03 December 2012 Americas/United States Equity Research

SMID Bit SMALL & MID CAP RESEARCH

SMID & Mid Led In November, Risk Has Been On Since Mid-November Low ■ Broader Index Performance: Mid & SMID outperformed in November (up 1.5% and 1.4% respectively), while small (+0.4%), micro (-0.1%) and mega (0.1%) lagged. But microcaps and small caps have been outperforming since the November 15th equity market low, evidence that risk has been back on in recent weeks. For 2012 YTD, micro (+14.6%) remains the top performing Russell size index, but SMID caps (+13.3%) are now outperforming mega caps (+13.0%). Research Analysts Lori Calvasina 212 538 6396 [email protected] Sara Mahaffy 212 325 6824 [email protected] Lauren Thompson 212 325 1417 [email protected]

■ Key Russell 2000 Trends In November: In terms of styles, sectors, and factors – growth beat value; high beta and low P/E led; Consumer Discretionary & Materials led while Utilities lagged badly. In terms of key issues/themes small cap investors grapple with, high quality (as defined by high ROE, positive trailing EPS) continued to outperform low quality, but we did find that the international trade resurfaced as small caps with domestic revenue exposure lagged those with both low & high international revenue exposure (low int’l exposure was the best). When we examine R2000 performance by ownership characteristics, we find that Darlings (most popular R2000 stocks in a study of 594 small cap funds) & Rising Stars (names with largest increase in ownership in 2Q12) lagged in November.

■ Key Russell 2000 Trends In The Rally Off The Mid November Lows:

Since the November 15th equity market low, we have found that several riskon trades have outperformed. The US small cap high beta and high volatility indices outperformed all other factor indices we track and small caps with low quality (low ROE, negative trailing EPS), zero dividend yield and high international revenue exposure outperformed.

■ Key Russell 2000 Trends In 2012 Overall: In terms of styles, sectors, and factors -- value is beating growth in small/SMID/mid; high beta and low P/E are outperforming; Materials & Consumer Discretionary are the top two small cap sectors while Energy is the only down small cap sector on the year. In terms of key issues/themes small cap investors grapple with, the safety trade has worked best for the year as a whole - high ROE is ahead of low ROE while positive earners are ahead of negative earners (both point to a high quality bias), domestically oriented small caps are ahead of small caps with both high & low international exposures (high has fared worst), small caps with low short interest are ahead of those with high short interest levels, and dividend payers are ahead of non-dividend payers.

DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S 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

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03 December 2012

Broader Index Performance Strong November For SMID & Mid-Caps The Russell Mid Cap and Russell 2500 indices outperformed all other size segments in November, up 1.5% and 1.4% respectively. The Russell 2000 index (+0.4%) lagged the Russell Mid Cap and Russell 2500 indices, but outperformed the Russell Top 200 index (+0.1%). The Russell Micro Cap index was the worst performing size segment and only Russell index to generate negative returns in November (-0.1%). The Russell Mid Cap and Russell 2500 indices are also the best performing indices so far in 4Q12. The Russell Microcap and NASDAQ are lagging in the first two months of the quarter.

Microcaps & Small Caps Lead Off November Lows We’ve received several questions from investors on what has worked in the most recent equity market rally. We parsed out the performance since the November 15th low, and found that microcaps have been outperforming all other size segments, evidence that risk has been on in the second half of the month. The Russell 2000 has also beaten the various large cap indices strongly over that time frame.

SMID Now Leading Large YTD The Russell Microcap and NASDAQ indices continue to be the best performers for 2012 as a whole, up 14.6% and 15.5%, respectively. But now the Russell 2500 index is leading the Russell Top 200 and Russell 1000 indices YTD, something that only emerged in November. th

Exhibit 1: Performance of Major US Size Indices as of November 30 , 2012

Major Indices RMICRO Index RTY Index R2500 Index RMC Index R200 Index RIY Index RAY Index CCMP Index INDU Index SPX Index

Russell Micro Cap Russell 2000 Russell 2500 SMID Russell Mid Cap Russell Top 200 Russell 1000 Russell 3000 Nasdaq DJIA S&P 500

1Q12 14.9% 12.1% 12.6% 12.5% 12.3% 12.3% 12.3% 18.7% 8.1% 12.0%

2Q12 -2.4% -3.8% -4.5% -4.8% -3.2% -3.6% -3.7% -5.1% -2.5% -3.3%

3Q12 5.6% 4.9% 5.2% 5.1% 6.0% 5.7% 5.7% 6.2% 4.3% 5.8%

4QTD Nov-12 -3.3% -0.1% -1.9% 0.4% 0.2% 1.4% 0.4% 1.5% -2.0% 0.1% -1.3% 0.5% -1.3% 0.5% -3.4% 1.1% -3.1% -0.5% -1.7% 0.3%

Since Nov Low (11/15) 2012 YTD 7.8% 14.6% 6.8% 10.9% 6.3% 13.3% 4.9% 13.0% 4.8% 13.0% 4.8% 13.0% 5.0% 12.8% 6.1% 15.5% 3.9% 6.6% 4.6% 12.6%

Source: Credit Suisse Small/Mid Cap US Equity Strategy, Bloomberg, performance through 11/30/2012

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Style & Factor Trends Within The Russell 2000 Growth Led In November, But Value Continues To Lead In Small/SMID/Mid YTD Growth indices outperformed value indices across all size segments in the month of November, but value indices are still leading within small, SMID and mid YTD. Growth is leading within large cap indices YTD. Performance trends off the November 15th low were mixed. Growth led within large caps, but value led within the SMID and small cap indices. th

Exhibit 2: Performance of US Growth & Value Indices as of November 30 , 2012

Russell US Growth vs. Value RUO Index Russell 2000 Growth RUJ Index Russell 2000 Value RDG Index Russell Mid Cap Growth RMV Index Russell Mid Cap Value R2500G Index Russell 2500 Growth R2500V Index Russell 2500 Value R200G Index Russell Top 200 Growth R200V Index Russell Top 200 Value RLG Index Russell 1000 Growth RLV Index Russell 1000 Value RAG Index Russell 3000 Growth RAV Index Russell 3000 Value

1Q12 13.1% 11.0% 14.2% 10.8% 14.4% 11.0% 14.3% 10.3% 14.3% 10.4% 14.2% 10.5%

2Q12 -4.1% -3.5% -5.9% -3.9% -5.6% -3.6% -3.8% -2.4% -4.4% -2.8% -4.4% -2.9%

3Q12 4.7% 5.1% 5.1% 5.2% 5.0% 5.3% 5.9% 6.1% 5.7% 5.8% 5.6% 5.8%

4QTD Nov-12 -2.5% 0.7% -1.2% 0.1% -0.3% 2.1% 0.9% 0.9% -0.3% 1.7% 0.7% 1.2% -2.1% 1.2% -1.8% -0.9% -1.6% 1.4% -1.0% -0.3% -1.7% 1.4% -1.0% -0.3%

Since Nov Low (11/15) 2012 YTD 6.6% 10.6% 7.1% 11.2% 4.9% 12.7% 4.9% 13.1% 6.1% 13.1% 6.4% 13.4% 5.4% 13.9% 4.1% 12.1% 5.3% 13.5% 4.4% 12.4% 5.4% 13.3% 4.6% 12.3%

Source: Credit Suisse Small/Mid Cap US Equity Strategy, Bloomberg, performance through 11/30/2012

High Beta, Low P/E Led In November In order to better understand what issues might be driving the Russell 2000’s performance, we have been tracking the performance of a number of relatively new factor-based indices created by Russell, which are derived from the Russell 2000. For November as a whole, we found that the two best performance factor indices were the Russell-Axioma US Small Cap High Beta total return index (+3.7%) and the Russell US Small Cap Low P/E index (+1.7%). These factor indices are also outperforming YTD, up 17.3% and 13.5%, respectively. The Russell US Small Cap High Dividend Yield index lagged the most last month, down 1%. Since the November 15th equity market low, the Russell-Axioma US Small Cap High Beta total return and the Russell-Axioma US Small Cap High Volatility total return indices have worked best of all the factor indices we track.

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Exhibit 3: Russell 2000 Factor Indices’ Performance as of November 30 , 2012

Small Cap Indices RTY INDEX RUR2ESC Index RUO Index RUJ Index RU2000DY Index RU2000DF Index RUR2AGG Index RUR2COG Index RUR2CNT Index R2DVSC Index RUR2LPE Index RU2HBTAT Index RU2LBTAT Index RU2HVOLT Index RU2LVOLT Index

Russell 2000 Russell 2000 Equal Weight Russell 2000 Growth Russell 2000 Value Russell 2000 Dynamic Russell 2000 Defensive Russell U.S. Small Cap Aggressive Growth Russell U.S. Small Cap Consistent Growth Russell U.S. Small Cap Contrarian Russell U.S. Small Cap High Dividend Yield Russell U.S. Small Cap Low P/E Russell-Axioma U.S. Small Cap High Beta Total Return Russell-Axioma U.S. Small Cap Low Beta Total Return Russell-Axioma U.S. Small Cap High Volatility Total Return Russell-Axioma U.S. Small Cap Low Volatility Total Return

1Q12 12.1% 11.7% 13.1% 11.0% 15.3% 9.2% 14.9% 12.3% 10.8% 7.4% 11.7% 15.8% 9.2% 14.2% 8.8%

2Q12 3Q12 4QTD 12-Nov -3.8% 4.9% -1.9% 0.4% -4.5% 5.2% -3.1% 0.0% -4.1% 4.7% -2.5% 0.7% -3.5% 5.1% -1.2% 0.1% -4.8% 5.3% -2.7% 0.3% -3.0% 4.5% -1.0% 0.5% -4.2% 4.3% -3.7% 0.2% -4.7% 4.9% -1.5% 0.4% -5.3% 4.0% 0.5% 0.8% -1.2% 2.2% -2.2% -1.0% -4.2% 5.5% 0.6% 1.7% -8.1% 6.0% 3.9% 3.7% -0.1% 4.1% -2.3% -0.4% -6.6% 3.4% -2.9% 0.1% -0.3% 4.1% -1.0% -0.1%

Since Nov Low (11/15) 2012 YTD 6.8% 10.9% 7.5% 8.8% 6.6% 10.6% 7.1% 11.2% 7.9% 12.4% 5.8% 9.6% 7.0% 10.5% 5.6% 10.6% 6.3% 9.6% 5.6% 6.1% 6.2% 13.5% 9.2% 17.3% 6.3% 10.9% 8.3% 7.1% 5.5% 11.9%

Source: Credit Suisse Small/Mid Cap US Equity Strategy, Bloomberg, performance through 11/30/2012

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03 December 2012

Russell 2000 Sector Trends Small Cap Discretionary & Materials Led In November, Utilities Fell Hard Small cap Consumer Discretionary and Materials were the two best performing sectors in November, up 2.0% and 1.7%, respectively. Small cap Utilities was by far the worst performing sector last month, down 3.7%.

Internationally Exposed Sectors Lead In Mid November Rally Since the November 15th lows, Materials and Technology have outperformed all other small cap sectors. These are also the two small cap sectors with the highest percentage of revenues coming from outside the US. th

Exhibit 4: Russell 200 Sector Performance as of November 30 , 2012

Small Cap Indices RGUSDS Index RGUSSS Index RGUSES Index RGUSFS Index RGUSHS Index RGUSMS Index RGUSPS Index RGUSTS Index RGUSUS Index

Russell 2000 Consumer Discretionary Russell 2000 Consumer Staples Russell 2000 Energy Russell 2000 Financial Services Russell 2000 Health Care Russell 2000 Materials & Processing Russell 2000 Producer Durables Russell 2000 Technology Russell 2000 Utilities (& Telecom)

1Q12 2Q12 3Q12 4QTD 12-Nov 17.9% -5.8% 6.8% 0.4% 2.0% 5.9% 3.1% 0.8% -1.1% 0.6% 5.9% -15.8% 8.6% -5.6% -1.3% 10.6% -0.3% 4.7% -1.6% -1.0% 15.4% 4.6% 4.4% -8.2% 0.6% 13.3% -7.0% 10.4% 2.7% 1.7% 11.6% -6.5% 2.8% 1.9% 1.1% 13.8% -8.4% 2.0% -2.0% 1.5% -1.0% 0.3% 6.6% -5.4% -3.7%

Since Nov Low (11/15) 2012 YTD 6.9% 19.1% 5.8% 8.8% 6.5% -8.6% 6.2% 13.7% 6.5% 15.6% 8.8% 19.4% 6.8% 9.1% 7.7% 4.1% 5.5% 0.1%

Source: Credit Suisse Small/Mid Cap US Equity Strategy, Bloomberg, performance through 11/30/2012

Materials & Consumer Discretionary Lead YTD Materials and Consumer Discretionary continue to be the best performing small cap sectors YTD (up 19.4% and 19.1%, respectively), followed by Health Care. Energy remains the worst performing small cap sector with a loss of 8.6% -- the only small cap sector down in 2012.

Most Sectors Stronger In Small Than Large In November When we compare the performance of the small cap sectors to their mega cap counterparts (Russell Top 200) in November, we find that most small cap sectors outperformed their large cap counterparts, with the exception of Consumer Discretionary and Financials. Mid cap Financials was actually more resilient than both small cap Financials and mega cap Financials in November.

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Exhibit 5: Performance of Small, SMID, Mid, and Mega Cap Sectors as of November 30 , 2012

Sectors - Small vs. SMID vs. Mid vs. Mega RTY INDEX Russell 2000 R2500 Index Russell 2500 SMID RMC Index Russell Mid Cap R200 Index Russell Top 200 RGUSDS Index Russell 2000 Consumer Discretionary RGU25D Index Russell 2500 Consumer Discretionary RGUMCD Index Russell Mid Cap Consumer Discretionary RGU200D Index Russell Top 200 Consumer Discretionary RGUSSS Index Russell 2000 Consumer Staples RGU25S index Russell 2500 Consumer Staples RGUMCS index Russell Mid Cap Consumer Staples RGU200S Index Russell Top 200 Consumer Staples RGUSES Index Russell 2000 Energy RGU25E Index Russell 2500 Energy RGUMCE Index Russell Mid Cap Energy RGU200E Index Russell Top 200 Energy RGUSFS Index Russell 2000 Financial Services RGU25F index Russell 2500 Financial Services RGUMCF index Russell Mid Cap Financial Services RGU200F Index Russell Top 200 Financial Services RGUSHS Index Russell 2000 Health Care RGU25H index Russell 2500 Health Care RGUMCH index Russell Mid Cap Health Care RGU200H Index Russell Top 200 Health Care RGUSMS Index Russell 2000 Materials & Processing RGU25M index Russell 2500 Materials & Processing RGUMCM index Russell Mid Cap Materials & Processing RGU200M Index Russell Top 200 Materials & Processing RGUSPS Index Russell 2000 Producer Durables RGU25P index Russell 2500 Producer Durables RGUMCP index Russell Mid Cap Producer Durables RGU200P Index Russell Top 200 Producer Durables RGUSTS Index Russell 2000 Technology RGU25T index Russell 2500 Technology RGUMCT index Russell Mid Cap Technology RGU200T Index Russell Top 200 Technology RGUSUS Index Russell 2000 Utilities (& Telecom) RGU25U index Russell 2500 Utilities (& Telecom) RGUMCU index Russell Mid Cap Utilities (& Telecom) RGU200U Index Russell Top 200 Utilities (& Telecom)

1Q12 12.1% 12.6% 12.5% 12.3% 17.9% 17.0% 16.8% 14.6% 5.9% 7.9% 7.6% 4.4% 5.9% 3.9% 3.4% 3.1% 10.6% 11.6% 13.6% 23.1% 15.4% 15.6% 15.4% 7.5% 13.3% 14.3% 15.2% 9.4% 11.6% 12.6% 12.5% 10.9% 13.8% 17.8% 19.5% 22.5% -1.0% -0.8% -1.6% -0.8%

2Q12 -3.8% -4.5% -4.8% -3.2% -5.8% -6.2% -4.8% -0.3% 3.1% 2.7% 2.3% 0.8% -15.8% -12.8% -10.0% -7.9% -0.3% -1.1% -1.9% -7.5% 4.6% 2.7% 1.6% 1.4% -7.0% -7.1% -3.6% -5.4% -6.5% -7.5% -6.0% -2.9% -8.4% -10.3% -9.7% -7.9% 0.3% 1.0% 5.0% 10.4%

3Q12 4.9% 5.2% 5.1% 6.0% 6.8% 7.4% 7.7% 7.8% 0.8% 1.8% -0.8% 3.6% 8.6% 8.3% 11.0% 9.1% 4.7% 3.7% 3.7% 6.8% 4.4% 7.4% 6.9% 5.9% 10.4% 7.4% 6.6% 4.1% 2.8% 3.3% 4.2% 2.9% 2.0% 2.5% 3.3% 7.2% 6.6% 5.6% 4.4% 1.4%

4QTD 12-Nov -1.9% 0.4% 0.2% 1.4% 0.4% 1.5% -2.0% 0.1% 0.4% 2.0% 3.0% 0.9% 1.8% 1.3% 1.8% 2.8% -1.1% 0.6% 5.2% 3.3% 4.1% 5.1% -2.7% -1.0% -5.6% -1.3% -3.1% -0.8% -0.6% 0.7% -4.6% -5.4% -1.6% -1.0% -0.4% -1.0% -0.4% -0.2% 1.6% -0.7% -8.2% 0.6% -4.2% 2.1% -2.0% 2.7% 0.4% -0.3% 2.7% 1.7% 2.4% 0.5% 2.4% 2.4% -1.6% -0.2% 1.9% 1.1% 3.4% 0.5% 3.7% 2.8% -1.8% -0.6% -2.0% 1.5% -2.2% 1.1% -3.2% 3.0% -7.6% -0.6% -5.4% -3.7% -3.2% -2.9% -1.9% -3.0% -6.1% -4.4%

Since Nov Low (11/15) 2012 YTD 6.8% 10.9% 6.3% 13.3% 4.9% 13.0% 4.8% 13.0% 6.9% 19.1% 6.8% 21.5% 5.0% 21.8% 6.6% 25.5% 5.8% 8.8% 8.8% 18.7% 6.2% 13.7% 5.1% 6.2% 6.5% -8.6% 6.0% -5.0% 4.1% 2.7% 3.3% -1.2% 6.2% 13.7% 5.2% 14.0% 4.2% 15.2% 3.9% 23.5% 6.5% 15.6% 5.7% 22.2% 4.5% 22.8% 4.0% 15.9% 8.8% 19.4% 7.2% 16.9% 6.3% 21.1% 5.5% 6.0% 6.8% 9.1% 6.5% 11.2% 5.4% 14.3% 4.7% 8.9% 7.7% 4.1% 7.1% 5.9% 5.0% 7.9% 5.9% 11.7% 5.5% 0.1% 4.9% 2.4% 4.0% 5.9% 3.5% 4.1%

Source: Credit Suisse Small/Mid Cap US Equity Strategy, Bloomberg, performance through 11/30/2012

2012 Mega Leadership vs. Small Broad Based For 2012 as a whole, we have seen strength in mega cap relative to small cap in most sectors including Consumer Discretionary, Energy, Health Care, Financials, Technology, and Utilities. Small cap has only been strong vs. mega in Consumer Staples and Materials. It is worth noting that mid is beating both small and mega in Energy, Health Care, Materials, Producer Durables, and Utilities.

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03 December 2012

Update On SMID E&P Performance Recently we started tracking the performance of different types of E&P’s within the SMID universe – SMID Oily names (22 names with the highest percentage of oil liquid reserves, based on 2011 reserve data), SMID Gassy names (20 names with the highest percentage of gas reserves based on 2011 reserve data) and SMID Hybrid names (remaining names in the industry that we were able to collect data for). We found that the SMID Oily basket was the best performing basket for November as a whole and was the only group to generated positive returns. This basket is also outperforming for 2012 as a whole. SMID Gassy names lagged both SMID Oily and SMID Hybrid names for November as a whole, but they did outperform the SMID Hybrid basket off the November 15th equity market low. th

Exhibit 6: SMID E&P Basket Performance as of November 30 , 2012

Oily Basket Hybrid Basket Gassy Basket

1Q12 15.2% 8.9% -2.1%

2Q12 -14.1% -23.7% -6.2%

3Q12 2.9% 12.0% 3.9%

4QTD -14.7% -18.3% -24.0%

Nov-12 0.5% -6.0% -10.4%

Since Nov Low (11/15) 2012 YTD 9.6% -6.2% 5.1% -19.3% 6.9% -23.4%

Source: Credit Suisse Small/Mid Cap US Equity Strategy, Bloomberg, performance through 11/30/2012

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03 December 2012

Key Issues For Small Cap Investors High Quality & Low Int’l Worked Best In November For November as a whole, we found that many trades that have worked throughout the second half of 2012 continued to outperform in November. High quality (as defined by high ROE and positive trailing EPS) outperformed low quality, high hedge fund ownership outperformed low ownership and dividend payers outperformed non-dividend payers. But we did find one important reversal last month. Small caps with low international revenue exposure outperformed their peers with high exposure and domestic exposure. Though small caps with high international revenue exposure lagged those with low exposure, they did outperform those with domestic exposure, which we think is evidence that the international trade is resurfacing.

Exhibit 7: Russell 2000 Performance By Quality & Risk Factors Russell 2000 Index - Ranked By ROE (Basket Performance) High ROE (Top Quintile) Low ROE (Bottom Quintile)

1Q12 2Q12 13.12 (3.17) 18.85 (5.64)

3Q12 4QTD 5.15 (0.88) 3.36 (7.15)

Nov-12 1.29 (0.75)

Russell 2000 Index - Ranked By Trailing EPS (Basket Performance) Positive Trailing EPS Negative Trailing EPS

1Q12 2Q12 12.59 (3.30) 17.99 (4.35)

3Q12 4QTD 5.90 (1.45) 3.64 (6.55)

Nov-12 0.51 (0.81)

Russell 2000 Index - Ranked By International Revenue Exposure (Basket Performance) High International (Top 2 Quintiles) Low International (Bottom 3 Quintiles) Domestic High LATAM Exposure (Top Decile) High Asia Exposure (Top Decile) High EMEA Exposure (Top Decile)

1Q12 14.42 14.25 14.37 13.34 15.70 15.29

Russell 2000 Index - Ranked By Hedge Fund Ownership (Basket Performance) High HF Ownership (Top Quintile) Low HF Ownership (Bottom Quintile)

2Q12 (8.55) (3.86) (0.05) (4.85) (8.92) (9.49)

3Q12 2.66 5.37 6.42 10.14 (2.66) 3.60

4QTD (3.42) (1.75) (3.08) (0.30) (8.60) (6.08)

Nov-12 1.01 1.40 (0.43) (1.41) (2.03) (0.93)

1Q12 2Q12 17.22 (3.33) 10.28 (1.78)

3Q12 4QTD 6.50 (2.43) 4.94 (2.74)

Nov-12 0.75 (0.04)

Russell 2000 Index - Ranked By Dividend Yield (Basket Performance) Dividend Payers Non-Dividend Payers

1Q12 2Q12 10.21 (1.24) 16.65 (5.01)

3Q12 4QTD 5.85 (0.74) 4.99 (4.22)

Nov-12 0.23 0.06

Russell 2000 Index - Ranked By ETF Ownership (Basket Performance) High ETF Ownership (Top Quintile) Low ETF Ownership (Top Quintile)

1Q12 2Q12 12.40 (3.57) 14.67 (3.70)

3Q12 4QTD 6.53 (1.72) 2.67 (4.25)

Nov-12 1.14 (0.94)

Russell 2000 Index - Ranked By Short Interest (Basket Performance) 1Q12 2Q12 High Short Interest Levels (Top Quintile) 15.93 (5.62) Low Short Interest Levels (Bottom Quintile) 12.17 (1.22)

3Q12 4QTD 5.08 (4.29) 4.40 (2.40)

Nov-12 0.09 (0.29)

Since Nov Low (11/15) 7.02 9.58 Since Nov Low (11/15) 6.85 8.99 Since Nov Low (11/15) 8.42 7.74 6.87 6.00 8.48 8.40 Since Nov Low (11/15) 7.42 7.36 Since Nov Low (11/15) 6.71 7.88 Since Nov Low (11/15) 7.10 6.95 Since Nov Low (11/15) 8.30 6.48

2012 YTD 14.16 7.63

2012 YTD 13.61 9.30

2012 YTD 3.76 13.73 17.89 18.42 (6.26) 1.53

2012 YTD 17.75 10.55

2012 YTD 14.35 11.42

2012 YTD 13.47 8.56

2012 YTD 10.04 12.89

Source: Credit Suisse Small/Mid Cap US Equity Strategy, Bloomberg, performance through 11/30/2012

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03 December 2012

High Int’l & Low Quality Have Worked Best Since November 15th Within the month of November, we saw several trades reverse within small cap. Since the November 15th equity market low, low quality (as defined by low ROE and negative trailing EPS) has outperformed high quality, non–dividend payers have outperformed dividend payers, and small caps with high international revenue exposure have outperformed small caps with low international revenue exposure and small caps with domestic revenue exposure. All of these trades tend to outperform when risk is on.

High Quality, Domestics Continue To Lead YTD For 2012 as a whole, the safety trades are still outperforming within small cap. High ROE is ahead of low ROE, positive earners are ahead of negative earners (both point to a high quality bias), domestically oriented small caps are head of small caps with both high & low international exposures, small caps with low short interest levels are ahead of those with high short interest levels and dividend payers are ahead of non-dividend payers.

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03 December 2012

Russell 2000 Performance By Fund Ownership Baskets Darlings & Rising Stars Lag In November Though the stocks most popular in small cap funds are showing leadership for 2012 as a whole, they underperformed in November, something we also saw in 2Q12 and October. In the table below, the performance of the Darlings captures the returns of the Russell 2000 stocks most popular in 594 Russell 2000 core, growth, and value benchmarked funds tracked by eVestment and Lipper as of 2Q12 (3Q12 data is not yet available). The performance of the Rising Stars captures the returns of the names that saw the largest increase in ownership in 2Q12. Both Darlings and Rising Stars lagged the Russell 2000 in November. Fringe Favorites, names outside the Russell 2000 that are most widely owned by small cap funds, were the best performing small cap fund basket in November. Exhibit 8: Performance of Russell 2000 Stocks By 2Q12 Ownership Trends

1Q12 R2000 Darlings (Top 25): In R2000, Most Widely Owned By Small Cap Funds Small Funds' Fringe Favorites (Top 25): Ex R2000, Still Widely Owned By Small Cap Funds Small Funds' Rising Stars (Top 25): Small Fund Ownership Rose The Most Small Funds' Fading Stars (Top 25): Small Fund Ownership Fell The Most Little Siblings (Top 20): In R2000, Widely Owned by Mid Cap Funds Cherished Small Cap Cousins (Top 20): In R2000, Widely Owned By Large Cap Growth Funds Russell 2000 Index

Since Nov Low 2Q12 3Q12 4QTD Nov-12 (11/15)

14.1% -4.7%

7.0% -3.4%

14.4% -4.1%

8.2%

2012 YTD

-0.5%

5.5% 12.4%

1.0%

3.5%

6.0% 19.8%

35.7% 11.5%

2.9% -7.2%

-0.2%

7.7% 44.4%

12.0% -16.0%

4.5%

1.6%

2.0%

5.6%

18.1% -5.7%

2.9% -0.7%

1.7%

4.6% 13.8%

17.8% -2.1% 12.1% -3.8%

2.4% -1.6% 4.9% -1.9%

0.7% 0.4%

7.1% 16.1% 6.8% 10.9%

-0.2%

Source: Credit Suisse Small/Mid Cap US Equity Strategy, eVestment, Lipper, Bloomberg, performance through 11/30/2012

Below we highlight the full list of the Darlings – the most popular Russell 2000 stocks in small cap funds. CATM, BRY, GTLS and SGY were the worst performers in November, all down double digits.

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Exhibit 9: Small Cap Funds’ Darlings – Most Widely Owned Names As Of 2Q12

Company Name Hexcel Corp Express Inc Actuant Corporation Cubist Pharmaceuticals Inc CommVault Systems, Inc. Energy XXI (Bermuda) Limited Align Technology Inc Gulfport Energy Corp Stone Energy Corp Berry Petroleum Co Portland General Electric Company Chart Industries Inc. Dana Holding Corporation EMCOR Group Inc Questcor Pharmaceuticals, Inc. Genesee & Wyoming Inc Rosetta Resources, Inc HMS Holdings Corp Netgear Inc Centene Corp Par Pharmaceutical Companies Inc Finish Line Inc EnerSys Portfolio Recovery Associates Inc. Cardtronics Inc. Robbins & Myers Inc

Ticker HXL EXPR ATU CBST CVLT EXXI ALGN GPOR SGY BRY POR GTLS DAN EME QCOR GWR ROSE HMSY NTGR CNC PRX FINL ENS PRAA CATM RBN

Sector Ind CD Ind HC Tech Ene HC Ene Ene Ene Uts Ind CD Ind HC Ind Ene HC Tech HC HC CD Ind Ind Tech Ind

Industry Aerospace & Defense Specialty Retail Machinery Biotechnology Software Oil, Gas & Cons Fuels HC Equip & Suppli Oil, Gas & Cons Fuels Oil, Gas & Cons Fuels Oil, Gas & Cons Fuels Electric Uts Machinery Auto Components Construction & Engineering Pharmaceuticals Road & Rail Oil, Gas & Cons Fuels HC Providers & Servic Communications Equip HC Providers & Servic Pharmaceuticals Specialty Retail Electrical Equip Commercial Svcs & Supplies IT Svcs Machinery

Market Price Cap 25.85 2,578 14.93 1,295 28.77 2,097 40.61 2,615 66.36 3,018 31.68 2,511 27.39 2,229 38.04 2,120 20.73 1,026 31.11 1,686 27.03 2,042 60.48 1,815 14.18 2,100 32.85 2,186 25.90 1,514 72.95 3,421 44.94 2,361 23.17 2,014 34.86 1,334 43.91 2,267 NA NA 20.63 1,074 34.84 1,689 98.82 1,668 22.94 1,020 59.40 2,508

Nov 2012 Perf 1.13 34.14 1.88 (5.34) 6.40 (4.29) 3.11 14.65 (12.12) (19.22) (1.35) (14.56) 7.75 2.15 1.65 0.66 (2.39) 0.22 (1.83) 15.61 NA (0.84) 1.04 (5.57) (19.25) 0.20

Total # Total # Total # Total # R2000 R2000 R2000 Small Cap Core Growth Value Funds Funds Funds Funds That That That That Own Own Own Own 2012 Stock Stock Stock Chg vs YTD Target Stock Perf CS Analyst Rating Price (2q12) (2q12) (2q12) (2q12) 1q12 6.77 John McNulty OUTPERFORM 33.00 27 73 12 112 -8 (25.13) #N/A #N/A #N/A 34 41 22 97 -2 26.80 #N/A #N/A #N/A 40 25 30 95 -1 2.50 #N/A #N/A #N/A 33 60 2 95 -1 55.34 Philip Winslow NEUTRAL 55.00 32 61 1 94 7 (0.63) Mark Lear OUTPERFORM 46.00 33 49 12 94 18 15.45 Glen Santangelo NEUTRAL 30.00 31 59 3 93 20 29.17 Mark Lear OUTPERFORM 49.00 33 48 12 93 -1 (21.42) #N/A #N/A #N/A 47 24 20 91 0 (25.96) Mark Lear UNDERPERFORM 34.00 26 29 33 88 -3 6.88 #N/A #N/A #N/A 32 1 55 88 -2 11.86 #N/A #N/A #N/A 22 62 3 87 -1 16.71 #N/A #N/A #N/A 38 22 27 87 0 22.53 #N/A #N/A #N/A 39 12 36 87 -5 (37.71) #N/A #N/A #N/A 29 53 5 87 0 20.42 Allison Landry OUTPERFORM 84.00 31 39 16 86 0 3.31 Mark Lear OUTPERFORM 65.00 30 51 5 86 -13 (27.55) #N/A #N/A #N/A 21 64 0 85 -15 3.84 #N/A #N/A #N/A 40 34 11 85 -6 10.91 Ralph Giacobbe NEUTRAL 45.00 38 34 12 84 -15 NA #N/A #N/A #N/A 37 19 28 84 -7 6.97 Seth Sigman NEUTRAL 23.00 32 24 27 83 -6 34.15 #N/A #N/A #N/A 37 13 32 82 -6 46.36 #N/A #N/A #N/A 36 40 6 82 9 (15.23) #N/A #N/A #N/A 26 48 6 80 -3 22.35 #N/A #N/A #N/A 35 25 20 80 -3

Source: Credit Suisse Small/Mid Cap US Equity Strategy, Bloomberg, price as of 11/30/2012

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Fund Manager Track Records vs. Benchmark Performance Most Small Cap Core & Value Funds Outperform In November, But Most Are Still Struggling YTD We are often asked how small cap fund managers are performing relative to their benchmarks. We track these statistics using the list of mutual funds tracked by Lipper, but we place them into our own categories sorted by specific benchmark. We then use Bloomberg to track the performance of the individual funds relative to the price and total return indices. Our data set differs a bit from similar stats tracked by other strategists due to our scrubbing, but we think it is important to examine SMID and micro cap benchmarked funds separately from small cap benchmarked funds. Based on this data set, we find that most small cap core and value funds (though not growth funds) beat their benchmarks for the month, similar to what we saw in October. When comparing fund performance to price return benchmark indices, most Russell 2000 core and Russell 2000 value funds are now beating their benchmark YTD. However, when one looks at fund performance compared to total return indices, small cap funds are still struggling for 2012 as a whole, something that also appears to be the case for SMID, mid and large cap funds as well. Exhibit 10: Percent Of Funds Beating Their Benchmark (vs Price Return Index) % Beating (Price Return) # Funds 2011 Jan-12 Feb-12 Mar-12 1Q12 Apr-12 May-12 Jun-12 2Q12 Jul-12 Aug-12 Sep-12 3Q12 Oct-12 Nov-12 Russell 2000 Core 176 52% 39% 78% 38% 51% 66% 40% 18% 31% 73% 49% 36% 60% 72% 74% Russell 2000 Growth 109 36% 36% 86% 59% 65% 74% 24% 22% 27% 66% 51% 46% 62% 53% 35% Russell 2000 Value 90 64% 49% 84% 16% 54% 69% 36% 21% 29% 72% 47% 22% 44% 66% 84% Russell 2500 Core 45 43% 49% 53% 47% 47% 38% 22% 29% 22% 67% 36% 32% 41% 42% 58% Russell 2500 Growth 23 41% 22% 65% 74% 61% 61% 39% 26% 43% 57% 57% 35% 43% 57% 48% Russell 2500 Value 14 27% 93% 50% 50% 71% 43% 29% 21% 21% 50% 50% 29% 50% 43% 71% Russell Mid Cap Core 43 52% 51% 65% 47% 49% 44% 33% 28% 30% 28% 51% 47% 33% 56% 59% Russell Mid Cap Growth 83 25% 40% 70% 59% 60% 42% 42% 57% 48% 20% 69% 43% 29% 50% 32% Russell Mid Cap Value 64 34% 75% 73% 55% 77% 56% 33% 19% 22% 45% 67% 49% 67% 31% 87% Russell 1000 Core 70 35% 50% 57% 21% 43% 40% 43% 35% 41% 51% 64% 39% 42% 82% 65% Russell 1000 Growth 168 17% 71% 89% 68% 84% 29% 20% 41% 16% 18% 88% 77% 68% 33% 77% Russell 1000 Value 157 35% 78% 71% 34% 69% 55% 25% 12% 22% 55% 78% 18% 59% 50% 70% Russell Microcap 19 47% 16% 63% 42% 37% 53% 21% 11% 21% 28% 39% 41% 47% 82% 38% *performance measured against price return index.

4QTD 2012 78% 52% 44% 43% 84% 55% 51% 26% 38% 48% 50% 36% 61% 37% 44% 45% 66% 66% 83% 32% 57% 67% 69% 56% 56% 31%

Source: Credit Suisse Small/Mid Cap US Equity Strategy, Bloomberg, Lipper, price as of 11/30/2012

Exhibit 11: Percent Of Funds Beating Their Benchmark (vs Total Return Index) % Beating (Total Return) # Funds 2011 Jan-12 Feb-12 Mar-12 1Q12 Apr-12 May-12 Jun-12 2Q12 Jul-12 Aug-12 Sep-12 Russell 2000 Core 176 39% 37% 74% 32% 45% 64% 37% 14% 28% 72% 42% 30% Russell 2000 Growth 109 34% 35% 86% 57% 63% 74% 22% 19% 26% 64% 50% 42% Russell 2000 Value 90 52% 48% 80% 13% 44% 63% 27% 14% 19% 70% 38% 18% Russell 2500 Core 45 18% 49% 49% 36% 36% 33% 20% 22% 16% 67% 25% 30% Russell 2500 Growth 23 32% 22% 61% 74% 57% 61% 39% 22% 43% 57% 52% 26% Russell 2500 Value 14 9% 86% 43% 43% 64% 36% 21% 7% 7% 50% 50% 21% Russell Mid Cap Core 43 29% 51% 58% 28% 42% 42% 30% 21% 19% 23% 44% 35% Russell Mid Cap Growth 83 20% 40% 66% 55% 48% 42% 42% 57% 45% 16% 65% 34% Russell Mid Cap Value 64 16% 73% 64% 39% 73% 52% 17% 14% 10% 44% 59% 38% Russell 1000 Core 70 21% 43% 43% 17% 34% 39% 34% 32% 25% 38% 46% 30% Russell 1000 Growth 168 6% 70% 84% 64% 80% 24% 15% 35% 12% 16% 84% 68% Russell 1000 Value 157 20% 74% 57% 25% 60% 45% 17% 6% 12% 49% 63% 14% Russell Microcap 19 47% 16% 58% 42% 32% 42% 21% 11% 16% 28% 39% 29% *performance measured against total return index

3Q12 Oct-12 Nov-12 44% 69% 71% 58% 51% 31% 35% 61% 83% 36% 42% 53% 39% 52% 48% 36% 43% 64% 28% 51% 54% 23% 49% 22% 48% 25% 74% 24% 74% 48% 46% 28% 71% 36% 35% 55% 47% 82% 38%

4QTD 74% 39% 80% 40% 29% 50% 49% 40% 49% 63% 45% 53% 56%

2012 39% 34% 35% 5% 33% 14% 24% 30% 26% 9% 42% 16% 31%

Source: Credit Suisse Small/Mid Cap US Equity Strategy, Bloomberg, Lipper, price as of 11/30/2012

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Please see exhibit 12 for a list of companies mentioned

Disclosure Appendix Important Global Disclosures I, Lori Calvasina, 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. As of October, 2 2012 Analysts’ stock rating 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 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. 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; Australia, New Zealand are, and prior to 2nd October 2012 U.S. and Canadian ratings were 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. 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 1015% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -1015% levels in the Neutral stock rating definition, respectively. 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’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight: The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight: The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight: The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors. Credit Suisse’s distribution of stock ratings (and banking clients) is: Global Ratings Distribution Outperform/Buy* 42% (53% banking clients) Neutral/Hold* 40% (47% banking clients) Underperform/Sell* 15% (43% banking clients) Restricted 3% *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.

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November 2012 In A Nutshell.doc