Jerry Su US$ - Credit Suisse

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, AND THE STATUS OF NON-US ANALYSTS. US 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 INFORMATION®

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02 February 2016

Asia Pacific/Taiwan

Equity Research

Technology (Technology - IC Deisgn TW (Asia)/Technology - TFT LCD TW

(Asia)/Technology - DRAM TW (Asia)/Technology - Handsets TW (Asia))

Taiwan Compound Semiconductor Sector

SECTOR REVIEW

RF content growth trend continuing to play out

Figure 1: Higher RF content for LTE models

<US$1US$2-3

US$6-7

US$15-16

0

10

20

2G 3G Regional LTE Global LTE

US

$

Source: Qorvo, Credit Suisse

■ RF content growth continues. We maintain the view that RF component demand should see solid growth in the next few years, driven by the 4G migration and WiFi spec upgrade for higher content gains (see our initiation report in 11 November 2015). In addition, Qualcomm’s recent strategy shift to join the compound semiconductor RF camp supports our view that compound semiconductor (e.g., GaAs) should remain as the preferred

solution for RF components, which is positive to the TW supply chain.

■ 4G migration and carrier aggregation adding more RF content. As 4G smartphones have higher RF content (US$6-15, vs ~US$3 for 3G) and the penetration is still increasing (65% in 2017 vs 54% in 2015), we expect the RF content to continue growing in the cellular application. Moreover, the increasing adoption of the carrier aggregation within 4G models (59% in 2017 vs 42% in 2015) to address the bandwidth issue could potentially lead to US$1-1.5 worth of RF content currently on the reception path and another

US$1.5 for the transmission path in 2017-18.

■ WiFi spec upgrade another driver. We are seeing the WiFi module transitioning from the legacy 802.11n standard into the 802.11ac and further into 802.11ac MIMO standard for higher data rates. This happens both at devices (e.g., smartphone) and WLAN equipment, which we believe could reinforce each for higher adoption and lead to more RF content demand.

■ Positive implications from Qualcomm’s RF strategy shift. We see Qualcomm’s recent strategy shift for compound semi RF component as positive as it represents more outsourcing opportunities for TW RF foundry players. We think Win Semi is best positioned, though the contribution in

2017 should depend on Qualcomm’s success among major end customers.

■ Win Semi top pick; VPEC downgraded to NEUTRAL. Win Semi (3105.TWO) remains our top pick, with its dominant industry position, diversified customer base and technology independence. We downgrade VPEC (2455.TW) to NEUTRAL, as we think its top-line growth on the RF/optical comm space, margin expansion on more favourable product mix and strong balance sheet have been largely priced into its current valuation

of 18x 12M forward P/E, leaving limited share price upside from here.

Research Analysts

Derrick Yang

886 2 2715 6367

[email protected]

Jerry Su

886 2 2715 6361

[email protected]

https://doc.research-and-analytics.csfb.com/docView?sourceid=em&document_id=x667828&serialid=iihuV%2bx5yiP1Si1JMH0wmKXRxpxt11iSVC3GPY%2b8hxY%3d

https://doc.research-and-analytics.csfb.com/docView?sourceid=em&document_id=x667828&serialid=iihuV%2bx5yiP1Si1JMH0wmKXRxpxt11iSVC3GPY%2b8hxY%3d

02 February 2016

Taiwan Compound Semiconductor Sector 2

Focus charts Figure 2: Mobile device shipments breakdown by cellular

standard

Figure 3: Carrier aggregation penetration within 4G

devices to increase to 59% in 2017 from 42% in 2015

30%18% 13% 12% 10%

51%

50%

33% 29%25%

19%32%

54% 59% 65%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016E 2017E

2G 3G 4G

100%

84%

58%50%

41%

16%

42%50%

59%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016E 2017E

Non-CA LTE devices CA-enabled LTE devices

Source: Navian, Credit Suisse Source: Navian, Credit Suisse

Figure 4: Smartphone WiFi migrating into 802.11ac and 802.11ac MIMO

2014 2015

High end models (>US$400)

802.11 a/b/g/n Huawei Honor 6, Huawei Ascend P7,

Huawei Ascend Mate 7

Huawei Mate S, Huawei Ascend P8,

VIVO X5 Pro, VIVO X6

802.11a/b/g/n/ac Apple iPhone 6, LG G3, HTC M8,

Sony Xperia Z2/Z3, Meizu MX4

HTC M9, ZTE Axon Max,


802.11a/b/g/n/ac MIMO Samsung GS5/GN 4,

Google Nexus 6

Apple iPhone 6s, Samsung GS6/GN5, LG G4,

Google Nexus 6P/5X, Sony Xperia Z3+/Z5

Mid to low end models (<US$400)

802.11 a/b/g/n HTC Desire 820/816G, Samsung Galaxy A3,

Sony Xperia C3, ZTE Blade L2

HTC Desire 820G, Samsung Galaxy J7, Xiaomi Redmi 2,

Sony Xperia C4, Samsung Galaxy A5/A7, ZTE

Nubia My Prague

802.11a/b/g/n/ac Xiaomi Mi 4 Xiaomi Redmi Note 2, ZTE Blade S6, OPPO R7s.

Meizu MX5, Meizu M1 Metal, ZTE Axon

802.11a/b/g/n/ac MIMO Xiaomi Mi 4C/Mi 4i

Source: Company data, Credit Suisse

Figure 5: Valuation comparison for the compound semiconductor supply chain Reporting Price Marketcap CS 12mth

Company Currency 2/1/2016 US$ mn Rating Target 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016

Compound semiconductor foundry

3105.TWO Win Semi TWD 53.60 961 O 63 4.53 5.01 11.8 10.7 1.9 1.7 16.3 16.8 0.4 5.1

8086.TWO AWSC TWD 80.20 331 N 92 7.81 8.47 10.3 9.5 3.5 3.1 39.9 35.1 2.4 6.7

Compound semiconductor epiwafer

2455.TW VPEC TWD 51.80 384 N 54 2.51 2.91 20.7 17.8 3.5 3.5 17.3 19.6 3.9 5.1

IQE.L IQE * GBP 20.50 195 NC NA 2.53 2.80 8.1 7.3 1.0 0.9 12.9 12.6 - -

3081.TWO Landmark Opto TWD 508.00 1,067 NC NA 14.06 18.56 36.1 27.4 11.2 9.4 44.7 38.1 1.7 2.5

4005.T Sumitomo Chemical JPY 609.0 8,203 N 650.0 31.94 50.48 19.1 12.1 1.3 1.2 7.3 10.0 1.5 2.3

RF component IDM

SWKS.OQ Skyworks * USD 68.92 13,174 NC NA 5.27 5.79 13.1 11.9 4.2 3.3 36.1 31.3 0.6 1.4

QRVO.OQ Qorvo * USD 39.60 5,597 NC NA 4.75 4.17 8.3 9.5 1.0 1.0 12.8 6.2 - -

6981.T Murata JPY 15,845.0 27,643 O 23,500.0 792.19 1,049.62 20.0 15.1 3.0 2.7 16.1 18.6 1.1 1.5

RF component fabless

MCHP.OQ Microchip USD 44.81 9,102 O 52.0 2.66 2.62 16.8 17.1 4.4 4.5 28.4 24.7 - -

Average 16.4 13.8 3.5 3.1 23.2 21.3 1.2 2.5

Dividend yield (%)ROAE (%)EPS P/E (X) P/B (X)

Source: Company data, Credit Suisse estimates, "*" estimates represent IBES consensus

Material Change Price Price Rating* Target Price Year EPS EPS FY1E EPS FY2E EPS FY3E

Company ccy 01 Feb 16 Prev. Cur. Prev. Cur. End Ccy Prev. Cur. Prev. Cur. Prev. Cur.

AWSC (8086.TWO) NT$ 80.20 — N — 92.00 Dec 14 NT$ 7.83 7.81 8.52 8.47 — 9.39

VPEC (2455.TW) NT$ 51.80 O N 51.00 54.00 Dec 14 NT$ 2.50 2.51 2.77 2.91 3.01 3.15

Win Semi (3105.TWO) NT$ 53.60 — O — 63.00 Dec 14 NT$ — 4.53 — 5.01 — 5.62

*O – Outperform, N – Neutral, U – Underperform, R – Restricted [V] = Stock considered volatile (see Disclosure Appendix).

02 February 2016


RF content growth trend continuing to play out We maintain the view that RF component demand should see solid growth in the next few

years, driven by the 4G migration and WiFi spec upgrade. As 4G smartphones have

higher RF content (US$6-15, vs ~US$3 for 3G) and the penetration is still increasing (65%

in 2017 vs 54% in 2015), we expect the RF content to continue growing in the cellular

application. In addition, the WiFi spec upgrade to 802.11ac and further to 802.11ac MIMO

among mobile device/WLAN equipment should also lead to more RF component demand.

Lastly, Qualcomm’s recent move into compound semi (e.g., GaAs) RF components should

be positive to the compound semi supply chain in Taiwan due to the potential outsourcing

opportunity. Win Semi (3105.TWO) remains our top pick in this space, with its dominant

position in the compound semi foundry space, diversified customer base and technology

independence. We downgrade VPEC (2455.TW) to NEUTRAL, as we think its top-line

growth on the RF/optical communication space, margin expansion on more favourable

product mix and strong balance sheet have been largely priced into its current valuation of

18x 12M forward P/E, leaving limited share price upside from here.

4G migration driving RF content increase

Much higher RF content in 4G smartphone models

We continue to see mobile device as one of the major growth drivers for RF component.

Despite the much slower smartphone shipment growth in the next few years (CS forecast

5%/4% YoY growth for 2016/17), the RF component revenues should continue to grow

due to increasing average RF content on the 4G migration. In 4G smartphone models,

US$6-15 worth of RF components are needed to support much more frequency bands (up

to 44 frequency bands, though not all in commercial operation now), compared to ~US$3

worth of RF components for a typical 3G models and less than US$1 for 2G models.

According to Navian, the 4G penetration among mobile devices is forecast to be 65% in

2017 vs 54% in 2015. Even within 4G smartphone models, we could also see increasingly

more frequency bands being supported as there are more and more fragmented frequency

bands turning into commercial operation. Apple's iPhone models could be a good example

for this, with supported bands increasing from 2-5 for iPhone 5, 7-13 for iPhone 5S, 16-20

for iPhone 6 and 22-23 for the latest iPhone 6S.

Figure 6: Mobile device shipments breakdown by cellular

standard

Figure 7: Higher RF content for LTE models

30%18% 13% 12% 10%

51%

50%

33% 29%25%

19%32%

54% 59% 65%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016E 2017E

2G 3G 4G

0

2

4

6

8

10

12

14

16

18

2G 3G Regional LTE Global LTE

US

$

Filters Switches Powr amplifiers Others

Source: Navian, Credit Suisse Source: Qorvo, Credit Suisse

4G migration and WiFi spec

upgrade leading to more RF

content

4G smartphone models

consume US$6-15 RF

components, vs ~US$3 for

3G models and <US$1 for

2G models

4G penetration to increase

to 65% in 2017 vs 54% in

2015

02 February 2016


Carrier aggregation (CA) also positive to RF content

The LTE technology has been evolving to provide higher data rates at different categories

and increasing the bandwidth has been one of the solutions, However, the 4G frequency

bands are much more fragmented, so the carrier aggregation technology was introduced

to address this, as it could combine smaller bands into a bigger one (e.g., two bands of

10MHz each into one to one 20MHz band) to support higher data rates. Carrier

aggregation was first defined in 3GPP Release 10 in 1Q11. The first version of carrier

aggregation was commercially available in 2013, enabling 10 +10 MHz bandwidth to

support the 150Mbps downlink rate in LTE Cat 4. The second version was also available

since 2014 to enable 20 + 20 MHz bandwidth for the 300 Mbps downlink rate in LTE Cat

6. With the LTE network coverage becoming more comprehensive, more and more carrier

aggregation service will be rolled out by carriers around the world.

Figure 8: Downlink and uplink speed for different LTE categories

(Mbps) Cat 1 Cat 2 Cat 3 Cat 4 Cat 6 Cat 7 Cat 9 Cat 10

Downlink 10 50 100 150 300 300 450 450

Uplink 5 25 50 50 50 100 50 100

Source: Wikipedia, Credit Suisse

Figure 9: More carrier aggregation rollouts in 2016

Source: Qorvo, Credit Suisse

More smartphone models supporting carrier aggregation as well

We started to see flagship smartphone models including Apple iPhone 6, Samsung Galaxy

S5, HTC M8, LG G3, Sony Xperia Z2/Z3, etc., supporting the LTE Cat 4 for 150Mbps

downlink / 50Mbps uplink data rate in 2014. The upgrade continued in 2015, with their

successors Apple iPhone 6S, Samsung Galaxy S6, HTC M9, LG G4, etc., migrating to

LTE Cat 6 for 300Mbps downlink / 50Mbps downlink data rate. These models all support

some carrier aggregation combinations and we believe that there will more carrier

aggregation combinations supported by those flagship models going forward and mid to

low end 4G smartphones will also see increasing penetration in the next few years.

According to Navian, the penetration of carrier aggregation within 4G mobile devices

should increase to 59% in 2017 vs 42% in 2015, representing a 39% CAGR in CA-enabled

mobile device shipment in 2015-17.

Carrier aggregation could potentially bring more frequency bands into commercial

operation and will require RF components of better quality to handle more complicated

signal processing; both are positive to the overall RF component content. Our checks

suggest that current carrier aggregation is mostly on the downlink side and could lead to

US$1-1.5 incremental RF content. There could be more to come when the uplink side also

moves to incorporate the carrier aggregation function, which could lead to another US$1.5

incremental RF content in the inter-band aggregation configuration in 2017-18.

Carrier aggregation to

address the bandwidth

bottleneck

More carrier aggregation

adoption in smartphones

going forward

CA-enabled device

shipment to see 39% CAGR

in 2015-17

CA needs US$1-1.5 more

RF content on the downlink

path and potentially another

US$1.5 on the uplink path in

the longer term

02 February 2016


Figure 10: CA-enabled devices to grow at a 39% CAGR in

2015-17

Figure 11: CA penetration within 4G devices to increase

to 59% in 2017 from 42% in 2015

342505

634 622 611

452630

876

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2013 2014 2015 2016E 2017E

mn

units


100%

84%

58%50%

41%

16%

42%50%

59%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2013 2014 2015 2016E 2017E


Source: Navian, Credit Suisse Source: Navian, Credit Suisse

WiFi upgrade to 802.11ac MIMO positive for RF

demand

We think the WiFi spec upgrade from 802.11n to 802.11ac and from 802.11ac SISO

(Single Input Single Output) to MIMO (Multi Input Multi Output) is positive to the RF

component demand as both will lead to higher RF content. We see the upgrade trend

playing out in both devices and WLAN equipment, which we think is the major driver for

our forecast of 22% CAGR in WiFi RF component revenues in the next two years.

802.11ac for higher data rate and better signal quality

Compared to its predecessor 802.11a/b/g/n, the more advanced 802.11ac WiFi spec was

released in December 2013 and is able to provide higher data rates and better signal

quality through various technologies including wider bandwidth (up to 16MHz vs up to

40MHz for 802.11n), higher data load (256 QAM vs 64 QAM for 33% higher data rate),

more spatial stream (up to 8 stream vs up to 4 for 802.11n), multi-user support, beaming

forming and less crowded frequency spectrum.

Figure 12: 802.11ac offers higher data rates and better signal quality

WiFi 802.11 spec 802.11 802.11a 802.11b 802.11g 802.11n 802.11ac

Release Jun-97 Sep-99 Sep-99 Jun-03 Oct-09 Dec-13

Frequency band 2.4GHz 5.0GHz 2.4GHz 2.4GHz 2.4/5.0GHz 5.0GHz

Bandwidth (MHz) 22 20 22 20 20/40 20/40/80/160

Modulation 64 QAM 64 QAM 64 QAM 64 QAM 64 QAM 256 QAM

Stream data rate (Mbps) up to 2 up to 54 up to 11 up to 54 up to 150 up to 6,933

MIMO streams NA NA NA NA 4 8

Multi-user MIMO NA NA NA NA NA Yes

Beam forming NA NA NA NA NA Yes

Source: WiFi Alliance, Credit Suisse

Different technologies

leading to higher data rates

for 802.11ac

02 February 2016


Figure 13: 802.11ac could support higher data rate

WiFi spec Bandwidth Spatial streams PHY data rate (Mbps)

802.11n 40MHz 1 150

40MHz 2 300

40MHz 3 450

40MHz 4 600

802.11ac 40MHz 1 200

40MHz 2 400

40MHz 3 600

40MHz 4 800

40MHz 8 1,600

80MHz 1 433

80MHz 2 867

80MHz 3 1,300

80MHz 4 1,733

80MHz 8 3,467

160MHz 1 867

160MHz 2 1,733

160MHz 3 2,600

160MHz 4 3,467

160MHz 8 6,933

Source: IEEE 802.11 Working Group, Credit Suisse

WiFi spec upgrade happening at both device and equipment side

WiFi spec upgrades happen in both devices and equipment. On the device side, HTC M7

was the first smartphone to adopt the 802.11ac standard in 2013 and most Android

smartphone brands followed suit immediately. Apple also joined in its iPhone 5s model in

2014. Currently, most of the flagship models from major smartphone brands are already

adopting the 802.11ac standard. For mid to low end models, we expect to see a similar

trend, though at a slower pace. Smartphone brands like Xiaomi, ZTE, Meizu, OPPO,

Samsung, etc., already equipped some of their mid end models with 802.11ac in 2015 and

we think the penetration could further rise in 2016, as this could be one of the

differentiating factors, especially amid end users' ever increasing demand for faster data

and video transmission.

On top of the 802.11n to 802.11ac upgrade, we also see an increasing number of

smartphone models adopting the 802.11ac MIMO from the existing 802.11ac SISO, which

could further increase the data rate. Other things being equal, the 2x2 MIMO structure that

supports two spatial streams could double the data rate compared to the 1x1 SISO

structure. For smartphone models, the initiation adoption of the 802.11ac MIMO structure

started from 2014, with Samsung and Google being the early movers for their flagship

models, e.g., Samsung Galaxy S5/Note 4 and Google Nexus 6.

In 2015, we have seen most of the major smartphone players, including Apple, LGE,

Sony, etc., decided to incorporate the 802.11ac MIMO into their flagship models in 2015

and our checks suggest that HTC's upcoming flagship model (likely named HTC M10) in

1H16 should also be upgrade to 802.11ac MIMO. For mid to low end models, while

upgrade from 802.11n to 802.11ac is still undergoing, we already see some models like

Xiaomi Mi 4c and Mi 4i equipped with the 802.11ac MIMO structure in 2015 and there

could be potentially more adoption in 2016 as well.

We see this development positive to overall RF component demand, as 802.11ac has

higher RF content and 802.11ac MIMO has even higher RF content, which is

proportionally to how many spatial streams it supports.

Flagship model models are

mostly in 802.11ac now and

mid to low end models to

follow suit

Migration into 802.11ac

MIMO also ongoing

More adoption of 802.11ac

MIMO for mid to low end

smartphones

02 February 2016


Figure 14: Smartphone WiFi migrating into 802.11ac and 802.11ac MIMO

2014 2015

High end models (>US$400)

802.11 a/b/g/n Huawei Honor 6, Huawei Ascend P7, Huawei

Ascend Mate 7

Huawei Mate S, Huawei Ascend P8, VIVO X5 Pro,

VIVO X6

802.11a/b/g/n/ac Apple iPhone 6, LG G3, HTC M8, Sony Xperia

Z2/Z3, Meizu MX4

HTC M9, ZTE Axon Max,


802.11a/b/g/n/ac MIMO Samsung GS5/GN 4

Google Nexus 6

Apple iPhone 6s, Samsung GS6/GN5, LG G4, Google

Nexus 6P/5X,

Sony Xperia Z3+/Z5

Mid to low end models (<US$400)

802.11 a/b/g/n HTC Desire 820/816G,

Samsung Galaxy A3,

Sony Xperia C3, ZTE Blade L2

HTC Desire 820G,

Samsung Galaxy J7, Xiaomi Redmi 2, Sony Xperia C4,

Samsung Galaxy A5/A7,

ZTE Nubia My Prague

802.11a/b/g/n/ac Xiaomi Mi 4 Xiaomi Redmi Note 2, ZTE Blade S6, OPPO R7s.

Meizu MX5,

Meizu M1 Metal, ZTE Axon

802.11a/b/g/n/ac MIMO Xiaomi Mi 4C/Mi 4i

Source: Company data, Credit Suisse

WLAN equipment also on the upgrade trend

IDC data suggest that only 31% of the shipments in home routers, gateways and access

points (AP) supported the 802.11ac standard in 2015, but the penetration is estimated to

increase to 34% in 2017, representing a 44% CAGR from 39 mn units in 2015 to 81 mn

units in 2017. Because of the higher ASP, 802.11ac-enabled home routers, gateways and

APs are forecast to take 64% of the revenue share in 2017, up from 58% in 2015.

Enterprise WLAN equipment is also witnessing a similar trend. IDC estimates that 61% of the

shipment in enterprise wireless APs will support the 802.11ac standards in 2017 vs only 30%

in 2015. This represents a 63% shipment CAGR and 45% revenue CAGR over 2015-17.

We believe that the increasing 802.11ac penetration in both device and equipment sides

could reinforce each other, as users can enjoy the much high data rates only when the

802.11ac standard is supported on both end.

Figure 15: Home router/gateway/AP migrating to 802.11ac Figure 16: Enterprise wireless AP also adopting 802.11ac

70% 70% 68% 66%

65%22%27%

31%

34%

34%

0

50

100

150

200

250

2013 2014 2015 2016E 2017E

mn

units

802.11g 802.11n 802.11ac

44% shipment CAGR for 802.11ac in 2015-17

99%88%

70% 54%39%

1% 12% 46% 61%

0

5

10

15

20

25

30

2013 2014 2015 2016E 2017E

mn

units

802.11a/b/g/n 802.11ac

63% shipment CAGR for 802.11ac in 2015-17

Source: IDC, Credit Suisse Source: IDC, Credit Suisse

Qualcomm’s shift in RF component strategy positive

to RF foundry players

Qualcomm’s move into the RF space started in 2013 with its RF360 solution, a silicon

based solution for higher levels of semiconductor integration and improved performance.

However, we have not seen its RF360 solutions gaining much traction in the RF

component space in the past three years. Recently, Qualcomm had made a few changes

in its RF business, including the joint venture with TDK and, more important, adding GaAs

solutions into its portfolio.

802.11ac home

router/gateway/AP to see a

44% shipments CAGR over

2015-17

802.11ac enterprise

wireless AP to see a 63%

shipment CAGR over 2015-

17

Qualcomm teaming up with

TDK

02 February 2016


On 13 January 2016, Qualcomm and TDK announced to set up a joint venture, RF360

Holdings, to leverage TDK’s capabilities in RF filters/packaging/module integration

technologies and Qualcomm’s expertise in advanced wireless technologies into fully

integrated systems. Some of TDKs existing SAW (Surface Acoustic Wave) filter business

will be transferred into the new entity, with an annual run rate of US$1 bn and

approximately 4,200 employees. The deal is expected to be concluded by early 2017,

subject to regulatory approvals. We think this joint venture will make Qualcomm’s solutions

more competitive in the RF component market, as filters are becoming more important

given that frequencies are getting more crowded in the 4G spectrum.

In addition, Qualcomm mentioned that RF360 Holdings will enable the delivery of RF front

end modules that include components such as CMOS, SOI, GaAs power amplifiers (PA),

a broad portfolio of switches antenna tuning and envelop tracking solutions. The inclusion

of GaAs PA is eye-catching as Qualcomm has been one of the most aggressive promoters

of silicon-based RF solutions. Qualcomm commented in the recent earnings call that it will

start the production of GaAs PAs in 2017. While silicon-based solutions will co-exist, the

shift to also adopt GaAs PAs seems to send out the message that the better performance

that GaAs PAs can offer on power consumption, linearity, electron mobility, breakdown

voltage, noise level, development leadtime, etc., is prioritised, which makes GaAs PAs a

better choice for mid to high end RF solutions.

We see positive implications for the Taiwan RF supply chain, as Qualcomm will need to

outsource the GaAs manufacturing to RF foundry players. Currently, the GaAs RF foundry

market is dominated by two major players, Win Semi for 60%+ share and AWSC for 30%+

share globally. We believe that Win Semi is better positioned in winning the potential

orders from Qualcomm given that AWSC has a strong tie with Skyworks. VPEC, an

epiwafer supplier, could also be one of the potential beneficiaries of this. With all that said,

the revenue contribution should depend on Qualcomm’s success with its new RF strategy.

Win Semi (3105.TW, OUTPERFORM)

4Q15 operating profits above CS/street's estimates

Win Semi’s 4Q15 operating profit of NT$967 mn, better than our estimate of NT$906 mn and

consensus's NT$908 mn on higher gross margin and better-controlled opex. 4Q15 gross

margin was flat QoQ at 40.4% as the benefit of higher utilisation (90% vs 85% in 3Q15) was

offset by lower contribution from the high-margin infrastructure business. Despite the 10% QoQ

top-line growth, 4Q15 opex declined 7% QoQ to NT$326 mn due to better cost control. It

booked a non-op loss of NT$68 mn, mostly due to the one-off financial asset impairment,

leading to the slightly lower-than-expected EPS of NT$1.23. Revenue mix for the quarter was

40-45% from cellular, 40-45% from WiFi, and 10-15% from infrastructure.

1Q16 revenue to be down by single-digit QoQ

Looking into 1Q16, management expects to see single-digit QoQ decline for top line,

which is better than the normal seasonality of double-digit QoQ decline, mostly due to the

sustaining WiFi momentum. Management indicated that the gross margin in 1Q16 might

decline by 1-2 pp due to the higher depreciation expenditure. We expect 1Q16 revenues

to be down 6% QoQ and the GM to decline to 38.0%.

Optimistic on 2016 outlook

Management maintains its optimistic view towards the 2016 outlook and expects to see

growth in all three major applications with WiFi being the strongest due to spec upgrade to

802.11ac and further to 802.11ac MIMO (Multi Input Multi Output). Cellular should also

continue to grow amid the migration to 4G smartphones, which supports more frequency

bands and thus consumes more RF components. In the mid term, management believes IoT

and carrier aggregation could also be the drivers for the industry. In response to the solid

demand outlook, it already installed 3K wafers/month in its newly built Fab C for customer

qualification in 1H16 and mass production in 2H16. It also plans to add another 2.5-3K

wafers/month in 2H16. 2016 capex is guided to be ~NT$3 bn (vs NT$3.5 bn in 2015).

JV with TDK wo make

QCOM’s RF solution more

competitive

QCOM’s strategy shift

supporting our view of better

compound semi

performance

QCOM’s strategy leading to

outsourcing opportunities for

the compound semi

foundry/epiwafer players

4Q15 OP above

expectation; 1Q16 revenues

above seasonal; our top

pick in the space

02 February 2016


Maintain OUTPERFORM

We maintain our OUTPERFORM rating as we think Win Semi is well positioned for the RF

component growth trend with its dominant position in the RF foundry space. Our target

price of NT$63 is based on 12x 12-month forward P/E, similar to its longer term average.

Figure 17: Win Semi—quarterly P/L

(NT$mn) 1Q15 2Q15 3Q15 4Q15 1Q16E 2Q16E 3Q16E 4Q16E 2015 2016E 2017E

Revenues 2,807 3,099 2,913 3,197 2,990 3,462 3,728 3,471 12,016 13,651 15,162

Gross profits 1,063 1,201 1,178 1,292 1,136 1,319 1,424 1,322 4,734 5,202 5,797

Operating profits 774 902 827 967 780 969 1,064 958 3,470 3,772 4,235

Net profits 618 537 805 733 639 675 879 790 2,693 2,982 3,347

EPS (NT$) 1.04 0.90 1.35 1.23 1.07 1.13 1.48 1.33 4.53 5.01 5.62

GM 37.9% 38.8% 40.4% 40.4% 38.0% 38.1% 38.2% 38.1% 39.4% 38.1% 38.2%

OPM 27.6% 29.1% 28.4% 30.2% 26.1% 28.0% 28.6% 27.6% 28.9% 27.6% 27.9%

NM 22.0% 17.3% 27.6% 22.9% 21.4% 19.5% 23.6% 22.8% 22.4% 21.8% 22.1%

Source: Company data, Credit Suisse estimates

VPEC (2455.TW, NEUTRAL)

4Q15 revenues better than guidance

VPEC saw its 4Q15 revenues at NT$629 mn, up 7% QoQ and 11% YoY, better than our

original estimate of down 5% QoQ and the management guidance of flat to slightly down

QoQ. Management attributed the strength mostly to the wireless application and some to

the optical space. We expect 4Q15 gross margin to expand to 36.7% (vs 35.8% in 3Q15)

on higher utilisation and the operating expense ratio to trend down to 9.0% (vs 9.4% in

3Q15) on operating leverage. We forecast 4Q15 EPS of NT$0.58.

1Q16 revenues to be down single digit QoQ

Looking into 1Q16, we expect VPEC to see revenues decline by single digit QoQ, which is

better than the normal seasonality, as the inventory correction at one major US

smartphone brand could be mitigated by the new model launches in the Android camp.

We anticipate the gross margin to decline modestly QoQ to 36.3% and the operating

margin down to 26.5% in 1Q16.

New product line to help its top line and profitability

VPEC had around 15% revenues from the optical communication space in 2015 and we

expect the contribution to further increase to 18% in 2016 and 19% in 2017, as the

segment is riding on the growth trend in the Fiber to the Home (FTTH) demand. In

addition, VPEC is now qualified to meet customers' requirements for the higher-margin

laser diode products (GM could be 60%+) for shipment in 2H16, which will help both its

top line and overall profitability.

Downgrade to NEUTRAL as valuation looks fair at this level

We lift our 2016-17 earnings by 5% to factor in higher contribution from the optical

communication segment and raise our target price to NT$54, based on the same 18x 12-

month forward P/E. However, as the share is now trading at 18x 2016E P/E (16x 2017

P/E), similar to its LT average of 18-19x, we think the valuation is fair at this level because

we forecast a 15% operating profit CAGR in 2015-17, similar to the 14% CAGR we saw in

2013-15. Therefore, while we are still positive on the overall RF demand and its move into

the optical communication application, we downgrade the stock to NEUTRAL and would

suggest investors to take profits at this level.

4Q15 and 1Q16 tracking in

line; laser diodes to help

from 2H16; downgrade to

NEUTRAL on fair valuation

02 February 2016


Figure 18: VPEC—quarterly P/L

(NT$mn) 1Q15 2Q15 3Q15 4Q15E 1Q16E 2Q16E 3Q16E 4Q16E 2014 2015E 2016E

Revenues 525 650 590 629 582 715 779 689 2,073 2,394 2,764

Gross profits 205 251 211 231 211 279 308 256 721 897 1,054

Operating profits 154 197 156 174 154 219 246 199 524 681 819

Net profits 133 173 171 142 136 192 215 174 468 618 717

EPS (NT$) 0.54 0.70 0.69 0.58 0.55 0.78 0.87 0.71 1.90 2.51 2.91

GM 39.0% 38.6% 35.8% 36.7% 36.3% 39.0% 39.5% 37.2% 34.8% 37.5% 38.1%

OPM 29.4% 30.3% 26.4% 27.7% 26.5% 30.7% 31.6% 28.9% 25.3% 28.4% 29.6%

NM 25.3% 26.5% 28.9% 22.6% 23.4% 26.8% 27.6% 25.3% 22.6% 25.8% 25.9%


AWSC (8086.TWO, NEUTRAL)

4Q15 revenues largely in line with guidance

AWSC 4Q15 revenues of NT$1,112mn were down 7% QoQ but up 7% YoY, largely in line

with the Management guidance and our original expectation. We think the sequential

decline in revenues is consistent with the seasonality, though some players in the Taiwan

compound semiconductor had seen sequential growth for 4Q15 revenues due to the lower

base in 3Q15 (down QoQ vs AWSC’s up QoQ). We expect its 4Q15 gross margin to trend

down slightly to 33.0% (vs 33.2% in 3Q15) on lower utilisation. With the operating

expenses staying roughly flat QoQ, we model for 4Q15 EPS of NT$1.85.

1Q16 revenue down 10% QoQ

We expect AWSC to see its 1Q16 revenues down by 10% QoQ and down 2% YoY, as its

major customer is seeing the inventory adjustment in one major US smartphone brand,

partially offset by the resilient demand from its Chinese and Korean customers. Given that

ASWC’s major customer commented that it expects 2Q16 revenues to be up QoQ, we

believe that the sequential decline at AWSC is likely to be milder, considering the

shipment leadtime.

Double-digit growth for 2016 revenues

Despite the slightly weaker momentum in 1Q16, we maintain the view that AWSC should

be able to deliver double digit YoY growth on the top line for 2016, given that its major

customer remains confident about the design wins for 2H16. In addition, AWSC will see

incremental revenue contribution from its Japanese customer for its GPS application and

the copper pillar bumping service to its major customer for higher value added.

Maintain NEUTRAL

We tweak down our 2016 earnings by 1% to factor in the weaker 1Q16 momentum,

partially offset by a stronger 2H16 outlook. We maintain our target price at NT$92, based

on 11x 12-month forward P/E. Due to the earnings volatility in the past few years, AWSC

does not have a stable P/E valuation history for reference (only small net profits in 2012

and net loss in 2013). We thus benchmark our target multiple to its peer Win Semi (we use

12x P/E for TP), though with a modest discount to factor in the potential single client risk

and the accompanied higher business volatility. The 11x 12M forward P/E is also

consistent with the midpoint of the 4-15x trading range since 2H13. We thus think the

shares are fairly valued at this level.

4Q15 tracking in line; 1Q16

slightly weaker than

expected, but 2016 outlook

intact

02 February 2016


Figure 19: AWSC – quarterly P/L

(NT$mn) 1Q15 2Q15 3Q15 4Q15E 1Q16E 2Q16E 3Q16E 4Q16E 2014 2015E 2016E

Revenues 1,016 1,098 1,197 1,112 997 1,324 1,434 1,217 2,669 4,424 4,972

Gross profits 337 377 398 367 320 453 490 397 578 1,479 1,660

Operating profits 276 318 334 303 259 387 423 328 396 1,231 1,397

Net profits 236 265 314 260 223 321 364 282 375 1,076 1,189

EPS (NT$) 1.73 1.93 2.24 1.85 1.59 2.29 2.59 2.01 2.76 7.81 8.47

GM 33.1% 34.4% 33.2% 33.0% 32.1% 34.2% 34.2% 32.6% 21.6% 33.4% 33.4%

OPM 27.2% 29.0% 27.9% 27.2% 26.0% 29.2% 29.5% 27.0% 14.8% 27.8% 28.1%

NM 23.3% 24.1% 26.3% 23.4% 22.3% 24.2% 25.4% 23.2% 14.0% 24.3% 23.9%


02 February 2016


Companies Mentioned (Price as of 01-Feb-2016)

Advanced Wireless Semiconductor Company (8086.TWO, NT$80.2, NEUTRAL[V], TP NT$92.0) Apple Inc (AAPL.OQ, $97.34) HTC Corp (2498.TW, NT$76.5) IQE (IQE.L, 20.5p) LG Electronics Inc (066570.KS, W56,900) LandMark (3081.TWO, NT$508.0) Microchip Technology Inc. (MCHP.OQ, $44.81) Murata Manufacturing (6981.T, ¥15,845) QUALCOMM Inc. (QCOM.OQ, $45.34) Qorvo (QRVO.OQ, $39.6) Samsung Electronics (005930.KS, W1,163,000) Skyworks Solutns (SWKS.OQ, $68.92) Sony (6758.T, ¥2,836) Sumitomo Chemical (4005.T, ¥609) TDK (6762.T, ¥6,980) Visual Photonics Epitaxy Co., Ltd (2455.TW, NT$51.8, NEUTRAL, TP NT$54.0) Win Semiconductors Corp (3105.TWO, NT$53.6, OUTPERFORM, TP NT$63.0)

Disclosure Appendix

Important Global Disclosures

Derrick Yang and Jerry Su each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

3-Year Price and Rating History for Advanced Wireless Semiconductor Company (8086.TWO)

8086.TWO Closing Price Target Price

Date (NT$) (NT$) Rating

11-Nov-15 73.40 88.00 N *

03-Dec-15 97.80 92.00

* Asterisk signifies initiation or assumption of coverage.

N EU T RA L

3-Year Price and Rating History for Visual Photonics Epitaxy Co., Ltd (2455.TW)

2455.TW Closing Price Target Price


11-Nov-15 37.20 47.00 O *

03-Dec-15 44.90 49.00

08-Jan-16 47.05 51.00


O U T PERFO RM

02 February 2016


3-Year Price and Rating History for Win Semiconductors Corp (3105.TWO)

3105.TWO Closing Price Target Price


11-Nov-15 45.45 62.00 O *

08-Jan-16 50.10 63.00


O U T PERFO RM

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 December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese 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 attractiv e, Neutrals the less attractive, and Underperforms the least attractive investmen t opportunities. 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 Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average to tal return of the relevant country or regional benchmark; 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, the expected total return (ETR) calculation includes 1 2-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in ope ration from 7 July 2011.

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

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 56% (36% banking clients)

Neutral/Hold* 31% (29% banking clients)

Underperform/Sell* 12% (42% banking clients)

Restricted 1%

*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 holdin gs, and other individual factors.

02 February 2016


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.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Advanced Wireless Semiconductor Company (8086.TWO)

Method: Our target price of NT$92 for Advanced Wireless Semiconductor Company is based on 11x 12M forward EPS (earnings per share) vs the historical trading range of 4-15x since 2H13. Due to the earnings volatility in the past few years, AWSC does not have a stable P/E valuation history for reference. We thus benchmark our target multiple to its peer Win Semi (we use 12x P/E for TP), though with a modest discount to factor in the potential single client risk and higher business volatility. We are NEUTRAL on AWSC as we think shares are fairly valued at this level.

Risk: Risks that could cause the share price to diverge from our NT$92 target price and NEUTRAL rating for ASWC include: (1) lower outsourcing ratios from Skyworks amid weaker end demand, (2) slower than expected LTE migration leading to softer RF component demand, (3) Skyworks losing share in the RF component market. Upside risks include: (1) More outsourcing orders from Skyworks along with its more disciplined capacity expansion; (2) Better progress in the contribution from new business opportunities.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Visual Photonics Epitaxy Co., Ltd (2455.TW)

Method: Our target price of NT$54 for VPEC is based on 18x 12M forward EPS (earnings per share), vs the historical average of 18-19x and the range of 4-30x 12M forward P/E (price-to-earnings). We rate VPEC NEUTRAL as we believe most positives are priced in and valuation is fair at this level.

Risk: Risks that could impede achievement of our target price of NT$54 and NEUTRAL rating for VPEC include: (1) weaker growth in the RF component space, (2) slower traction in the optical communication expansion, (3) higher-than-expected adoption of the silicon-based RF components impacting the total addressable market.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Win Semiconductors Corp (3105.TWO)

Method: Our target price of NT$63 for Win Semiconductors Corp is based on 12x 12M forward EPS (earnings per share), vs the historical average of 12x and the range of 6-20x 12M forward P/E (price-to-earnings). We have OUTPERFORM rating on Win Semi as we believe it is well positioned to benefit from the RF growth trend with its strong customer relationship, technology independence, and margin expansions on favourable product mix.

Risk: Risks that could impede achievement of our NT$63 target price and OUTPERFORM rating for Win Semi include: (1) slower shipment growth in the LTE-enabled devices, (2) lower capex among telecom operators for LTE infrastructure due to macro uncertainties, (3) weaker WiFi demand on delayed spec upgrade to 802.1ac and softer IoT device proliferation.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

The subject company (3105.TWO, QCOM.OQ, MCHP.OQ, AAPL.OQ, 005930.KS, 066570.KS, 2498.TW) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (MCHP.OQ, AAPL.OQ) within the past 12 months.

Credit Suisse has managed or co-managed a public offering of securities for the subject company (AAPL.OQ) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (MCHP.OQ, AAPL.OQ) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (3105.TWO, QCOM.OQ, 6762.T, 4005.T, 6981.T, MCHP.OQ, AAPL.OQ, 005930.KS, 066570.KS, 2498.TW) within the next 3 months.

As of the date of this report, Credit Suisse makes a market in the following subject companies (QCOM.OQ, MCHP.OQ, AAPL.OQ, 6758.T).

As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (2455.TW, 6762.T, 2498.TW).

02 February 2016


Credit Suisse has a material conflict of interest with the subject company (MCHP.OQ) . Credit Suisse is acting as financial advisor to Micrel Inc. (MCRL) in relation to its proposed sale to Microchip Technology Inc. (MCHP).

Credit Suisse has a material conflict of interest with the subject company (005930.KS) . Credit Suisse is acting as exclusive financial advisor to Samsung Electronics and Samsung Fine Chemicals in relation to the proposed sale of their ownership stakes in the semiconductor wafer joint ventures with SunEdison, SMP Ltd and MEMC Korea Company Ltd, to SunEdison.

As of the date of this report, an analyst involved in the preparation of this report has the following material conflict of interest with the subject company (AAPL.OQ). A Credit Suisse analyst involved in the preparation of this report has a long position in the common stock of AAPL.

For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events.

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 https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html.

Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (AAPL.OQ) within the past 3 years.

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.

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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.

Credit Suisse AG, Taipei Securities Branch ........................................................................................................................ Derrick Yang ; Jerry Su

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

02 February 2016


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In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. 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. 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Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.

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