09 December 2014 Asia Pacific/Japan Equity Research Beverage (Food (Japan)) / MARKET WEIGHT

Kirin Holdings (2503 / 2503 JP) Rating UNDERPERFORM* Price (08 Dec 14, ¥) 1,562 INITIATION

Target price (¥) 1,400¹ Chg to TP (%) -10.4 E xpect tough times to continue in 2015 Market cap. (¥ bn) 1,425.86 (US$ 11.73) Enterprise value (¥ bn) 2,173.77 ■ Initiate coverage: We initiate coverage of Kirin Holdings with an Number of shares (mn) 912.55 UNDERPERFORM rating and ¥1,400 target price (potential return −10.4%). We Free float (%) 80.0 expect Kirin to continue experiencing tough times in 2015, owing to: (1) absence 52-week price range 1,574 - 1,293 of effective strategies to boost sales at the beer and soft drinks business in *Stock ratings are relative to the coverage universe in each Japan; (2) diminishing returns from sales mix improvement and price hikes at the analyst's or each team's respective sector. ¹Target price is for 12 months. alcoholic beverage business in Australia, currently performing well; (3) diminishing returns from cost savings at the soft drink business in Australia; Research Analysts (4) slower growth in the Brazilian market, where competition continues to Masashi Mori intensify; and (5) sluggish performance by the pharmaceuticals and biochemicals 81 3 4550 9695 segment. We believe downside is limited, as the stock looks undervalued [email protected] compared with global brewers and soft drink makers and has a high dividend yield. However, we rate the stock UNDERPERFORM as our FY12/15 forecasts are some 10% below the I/B/E/S consensus OP and NP estimates and we see Kirin as a less appealing option within the Japanese beverage subsector. ■ Investment themes: As 2015 is the final year of Kirin's current medium-term plan, we consider it unlikely to announce radical restructuring measures. Although the next medium-term plan (2016–18) may dictate otherwise, at this stage we see little likelihood in the next three years of OP beating the previous record set in FY12/12. While earnings remain downbeat, we think Kirin will continue prioritizing returns to shareholders. ■ Catalysts/risks: In the near term, we are focusing on monthly sales in Japan. From a longer term perspective, our focus is on the next medium-term business plan (2016 through 2018). Upside risks: (1) a rebound in domestic market share, (2) renewed market expansion in Oceania and Brazil, and (3) improved shareholder returns. ■ Valuation: We derive our ¥1,400 TP by applying the average EV/EBITDA of the past seven years (roughly 7.4x) to our FY12/15 estimates. We think our multiple is reasonable as it hovers near the low since the launch of Abenomics shook up the Japanese stock market.

Share price performance Financial and valuation metrics

Year 12/13A 12/14E 12/15E 12/16E Price (LHS) Rebased Rel (RHS) Sales (¥ bn) 2,254.6 2,202.0 2,211.0 2,233.0 2000 140 Operating profit (¥ bn) 142.8 118.5 122.5 130.0 120 Recurring profit (¥ bn) 132.1 106.5 110.9 119.1 1500 100 Net income (¥ bn) 85.7 37.5 45.7 51.0 EPS (¥) 90.8 41.0 50.0 55.8 1000 80 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Change from previous EPS (%) n.a. IBES Consensus EPS (¥) n.a. 43.3 55.6 61.8 The price relative chart measures performance against the EPS growth (%) 55.3 -54.8 22.1 11.6 TOPIX which closed at 1447.58 on 08/12/14 P/E (x) 16.7 38.1 31.2 28.0 On 08/12/14 the spot exchange rate was ¥121.52/US$1 Dividend yield (%) 2.4 2.4 2.6 2.7 EV/EBITDA(x) 7.1 8.2 7.8 7.4 Performance Over 1M 3M 12M P/B (x) 1.3 1.3 1.3 1.3 Absolute (%) 8.2 10.5 1.1 ROE(%) 8.5 3.5 4.2 4.6 Relative (%) 2.1 -0.8 -16.1 Net debt/equity (%) 63.0 68.3 63.0 55.7

Source: Company data, Thomson Reuters, IFIS, Credit Suisse estimates. 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® Client-Driven Solutions, Insights, and Access

09 December 2014

Share price catalysts, risks and valuations Share price catalysts: slim likelihood of major strategy change in 2015, the final year of the medium-term plan In the near term, domestic monthly sales and quarterly earnings represent the main catalysts for the share price. Kirin is Japan’s second-largest brewer, but continues to lose market share. In the soft drink industry, it is ranked fifth and is struggling to expand its presence. Signs of marked improvement on both counts would likely alter our view on earnings and the share price. At this stage, such signs are absent. We expect Kirin to reaffirm its group business strategy in Jan–Feb 2015, but anticipate little change from the past two years, as 2015 marks the final year of its current medium-term plan. From a longer-term perspective, our focus lies on Kirin's next medium-term plan, for 2016–18. Kirin aims to enhance shareholder returns under the current plan, but we see divergent possibilities for the new plan: will there be further improvement in shareholder returns or will the company return to a focus on M&A activity? In most of its active markets, Kirin is experiencing a loss of growth momentum compounded by heightened competition. In such circumstances, earnings growth is best achieved via cost-cutting, not sales expansion. In our view, though, Kirin lags rivals in efforts to achieve cost synergies within the group, and we would like to see the new medium-term plan outline strategies for group-level cost cutting.

Figure 1: Kirin continues to underperform TOPIX Figure 2: EV/EBITDA close to historical average (Index) (Yen) (x) 120 Versus TOPIX (LHS) 2,000 12 115 Share price (RHS) 1,900 11 110 1,800 105 1,700 10 +2σ 9.8

100 1,600 9 +1σ 8.6 95 1,500 8 90 1,400 7 Ave. 7.4 85 1,300 -1σ 6.3 80 1,200 6 75 1,100 5 -2σ 5.1 70 1,000 4 07/1 08/1 09/1 10/1 11/1 12/1 13/1 14/1

Note: Shows TOPIX-relative share price performance Note: Comparison of 12-month forward EV/EBITDA multiples Source: Bloomberg, Credit Suisse estimates Source: Bloomberg, Credit Suisse estimates

Valuation We derive our ¥1,400 TP by applying the average EV/EBITDA for the past seven years (roughly 7.4x) to our FY12/15 estimates. Outside of the alcoholic beverages business in Australia, the company is losing ground to rivals and we see little likelihood that 2015 onward will bring significant improvement in this operating environment. We consider it appropriate therefore to use a multiple providing downside support for the share price. Our fair-value EV/EBITDA of around 7.4x is roughly level with the low since the launch of Abenomics shook up the Japanese stock market. Our TP implies an FY2 dividend yield of roughly 3%, exceeding the 2% or so simple average yield for global beer and soft drink makers (based on Bloomberg consensus forecasts for FY2).

Kirin Holdings (2503 / 2503 JP) 2 09 December 2014

Company overview Three main segments; await recovery at Japan integrated beverages segment Kirin’s business portfolio in essence comprises three segments: (1) the Japan integrated beverages segment (beer, wine, soft drinks, etc.); (2) the overseas integrated beverages segment (alcoholic beverage and soft drink sales in Oceania, Brazil, and Southeast Asia); and (3) the pharmaceuticals and biochemical segment (primarily, Kyowa Hakko Kirin). The overseas business consists for the most part of companies acquired and then added to the consolidated reporting structure. Among Kirin’s foreign equity-affiliates, the main ones are San Miguel Brewery (the largest beer producer in the Philippines), along with a soft drink joint venture in China, and a pharmaceuticals joint venture. In FY12/12, when Kirin posted record-high OP, the Japan integrated beverages segment generated 36% of this figure (before goodwill amortization). Since then Kirin has lost ground in Japan to rival manufacturers of alcoholic beverages and soft drinks, and we anticipate little near-term improvement. This leads us to expect the Japan integrated beverages segment to generate less than 30% of companywide OP in FY12/15. Aided by the weakening yen, the remaining two segments should manage to grow profits in FY12/15, albeit slightly. Senji Miyake serves as President and CEO of Kirin Holdings. He joined Kirin Brewery in 1970 and was appointed Executive Vice President of the Heineken Japan joint venture in 1993. In 1998, Miyake was named Sales Manager of Kirin Brewery’s Sales & Marketing Division and then appointed Managing Executive Officer and President of the Beer, Wine and Spirits Division in 2006. Following the move to a pure holding company structure in 2007, Miyake became President of Kirin Brewery. He was later appointed Executive Vice President of Kirin Holdings, and assumed his current position of President and CEO in 2010. Given his wealth of experience in domestic sales, we look to Miyake to steer the Japan integrated beverages segment toward recovery.

Figure 3: Segment breakdown of OP before goodwill amortization FY12/12 actual FY12/15 CSE

Other Other Japan 2.2% Japan 1.8% Integrated Integrated Beverages Beverages 36.0% Pharmas and 27.7% Pharmas and Biochemicals Biochemicals 31.1% 32.5%

Overseas Overseas Integrated Integrated Beverages Beverages 29.3% 39.3%

Source: Company data, Credit Suisse estimates Financial strategy and shareholder returns: goals in current medium-term plan look achievable Under its 2013–15 medium-term business plan, Kirin targets a consolidated dividend payout ratio of 30% (against EPS normalized to remove extraordinary gains/losses and other non-operating items). Earlier in 2014, the company repurchased nearly ¥20bn in its own shares. Kirin expects free cash flow over ¥400bn in its plan and we think it could even come close to ¥420bn. While making solid progress in enhancing shareholder returns, Kirin is also making steady inroads on paying down its debt. We forecast a D/E ratio of 72% for FY12/15, down from 102% in FY12/12. However, Kirin will likely miss some other targets: (1) mid-single-digit CAGR for normalized EBITDA (high single-digits for EPS) and

Kirin Holdings (2503 / 2503 JP) 3 09 December 2014

(2) OP of ¥170bn or higher in 2015. We expect EBITDA to decrease at roughly 3% per year. We believe capex, driven mostly by overseas operations, especially those in Australia and Brazil, will peak in 2014 and decrease thereafter. While Kirin still has the option of expanding its business through acquisitions, at this juncture we doubt that there are any suitable candidates mid-sized or larger, particularly in Southeast Asia. Kirin will likely prioritize moves to stabilize earnings at its soft drink business in Oceania and its Brazilian operation. We see little reason therefore to be concerned about financial risk arising from a major acquisition. Thus under the new medium-term plan, we think Kirin will focus on shareholder returns and debt repayment. In our view, the company needs to find an appropriate balance for allocating cash flow between capex, laying foundations for growth (via capital and business tie-ups, for example), and bolstering shareholder returns.

Figure 4: D/E ratio declining from steady progress on debt Figure 5: Two straight years of dividend hikes and share buybacks (JPY bn) (%) (JPY bn) Share buyback (LHS) (%) Dividend (LHS) Net Debt (LHS) FCF (LHS) D/E ratio (RHS) 1,200 140 100 Dividend payout ratio (RHS) 400 Shareholder return ratio (dividend+shr buyback) (RHS) 1,000 120 350 80 800 300 100 600 250 80 60 400 200 60 200 40 150 40 0 100 20 (200) 20 50 (400) 0 0 0

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates Overseas business contributes some 30% of profits; main regions Australia, Brazil

Figure 6: OP forex sensitivity matrix (¥mn) If current yen rates vs. AUD and BRL prevail in 2015, we see just over ¥1bn upside to our FY12/15 OP estimate, but if further yen depreciation vs. USD raises domestic business costs, overall weak-yen benefits are likely limited CSE Current level FX JPY/AUD sensitivity 92.0 93.0 94.0 95.0 96.0 97.0 98.0 99.0 100.0 101.0 102.0 103.0 104.0 42.0 -1,780 -1,520 -1,260 -1,000 -740 -480 -220 40 300 560 820 1,080 1,340 42.5 -1,700 -1,440 -1,180 -920 -660 -400 -140 120 380 640 900 1,160 1,420 43.0 -1,620 -1,360 -1,100 -840 -580 -320 -60 200 460 720 980 1,240 1,500 43.5 -1,540 -1,280 -1,020 -760 -500 -240 20 280 540 800 1,060 1,320 1,580 44.0 -1,460 -1,200 -940 -680 -420 -160 100 360 620 880 1,140 1,400 1,660 44.5 -1,380 -1,120 -860 -600 -340 -80 180 440 700 960 1,220 1,480 1,740 CSE 45.0 -1,300 -1,040 -780 -520 -260 0 260 520 780 1,040 1,300 1,560 1,820

45.5 -1,220 -960 -700 -440 -180 80 340 600 860 1,120 1,380 1,640 1,900 JPY/BRL 46.0 -1,140 -880 -620 -360 -100 160 420 680 940 1,200 1,460 1,720 1,980 Current 46.5 -1,060 -800 -540 -280 -20 240 500 760 1,020 1,280 1,540 1,800 2,060 47.0 -980 -720 -460 -200 60 320 580 840 1,100 1,360 1,620 1,880 2,140 47.5 -900 -640 -380 -120 140 400 660 920 1,180 1,440 1,700 1,960 2,220 48.0 -820 -560 -300 -40 220 480 740 1,000 1,260 1,520 1,780 2,040 2,300 Source: Credit Suisse estimates

Kirin Holdings (2503 / 2503 JP) 4 09 December 2014

Figure 7: Company history 1885 Japan Brewery Co., Ltd. (the forerunner of Kirin Brewery Co., Ltd.) established 1907 Kirin Brewery established 1976 Koiwai Dairy Products Co., Ltd. established 1983 US subsidiary established 1996 Shanghai subsidiary established 1998 Stake acquired in Lion Nathan Limited (the forerunner of Lion Nathan Pty Limited) of New Zealand 2002 Stake acquired in San Miguel Corp. of the Philippines 2005 Thai subsidiary established 2006 Indonesian subsidiary established 2006 Kirin Beverage Co., Ltd. made into a wholly owned subsidiary 2006 Mercian Corporation made into consolidated subsidiary 2007 Kirin Brewery Co., Ltd. changes name to Kirin Holdings Co., Ltd. and becomes holding company of Kirin Group 2007 Stake acquired in Kyowa Hakko Kogyo Co., Ltd. 2007 National Foods (the forerunner of Lion-Dairy & Drinks Pty Ltd) made into a wholly owned subsidiary 2008 Kyowa Hakko Kogyo Co., Ltd. and Kirin Pharma Co., Ltd. merged to establish Kyowa Hakko Kirin Co., Ltd. 2009 Stake acquired in San Miguel Brewery of the Philippines 2009 Lion Nathan National Foods Pty Ltd (the forerunner of Lion Pty Ltd) of Australia makes Lion Nathan Limited of Australia its wholly owned subsidiary, and oversees Oceania business operations of Lion Nathan Limited and National 2010 Stake acquired in Fraser and Neave (Singapore; later sold) 2010 Mercian made into a wholly owned subsidiary 2011 Interfood Shareholding Company (Vietnam) made into a wholly owned subsidiary 2011 China Resources Kirin Beverages (Greater China) Company Ltd. established as a joint venture between Kirin and China Resources Enterprise, Limited 2011 Schincariol Participações e Representações S.A. (now Brasil Kirin Participações e Representações S.A.) made into a wholly owned subsidiary 2013 Kirin Company established; new structure started as a domestic integrated beverages business Source: Company data

Kirin Holdings (2503 / 2503 JP) 5 09 December 2014

Overseas business performance (Oceania, Brazil) Australia’s beer market notable for falling consumption, increasing domination by two companies Kirin’s business in Oceania is handled by Lion, Australia’s leading beer supplier at 50% share of shipment volume. Beer consumption is falling both per capita and overall. This trend has been attributed to consumers’ changing tastes—with wine and cider consumption on the rise—and to rising concern about health issues. In our view, though, the decline in beer consumption will remain limited to 1–2% per year owing to: (1) a gradually increasing population and (2) rising numbers of foreign visitors. On the other hand, diversifying consumer tastes have led to a surge in popularity for craft beers, whose price puts them into the premium category. This is no passing fad, but rather a growing phenomenon. This shift to premium beers is delivering an improved product mix even while the beer market is likely to continue contracting in volume. In value, we expect the market to keep expanding, albeit at a slow rate. The on-premise channel is likely to assume more importance than ever (this includes restaurants, bars, nightclubs, and hotels, where travelers also contribute to consumption). The Australian beer market is effectively a duopoly. Lion is expanding its portfolio of imported premium beers, such as Corona, and craft beers, and thus its decline in sales volume should remain milder than that for the market as a whole.

Figure 8: Australia’s beer market share (by volume, 2013) Figure 9: Breakdown of alcoholic beverage sales in Australia (by value) Other RTD 8% Cider 8% 7%

Beer 40% Foster's Spirits (SABMiller) 20% 42% Pubs & bars Liquor (On- Lion Wine stores premis (Kirin HD) 25% 52% es) 50% 48%

Source: Company data, Credit Suisse Source: Australian Bureau of Statistics (ABS), Credit Suisse

Figure 10: Australia's population rising at a CAGR of 1.2% Figure 11: Visitors to Australia on the rise

(mil ppl) (K ppl) Short-term visitors arriving (LHS) (%) 25 900 12-month MA YoY (RHS) 10 800 8 20 700 6 600 4 15 500 2 400 0 10 300 200 -2 5 100 -4 0 -6

0

Jul-2014 Jul-2009

2000 2001 2010 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 2013

Oct-2010 Apr-2008 Apr-2013

Jan-2007 Jun-2007 Jan-2012 Jun-2012

Mar-2011

Feb-2009 Feb-2014

Nov-2007 Dec-2009 Nov-2012

Sep-2008 Aug-2011 Sep-2013

May-2010

2015e 2016e 2017e 2018e 2019e 2014e Source: IMF estimates Source: ABS, Credit Suisse

Kirin Holdings (2503 / 2503 JP) 6 09 December 2014

Figure 12: Australia’s alcoholic beverage consumption largely unchanged, with beer and RTD sales declining while cider sales increase Beer Wine

(mnl) Beer consumption volume (pure alcohol, LHS) (l) (mn l) Wine consumption volume (pure alcohol, LHS) (l) 90 5.5 Per capita consumption (RHS) 80 Per capita consumption (RHS) 4.0 3.9 80 70 3.8 70 5.0 60 3.7 60 4.5 50 3.6 50 3.5 40 40 3.4 4.0 30 30 3.3 20 3.2 20 3.5 3.1 10 10 3.0 0 3.0 0 2.9 01 02 03 04 05 06 07 08 09 10 11 12 13 01 02 03 04 05 06 07 08 09 10 11 12 13

Spirits RTD

(mn l) Spirits consumption volume (pure alcohol, LHS) (l) (mn l) RTD consumption volume (pure alcohol, LHS) (l) Per capita consumption (RHS) 30 Per capita consumption (RHS) 1.4 20 1.2 18 1.1 25 1.0 16 1.3 0.9 14 20 0.8 12 0.7 15 1.2 10 0.6 8 0.5 10 0.4 6 1.1 0.3 4 5 0.2 2 0.1 0 1.0 0 0.0 03 04 05 06 07 08 09 10 11 12 13 03 04 05 06 07 08 09 10 11 12 13 Cider Total (pure alcohol base)

Cider Spirits&RTDs (mn l) Cider consumption volume (pure alcohol, LHS) (l) (mn l) Wine Beer 4 Per capita consumption (RHS) 0.2 200 YoY 7% 180 6% 3 160 5% 140 4% 120 2 0.1 3% 100 2% 80 1% 1 60 40 0% 20 -1% 0 0.0 05 06 07 08 09 10 11 12 13 0 -2% 01 02 03 04 05 06 07 08 09 10 11 12 13

Note: Financial year ends in June (e.g. FY13 indicates a period between May 2012 to June 2013) Source: ABS, Credit Suisse

Kirin Holdings (2503 / 2503 JP) 7 09 December 2014

Oceania beverage business: company needs reduced sales exposure to white milk Lion’s beverage business consists mainly of milk and milk-based drinks together with other dairy products. White milk alone accounts for an estimated 50% of the business. As a major Australian milk producer, Lion has been facing several recent challenges, which include: (1) increasing sales of private-label white milk by Coles and Woolworths (Australia's two largest supermarket chains) eating into the share held by national brands, (2) intensifying competition to secure supply contracts for private labels, and (3) certain raw material suppliers building integrated production structures extending to downstream processing, eroding the cost competitiveness of national brands. At the major supermarkets, it appears that private label sales already exceed those of national brands. We believe private-label dairy products will continue to gain market share, owing to consumers' increasing preference for low-priced goods. To counter this, Lion likely needs to overhaul a business portfolio that remains heavily tilted toward milk and milk-based beverages, where competition is toughest. To reduce its exposure to the increasingly commoditized white milk segment, the company has said it will expand its offerings of high value added (e.g., health-oriented) products. It has apparently stepped up efforts to strengthen categories where differentiation is possible, including yogurt and specialty cheese, but no significant change is evident yet. To exacerbate matters, Lion appears to have lost its contract to supply a major retailer’s private-brand white milk in 2015. This could result in a steep decline in sales. The company has little further scope to reduce costs after already taking steps to consolidate manufacturing. However, there is a strong likelihood of farmgate milk prices dropping in FY12/15. Toward end-September, New Zealand's largest milk supplier, Fonterra, reduced its forecast farmgate milk price for the 2014–15 season (June to May). As reasons, the company cited strong global milk production, the impact of Russia’s import ban on dairy products, and slowing growth in China. Around the same time, Australian milk giant Murray Goulburn said it was maintaining its price forecast, despite having the same concerns about Russia and China. Although milk producers should benefit somewhat in 2015 from lower raw material costs, longer term we think it imperative that Lion build a business portfolio that is less reliant on white milk.

Figure 13: Beverage segment portfolio (breakdown by Figure 14: For regular milk, private label products are half FY12/13 sales value) the price of national brands (AU$) Cheese 4 14% National Brand 3.5 Private Brand 3

Yogurt 2.5 16% White milk 2 50% 1.5

Fruit juice 1 10% 0.5 Flavored milk 0 Fresh White Fresh Flavoured UHT White 10%

Source: Company data, Dairy Australia, Credit Suisse estimates Source: IRI-Aztec (2013), Credit Suisse

Kirin Holdings (2503 / 2503 JP) 8 09 December 2014

Figure 15: Australia's average farmgate milk price likely to Figure 16: Fonterra (New Zealand): Farmgate milk prices fall from 2015, reducing input costs for dairy companies and dividends

(NZ$) (AUD cents/litre) Dividend 55 10.0 9.0 Farmgate Milk Price 50 8.0 45 7.0 40 6.0 35 5.0 30 4.0 25 3.0

20 2.0 1.0 0.0 08/09 09/10 10/11 11/12 12/13 13/14 14/15e

Note: FY13/14 indicates a period between Jul 2013 to Jun 2014 Note 1: FY14/15 indicates a period between Jun 2014 to May 2015 Source: Dairy Australia, Credit Suisse (Fonterra estimates) Note 2: Farmgate milk prices are per kilogram of milk solids; dividends are per-share (farmers receive shares in proportion to their milk supply). Source: ALIC, Credit Suisse Profits from Brazilian operation squeezed by lackluster macro growth Brazil is the world’s third-largest consumer of beer, after China and the US. Ambev from the Anheuser-Busch InBev group dominates the market, with a roughly 70% share. Schincariol, renamed Brasil Kirin after becoming a wholly owned subsidiary in 2H FY12/11, is second, accounting for 15% of the market. Brasil Kirin is an integrated beverage manufacturer, with the country’s third-largest soft drink business, commanding a market 5% share. Consumer sentiment has been weak for some time and shows little sign of recovering in 2015 or beyond. We expect competition to intensify in FY12/15 onward, and see little further scope for cost reductions. Any price increase will be contingent on the timing of a planned tax increase, but no date has been set. According to a 25 November article on brewersguardian.com, SABMiller has partnered with Grupo Petropolis, with a view to re-entering the Brazilian market in 2015. If the article is correct, it seems likely that the competitive landscape will grow even tighter over the longer term.

Kirin Holdings (2503 / 2503 JP) 9 09 December 2014

Figure 17: Brazil’s beer market share (by shipment Figure 18: Brazil’s beer production has exhibited slower volume, 2013) growth since the FIFA World Cup

Other (mn liter) Beer production (LHS) (%) Heineken 1% 1,600 6-month MA YoY (RHS) 16 7% 14 Petropolis 1,400 12 9% 1,200 10 1,000 8 6 Brasil Kirin 800 14% 4 600 2

400 0 -2 200 AB InBev -4 69% 0 -6

Source: Company data, SICOBE, Credit Suisse Source: SICOBE

Figure 19: Competition with larger rivals likely to intensify in the North, where Kirin is comparatively strong; share stagnant in the South Production Share of 14 YTD # of Kirin's Brasil Kirin M/S (mn L) production (YoY) factories North 369 3% 10.6% c30% (#2 M/S) 5 Northeast 3,144 23% 1.7% c40% (#2 M/S) 2 Midwest 1,216 9% 2.6% AmBev #1 M/S, 1 Southeast 7,323 54% 1.0% Petropolis #2 M/S, 2 South 1,417 11% 9.5% Kirin c1-3% 3 Total 13,470 100% 2.4% 13 Note: Shows beer production and share of production for each region (as of Oct 2014) Source: SICOBE, company data, Credit Suisse

Figure 20: Slide in confidence of Brazilian consumers Figure 21: Minimal yen depreciation against Brazilian real 130 (JPY/BRL) 55 125 53 51 120 49 115 47 45 110 43

105 41 39 100 37

95 35

Jul-10

Jan-08 Jan-13

Jun-08 Jun-13

Oct-11

Apr-09 Apr-14

Sep-09 Feb-10 Sep-14

Dec-10

Aug-12 Nov-13

Nov-08 Mar-12 May-11 Source: Thomson Reuters Source: Bloomberg

Kirin Holdings (2503 / 2503 JP) 10 09 December 2014

Earnings forecasts

Figure 22: Earnings forecast summary Sales Operating profit Recurring profit Net profit EPS ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥mn YoY (%) ¥ YoY (%) Consolidated 13/12 Actual 2,254,585 3.1 142,818 -6.7 132,134 -4.6 85,656 52.4 90.8 55.3 14/12 CS E 2,202,000 -2.3 118,500 -17.0 106,500 -19.4 37,500 -56.2 41.0 -54.8 CoE 2,210,000 -2.0 120,000 -16.0 102,000 -22.8 35,000 -59.1 38.1 -58.0 IBES E 2,211,877 -1.9 125,330 -12.2 114,015 -13.7 40,424 -52.8 43.3 -52.3 15/12 CS E 2,211,000 0.4 122,500 3.4 110,900 4.1 45,700 21.9 50.0 22.1 IBES E 2,236,961 1.1 134,054 7.0 125,002 9.6 50,459 24.8 55.6 28.4 16/12 CS E 2,233,000 1.0 130,000 6.1 119,100 7.4 51,000 11.6 55.8 11.6 IBES E 2,256,570 0.9 138,760 3.5 131,293 5.0 55,840 10.7 61.8 11.1 Source: Company data, I/B/E/S, Credit Suisse estimates Japan integrated beverages: product strategy doing little to offset relatively poor performance in beer business In Figures 23–24, we outline our sales volume projections for Kirin Brewery and Kirin Beverage and forecasts for major OP factors. We expect profit to fall slightly short of guidance in FY12/14, largely because Kirin Beverage lags rivals in coffee and green tea beverages. We think the downtrend in Kirin Brewery's profits will continue in FY12/15 onward. In the beer business in particular, the fall in sales volume is outstripping the market average, and we think efforts to lower its depreciation burden and curtail other fixed costs will not go far enough to offset the decline in marginal profit from alcoholic beverages. We see room for upside versus our forecasts if the company's signature brand, Ichiban Shibori, stages a full-strength recovery in sales. Kirin introduced a gift-sales-only Ichiban Shibori Premium this summer, but apparently has no present plans to sell it year-round. Profitability at Kirin Beverage should improve by just under ¥1bn YoY in FY12/15, provided there is no repeat of the unseasonably cool weather that hurt beer sales in the summer of 2014. However, we think it will be FY12/16 before Kirin Beverage returns to the black, as we expect a drag from high costs for ingredients and other raw materials (partially due to a weak yen). The business has a substantial presence in the black tea category, where we believe marginal profits are also high. This will likely evolve into the mainstay of Kirin's operations; however, in other segments the company faces heightened competition and its position lacks staying power. We believe an earlier-than-forecast return to profit hinges on resurgent sales of high-margin coffee beverages. Overseas integrated beverage business: expect OP growth for 2015–16, but Brazil a concern For FY12/14, we think both sales and OP will be in line with guidance. The Brazilian operation has underperformed because of economic stagnation and increased competition. This should be offset, though, by brisk sales of alcoholic beverages in Australia. Our forecasts for FY12/15 onward are based on the following assumptions. For Lion’s alcoholic beverages business we assume YoY growth of +3.0% in price/mix and −1.5% in volume (FY12/14: +4.5% and −1.0%, respectively). With the Oceania market now contracting, we think Lion will continue seeking to offset declining sales volume with improvement in the product mix by increasing sales in growth categories such as imported premium beers and craft beers. On a local currency basis, we see sales rising around 1.5% YoY while profit remains flat. Although this seems conservative, with competition increasing we think Lion will incur higher SG&A costs as it ramps up marketing in a bid to broaden its customer base. (This would generate an unfavorable comparison with FY12/14, during which Lion has sought to rein in marketing spend.)

Kirin Holdings (2503 / 2503 JP) 11 09 December 2014

At Lion’s beverages business, we see sales on a local currency basis falling 6% YoY in FY12/14 and 15% YoY in FY12/15, then staying flat in FY12/16, against a backdrop of stiffer competition and the loss of some private label milk supply contracts. We forecast a double-digit fall in sales for FY12/15, again from the loss of some major private-label milk supply contracts. However, we think OP on a local currency basis will be up around 2% YoY, owing to: (1) a smaller weighting for low-margin private-label white milk products, (2) expanded offerings of high-value-added products such as yogurt and cheese, and (3) lower farmgate milk prices. In FY12/16, we see OP increasing 9% YoY despite the low likelihood of further benefit from consolidation of manufacturing, as Lion should see benefits from a focus on high-margin SKUs and more effective utilization of cheaper inputs. For Brasil Kirin, we forecast a 7.0% YoY increase in FY12/14 of sales on a local currency basis (+12.8% for price/mix, −5.7% for volume), followed by gains of 4.7% for FY12/15 (+7.0%, −2.3%) and 6.5% for FY12/16 (+7.0%, −0.5%). Weaker economic growth and stiffer competition should result in a continued decline in sales volume of both beer and soft drinks. Profit growth will likely remain in the mid-single digits, with decreased volume countered by mix improvement, price increases, and across-the-board cost savings from procurement through sales. Forecast lackluster earnings for pharmaceuticals and biochemical segment, mixed outlook for equity affiliates As our outlook for the pharmaceuticals and biochemicals segment is based on the earnings forecast compiled by our pharmaceuticals analyst, Fumiyoshi Sakai, for Kyowa Hakko Kirin, we will omit details here. The 5 November report on Kyowa also forecasts a stall in earnings owing to a lackluster performance by the core domestic pharmaceutical operation. Our view on Kirin's main equity affiliates is as follows. For Philippines-based San Miguel, which markets alcoholic beverages and soft drinks mainly in Southeast Asia, we forecast healthy margins and stable profit growth underpinned by a strong home-market presence. For China Resources Kirin Beverages, a joint venture with China Resources Enterprise (a leading consumer goods company with core activities including alcoholic and non-alcoholic beverages), we forecast a return to profits in FY12/14 as we expect stronger sales to outweigh ¥2.3bn in goodwill amortization. From 2015 onward China’s soft drink market should become increasingly competitive. Nonetheless, we expect progressive improvement in profitability as the joint venture draws on each partner's strengths, namely, China Resources Enterprise's extensive sales and distribution network and Kirin Holdings’ product development capabilities. Fujifilm Kyowa Kirin Biologics, a joint venture in biosimilar development between Kyowa Hakko Kirin and Fujifilm Holdings, is likely to continue generating equity-method losses of several billion yen for the time being, owing to heavy upfront investment in R&D.

Kirin Holdings (2503 / 2503 JP) 12 09 December 2014

Figure 23: Kirin Brewery’s earnings forecasts FY12/09 FY12/10 FY12/11 FY12/12 FY12/13 FY12/14E FY12/15E FY12/16E Sales Volume（1,000 KL） Beer 799 751 714 699 672 645 629 616 Happoshu 726 661 595 560 522 501 489 476 New Genre 714 740 719 714 714 628 609 591 Beer Beverages Total 2,239 2,152 2,030 1,975 1,909 1,775 1,727 1,684 Volume (YoY, %) Beer -7.8 -6.0 -4.9 -2.1 -3.9 -4.0 -2.5 -2.0 Happoshu -10.5 -9.0 -10.0 -5.9 -6.8 -4.0 -2.5 -2.5 New Genre 17.8 3.6 -2.8 -0.7 0.0 -12.0 -3.0 -3.0 Beer Beverages Total -2.0 -3.9 -5.7 -2.7 -3.3 -7.0 -2.7 -2.5 Amount (¥mn) Beer 329,800 310,800 296,300 290,400 279,600 268,400 261,700 256,500 Happoshu 221,700 201,600 181,700 171,000 159,200 152,800 149,000 145,300 New Genre 187,400 194,300 188,900 187,200 187,600 165,100 160,100 155,300 Beer Beverages Total 738,900 706,700 667,100 648,800 626,500 586,500 571,100 557,300 RTD (Low Alcohol Drinks) 54,100 55,100 53,400 56,900 62,700 72,100 77,200 84,100 Shochu, Foreign Alcohol, Other 52,200 63,900 54,800 46,600 39,800 32,200 30,600 29,100 Kirin Brewery Sales 853,700 826,000 775,200 752,400 729,100 691,000 679,000 670,000 (YoY, %) -1.7 -3.2 -6.2 -2.9 -3.1 -5.2 -1.7 -1.3 (Alcohol Tax） 491,700 490,100 459,100 445,800 430,400 407,700 400,600 395,300 Operating Profit （Main factors influencing OP） Change in marginal profit 5,000 -5,500 -18,900 -8,600 -7,700 -13,458 -4,816 -3,264 Beer volume -8,000 -6,000 -5,163 -2,000 -3,430 -3,691 -2,214 -1,780 Happoshu volume -8,400 -6,700 -6,800 -3,700 -4,100 -2,229 -1,337 -1,304 New Genre volume 11,800 2,900 -2,300 -700 100 -9,230 -2,031 -2,042 RTD volume 0 0 -600 1,300 1,700 3,292 1,767 2,361 Other 9,600 4,299 -4,037 -3,500 -1,970 -1,600 -1,000 -500 Change in raw materials costs 700 4,100 600 500 -1,500 600 -500 0 Change in cost of sales 3,000 3,500 5,500 -2,400 -900 -1,900 -1,000 -1,000 Change in other expenses -7,300 7,900 9,300 1,800 4,100 5,500 4,500 4,000 YoY change in income 1,400 10,000 -3,500 -8,700 -6,000 -9,300 -1,800 -300 Kirin Brewery Operating Profit 59,900 69,900 66,600 57,800 51,800 42,500 40,700 40,400 (YoY, %) 2.4 16.7 -4.7 -13.2 -10.4 -18.0 -4.2 -0.7 Operating Profit Margin (%) 7.0 8.5 8.6 7.7 7.1 6.2 6.0 6.0 OPM excluding Alcohol Tax (%) 12.2 14.3 14.5 13.0 12.0 10.4 10.2 10.2 Source: Company data, Credit Suisse estimates

Kirin Holdings (2503 / 2503 JP) 13 09 December 2014

Figure 24: Kirin Beverage’s earnings forecasts FY12/09 FY12/10 FY12/11 FY12/12 FY12/13 FY12/14E FY12/15E FY12/16E Sales Volume (10,000 cases) Japanese Tea 2,475 2,217 2,066 1,996 2,088 1,921 1,979 2,018 Oolong Tea 342 300 283 283 268 241 246 248 Black Tea 3,798 4,439 4,636 4,638 4,726 4,688 4,735 4,782 Coffee Drinks 3,692 3,336 3,148 3,028 2,983 2,864 2,864 2,835 Fruit and Vegetable Drinks 2,312 2,142 1,891 2,327 2,536 2,409 2,433 2,458 Carbonated Soft Drinks 821 982 749 1,491 1,656 1,623 1,639 1,655 Water 3,364 2,847 3,314 3,458 3,417 3,349 3,449 3,518 Other 1,502 1,298 1,202 1,734 2,482 2,730 2,785 2,841 Domestic Soft Drink Total 18,306 17,561 17,289 18,955 20,156 19,825 20,130 20,356 Overseas Soft Drink Total 706 695 473 - - - - - Total 19,012 18,256 17,762 18,955 20,156 19,825 20,130 20,356 Volume (YoY, %) Japanese Tea -15.0 -10.4 -6.8 -3.4 4.6 -8.0 3.0 2.0 Oolong Tea 4.0 -12.3 -5.7 0.0 -5.3 -10.0 2.0 1.0 Black Tea 0.9 16.9 4.4 0.0 1.9 -0.8 1.0 1.0 Coffee Drinks 4.9 -9.6 -5.6 -3.8 -1.5 -4.0 0.0 -1.0 Fruit and Vegetable Drinks -6.9 -7.4 -11.7 23.1 9.0 -5.0 1.0 1.0 Carbonated Soft Drinks -11.3 19.6 -23.7 99.1 11.1 -2.0 1.0 1.0 Water -14.7 -15.4 16.4 4.3 -1.2 -2.0 3.0 2.0 Other -13.2 -13.6 -7.4 44.3 43.1 10.0 2.0 2.0 Domestic Soft Drink Total -6.6 -4.1 -1.5 9.6 6.3 -1.6 1.5 1.1 Overseas Soft Drink Total -12.8 -1.6 -31.9 - - - - - Total -6.9 -4.0 -2.7 6.7 6.3 -1.6 1.5 1.1 Sales total 371,600 350,000 317,000 336,800 353,500 348,000 353,000 357,000 (YoY, %) -8.0 -5.8 -9.4 6.2 5.0 -1.6 1.4 1.1 Operating Profit （Main factors influencing OP） Change in volume -15,700 -8,300 -3,000 16,100 12,700 -2,677 2,053 1,533 Change in raw materials costs 2,000 1,400 -800 100 2,600 -300 -1,500 0 Change in cost of sales 13,900 10,400 3,200 -16,600 -14,100 1,000 500 500 Change in packaging -3,100 -1,900 -3,500 -800 -3,500 -1,700 -500 500 Change in other costs and expenses 0 700 4,100 2,500 100 -1,523 347 167 YoY change in income -2,900 2,300 0 1,300 -2,200 -5,200 900 2,700 OP (before G/W amortization) 2,300 4,600 4,600 5,800 3,700 -1,600 -700 2,000 (YoY, %) -55.8 100.0 0.0 26.1 -36.2 - - - Operating Profit Margin (%) 0.6 1.3 1.5 1.7 1.0 -0.5 -0.2 0.6 Source: Company data, Credit Suisse estimates

Kirin Holdings (2503 / 2503 JP) 14 09 December 2014

Figure 25: Sales and OP by segment (new segment) FY12/12 FY12/13 FY12/14E FY12/15E FY12/16E Forex Rate JPY/AUD 81.6 92.0 94.0 97.0 97.0 JPY/BRL 41.1 45.2 45.0 45.0 45.0 Sales (¥mn) Japan Integrated Beverages 1,190,000 1,180,100 1,148,000 1,142,000 1,138,000 Kirin Brewery 752,400 729,100 691,000 679,000 670,000 Kirin Beverage 336,800 353,500 348,000 353,000 357,000 Mercian 69,700 67,000 69,000 70,000 70,000 Other and elimination 30,900 30,400 40,000 40,000 41,000 Overseas Integrated Beverages 577,000 685,200 707,000 711,000 730,000 Lion Alcohol Beverages 189,800 244,900 259,000 271,000 275,000 Lion Soft Drinks 206,800 223,400 215,000 195,000 195,000 Brazil Kirin 148,800 178,300 190,000 199,000 212,000 Other and elimination 31,500 38,400 43,000 46,000 48,000 Pharmaceuticals and Biochemicals 322,900 331,300 323,000 334,000 341,000 Pharmaceuticals 258,000 259,500 249,000 256,000 261,000 Biochemicals 75,100 81,000 83,000 88,000 90,000 Other and elimination -10,100 -9,200 -9,000 -10,000 -10,000 Other 96,100 57,700 24,000 24,000 24,000 Total 2,186,100 2,254,500 2,202,000 2,211,000 2,233,000 Sales (YoY, %) Japan Integrated Beverages - -0.8 -2.7 -0.5 -0.4 Overseas Integrated Beverages - 18.8 3.2 0.6 2.7 Pharmaceuticals and Biochemicals - 2.6 -2.5 3.4 2.1 Other - -40.0 -58.4 0.0 0.0 Total - 3.1 -2.3 0.4 1.0 FY12/12 FY12/13 FY12/14E FY12/15E FY12/16E Operating Profit (¥mn) Japan Integrated Beverages 68,900 62,100 48,100 47,200 49,700 Kirin Brewery 57,800 51,800 42,500 40,700 40,400 Kirin Beverage 3,900 1,700 -3,500 -2,600 100 OP before G/W amortization 5,800 3,700 -1,600 -700 2,000 Goodwill Amortization -1,900 -1,900 -1,900 -1,900 -1,900 Mercian 2,100 300 500 500 600 Other 4,900 8,100 8,600 8,600 8,600 Overseas Integrated Beverages 27,610 30,600 29,800 33,400 35,100 Lion 20,600 28,700 27,600 30,500 31,000 Lion Alcohol Beverages 50,000 66,300 69,800 72,500 72,700 Lion Soft Drinks 7,400 7,300 2,900 3,100 3,400 Lion Corporate Expenses -7,900 -10,200 -10,000 -10,000 -10,000 Goodwill Amortization -25,200 -30,300 -31,000 -31,000 -31,000 Brand Amortization -3,800 -4,200 -4,100 -4,100 -4,100 Brazil Kirin 5,200 300 500 1,000 1,900 OP before G/W amortization 13,000 8,800 8,900 9,400 10,300 Goodwill Amortization -4,800 -5,300 -5,300 -5,300 -5,300 Brand Amortization -2,800 -3,100 -3,100 -3,100 -3,100 Other 1,700 1,500 1,700 1,900 2,200 Pharmaceuticals and Biochemicals 55,500 54,300 45,000 46,500 50,000 Pharmaceuticals 50,300 46,100 34,000 35,000 38,200 Biochemicals 2,100 5,600 8,000 8,500 8,800 Goodwill Amortization Elimination 9,100 8,700 9,200 9,200 9,200 Goodwill Amortization -6,200 -6,200 -6,200 -6,200 -6,200 Other 3,700 3,700 3,100 3,300 3,400 Total Corporate Expenses and Eliminations -2,800 -8,000 -7,500 -7,900 -8,200 Total 153,000 142,800 118,500 122,500 130,000 OP (YoY, %) Japan Integrated Beverages - -9.9 -22.5 -1.9 5.3 Overseas Integrated Beverages - 10.8 -2.6 12.1 5.1 Pharmaceuticals and Biochemicals - -2.2 -17.1 3.3 7.5 Other - 0.0 -16.2 6.5 3.0 Total - -6.7 -17.0 3.4 6.1 OPM before G/W amortization (%) Japan Integrated Beverages 6.0 5.5 4.4 4.4 4.6 Overseas Integrated Beverages 10.1 9.8 9.5 9.9 9.9 Pharmaceuticals and Biochemicals 20.0 19.0 16.8 16.7 17.4 Other 4.5 6.9 12.9 13.8 14.2 Total 9.0 8.5 7.6 7.7 8.0 OP breakdown before G/W amortization (%) Japan Integrated Beverages 36.0 32.5 28.9 27.7 27.9 Overseas Integrated Beverages 29.3 33.7 38.3 39.3 38.6 Pharmaceuticals and Biochemicals 32.5 31.7 31.0 31.1 31.7 Other 2.2 2.0 1.8 1.8 1.8 Source: Company data, Credit Suisse estimates

Kirin Holdings (2503 / 2503 JP) 15 09 December 2014

Figure 26: Consolidated balance sheet and change in net assets (¥mn) FY12/07 FY12/08 FY12/09 FY12/10 FY12/11 FY12/12 FY12/13 FY12/14E FY12/15E FY12/16E (Assets) Cash,cash equivalents & securities 55,255 73,424 125,686 51,463 76,218 83,916 113,759 71,159 94,918 84,624 Account receivable 361,127 446,630 423,835 415,268 406,448 413,138 396,113 395,188 397,268 400,171 Inventories 148,649 219,320 198,517 187,812 192,982 206,501 225,045 210,740 218,783 216,899 Other 72,096 88,726 93,686 74,482 88,664 90,077 83,729 80,376 80,376 80,376 Allowance for doubtful accounts -2,500 -1,879 -2,278 -1,939 -6,250 -4,138 -3,860 -4,030 -4,030 -4,030 Total current assets 634,629 826,222 839,450 727,088 758,065 789,496 814,788 753,433 787,315 778,040 Tangible fixed assets 635,963 791,311 774,274 739,235 763,833 763,437 764,378 797,578 805,778 813,978 Depreciable PP&E 441,965 489,826 471,365 452,883 514,865 511,343 502,752 - - - Land 158,558 244,240 227,671 225,246 201,436 201,513 186,820 - - - Construction in progress 35,437 57,244 75,235 61,103 47,529 50,578 74,805 - - - Intangible fixed assets 386,915 449,469 734,688 658,357 816,261 821,948 836,936 816,836 773,736 717,636 Goodwill 258,780 343,975 605,210 562,492 713,749 642,190 649,519 630,619 591,719 542,819 Other 128,134 105,493 129,477 95,864 102,511 179,758 187,417 186,217 182,017 174,817 Investments & other assets 812,160 552,619 512,781 524,515 516,094 576,179 480,351 492,822 492,822 492,822 Investment securities 394,170 425,384 388,677 428,383 417,619 475,157 376,155 384,289 384,289 384,289 Other 420,874 131,182 128,511 103,562 105,156 106,749 109,487 113,824 113,824 113,824 Allowances -2,884 -3,947 -4,407 -7,430 -6,681 -5,727 -5,291 -5,291 -5,291 -5,291 Total fixed assets 1,835,038 1,793,400 2,021,743 1,922,108 2,096,189 2,161,564 2,081,667 2,107,236 2,072,336 2,024,436 Total assets 2,469,667 2,619,623 2,861,194 2,649,197 2,854,254 2,951,061 2,896,456 2,860,669 2,859,651 2,802,476 (Liabilities) Account payable 139,255 189,589 169,936 169,036 146,955 151,184 155,863 149,943 153,528 153,245 Short-term debt 404,723 163,309 271,946 196,145 230,617 195,040 148,410 240,667 241,616 184,457 Other 347,782 366,715 352,214 314,514 337,846 371,913 355,625 288,588 288,588 288,588 Total current liabilities 891,760 719,613 794,096 679,695 715,419 718,137 659,898 679,198 683,732 626,290 Long-term debt 205,075 500,581 625,494 582,790 834,486 768,584 642,667 578,400 549,480 522,006 Other 273,276 249,431 242,734 227,674 256,453 310,438 293,164 269,173 269,173 269,173 Total fixed liabilities 478,351 750,012 868,228 810,464 1,090,939 1,079,022 935,831 847,573 818,653 791,179 Total liabilities 1,370,111 1,469,625 1,662,324 1,490,160 1,806,359 1,797,159 1,595,729 1,526,771 1,502,386 1,417,469 (Net assets) Capital stock 102,045 102,045 102,045 102,045 102,045 102,045 102,045 102,045 102,045 102,045 Capital surplus 71,353 71,536 71,582 81,412 81,417 81,415 81,417 81,417 81,417 81,417 Retained earnings 781,499 839,248 860,538 821,519 801,856 796,737 850,511 853,238 862,406 875,047 Treasury stock -28,170 -29,058 -30,486 -2,985 -3,271 -3,509 -53,903 -73,668 -73,668 -73,668 Total shareholders' equity 926,727 983,771 1,003,679 1,001,991 982,048 976,689 980,071 963,032 972,200 984,841 Valuation and translation adjustments 128,083 -55,960 -22,357 -39,516 -129,126 -27,746 95,790 131,998 131,998 131,998 Total equity capital 1,054,811 927,813 981,323 962,477 852,922 948,943 1,075,861 1,095,030 1,104,198 1,116,839 Share warrant 0 162 196 207 250 203 306 310 310 310 Minority interests 44,744 222,023 217,350 196,352 194,722 204,754 224,558 238,558 252,758 267,858 Total net assets 1,099,555 1,149,998 1,198,869 1,159,036 1,047,895 1,153,901 1,300,726 1,333,898 1,357,266 1,385,007 Total liabilities & net assets 2,469,667 2,619,623 2,861,194 2,649,197 2,854,254 2,951,061 2,896,456 2,860,669 2,859,651 2,802,476

FY12/07 FY12/08 FY12/09 FY12/10 FY12/11 FY12/12 FY12/13 FY12/14E FY12/15E FY12/16E (Changes in net assets) Beginning balance 1,043,724 1,099,555 1,149,998 1,198,869 1,159,036 1,047,895 1,153,901 1,300,726 1,333,898 1,357,266 Capital stock 0 0 0 0 0 0 0 0 0 0 Capital surplus 239 183 46 9,830 5 -2 2 0 0 0 Net profits 66,713 80,182 49,172 11,394 7,407 56,198 85,656 37,500 45,700 51,000 Dividends from surplus -17,208 -22,432 -21,949 -22,878 -25,967 -27,883 -33,456 -34,706 -36,532 -38,359 Treasury stock -1,373 -888 -1,428 27,501 -286 -238 -50,394 -19,765 0 0 Valuation and translation adjustments 12,589 -184,043 33,603 -17,159 -89,610 101,380 123,536 36,208 0 0 Minority interests -4,990 177,279 -4,673 -20,998 -1,630 10,032 19,804 14,000 14,200 15,100 Other -139 162 -5,900 -27,523 -1,060 -33,481 1,677 -66 0 0 Final balance 1,099,555 1,149,998 1,198,869 1,159,036 1,047,895 1,153,901 1,300,726 1,333,898 1,357,266 1,385,007 Source: Company data, Credit Suisse estimates

Kirin Holdings (2503 / 2503 JP) 16 09 December 2014

Figure 27: Consolidated profit and loss and cash flow statements (¥mn) FY12/07 FY12/08 FY12/09 FY12/10 FY12/11 FY12/12 FY12/13 FY12/14E FY12/15E FY12/16E Sales revenue (incl. alcohol tax) 1,801,164 2,303,569 2,278,473 2,177,802 2,071,774 2,186,177 2,254,585 2,202,000 2,211,000 2,233,000 Sales revenue (excl. alcohol tax) 1,400,600 1,922,800 1,918,700 1,835,200 1,748,300 1,870,600 1,943,700 1,907,000 1,921,000 1,947,000 CGS 1,078,614 1,392,895 1,383,821 1,314,809 1,218,852 1,274,472 1,287,590 1,260,000 1,267,000 1,280,000 Gross profit 722,550 910,673 894,652 862,992 852,922 911,704 966,995 942,000 944,000 953,000 SG&A 601,942 764,696 766,216 711,380 710,058 758,682 824,177 823,500 821,500 823,000 OP 120,608 145,977 128,435 151,612 142,864 153,022 142,818 118,500 122,500 130,000 Interest and dividend income 7,263 8,965 8,146 4,839 8,637 7,164 7,063 6,000 6,000 6,000 Interest expense 12,618 25,385 19,617 22,047 20,915 22,827 21,351 21,000 21,000 21,000 Equity in earnings of affiliates 10,282 11,833 8,902 9,479 10,541 -676 1,643 4,500 5,400 6,100 Other -2,146 -38,325 18,748 -2,914 -4,309 1,768 1,960 -1,500 -2,000 -2,000 RP 123,389 103,065 144,614 140,969 136,818 138,452 132,134 106,500 110,900 119,100 Extraordinary gains 22,404 96,585 44,553 39,850 44,776 34,030 73,227 4,000 0 0 Etrtraordinary losses 17,380 33,915 96,554 100,492 96,675 38,890 48,155 15,000 11,000 11,000 Pretax profit 128,413 165,735 92,613 80,327 84,918 133,592 157,206 95,500 99,900 108,100 Income taxes 50,343 68,392 28,914 57,823 61,666 60,128 53,257 44,000 40,000 42,000 Minority interests 11,355 17,160 14,526 11,109 15,844 17,265 18,292 14,000 14,200 15,100 NP 66,713 80,182 49,172 11,394 7,407 56,198 85,656 37,500 45,700 51,000 Tax rate 39.2% 41.3% 31.2% 72.0% 72.6% 45.0% 33.9% 46.1% 40.0% 38.9% Capital expenditure (tangible&intangible) 66,873 126,063 110,246 106,650 79,830 98,900 117,300 125,000 100,000 100,000 Depreciation expense (incl.brand amortization) 73,870 95,751 105,874 105,259 103,871 103,428 101,126 99,000 99,000 99,000 Goodwill amortization 7,448 22,376 21,627 34,728 38,891 42,934 47,910 49,000 49,000 49,000 EBITDA 201,926 264,104 255,936 291,599 285,626 299,384 291,854 266,500 270,500 278,000 Profitability (%) Before goodwill amortization OPM (incl. alcohol tax) 7.1 7.3 6.6 8.6 8.8 9.0 8.5 7.6 7.8 8.0 OPM (excl. alcohol tax) 9.1 8.8 7.8 10.2 10.4 10.5 9.8 8.8 8.9 9.2 After goodwill amortization OPM (incl. alcohol tax) 6.7 6.3 5.6 7.0 6.9 7.0 6.3 5.4 5.5 5.8 OPM (excl. alcohol tax) 8.6 7.6 6.7 8.3 8.2 8.2 7.3 6.2 6.4 6.7 EBITDA margin (incl. alcohol tax) 11.2 11.5 11.2 13.4 13.8 13.7 12.9 12.1 12.2 12.4 EBITDA margin (excl. alcohol tax) 14.4 13.7 13.3 15.9 16.3 16.0 15.0 14.0 14.1 14.3

FY12/07 FY12/08 FY12/09 FY12/10 FY12/11 FY12/12 FY12/13 FY12/14E FY12/15E FY12/16E (Operating activities) NP 66,713 80,182 49,172 11,394 7,407 56,198 85,656 37,500 45,700 51,000 Depreciation(+) 73,870 95,751 105,874 105,259 103,871 103,428 101,126 99,000 99,000 99,000 Goodwill amortization(+) 7,448 22,376 21,627 34,728 38,891 42,934 47,910 49,000 49,000 49,000 Account receivable(-) -39,433 -85,503 22,795 8,567 8,820 -6,690 17,025 925 -2,080 -2,903 Inventories(-) -28,762 -70,671 20,803 10,705 -5,170 -13,519 -18,544 14,305 -8,043 1,885 Account payable(+) 31,645 50,334 -19,653 -900 -22,081 4,229 4,679 -5,920 3,585 -283 Minority interests(+) 11,355 17,160 14,526 11,109 15,844 17,265 18,292 14,000 14,200 15,100 Other 2,031 33,485 -16,335 46,642 59,751 7,540 -48,984 0 0 0 Operating cashflow 114,585 131,281 189,907 218,025 196,792 212,061 205,517 204,309 195,963 206,699 (Investing activities) Capital expenditures(-) -66,873 -126,063 -110,246 -106,650 -79,830 -98,977 -117,393 -161,100 -113,100 -100,100 Purchases of marketable securities(-) -183,787 -2,144 -137,318 -86,973 -44,326 -9,639 -4,424 0 0 0 Purchases of shares of subsidiaries(-) -77,237 -73,190 -262,971 -6,659 -345,241 -1,684 -24,672 0 0 0 Other 58,276 32,067 188,881 59,365 107,739 61,921 232,015 0 0 0 Investing cashflow -269,621 -169,330 -321,654 -140,917 -361,658 -48,379 85,526 -161,100 -113,100 -100,100 (Financing activities) Debt (+) 368,754 54,092 233,550 -118,505 286,168 -101,479 -172,547 27,991 -27,971 -84,634 Dividends (-) -17,208 -22,432 -21,949 -22,878 -25,967 -27,883 -33,456 -34,706 -36,532 -38,359 Other -229,991 -4,976 -37,393 1,186 -66,987 -30,646 -66,354 -20,000 0 0 Financing cashflow 121,555 26,684 174,208 -140,197 193,214 -160,008 -272,357 -26,715 -64,503 -122,993 (Cash & cash equivalents) Increases -33,481 -11,365 42,461 -63,089 28,348 3,674 18,686 16,494 18,360 -16,394 Beginning balance 90,158 55,255 73,424 125,686 51,463 76,218 83,916 113,759 71,159 94,918 Final balance 56,677 43,890 115,885 62,597 79,811 79,892 102,602 130,253 89,518 78,524 Adjustments -1,422 29,534 9,801 -11,134 -3,593 4,024 11,157 -59,095 5,400 6,100 Source: Company data, Credit Suisse estimates

Kirin Holdings (2503 / 2503 JP) 17 09 December 2014

Figure 28: Financial indicators FY12/07 FY12/08 FY12/09 FY12/10 FY12/11 FY12/12 FY12/13 FY12/14E FY12/15E FY12/16E (Safety) Current ratio (%) 71.2 114.8 105.7 107.0 106.0 109.9 123.5 110.9 115.1 124.2 Quick ratio (%) 46.7 72.3 69.2 68.7 67.5 69.2 77.3 68.7 72.0 77.4 Adjusted quick ratio (%) 13.7 45.0 46.2 26.2 33.0 43.0 76.7 29.6 39.3 45.9 Fixed ratio (%) 174.0 193.3 206.0 199.7 245.8 227.8 193.5 192.4 187.7 181.3 Interest-bearing debt (¥mn) 609,798 663,890 897,440 778,935 1,065,103 963,624 791,077 819,068 791,097 706,463 Average debt interest rate (%) 3.0 4.0 2.5 2.6 2.3 2.3 2.4 2.6 2.6 2.8 Dependence on debt (%) 24.7 25.3 31.4 29.4 37.3 32.7 27.3 28.6 27.7 25.2 Net debt (¥mn) 554,543 590,466 771,754 727,472 988,885 879,708 677,318 747,909 696,178 621,838 Equity capital ratio (%) 42.7 35.4 34.3 36.3 29.9 32.2 37.1 38.3 38.6 39.9 D/E ratio (%) 57.8 71.6 91.5 80.9 124.9 101.5 73.5 74.8 71.6 63.3 Long-term debt ratio (%) 33.6 75.4 69.7 74.8 78.3 79.8 81.2 70.6 69.5 73.9 Working capital (¥mn) -257,131 106,609 45,354 47,393 42,646 71,359 154,890 74,235 103,583 151,750 Net interest expense (¥mn) -5,355 -16,420 -11,471 -17,208 -12,278 -15,663 -14,288 -15,000 -15,000 -15,000 Cash plus marketable securities (¥mn) 55,255 73,424 125,686 51,463 76,218 83,916 113,759 71,159 94,918 84,624 Interest coverage ratio (x) 10.13 6.10 6.96 7.10 7.24 7.02 7.02 5.93 6.12 6.48 Financial leverage (x) 2.34 2.82 2.92 2.75 3.35 3.11 2.69 2.61 2.59 2.51 A/R to A/P ratio (%) 259.3 235.6 249.4 245.7 276.6 273.3 254.1 263.6 258.8 261.1 Dividend on equity (%) 1.7 2.3 2.3 2.4 2.9 3.1 3.3 3.2 3.3 3.5 (Profitability) ROE (%) 6.5 8.1 5.1 1.2 0.8 6.2 8.5 3.5 4.2 4.6 ROE (%) - Before goodwill amortization 7.2 10.3 7.4 4.8 5.1 11.0 13.2 8.0 8.6 9.0 ROA (%) 5.4 5.7 4.7 5.5 5.2 5.3 4.9 4.1 4.3 4.6 ROA (%) - Before goodwill amortization 5.8 6.6 5.5 6.8 6.6 6.8 6.5 5.8 6.0 6.3 Inventory turnover ratio (x) 13.4 12.5 10.9 11.3 10.9 10.9 10.4 10.1 10.3 10.3 A/R turnover ratio (x) 5.3 5.7 5.2 5.2 5.0 5.3 5.6 5.6 5.6 5.6 A/P turnover ratio (x) 14.6 14.0 12.7 12.8 13.1 14.7 14.7 14.4 14.6 14.6 Inventory turnover days (days) 27.2 29.2 33.5 32.4 33.5 33.3 34.9 36.1 35.5 35.6 A/R turnover days (days) 69.2 64.0 69.7 70.3 72.4 68.4 65.5 65.6 65.4 65.2 A/P turnover days (days) 25.0 26.1 28.8 28.4 27.8 24.9 24.9 25.3 25.0 25.1 Sales per employee (¥mn) 70.8 71.9 63.6 64.9 57.3 53.6 55.6 55.2 55.4 55.9 OP per employee (¥mn) 4.7 4.6 3.6 4.5 4.0 3.8 3.5 3.0 3.1 3.3 (Per share data) EPS (¥) 69.9 84.0 51.5 11.9 7.7 58.4 90.8 41.0 50.0 55.8 EPS (¥) - Before goodwill amortization 77.7 107.5 74.2 48.4 48.1 103.1 141.5 94.5 103.7 109.5 BPS (¥) 1104.8 972.2 1029.4 1000.5 886.9 986.9 1157.7 1199.0 1209.0 1222.9 Sales per share (¥) 1886.1 2413.5 2388.2 2283.1 2154.0 2273.3 2389.0 2406.3 2420.9 2445.0 Operating cashflow per share (¥) 120.0 137.5 199.1 228.6 204.6 220.5 217.8 223.3 214.6 226.3 DPS (¥) 17.0 21.0 23.0 25.0 27.0 29.0 36.0 38.0 40.0 42.0 Dividend ratio (%) - Before goodwill amortization 21.9 19.5 31.0 51.7 56.1 28.1 25.4 40.2 38.6 38.4 (Growth) EPS growth (%) 24.8 20.3 -38.6 -76.8 -35.5 658.8 55.3 -54.8 22.1 11.6 BPS growth (%) 6.2 -12.0 5.9 -2.8 -11.4 11.3 17.3 3.6 0.8 1.1 Total assets growth (%) 25.8 6.1 9.2 -7.4 7.7 3.4 -1.9 -1.2 0.0 -2.0 Sustainable growth rate (%) 5.1 6.5 3.6 0.6 0.4 4.5 6.3 2.1 2.6 2.8 (Investment profitability) Capital invested (¥ mn) 1,533,162 1,677,825 1,849,551 1,772,941 1,943,861 2,027,965 2,011,692 1,942,603 1,922,851 1,908,018 NOPAT (¥ mn) 78,271 70,178 107,355 44,314 40,825 84,750 96,818 65,521 75,490 81,998 ROIC (%) 5.1 4.2 5.8 2.5 2.1 4.2 4.8 3.4 3.9 4.3 WACC (%) 2.9 3.1 2.6 2.7 2.5 2.5 2.7 2.7 2.7 2.8 EVA (¥ mn) 33,692 17,445 58,551 -4,333 -6,976 33,891 43,068 13,231 23,292 28,034 EVA spread (%) 2.2 1.0 3.2 -0.2 -0.4 1.7 2.1 0.7 1.2 1.5 (Cashflow) FCF (¥mn) -155,036 -38,049 -131,747 77,108 -164,866 163,682 291,043 43,209 82,863 106,599 Operating C/F margin (%) 6.4 5.7 8.3 10.0 9.5 9.7 9.1 9.3 8.9 9.3 Operating C/F to current liabilities rate (%) 12.8 18.2 23.9 32.1 27.5 29.5 31.1 30.1 28.7 33.0 Operating C/F to debt rate (%) 18.8 19.8 21.2 28.0 18.5 22.0 26.0 24.9 24.8 29.3 Operating C/F to Investment C/F rate (%) 42.5 77.5 59.0 154.7 54.4 438.3 -240.3 126.8 173.3 206.5 (Other) Employees numbers 27,543 36,554 35,150 31,966 40,348 41,246 39,922 39,922 39,922 39,922 Consolidated subsidiaries numbers 345 371 285 259 263 257 236 234 234 234 Equity method affiliates numbers 22 27 25 22 19 18 16 16 16 16 Average shares outstanding (mn) 955.0 954.5 954.1 953.9 961.8 961.7 943.7 915.1 913.3 913.3 End-of-period shares outstanding (mn) 954.7 954.4 953.3 962.0 961.7 961.5 929.3 913.3 913.3 913.3 Source: Company data, Credit Suisse estimates

Kirin Holdings (2503 / 2503 JP) 18 09 December 2014

HOLT analysis Our HOLT analysis (DCF model premised on long-term average trendline) indicates potential upside of 28% for Kirin's share price based on analyst forecasts for FY14–16 and average trendline FY12/17 and thereafter).

Figure 29: HOLT analysis

Source: Company data, Credit Suisse estimates, HOLT estimates

Kirin Holdings (2503 / 2503 JP) 19 09 December 2014

Companies Mentioned (Price as of 08-Dec-2014) AmBev (ABEV3.SA, R$15.75) Anheuser-Busch InBev (ABI.BR, €93.58) CRE (0291.HK, HK$15.86) Devondale Murray Goulburn (Unlisted) Fonterra (FSF.NZ, NZ$6.21) Fujifilm Holdings (4901.T, ¥3,866) Grupo Petropolis (Unlisted) Heineken (HEIN.AS, €62.39) Kirin Beverage Company, Limited. (Unlisted) Kirin Brewery Company, Limited. (Unlisted) Kirin Holdings (2503.T, ¥1,562, UNDERPERFORM, TP ¥1,400) Kyowa Hakko Kirin (4151.T, ¥1,285) Lion Pty Limited (Unlisted) SABMiller (SAB.L, 3350.0p)

Disclosure Appendix

Important Global Disclosures I, Masashi Mori, 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.

3-Year Price and Rating History for Kirin Holdings (2503.T)

2503.T Closing Price Target Price Date (¥) (¥) Rating 12-Jan-12 920 1,100 N 24-Feb-12 966 1,000 22-Aug-12 983 1,050 25-Feb-13 1,330 1,600 O 08-May-13 1,758 1,800 N 23-Aug-13 1,438 1,500 24-Feb-14 1,371 1,300 18-Apr-14 1,410 NR * Asterisk signifies initiation or assumption of coverage. NEUTRAL OUTPERFORM N O T RAT ED

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 attractive, Neutrals the less attractive, and Underperforms the least attractive investment 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 total 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, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10- 15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark. 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.

Kirin Holdings (2503 / 2503 JP) 20 09 December 2014

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* 46% (53% banking clients) Neutral/Hold* 38% (50% banking clients) Underperform/Sell* 14% (44% banking clients) Restricted 2% *For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein. Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and- analytics/disclaimer/managing_conflicts_disclaimer.html Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Price Target: (12 months) for Kirin Holdings (2503.T) Method: Our ¥1,400 target price for Kirin Holdings is based on the average EV/EBITDA of the past seven years (roughly 7.4x) applied to our FY12/15 estimates. Our 7.4x multiple corresponds to the bottom of the trading range since the introduction of Abenomics, which brought about an about-face in Japan's stock market. Risk: Upside risks to our ¥1,400 target price for Kirin Holdings include; (1) a rebound in domestic market share, (2) renewed market expansion in Oceania and Brazil, and (3) improved shareholder returns.

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 (ABI.BR, FSF.NZ, HEIN.AS, SAB.L) 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 (ABI.BR, HEIN.AS) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (ABI.BR, HEIN.AS) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (2503.T, ABI.BR, FSF.NZ, HEIN.AS, SAB.L, 4151.T) within the next 3 months. As of the end of the preceding month, Credit Suisse beneficially own 1% or more of a class of common equity securities of (SAB.L).

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 have not visited the material operations of the subject company (2503.T, ABEV3.SA, ABI.BR, FSF.NZ, HEIN.AS, SAB.L, 4151.T) within the past 12 months

Kirin Holdings (2503 / 2503 JP) 21 09 December 2014

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml. The following disclosed European company/ies have estimates that comply with IFRS: (ABI.BR, HEIN.AS, SAB.L). Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (FSF.NZ, HEIN.AS) 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. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. Credit Suisse has entered into a strategic partnership with First NZ Capital ("FNZC"). Pursuant to this agreement, (FSF.NZ) is jointly covered by Credit Suisse and First NZ Capital. 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 Securities (Japan) Limited ...... Masashi Mori Important Credit Suisse HOLT Disclosures With respect to the analysis in this report based on the Credit Suisse HOLT methodology, Credit Suisse certifies that (1) the views expressed in this report accurately reflect the Credit Suisse HOLT methodology and (2) no part of the Firm’s compensation was, is, or will be directly related to the specific views disclosed in this report. The Credit Suisse HOLT methodology does not assign ratings to a security. It is an analytical tool that involves use of a set of proprietary quantitative algorithms and warranted value calculations, collectively called the Credit Suisse HOLT valuation model, that are consistently applied to all the companies included in its database. Third-party data (including consensus earnings estimates) are systematically translated into a number of default algorithms available in the Credit Suisse HOLT valuation model. The source financial statement, pricing, and earnings data provided by outside data vendors are subject to quality control and may also be adjusted to more closely measure the underlying economics of firm performance. The adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national borders. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes the baseline valuation for a security, and a user then may adjust the default variables to produce alternative scenarios, any of which could occur. Additional information about the Credit Suisse HOLT methodology is available on request. The Credit Suisse HOLT methodology does not assign a price target to a security. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes a warranted price for a security, and as the third-party data are updated, the warranted price may also change. The default variable may also be adjusted to produce alternative warranted prices, any of which could occur. CFROI®, HOLT, HOLTfolio, ValueSearch, AggreGator, Signal Flag and “Powered by HOLT” are trademarks or service marks or registered trademarks or registered service marks of Credit Suisse or its affiliates in the United States and other countries. HOLT is a corporate performance and valuation advisory service of Credit Suisse.

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.

Kirin Holdings (2503 / 2503 JP) 22 09 December 2014

References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who_we_are/en/This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This report is being distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). This report is being distributed in the United States and Canada by Credit Suisse Securities (USA) LLC; in Switzerland by Credit Suisse AG; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; in Mexico by Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); in Japan by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; elsewhere in Asia/ Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong Kong) Limited, Credit Suisse Equities (Australia) Limited, Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok 10500, Thailand, Tel. +66 2614 6000, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited (CIN no. U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India (registration Nos. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore branch to overseas investors (as defined under the Financial Advisers Regulations). By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the "FAA"), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore branch may provide to you. This information is being distributed by Credit Suisse AG, Dubai Branch, duly licensed and regulated by the Dubai Financial Services Authority (DFSA), and is directed at Professional Clients or Market Counterparties only, as defined by the DFSA. The financial products or financial services to which the information relates will only be made available to a client who meets the regulatory criteria to be a Professional Client or Market Counterparty only, as defined by the DFSA, and is not intended for any other person. This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials, management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. 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. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. Copyright © 2014 CREDIT SUISSE AG and/or its affiliates. All rights reserved. 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.

2503_120914_Kirin_E.doc Kirin Holdings (2503 / 2503 JP) 23