Saxo Asset Allocation - 20090904

September 4, 2009

Saxo Asset Allocation – Outright Bearish Scenario Allocation Our Asset Allocation Model has shifted its scenario from “Outright Bearish” to “Moderately Bearish” for the first time in more than a year. The reason is less decelerating global economy (according to our Global Business Cycle Indicator) and that means that the overall allocation has changed and now recommends a net long (however small) position in equities. Asset Allocation Weights MSCI World MSCI EM 12% 8%

Scenario Moderately Bearish

Commodities 0%

Bonds 80%

Portfolio In order to directly or synthetically create the recommended exposure in the present scenario, an investor should allocate capital as follows:

Position Long Long Long ** Long **

Exposure 12,0% 8,0% 40,0% 40,0%

Portfolio Replication* Name (Ticker) iShares MSCI World (IQQW:xetr) iShares MSCI EM (IEMM:xams) iShares 1-3 Year US Treasuries (SHY) iShares 1-3 Year EUR Treasuries (IBCA)

# (1 mio. EUR capital) 10634 3416 6807 2944

SAXO BANK RESEARCH David B. Karsbøl Chief Economist [email protected] John J. Hardy FX Strategist [email protected] Christian T. Blaabjerg Equity Strategist [email protected] Mads Koefoed Market Strategist [email protected] Robin B. Sjöback Market Strategist [email protected]

*) A EUR-denominated investor should get rid of the implicit currency exposure in the portfolio by buying EURUSD worth 40% of the capital allocated to the portfolio. For an investor with a 1 million EUR portfolio, this would equal 400,000 EURUSD. **) In order to yield the results in the back-testing, and investor should allocate capital to the bonds mentioned on page 3, but for smaller clients the iShares Bond Funds should give a sufficient return.

Performance Our benchmark is an index consisting of returns from 33% EFFA +10 year Treasuries, 33% MSCI World and 33% CS Tremont Long/Short Equities. Given the back-testing since 1992 and the historical aggregated volatility of the individual allocations of the portfolio in the present scenario, the following risk measures and expected returns apply for the suggested portfolio:

Scenario Outright Bearish

Historical Performance Metrics Sharpe Ratio VaR (95%-level) Std.dev (%) 0,53 3.35 2,03

Exp. Return (%) 1.08

For important disclosures, refer to the Disclosures Section, located at the end of this document.

Saxo Bank. Serious Trading. Worldwide.

Saxo Asset Allocation - Outright Bearish Scenario Global Business Cycle Indicator Our global business indicator in an expression of how much global economic activity is accelerating or decelerating. It seems that the pace with which the global economic activity is decelerating is petering out. However, it is still contracting dramatically. In our Asset Allocation Model, this scenario is characterized as “Outright Bearish”.

Allocation Weights The capital allocation weights depend on the economic scenario. The current scenario is “outright bearish”, since the global economy is decelerating at a record pace. Deflation – or at least disinflation – is a likely outcome in this scenario and therefore the model is recommending a heavy exposure to bonds while shorting business cycle sensitive asset classes like especially EM stocks and Commodities and Stocks in general.

Scenario Outright Bullish Moderately Bullish Moderately Bearish Outright Bearish

MSCI World 30% 43% 12% -20%

Asset Allocation Weights MSCI EM 5% 7% 8% -5%

Commodities 45% 11% 0% -5%

1-3-Year Bonds *** 20% 40% 80% 70%

*** Note that we have changed from the suggested +10-year maturity bonds to a maturity no longer than 3-years, as we are fearing that irresponsible fiscal policies will lead to a bond market dislocation – hurting the long-maturity bonds the most.

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Saxo Asset Allocation - Outright Bearish Scenario Backtesting and benchmarks Our backtesting (since 1992) of the asset allocation model is done via MSCI World, MSCI Emerging Markets, The CRB Commodities Index and +10-Year Bloomberg/Effa Government Bond TR Benchmark Indices. The backtesting indicates that the model is able to yield a return of 10.1% per year (excluding dividends) with an average Sharpe ratio of 1.4. Backtesting Results for Saxo Bank Asset Allocation Model: 10.1% p.a.

Bond Model Our Bond Model is based on national sub-indices of our Global Business Cycle Indicator. The overall idea is to buy government fixed income in the country with the most rapidbly deteriorating economy (from a rate perspective). The back-testing shows that this strategy is superior to the benchmark (an equal weighted index of returns for 10-year treasuries in the US, the Euro-Zone, Japan, UK, Canada, Switzerland, Norway, Sweden, New Zealand and Australia).

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Saxo Asset Allocation - Outright Bearish Scenario The Bond Model is backtested using the Bloomberg/EFFA Bond Indices. In the current environment, it recommends the Norwegian Govt 7-10 Year Treasuries (Norway doesn’t hardly have any government debt and no maturities longer than 10 years). To approximate that current exposure an investor should buy: 72% in NGB 4.250 5/19/17 28% in NGB 4.500 5/22/19 Since the model is looking for the most decelerating country, the NOK might be under pressure. Therefore, it is recommended that investors with e.g. a EUR denominated account buy equal amounts of EURNOK to get rid of the implicit currency exposure from buying the bonds.

Month aug-09 jul-09 jun-09 maj-09 apr-09

AUD 0,36 0,24 0,24 0,15 -0,15

CAD -0,30 -0,43 -0,50 -0,70 -0,98

Bond Model Output: Where to Invest CHF EUR GBP JPY NOK 0,05 0,17 -0,14 0,17 -0,35 -0,20 0,06 -0,24 0,05 -0,34 -0,34 -0,07 -0,31 -0,15 -0,40 -0,55 -0,20 -0,42 -0,45 -0,51 -0,77 -0,48 -0,57 -0,72 -0,74

NZD 0,32 0,15 -0,05 -0,33 -0,54

SEK 0,16 0,09 0,04 -0,12 -0,29

USD 0,16 0,06 -0,11 -0,31 -0,57

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Saxo Asset Allocation - Outright Bearish Scenario General These pages contain information about the services and products of Saxo–Bank A/S (hereinafter referred to as “Saxo Bank”). The material is Germany HDAX provided for informational purposes only without regard to any particular user's investment objectives, financial situation, or means. Hence, no information contained herein is to be construed as a recommendation; or an offer to buy or sell; or the solicitation Gainers Losers of an offer to buy or sell any security, financial product, or instrument; or to participate in any particular trading strategy in any jurisdiction in which such an offer or solicitation, or trading strategy would Saxo Bank does Name 1D be illegal.MTD YTD not guarantee Namethe accuracy or completeness 1Dof any information MTD or analysis YTD to any customer person for the accuracy AG of the information or any market 32,66% quotations supplied TELEsupplied. ATLAS NVSaxo Bank shall not be liable #VALUE! #VALUE! or third #VALUE! VOLKSWAGEN -7,53% 136,07% through this service to a customer, nor for any delays, inaccuracies, errors, interruptions or omissions in the furnishing thereof, for any direct or E.ONconsequential AG #VALUE! #VALUE! #VALUE! PFLEIDERER AG-REGISTERED -6,49% or for any -15,89% -49,44% damages arising from or occasioned by said delays, inaccuracies, errors, interruptions or omissions, discontinuance of SHSof any the service. Saxo BankSHARES accepts no8,94% responsibility-27,53% or liability for the contents to this site or-48,10% not, or any -67,02% DAIMLER AG-REGISTERED -61,42% LEONI AGother site, whether linked-6,02% consequences from your acting upon the contents of another site. Opening this website shall not render the user a customer of Saxo Bank nor DEUTSCHE POSTBANK AG 8,12% -16,09% -63,18% PRAKTIKER BAU-UND -5,91% -31,28% -78,14% shall Saxo Bank owe such users any duties or responsibilities as a result thereof. HEIMWERK A HYPO REAL ESTATE HOLDING 7,97% 50,12% -82,74% AUSTRIA TECHNOLOGIE & -5,88% -31,82% -69,98% SYSTEM

Analysis Disclosure & Disclaimer Index Technicals

Austria – ATX

The pivot support and resistance levels and the trend indications displayed below are provided forLosers trading purposes. Gainers

Risk warning

Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information Name MTDshould not YTD Name 1Dguarantee or MTD YTD herein contained. The contents of1D this publication be construed as an express or implied promise, implication by Saxo BOEHLER-UDDEHOLM #VALUE! ERSTE GROUP BANKcan AG or will be limited. -8,21% Trades-36,08% Bank that clients will profit from the strategies0,00% herein or that6,66% losses in connection therewith in accordance-54,60% with the recommendations in an analysis, 3,17% especially leveraged foreign exchange tradingAG and investment very INTERCELL AG -8,44% investments -20,19%such as MAYR-MELNHOF KARTON -6,76% in derivatives, -10,61% can be -35,03% speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated. VOESTALPINE AG 1,29% -20,28% -64,93% OEST ELEKTRIZITATSWIRTS-A -6,11% -17,01% -25,21% ZUMTOBEL AG

1,15%

-12,01%

-64,47%

A-TEC INDUSTRIES AG

-5,60%

-27,30%

-51,32%

BWIN INTERACTIVE ENTERTAINME

1,12%

-27,38%

-49,27%

FLUGHAFEN WIEN AG

-4,57%

-29,04%

-60,06%

Switzerland – SMI Gainers

Losers

Name NOVARTIS AG-REG

1D 7,90%

MTD -2,05%

YTD -7,65%

Name SYNGENTA AG-REG

1D -2,68%

MTD -31,07%

YTD -43,33%

CREDIT SUISSE GROUP AG-REG

6,37%

-3,01%

-28,93%

UBS AG-REG

-1,89%

1,46%

-59,81%

SWISSCOM AG-REG

6,12%

0,68%

-24,07%

-1,14%

-31,83%

-37,26%

ROCHE HOLDING AGGENUSSCHEIN NESTLE SA-REG

5,85%

-3,55%

-13,96%

ZURICH FINANCIAL SERVICEREG HOLCIM LTD-REG

-1,01%

-21,17%

-47,36%

5,43%

-10,50%

-17,04%

BALOISE HOLDING-REG

-0,28%

-29,99%

-52,78%

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