ($)

Rating MSCI

ESG

Rating

View on

MSCI

rating

1 month

total return

6 months

total return

12 months

total return

3 year

performance Market cap Key call criteria

ASX.AX ASX 30.34 28.50 UNDERPERFORM BBB Negative -0.1% -3.2% 9.9% 3.1% 5,329 Analyst Negative view on ESG rating

plus Analyst key Short callBOQ.AX Bank of Queensland 7.74 8.00 OUTPERFORM BBB Positive 2.4% 4.4% 29.1% -13.6% 2,387 Analyst positive view on ESG rating

plus Quant call on Growth and ValueBXB.AX Brambles Limited 6.74 7.88 OUTPERFORM AAA Neutral 4.1% -1.6% 9.6% -5.2% 11,010 AAA rated (MSCI IVA) and Strategy

sector call on Global cyclicalsILU.AX Iluka Resources 10.73 13.50 OUTPERFORM BBB Positive 16.4% -36.2% -7.3% 207.7% 4,572 Analyst positive view on ESG rating

plus Quant call on Growth and ValuePRU.AX Perseus Mining 2.82 3.10 OUTPERFORM B Positive 6.4% 17.8% -14.2% 118.5% 1,301 Analyst positive view on ESG rating

plus Quant call on Growth and ValueRMD.AX ResMed Inc. 3.79 3.93 OUTPERFORM BB Positive 7.3% 25.4% 32.4% 44.8% 6,135 Analyst positive view on ESG rating

plus Analyst key Long callTAH.AX Tabcorp Holdings 2.88 3.30 NEUTRAL AAA Neutral 0.3% 10.3% 19.5% 11.1% 2,103 AAA rated (MSCI IVA) plus Analyst key

Long callTWE.AX Treasury Wine 4.80 3.50 UNDERPERFORM B Neutral 1.7% 16.7% 36.3% #NULL! 3,074 Low MSCI IVA Rating of B plus Analyst

key Short call (paired with TAH)WBC.AX Westpac 24.49 26.75 OUTPERFORM AAA Negative -0.1% 16.0% 40.1% 10.8% 75,833 AAA rated (MSCI IVA) and Analyst key

Long call Source: MSCI IVA ratings, Company data, Credit Suisse estimates

27 September 2012


Common ESG concerns by sector

■ In Figure 11 we have summarised some of our key ESG concerns for each sector.

The Financials sector is dominated by Social issues, whereas the Resources sector

has issues right across the ESG spectrum.

Figure 11: ESG issues by Sector Sector Subsector Issues

Financials Banks Social: regulatory changes arising from social pressures,

Social: pressure to pass on full reserve Bank rates cut to home borrowers

Diversified Financials Social: key man risk for fund managers

Social: regulatory changes to monopoly/dominant market positions

Social: large scale redundancies

Insurance Social: regulatory changes for capital requirements

Resources Coal Environmental: ability to develop new resources

Energy Social: landowner compensation for coal seam gas

Governance: country specific risk

Diversified resources Social: labour disputes

Governance: country specific risk

Other metals Environmental: ability to develop new resources

Governance: country specific risks

Steel Environmental: impact of carbon tax

Social: layoff of staff and viability of domestic production

Industrials Building materials Social: asbestos liability

Chemicals, paper, packaging Environmental: carbon tax impact

Construction Social: OH&S

Governance: bribery and reputation damage

Food and beverage Environmental: emissions and water usage

Gaming Social: potential responsible gaming legislation and employee initiatives

Healthcare Governance: disclosure and family domination

Media Governance: family domination

Retail Social: labour supply chain concerns

Social: gaming and liquor asset concerns

Telcos Social: privacy of data, upside from improving regulation (NBN)

Transport & infrastructure Environment: fuel efficient of fleet

Social: labour productivity

Utilities Environment: ability to develop coal seam gas in NSW

Social: rising electricity prices; landowner compensation for coal seam gas

REITS Environment: upside potential from strong environmental sustainability

Small caps Building Products Environment: carbon impact

Social: labour rights and OH&S

Governance: anti bribery

Consumer Retail Environment: waste


Governance: supply chain labour issues

Consumer Services Social: privacy and data security; labour rights and OH&S

Corporate Services Environment: regulation


Governance: anti bribery and corruption

IT Services Social: privacy and data security; labour rights and OH&S

Mining services Environment: policy and management systems


Governance: anti bribery

Travel Environment: carbon offsetting

Social: privacy and data security

Governance: contracts and anti competitive regulations

Source: Company data, Credit Suisse estimates

27 September 2012


Financial Banks

Analyst: Jarrod Martin, James Ellis, Omkar Joshi

MSCI ratings views

■ Positive on BEN, BOQ and NAB: We have a positive outlook on the MSCI IVA

ratings for BEN, BOQ and NAB. The MSCI ratings for these banks were last reviewed

in October 2011.

■ Community banking initiatives should lift BEN’s BBB: For BEN, we do not believe

the BBB rating considers environmental initiatives undertaken by BEN recently, as well

as BEN’s community banking strategy.

■ Green initiatives should lift BOQ’s BBB: For BOQ, we do not believe the BBB

rating considers the green initiatives undertaken by BOQ. These green initiatives

include investments in new energy efficient equipment; power saving modules for air

conditioning and office equipment and incorporating environmental considerations

when evaluating suppliers. BOQ is also a participant in the Carbon Disclosure Project

(CDP), a global database of climate change information which assists BOQ in

disclosing greenhouse gas emissions and reduction targets.

■ NAB reliance on wholesale funding not out of line with peers: For NAB, MSCI

considers that its reliance on wholesale funding warrants a lower Governance score

than peers such as CBA and WBC, leading to an AA score compared to AAA for

WBC, CBA and ANZ. We do not believe its wholesale funding proportion is

significantly higher than peers so we believe an upgrade may be warranted.

■ Headcount reductions affect our views on ANZ, WBC and MQG ratings: We have

a Negative outlook on ANZ, MQG and WBC. MQG was last reviewed in March 2012,

whereas ANZ and WBC were last reviewed in October 2011. The ANZ and WBC AAA

ratings do not consider headcount reductions and outsourcing initiatives currently

underway, and hence we place both of them on Negative watch. Similarly the A rating

for MQG does not consider recent headcount reductions.

ESG concerns in the sector

■ Current ESG compliance valued in Target Price: The Australian banks’ recent

focus has shifted to cost and FTE reduction programs with the prospect of significant

offshoring of personnel gaining increased attention. Given the systemic importance of

the banks within the Australian financial system, each bank pursues significant ESG

policies and compliance. Our valuation methodology is based on the assumption that

banks are ESG compliant. We have factored in the current internal cost reduction

programs in our Target Prices, and hence have no explicit downside ESG risk in our

Target Prices.

■ Further downside potential scenarios: However, downside risk potential remains

from Social pressures and Regulatory changes. This downside risk impact can be

calculated by increasing the equity risk premium by 1% above what we would expect

in a more benign ESG environment (cost of equity of 11.3% for commercial banks and

13.7% for MQG), to account for greater social and governance risks. Based on an

analysis of past episodes in which there has been the threat of intervention/regulation

such as fee caps, capital imposts and/or super-profits tax, the sector has traded at up

to a 1 PE point discount. We consider this will manifest itself through demand for a

higher equity return and therefore, we have judged the maximum threat to sector

valuations as an increase in the cost of equity by 1%. This results in potential

downside risk from ESG non-compliance of 10.1%, which we have not factored into

our Target Prices.

27 September 2012


■ Declining cash rate environment: Given the start of a cash rate easing cycle, there

is the expectation that banks will pass on the full rate cuts to borrowers. However, due

to funding cost pressures, banks are inclined to withhold a portion of these rate cuts.

This pressure to pass on rate cuts in full has potential negative ESG consequences.

We have not valued this in our Target Price, believing the banks will withstand the

political and social pressures. In the last 25 bps Reserve Bank cuts, ANZ passed on

the full 25 bps, but CBA passed on 21bps, WBC passed on 20bps and NAB passed

on 21bps.

■ Social pressures on fees is reflected in recent class actions against ANZ. All banks

have cut the punitive type fees associated with late payments and overdrawn account,

and we do not forecast such fee income in our assumptions. Any successful outcome

from class actions on repayment of past fees would have minimal impact on valuations.

Summary of analyst views on MSCI rating

Figure 12: Analyst views on MSCI IVA rating

Company

Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction Comments

Env

rating

Soc

rating

Gov

rating

Rating

date

ANZ.AX Australia and New Zealand Bank 25.00 0.0% AAA Negative Rating is based on FY11 and does not consider the headcount

reduction programs currently underway and push for greater

outsourcing.

8.5 6.8 8.4 1/10/2011

BEN.AX Bendigo and Adelaide Bank 8.75 0.0% BBB Positive Rating does not consider environmental and community

initiatives being undertaken by BEN.

4.1 5.3 10.0 1/10/2011

BOQ.AX Bank of Queensland 8.00 0.0% BBB Positive Rating does not consider"green" initiatives being undertaken

by BOQ.

3.5 5.3 9.8 1/10/2011

CBA.AX Commonwealth Bank Australia 54.00 0.0% AAA Neutral Rating is appropriate based on its consideration of all relevant

factors.

8.7 6.1 10.0 1/10/2011

MQG.AX Macquarie Group 35.00 0.0% A Negative Rating is based on FY11 and does not consider the headcount

reduction programs currently underway.

3.5 6.3 4.9 1/03/2012

NAB.AX National Australia Bank 26.00 0.0% AA Positive Rating is based on a high proportion of wholesale funding

reliance, however, it is comparable to major bank peers and

does not increase its financial instability.

7.1 6.4 7.0 1/10/2011

WBC.AX Westpac 26.75 0.0% AAA Negative Rating is based on FY11 and does not consider the headcount

reduction programs currently underway and push for greater

outsourcing.

9.1 5.4 10.0 1/10/2011

Average 6.4 5.9 8.6 Source: MSCI IVA ratings, Company data, Credit Suisse estimates

MSCI IVA ratings in context

Figure 13: MSCI IVA analysis: ANZ Figure 14: MSCI IVA analysis: CBA Overall ESG rating AAA

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Environment Social Governance

Stock Local Sector Country Global Sector

Overall ESG rating AAA

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0



Source: MSCI IVA Ratings Source: MSCI IVA Ratings

27 September 2012


Figure 15: MSCI IVA analysis: WBC Figure 16: MSCI IVA analysis: NAB Overall ESG rating AAA

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0



Overall ESG rating AA

3.0

4.0

5.0

6.0

7.0

8.0

9.0




Figure 17: MSCI IVA analysis: MQG Figure 18: MSCI IVA analysis: BEN Overall ESG rating A

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating BBB

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0




Figure 19: MSCI IVA analysis: BOQ Overall ESG rating BBB

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0



Source: MSCI IVA Ratings

27 September 2012


Diversified Financials

Analyst: John Heagerty, David Bailey

MSCI ratings views

■ Upside possible for HGG: We have a Positive outlook on the MSCI IVA A rating for

HGG (last reviewed June 2012), and Negative outlook on PPT’s AAA rating and ASX’s

BBB rating.

■ Upside for HGG: For HGG, post the Gartmore acquisition, staff retention and AuM

have been ahead of expectations. Hence we see upside to HGG’s A rating which was

downgraded to A from AA in June 2012.

■ Downsides for PPT: For PPT, we see downside from the AAA rating set in June

2012, from key man risk and strategic cost initiatives.

■ Downside for ASX: For ASX, we see downside from the BBB rating set in July 2011,

from potential changes in the regulatory (clearing and settlements) environment.

■ IOOF upgraded to AA from A in June 2012, based on the strong integration of ESG

into the investment analysis of its subsidiary, Perennial Investment Partners.

■ No near-term change for low rating on PTM and IRE: Both IRE and PTM rate a

relatively low B, compared to the rest of the sector. IRE suffers from concerns over

poor employee benefits and programs and concerns over a lack of policies on data

protection. We do not see any near-term changes. For PTM, a lack of any ESG

consideration in investment decisions, plus a lack of employee benefits for all staff,

leads to a low B rating. We do not see any near-term change to this rating.


■ Key man risk for fund managers: The key risk currently facing all fund managers is

that of key man risk whereby the departure of an important individual can negatively

impact flows and hence revenues. This was witnessed in 2011 when PPT suffered the

loss of over $2bn of FUM following the departure of its Head of Equities. We have

considered a scenario of 10% downside to our Target Price should PPT lose $2bn

(8%) of FUM.

■ Regulatory risk leading to market share changes also a concern: For ASX, any

regulatory change to promote competition in clearing would be damaging to ASX’s

monopoly position. We have considered a scenario of halving of fees, which would

result in a 6% downside to Target Price, but we have not factored this into our Target

Price. Similarly, CPU and IRE enjoy dominant market shares in most of their

operations; changes to the competitive environment stemming from regulatory change

could have damaging impacts on profitability. We have considered a 4% Target Price

downside scenario for CPU should competition in the USA intensify.

■ Market environment the biggest threat: While only relevant to ESG in the broader

sense of the phrase, the exposure of diversified financial stocks to global

macroeconomic shocks leaves them vulnerable to large earnings swings and therefore

greater social upheaval, e.g. PPT recently announced that 300 FTE would be made

redundant over the next two years.

27 September 2012



Figure 20: Impact of ESG on Target Prices for Diversified Financials Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating date

ASX.AX ASX 28.50 0.0% BBB Negative Negative watch reflects potential adverse impacts from change

in regulatory environment (particularly in clearing and

settlement).

5.0 5.2 7.5 1/07/2011

BTT.AX BT Investment Management 2.10 0.0%

CGF.AX Challenger Financial Services Group5.00 0.0%

CPU.AX Computershare 9.38 0.0% BBB Neutral We see the rating as appropriate given balance of risks

between increased IT functions and reduced paper usage as

well as focus on data security.

7.7 4.4 7.0 25/05/2012

HGG.AX Henderson group 1.47 0.0% A Positive Retention of both AuM and staff post Gartmore acquistion has

been ahead of expectations.

6.8 5.6 7.0 25/06/2012

IFL.AX IOOF Holdings 6.50 0.0% AA Neutral We see the rating as appropriate given balance of risks

between socially responsible investing and staff retention /

development.

6.2 6.5 7.0 25/06/2012

IRE.AX IRESS Limited 7.30 0.0% B Neutral We see the rating as appropriate given consideration of key

criteria.

4.2 3.8 7.0 25/05/2012

PPT.AX Perpetual 28.00 0.0% AAA Negative Negative risk relates to key man risk as well as the

implementation of strategic cost initiatives.

7.0 7.0 7.0 25/06/2012

PTM.AX Platinum Asset Management 3.35 0.0% B Neutral We see the rating as appropriate given balance of risks

between socially responsible investing and key man loss.

4.5 1.9 7.0 25/06/2012



Figure 21: MSCI IVA analysis: ASX Figure 22: MSCI IVA analysis: CPU Overall ESG rating BBB

3.0

4.0

5.0

6.0

7.0

8.0

9.0




3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0




Figure 23: MSCI IVA analysis: HGG Figure 24: MSCI IVA analysis: IFL

Overall ESG rating A

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating AA

3.0

4.0

5.0

6.0

7.0

8.0

9.0




27 September 2012


Figure 25: MSCI IVA analysis: IRE Figure 26: MSCI IVA analysis: PPT Overall ESG rating B

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0




3.0

4.0

5.0

6.0

7.0

8.0

9.0




Figure 27: MSCI IVA analysis: PTM Overall ESG rating B

1.5

2.5

3.5

4.5

5.5

6.5

7.5

8.5

9.5




27 September 2012


Insurance

Analyst: John Heagerty, Andrew Adams

MSCI ratings views

■ QBE on Negative outlook, post CEO resignation: We have a Negative outlook on

QBE’s A rating, set in April 2012 (down from AA). We believe a further downgrade is

possible, with the resignation of long standing CEO, Frank O’Halloran, and his

expected return to the board before the 2013 AGM.

■ SUN on Positive outlook: For SUN, we see upside to its BBB rating, set in April

2012. SUN received a relatively low score for Insuring Climate Change Risk,

compared to peers such as IAG. However, we see SUN leading the industry in flood

mapping, especially post the 2011 flooding in Queensland. We also see the low score

for Responsible Investing improving as SUN moves to sell its head office (viewed as

an illiquid asset and subject to climate change issues). SUN has also joined the

FTSE4Good Index. SUN has commented that responsible management of financial,

social and environmental performance was integral to the group's way of doing business

and shaping operations for the future, emphasising the achievements in reducing

environmental impact, promoting a flexible and diverse workplace and the many

volunteering, sponsorship and community investment programs that SUN has initiated.


■ Government policy re capital requirements: As a reaction to the recent financial

crisis and changes to global capital requirements for insurers, the local regulator,

APRA, has released final proposals for new capital requirements. While the exact

impact on insurers is still unknown it is likely that the outcome is an increase in the

levels of capital held. This and potential further changes, puts pressure on the return

on equity achieved by insurers and hence their valuations as they gradually try to

recover this from policyholders. We have not included any impact from this in our

Target Prices.

■ Government pressure on disaster coverage and payout: As a result of the extreme

flooding in Queensland in early 2011, the Government recently enacted legislation to

give a standard definition of flood. There is also the requirement for flood cover to be

compulsory in home insurance policies. With some risks being uninsurable it is yet to

be seen how this will play out with the potential for the industry to have to share in the

losses from these extreme risks. We have not included any impact from this in our

Target Prices.

■ Impact of affordability: With increases in reinsurance costs, additional flood, falling

bond yields and other factors impacting the cost of insurance, insurers are looking to

increase insurance premiums by more than 10% on some policies. In the current

economic environment it is however difficult for some consumers to cover this cost

and hence insurers face the risk that they will be required to offset their own cost

increase over a period of a few years. This could pressure on earnings in the near

term. We have not included any impact from this in our Target Prices.

■ Regulated price products: In addition to the affordability issue, in some products

(Compulsory Third Party and workers compensation) the Government regulator is

require to approve premium rate increases. There is a risk that the Government caps

the level of premium rates increases and hence the insurers could suffer some short-

term margin contraction as a result of inadequate premiums being charged. We have

not included any impact from this in our Target Prices.

27 September 2012



Figure 28: : Impact of ESG on Target Prices for Insurance Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

AMP.AX AMP 4.65 0.0% A Neutral An 'A' rating is appropriate based on AMP's exposure and the

company's current management of ESG.

7.0 4.4 9.3

AUB.AX Austbrokers 7.95 0.0% No rating

IAG.AX Insurance Australia Group 4.00 0.0% AAA Neutral Recently upgraded to AAA from A and we support this rating.

The recent few years (large claim events) have given IAG the

opportunity to demonstrate its ESG focus.

6.8 4.3 8.2

QBE.AX QBE Insurance Group 14.79 0.0% A Negative Recently downgraded from 'AA' to 'A' which is justified based

on environmental risks, but we consider a further downgrade

likely as the CEO looks to retire and move on to the board

later in 2012.

4.8 3.5 8.7

SUN.AX Suncorp Group Limited 9.00 0.0% BBB Positive SUN has a 'BBB' rating which will likely be revised up in the

near term. SUN has been marked down due to weather-related

claims, whereas for IAG this was rated as a positive. We also

consider SUN's low rating for responsible investment to be

addressed in the near term with the sale of their Brisbane head

office. When these issues are addressed SUN will likely move

up to an 'A' or 'AA' rating in our view.

4.9 3.0 7.0

TWR.AX Tower Limited 1.72 0.0% No rating



Figure 29: MSCI IVA analysis: AMP Figure 30: MSCI IVA analysis: IAG Overall ESG rating A

1.5

2.5

3.5

4.5

5.5

6.5

7.5

8.5

9.5

10.5




1.5

2.5

3.5

4.5

5.5

6.5

7.5

8.5

9.5




Figure 31: MSCI IVA analysis: QBE Figure 32: MSCI IVA analysis: SUN Overall ESG rating A

1.5

2.5

3.5

4.5

5.5

6.5

7.5

8.5

9.5




1.5

2.5

3.5

4.5

5.5

6.5

7.5

8.5

9.5




27 September 2012


Resources and Energy Coal

Analyst: Paul McTaggart, James Redfern, Martin Kronberg

MSCI ratings views

■ Upside possible for BTU’s CCC rating: Few of our covered coal companies are

rated by MSCI. We have a Positive outlook on the CCC MSCI IVA rating for BTU, set in

December 2011. We believe the recent announcement that one party has withdrawn

their appeal against BTU’s Buller Escarpment coking coal project in New Zealand is

positive. BTU has revised its construction plan to be more environmentally considerate.


■ Environmental challenges: The Australian coal sector faces stiffer environmental

approvals, including delays, and some opposition from farmers and environmentalists

for development of new and expanded mines. We have risk weighted or excluded

assets exposed to these risks in assessing the ESG impacts on the coal sector.


Figure 33: Impact of ESG on Target Prices for Coal Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

BND.AX Bandanna Energy Limited 0.70 -10.0% No MSCI rating

BTU.AX Bathurst Resources 0.80 -18.0% CCC Positive BTU recently announced that one party (the Fairdown Whareatea

Residents) has withdrawn their appeal against BTU's Buller

Escarpment coking coal project and that it revised its construction

plan to be more environmentally considerate

1.4 3.4 3.8

COK.AX Cockatoo Coal 0.20 0.0% No MSCI rating

NHC.AX New Hope Corporation 4.60 -3.0% No MSCI rating

SMR.AX Stanmore Coal 0.65 -15.0% No MSCI rating

TIG.AX Tigers Realm Coal 0.30 -17.0% No MSCI rating

WHC.AX Whitehaven Coal 4.40 -4.0% BB Neutral We do not see the merger with Azton providing any change to

WHC's ratings

1.6 5.6 5.0

YAL.AX Yancoal Australia 1.50 -10.0%



Figure 34: MSCI IVA analysis: BTU Figure 35: MSCI IVA analysis: WHC Overall ESG rating CCC

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating BB

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Energy

Analyst: Paul McTaggart, Ben Combes, James Redfern

MSCI ratings views

■ AUT upside from improved disclosure: We have Positive outlooks on the MSCI IVA

ratings for AUT, CTX and KAR. AUT receives a low B rating from MSCI for its IVA.

This rating was last reviewed in May 2012. Poor disclosure and lack of a proactive

approach on sensitive environmental concerns and safety are the substantial

contributors to this low rating. We set a Positive outlook on the assumption that

disclosure may now improve, post the change of operatorship to Marathon.

■ KAR upside possible on improved disclosure: Similar to AUT, KAR receives a low

B rating, set in May 2012. Concerns about poor disclosure and weak management

systems for environments risks, combined with concerns over expected ultra deep

water drilling in offshore Brazil has led to the B rating. KAR is yet to announce the

outcome of an expected farmout of a portion of its Brazil acreage, and we are

expecting any partner will be an experienced offshore operator, thus bringing some

confidence back into the process of drilling in Brazil. In Australia, COP is undertaking

the offshore drilling. COP has an MSCI IVA rating of A, with stronger individual rating

for environmental practices and health and safety.

■ Upside in CTX from refinery closure: With CTX announcing its decision to close one

of its two Australian refineries, we see upside to its existing A rating, which was

upgraded from BBB in April 2012.

■ Downside risk for AWE’s BBB rating: AWE was downgraded to BBB (from A) in

May 2012. AWE has now invested in Indonesia, which the report does mention, but

we believe there is further downside possible to AWE’s current strong score for

Corruption and Instability issues.


■ Country risk issues impact OSH, KAR and AWE valuations: We have factored in a

higher WACC for OSH (0.5% higher than that used for STO and WPL) to account for

the PNG country risk. This reduces our valuation by 4.5% ($427mn). For KAR, we

apply a 25% downside risk weighting to account for higher country risk for its Brazilian

and Peru assets. This results in a large 11.7% downside to our valuation.

■ Social Licence to operate costs have small impact on STO: We have taken a view

that both STO and ORG (under Utilities section) will have to offer improved landowner

compensation as political and social pressure is brought to bear on the coal seam gas

operators. The Federal Opposition’s policy of allowing landowners to say No to coal

seam gas companies seeking to develop is aimed at forcing the CSG companies to

offer enticing compensation sufficient for the vast majority of landowners to accept

CSG drilling on their land. We have factored in an additional 2.5% royalty cost to

reflect expected higher landowner compensation.

■ Environmental issues: For small cap stocks such as MPO, the moratorium on

fraccing in Quebec has reduced our Target Price by a large 15%. This moratorium is

unlikely to be resolved in the near term, meaning we remove the affected assets

entirely when setting our Target Price.

■ CTX faces higher redundancy and remediation costs: As CTX ponders a decision

to close one or both of its Australian refineries, we expect any such decision will come

with improved redundancy costs. We factor in an addition 25% in redundancy costs on

top of the announced $62.5mn and add $50mn in additional remediation costs (on top

of $250mn).

27 September 2012



Figure 36: Impact of ESG on Target Prices for Energy Company Target

Price

(AUD)

ESG

downside

included

MSCI

IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

AUT.AX Aurora Oil & Gas 4.02 -3.0% B Positive AUT ranks poorly due to weak disclosure on carbon management

systems, no management strategy to mitigate risks to the environment

or safety risks. It would not take much to improve this ranking.

0.9 1.6 4.1 25/05/2012

AWE.AX AWE Ltd 1.75 -0.4% BBB Negative Since the last rating review, AWE has invested in Indonesia which will

most likely lower the company's score for corruption and instability.

2.5 5.7 5.7 25/05/2012

CTX.AX Caltex Australia 15.55 -0.2% A Positive The announcement to close the Kurnell refinery will likely see CTX

improve on its Environmental score.

4.5 7.4 7.0 1/04/2012

KAR.AX Karoon Gas 7.65 -11.7% B Positive KAR ranks poorly due to weak disclosure on carbon management

systems, no management strategy to mitigate risks to corruption and

instability from operating in Peru and Brazil. It would not take much to

improve this ranking.

0.5 3.1 3.5 25/05/2012

MPO.AX Molopo Australia 0.70 -15.0%

OSH.AX Oil Search 8.70 -4.5% BB Neutral It will be difficult for OSH to improve their rating due to the fact they

operate entirely in PNG which is deemed to have a weak rule of law and

high levels of corruption

4.1 1.5 2.0 25/05/2012

STO.AX Santos Ltd 12.65 -1.0% A Neutral STO is the top ranked company under our coverage and scores well in

all areas. Carbon emissions are the biggest concern, however STO have

a strong emphasis on carbon emission reductions.

4.4 7.3 3.8 25/05/2012

TAP.AX Tap Oil Ltd 0.85 -1.8%

WPL.AX Woodside Petroleum 38.55 -0.2% AA Neutral WPL has been upgraded from "A" to "AA" as there are suitable

alternatives for its proposed LNG project at James Price Point that will

allow the company to avoid community issues, potential litigation and

regulatory intervention which could threaten costs and/or delay the

project. While we think the preferred development of Browse is a NWS

backfill, we do not see a decision on this until 2013 therefore no change

to our view on rating.

4.1 7.0 7.2 25/05/2012



Figure 37: MSCI IVA analysis: AUT Figure 38: MSCI IVA analysis: AWE Overall ESG rating B

Source: MSCI IVA Rating

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 39: MSCI IVA analysis: CTX Figure 40: MSCI IVA analysis: KAR Overall ESG rating A

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating B

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Figure 41: MSCI IVA analysis: OSH Figure 42: MSCI IVA analysis: STO Overall ESG rating BB

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 43: MSCI IVA analysis: WPL Overall ESG rating AA

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Gold

Analyst: Michael Slifirski, Sam Webb

MSCI ratings views

■ We have a Positive outlook on the B MSCI IVA ratings for EVN and PRU. These

ratings were reviewed in March 2012. For EVN the rating reflects a lack of policies for

environmental and safety issues, post the merger of Catalpa Resources and Conquest

Mining. We expect these policies will be developed over time, thus improving the

current B rating. PRU was downgraded to B (from BB) in March 2012, as the company

lacked key policies despite moving into production. We expect this will be addressed

and result in an upgrade.


■ African concerns: The raft of royalty and tax changes on top of coups in Africa have

severely reduced the appeal of otherwise commercial looking mineral deposits. Ghana

in Africa now appears relatively low risk having already implemented tax, royalty and

tax depreciation changes (PRU), however explorers or operators across wider West

Africa (AMX, GRY) may find it challenging to get equity market support, debt facilities,

etc., if investors are unable to make robust assumptions about project returns.

■ Industry-wide cost pressures also impact Gold sector: Despite historically high

commodity prices, project capex and opex estimates are coming in materially above

estimates that already appeared elevated. In the Gold space, we have seen cash cost

forecast revision of typically $100/oz or about 15% above forecasts made 12–18

months ago at concept stage. As contractor quotes are received at Detailed

Feasibility Stage (DFS), we are seeing significant opex surprises. We are seeing

similar inflation with regards to capex as well, with up to 50% inflation above early

estimates and understanding of projects made sometimes as little as 18 months ago.

The unknown is how much of the cost pressure is temporary and how much is

structural. The advent of very generous FIFO rosters to remote operations and the

need for additional crews to cover the imposts of the generous rosters suggests that

much of the cost pressure might actually be structural.

■ No country risk concerns included in NCM: We do not include any country risk in

our Newcrest valuation. Indonesian country risk is mitigated by a Contract of Work

(COW) agreement, which defines its fiscal arrangements until ~2028/29 which is

beyond the current expected life of the operation, and provides a high degree of

protection against any external legislation changes. PNG country risk is already

inferred in our assumed production costs. Bonikro (Cote D’Ivoire) only contributes

~60cps to our NPV, a small part of our NCM valuation.

27 September 2012



Figure 44: : Impact of ESG on Target Prices for Gold Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

AMX.AX Ampella Mining Limited 1.50 0.0%

AQG.AX Alacer Gold Corp. 7.72 0.0%

EVN.AX Evolution Mining Limited 1.70 0.0% B Positive Current 'B' rating would appear to be weighed down by

Evolution only recently being formed (merger of Catalpa

Resources and Conquest Mining). We'd expect ESG policies

to be gradually developed over time.

2.1 2.9 5.0 23/03/2012

GRY.AX Gryphon Minerals Limited 1.25 -9.0% A Neutral Given GRY remains in an early exploration phase, we see little

risk in near-term to any MSCI rating change.

4.7 3.1 5.6 1/03/2012

KGD.AX Kula Gold 1.15 -25.0%

NCM.AX Newcrest Mining 26.00 0.0% BB Neutral Given performance and rating provided, feel change in rating in

near-term may be unlikely.

3.5 3.7 4.7 1/03/2012

PRU.AX Perseus Mining 3.10 0.0% B Positive Recent downgrrade to 'B' rating reflects poor biodiversity and

land use, health & safety scores. Given the project is in early

stages, as production ramps up at Edikan in Ghana, we

expect an increased focus by management on addressing

these issues in future.

3.3 2.5 3.0 1/03/2012



Figure 45: MSCI IVA analysis: EVN Figure 46: MSCI IVA analysis: GRY Overall ESG rating B

2.0

3.0

4.0

5.0

6.0

7.0

8.0




2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 47: MSCI IVA analysis: NCM Figure 48: MSCI IVA analysis: PRU Overall ESG rating BB

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating B

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Diversified Resources

Analyst: Paul McTaggart, James Redfern, Martin Kronberg

MSCI ratings views

■ We have a Negative view on the AA MSCI rating for BHP, given recent labour

disputes at BHP’s coal operations in the Bowen Basin Queensland. The last MSCI

report on BHP was published in December 2011 so it does not cover the labour

issues, which resulted in reduced production.


■ Higher WACC for BHP impacts Target Price by 2%: While BHP is a leader in ESG

management, we include an additional 0.5% WACC (9% real post tax WACC) to

account for operations in numerous high risk places. This leads to a 2% downside to

our BHP Target Price.

■ Higher WACC for RIO impacts Target Price by 3%: For RIO, we have used a 0.5%

higher WACC (9% real post tax WACC) to account for projects in sensitive areas. This

results in a 3% negative impact on our RIO Target Price.


Figure 49: : Impact of ESG on Target Prices for Other Metals Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

BHP.AX BHP Billiton 35.85 -2.0% AA Negative Labour disputes in Queensland could negatively impact social

rating

4.9 5.9 8.2 17/02/2012

RIO.AX Rio Tinto 73.32 -3.0% BBB Neutral We are not aware of any events since last issued MSCI report

(December 1) that is likely to change RIO's rating

4.1 4.7 5.3 1/12/2011



Figure 50: MSCI IVA analysis: BHP Figure 51: MSCI IVA analysis: RIO Overall ESG rating AA

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Other Metals

Analysts: Paul McTaggart, Mike Slifirski, Matthew Hope, James Redfern, Martin

Kronberg, Sam Webb

MSCI ratings views

■ We have a Positive outlook on the MSCI ratings for AQA, GBG, ILU, MDL and

SFR. All these companies had their MSCI IVA ratings set in December 2011. For

AQA, a reduction in its coal exposure is expected to result in an improvement in its

B rating. We see upside to GBG’s B rating from positive social influences, through

direct local employment opportunities. For ILU, we see upside from reduced emission

since the MSCI review, with only two of four kilns operating. We see upside for MDL

as recent political disturbances in Senegal are subsiding. We expect SFR to improve

on its B rating, as it turns its attention to ESG matters post startup of production.

■ We see downside risk to AGO, AWC, and ERA. All these companies had their MSCI

IVA ratings set in December 2011. For AGO, ongoing road trucking of iron ore may

expose the company to social pressure from local communities, hence we place its

B rating on a Negative view. For AWC, it is exposed to carbon tax for the AWAC

Victorian smelters which use the higher emitting brown coal generators. AWC has a

reasonably high AA MSCI IVA rating and we have a Negative outlook on this rating.

For ERA, we see downside to its BB rating, from safety concerns from underground

mining. In Australia, political ambiguity over uranium mining plus operations in the

sensitive Kakadu world heritage site continues to place pressure on ERA.


■ ERA has 36% downside in Target Price: Most impacted is ERA, with 36% downside

included in the Target Price. We include only 50% of our valuation for the Ranger

Uranium mine.

■ Country specific risk leads to 13% downside for BSE and MDL: We have applied

2% higher WACCs (than the 9.5% used for ILU) to BSE and MDL to handle country

risk concerns for Kenya and Senegal.

■ 5% downside in AQA for project approval: We have included 5% downside in our

AQA valuation to take account of concerns on the approval of the Washpool HCC

project, as well as a higher 11% WACC.

■ 4% downside in AWC for carbon tax concerns: We have valued the impact on

AWC’s earning from the carbon tax, with $20mn impact in FY13 and 4% downside

included in our Target Price.

27 September 2012



Figure 52: Impact of ESG on Target Prices for Other Metals Company Target

Price

(AUD)

ESG

downside

included

MSCI

IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

AGO.AX Atlas Iron 2.70 0.0% B Negative Usage of highways for trucking iron ore to Port Hedland is

ongoing which may expose the company to social pressure

from local community groups if the movements impact Port

Hedland. It also increases risks of a road accident involving

passenger vehicles.

2.6 4.9 7.0 1/12/2011

AOH.AX Altona Mining Limited 0.46 0.0%

AQA.AX Aquila Resources 2.75 -5.0% B Positive AQA has sold its Isaac plains operations and we expect it to

further reduce its coal exposure which should improve

environmental scores

1.6 3.5 3.4 1/12/2011

AWC.AX Alumina Limited 0.84 -4.0% AA Negative CO2 emmissions mainly from Victorian smelters is the main

high profile environmental issue. Industry get 96.5% protection

in year 1, but AWAC smelters run on Victorian electricity

generated by burning brown coal so subsidy less than industry

average.

4.5 7.3 6.6 1/12/2011

BSE.AX Base Resources Ltd 0.80 -13.0%

ERA.AX Energy Resources of Australia 1.65 -36.0% BB Negative Going underground increases health and safety risk. Operating

in extremely sensitive Kakadu World Heritage Area and

political ambiguity around uranium.

1.1 7.9 5.1 1/12/2011

FMG.AX Fortescue Metals Group Ltd Restricted BBB 4.3 5.8 7.0 1/12/2011

GBG.AX Gindalbie Metals Ltd 1.00 0.0% B positive MSCI notes environmental risks in monitoring water draw from

borefield. However, potential positive social influence on town

of Geraldton through deliberate employment of local

businesses and additional power security as Government links

Mid-West electrical distribution to Perth Area power for benefit

of the mine.

1.6 6.4 7.0 1/12/2011

IGO.AX Independence Group NL 3.50 -2.0% BB Neutral MSCI concerns include general issues with underground

mining, managing carbon emissions and applying consistent

OH&S standards for its multiple exploration projects. Above

all, MSCI notes a more proactive approach to each issue is

desired and, as we are not aware of any significant shift in IGO

policies, we expect the rating to remain unchanged.

2.5 4.2 4.7 1/12/2011

ILU.AX Iluka Resources 13.50 -3.9% BBB Positive Rating primarily based on negative impact from carbon tax -

CO2 numbers quoted were for all 4 kilns, whereas only two are

operational. Furthermore, Iluka expects to being eligible for

assistance making the financial impact small.

3.3 5.9 5.6 1/12/2011

MBN.AX Mirabela Nickel 0.53 -6.0% BB Neutral MSCI notes that operational risks are significantly higher in

Brazil compared to Australia and that MBN has taken limited

steps to adress these. With a loss making operation we do

not think ESG score improvement will be MBN's highest

priority.

3.2 3.9 3.2 1/12/2011

MDL.AX Mineral Deposits Ltd. 9.09 -11.0% BBB Positive MDL has experience in Senegal through building the Sabodala

gold mine. Recent political disturbance subsided when

President Wade accepted defeat after 2nd round presidential

elections.

5.5 3.3 2.4 1/12/2011

MGX.AX Mount Gibson Iron 1.00 0.0% B Neutral MSCI ESG risks related to water mangement and carbon

emission policies, whereas we are more focussed on

corporate governance, which we consider is improving. Recent

change in management may change policy focus.

1.6 5.0 7.0 1/12/2011

OZL.AX OZ Minerals 9.70 0.0% BB Neutral Recent downgrade to 'BB' rating appears to be over relatively

minor issues. From our experience and visits to Prominent

Hill, health & safety appear to be very conscious elements of

day-to-day operations. Carbon tax impact is yet to be fully

quantified in our view.

2.6 3.7 5.2 1/12/2011

PAN.AX Panoramic Resources 1.25 0.0% AA Neutral PAN rates strongly on MSCI ratings thanks excellent health

and safety record and strong environmental risk management.

Planned new developments should not expose PAN to

materially higher risks.

4.5 8.1 6.8 1/12/2011

PNA.AX PanAust 3.13 0.0% BBB Neutral Main operations in Laos/Thailand place geopolitical risk on

PNA that is shown in its 'BBB' rating. It is unlikely PNA will

move from these operating jurisdictions, as such, feel MSCI

rating unlikely to change in the near-term.

4.1 4.4 4.9 1/12/2011

SFR.AX Sandfire Resources NL 7.20 0.0% B Positive B rating (coverage just initiated) noted concerns over "a weak

management approach to all key issues assessed". Given

SFR's operational mine has only just commenced production,

risk is to the upside that focus may, in time, gradually

increasingly turn to improving ESG awareness.

2.0 3.0 3.2 1/12/2011

WSA.AX Western Areas NL 4.70 0.0% BB Neutral With a recent transition to underground mining at Spotted

Quoll, safety risks have increase but we note that the

company maintains an excellent safety record, has brought in

MYR Risk consultants and is working on expanding its

medical facilities

2.6 5.3 3.5 1/12/2011

MSCI_Total Average 3.0 5.2 5.2 Source: MSCI IVA ratings, Company data, Credit Suisse estimates

27 September 2012



Figure 53: MSCI IVA analysis: AGO Figure 54: MSCI IVA analysis: AQA Overall ESG rating B for AGO.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating B for AQA.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 55: MSCI IVA analysis: AWC Figure 56: MSCI IVA analysis: ERA Overall ESG rating AA for AWC.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating BB for ERA.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




Figure 57: MSCI IVA analysis: GBG Figure 58: MSCI IVA analysis: IGO Overall ESG rating B for GBG.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating BB for IGO.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 59: MSCI IVA analysis: ILU Figure 60: MSCI IVA analysis: MBN

Overall ESG rating BBB for ILU.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating BB for MBN.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Figure 61: MSCI IVA analysis: MDL Figure 62: MSCI IVA analysis: MGX

Overall ESG rating BBB for MDL.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating B for MGX.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 63: MSCI IVA analysis: OZL Figure 64: MSCI IVA analysis: PAN

Overall ESG rating BB for OZL.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating AA for PAN.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




Figure 65: MSCI IVA analysis: PNA Figure 66: MSCI IVA analysis: SFR

Overall ESG rating BBB for PNA.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating B for SFR.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 67: MSCI IVA analysis: WSA

Overall ESG rating BB for WSA.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Steel

Analyst: Michael Slifirski, Sam Webb

MSCI ratings views

■ No upside or downside seen in Steel stock MSCI rating: We are Neutral on the

MSCI IVA rating outlook for all three Steel stocks. These MSCI IVA ratings were last

updated in December 2011. SGM has the top rating of AAA, but is not involved in

production, so we see limited downside risk.


■ Long-term viability of domestic steel making industry continues to be a

concern: Domestic steel producers ARI and BSL have been impacted by multiple

macro and ESG factors, resulting in significant share price depreciation over the past

24 months. From a macro standpoint, a high Australian dollar, weak global and

domestic demand and high import costs have decimated steel making earnings and

returns. From an ESG standpoint, carbon tax implications in particular overlays future

concerns for the industry. Both the macro and carbon tax issues have the potential to

impact labour demand in the future.

■ Steel Transformation Plan (STP): Under a facility, originally announced by the Prime

Minister in August last year, eligible steelmakers have been able to apply for advances

to provide competitiveness assistance. The Plan is a $300mn program operating over

six payment years from 2011–12 that aims to encourage investment, innovation and

competitiveness in the Australian steel manufacturing industry in order to assist the

industry to transform into an efficient and economically sustainable industry in a low

carbon economy.

■ Although near-term carbon impact alleviated, long-term impact unknown: The

small ESG downside include in our Target Prices (5cps for both ARI and BSL) reflect

uncertainty regarding the future of the domestic steel industry. Whilst short-term

carbon tax issues have been eased via the STP, similar mid- to long-term solutions

are less certain.


Figure 68: Impact of ESG on Target Prices for Steel Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

ARI.AX Arrium 1.15 0.0% BBB Neutral Neutral rating maintained, consistent with our Steel exposures. 4.5 6.9 7.0 1/12/2011

BSL.AX BlueScope Steel Restricted BBB 3.8 6.3 7.0 1/12/2011

SGM.AX Sims Metal Management 11.00 0.0% AAA Neutral As SGM is not involved in production of steel or Iron Ore, and

is not anticipated too, we expect low risk of a MSCI rating

downgrade

7.4 8.2 7.0 1/12/2011


27 September 2012



Figure 69: MSCI IVA analysis: ARI Figure 70: MSCI IVA analysis: BSL Overall ESG rating BBB for ARI.AX

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5



Overall ESG rating BBB for BSL.AX

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5




Figure 71: MSCI IVA analysis: SGM Overall ESG rating AAA for SGM.AX

3.0

4.0

5.0

6.0

7.0

8.0

9.0




27 September 2012


Industrials Building materials

Analyst: Andrew Peros

MSCI ratings views

■ Upside potential for ABC: We see Positive upside to the CCC MSCI IVA rating for

ABC, from reduced carbon emissions with the potential for ABC to import cement, or

use alternative fuels or cement substitutes. The MSCI IVA rating for ABC was last

reviewed in May 2012.

■ CSR upside from environmentally friendly building products: We note CSR, with

a BB MSCI IVA rating, was last reviewed in August 2011. We have a Positive outlook

on this rating, given its does not take account of the upside from CSR’s manufacturing

of products such as smart glass and insulation that facilitate the construction of 6-star

green rating homes and buildings.


■ Average 13.2% downside from asbestos liabilities and carbon: We have included

13.2% average downside to our Target Prices for the Building Materials sector stocks,

due mostly to the cost of asbestos liabilities for both CSR and JHX. We include the

liabilities as disclosed by the companies, and have factored in 39% reduction to our

Target price for CSR and 18% for JHX for these asbestos liabilities. For stocks such

as ABC and BLD, we have 3.4% and 0.8% downside, respectively, to our Target Price

for the impact of the carbon legislation. We have calculated this as the net exposure to

carbon liabilities (net of any Government assisted offsets).


Figure 72: Impact of ESG on Target Prices for Building Materials Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

ABC.AX Adelaide Brighton 3.15 -3.4% CCC Positive We see upside risk to the MSCI rating given ABC's has

flexibility to increase its cement/clinker import capabilities, and

hence reduce carbon emissions. Increasing the use of

alternative fuels and cement substitutes (slag) should further

assist with reducing carbon emissions. This is not captured in

the MSCI assessment.

2.1 4.7 7.0 25/05/2012

BLD.AX Boral 3.95 -0.8% AA Neutral We are comfortable with BLD's MSCI rating. With a large

component weighted towards carbon, we see upside in the

furture as BLD further develops carbon friendly products

("smog eating roof tile") and shifts more towrds light weight

Building Products to reduce emissions.

4.7 6.5 7.0 25/05/2012

CSR.AX CSR 1.17 -39.0% BB Positive We see upside to MSCI's 'BB' rating. CSR is invlolved in the

manufacture of building products that facilitate the construction

of 6-star green rating homes (smart glass; insulation). This is

not captured in the MSCI commentary. CSR is also active in

sourcing renewable energy for manufacturing purposes.

3.2 7.5 5.2 1/08/2011

JHX.AX James Hardie Industries SE 9.24 -18.0% BB Neutral JHX has appropriately provided for the asbestos liability on its

B/S and cash payments (35% op CF) are made into the

asbestos fund. A reduction in the projected future number of

asbestos claims to be reported for a number of disease types

implies the liability is appropriately provided for.

4.0 5.1 3.5 25/05/2012


27 September 2012



Figure 73: MSCI IVA analysis: ABC Figure 74: MSCI IVA analysis: BLD Overall ESG rating CCC for ABC.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating AA for BLD.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 75: MSCI IVA analysis: CSR Figure 76: MSCI IVA analysis: JHX Overall ESG rating BB for CSR.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating BB for JHX.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Chemicals, paper & packaging

Analyst: Larry Gandler, Andrew Peros

MSCI ratings views

■ Expecting downside for ORI: We have ORI on a Negative outlook for its BBB MSCI

IVA rating, which was set in September 2011. ORI has had a series of issues at its

Kooragang Island and Botany plant involving toxic and chemical releases, which have

not been fully considered in this report.


■ Average 2.7% downside from carbon liabilities: We have included 2.7% average

downside to our Target Prices for the Chemicals, Paper and Packaging sector stocks,

due mostly to the cost of carbon tax liabilities, which commenced on 1 July 2012. For

ORI, we have also included the costs for groundwater remediation, HCB

remediation, and Botany mercury remediation, which amount to less than 1% of

the Target Price on an NPV basis.


Figure 77: Impact of ESG on Target Prices for Chemicals, Paper & Packaging Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

AMC.AX Amcor 7.70 -3.0% A Neutral We remain comfortable with MSCI's 'A' rating. The only

identifiable risk surrounds "Labour" given the expected

synergies from recent acquisitions (plant closures) and

Carbon.

6.5 6.3 7.0 1/10/2011

IPL.AX Incitec Pivot Ltd. 3.50 -1.3% BB Neutral We remain comfortable with MSCI's 'BB' rating. Key risks

surround the "Toxic Release" component (31.7% weighting)

following recent issues at ORI's Kooragang Island and botany

plant.

2.4 3.7 7.0 1/02/2012

NUF.AX Nufarm 5.80 -4.0% BBB Neutral NUF is not typically a Carbon intensive company, although this

carries a 31.7% weighting per MSCI. Of greater concern, in our

view, surrounds Governance. This involves Board

independence, Accounting treatment and management

integrity (5% weighting). Given NUF's recent history, we

believe these issue should carry significantly more weighting.

4.3 4.0 4.5 1/02/2012

ORI.AX Orica 29.40 -3.0% BBB Negative We see risks around ORI's 'BBB' rating. This follows a series

of production issues at its Kooragang Island ammonium nitrate

facilities involving toxic chemical release. Implicit within the

MSCI report is a section on "Toxic Release" (33% weighting)

and "Product Safety" (17% weighting) component. These

sections make no consideration for the recent toxic issues.

5.6 6.1 7.0 1/09/2011



Figure 78: MSCI IVA analysis: AMC Figure 79: MSCI IVA analysis: IPL Overall ESG rating A

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5




3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5




27 September 2012


Figure 80: MSCI IVA analysis: NUF Figure 81: MSCI IVA analysis: ORI Overall ESG rating BBB

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5




3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5




27 September 2012


Construction

Analyst: Brad Clibborn, Emma Alcock

MSCI ratings views

■ Downside potential for DOW from carbon emissions: We see downside to the

MSCI IVA rating of A for DOW, which was last reviewed in March 2012. DOW scored

highly (9.6 out of 10) for carbon emissions, which was 18% of the total weighting. We

see downside given DOW’s involvement in asphalt production and expansion of its

contract mining operations.

■ Upside for UGL from Corruption policy: We see upside to the MSCI IVA rating of

BBB for UGL, last reviewed in April 2012. UGL scored lowly on Corruption (2.8 out of

10), due to a lack of policies. This component had a 38% weighting in forming the

MSCI IVA rating. Formulation of a policy should deliver upside.


■ No ESG impact but LEI reputation impacts and possible business exit scenario

considered: We have included no downside to our Target Prices for ESG risks in the

Construction sector. However, we have considered a scenario for a 1.3% downside to

our LEI Target Price, due to the risk that LEI may exit its offshore business. This

business has been the subject of recent bribery claims. In this scenario, we risk weight

our valuation of this overseas business down by 50% to reflect this risk.


Figure 82: Impact of ESG on Target Prices for Construction Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

BLY.AX Boart Longyear Group 3.04 0.0% AA Neutral We are comfortable with the current MSCI rating 3.8 6.3 6.8 24/04/2012

ALQ.AX ALS Limited 10.16 0.0% A Neutral We are comfortable with ALQ’s A rating . We see medium

term upside risk to ALQ's labour management score of 2.2

which compares to the industry average of 3.8 and represents

40% of the MSCI rating. Upside risk comes from the lack of

outstanding labour disruptions within the company.

10.0 4.7 7.0 25/05/2012

DOW.AX Downer EDI 4.10 0.0% A Negative We see downside risk to DOW's MSCI rating based on social

issues that could extend from NZ restructure. In addition we

note DOW has scored extremely well (9.6/10) for carbon

emissions which are 18% of overall weighting. We highlight

potential downside risks to this given DOW's involvment in

asphalt production (which currently falls under the carbon tax

threshold) and expansion of its contract mining operations.

6.0 6.7 3.2 1/03/2012

LEI.AX Leighton Holdings 17.60 0.0% BB Neutral MSCI flagged "substantial fines and reputational damages"

associated with the recent LEI offshore bribery claims. Under a

'guilty scenario' LEI could close the LEI offshore business to

signal it has 'dealt with' the problem and cast it aside. This

would reduce our LEI Target Price by -1.3% . Under this 'guilty

scenario' we ascribe a 50% probability to LEI exiting the

offshore business. This forms the basis of our valuation risk

adjustment.

4.4 4.7 2.4 25/04/2012

TSE.AX Transfield Services Ltd 2.05 0.0% A Neutral The only risk we would highlight to watch is potential corporate

governance issues surrounding 10.5% blocking stake of

Bellgiorno-Nettis family. However Governance is only 5% of

total rating, so minimal risks to overall group ESG rating from

this.

5.8 6.2 5.3 1/03/2012

UGL.AX UGL Limited 13.00 0.0% BBB Positive UGL scores only 2.8 on corruption purely due to lack of policy.

Track record is actually good. Hence formation of anti

corruption policies would see a sharp reversal in this indicator

which is 38% of total weighting. Upside from environment

rating based on expected increase in property services

earnings as % group.

2.8 8.1 2.9 24/04/2012

WOR.AX WorleyParsons 27.55 0.0% AAA Neutral We are comfortable with WOR's AAA rating. WOR has limited

exposure to operational, regulatory and environmental risks

versus its peers.

9.2 10.0 9.0 1/12/2011


27 September 2012



Figure 83: MSCI IVA analysis: BLY Figure 84: MSCI IVA analysis: DOW Overall ESG rating AA for BLY.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating A for DOW.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 85: MSCI IVA analysis: LEI Figure 86: MSCI IVA analysis: TSE Overall ESG rating BB for LEI.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating A for TSE.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 87: MSCI IVA analysis: UGL Figure 88: MSCI IVA analysis: WOR Overall ESG rating BBB for UGL.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating AAA for WOR.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0




27 September 2012


Food and Beverage

Analyst: Larry Gandler, Ruvani Fernando

MSCI ratings views

■ Neutral outlook on MSCI IVA ratings: We have a Neutral outlook on the MSCI IVA

ratings for CCL and TWE (last updated in June 2012) and GFF (last updated in

December 2011).


■ No TP impact from ESG: We have not included any impact on our Target Prices for

ESG issues in the Food and beverage sector.


Figure 89: Impact of ESG on Target Prices for Food and Beverage Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

CCL.AX Coca-Cola Amatil 12.50 0.0% A Neutral CS ESG risk assessment in line with MSCI 5.5 5.2 7.0 8/06/2012

GFF.AX Goodman Fielder 0.60 0.0% BB Neutral CS ESG risk assessment in line with MSCI 2.0 3.4 7.0 1/12/2011

TWE.AX Treasury Wine 3.50 0.0% B Neutral CS ESG risk assessment in line with MSCI

rating

3.3 3.7 7.0 8/06/2012



Figure 90: MSCI IVA analysis: CCL Figure 91: MSCI IVA analysis: GFF Overall ESG rating A for CCL.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating BB for GFF.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




Figure 92: MSCI IVA analysis: TWE Overall ESG rating B for TWE.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




27 September 2012


Gaming

Analyst: Larry Gandler, Ruvani Fernando

MSCI ratings views

■ Neutral outlook on MSCI IVA ratings: We have a Neutral outlook on the MSCI IVA

ratings for Gaming stocks, with these ratings last updated in February 2012. Both

CWN and TAH achieved the highest AAA rating.


■ Explicit ESG impact not included in gaming stocks: We have not included any

explicit impact for ESG concerns in our Target Price for gaming stocks. Harm

minimisation reforms in Australia are not likely to have a material valuation impact. The

most severe gaming reform, mandatory pre commitment, is unlikely to be implemented

in the medium term, if at all. Other proposed reforms should have broadly neutral

impacts on gaming operators, and if negative, only mildly. Our key concerns for potential

downside risk to earnings include the emergence of a tighter regulatory environment

and/or a significant change in social attitudes towards gambling.

■ Reforms in Queensland may offset extra gaming tax: In its September 2012

Budget, the Queensland Government announced it would increase the level of gaming

tax paid by Clubs. Effective Monday, 1 October 2012 these clubs will pay an additional

5.0% in gaming tax for their taxable metered win between $850,000 and $1.4mn. The

State Government has also indicated it may introduce favourable gaming reforms to

assist these 25 clubs offset the new gaming tax. This suggests that the Qld Govt is

more positively disposed towards reducing the regulatory burden on clubs.

Anecdotally, we have previously received similar feedback on the new State

Government’s view of the regulatory burden on Qld casinos. Echo (ECP) is working

with the Queensland Government on its announcement to increase the casino

industry's contributions to tax revenues, including implementation of a range of

regulatory reform proposals, made with the release of the State Budget. We are

presently not incorporating any impact from potential casino tax changes into our

valuation or earnings.


Figure 93: Impact of ESG on Target Prices for Gaming Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

ALL.AX Aristocrat Leisure 2.60 0.0% A Neutral CS ESG risk assessment in line with MSCI rating 5.0 4.2 4.4 1/02/2012

CWN.AX Crown 8.80 0.0% AAA Neutral CS ESG risk assessment in line with MSCI rating 3.5 7.6 5.3 1/02/2012

EGP.AX Echo Entertainment 3.80 0.0% BB Neutral CS ESG risk assessment in line with MSCI 1.9 3.7 4.6 1/02/2012

TAH.AX Tabcorp Holdings 3.30 0.0% AAA Neutral CS ESG risk assessment in line with MSCI rating 2.8 5.4 7.2 1/02/2012

TTS.AX Tatts Group 2.60 0.0% A Neutral CS ESG risk assessment in line with MSCI rating 7.6 4.7 4.2 1/02/2012


27 September 2012



Figure 94: MSCI IVA analysis: ALL Figure 95: MSCI IVA analysis: CWN Overall ESG rating A for ALL.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating AAA for CWN.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 96: MSCI IVA analysis: EGP Figure 97: MSCI IVA analysis: TAH Overall ESG rating BB for EGP.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating AAA for TAH.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 98: MSCI IVA analysis: TTS Overall ESG rating A for TTS.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Healthcare

Analyst: Saul Hadassin, Will Dunlop

MSCI ratings views

■ We have positive views on the MSCI ratings for MSB and RMD. MSB, rated as B,

was last reviewed in September 2011. For MSB, we believe the concerns over

programs for human capital losses ignores the equity options granted to senior

employees, and concerns over the staff morale impacts of the 2010 Angioblast

acquisition are now outdated. RMD was rated as BB in December 2011. We see

upside for the MSCI IVA rating for RMD from improved carbon impact disclosure.


■ Disclosure concerns: We have disclosure concerns for COH, CSL, MSB, PRX which

are factored into explicit downsides in our Target Prices of 1%–5%.

■ Governance concerns: With 24% shareholder, Washington Soul Pattison, having

strong board representation on API, we have factored in 5% downside to our Target

Price for Governance concerns. For PRY, we have included 5% downside in our

Target Price for concerns over a concentration of family on the board (three of nine

board members) and senior management positions. Similar family concerns at RMD

have led to 1 3% downside being included in our Target Price.

27 September 2012



Figure 99: Impact of ESG on Target Prices for Healthcare Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating date

API.AX Australian Pharmaceutical Ind 0.46 -5.0%

COH.AX Cochlear 65.50 -2.0% BBB Neutral COH has an average BBB rating largely due to susceptibility of corrupt

payments to heatlhcare providers, for which it has been convicted in the

past by the US DoJ. Further, COH are penalised for their short-term

initatives in improving healthcare in emerging markets. We disagree with

this point, noting that COH has been instrumental in raising cochlear

implant awareness and educating healthcare providers in developing

countries (i.e. China). However, given COH's relative lack of disclosure on

these matters, and also its anti-corruption policies, we do not foresee an

upgrade in the near term. More robust disclosure would, in our view, lead

to a materially higher MSCI ESG rating.

4.3 5.5 4.9 1/12/2011

CSL.AX CSL Ltd 44.30 -1.0% AA Neutral Current 'AA' rating. We expect civil lawsuits against CSL may emerge

given the deaths of children in Western Australia in 2010 due to CSL's

Fluvax vaccine.

5.0 6.1 7.0 1/09/2011

MSB.AX Mesoblast 7.40 -3.0% B Positive B' rating. MSB is penalised for not having programs in place to mitigate

human capital loss. We believe the report has overlooked the fact that

MSB's senior employees are all granted equity options. MSB is also

penalised for its 2010 Angioblast acquisition, which is cited as having the

potential to destabilise moral. In our view this is not an issue. Further, it is

noted that MSB does not have a strategy to improve healthcare in

emerging markets. Given MSB is still undertaking clinical studies into its

products, this last point appears misguided. We expect an upgrade to

MSB's ESG rating, however whether this happens in the near or long term

is unknown.

5.0 3.6 7.0 1/09/2011

PRY.AX Primary Health Care 3.65 -5.0% A Neutral A' rating. PRY has been sighted for a lack of policies on corruption and

ethical business conduct, as well as lack of evidence that PRY traces its

supplies to ethicall producers. We see no change in PRY's lack of

disclosure soon, and further, do not believe PRY has robust policies in

place to mitigate these concerns.

5.8 6.4 3.2 25/05/2012

PXS.AX Pharmaxis 1.70 -5.0%

RHC.AX Ramsay Health Care 25.00 -1.0% A Neutral A' rating. Long history of good governance, high quality service offering.

There is some risk RHC could come under scrutiny in the UK for

incentives to surgeons, and to a lesser extent perhaps in Australia - this

is a matter of judgement though. Nothing would cause us to think a

controversy / adverse event may arise at the moment though - anything

adverse would likely be politically motivated given we understand RHC has

been operating in its current form for years.

8.8 5.6 2.5 25/05/2012

RMD.AX ResMed Inc. 3.93 -3.0% BB Positive BB' rating. RMD's rating suffers as it does not disclose initiatives to

improve healthcare in developing regions, nor does it provide evidence of

anti-corruption measures. RMD was also penalised for a lack of carbon

emission disclosures. In our view, RMD's disclosure on carbon should

improve as the carbon tax legislation in Australia becomes operative. As

such, we believe ESG risk is positively skewed

4.8 4.6 5.5 1/12/2011

SHL.AX Sonic Healthcare 13.50 -2.0% AA Neutral AA' rating. Cited for not showing compliance with ISO 9001 / quality

management standards. We do not expect this to change in the near

term, and further, do not consider it meaningful to SHL's business.

Negative risk is limited in our view given the mature nature of pathology

businesses and strong government regulation of the industry in most

countries in which SHL operates.

6.7 6.8 3.8 25/05/2012

SIP.AX Sigma Pharmaceuticals 0.74 0.0% AA Neutral AA rating. SIP has been noted as having a lack of product quality

management disclosure. We see no change in SIP's lack of disclosure in

the near future, noting that it is likely not warranted from an investment

perspective given SIP to not manufacture / create products.

7.0 5.8 4.5 25/05/2012



Figure 100: MSCI IVA analysis: COH Figure 101: MSCI IVA analysis: CSL Overall ESG rating BBB for COH.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating AA for CSL.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Figure 102: MSCI IVA analysis: MSB Figure 103: MSCI IVA analysis: PRY Overall ESG rating B for MSB.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating A for PRY.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 104: MSCI IVA analysis: RHC Figure 105: MSCI IVA analysis: RMD Overall ESG rating A for RHC.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0



Overall ESG rating BB for RMD.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 106: MSCI IVA analysis: SHL Figure 107: MSCI IVA analysis: SIP Overall ESG rating AA for SHL.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating AA for SIP.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




27 September 2012


Retail

Analyst: Grant Saligari, Samantha Carleton

MSCI ratings views

■ We have a Positive outlook on the MSCI IVA ratings for DJS, and HVN. The MSCI

IVA ratings for DJS and HVN (both rated B) were last reviewed in June 2012. Both

were low rated, mostly due to lack of disclosure on managing issues such as product

safety, supply chain labour standards, handling of chemicals (HVN) and carbon

emissions reductions. We believe disclosure on these issues can be addressed and

will monitor for a possible Positive outlook. For PMV, its initial rating of CCC rating was

in June 2012 and is impacted by a low score for mitigating environmental impacts of

carbon and raw material sourcing, disclosure on mitigating supply chain labour

standards, and regulatory risks from use of certain chemicals.

■ Possible upside for PMV on a Neutral outlook: We see upside from investments by

PMV to address these issues and, like HVN and DJS, we will monitor for a possible

Positive outlook.

■ Near-term profitability focus may put downside pressure on ratings for MTS,

PBG and TRS. We have a Neutral outlook on the MSCI ratings for MTS, PBG and

TRS. MTS was upgraded to A from BBB in June 2011 but we believe a deteriorating

operating position could push ESG issues to a lower priority. We will monitor this for a

possible downgrade. In June 2012, the MSCI IVA rating for PBG was upgraded to

BBB from BB. We believe this rating will be under pressure in future as PBG attempts

to shift its labour force into low cost countries with higher social issues. We maintain a

Neutral outlook on PBG but will monitor this for change. In June 2011, TRS has its

MSCI IVA rating downgraded to CCC from B. for a lack of transparency on supply-

chain labour standards and oversight into the chemicals used by textile suppliers.

For the company to improve its rating significant investment is required that could

inhibit operational profitability. We currently have a bleak outlook for The Reject

Shop’s capability to sustain earnings and so do not anticipate these investments

to be forthcoming. These factors leave us seeing more downside than upside to

TRS's MSCI rating, however with no evidence of deterioration we carry a Neutral

outlook.


■ 5% downside for WOW and WES: We have included 5% downside risk in our WOW

and WES Target Prices to account for ESG concerns over the possible tightening

regulations on liquor and gaming. No ESG impact has been included in any of the

other Retail sector stocks.

27 September 2012



Figure 108: Impact of ESG on Target Prices for Retail Company Target

Price (AUD)

ESG

downside

included

MSCI

IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

BBG.AX Billabong International Restricted A 2.5 5.7 7.0 1/09/2011

DJS.AX David Jones 2.20 0.0% B Positive David Jones was recently downgraded to 'B' from 'BB' as the company lacks transparency on its

ability to manage issues such as product safety, supply chain labour standards, and carbon

reductions in its operations. We view these issues as being manageable, largely requiring more

disclosure on their operations alone. With this in mind and with no obvious additional MSCI risks

surrounding the business we have a positive outlook for its rating.

4.0 3.6 7.0 1/06/2011

FAN.AX Fantastic Holdings 2.80 0.0%

GNC.AX Graincorp Restricted B 0.6 5.4 7.0 1/12/2011

HVN.AX Harvey Norman 2.15 0.0% B Positive Harvey Norman was recently downgraded to 'B' from 'BB' as the company lacks transparency on its

ability to manage issues such as supply chain labour standards and in its handling of chemicals

used by its electronics suppliers. With the downgrading relating only to disclosure of issues we see

a future upgrade as being relatively inexpensive to achieve and so carry a positive outlook.

5.0 3.7 7.0 1/06/2011

JBH.AX JB Hi-Fi 9.70 0.0% BBB Neutral JB Hi-Fi has a 'BBB' rating and lags its peers in the Specialty Retail subset in managing regulatory

risk related to end-of-life electronic waste handling. It is not at risk of supply-chain labour issues as

it has no private label product but is susceptible to labour union disputes more common in Australia

than other countries. Balancing these issues, we have a neutral outlook for JB Hi-Fi’s MSCI rating.

5.6 4.2 7.0 25/05/2012

MTS.AX Metcash 3.85 0.0% A Neutral Metcash was recently upgraded to 'A' from 'BBB' following initiatives aimed at minimizing the

propensity for labour disruptions. Our outlook for MTS is Neutral however we are conscious of

transparency issues relating to produce sourcing and carbon impacts affecting competitors in the

industry coupled with a deteriorating operating position which we believe may make ESG issues a

secondary priority for the business. Evidence of these issues continuing to evolve would warrant a

downgrade to our outlook.

4.3 6.5 7.0 1/06/2011

MYR.AX Myer Holdings 2.70 0.0% BBB Neutral Myer Holdings was recently upgraded to 'BBB' from 'B' as the company has several strong labour

management initiatives and some promising initiatives in supply chain oversight. The key downside

risk remaining to Myer’s MSCI rating relates to transparency on its cotton sourcing and supply

chain-management however with these requiring relatively less capital input than past issues we do

not view them as likely to pull back Myer’s new rating and so carry a neutral outlook.

4.5 4.8 7.0 1/06/2011

ORL.AX OrotonGroup 8.00 0.0%

PBG.AX Pacific Brands 0.60 0.0% BBB Neutral Pacific Brands was recently upgraded to 'BBB' from 'BB' for demonstrating strong performance in

improving energy efficiencies from its operations and across its supply chain. We see potential for

this rating to come under threat as Pacific Brands attempts to shift its labour force into low-cost

countries as they may generate social concerns threatening their rating. While we are conscious of

this we are yet to see any evidence and therefore carry a Neutral outlook.

10.0 3.8 3.3 10/07/2012

PMV.AX Premier Investments Ltd 5.95 0.0% CCC Neutral Premier Investments lags its industry on ESG issues, carrying a 'CCC' based on a lack of tangible

evidence that the company is reducing its environmental impact or mitigating regulatory risks. While

these problems will require investment to address, we view these changes as manageable for

Premier to make and therefore carry a Neutral outlook with the intention of moving to Positive

should we see evidence of these issues being handled.

1.4 1.6 7.0 8/06/2012

SFH.AX Specialty Fashion Group 0.30 0.0%

SUL.AX Super Retail Group 8.40 0.0% BB Neutral Super Retail Group was recently upgraded to 'BB' from 'B' based on improvements in measuring

employee job satisfaction which could result in improved performance. Because Super Retail’s

focus is car accessories rather than parts, we believe it has relatively less exposure to growing

demand for clean technology and so should have a more stable MSCI rating than its peers which

warrants a neutral outlook.

2.0 4.6 7.0 25/05/2012

TRS.AX The Reject Shop 11.00 0.0% CCC Neutral The Reject Shop was recently downgraded to 'CCC' from 'B' for a lack of transparency on supply-

chain labour standards and oversight into the chemicals used by textile suppliers. For the company

to improve its rating significant investment is required that could inhibit operational profitability. We

currently have a bleak outlook for The Reject Shop’s capability to sustain earnings and so do not

anticipate these investments to be forthcoming. These factors leave us seeing more downside than

upside to TRS's MSCII rating however with no evidence of deterioration we carry a Neutral outlook.

5.0 3.1 7.0 1/06/2011

WES.AX Wesfarmers 31.50 -5.0% BBB Neutral Wesfarmers was recently downgraded to 'BBB' from 'A' for a lack of transparency on livestock

sourcing and carbon output. We view both coal production and cost-savings in the supermarket’s

division as integral to the company’s future earnings growth and therefore do not foresee these

being jeopardised to improve ESG standards. We therefore believe the currently rating reflects

Wesfarmers’ likely ongoing position and so carry a neutral rating.

4.0 5.1 4.5 1/06/2011

WOW.AX Woolworths 25.40 -5.0% BB Neutral Woolworths was recently downgraded to 'BB' from 'A' for lacking a comprehensive approach to

managing environmental issues created by its handling of raw materials such as beef and dairy. We

believe in an increasingly competitive Australian supermarket industry these issues will be less

prioritised in favour of cost-saving measures and so do not anticipate Woolworth’s contributing

investments that would improve their rating. Our outlook for the rating is therefore neutral.

3.7 4.4 7.0 1/06/2011



Figure 109: MSCI IVA analysis: DJS Figure 110: MSCI IVA analysis: HVN

Overall ESG rating B for DJS.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating B for HVN.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Figure 111: MSCI IVA analysis: JBH Figure 112: MSCI IVA analysis: MTS Overall ESG rating BBB for JBH.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating A for MTS.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




Figure 113: MSCI IVA analysis: MYR Figure 114: MSCI IVA analysis: PBG Overall ESG rating BBB for MYR.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating BBB for PBG.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0




Figure 115: MSCI IVA analysis: PMV Figure 116: MSCI IVA analysis: SUL Overall ESG rating CCC for PMV.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating BB for SUL.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




Figure 117: MSCI IVA analysis: TRS Figure 118: MSCI IVA analysis: WES Overall ESG rating CCC for TRS.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating BBB for WES.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Figure 119: MSCI IVA analysis: WOW Overall ESG rating BB for WOW.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Telcos

Analyst: Brad Clibborn, Emma Alcock

MSCI ratings views

■ Upside expected for TLS from NBN: We see upside to TLS’ BBB MSCI IVA rating

(last reviewed in Feb 2012) as the NBN rollout removes a lot of regulatory and labour

risks for TLS. Without a fixed line business, we expect TLS will have fewer

labour/industrial issues as well as fewer regulatory issues.


■ Regulatory changes deliver more certainty of asset value: Telstra’s key

challenges historically have been driven by regulatory and or Government intervention

relating to its ownership of the copper fixed access network. With the $11bn NBN

agreement now approved by the regulators, Government and TLS shareholders,

Telstra has the most certainty in a decade on the value of its fixed line network value.

On the fixed line retail side of the business, Telstra’s NBN retail resale business only

drives around 15% of our valuation. Hence we believe risks from a ‘level playing field’

in fixed line retail are: 1) captured in our valuation; and 2) not material to the overall

group valuation.

■ Change of government unlikely to change value: We believe risks from a change

in government are low, given indications of planned policy from the opposition and the

legislative instruments underpinning Telstra’s $11bn deal. We expect to see Telstra’s

NBN payment arrangements largely unchanged, with the NBN moving to a FTTN

rollout rather than FTTH. The implications of this for Telstra will be a faster realisation

(and higher NPV) of NBN payments, but a faster run off of copper of cash flows.

■ A more favourable regulatory environment for TLS post the NBN deal reduces

risk and could add 16cps to the valuation: The conclusion: Exiting the fixed line

access business substantially reduces the regulatory risk for Telstra. Being paid to exit

the fixed line access business is a bonus which actually drives a higher NPV outcome

for Telstra as the NBN cash payments plus run-off copper cash flows are higher than

the copper network into perpetuity in our view. In addition, we believe this reduced

regulatory risk could see a lower beta being applied to Telstra’s valuation. If we were

to reduce our beta from 1.0 to 0.9 to reflect this improved risk profile, it would drive a

+4.7% (16 cps or $2.2bn) positive impact on our Target Price for TLS.


Figure 120: Impact of ESG on Target Prices for Telcos Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

IIN.AX iiNet 3.50 0.0%

TLS.AX Telstra Corporation 4.00 0.0% BBB Positive We see medium to long term upside risks to TLS ESG rating

driven by 1) the reduction in unionised labor force as NBN rolls

out. This will reduce risks for industrial disputes going forward

adding to TLS Social rating. 2) Secondly after the NBN is

rolled out TLS will not longer be in the business of fixed line

access, this has been a large source of regulatory disputes /

fines historically. Hence we see upside risk to TLS governance

rating as regulatory disputes become a thing of the past as

NBN progresses.

7.9 4.6 4.5 1/02/2012

TPM.AX TPG Telecom 2.40 0.0% BB Neutral We are comfortable with TPM's MSCI rating. Any expansion

into emerging markets would could create a positive risk to

this rating by improving TPM's social rating (accounts for 79%

total rating score). We agree with MSCI view of TPG risks on

privacy and data security given 1) a lack of policies

surrounding data protection and 2) offshoring of call centre

4.6 3.5 5.1 1/02/2012


27 September 2012



Figure 121: MSCI IVA analysis: TLS Figure 122: MSCI IVA analysis: TPM Overall ESG rating BBB

3.0

4.0

5.0

6.0

7.0

8.0

9.0




3.0

4.0

5.0

6.0

7.0

8.0

9.0




27 September 2012


Transport and Infrastructure

Analyst: Nick Markiewicz

MSCI ratings views

■ AIO upside: While staff engagement is a key concern at Patrick, the conclusion of

negotiations and the signing of a new workplace agreement should result in immediate

productivity improvements and staff engagement. On this basis we do not agree with

the poor MSCI rating in this category and believe there is scope for a re-rating from

the BBB MSCI IVA rating set in March 2012.

■ QUB upside despite governance concerns: QUB was given an initial B rating from

MSCI for IVA in October 2011. Governance is the biggest issue for QUB, with poor

disclosure of financial information as well as limited visibility into future earnings

growth. Given the environmental benefits of shifting container transport from road to

rail, we disagree with the low environment MSCI rating, and see upside as more

disclosure of policies is made.

■ TOL Neutral after substantial upgrade: TOL was upgraded substantially to AA from

CCC in June 2011. In the MSCI index TOL has received a low social score which is

primarily due to poor disclosure of employee benefits.

■ BXB top rated: While Brambles is AAA rated, we believe the MSCI social score of 7.3

should be higher, as concerns over the use of illegal immigrants in the IFCO business

relates to the 2003–2006 period, which was prior to its acquisition by Brambles.

Adequate provisions have been made. Furthermore, the high risk MSCI places on

Privacy and Data security as a result of the Recall business should disappear with its

impending sale. With a near-term improvement in the Social score and a stable AAA

rating, we believe this could be one of the highest ESG related businesses in the

Australian market.


■ 1.3% downside ESG impact included in Target Prices: We have assessed 1.3%

overall downside ESG impact on Target Prices for the Australian transport stocks

covered.

■ AIO risk of delivering on improved productivity: The biggest ESG downside impact

is from AIO, with low staff engagement and poor productivity at Patrick. A new EBA

has been signed with potential upside likely, but the analysts are concerned about the

risk of delivering on that upside. The analysts have included 3.2% downside risk in

their AIO Target Price.

■ QAN impacted by inefficient fleet: We include 9.2% downside in our Target Price for

fuel inefficiency at QAN. This may improve post fleet investment.

■ QRN, QUB and TOL all impacted by Social issues: We have concerns about ESG

issues at QRN, QUB and TOL, but have not included explicit downside risks in their

Target Prices. At QRN the concern is the impact of staff redundancies. At QUB, the

analysts are concerned about disclosure and low staff engagement at QUB. For TOL,

the analysts are concerned about workplace issues in the USA with truck drivers.

27 September 2012



Figure 123: Impact of ESG on Target Prices for Transport and Infrastructure Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov rating Rating date

AIO.AX Asciano Group 5.95 -3.1% BBB Positive While staff engagement is a key concern at Patrick, the conclusion of

negotiations and the signing of a new workplace agreement should

result in immediate productivity improvements and staff engagement.

On this basis we do not agree with the poor MSCI rating in this

category and believe there is scope for a re-rating.

3.7 5.1 7.0 1/03/2012

BXB.AX Brambles Limited 7.88 0.0% AAA Neutral While Brambles is AAA rated, we believe the MSCI social score of

7.3 should be higher, as concerns over the use of illegal immigrants in

the IFCO business relates to the 2003-2006 period, which was prior to

its acquisition by Brambles. Adequate provisions have been made.

Furthermore, the high risk MSCI places on Privacy and Data security

as a result of the Recall business should disappear with its impending

sale. With a higher MSCI re-rating likely, we believe this could be one

of the highest ESG ranked businesses in the Australian market.

7.8 7.3 7.0 1/03/2012

QAN.AX Qantas Airways 1.95 -9.2% BB Neutral Contrary to the MSCI overview, staff engagement remains a key

concern, though the impact to productivity remains hard to quantify.

Fuel burn and energy efficiency is low relative to other airlines with

newer fleets, however with $15bn of capital expenditure on new

aircraft in the medium term, we see this risk as gradually subsiding,

particularly once the B787 enters service.

4.5 6.1 7.0 10/07/2012

QRN.AX QR National 3.80 0.0% BB Neutral No change to MSCI 2.2 5.1 7.0 1/03/2012

QUB.AX Qube Logistics 1.90 0.0% B Positive Given the indirect environmental benefits of shifting up to 1 million

containers from road to rail which the Moorebank facility could

provide, we believe the MSCI environment rating should be higher.

2.7 0.1 5.2 1/10/2011

TOL.AX Toll Holdings 4.80 0.0% AA Neutral We are satisfied with the MSCI IVA rating. 8.0 4.3 5.8 1/06/2011

VAH.AX Virgin Australia Holdings 0.50 0.0% BBB Neutral We are satisfied with the MSCI IVA rating. 4.9 2.7 7.0 10/07/2012



Figure 124: MSCI IVA analysis: AIO Figure 125: MSCI IVA analysis: BXB Overall ESG rating BBB for AIO.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating AAA for BXB.AX

Source: MSCI IVA Rating

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




Figure 126: MSCI IVA analysis: QAN Figure 127: MSCI IVA analysis: QRN Overall ESG rating BB for QAN.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating BB for QRN.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




27 September 2012


Figure 128: MSCI IVA analysis: QUB Figure 129: MSCI IVA analysis: TOL Overall ESG rating B for QUB.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating AA for TOL.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




Figure 130: MSCI IVA analysis: VAH Overall ESG rating BBB for VAH.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Utilities

Analyst: Ben McVicar

MSCI ratings views

■ One upside in Utilities space: In the Utilities sector, MSCI ratings range from AA

(e.g. ORG, APA) to BB for SPN, given the overhang of litigation from the 2009

Victorian bushfires. Our analyst has placed one stock, DUE, on Positive watch (see

discussion below). Post the recent downgrade to AGK’s MSCI IVA rating to A (from

AA), we move to a Neutral view on AGK (see discussion below).

■ DUE rating reflects lack of disclosure: DUE’s MSCI IVA rating was downgraded

from BBB to BB in July 2012. DUE received a very low Social score of 1.5, due to lack

of disclosure on employee benefits and programs. By comparison, SKI has a Social

rating of 9.1, and SPN had 10. In addition, the recent downgrade addressed the lack

of disclosure on biodiversity and land use, giving DUE a very low score of 0.7. By

comparison, SKI is rated at 3.1, SPN at 2.0, ENV at 5.1 and APA at a strong 7.8.. We

expect DUE management to address this lack of disclosure and therefore an upgrade

from the current BB to at least BBB is possible.

■ AGK MSCI rating downgraded to A to reflect Loy Yang purchase: AGK has

recently acquired the Loy Yang brown coal generator in Victoria. The MSCI IVA rating

of A and Environmental rating of 5.6 was downgraded from AA in July 2012, post the

acquisition of the Loy Yang brown coal generator in Victoria. AGK had previously

stated its aim was to have carbon emission of at least 50% below the average in the

NEM (National Electricity Market), which will now not be met.


■ Integrated Utilities have Environmental and Social issues around coal seam gas

development: We have formed the view that it will be quite difficult for AGK to

develop parts of its coal seam gas tenements in NSW, especially those in the wine

growing areas of the Hunter Valley. We exclude all the value paid for the NSW coal

seam gas assets from our AGK Target Price, resulting in a 2.2% discount. ORG has

environmental approval for fields it requires for the APLNG coal seam gas to LNG

project in Queensland, and has no CSG acreage position in NSW. Hence we feel

more comfortable with ORG’s ability to develop its CSG assets.

■ ORG may face increased landowner compensation: In Queensland, coal seam gas

development is well underway, with strong regulation of the sector. Both ORG and

STO have been proactive in their environmental and social responsibilities, and the

costs of compliance are factored into our Target Price. However, we have considered

a scenario of a further downside cost for increased landowner compensation, which

would reduce our Target Price by 0.9%.

■ Regulated utilities have Social concerns on rising electricity prices: The

Regulators in Australia are reviewing parts of the electricity and gas regulations. A

focus is on the allowance for the debt margin, as part of the WACC in the Building

Block approach to setting network and transmission charges. We assume that the

debt margin will drop back to levels around 330bps for any regulatory resets post

2015, and we include that fall in WACC in our Target Price for all Regulated assets.

We therefore value the ESG impact as the valuation impact of the difference between

the current margin and the assumed 330bps.

27 September 2012


■ Conflicting views on the renewables target: An interesting ESG conundrum is

developing in the Utilities space. ORG is challenging the federal Government’s policy

of a 20% target for renewable generation by 2020. ORG’s position is that the target is

now more like a ~27% target, with lower-than-projected electricity demand leaving the

2020 volume target of an additional 45TWh of renewals too high. Recent disclosure

has highlighted the contribution to rising electricity prices of various jurisdictional

emission initiatives outside the carbon tax, focussing community views on the cost of

these schemes to electricity prices.


Figure 131: Analyst views on MSCI IVA rating Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating date

AGK.AX AGL Energy 16.60 -2.5% A Neutral Post the acquisition of the Loy Yang brown coal generator, AGK’s

MSCI IVA rating has been downgraded to A. We move out Outlook to

neutral from Negative, as a result.

6.0 7.8 7.0 10/07/2012

APA.AX APA Group AA 5.6 7.9 7.0 1/09/2011

DUE.AX DUET Group 2.07 -2.6% BB Positive DUE has recently been downgraded from BBB to BB, with a lack of

disclosure on environmental issues such as biodiversity and land use,

and Social issues such as Employee benefits and programs. We

believe as DUE moves to internalise management and acts more as an

integrated company rather than as a manager of asset companies,

disclosure will improve.

4.3 1.5 7.0 10/07/2012

ENV.AX Envestra 0.83 -5.7% BBB Neutral No current concerns 3.8 7.3 7.0 1/09/2011

ORG.AX Origin Energy 16.00 0.0% AA Neutral Although Environmental and Social concerns around the APLNG project

continue, ORG is considered to be handling these well.

6.1 7.9 7.5 1/09/2011

SKI.AX Spark Infrastructure Group1.63 -7.4% BBB Neutral No current concerns 4.2 9.1 7.0 1/01/2012

SPN.AX SP AusNet 1.03 -13.2% BB Neutral The Rating includes the impact of the bushfire issues 3.7 10.0 7.0 1/01/2012



Figure 132: MSCI IVA analysis: AGK Figure 133: MSCI IVA analysis: APA Overall ESG rating A for AGK.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating AA for APA.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




Figure 134: MSCI IVA analysis: DUE Figure 135: MSCI IVA analysis: ENV

Overall ESG rating BB for DUE.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating BBB for ENV.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Figure 136: MSCI IVA analysis: ORG Figure 137: MSCI IVA analysis: SKI Overall ESG rating AA for ORG.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating BBB for SKI.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0




Figure 138: MSCI IVA analysis: SPN Overall ESG rating BB for SPN.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0




27 September 2012


REITS Analyst: Stephen Rich, John Richmond, John Lee

MSCI ratings views

■ Five AAA rated stocks in REITS: We have a Neutral Outlook on the MSCI IVA

ratings for the covered stocks in the REITS sector. Five companies achieved the top

AAA rating: CPA, DXS, GPT, LLC and SGP, with strong environmental scores. Recent

issues at LLC regarding discrepancies in profit recognition may impact on the AAA

rating (governance concerns), so we will monitor this issue.

■ No near-term upside for B-rated stocks: CQR, CRF and WRT achieved a lowly B

MSCI IVA rating and we see little upside in the near term to these ratings.


■ Current ESG compliance valued in Target Price: Our valuation methodology is

based on the assumption that A-REITs are ESG compliant, particularly against a

backdrop where REITs have progressively upgraded the environmental sustainability

rating of their portfolios over the past three years. ESG compliance is factored into our

Net Asset Valuation by deducting an intangible liability from the value of the passive

portfolio. The application of a multiple to forward expenses (management and other

ranging from 7.5x–10x) incorporates the costs of running a vehicle (implicitly

incorporating ESG considerations), and becomes the primary driver of the discount

between our valuation and book NTA. Hence, we have no explicit downside ESG risk

in our Target Prices.

■ Further upside potential scenarios: However, upside risk potential remains from

social pressures and regulatory changes with tenants (most notably Government

tenants) increasingly looking for accommodation solutions of a particular Green Star

rating. However, this is yet to manifest itself into greater demand, and hence higher

rents paid for green buildings just yet and as such we have not factored these into our

Target Prices.

■ LLC the standout - upside of 2%: Consistent with the Credit Suisse Australian

Equities valuation approach, we have incorporated an explicit valuation of ESG into

our LLC target price. LLC pursues significant ESG policies and compliance, most

notably across safety and environment within its construction and development

businesses, and is regarded as a leader in the development of green commercial

buildings. Going forward, we feel this will be a greater source of competitive

advantage for LLC as ESG policies tighten, enabling higher development margins

through competitive tendering, tenant pre-commitments and faster government

approvals. We have explicitly captured this in our valuation of LLC’s development

business, assigning 1x higher multiple on LLC’s Australian development business,

resulting in a 2% increase to valuation – which is incorporated in our $8.48 target price.

27 September 2012



Figure 139: : Impact of ESG on Target Prices for REITS Company Target

Price

(AUD)

ESG

downside

included

MSCI

IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating date

ALZ.AX Australand 2.91 0.0% BBB Neutral We see the potential for ALZ's BBB rating to be upgraded, as newly developed commercial

assets improve its average green ratings.

4.9 5.0 7.0 1/10/2011

CFX.AX CFS Retail Property Trust 1.97 0.0% A Neutral We agree with MSCI's A rating for CFX. CFX continues to perform strongly on green

building certifications and energy and water efficiency improvements compared to most

peers, though several have accelerated their adoption of green building certifications and

demonstrated more rapid improvements in energy and water use than CFS Retail

5.2 5.0 7.0 1/10/2011

CPA.AX Commonwealth Property Office Fund 1.03 0.0% AAA Neutral We concur with MSCI 'AAA' rating for CPA as it continues to improve on the standard of its

green building certifications relative to peers as well as make improvements in energy and

water intensity across its portfolio.

7.9 5.0 7.0 1/10/2011

CQR.AX Charter Hall Retail REIT 3.07 0.0% B Neutral We agree with MSCI's B rating for CQR as it continues to show relatively little attention to

energy and water intensity relative to a number of more proactive peers, and since it holds

no recognized green building certifications. Meanwhile, a number of its retail property

owning peers have increased their efforts to achieve green certifications for their assets and

set transparent targets for further improvement.

0.7 5.0 7.0 1/10/2011

CRF.AX Centro Retail Australia 2.00 0.0% B Neutral We agree with MSCI's B rating for CRF as the company lacks policies to take advantage of

growth opportunities in green properties' management and development, and displays no

explicit management capabilities on tenant engagement and service quality. However,

Centro does display moderate programs to improve the energy efficiency of its operations.

2.4 4.1 7.0 31/07/2012

DXS.AX Dexus Property Group 1.00 0.0% AAA Neutral We concur with MSCI's 'AAA' rating for DXS as it outperforms its peers across the

environmental key issues that we assess, and has best-in-class performance in energy

and water consumption intensity.

7.8 5.0 7.0 1/10/2011

GMG.AX Goodman Group 3.98 0.0% A Neutral We agree with MSCI's A rating for GMG as it outperforms its peers in the area of green

building and energy efficiency, despite facing relatively high exposure to the tightening

regulations relating to climate change and building energy efficiency in Australia. With 61%

of assets in industrial properties, the company's rating benefits from the low energy

intensity of industrial properties. However, we are concerned that its inactive approach in

water management will result in increases in its operational costs over time.

5.5 5.0 7.0 1/10/2011

GPT.AX GPT Group 3.60 0.0% AAA Neutral We agree with MSCI's AAA rating for GPT as it continues to lead most in its industry in

the adoption of green building certifications and its improvement trend and targets for

energy and water efficiency

8.0 5.0 7.0 1/10/2011

IOF.AX Investa Office Fund 2.95 0.0% AA Neutral We concur with MSCI's AA rating for IOF it has achieved significant improvements in

green building development and management, energy efficiency, and water efficiency.

6.2 5.0 7.0 1/10/2011

LLC.AX Lend Lease 8.48 2.0% AAA Neutral While LLC continues to pursue best practice standards in green building certifications,

energy and water efficiency, the recent disclosure issues within its Abigroup business may

see MSCI review LLC's AAA rating.

8.4 6.5 9.2 25/07/2012

MGR.AX Mirvac Group 1.48 0.0% AA Neutral We agree with MSCI's AA rating for MGR due to MGR's above average performance

across the three key issues that we assess: opportunities in green building, energy

efficiency, and water stress. It is one of relatively few Australian REITs in the peer set that

have set specific targets in obtaining both NABERS Energy and Water ratings. By

identifying energy efficiency opportunities and upgrading NABERS Energy ratings for

existing assets, the company has achieved above average performance in green building

and energy efficiency.

6.7 5.0 7.0 1/10/2011

SGP.AX Stockland 3.30 0.0% AAA Neutral We agree with MSCI's AAA rating for SGP as it continues to pursue best practice

standards in green building certifications, and energy and water efficiency

7.6 5.0 7.0 1/10/2011

WDC.AX Westfield 10.20 0.0% BB Neutral We agree with MSCI's BB rating as a number of WDC retail property owning peers have

started to demonstrate more proactive efforts to achieve green certifications across their

portfolios, and while Westfield continues to adopt green certifications at a slow rate and

demonstrates little evidence of improvement in portfolio-wide energy and water efficiency

2.8 4.4 7.0 1/10/2011

WRT.AX Westfield Retail Trust 3.10 0.0% B Neutral We agree with MSCI's B rating for WRT as it has a relatively low proportion of green

certifications and demonstrates little evidence of improvement in portfolio-wide energy and

water efficiency, while a number of other retail property owners demonstrate an increasing

attention to green certifications and resource efficiency

2.0 5.0 7.0 1/10/2011



Figure 140: MSCI IVA analysis: ALZ Figure 141: MSCI IVA analysis: CFX Overall ESG rating BBB for ALZ.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating A for CFX.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




27 September 2012


Figure 142: MSCI IVA analysis: CPA Figure 143: MSCI IVA analysis: CQR Overall ESG rating AAA for CPA.AX

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating B for CQR.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




Figure 144: MSCI IVA analysis: CRF Figure 145: MSCI IVA analysis: DXS Overall ESG rating B for CRF.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating AAA for DXS.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




Figure 146: MSCI IVA analysis: GMG Figure 147: MSCI IVA analysis: GPT Overall ESG rating A for GMG.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating AAA for GPT.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




Figure 148: MSCI IVA analysis: IOF Figure 149: MSCI IVA analysis: LLC Overall ESG rating AA for IOF.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating AAA for LLC.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0




27 September 2012


Figure 150: MSCI IVA analysis: MGR Figure 151: MSCI IVA analysis: SGP Overall ESG rating AA for MGR.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating AAA for SGP.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




Figure 152: MSCI IVA analysis: WDC Figure 153: MSCI IVA analysis: WRT Overall ESG rating BB for WDC.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating B for WRT.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




27 September 2012


Small cap companies Building Products/Engineering/Construction

Analyst: Paul Buys, Chris Smith

MSCI ratings views

■ Neutral on FWD and GWA MSCI IVA outlook: We have a Neutral view on the MSCI

IVA rating for FWD and GWA. FWD’s BBB rating was set in June 2012 and GWA’s B

rating was set in June 2012.


■ No explicit downside for ESG concerns: We have included no explicit downside

impact in Target Prices for ESG concerns. For building products & civil

engineering/construction companies we highlight the key areas for ESG as:

1) Environmental management of the carbon impact and policies; 2) Labour rights and

OH&S given the level of restructuring; and 3) governance surrounding contracts and

anti-bribery regulations.


Figure 154: Impact of ESG on Target Prices for Small Caps – Builders/Engineering/Construction Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

ALS.AX Alesco Corporation 2.05 0.0%

FWD.AX Fleetwood Corporation 12.08 0.0% BBB Neutral We belive the MSCI rating is appropriate given FWD's labour,

product and environmental exposure and policies.

3.6 7.5 7.0 25/06/2012

GWA.AX GWA GROUP Limited 1.95 0.0% B Neutral We belive the MSCI rating is appropriate given GWA's labour,

product and environmental exposure and policies.

4.8 6.1 7.0 8/06/2012



Figure 155: MSCI IVA analysis: FWD Figure 156: MSCI IVA analysis: GWA

Overall ESG rating BBB for FWD.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating B for GWA.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Consumer Retail


MSCI ratings views

■ Neutral outlook for ARP and GUD: We have a Neutral view on the MSCI IVA ratings

for ARP (BBB rated) and GUD (BB rated). GUD’s BB rating was set in October 2011,

while ARP BBB rating was set in May 2012.



impact in Target Prices for ESG concerns. For consumer retail and other companies in

the Small Caps sector, we highlight the key areas for ESG as: 1) Environmental

regulation regarding waste; 2) Labour rights; and OH&S; and 3) supply chain

management for labour and raw material sourcing issues.


Figure 157: Impact of ESG on Target Prices for Small Caps – Consumer Retail Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

ARP.AX ARB Corp 9.80 0.0% BBB Neutral We belive the MSCI rating is appropriate given ARP's labour,

product, manufacturing and environmental exposure and

policies.

2.3 5.6 7.0 25/05/2012

BRG.AX Breville Group 6.30 0.0% No MSCI rating

DMP.AX DOMINO'S PIZZA 10.20 0.0% No MSCI rating

GUD.AX G.U.D. Holdings 9.20 0.0% BB Neutral We belive the MSCI rating is appropriate given GUD's product

and manufacturing exposure and policies.

2.5 3.4 7.0 1/10/2011



Figure 158: MSCI IVA analysis: ARP Figure 159: MSCI IVA analysis: GUD Overall ESG rating BBB for ARP.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating BB for GUD.AX

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




27 September 2012


Consumer Services


MSCI ratings views

■ Upside seen for MMS and NVT: We see upside to the MSCI IVA B rating for MMS set

in May 2012 and the BB rating for NVT set in December 2011. MMS received a low 0.6

score for labour management, but we believe MMS has a proactive approach to human

capital management and with more disclosure this low score could be improved.

■ For NVT, we see upside to its BB rating and the low score for human capital

development does not include current initiatives, which may require more disclosure

from the company. It has also been penalised for lack of disclosure on carbon

emissions despite its low carbon footprint.

■ Downside possible for CAB’s BBB: We see downside potential for CAB’s MSCI IVA

rating of BBB, which was upgraded from BB in March 2012. The rating does not

include social issues in Australia such as concerns over credit card surcharges, taxi

industry oversight and competition issues, which have been given reasonable levels of

media and consumer focus.


■ CAB 10% ESG downside from regulation and governance: For CAB, we include in

our base valuation downside to reflect: 1) follow on litigation as a result of the ACCC

settlement for anticompetitive practices; 2) the regulatory risk associated with CAB's

10% commission; and 3) a possible second shareholder vote against the group’s

remuneration report. We capture this ESG risk by assuming CAB trades up to the XSI

rather than at its historic 10% premium to XSI.

■ No explicit downside for ESG concerns for other stocks in this sector: We have

not included any explicit downside impact in Target Prices for ESG concerns outside

those listed above for CAB. For consumer services companies we highlight the key

areas for ESG as: 1) privacy and data security of customer information; and 2) labour

and OH&S.


Figure 160: : Impact of ESG on Target Prices for Small Caps – Consumer Services Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating date

CAB.AX Cabcharge Australia 6.40 -10.0% BBB Negative We believe the MSCI rating is not appropriate given it does not

factor in CAB's various areas of regulatory risk. Such as, credit

card surcharging, taxi industry oversight and competition

concerns.

4.7 5.1 7.0 1/03/2012

FXL.AX FlexiGroup Limited 3.45 0.0% No MSCI rating

IVC.AX Invocare Group 9.20 0.0% A Neutral We believe the MSCI rating is appropriate given IVC's proactive

approach to human capital and focus on client product and

service quality.

9.3 6.4 7.0 1/12/2011

MMS.AX McMillan Shakespeare 13.55 0.0% B Positive We belive the MSCI rating is not appropriate for MMS given it

highlights "operational losses related to labour management"

as key area of weakness. We believe that MMS's proactive

approach to human capital and rigorous internal/external audit

and focus on risk management is not represented in its 0.6/10

"Labor Management" score.

6.0 0.6 5.0 25/05/2012

NVT.AX Navitas Ltd 4.80 0.0% BB Positive We belive the MSCI rating is not appropriate for NVT given that

the two areas of weakness highlighted are "Human Capital

Development" and "Carbon Emissions". We believe that NVT's

internal human capital initiatives and small carbon footprint are

not representative of the ratings allocated.

2.9 4.6 7.0 1/12/2011

TGA.AX Thorn Group 1.90 0.0% No MSCI rating


27 September 2012



Figure 161: MSCI IVA analysis: CAB Figure 162: MSCI IVA analysis: IVC Overall ESG rating BBB for CAB.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0



Overall ESG rating A for IVC.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0




Figure 163: MSCI IVA analysis: MMS Figure 164: MSCI IVA analysis: NVT Overall ESG rating B for MMS.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating BB for NVT.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0




27 September 2012


Corporate Services


MSCI ratings views

■ Neutral outlook for Corporate Services stocks: We see no change to the MSCI IVA

ratings for SAI and TPI. SAI is rated BBB (MSCI IVA) and this was last reviewed in

May 2012. TPI was rated BB in March 2012.


■ No explicit downside for ESG concerns: We have not included any explicit

downside impact in Target Prices for ESG concerns. For corporate services companies

we highlight the key areas for ESG as: 1) environmental regulations; 2) labour and

OH&S; and 3) governance surrounding contracts and anti-bribery regulations.


Figure 165: Impact of ESG on Target Prices for Small Caps – Corporate Services Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

PRG.AX Programmed Maintenance Services 2.65 0.0% No MSCI rating

RWH.AX Royal Wolf Holdings 2.45 0.0% No MSCI rating

SAI.AX SAI Global 4.40 0.0% BBB Neutral We belive the MSCI rating is appropriate given SAI's

proactive approach to data security procedures/policies.

6.0 4.8 7.0 25/05/2012

SKE.AX Skilled Group Limited 3.30 0.0% No MSCI rating

SLM.AX Salmat 1.82 0.0% No MSCI rating

TPI.AX Transpacific Industries Group 0.96 0.0% BB Neutral We belive the MSCI rating is appropriate given TPI's

recent environmental performance in relation to specific

occurences and management of its carbon footprint.

1.9 5.7 4.5 1/03/2012



Figure 166: MSCI IVA analysis: SAI Figure 167: MSCI IVA analysis: TPI Overall ESG rating BBB for SAI.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating BB for TPI.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




27 September 2012


IT Services

Analyst: Chris Smith

MSCI ratings views

■ Neutral outlook for SMX: We have a Neutral outlook for the MSCI IVA rating of BB

on SMX, given its proactive approach to human capital management and its focus on

data security and management.



impact in Target Prices for ESG concerns. For IT services companies we highlight key

areas for ESG as: 1) governance surrounding contracts and anti-bribery regulations;

2) privacy and data security of customer information; and 3) labour and OH&S.


Figure 168: Impact of ESG on Target Prices for Small Caps – IT Services Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating

date

OKN.AX Oakton 1.40 0.0% No MSCI rating

SMX.AX SMS Management & Technology 6.80 0.0% BB Neutral We belive the MSCI rating is not appropriate given SMX's

proactive approach to human capital and focus on data

security and management.

4.8 3.5 7.0 25/05/2012



Figure 169: MSCI IVA analysis: SMX Overall ESG rating BB for SMX.AX

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0




27 September 2012


Mining Services

Analyst:, Paul Buys, Chris Smith

MSCI ratings views

■ Downside views for top ratings of IDL: We see downside risk to the MSCI IVA top

ratings of AAA for IDL, set in May 2012. For IDL, its initial AAA rating does not match

commentary of weak efforts in relation to key emissions and waste risks.



impact in Target Prices for ESG concerns. For mining services companies we highlight

the key areas for ESG as: 1) Environmental management systems and policies;

2) Labour rights and OH&S; and 3) governance surrounding contracts and anti-bribery

regulations.


Figure 170: Impact of ESG on Target Prices for Small Caps – Mining Services Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov

rating

Rating date

AQZ.AX Alliance Aviation Services Limited 2.58 0.0% No MSCI rating

BKN.AX Bradken Limited 6.95 0.0% BBB Neutral We belive the MSCI rating is appropriate given BKN's proactive

approach to human capital and focus on its carbon emissions.

4.4 5.2 7.0 3/05/2012

CLO.AX Clough 0.97 0.0% No MSCI rating

EHL.AX Emeco Holdings 1.25 0.0% AAA Neutral We belive the MSCI rating is appropriate given EHL's sector

leading commitment to human capital management, workplace

accident reduction targets and OHS policies and procedures.

3.0 8.4 3.0 25/05/2012

IDL.AX Industrea Ltd 1.27 0.0% AAA Negative We belive the MSCI rating is not appropriate given IDL's end

market exposures in relation to carbon emissions and waste

management.

6.8 8.0 7.0 3/05/2012

MRM.AX Mermaid Marine Australia 3.61 0.0% B Neutral We belive the MSCI rating is appropriate given MRM's

implementation and enforcement of its environmental policy

and exposure to carbon emissions.

3.9 5.3 7.0 1/02/2012

NWH.AX NRW Holdings Limited 3.10 0.0% AA Neutral We belive the MSCI rating is appropriate given NWH's focus on

human capital management and risk mitigation policies and

procedures.

2.3 6.7 7.4 24/04/2012



Figure 171: MSCI IVA analysis: BKN Figure 172: MSCI IVA analysis: EHL Overall ESG rating BBB for BKN.AX

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5



Overall ESG rating AAA for EHL.AX

3.0

4.0

5.0

6.0

7.0

8.0

9.0




27 September 2012


Figure 173: MSCI IVA analysis: IDL Figure 174: MSCI IVA analysis: MRM Overall ESG rating AAA for IDL.AX

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Overall ESG rating B for MRM.AX

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0




Figure 175: MSCI IVA analysis: NWH Overall ESG rating AA for NWH.AX

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0




27 September 2012


Travel


MSCI ratings views

■ Positive upside for FLT’s BB rating: We have a positive outlook for the MSCI IVA

rating of BB for FLT. Set in November 2011, this rating was downgraded from A. It

focuses on FLT’s lack of water management plans, despite this being a low exposure

for an office-based travel business. FLT scores highly on labour relations with a 9.2

score and we see this should be more highly weighted for this type of business.



impact in Target Prices for ESG concerns. For travel companies we highlight the key

areas for ESG as: 1) privacy and data security of customer information;

2) environmental opportunities for carbon offsetting; and 3) governance surrounding

contracts and anti-competiveness regulations.


Figure 176: Impact of ESG on Target Prices for Small Caps – Travel Company Target

Price

(AUD)

ESG

downside

included

MSCI IVA

rating

Analyst

view on

rating

direction

Comments Env

rating

Soc

rating

Gov rating Rating date

FLT.AX Flight Centre 26.35 0.0% BB Positive We believe the MSCI rating is not appropriate for FLT given that it

highlights water stress as a key area of exposure. FLT is a retail

travel agent and we believe this risk has been miscategorised.

4.8 9.2 7.0 1/11/2011

WEB.AX Webjet 4.05 0.0% No MSCI rating

WTF.AX Wotif.com Holdings 5.30 0.0% A Neutral Following a recent rating upgrade, we now believe that the rating for

WTF is appropriate given its focus on data security and human

capital management.

6.6 5.9 7.0 10/07/2012



Figure 177: MSCI IVA analysis: FLT Figure 178: MSCI IVA analysis: WTF Overall ESG rating BB for FLT.AX

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0



Overall ESG rating A for WTF.AX

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5




27 September 2012


Appendix 1 – detailed tables Figure 179: Summary of MSCI IVA ratings and analyst outlooks by sector

Sector AAA AA A BBB BB B CCC

No

Rating Total

Postive,

Negative

Banks 1 2 3

2 1 3

Diversified Financials 1 1 1 1 2 - 2 - 2 1

1 1 2

Insurance 1 - 2 1 1 - - - 2 1

1 1

Sub-total - 1 1 3 - - - 5

3 - 2 1 - - - 6

Coal - - - - 1 - 1 1 6 1

-

Energy - 1 2 1 1 1 2 2 - 2 3

1 1

Gold - - 1 - 1 2 2 - 3 2

-

Diversified Resources - 1 - 1 - - - - -

1 1

Other Metals - 2 - 4 2 5 5 3 - 2 5

1 1 1 3

Steel 1 - - 2 - - - - -

-

Sub-total 1 - 4 - 3 1 8 2 8 - 9 7 1 1 13 47 11

- 2 - 1 1 1 - 5

Building materials - 1 - - 2 1 - 1 1 - 2

-

Chemicals, paper & pkg - - 1 2 1 - - - -

1 1

Construction 1 1 3 1 1 1 - - - 1

1 1

Food and beverage - - 1 - 1 1 - - -

-

Gaming 2 - 2 - 1 - - - -

-

Healthcare - 3 2 1 1 1 1 1 - 2 2

-

Retail - - 2 4 2 3 2 2 3 2

-

Telcos - - - 1 1 1 - - 1 1

-

Transport & infrastructure 1 1 - 2 1 2 1 1 - - 2

-

Utilities - 2 1 2 2 1 - - - 1

-

Sub-total 4 - 8 - 12 - 13 3 14 3 6 4 3 1 6 66 11

- - 1 1 - - - 2

REITS 5 2 2 1 1 3 - - -

-

Sub-total 5 - 2 - 2 - 1 - 1 - 3 - - - - 14 -

- - - - - - - -

Building prds/construction - - - 1 - 1 - 1 -

-

Consumer Retail - - - 1 1 - - 2 -

-

Consumer Services - - 1 1 1 1 1 1 - 2 2

1 1

Corporate Services - - - 1 1 - - 4 -

-

IT Services - - - - 1 - - 1 -

-

Mining Service 2 1 - 1 - 1 - 2 -

1 1

Travel - - 1 - 1 1 - - 1 1

-

Sub-total 2 - 1 - 2 - 5 - 5 2 3 1 - - 13 31 3

1 - - 1 - - - 2

Total 17 - 17 1 23 2 32 8 28 5 23 12 4 2 36 180 30

4 2 3 4 1 1 - 15

6

6

2

7

3

3

7

7

14

3

4

4

7

3

5

10

16

7

2

18

3

4

4 22

9

6

8

9

- - 7

- 5 2 4 5 - 2

3 2 1 1 - -

Source: MSCI IVA ratings, Credit Suisse estimates

27 September 2012


Figure 180: AAA (MSCI IVA rated) stocks and performance Ticker Company name Actual

share

price ($)

Target

Price ($)

Rating MSCI

ESG

Rating

View on

MSCI

rating

Date of

MSCI

rating

1 month

total return

6 months

total return

12 months

total return

3 year


ANZ.AX Australia and New Zealand Bank 24.50 25.00 NEUTRAL AAA Negative 1/10/2011 -1.8% 8.2% 31.3% 16.6% 66,574

BXB.AX Brambles Limited 6.85 7.88 OUTPERFORM AAA Neutral 1/03/2012 3.1% -1.2% 12.2% -3.3% 11,029

CBA.AX Commonwealth Bank Australia 55.37 54.00 UNDERPERFORM AAA Neutral 1/10/2011 1.8% 14.5% 29.0% 27.0% 88,158

CPA.AX Commonwealth Property Office 1.04 1.03 UNDERPERFORM AAA Neutral 1/10/2011 -1.0% 8.8% 17.1% 27.9% 2,441

CWN.AX Crown 9.10 8.80 NEUTRAL AAA Neutral 1/02/2012 2.3% 6.9% 16.9% 14.8% 6,628

DXS.AX Dexus Property Group 0.97 1.00 NEUTRAL AAA Neutral 1/10/2011 0.0% 14.0% 21.3% 40.2% 4,670

EHL.AX Emeco Holdings 0.73 1.25 OUTPERFORM AAA Neutral 25/05/2012 -17.0% -29.2% -19.8% 15.8% 461

GPT.AX GPT Group 3.50 3.60 UNDERPERFORM AAA Neutral 1/10/2011 -1.4% 15.2% 14.9% 23.2% 6,184

IAG.AX Insurance Australia Group 4.37 4.00 NEUTRAL AAA Neutral 18/04/2012 7.9% 32.1% 48.9% 29.8% 9,085

IDL.AX Industrea Ltd 1.24 1.27 NEUTRAL AAA Negative 3/05/2012 -0.8% 21.0% 4.1% 5.3% 459

LLC.AX Lend Lease 7.70 8.48 NEUTRAL AAA Neutral 25/07/2012 -3.4% 6.0% 11.4% -4.0% 4,410

PPT.AX Perpetual 26.30 28.00 NEUTRAL AAA Negative 25/06/2012 -2.2% 5.2% 26.5% -16.7% 1,104

SGM.AX Sims Metal Management 9.60 11.00 OUTPERFORM AAA Neutral 1/12/2011 4.2% -34.6% -18.9% -53.2% 1,961

SGP.AX Stockland 3.33 3.30 NEUTRAL AAA Neutral 1/10/2011 6.1% 17.3% 21.4% 0.4% 7,337

TAH.AX Tabcorp Holdings 2.84 3.30 NEUTRAL AAA Neutral 1/02/2012 -2.7% 8.5% 18.5% 11.5% 2,074

WBC.AX Westpac 24.52 26.75 OUTPERFORM AAA Negative 1/10/2011 -1.4% 15.8% 26.6% 10.7% 75,525

WOR.AX WorleyParsons 27.75 27.55 NEUTRAL AAA Neutral 1/12/2011 7.9% -1.3% 11.9% 1.3% 6,720


All Ords 4382.46 All Ords -0.1% -0.8% 6.9% -6.3%


Figure 181: AA (MSCI IVA rated) stocks and performance Ticker Company name Actual

share

price ($)

Target

Price ($)

Rating MSCI

ESG

Rating

View on

MSCI

rating

Date of

MSCI

rating

1 month

total return

6 months

total return

12 months

total return

3 year


APA.AX APA Group 4.78 NOT RATED AA 1/09/2011 -0.2% -2.7% 25.7% 84.2% 3,115

AWC.AX Alumina Limited 0.85 0.84 NEUTRAL AA Negative 1/12/2011 16.4% -31.2% -38.2% -45.7% 2,147

BHP.AX BHP Billiton 32.81 35.85 NEUTRAL AA Negative 17/02/2012 0.8% -3.6% -4.6% -3.5% 174,230

BLD.AX Boral 3.68 3.95 OUTPERFORM AA Neutral 25/05/2012 3.7% -7.8% 14.2% -30.4% 2,792

BLY.AX Boart Longyear Group 1.62 3.04 OUTPERFORM AA Neutral 24/04/2012 -29.9% -59.6% -38.0% -37.7% 773

CSL.AX CSL Ltd 45.18 44.30 NEUTRAL AA Neutral 1/09/2011 6.2% 27.2% 59.7% 43.0% 22,829

IFL.AX IOOF Holdings 5.75 6.50 NEUTRAL AA Neutral 25/06/2012 -2.1% 2.6% 15.3% 42.6% 1,321

IOF.AX Investa Office Fund 2.90 2.95 NEUTRAL AA Neutral 1/10/2011 -0.3% 18.8% 26.3% 46.5% 1,781

MGR.AX Mirvac Group 1.41 1.48 OUTPERFORM AA Neutral 1/10/2011 5.2% 22.6% 28.2% 2.9% 4,830

NAB.AX National Australia Bank 25.42 26.00 NEUTRAL AA Positive 1/10/2011 0.7% 7.0% 18.5% -1.0% 58,396

NWH.AX NRW Holdings Limited 2.17 3.10 NEUTRAL AA Neutral 24/04/2012 -25.2% -47.7% -2.1% 43.5% 605

ORG.AX Origin Energy 11.16 16.00 OUTPERFORM AA Neutral 1/09/2011 -5.7% -14.5% -10.8% -18.8% 12,166

PAN.AX Panoramic Resources 0.55 1.25 OUTPERFORM AA Neutral 1/12/2011 -0.9% -51.1% -57.0% -66.4% 139

SHL.AX Sonic Healthcare 13.25 13.50 NEUTRAL AA Neutral 25/05/2012 1.6% 8.6% 17.8% 9.3% 5,203

SIP.AX Sigma Pharmaceuticals 0.66 0.74 OUTPERFORM AA Neutral 25/05/2012 -0.7% 7.9% 15.8% 27.1% 783

TOL.AX Toll Holdings 4.40 4.80 NEUTRAL AA Neutral 1/06/2011 0.6% -22.7% 5.7% -37.8% 3,155

WPL.AX Woodside Petroleum 33.25 38.55 NEUTRAL AA Neutral 25/05/2012 -4.0% -2.7% 7.7% -28.8% 28,362

AA Weighted average 0.5% 0.3% 6.3% -1.7% 322,627

All Ords 4382.46 All Ords -0.1% -0.8% 6.9% -6.3%

Relative 0.6% 1.1% -0.6% 4.6% Source: MSCI IVA ratings, Credit Suisse estimates

27 September 2012


Figure 182: A (MSCI IVA rated) stocks and performance Ticker Company name Actual

share

price ($)

Target

Price ($)

Rating MSCI

ESG

Rating

View on

MSCI

rating

Date of

MSCI

rating

1 month

total return

6 months

total return

12 months

total return

3 year


AGK.AX AGL Energy 14.70 16.60 NEUTRAL A Neutral 10/07/2012 -3.6% 5.2% 11.4% 23.7% 8,024

ALL.AX Aristocrat Leisure 2.71 2.60 UNDERPERFORM A Neutral 1/02/2012 -0.4% -8.9% 35.4% -42.5% 1,492

ALQ.AX ALS Limited 8.30 10.16 NEUTRAL A Neutral 25/05/2012 -11.2% -36.3% 4.2% 58.3% 2,826

AMC.AX Amcor 7.72 7.70 UNDERPERFORM A Neutral 1/10/2011 4.3% 6.3% 19.1% 59.4% 9,316

AMP.AX AMP 4.30 4.65 NEUTRAL A Neutral 11/04/2012 -0.8% 2.4% 19.2% -15.4% 12,448

BBG.AX Billabong International 1.34 RESTRICTED A 1/09/2011 -1.5% -39.6% -48.6% -79.1% 639

CCL.AX Coca-Cola Amatil 13.62 12.50 UNDERPERFORM A Neutral 8/06/2012 -0.4% 11.1% 18.1% 51.5% 10,369

CFX.AX CFS Retail Property Trust 1.97 1.97 UNDERPERFORM A Neutral 1/10/2011 1.0% 13.7% 19.0% 21.6% 5,572

CTX.AX Caltex Australia 15.80 15.55 UNDERPERFORM A Positive 1/04/2012 3.8% 15.0% 52.6% 41.6% 4,266

DOW.AX Downer EDI 3.55 4.10 OUTPERFORM A Negative 1/03/2012 -6.3% -11.7% 16.4% -51.2% 1,523

GMG.AX Goodman Group 4.07 3.98 NEUTRAL A Neutral 1/10/2011 3.8% 20.6% 42.9% 51.9% 6,543

GRY.AX Gryphon Minerals Limited 0.88 1.25 OUTPERFORM A Neutral 1/03/2012 26.8% -19.0% -36.8% 121.5% 305

HGG.AX Henderson group 1.70 1.47 OUTPERFORM A Positive 25/06/2012 4.0% -8.3% 3.8% -15.5% 1,956

IVC.AX Invocare Group 8.36 9.20 NEUTRAL A Neutral 1/12/2011 -4.3% 6.2% 26.6% 51.0% 920

MQG.AX Macquarie Group 28.55 35.00 OUTPERFORM A Negative 1/03/2012 6.9% 0.8% 32.9% -42.7% 9,684

MTS.AX Metcash 3.65 3.85 NEUTRAL A Neutral 1/06/2011 0.6% -11.3% -3.9% -1.8% 3,215

PRY.AX Primary Health Care 3.50 3.65 NEUTRAL A Neutral 25/05/2012 -2.2% 24.5% 17.6% -35.5% 1,756

QBE.AX QBE Insurance Group 12.98 14.79 OUTPERFORM A Negative 17/04/2012 -0.3% -5.6% 7.4% -32.8% 15,880

RHC.AX Ramsay Health Care 23.71 25.00 NEUTRAL A Neutral 25/05/2012 -3.9% 23.0% 30.3% 132.9% 4,791

STO.AX Santos Ltd 11.21 12.65 NEUTRAL A Neutral 25/05/2012 -2.8% -20.2% 4.1% -17.2% 10,685

TSE.AX Transfield Services Ltd 1.78 2.05 NEUTRAL A Neutral 1/03/2012 -9.0% -24.8% 0.0% -45.4% 919

TTS.AX Tatts Group 2.73 2.60 UNDERPERFORM A Neutral 1/02/2012 0.7% 14.9% 32.7% 45.2% 3,721

WTF.AX Wotif.com Holdings 4.01 5.30 OUTPERFORM A Neutral 10/07/2012 -2.5% -9.7% 11.2% -13.9% 849

A Weighted average 0.2% 1.6% 18.4% 11.2% 117,700

All Ords 4382.46 All Ords -0.1% -0.8% 6.9% -6.3%


Figure 183: BBB (MSCI IVA rated) stocks and performance Ticker Company name Actual

share

price ($)

Target

Price ($)

Rating MSCI

ESG

Rating

View on

MSCI

rating

Date of

MSCI

rating

1 month

total return

6 months

total return

12 months

total return

3 year


AIO.AX Asciano Group 4.39 5.95 OUTPERFORM BBB Positive 1/03/2012 -3.7% -9.6% 3.0% -7.7% 4,282

ALZ.AX Australand 2.94 2.91 OUTPERFORM BBB Neutral 1/10/2011 1.4% 18.9% 37.2% 34.5% 1,696

ARI.AX Arrium 0.53 1.15 OUTPERFORM BBB Neutral 1/12/2011 -29.6% -54.8% -53.7% -73.9% 713

ARP.AX ARB Corp 9.74 9.80 NEUTRAL BBB Neutral 25/05/2012 -1.3% 5.9% 17.4% 134.0% 706

ASX.AX ASX 29.85 28.50 UNDERPERFORM BBB Negative 1/07/2011 -1.8% -7.5% 5.3% 2.6% 5,228

AWE.AX AWE Ltd 1.34 1.75 OUTPERFORM BBB Negative 25/05/2012 -7.3% -32.8% 46.4% -46.6% 699

BEN.AX Bendigo and Adelaide Bank 7.63 8.75 NEUTRAL BBB Positive 1/10/2011 -3.7% 2.3% -1.9% 5.3% 3,027

BKN.AX Bradken Limited 5.55 6.95 OUTPERFORM BBB Neutral 3/05/2012 -10.3% -32.8% -10.4% 4.1% 939

BOQ.AX Bank of Queensland 7.60 8.00 OUTPERFORM BBB Positive 1/10/2011 0.4% 8.0% 15.7% -14.4% 2,347

BSL.AX BlueScope Steel 0.40 RESTRICTED BBB 1/12/2011 5.3% 0.0% -36.1% -81.9% 1,323

CAB.AX Cabcharge Australia 5.37 6.40 NEUTRAL BBB Negative 1/03/2012 -2.6% -8.0% 35.5% 16.3% 647

COH.AX Cochlear 66.55 65.50 NEUTRAL BBB Neutral 1/12/2011 -2.0% 9.5% 40.6% 10.1% 3,792

CPU.AX Computershare 8.45 9.38 OUTPERFORM BBB Neutral 25/05/2012 -0.9% -4.6% 14.6% -13.5% 4,861

ENV.AX Envestra 0.89 0.83 UNDERPERFORM BBB Neutral 1/09/2011 8.2% 17.9% 39.7% 93.2% 1,392

FMG.AX Fortescue Metals Group Ltd 3.51 RESTRICTED BBB 1/12/2011 -9.0% -38.9% -20.6% -6.4% 11,315

FWD.AX Fleetwood Corporation 10.17 12.08 UNDERPERFORM BBB Neutral 25/06/2012 -13.2% -13.5% -4.0% 47.3% 603

ILU.AX Iluka Resources 10.16 13.50 OUTPERFORM BBB Positive 1/12/2011 4.0% -41.5% -15.3% 191.2% 4,254

JBH.AX JB Hi-Fi 9.03 9.70 UNDERPERFORM BBB Neutral 25/05/2012 -4.1% -16.1% -36.7% -42.0% 893

MDL.AX Mineral Deposits Ltd. 5.65 9.09 OUTPERFORM BBB Positive 1/12/2011 4.2% -10.0% 15.3% 540.1% 489

MYR.AX Myer Holdings 1.75 2.70 OUTPERFORM BBB Neutral 1/06/2011 -5.9% -21.6% -7.9% N/A 1,018

NUF.AX Nufarm 5.80 5.80 UNDERPERFORM BBB Neutral 1/02/2012 -2.5% 20.8% 35.0% -47.8% 1,520

ORI.AX Orica 24.79 29.40 OUTPERFORM BBB Negative 1/09/2011 -0.2% -10.0% 10.8% 18.0% 9,064

PBG.AX Pacific Brands 0.59 0.60 NEUTRAL BBB Neutral 10/07/2012 -1.7% 0.8% -6.6% -39.9% 539

PNA.AX PanAust 3.04 3.13 NEUTRAL BBB Neutral 1/12/2011 11.2% 1.0% 14.1% 24.0% 1,906

RIO.AX Rio Tinto 52.89 73.32 OUTPERFORM BBB Neutral 1/12/2011 2.2% -18.1% -15.0% -3.6% 88,656

SAI.AX SAI Global 4.28 4.40 OUTPERFORM BBB Neutral 25/05/2012 0.5% -12.8% -6.1% 42.4% 877

SKI.AX Spark Infrastructure Group 1.66 1.63 NEUTRAL BBB Neutral 1/01/2012 5.4% 14.2% 42.5% 79.6% 2,196

SUN.AX Suncorp Group Limited 9.23 9.00 NEUTRAL BBB Positive 18/04/2012 2.9% 15.9% 25.2% 27.9% 11,875

TLS.AX Telstra Corporation 3.90 4.00 NEUTRAL BBB Positive 1/02/2012 3.7% 22.8% 35.3% 46.7% 48,528

UGL.AX UGL Limited 10.47 13.00 OUTPERFORM BBB Positive 24/04/2012 -0.6% -18.0% -4.4% -15.5% 1,741

VAH.AX Virgin Australia Holdings 0.41 0.50 NEUTRAL BBB Neutral 10/07/2012 -14.6% -10.9% 30.2% -1.2% 906

WES.AX Wesfarmers 34.49 31.50 UNDERPERFORM BBB Neutral 1/06/2011 0.6% 18.1% 13.4% 49.1% 40,099

BBB Weighted average 1.1% -1.6% 6.0% 21.6% 258,130

All Ords 4382.46 All Ords -0.1% -0.8% 6.9% -6.3%

Relative 1.2% -0.7% -1.0% 27.9% Source: MSCI IVA ratings, Credit Suisse estimates

27 September 2012


Figure 184: BB (MSCI IVA rated) stocks and performance Ticker Company name Actual

share

price ($)

Target

Price ($)

Rating MSCI

ESG

Rating

View on

MSCI

rating

Date of

MSCI

rating

1 month

total return

6 months

total return

12 months

total return

3 year


CSR.AX CSR 1.58 1.17 UNDERPERFORM BB Positive 1/08/2011 12.1% -8.3% -27.5% -3.7% 799

DUE.AX DUET Group 2.08 2.07 NEUTRAL BB Positive 10/07/2012 0.5% 18.7% 36.6% 61.6% 2,323

EGP.AX Echo Entertainment 3.75 3.80 UNDERPERFORM BB Neutral 1/02/2012 -7.6% -10.6% 7.4% N/A 3,096

ERA.AX Energy Resources of Australia 1.35 1.65 NEUTRAL BB Negative 1/12/2011 -4.6% 4.3% -30.7% -90.9% 696

FLT.AX Flight Centre 23.75 26.35 OUTPERFORM BB Positive 1/11/2011 3.2% 11.2% 40.3% 82.4% 2,378

GFF.AX Goodman Fielder 0.52 0.60 NEUTRAL BB Neutral 1/12/2011 -3.7% -25.4% -6.2% -50.5% 1,007

GUD.AX G.U.D. Holdings 8.10 9.20 NEUTRAL BB Neutral 1/10/2011 -5.7% 11.5% 29.7% 22.7% 578

IGO.AX Independence Group NL 4.04 3.50 NEUTRAL BB Neutral 1/12/2011 15.7% 2.3% -8.5% -4.3% 941

IPL.AX Incitec Pivot Ltd. 2.89 3.50 OUTPERFORM BB Neutral 1/02/2012 -4.9% -7.2% -10.0% 9.0% 4,707

JHX.AX James Hardie Industries SE 8.59 9.24 NEUTRAL BB Neutral 25/05/2012 0.6% 16.7% 50.3% 18.2% 3,909

LEI.AX Leighton Holdings 16.50 17.60 NEUTRAL BB Neutral 25/04/2012 -2.1% -21.7% -10.0% -45.5% 5,562

MBN.AX Mirabela Nickel 0.37 0.53 OUTPERFORM BB Neutral 1/12/2011 21.7% -32.4% -73.3% -86.7% 331

NCM.AX Newcrest Mining 27.70 26.00 UNDERPERFORM BB Neutral 1/03/2012 4.6% -5.9% -19.1% -8.3% 21,191

NVT.AX Navitas Ltd 4.20 4.80 OUTPERFORM BB Positive 1/12/2011 -1.2% 21.2% 18.8% 31.2% 1,576

OSH.AX Oil Search 7.47 8.70 OUTPERFORM BB Neutral 25/05/2012 0.9% 7.4% 32.4% 22.4% 10,296

OZL.AX OZ Minerals 6.56 9.70 OUTPERFORM BB Neutral 1/12/2011 -0.7% -31.8% -27.9% -13.7% 1,991

QAN.AX Qantas Airways 1.22 1.95 OUTPERFORM BB Neutral 10/07/2012 2.1% -31.9% -16.2% -56.5% 2,752

QRN.AX QR National 3.36 3.80 NEUTRAL BB Neutral 1/03/2012 -5.4% -8.7% 8.6% N/A 8,198

RMD.AX ResMed Inc. 3.89 3.93 OUTPERFORM BB Positive 1/12/2011 8.8% 30.2% 32.0% 54.4% 6,267

SMX.AX SMS Management & Technology 6.48 6.80 OUTPERFORM BB Neutral 25/05/2012 2.0% 12.9% 19.2% 38.8% 446

SPN.AX SP AusNet 1.04 1.03 NEUTRAL BB Neutral 1/01/2012 2.5% 1.8% 25.4% 50.6% 3,473

SUL.AX Super Retail Group 7.96 8.40 NEUTRAL BB Neutral 25/05/2012 -0.4% 6.8% 52.0% 67.4% 1,563

TPI.AX Transpacific Industries Group 0.88 0.96 NEUTRAL BB Neutral 1/03/2012 2.3% 12.8% 49.4% -34.2% 1,389

TPM.AX TPG Telecom 2.21 2.40 OUTPERFORM BB Neutral 1/02/2012 4.2% 25.7% 64.4% 87.3% 1,754

WDC.AX Westfield 10.13 10.20 NEUTRAL BB Neutral 1/10/2011 2.3% 17.5% 33.6% 11.2% 22,822

WHC.AX Whitehaven Coal 2.84 4.40 OUTPERFORM BB Neutral 1/12/2011 -14.6% -34.8% -30.9% 6.3% 2,877

WOW.AX Woolworths 29.28 25.40 UNDERPERFORM BB Neutral 1/06/2011 3.5% 15.3% 21.8% 13.6% 36,139

WSA.AX Western Areas NL 4.16 4.70 OUTPERFORM BB Neutral 1/12/2011 -0.7% -22.1% -6.2% -0.7% 748

BB Weighted average 1.7% 5.3% 14.6% 10.0% 149,812

All Ords 4382.46 All Ords -0.1% -0.8% 6.9% -6.3%


Figure 185: B (MSCI IVA rated) stocks and performance Ticker Company name Actual

share

price ($)

Target

Price ($)

Rating MSCI

ESG

Rating

View on

MSCI

rating

Date of

MSCI

rating

1 month

total return

6 months

total return

12 months

total return

3 year


AGO.AX Atlas Iron 1.42 2.70 OUTPERFORM B Negative 1/12/2011 -5.6% -50.7% -54.0% -12.1% 1,285

AQA.AX Aquila Resources 2.65 2.75 NEUTRAL B Positive 1/12/2011 8.6% -47.0% -43.3% -47.2% 1,091

AUT.AX Aurora Oil & Gas 3.50 4.02 NEUTRAL B Positive 25/05/2012 2.9% -7.4% 50.9% 2158.1% 1,623

CQR.AX Charter Hall Retail REIT 3.41 3.07 UNDERPERFORM B Neutral 1/10/2011 -1.7% 12.1% 14.0% 27.8% 1,022

CRF.AX Centro Retail Australia 2.12 2.00 UNDERPERFORM B Neutral 31/07/2012 1.0% 18.8% N/A N/A 3,026

DJS.AX David Jones 2.50 2.20 UNDERPERFORM B Positive 1/06/2011 2.5% 8.1% -6.0% -41.2% 1,322

EVN.AX Evolution Mining Limited 1.92 1.70 NEUTRAL B Positive 23/03/2012 16.0% 10.0% 24.4% 29.2% 1,359

GBG.AX Gindalbie Metals Ltd 0.28 1.00 OUTPERFORM B positive 1/12/2011 -25.3% -54.8% -41.7% -66.9% 349

GNC.AX Graincorp 8.80 RESTRICTED B 1/12/2011 -9.9% 3.1% 37.5% 45.9% 1,852

GWA.AX GWA GROUP Limited 1.82 1.95 NEUTRAL B Neutral 8/06/2012 -1.3% -11.4% 1.5% -12.6% 550

HVN.AX Harvey Norman 1.95 2.15 NEUTRAL B Positive 1/06/2011 -9.3% -0.5% -3.7% -44.6% 2,072

IRE.AX IRESS Limited 7.42 7.30 NEUTRAL B Neutral 25/05/2012 4.1% 7.9% 10.3% 1.9% 954

KAR.AX Karoon Gas 5.36 7.65 OUTPERFORM B Positive 25/05/2012 27.9% -17.7% 90.7% -26.6% 1,187

MGX.AX Mount Gibson Iron 0.78 1.00 OUTPERFORM B Neutral 1/12/2011 1.3% -30.8% -41.8% -22.7% 841

MMS.AX McMillan Shakespeare 12.20 13.55 OUTPERFORM B Positive 25/05/2012 5.9% 13.0% 50.7% 239.9% 909

MRM.AX Mermaid Marine Australia 2.98 3.61 OUTPERFORM B Neutral 1/02/2012 -7.9% -6.7% -1.3% 13.6% 660

MSB.AX Mesoblast 6.77 7.40 NEUTRAL B Positive 1/09/2011 7.3% -13.8% -14.2% 547.8% 1,926

PRU.AX Perseus Mining 2.76 3.10 OUTPERFORM B Positive 1/03/2012 5.7% 17.4% -9.5% 119.0% 1,264

PTM.AX Platinum Asset Management 3.56 3.35 UNDERPERFORM B Neutral 25/06/2012 4.7% -9.1% 2.7% -18.5% 1,998

QUB.AX Qube Logistics 1.48 1.90 OUTPERFORM B Positive 1/10/2011 -0.3% -10.1% 13.7% 145.7% 1,346

SFR.AX Sandfire Resources NL 8.35 7.20 UNDERPERFORM B Positive 1/12/2011 9.4% 5.8% 39.2% 138.0% 1,272

TWE.AX Treasury Wine 5.01 3.50 UNDERPERFORM B Neutral 8/06/2012 6.6% 23.9% 37.1% N/A 3,243

WRT.AX Westfield Retail Trust 2.92 3.10 NEUTRAL B Neutral 1/10/2011 1.0% 16.8% 22.4% N/A 8,918

B Weighted average 2.4% 2.8% 13.4% 128.0% 40,069

All Ords 4382.46 All Ords -0.1% -0.8% 6.9% -6.3%


27 September 2012


Figure 186: CCC (MSCI IVA rated) stocks and performance

Ticker Company name Actual

share

price ($)

Target

Price ($)

Rating MSCI

ESG

Rating

View on

MSCI

rating

Date of

MSCI

rating

1 month

total return

6 months

total return

12 months

total return

3 year


ABC.AX Adelaide Brighton 2.96 3.15 NEUTRAL CCC Positive 25/05/2012 0.0% 4.7% 21.1% 29.9% 1,887

BTU.AX Bathurst Resources 0.41 0.80 OUTPERFORM CCC Positive 1/12/2011 -1.2% -45.0% -42.3% 521.6% 286

PMV.AX Premier Investments Ltd 5.82 5.95 NEUTRAL CCC Neutral 8/06/2012 16.9% 7.5% 17.5% -8.1% 904

TRS.AX The Reject Shop 11.95 11.00 UNDERPERFORM CCC Neutral 1/06/2011 4.4% 0.9% 33.2% 2.4% 312

CCC Weighted average 4.8% 0.9% 15.9% 58.7% 3,388

All Ords 4382.46 All Ords -0.1% -0.8% 6.9% -6.3%


27 September 2012


Disclosure of stocks Figure 187: Stock list as at 26 September

Ticker Company name

Actual

share

price ($)

Target

Price ($) Rating

TP rating

risk %

Mcap

($mn)

ESG

Impact

($mn)

MSCI IVA

rating

Analyst

outlook

on rating

Date of

MSCI IVA

rating Analyst Email contact

ABC.AX Adelaide Brighton 3.00 3.15 NEUTRAL -3.4% 1,909 67- CCC Positive 25/05/2012 Andrew Peros [email protected]

AGK.AX AGL Energy 14.77 16.60 NEUTRAL -2.5% 8,062 208- A Neutral 10/07/2012 Benjamin McVicar [email protected]

AGO.AX Atlas Iron 1.43 2.70 OUTPERFORM 0.0% 1,294 - B Negative 1/12/2011 Matthew Hope [email protected]

AIO.AX Asciano Group 4.37 5.95 OUTPERFORM -3.1% 4,258 135- BBB Positive 1/03/2012 Nicholas [email protected]

ALL.AX Aristocrat Leisure 2.71 2.60 UNDERPERFORM 0.0% 1,492 - A Neutral 1/02/2012 Larry Gandler [email protected]

ALQ.AX ALS Limited 8.55 10.16 NEUTRAL 0.0% 2,911 - A Neutral 25/05/2012 Bradley Clibborn [email protected]

ALS.AX Alesco Corporation 2.00 2.05 NEUTRAL 0.0% 188 - Chris Smith [email protected]

ALZ.AX Australand 2.95 2.91 OUTPERFORM 0.0% 1,699 - BBB Neutral 1/10/2011 John Richmond [email protected]

AMC.AX Amcor 7.76 7.70 UNDERPERFORM -3.0% 9,364 290- A Neutral 1/10/2011 Larry Gandler [email protected]

AMP.AX AMP 4.27 4.65 NEUTRAL 0.0% 12,347 - A Neutral 11/04/2012 John Heagerty [email protected]

AMX.AX Ampella Mining Limited 0.70 1.50 OUTPERFORM 0.0% 172 - Michael Slifirski [email protected]

ANZ.AX Australia and New Zealand Bank 24.66 25.00 NEUTRAL 0.0% 66,995 - AAA Negative 1/10/2011 Jarrod Martin [email protected]

AOH.AX Altona Mining Limited 0.28 0.46 OUTPERFORM 0.0% 148 - Michael Slifirski [email protected]

APA.AX APA Group 4.76 NOT RATED 3,102 - AA Neutral 1/09/2011 Benjamin McVicar [email protected]

API.AX Australian Pharmaceutical Ind 0.45 0.46 OUTPERFORM -5.0% 217 11- Saul Hadassin [email protected]

AQA.AX Aquila Resources 2.62 2.75 NEUTRAL -5.0% 1,079 57- B Positive 1/12/2011 Paul McTaggart [email protected]

AQG.AX Alacer Gold Corp. 6.75 7.72 OUTPERFORM 0.0% 714 - Michael Slifirski [email protected]

AQZ.AX Alliance Aviation Services Limited 2.05 2.58 OUTPERFORM 0.0% 185 - Paul Buys [email protected]

ARI.AX Arrium 0.54 1.15 OUTPERFORM 0.0% 727 - BBB Neutral 1/12/2011 Michael Slifirski [email protected]

ARP.AX ARB Corp 9.82 9.80 NEUTRAL 0.0% 712 - BBB Neutral 25/05/2012 Paul Buys [email protected]

ASX.AX ASX 29.64 28.50 UNDERPERFORM 0.0% 5,191 - BBB Negative 1/07/2011 John Heagerty [email protected]

AUB.AX Austbrokers 7.92 7.95 NEUTRAL 0.0% 444 - Andrew Adams [email protected]

AUT.AX Aurora Oil & Gas 3.50 4.02 NEUTRAL -3.0% 1,625 50- B Positive 25/05/2012 Paul McTaggart [email protected]

AWC.AX Alumina Limited 0.84 0.84 NEUTRAL -4.0% 2,125 89- AA Negative 1/12/2011 Matthew Hope [email protected]

AWE.AX AWE Ltd 1.31 1.75 OUTPERFORM -0.4% 684 3- BBB Negative 25/05/2012 Paul McTaggart [email protected]

BBG.AX Billabong International 1.33 RESTRICTED 637 - Grant Saligari [email protected]

BEN.AX Bendigo and Adelaide Bank 7.67 8.75 NEUTRAL 0.0% 3,043 - BBB Positive 1/10/2011 James Ellis [email protected]

BHP.AX BHP Billiton 32.81 35.85 NEUTRAL -2.0% 174,360 3,558- AA Negative 17/02/2012 Paul McTaggart [email protected]

BKN.AX Bradken Limited 5.59 6.95 OUTPERFORM 0.0% 946 - BBB Neutral 3/05/2012 Paul Buys [email protected]

BLD.AX Boral 3.76 3.95 OUTPERFORM -0.8% 2,848 22- AA Neutral 25/05/2012 Andrew Peros [email protected]

BLY.AX Boart Longyear Group 1.65 3.04 OUTPERFORM 0.0% 787 - AA Neutral 24/04/2012 Emma Alcock [email protected]

BND.AX Bandanna Energy Limited 0.33 0.70 OUTPERFORM -10.0% 174 19- Paul McTaggart [email protected]

BOQ.AX Bank of Queensland 7.54 8.00 OUTPERFORM 0.0% 2,328 - BBB Positive 1/10/2011 James Ellis [email protected]

BRG.AX Breville Group 5.47 6.30 OUTPERFORM 0.0% 712 - Paul Buys [email protected]

BSE.AX Base Resources Ltd 0.45 0.80 OUTPERFORM -13.0% 205 31- Matthew Hope [email protected]

BSL.AX BlueScope Steel 0.40 RESTRICTED 1,340 - Michael Slifirski [email protected]

BTT.AX BT Investment Management 2.04 2.10 OUTPERFORM 0.0% 547 - David Bailey [email protected]

BTU.AX Bathurst Resources 0.42 0.80 OUTPERFORM -18.0% 289 63- CCC Positive 1/12/2011 Paul McTaggart [email protected]

BXB.AX Brambles Limited 6.88 7.88 OUTPERFORM 0.0% 11,090 - AAA Neutral 1/03/2012 Nicholas [email protected]

CAB.AX Cabcharge Australia 5.47 6.40 NEUTRAL -10.0% 659 73- BBB Negative 1/03/2012 Paul Buys [email protected]

CBA.AX Commonwealth Bank Australia 55.59 54.00 UNDERPERFORM 0.0% 88,508 - AAA Neutral 1/10/2011 Jarrod Martin [email protected]

CCL.AX Coca-Cola Amatil 13.70 12.50 UNDERPERFORM 0.0% 10,430 - A Neutral 8/06/2012 Larry Gandler [email protected]

CFX.AX CFS Retail Property Trust 1.96 1.97 UNDERPERFORM 0.0% 5,535 - A Neutral 1/10/2011 John Richmond [email protected]

CGF.AX Challenger Financial Services Group 3.27 5.00 OUTPERFORM 0.0% 1,778 - John Heagerty [email protected]

CLO.AX Clough 0.70 0.97 OUTPERFORM 0.0% 538 - Paul Buys [email protected]

COH.AX Cochlear 67.44 65.50 NEUTRAL -2.0% 3,842 78- BBB Neutral 1/12/2011 Saul Hadassin [email protected]

COK.AX Cockatoo Coal 0.12 0.20 OUTPERFORM 0.0% 117 - Paul McTaggart [email protected]

CPA.AX Commonwealth Property Office Fund 1.05 1.03 UNDERPERFORM 0.0% 2,453 - AAA Neutral 1/10/2011 John Lee [email protected]

CPU.AX Computershare 8.36 9.38 OUTPERFORM 0.0% 4,815 - BBB Neutral 25/05/2012 John Heagerty [email protected]

CQR.AX Charter Hall Retail REIT 3.43 3.07 UNDERPERFORM 0.0% 1,028 - B Neutral 1/10/2011 Stephen Rich [email protected]

CRF.AX Centro Retail Australia 2.11 2.00 UNDERPERFORM 0.0% 3,005 - B Neutral 31/07/2012 Stephen Rich [email protected]

CSL.AX CSL Ltd 45.96 44.30 NEUTRAL -1.0% 23,223 235- AA Neutral 1/09/2011 Saul Hadassin [email protected]

CSR.AX CSR 1.58 1.17 UNDERPERFORM -39.0% 798 510- BB Positive 1/08/2011 Andrew Peros [email protected]

CTX.AX Caltex Australia 15.89 15.55 UNDERPERFORM -0.2% 4,290 9- A Positive 1/04/2012 Paul McTaggart [email protected]

CWN.AX Crown 9.03 8.80 NEUTRAL 0.0% 6,574 - AAA Neutral 1/02/2012 Larry Gandler [email protected]

DJS.AX David Jones 2.51 2.20 UNDERPERFORM 0.0% 1,324 - B Positive 1/06/2011 Grant Saligari [email protected]

DMP.AX DOMINO'S PIZZA 10.42 10.20 NEUTRAL 0.0% 730 - Paul Buys [email protected]

DOW.AX Downer EDI 3.63 4.10 OUTPERFORM 0.0% 1,558 - A Negative 1/03/2012 Bradley Clibborn [email protected]

DUE.AX DUET Group 2.07 2.07 NEUTRAL -2.6% 2,306 62- BB Positive 10/07/2012 Benjamin McVicar [email protected]

DXS.AX Dexus Property Group 0.96 1.00 NEUTRAL 0.0% 4,645 - AAA Neutral 1/10/2011 Stephen Rich [email protected]

EGP.AX Echo Entertainment 3.80 3.80 UNDERPERFORM 0.0% 3,133 - BB Neutral 1/02/2012 Larry Gandler [email protected]

EHL.AX Emeco Holdings 0.73 1.25 OUTPERFORM 0.0% 458 - AAA Neutral 25/05/2012 Paul Buys [email protected]

ENV.AX Envestra 0.88 0.83 UNDERPERFORM -5.7% 1,376 83- BBB Neutral 1/09/2011 Benjamin McVicar [email protected]

ERA.AX Energy Resources of Australia 1.33 1.65 NEUTRAL -36.0% 689 387- BB Negative 1/12/2011 Matthew Hope [email protected]

EVN.AX Evolution Mining Limited 1.87 1.70 NEUTRAL 0.0% 1,325 - B Positive 23/03/2012 Michael Slifirski [email protected] Source: MSCI IVA ratings, Company data, Credit Suisse estimates

27 September 2012


Figure 188: Stock list as at 26 September (continued)

Ticker Company name

Actual

share

price ($)

Target

Price ($) Rating

TP rating

risk %

Mcap

($mn)

ESG

Impact

($mn)

MSCI IVA

rating

Analyst

outlook

on rating

Date of

MSCI IVA


FAN.AX Fantastic Holdings 2.80 2.80 NEUTRAL 0.0% 288 - Samantha Carleton [email protected]

FLT.AX Flight Centre 23.71 26.35 OUTPERFORM 0.0% 2,374 - BB Positive 1/11/2011 Paul Buys [email protected]

FMG.AX Fortescue Metals Group Ltd 3.49 RESTRICTED 11,264 - Matthew Hope [email protected]

FWD.AX Fleetwood Corporation 10.45 12.08 UNDERPERFORM 0.0% 620 - BBB Neutral 25/06/2012 Paul Buys [email protected]

FXL.AX FlexiGroup Limited 3.23 3.45 OUTPERFORM 0.0% 926 - Paul Buys [email protected]

GBG.AX Gindalbie Metals Ltd 0.27 1.00 OUTPERFORM 0.0% 337 - B positive 1/12/2011 Matthew Hope [email protected]

GFF.AX Goodman Fielder 0.50 0.60 NEUTRAL 0.0% 972 - BB Neutral 1/12/2011 Larry Gandler [email protected]

GMG.AX Goodman Group 4.03 3.98 NEUTRAL 0.0% 6,478 - A Neutral 1/10/2011 Stephen Rich [email protected]

GNC.AX Graincorp 8.93 RESTRICTED 1,879 - Grant Saligari [email protected]

GPT.AX GPT Group 3.44 3.60 UNDERPERFORM 0.0% 6,078 - AAA Neutral 1/10/2011 Stephen Rich [email protected]

GRY.AX Gryphon Minerals Limited 0.89 1.25 OUTPERFORM -9.0% 310 31- A Neutral 1/03/2012 Michael Slifirski [email protected]

GUD.AX G.U.D. Holdings 8.15 9.20 NEUTRAL 0.0% 581 - BB Neutral 1/10/2011 Paul Buys [email protected]

GWA.AX GWA GROUP Limited 1.83 1.95 NEUTRAL 0.0% 551 - B Neutral 8/06/2012 Paul Buys [email protected]

HGG.AX Henderson group 1.66 1.47 OUTPERFORM 0.0% 1,942 - A Positive 25/06/2012 John Heagerty [email protected]

HVN.AX Harvey Norman 1.96 2.15 NEUTRAL 0.0% 2,079 - B Positive 1/06/2011 Grant Saligari [email protected]

IAG.AX Insurance Australia Group 4.39 4.00 NEUTRAL 0.0% 9,127 - AAA Neutral 18/04/2012 John Heagerty [email protected]

IDL.AX Industrea Ltd 1.25 1.27 NEUTRAL 0.0% 461 - AAA Negative 3/05/2012 Paul Buys [email protected]

IFL.AX IOOF Holdings 5.73 6.50 NEUTRAL 0.0% 1,317 - AA Neutral 25/06/2012 David Bailey [email protected]

IGO.AX Independence Group NL 4.04 3.50 NEUTRAL -2.0% 941 19- BB Neutral 1/12/2011 Paul McTaggart [email protected]

IIN.AX iiNet 3.65 3.50 UNDERPERFORM 0.0% 588 - Bradley Clibborn [email protected]

ILU.AX Iluka Resources 10.27 13.50 OUTPERFORM -3.9% 4,300 175- BBB Positive 1/12/2011 Matthew Hope [email protected]

IOF.AX Investa Office Fund 2.88 2.95 NEUTRAL 0.0% 1,768 - AA Neutral 1/10/2011 John Lee [email protected]

IPL.AX Incitec Pivot Ltd. 2.99 3.50 OUTPERFORM -1.3% 4,870 62- BB Neutral 1/02/2012 Larry Gandler [email protected]

IRE.AX IRESS Limited 7.48 7.30 NEUTRAL 0.0% 962 - B Neutral 25/05/2012 David Bailey [email protected]

IVC.AX Invocare Group 8.43 9.20 NEUTRAL 0.0% 928 - A Neutral 1/12/2011 Chris Smith [email protected]

JBH.AX JB Hi-Fi 8.99 9.70 UNDERPERFORM 0.0% 889 - BBB Neutral 25/05/2012 Grant Saligari [email protected]

JHX.AX James Hardie Industries SE 8.70 9.24 NEUTRAL -18.0% 3,961 870- BB Neutral 25/05/2012 Andrew Peros [email protected]

KAR.AX Karoon Gas 5.32 7.65 OUTPERFORM -11.7% 1,178 156- B Positive 25/05/2012 Paul McTaggart [email protected]

KGD.AX Kula Gold 0.46 1.15 OUTPERFORM -25.0% 42 14- Michael Slifirski [email protected]

LEI.AX Leighton Holdings 16.35 17.60 NEUTRAL 0.0% 5,511 - BB Neutral 25/04/2012 Bradley Clibborn [email protected]

LLC.AX Lend Lease 7.80 8.48 NEUTRAL 2.0% 4,468 88 AAA Neutral 25/07/2012 John Richmond [email protected]

MBN.AX Mirabela Nickel 0.38 0.53 OUTPERFORM -6.0% 341 22- BB Neutral 1/12/2011 Paul McTaggart [email protected]

MDL.AX Mineral Deposits Ltd. 5.58 9.09 OUTPERFORM -11.0% 483 60- BBB Positive 1/12/2011 Matthew Hope [email protected]

MGR.AX Mirvac Group 1.42 1.48 OUTPERFORM 0.0% 4,871 - AA Neutral 1/10/2011 John Richmond [email protected]

MGX.AX Mount Gibson Iron 0.76 1.00 OUTPERFORM 0.0% 825 - B Neutral 1/12/2011 Matthew Hope [email protected]

MMS.AX McMillan Shakespeare 12.27 13.55 OUTPERFORM 0.0% 914 - B Positive 25/05/2012 Paul Buys [email protected]

MPO.AX Molopo Australia 0.62 0.70 OUTPERFORM -15.0% 152 27- Paul McTaggart [email protected]

MQG.AX Macquarie Group 28.35 35.00 OUTPERFORM 0.0% 9,617 - A Negative 1/03/2012 James Ellis [email protected]

MRM.AX Mermaid Marine Australia 3.07 3.61 OUTPERFORM 0.0% 680 - B Neutral 1/02/2012 Paul Buys [email protected]

MSB.AX Mesoblast 6.79 7.40 NEUTRAL -3.0% 1,932 60- B Positive 1/09/2011 Saul Hadassin [email protected]

MTS.AX Metcash 3.54 3.85 NEUTRAL 0.0% 3,118 - A Neutral 1/06/2011 Grant Saligari [email protected]

MYR.AX Myer Holdings 1.75 2.70 OUTPERFORM 0.0% 1,019 - BBB Neutral 1/06/2011 Grant Saligari [email protected]

NAB.AX National Australia Bank 25.53 26.00 NEUTRAL 0.0% 58,637 - AA Positive 1/10/2011 Jarrod Martin [email protected]

NCM.AX Newcrest Mining 28.09 26.00 UNDERPERFORM 0.0% 21,489 - BB Neutral 1/03/2012 Michael Slifirski [email protected]

NHC.AX New Hope Corporation 4.55 4.60 NEUTRAL -3.0% 3,779 117- Paul McTaggart [email protected]

NUF.AX Nufarm 5.91 5.80 UNDERPERFORM -4.0% 1,549 65- BBB Neutral 1/02/2012 Larry Gandler [email protected]

NVT.AX Navitas Ltd 4.15 4.80 OUTPERFORM 0.0% 1,558 - BB Positive 1/12/2011 Paul Buys [email protected]

NWH.AX NRW Holdings Limited 2.19 3.10 NEUTRAL 0.0% 611 - AA Neutral 24/04/2012 Paul Buys [email protected]

NWS.AX News Corporation 23.74 23.00 NEUTRAL -17.2% 57,670 11,980- CCC 1/04/2012 Samantha Carleton [email protected]

OKN.AX Oakton 1.35 1.40 NEUTRAL 0.0% 124 - Chris Smith [email protected]

ORG.AX Origin Energy 11.30 16.00 OUTPERFORM 0.0% 12,318 - AA Neutral 1/09/2011 Benjamin McVicar [email protected]

ORI.AX Orica 25.06 29.40 OUTPERFORM -3.0% 9,163 283- BBB Negative 1/09/2011 Larry Gandler [email protected]

ORL.AX OrotonGroup 7.00 8.00 OUTPERFORM 0.0% 286 - Grant Saligari [email protected]

OSH.AX Oil Search 7.40 8.70 OUTPERFORM -4.5% 10,212 481- BB Neutral 25/05/2012 Paul McTaggart [email protected]

OZL.AX OZ Minerals 6.71 9.70 OUTPERFORM 0.0% 2,036 - BB Neutral 1/12/2011 Michael Slifirski [email protected]

PAN.AX Panoramic Resources 0.54 1.25 OUTPERFORM 0.0% 137 - AA Neutral 1/12/2011 Paul McTaggart [email protected]

PBG.AX Pacific Brands 0.60 0.60 NEUTRAL 0.0% 548 - BBB Neutral 10/07/2012 Grant Saligari [email protected]

PMV.AX Premier Investments Ltd 5.83 5.95 NEUTRAL 0.0% 905 - CCC Neutral 8/06/2012 Grant Saligari [email protected]

PNA.AX PanAust 3.00 3.13 NEUTRAL 0.0% 1,883 - BBB Neutral 1/12/2011 Michael Slifirski [email protected]

PPT.AX Perpetual 26.18 28.00 NEUTRAL 0.0% 1,099 - AAA Negative 25/06/2012 John Heagerty [email protected]

PRG.AX Programmed Maintenance Services 2.16 2.65 OUTPERFORM 0.0% 255 - Neil Watson [email protected]

PRU.AX Perseus Mining 2.82 3.10 OUTPERFORM 0.0% 1,291 - B Positive 1/03/2012 Michael Slifirski [email protected]

PRY.AX Primary Health Care 3.58 3.65 NEUTRAL -5.0% 1,794 94- A Neutral 25/05/2012 Saul Hadassin [email protected]

PTM.AX Platinum Asset Management 3.52 3.35 UNDERPERFORM 0.0% 1,976 - B Neutral 25/06/2012 David Bailey [email protected]

PXS.AX Pharmaxis 1.10 1.70 OUTPERFORM -5.0% 337 18- Saul Hadassin [email protected]

QAN.AX Qantas Airways 1.21 1.95 OUTPERFORM -9.2% 2,734 276- BB Neutral 10/07/2012 Nicholas [email protected]

QBE.AX QBE Insurance Group 12.97 14.79 OUTPERFORM 0.0% 15,880 - A Negative 17/04/2012 John Heagerty [email protected]

QRN.AX QR National 3.41 3.80 NEUTRAL 0.0% 8,308 - BB Neutral 1/03/2012 Bradley Clibborn [email protected]

QUB.AX Qube Logistics 1.47 1.90 OUTPERFORM 0.0% 1,337 - B Positive 1/10/2011 Nicholas [email protected]

RHC.AX Ramsay Health Care 23.80 25.00 NEUTRAL -1.0% 4,810 49- A Neutral 25/05/2012 Saul Hadassin [email protected]

RIO.AX Rio Tinto 53.14 73.32 OUTPERFORM -3.0% 88,800 2,746- BBB Neutral 1/12/2011 Paul McTaggart [email protected]

RMD.AX ResMed Inc. 3.85 3.93 OUTPERFORM -3.0% 6,202 192- BB Positive 1/12/2011 Saul Hadassin [email protected]

RWH.AX Royal Wolf Holdings 2.20 2.45 OUTPERFORM 0.0% 221 - Paul Buys [email protected] Source: MSCI IVA ratings, Company data, Credit Suisse estimates

27 September 2012


Figure 189: Stock list as at 26 September (continued)

Ticker Company name

Actual

share

price ($)

Target

Price ($) Rating

TP rating

risk %

Mcap

($mn)

ESG

Impact

($mn)

MSCI IVA

rating

Analyst

outlook

on rating

Date of

MSCI IVA


SAI.AX SAI Global 4.27 4.40 OUTPERFORM 0.0% 875 - BBB Neutral 25/05/2012 Paul Buys [email protected]

SFH.AX Specialty Fashion Group 0.50 0.30 UNDERPERFORM 0.0% 96 - Samantha Carleton [email protected]

SFR.AX Sandfire Resources NL 8.14 7.20 UNDERPERFORM 0.0% 1,239 - B Positive 1/12/2011 Michael Slifirski [email protected]

SGM.AX Sims Metal Management 9.49 11.00 OUTPERFORM 0.0% 1,939 - AAA Neutral 1/12/2011 Michael Slifirski [email protected]

SGP.AX Stockland 3.33 3.30 NEUTRAL 0.0% 7,337 - AAA Neutral 1/10/2011 John Richmond [email protected]

SHL.AX Sonic Healthcare 13.17 13.50 NEUTRAL -2.0% 5,171 106- AA Neutral 25/05/2012 Saul Hadassin [email protected]

SIP.AX Sigma Pharmaceuticals 0.67 0.74 OUTPERFORM 0.0% 789 - AA Neutral 25/05/2012 Saul Hadassin [email protected]

SKE.AX Skilled Group Limited 2.61 3.30 OUTPERFORM 0.0% 609 - Paul Buys [email protected]

SKI.AX Spark Infrastructure Group 1.64 1.63 NEUTRAL -7.4% 2,178 174- BBB Neutral 1/01/2012 Benjamin McVicar [email protected]

SLM.AX Salmat 2.43 1.82 NEUTRAL 0.0% 388 - Paul Buys [email protected]

SMR.AX Stanmore Coal 0.23 0.65 OUTPERFORM -15.0% 41 7- Paul McTaggart [email protected]

SMX.AX SMS Management & Technology 6.42 6.80 OUTPERFORM 0.0% 442 - BB Neutral 25/05/2012 Chris Smith [email protected]

SPN.AX SP AusNet 1.04 1.03 NEUTRAL -13.2% 3,457 528- BB Neutral 1/01/2012 Benjamin McVicar [email protected]

STO.AX Santos Ltd 11.16 12.65 NEUTRAL -1.0% 10,638 107- A Neutral 25/05/2012 Paul McTaggart [email protected]

SUL.AX Super Retail Group 7.77 8.40 NEUTRAL 0.0% 1,526 - BB Neutral 25/05/2012 Samantha Carleton [email protected]

SUN.AX Suncorp Group Limited 9.24 9.00 NEUTRAL 0.0% 11,888 - BBB Positive 18/04/2012 John Heagerty [email protected]

TAH.AX Tabcorp Holdings 2.83 3.30 NEUTRAL 0.0% 2,063 - AAA Neutral 1/02/2012 Larry Gandler [email protected]

TAP.AX Tap Oil Ltd 0.75 0.85 OUTPERFORM -1.8% 181 3- Paul McTaggart [email protected]

TGA.AX Thorn Group 1.76 1.90 OUTPERFORM 0.0% 258 - Neil Watson [email protected]

TIG.AX Tigers Realm Coal 0.16 0.30 OUTPERFORM -17.0% 44 9- Paul McTaggart [email protected]

TLS.AX Telstra Corporation 3.92 4.00 NEUTRAL 0.0% 48,777 - BBB Positive 1/02/2012 Bradley Clibborn [email protected]

TOL.AX Toll Holdings 4.38 4.80 NEUTRAL 0.0% 3,141 - AA Neutral 1/06/2011 Nicholas [email protected]

TPI.AX Transpacific Industries Group 0.87 0.96 NEUTRAL 0.0% 1,373 - BB Neutral 1/03/2012 Paul Buys [email protected]

TPM.AX TPG Telecom 2.21 2.40 OUTPERFORM 0.0% 1,754 - BB Neutral 1/02/2012 Bradley Clibborn [email protected]

TRS.AX The Reject Shop 11.85 11.00 UNDERPERFORM 0.0% 309 - CCC Neutral 1/06/2011 Grant Saligari [email protected]

TSE.AX Transfield Services Ltd 1.76 2.05 NEUTRAL 0.0% 909 - A Neutral 1/03/2012 Bradley Clibborn [email protected]

TTS.AX Tatts Group 2.73 2.60 UNDERPERFORM 0.0% 3,721 - A Neutral 1/02/2012 Larry Gandler [email protected]

TWE.AX Treasury Wine 4.99 3.50 UNDERPERFORM 0.0% 3,230 - B Neutral 8/06/2012 Larry Gandler [email protected]

TWR.AX Tower Limited 1.40 1.72 UNDERPERFORM 0.0% 474 - Andrew Adams [email protected]

UGL.AX UGL Limited 10.47 13.00 OUTPERFORM 0.0% 1,740 - BBB Positive 24/04/2012 Bradley Clibborn [email protected]

VAH.AX Virgin Australia Holdings 0.41 0.50 NEUTRAL 0.0% 906 - BBB Neutral 10/07/2012 Nicholas [email protected]

WBC.AX Westpac 24.44 26.75 OUTPERFORM 0.0% 75,279 - AAA Negative 1/10/2011 Jarrod Martin [email protected]

WDC.AX Westfield 10.14 10.20 NEUTRAL 0.0% 22,833 - BB Neutral 1/10/2011 Stephen Rich [email protected]

WEB.AX Webjet 4.02 4.05 OUTPERFORM 0.0% 286 - Chris Smith [email protected]

WES.AX Wesfarmers 34.46 31.50 UNDERPERFORM -5.0% 40,062 2,109- BBB Neutral 1/06/2011 Grant Saligari [email protected]

WHC.AX Whitehaven Coal 2.76 4.40 OUTPERFORM -4.0% 2,796 117- BB Neutral 1/12/2011 Paul McTaggart [email protected]

WOR.AX WorleyParsons 27.67 27.55 NEUTRAL 0.0% 6,700 - AAA Neutral 1/12/2011 Emma Alcock [email protected]

WOW.AX Woolworths 29.03 25.40 UNDERPERFORM -5.0% 35,830 1,886- BB Neutral 1/06/2011 Grant Saligari [email protected]

WPL.AX Woodside Petroleum 32.99 38.55 NEUTRAL -0.2% 28,173 56- AA Neutral 25/05/2012 Paul McTaggart [email protected]

WRT.AX Westfield Retail Trust 2.92 3.10 NEUTRAL 0.0% 8,903 - B Neutral 1/10/2011 Stephen Rich [email protected]

WSA.AX Western Areas NL 4.03 4.70 OUTPERFORM 0.0% 724 - BB Neutral 1/12/2011 Paul McTaggart [email protected]

WTF.AX Wotif.com Holdings 3.96 5.30 OUTPERFORM 0.0% 838 - A Neutral 10/07/2012 Paul Buys [email protected]

YAL.AX Yancoal Australia 1.18 1.50 OUTPERFORM -10.0% 1,173 130- Paul McTaggart [email protected] Source: MSCI IVA ratings, Company data, Credit Suisse estimates

27 September 2012


Companies Mentioned (Price as of 26 Sep 12)

For a full list of companies mentioned refer to Figure 187, Figure 188, and Figure 189. Other companies referenced are listed below. BG Group plc (BG.L, 1252 p, NEUTRAL, TP 1,450.00 p) ConocoPhillips (COP, $57.01, NEUTRAL, TP $60.00) (Note Figures 1–186 are intraday pricing)

Disclosure Appendix Important Global Disclosures

I, Sandra McCullagh, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities.

Analysts’ stock ratings are defined as follows: Outperform (O): The stock’s total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stock’s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock’s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stock’s total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ coverage universe weightings are distinct from analysts’ stock ratings and are based on the expected performance of an analyst’s coverage universe* versus the relevant broad market benchmark**: Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. *An analyst’s coverage universe consists of all companies covered by the analyst within the relevant sector. **The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months.

Credit Suisse’s distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Outperform/Buy* 44% (52% banking clients) Neutral/Hold* 42% (50% banking clients) Underperform/Sell* 11% (39% banking clients) Restricted 2%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update 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's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

27 September 2012


Important Regional Disclosures

Singapore recipients should contact a Singapore financial adviser for any matters arising from this research report.

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml.

The following disclosed European company/ies have estimates that comply with IFRS: BG.L.

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at anytime after that. Taiwanese Disclosures: This research report is for reference only. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. Reports may not be reprinted without permission of CS. Reports written by Taiwan-based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. • Sandra McCullagh, non-U.S. analyst, is a research analyst employed by Credit Suisse Equities (Australia) Limited.

Important MSCI Disclosures

The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, re-disseminated or used to create any financial products, including any indices. This information is provided on an “as is” basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI, Morgan Stanley Capital International and the MSCI indexes are services marks of MSCI and its affiliates.

The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor’s. GICS is a service mark of MSCI and S&P and has been licensed for use by Credit Suisse.

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.credit-suisse.com/researchdisclosures or call +1 (877) 291-2683. Disclaimers continue on next page.

27 September 2012

Asia Pacific/Australia

Equity Research

Australian ESG-SRI 2012 09 27 - ESG overlay on key stock calls.doc

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG, the Swiss bank, or its subsidiaries or its affiliates (“CS”) to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates.

The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients as its customers by virtue of their receiving the report. The investments or services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice or a representation that any investment or strategy is suitable or appropriate to your individual circumstances or otherwise constitutes a personal recommendation to you. CS does not offer advice on the tax consequences of investment and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. CS believes the information and opinions in the Disclosure Appendix of this report are accurate and complete. Information and opinions presented in the other sections of the report were obtained or derived from sources CS believes are reliable, but CS makes no representations as to their accuracy or completeness. Additional information is available upon request. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, a trading call regarding this security. Trading calls are short term trading opportunities based on market events and catalysts, while stock ratings reflect investment recommendations based on expected total return over a 12-month period as defined in the disclosure section. Because trading calls and stock ratings reflect different assumptions and analytical methods, trading calls may differ directionally from the stock rating. In addition, CS may have issued, and may in the future issue, other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. Those reports reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other reports are brought to the attention of any recipient of this report. CS is involved in many businesses that relate to companies mentioned in this report. These businesses include specialized trading, risk arbitrage, market making, and other proprietary trading. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgement at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR’s, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase.

Some investments discussed in this report have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment, in such circumstances you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed the linked site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS’s own website material) is provided solely for your convenience and information and the content of the linked site does not in any way form part of this document. Accessing such website or following such link through this report or CS’s website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is regulated in the United Kingdom by The Financial Services Authority (“FSA”). This report is being distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). This report is being distributed in the United States by Credit Suisse Securities (USA) LLC ; in Switzerland by Credit Suisse AG; in Canada by Credit Suisse Securities (Canada), Inc.; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A. or its affiliates; in Mexico by Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); in Japan by Credit Suisse Securities (Japan) Limited, Financial Instrument Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Securities Investment Advisers Association, Type II Financial Instruments Firms Association; elsewhere in Asia/Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong Kong) Limited, Credit Suisse Equities (Australia) Limited , Credit Suisse Securities (Thailand) Limited, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited regulated by the Securities and Exchange Board of India (registration Nos. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House,Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn. Bhd., to whom they should direct any queries on +603 2723 2020. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this report was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not regulated by the FSA or in respect of which the protections of the FSA for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. Any Nielsen Media Research material contained in this report represents Nielsen Media Research's estimates and does not represent facts. NMR has neither reviewed nor approved this report and/or any of the statements made herein. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content.

Copyright 2012 CREDIT SUISSE AG and/or its affiliates. All rights reserved.

Documents

share Price ($) ESG MSCI rating