Volatility Rising: the Growth of an Alternative Asset Class

CONFIDENTIAL. For institutional and qualified purchaser use only. Not for redistribution or use with the general public. These materials do not constitute an offer to sell or a solicitation of an offer to buy securities.

Volatility Rising: The Growth of an Alternative Asset Class

Stuart Rosenthal, Director Volaris Volatility Management Group Credit Suisse Securities (USA) LLC

February 26, 2008

This material has been prepared by Credit Suisse Securities (USA) LLC (“Credit Suisse”) on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. Credit Suisse has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information.

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This material should not be viewed as a current or past recommendation or a solicitation of an offer to buy or sell any securities or investment products or to adopt any investment strategy.

The reader should not assume that any investments in companies, securities, sectors, strategies and/or markets identified or described herein were or will be profitable and no representation is made that any investor will or is likely to achieve results comparable to those shown or will make any profit or will be able to avoid incurring substantial losses. This informational report does not constitute research and may not be used or relied upon in connection with any offer or sale of a security. Investing entails risks, including possible loss of some or all of the investor’s principal. The investment views and market opinions/analyses expressed herein may not reflect those of Credit Suisse Group as a whole and different views may be expressed based on different investment styles, objectives, views or philosophies.

The charts, tables and graphs contained in this document are not intended to be used to assist the reader in determining which securities to buy or sell or when to buy or sell securities.

Benchmarks are used solely for purposes of comparison and the comparison does not mean that there will necessarily be a correlation between the returns described herein and the benchmarks. There are limitations in using financial indices for comparison purposes because, among other reasons, such indices may have different volatility, diversification, credit and other material characteristics (such as number or type of instrument or security).

Certain information contained in this document constitutes “Forward-Looking Statements” (including observations about markets and industry and regulatory trends as of the original date of this document), which can be identified by the use of forward-looking terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe”, or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties beyond our control, actual events, results or performance may differ materially from those reflected or contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on such statements. Credit Suisse has no obligation to update any of the forward-looking statements in this document.

Structured securities, derivatives and options are complex instruments that are not suitable for every investor, may involve a high degree of risk, and may be appropriate investments only for sophisticated investors who are capable of understanding and assuming the risks involved. Supporting documentation for any claims, comparisons, recommendations, statistics or other technical data will be supplied upon request. Please read the Options Clearing Corporation's disclosure document . Because of the importance of tax considerations to many option transactions, the investor considering options should consult with the investor’s tax advisor as to how taxes affect the outcome of contemplated options transactions. The strategies mentioned here may help to decrease the risk of your investments, however, they may also limit the upside potential of your investments. For more information regarding these risks, please contact us.

Risks:

!Call or Put Purchasing: The risk of purchasing a call/put is that you will lose the entire premium paid.

!Uncovered Call Writing: The risk of selling an uncovered call is unlimited and may result in losses significantly greater than the premium received.

!Uncovered Put Writing: The risk of selling an uncovered put is significant and may result in losses significantly greater than the premium received.

!Call or Put Vertical Spread Purchasing (same expiration month for both options): The basic risk of affecting a long spread transaction is limited to the premium paid when the position is established.

!Call or Put Vertical Spread Writing (same expiration month for both options): The basic risk of effecting a short spread transaction is limited to the difference between the strike prices less the amount received in premiums.

!Call or Put Calendar Spread Purchasing (different expiration months and short must expire prior to the long): The basic risk of effecting a long calendar spread transaction is limited to the premium paid when the position is established.

IRS Circular 230 Notice: Any tax statement herein regarding any U.S. federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding any U.S. federal tax penalties. Any such statement herein was written to support the marketing or promotion of the transaction(s) or matter(s) to which the statement relates. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent advisor.

1. Volatility as an alternative asset class 2. Volatility strategies & products 3. Volaris Volatility Management Group

• Volatility is a priced risk factor * • Non-diversifiable • Measurable • Quoted • Tradable

• Intrinsic Worth • An option-implied forecast of future underlying asset volatility • Sell [buy] volatility if you believe it trades rich [cheap]

• Perishable • Its value converges to zero at expiration

• Transaction costs are falling • Electronic trading • Penny-wide markets

• Risks • Asymmetric payoff • Negative carry • Liquidity

* See: 'Fear and the Fama-French Factors' by R. Durand, D Lim & JK Zumwalt, 2007, www.ssrn.com, #965587

Negative Correlation With Equity Market High Correlation With Credit Spreads • Potential risk reduction • Hedge exposure to IG or HY spreads • Hedging vehicle for equity portfolios • Relative value opportunity set • Relatively inexpensive portfolio insurance • e.g. sell VIX* & buy credit risk • Cheaper and simpler alternative to a protective put

Negative Correlation With Other Assets Cyclical Opportunities • Seeks to improve return • VIX is mean-reverting • Seeks to reduce risk • VIX may also trend and cluster

* VIX is an options market implied forecast of 30 day S&P 500 volatility

Negative Correlation With S&P 500* High Correlation With Credit Spreads

80 Monthly Rets, 1990-2006 60 3.0

45 % IG Spread VIX 2.5 40 IG Spread 35 2.0 20 25 1.5

0 VIX %

VIX % Ret VIX % 1.0 15 -20 0.5 -40 5 0.0 -15 -10 -5 0 5 10 1990 1993 1996 1999 2002 2005 2006 S&P 500 % Ret

Negative Correlation With Other Indices * Cyclical Opportunities 0.0 45 Av g VIX -0.2 35 VIX 25 -0.4 VIX % 15 -0.6 5 Monthly1990-2006 Obs., Correlation to VIX Correlation to MSCI 1990 1993 1996 1999 2002 2005 2006 US REIT Lehman Equity S&P 500 S&P Aggregate Rusl 2000 MSCI Emg * See appendix for definition of each index S&P GSCI S&P MSCI EAFE Source: Credit Suisse Securities (USA) LLC, Bloomberg. All data was obtained from publicly available information, internally developed data and other third party sources believed to be reliable. Credit Suisse has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information.

The growth in volatility-linked 4,000 assets has accelerated

2,000

g n s s i d d p a n Total Notional Outstanding ($Bil) Volatility US Equity a r u s s s w T F e n n r S c x e io x io i e t u t t e n i t e c d r u p d p o n n I W F O In O a tr - i c y X X F r e M I I IX T a l X u V V V E V E B B

1990 1993 1997 1999 2001 2003 2005 2006

Sources: Credit Suisse Securities (USA) LLC, Bank for International Settlements (BIS) and Chicago Board Options Exchange (CBOE). All data was obtained from publicly available information, internally developed data and other third party sources believed to be reliable. Credit Suisse has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information.

• Alternative investments represent a small but growing proportion of global institutional assets Asset Allocation Among • Expect a greater allocation to Global Institutions, 2006 alternative investments in the years ahead 60 • 20-40% of institutions expect to 'significantly' increase allocations 50 to alternatives by 2009

• Volatility-based products may 40 7% Average US Investors benefit from increased Allocation institutional interest in alternative UK 30 strategies Cont. Europe

% Weight % Japan 20

0 Domestic Fixed Income Int'l Equity Alternative Cash & Equity Inve stme nts* Equivalents Source: Greenwich Associates 2006 global survey of 2400+ institutions with $14+ trillion in AUM. All data was obtained from publicly available information, *Hedge funds, private equity & real estate internally developed data and other third party sources believed to be reliable. Credit Suisse has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information. assets

• Volatility quoted in the options market (implied volatility) can be expensive or cheap relative to future asset volatility

• The spread between implied volatility and subsequent realized volatility is not often zero

• An investor can attempt to implement a view on perceived mispricing of this spread

•Delta-neutral straddles/strangles •Variance swaps • Risks •Vega risk – implied volatility may rapidly change •Gamma risk – realized volatility may differ from implied volatility

The information provided herein is confidential and may not be distributed to others without the prior written consent of Credit Suisse. These materials do not constitute an offer to sell securities or a solicitation of an offer to buy securities. This presentation may not be altered except by Credit Suisse. Please see 9 “Important Legal Information” on pages 1-2 for important disclosures regarding the data and information contained and the views and opinions expressed in this material. Volatility Strategy 2: Arbitrage • Correlated assets may occasionally experience a divergence in their underlying volatilities

• A relative value approach to volatility investing •Volatility Surface •Pairs •Correlation / Dispersion •Cross-asset

• Transactions Costs • Margin / Collateral • Rebalancing / Scalping • Technology • Operations • Risks •Correlation •Liquidity

AUM $Mil 7/31/2007

1 ADMC Absolute Return Strategies Offshore, Ltd 79 2 ADMC Absolute Return Strategies, LP 14 3 CC Athena OS Fund Ltd (EURO Retail Sub Class) 92 4 CC Athena OS Fund Ltd. (EURO Inst. Sub Class) 92 5 CC Athena OS Fund Ltd. (USD) 92 6 Coastwise Premium Appreciation Fund, LP 2 7 Innovative Options Fund, LP 41 8 Innovative Options Offshore, Ltd. 19 9 Parallax Fund, L.P. 76 10 Rosen Capital Partners 32 11 Rosen Offshore Limited 14 12 Snow Fund One, LLC 31 13 Titan Asia Volatility Fund, Ltd. 36 14 Titan Global Relative Value Volatility Fund 80 15 Titan Global Return Fund LP 80 16 Titan Global Volatility Fund - Class M 65 17 Titan Relative Value Volatility Fund LP 106 18 Titan Volatility Fund LP (US) 106 $1,057

Source: Barrons, Aug 27, 2007. All data was obtained from publicly available information, internally developed data and other third party sources believed to be reliable. Credit Suisse has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information.

The information provided herein is confidential and may not be distributed to others without the prior written consent of Credit Suisse. These materials do not constitute an offer to sell securities or a solicitation of an offer to buy securities. This presentation may not be altered except by Credit Suisse. Please see 12 “Important Legal Information” on pages 1-2 for important disclosures regarding the data and information contained and the views and opinions expressed in this material. Volatility Strategy 3: Volatility Overlay • Overlay an equity portfolio with short call options or variance swaps • A source of both alpha potential and risk reduction • Ideal when equity risk premiums are not considered high • Risks •Equity risk -- loss due to downward move •Opportunity cost -- options may expire it-the-money

IPO $ Option-Linked US Investment Offerings Ticker IPO Date MM

1 Madison/Claymore Covered Call Fund MCN 7/28/2004 260 2 First Trust/Fiduciary Asset Management Covered Call Fund FFA 8/26/2004 370 3 Eaton Vance Enhanced Equity Income Fund I EOI 10/27/2004 750 4 Nuveen Equity Premium Fund JPZ 10/27/2004 676 5 Morgan Stanley Strategic Total Return Securities (STARS linked to BXM Index) MBS 11/23/2004 120 6 Nuveen Equity Premium Opportunity JSN 1/27/2005 1,300 7 Eaton Vance Enhanced Equity Income Fund II EOS 1/27/2005 875 8 Advent/Claymore Enhanced Growth & Income Fund LCM 1/27/2005 251 9 NFJ Dividend Interest & Premium Strategy Fund NFJ 2/28/2005 2,475 10 Morgan Stanley 8% Targeted Income Strategic TotRet / BXM Notes MBJ 3/24/2005 320 11 S&P 500 Covered Call Fund BEP 3/29/2005 312 12 ING Global Equity Dividend and Premium Opportunity Fund IGD 3/29/2005 1,700 13 Gabelli Gold Natural Resources & Income Trust GGN 3/29/2005 332 14 Blackrock Health Sciences Trust BME 3/29/2005 188 15 Eaton Vance Tax-Managed Buy-Write Inc. Fund ETB 4/27/2005 450 16 Fiduciary/Claymore Dynamic Equity Fund HCE 4/27/2005 107 17 Dow 30 Premium & Dividend Income Fund Inc DPD 4/27/2005 225 18 Nicholas-Applegate International & Premium Strategy Fund NAI 4/27/2005 225 19 Madison Strategic Sector Premium Fund MSP 4/27/2005 110 20 Enhanced Equity Yield Fund EEF 5/4/2005 425 21 Nuveen Equity Premium Advantage Fund JLA 5/26/2005 533 22 PIMCO Global StocksPLUS & Income Fund PGP 5/26/2005 233 23 BlackRock Global Opportunities Equity Trust BOE 5/26/2005 300 24 Eaton Vance Tax-Managed Buy-Write Opportunities Fund ETV 6/27/2005 1,110 25 Enhanced Equity Yield & Premium Fund ECV 6/28/2005 320 26 ML 8% S.R. BXM Notes BXA 7/8/2005 140 27 Morgan Stanley 8% Targeted Income STARS on CBOE BXD Index DBY 7/25/2005 140 Source: Bloomberg & Closed End Fund Association (CEFA). All data was obtained from publicly available information, internally developed data and other third party sources believed to be reliable. Credit Suisse has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information.

28 Morgan Stanley STARS on CBOE BXD Index DBZ 7/25/2005 30 29 Small Cap Premium & Dividend Income Fund RCC 7/26/2005 340 30 Goldman Sachs US Equity Div & Prem Fund GSPAX 7/28/2005 11 31 BlackRock Enhanced Dividend Achievers Trust BDJ 8/25/2005 951 32 Enhanced S&P 500 Covered Call Fund BEO 9/28/2005 173 33 Eaton Vance Tax-Managed Global Buywrite ETW 9/28/2005 2,000 34 Citigroup Funding, Inc. BXM PISTONS PBN 9/28/2005 33 35 BlackRock World Investment Trust BWC 10/25/2005 704 36 Evergreen Intl Balanced Income Fund EBI 10/27/2005 345 37 ING Global Advantage & Premium Opportunity Fund IGA 10/27/2005 345 38 ML 8% Monthly Income Strategic Notes on CBOE BXD Index CQP 11/3/2005 42 39 Nuveen Equity Prem & Growth JPG 11/23/2005 330 40 MS 8% Targeted STARS on CBOE BXM Index BWN 12/23/2005 15 41 ML 8% S Return Notes Linked to BXM Index BXU 12/29/2005 19 42 Eaton Vance Tax-Managed Diversified Equity Income Fund ETY 11/28/2006 2,620 43 Eaton Vance Tax-Mgd Global Divers Equity Income Fund EXG 2/23/2007 5,500 44 Nicholas-Applegate Eq & Conv. Income Fund NIE 2/23/2007 508 45 Nasdaq Premium Income & Growth QQQX 3/9/2007 348 46 Nuveen Core Eq Alpha Fund JCE 3/28/2007 310 47 Dow 30 Enhanced Premium & Income DPO 5/24/2007 500 48 Blackrock Intl Growth & Income BGY 5/29/2007 1,970 49 Nuveen Tax-Advantaged Div Growth JTD 6/27/2007 320 50 Delaware Enhanced Global Div & Income DEX 6/29/2007 235 51 Cohen & Steers Global Income Builder Fund INB 7/25/2007 450 52 Eaton Vance Risk-Mgd Diversified Eq Income Fund ETJ 7/26/2007 1,300 53 Cohen & Steers Global Income Builder CNS 7/26/2007 450 54 Nicholas-Applegate Global Eq & Convertible Income Fund NGZ 9/26/2007 175 55 John Hancock Tax-Advantaged Global Shareholder Yield Fund HTY 9/25/2007 175 56 ING International High Dividend Equity Income Fund IID 9/25/2007 163 57 BlackRock EcoSolutions Investment Trust BQR 9/25/2007 235 $34,843

Source: Bloomberg & Closed End Fund Association (CEFA). All data was obtained from publicly available information, internally developed data and other third party sources believed to be reliable. Credit Suisse has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information.

• Listed Market •Options •Volatility Futures & Options Demand for Global Equity Volatility- •Buy-Write Products Based Products has Grown

12 • OTC Market North America •Options 10 Europe Variance Swaps • 8 Asia •Correlation Swaps 6 Other

• Volatility Manager 4 •Separate Account 2 •Hedge Fund Notional Outstanding ($Tril) 0 1998* 2000 2002 2004 2006

* Information prior to 1998 is not available

Source: Bank for International Settlements (BIS) Quarterly Review, 2006. All data was obtained from publicly available information, internally developed data and other third party sources believed to be reliable. Credit Suisse has not sought to independently verify information obtained from public and third party sources and makes no representations or warranties as to accuracy, completeness or reliability of such information.

• Specialized volatility management group within the Alternative Investment division at Credit Suisse

• Dedicated team of trading, portfolio management, marketing, and operations professionals with extensive expertise in listed and OTC options markets

• Transparent and disciplined methodology and process supported by proprietary research, technology and risk management capabilities

• Offerings include: Volatility • Customized volatility management overlay programs for Specialists clients looking to enhance existing beta portfolios (indices, ETFs, portfolios, single stock or combinations Investor thereof) Advisor • Volatility-based absolute and relative return strategies customized to specific return, risk or beta targets

Focused Exclusively On Providing Volatility Management Solutions

• We believe: • The quest for alpha will lead to higher allocations to alternative investments such as volatility • Volatility is an investable, alternative asset class • Volatility exhibits negative correlation with traditional assets • Powerful diversification strategy • Volaris focuses exclusively on volatility management • Systematic, transparent products and services

• The Standard & Poors (S&P) 500 is an equity index of 500 large capitalization companies based in the US. It is published by Standard & Poors, a division of the McGraw-Hill Companies. • The Russell 2000 is an is a equity index of 2000 small capitalization companies based in the US. It is published by the Russell Investment Group. • The MSCI European, Australia and Far East (EAFE) is an equity index of large capitalization companies based outside of the US. It is published by MSCI Barra which is majority-owned by Morgan Stanley. • The MSCI US Real Estate Investment Trust (REIT) is an index of equity REITs residing in the US. It is published by MSCI Barra which is majority- owned by Morgan Stanley. • The Lehman Aggregate Bond Index is a broad-based US fixed income index. It is published by Lehman Brothers Holdings Inc. • The Standard & Poors (S&P) Goldman Sachs Commodity Index (GSCI) is global index of commodity instruments. It is published by Standard & Poors, a division of the McGraw-Hill Companies.