June 24, 2011 Company Report

SM Entertainment (041510 KQ) Entertainment

An irresistible Buy! Chang-kwean Kim +822-768-4321 [email protected]

Global expansion efforts beginning to bear fruit Jee-hyun Moon SM Entertainment (SM) is growing as a global player in the music industry, tapping +822-768-3615 into the European, North American, and South American markets (on top of the [email protected]

Asian market). Indeed, songs, music videos, and concert footage featuring SM artists are spreading around the world through social media websites such as

YouTube and Facebook. The global music market should offer numerous new opportunities to SM, especially considering the companyÊs content development capability has proven to be superior to that of its domestic rivals.

Maintain Buy rating with TP of W30,000 Buy (Maintain) SMÊs shares have remained stagnant since early this year, due to: ① low earnings Target Price (12M, W) 30,000 predictability (earnings are dependant on the success/failure of songs); ② Share Price (06/23/11, W) 18,900 uncontrollable risks inherent to the industry (scandals, etc.); ③ sell-offs by large Expected Return (%) 58.7 shareholders; and ④ deterioration of quarterly earnings. However, we expect the EPS Growth (11F, %) -32.9 stock to break out of its current trading range, given the companyÊs Japanese Market EPS Growth (11F, %) 23.4 earnings momentum. P/E (11F, x) 21.0 Market P/E (11F, x) 10.4 The surprising success of SMÊs artists in Japan should translate into full-swing KOSDAQ 464.62 earnings growth in 2012. The companyÊs P/E (based on a 2012F EPS) is 7.2x, Market Cap (Wbn) 313 which seems extremely undervalued compared to the domestic peer groupÊs Shares Outstanding (mn) 17 average P/E of 15.4x. Thus, we maintain our Buy rating on SM with a target price of Avg Trading Volume (60D, '000) 597 Avg Trading Value (60D, Wbn) 11 W30,000. Dividend Yield (11F, %) - Free Float (%) 75.6 52-Week Low 11,400 52-Week High 22,500 Beta (12M, Daily Rate of Return) 0.7 Price Return Volatility (12M Daily,%,SD) 3.8 Foreign Ownership (%) 6.6 Major Shareholder(s): SM Lee (24.43%) KB Asset Mgmt. (11.24%) Partners Venture Capital and et. al (7.25%) Price Performance (%) 1M 6M 12M Absolute 10.5 24.8 38.5 Relative 12.3 32.3 44.6

§ Earnings & Valuation Metrics Share price 180 KOSDAQ OP EV/ Sales OP NP EPS EBITDA FCF ROE P/E P/B 160 FY Margin EBITDA (Wbn) (Wbn) (Wbn) (W) (Wbn) (Wbn) (%) (x) (x) 140 (%) (x) 120 12/09 62 9 15.0 4 278 12 11 7.3 16.2 1.2 3.7 100 12/10 86 25 29.5 22 1,342 28 23 29.1 12.6 3.3 8.2 80 12/11F 90 17 19.2 15 901 20 21 16.0 21.0 3.2 11.6 60 12/12F 145 52 35.9 44 2,637 54 43 36.0 7.2 2.2 3.3 40 12/13F 159 59 37.0 50 3,029 60 51 29.8 6.2 1.6 2.2 6/10 10/10 2/11 6/11 Note: Parent basis under K-GAAP, Source: Company data, Daewoo Securities Research estimates

Please read carefully important disclosures at the end of this report.

I. Investment summary ...... 3

II. Valuation ...... 4 1. Difficult to analyze entertainment companies ...... 4 2. Valuation premium anticipated...... 5

III. Success in Japan ...... 8

IV. Earnings outlook...... 16

2

June 24, 2011 SM Entertainment

I. Investment summary

Strong R&D and marketing capabilities

Internal training, content SM has proven its superior ability to find and nurture successful performing artists from development and which globally-competitive contents can be created and sold. Such a strong (so-called) R&D copyrights capability (finding, training and nurturing successful artists) helps the company significantly lessen the shock of failed albums or artists.

SM owns the copyrights to all its content. As platforms and networks increasingly diversify (smartphones, smart TVs, etc.), customer contact points are broadening. Moreover, the one source, multi-use environment (same content for different platforms) is spreading across the globe. This indicates that the companyÊs copyrighted contents are increasing in value.

Global marketing The success of SM Town concerts in Paris (June 2011) proved that K-pop is hugely popular through social media in Europe. Indeed, songs, music videos, and concert footage featuring SM artists are websites spreading around the world through social media websites such as YouTube, Facebook and Twitter. The global music market should offer numerous new opportunities to SM, especially considering the companyÊs content development capability has proven to be superior to that of its domestic rivals.

Korean music industryÊs PWC, a market research firm, forecasts the global share of the Korean music industry at only global market is forecast 1.6% in 2011, which means there is huge growth potential for Korean music firms. In at 1.6% in 2011 particular, Japan should provide a great opportunity to Korean music companies, as the countryÊs offline music market is 66 times larger that that of Korea (15 times larger in terms of total music market size).

SM is gaining market In 2010, SM delivered an earnings surprise thanks to strong 2009 sales in Japan (TVXQ sold share in Japan, the 942,000 CDs and 374,000 concert tickets). In 1H11, TVXQ sold 284,000 CDs, GirlÊs worldÊs third largest Generation sold 370,000 CDs (pre-order of 600,000 CDs), and pre-orders for SHINeeÊs June music market single reached 120,000 copies.

SM should sell at least 432,000 tickets for its SM Town concerts in Japan in 1H11, and SHINee plans to hold concerts in five Japanese cities beginning in July. We forecast SMÊs CD sales in Japan to reach 2.02mn copies (to be reflected in 2012 earnings), more than twice the figure in 2009.

Figure 1. Quarterly operating profit forecast and share price trend

(Wbn) Operating profit (L) Earnings to grow thanks to (W) 18 Share price (R) Japan business 24,000 (TVXQ, Girls' Generation, SHINee and Super Junior) in 2011~2012 12 TVXQ's success in Japan in 2009: 18,000 - Concerts: 374,126 tickets sold Earnings gap to - Singles: 624,913 CDs sold widen due to - Albums: 317,314 CDs sold 6 earthquake in Japan 12,000

0 6,000

-6 0 1Q08 1Q09 1Q10 1Q11 1Q12F

Source: Daewoo Securities Research

Daewoo Securities Research 3 June 24, 2011 SM Entertainment

II. Valuation

1. Difficult to analyze entertainment companies

Difficult to estimate It is more difficult to analyze entertainment companies and estimate their earnings than earnings; Large other companies. In Korea, entertainment companies are reluctant to announce precise shareholders and sales-related data due to the nature of the entertainment industry, which is sensitive to executives have sold rumors. As for SM, the percentage of overseas sales (including Japan) out of its total sales some of their stakes; rose to 42.4% in 2010, making it even more difficult to estimate earnings. The company Share price has been accounts for overseas sales two quarters after sales are generated (sales of CDs in Japan in range-bound 1Q will be recognized as overseas sales in 3Q).

SMÊs stock has risen on higher overseas royalty income and domestic digital music sales since 2009, while the companyÊs large shareholders and executives have sold some of their stakes. Since the remaining stock options that are exercisable from March 2012 are equivalent to only 294,000mn shares (out of the total of 526,000mn shares), overhang is unlikely to occur for the time being. The companyÊs stock has been range-bound around W20,000 since early this year, due to ① weaker quarterly earnings and ② the recent earthquake in Japan. We expect the stock to break thorough this range, as earnings should improve on the success of the companyÊs performers in Japan.

Figure 2. Quarterly overseas sales and operating profit trend and forecast

(Wbn) Overseas sales 18 Operating profit TVXQ's 2009 success in Japan - Domestic: Offline/digital music sales, management sales 12 - Overseas: Offline/digital music sales, management sales (Recognized as royalty income two quarters after they are generated)

6

0

-6 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11

Source: Daewoo Securities Research

Figure 3. Share price performance and sales by major shareholders Figure 4. Domestic institution's cumulative net buying

(W) Major shareholder Soo-man Lee ('000 shares) Domestic institutions' cumulative net buying (L) (W) 25,000 Share price sold 500k shares 4,000 Share price (R) 25,000 during extended tranding hours

20,000 Four executives sold 90,000 shares 3,000 20,000 during extended trading hours

15,000 2,000 15,000 Neowiz Internet (Bugs Music) Neowiz bought 2,479,203 shares Internet over the counter sold 10,000 1,000 10,000 Neowiz 430k shares Internet sold 5,000 799,203 Four executives 0 5,000 shares sold 60k shares

0 -1,000 0 1/09 7/09 1/10 7/10 1/11 1/10 4/10 7/10 10/10 1/11 4/11

Source: Daewoo Securities Research Source: Daewoo Securities Research Daewoo Securities Research 4 June 24, 2011 SM Entertainment

2. Valuation premium anticipated

SM just entered a new It is difficult to derive fair valuation multiples for entertainment companies as their valuations phase of growth depend on the success of performers as well as the emergence of new media devices and distribution channels. In valuing SM, we noted that the global entertainment giant, Disney, traded at two to three times the market average P/E during its growth phases – between 1986 and 1998 – thanks to 1) blockbuster films, such as The Lion King and Toy Story and 2) the popularity of its music, movies, and dramas in the U.S. During this period, DisneyÊs market capitalization soared by 23x. We believe SMÊs valuation may also rise as the company just entered a similar phase of growth.

We maintain our target price of W30,000, which we derived by applying a 2011F P/E of Maintain Buy with TP of 12.4x (the Korean music industry average) to a 2011F EPS in October 2010. The companyÊs W30,000 2011 earnings are expected to fall below our expectations, as Japanese performance schedules were delayed by three to four months due to the earthquake. However, we maintain our target price, as the surprising success of SMÊs artists in Japan should translate into full-swing earnings growth in 2012. The companyÊs P/E (based on a 2012F EPS) is 7.2x, which seems extremely undervalued compared to the domestic peer groupÊs average P/E of 15.4x. Thus, we maintain our Buy rating on SM with a target price of W30,000.

Figure 5. AvexÊs share price and P/E trend

(JPY) (x) 14,000 Avex's share price (L) 200 Earnings momentum: Operating profit doubled YoY Avex's P/E (R)

10,500 Major artists 150 (including BoA, Kumi Koda, Ayumi Hamasaki) entered the top 10 7,000 100

3,500 50

0 0 98 00 02 04 06 08 10

Source: Thomson Reuters, Daewoo Securities Research

Figure 6. AvexÊs P/E and Japanese stock market P/E trend

(x) 200 Avex's P/E MSCI JP 12M-fwd P/E Major artists (including BoA, Kumi Koda, 150 Ayumi Hamasaki) entered the top 10

100 Earnings momentum: Operating profit doubled YoY

50

0 98 00 02 04 06 08 10

Source: Thomson Reuters, Daewoo Securities Research

Daewoo Securities Research 5 June 24, 2011 SM Entertainment

Figure 7. DisneyÊs market cap trend

(US$bn) Acquisition of 100 Walt Disney's market cap Lion King 2 in 1998 media companies Toy Story 2 in 1999 including Fox in 2001 Acquisition of Marvel Ent. 80

60 Market cap increased by 23x from 1986 to 1998

40 Acquisition of Pixar in 2006 20 Acquisition of ESPN in 1996

0 80 83 86 89 92 95 98 01 04 07 10

Source: Thomson Reuters, Daewoo Securities Research

Figure 8. DisneyÊs share price and P/E trend

(US$) Lion King 2, Walt Disney's share price (L) (x) 50 Toy Story 2 Walt Disney's P/E (R) 160

Acquisition of ESPN 40 120 Toy Story 30 Lion King 80 20

40 10 Acquisition of media companies (including Fox) 0 0 91 93 95 97 99 01 03 05 07 09 11

Source: Thomson Reuters, Daewoo Securities Research

Figure 9. DisneyÊs P/E and the U.S. stock marketÊs P/E trend

(x) Walt Disney's P/E 100 Lion King 2, Toy Story 2 MSCI US 12M-fwd P/E

Acquisition of ESPN 80 Toy Story

60 Lion King Acquisition of media companies (including Fox) 40

20

0 91 93 95 97 99 01 03 05 07 09 11

Source: Thomson Reuters, Daewoo Securities Research

Daewoo Securities Research 6 June 24, 2011 SM Entertainment

Table 1. Global major music companiesÊ earnings and valuations (2010) (respective countryÊs currency, %, x) Company Sales OP NP Share price ROE EPS EPSG P/E OP margin Net margin SM 86.4 25.5 21.8 16,900 29.1 1,342 382.6 12.6 29.5 25.2 YG 44.8 10.3 9.8 - 48.0 2,615 131.8 - 23.1 21.5 JYP 21.7 5.9 0.9 - 34.2 333 TTB - 27.2 4.2 Loen 138.9 16.3 9.8 8,550 14.7 386 116.4 22.1 11.7 7.0 Neowiz Internet 44.3 5.6 11.4 8,750 25.2 679 38.0 12.9 12.6 25.8 KT Music 40.1 0.3 0.6 2,710 2.7 20 TTB 134.4 .6 1.5 Avex (JP) 112 11 5 1,187 17.5 124 444.0 9.6 10.2 4.8 A8 Digital Music (CN) 682 44 42 4.68 8.3 0.09 -59.1 52.0 6.5 6.1 Warner Music (US) 2,984 90 -143 5.17 -- -0.96 RR - 3.0 -4.8 Realnetworks (US) 402 -43 3 3.41 -- 0.05 0.0 68.2 -10.7 0.8 Korean average 25.6 15.9 17.0 14.4 Overseas average 12.9 43.3 2.2 1.7 Average 19.3 29.6 11.4 9.2 Note: Korean companiesÊ data on parent-based under K-GAAP; All units are in billions (Korea, Japan) and millions (the others) except for per share data Source: Thomson Reuters, Daewoo Securities Research

Table 2. Global major music companiesÊ earnings forecasts and valuations (2011F) (respective countryÊs currency, %, x) Company Sales OP NP Share price ROE EPS EPSG P/E OP margin Net margin SM 90.3 17.3 14.8 18,900 16.0 901 -32.9 21.0 19.2 16.5 Loen 152.9 27.9 19.4 8,300 25.0 765 98.1 10.8 18.2 12.7 Neowiz Internet 53.1 7.1 6.4 9,010 15.8 341 -49.8 26.4 13.3 12.0 KT Music 42.7 0.8 0.5 1,520 -- 16 -21.7 96.3 1.9 1.1 Avex (JP) 120 12 6 1,030 16.5 133 -- 7.7 -- -- A8 Digital Music (CN) 1,152 224 192 1.39 24.2 0.42 366.7 3.3 19.4 16.7 Warner Music (US) 2,746 74 -131 8.20 -- -0.93 RR -- 2.7 -4.8 Realnetworks (US) 361 -1 -17 3.49 -6.8 -0.12 TTR -- -0.4 -4.7 Korean average 18.9 38.6 15.6 12.1 Overseas average 11.3 5.5 7.2 2.4 Average 15.1 22.1 10.6 7.1 Note: Korean companiesÊ data on parent-based under K-GAAP; All units are in billions (Korea, Japan) and millions (the others) except for per share data Source: Thomson Reuters, Daewoo Securities Research

Table 3. Global major music companiesÊ earnings forecasts and valuations (2012F) (respective countryÊs currency, %, x) Company Sales OP NP Share price ROE EPS EPSG P/E OP margin Net margin SM 145.5 52.3 43.6 18,900 36.0 2,637 192.6 7.2 35.9 30.0 Loen 164.8 30.8 20.6 8,300 22.4 813 6.3 10.2 18.7 12.5 Neowiz Internet 145.5 52.3 43.6 9,010 25.4 431 26.4 20.9 14.1 13.6 KT Music 44.5 1.9 1.9 1,520 - 65 312.0 23.4 4.2 4.4 Avex (JP) 124 12 6 1,030 -- 143 7.7 7.2 9.8 4.8 A8 Digital Music (CN) 1,365 264 231 1.39 22.0 0.51 21.4 2.7 19.4 16.9 Warner Music (US) 2,777 85 -127 8.20 -- -0.87 RR -- 3.1 -4.6 Realnetworks (US) 379 16 1 3.49 -2.3 0.01 TTB 436.3 4.3 0.2 Korean average 27.9 15.4 27.4 21.9 Overseas average 9.9 5.0 9.1 4.4 Average 18.9 10.2 13.7 9.7 Note: Korean companiesÊ data on parent-based under K-GAAP; All units are in billions (Korea, Japan) and millions (the others) except for per share data Source: Thomson Reuters, Daewoo Securities Research

Daewoo Securities Research 7 June 24, 2011 SM Entertainment

III. Success in Japan

1H11 Performance has already exceeded that of 2009

It is taking less time for We compared the successes of BoA (Japanese debut album released in May 2001), TVXQ SMÊs artists to become (Japanese debut album released in November 2004), GirlsÊ Generation (Japanese debut popular enough to book album released in August 2010), and SHINee (Japanese debut album released in June 2011). a concert at a large arena In March 2007, BoA embarked on a concert tour (seating capacity of 2,700 people) in Japan, eight quarters after the launch of her first Japanese album. In May 2006, TVXQ held its first concert (seating capacity of 500 people), seven quarters after their Japanese debut. In May 2011, GirlsÊ Generation went on tour (seating capacity of 16,000 people), four quarters after their showcase in Japan. SHINee, who debuted in Japan with a single in June 2011, is scheduled to hold a concert in July 2011

.

In Japan, if artists book a concert in an arena that houses more than 10,000 people, they are considered to be popular singers that are capable of commercial success. It is taking less and less time for SMÊs artists to become popular enough to book a concert at a large arena, and CD sales have been increasing markedly.

In 2009, TVXQ sold SM delivered an earnings surprise in 2010 with an operating profit of W25.5bn, which was 940,000 CDs in Japan primarily driven by overseas sales. We believe that last yearÊs robust overseas sales were largely the result of the recognition of sales related to the boy band TVXQ, which proved to be very popular in Japan in 2009. In 2009, TVXQ sold 942,000 CDs in Japan (624,000 singles and 317,000 full albums; retailers typically sell singles and full albums for W20,000/copy and W50,000/copy, respectively)

. In that same year, 374,000 fans attended the boy bandÊs Japanese concerts (based on official maximum seating capacity figures). The average price of a concert ticket in Japan is around W150,000.

Pre-order sales for In 2011, due to the earthquake and subsequent nuclear leaks, SM postponed its Japanese GirlsÊ GenerationÊs first album releases and concerts by three to four months. However, thus far in 2011, TVXQ Japanese album reached (now a duo) has sold 284,000 copies of its „Why‰ single in Japan and plans to release 600,000 copies in June; another single in July. In June, GirlsÊ Generation released its first Japanese full album 284,000 copies of (600,000 copies of which were ordered by retailers). This album is estimated to have sold TVXQÊs single „Why‰ more than 370,000 copies thus far. have been sold since Figure 10. SM artistsÊ activities in Japan January

('000 copies) BoA's CDs (L) TVXQ's CDs (L) Girls' Generation's CDs (L) ('000 seats) 1,400 BoA's concert (R) TVXQ's concert (R) Girls' Generation's concert (R) 320

It is taking less time for SMÊs artists to become 1,050 popular enough to book 240 a concert at a large arena

- BoA: after 8Qs 700 4Q 160 528,344 - TVXQ: After 7Qs 478,985 - Girls' Generation: After 4Qs

350 80

7Q 8Q

0 0 1Q 5Q 9Q 13Q 17Q 21Q 25Q 29Q

Note: Each artistÊs activities are in chronological order starting from their debut dates Source: Daewoo Securities Research

Daewoo Securities Research 8 June 24, 2011 SM Entertainment

SHINee released its first Japanese single on June 22nd; 120,000 copies had been ordered by retailers. Another boy band, Super Junior, which released its first Japanese single in June, is scheduled to hold a showcase in Japan in July. All in all, we project SMÊs 2012 album sales volume in Japan to reach 2.02mn copies (doubling the companyÊs 2009 figures), which should be reflected in the companyÊs 2012 earnings.

SMÊs 1H11 concerts can Furthermore, the attendance numbers for SMÊs 2011 Japanese concerts are likely to significantly accommodate 432,000 exceed the companyÊs 2009 figures. SMÊs 1H11 concerts, including SM Town at the Tokyo Dome fans and GirlsÊ GenerationÊs Japanese tour, should be able to accommodate 432,000 fans. In addition, SHINee plans to embark on a concert tour to JapanÊs five major cities in July.

SM boasts a diverse set of Japanese profit sources, including CD albums, concerts, digital music, and DVDs. In Japan, the digital music business makes up 30% of the music market (excluding concerts and sales of goods such as towels, photos, and T-shirts, etc.), while the concert/music video DVD business accounts for 11.6%. In addition, SM can generate profits from artistsÊ appearances in TV shows and commercials, and merchandise sales (priced at JPY500~5,000/unit).

SMÊs royalty income as We estimate that SM (which holds the copyrights to its artistsÊ CD albums and digital music) a percentage of total takes 15% of Japanese album sales and 30% of Japanese digital music sales. With regard Japanese sales rose to to concerts, SM shares profits (after costs such as appearance fees, venue rentals, and 30~40% in 2011 other personnel expenses) with a Japanese entertainment agency. Profits from artistsÊ TV shows and commercial appearances are minimal, as most of the associated income from 20% in 2009 (excluding commissions to a Japanese agency) goes to the artists. In 2009, SMÊs royalty income was equivalent to around 20% of total Japanese sales. In 2009, TVXQ was the only performance act operating in Japan. However, this percentage is estimated to have risen to 30~40% since 2010.

Figure 11. SM boasts a divers set of profit sources in Japan

CD DVD MP3

SM boasts a diverse set of Event profit sources Commercial

Concert Goods TV

Source: Daewoo Securities Research Daewoo Securities Research 9 June 24, 2011 SM Entertainment

Figure 12. Sum of CDs and concert tickets sold in Japan and overseas sales trend

('000 copies) (Wbn) Further 2,400 Sum of CDs and concert tickets sold (2Q delayed) (L) sales expected 16 Overseas sales (R) from SHINee and Super Junior 1,800 in addition to 12 Girls' Generation

1,200 8

600 4

0 0 1Q01 1Q03 1Q05 1Q07 1Q09 1Q11

Source: SM, Quantiwise, Daewoo Securities Research

Figure 13. CDs sold in Japan and overseas sales trend

('000 copies) TVXQ's (Wbn) success 2,400 CD copies sold (2Q delayed) (L) Girls' Generation, 16 Overseas sales (R) SHINee, and Super Junior 1,800 12 BoA's success

1,200 8

600 4

0 0 1Q01 1Q03 1Q05 1Q07 1Q09 1Q11

Source: SM, Quantiwise, Daewoo Securities Research

Figure 14. ConcertÊs max seating capacity in Japan and overseas sales trend

('000 seats) (Wbn) 480 Concert's max seating capacity (2Q delayed) (L) Girl's Generation Tour; 16 SM Town Live Overseas sales (R) at Tokyo Dome; TVXQ Tour SHINee; 360 12 (Concert at Super Junior Tokyo Dome)

240 8

BoA Tour 120 4

0 0 1Q01 1Q03 1Q05 1Q07 1Q09 1Q11

Source: SM, Quantiwise, Daewoo Securities Research

Daewoo Securities Research 10 June 24, 2011 SM Entertainment

Table 4. CD sales volume of SMÊs major performing artists in Japan (copies) Release date BoA TVXQ GirlsÊ Generation SHINee Super Junior Title 5/30/01 40,470 ID; Peace B 7/25/01 59,450 Amazing Kiss 12/05/01 77,220 氣持ちはつたわる 1/17/02 179,590 LISTEN TO MY HEART 3/13/02 84,430 Every Heart-ミンナノキモチ 3/13/02 931,742 ALBUM1: LISTEN TO MY HEART 5/29/02 20,580 Don't start now 8/28/02 202,000 VALENTI 9/19/02 122,440 奇蹟ㆍNO.1 12/11/02 151,485 JEWEL SONG-BESIDE YOU-僕を呼ぶ声- 1/29/03 1,249,197 ALBUM2: VALENTI 5/14/03 144,264 Shine We Are! : Earthsong 10/22/03 82,395 DOUBLE 12/03/03 58,314 Rock With You 1/15/04 653,630 ALBUM3: LOVE & Honesty 2/11/04 24,292 Be the one 9/01/04 82,614 QUINCY 11/25/04 4,710 HUG 12/01/04 136,725 メリクリ 2/02/05 1,099,720 ALBUM: BEST1 3/30/05 169,542 DO THE MOTION 4/27/05 10,166 Stay With Me Tonight 7/13/05 10,496 Somebody To Love 8/31/05 54,453 make a secret 11/23/05 58,436 抱きしめる 11/02/05 16,615 My Destiny 1/18/06 74,744 Everlasting 2/15/06 427,871 ALBUM4: OUTGROW 3/08/06 11,484 明日は 來るから 3/23/06 59,055 ALBUM1: Heart, Mind and Soul 4/05/06 90,936 七色の明日∼brand new beat∼-Your Color 4/19/06 7,672 Rising Sun-Heart,Mind and Soul 6/21/06 17,283 Begin 8/09/06 40,943 KEY OF HEART-DOTCH 8/16/06 26,890 Sky 11/01/06 99,078 Winter Love 11/08/06 29,226 Miss you, O-正-反-合 1/17/07 348,093 ALBUM5: MADE IN 20 1/24/07 29,144 Step by Step 3/07/07 28,116 Choosey Lover 3/14/07 86,677 ALBUM2: Five in the Black 4/25/07 42,789 Sweet Impact 6/13/07 50,074 Lovin' you 8/01/07 124,829 SUMMER ~Summer Dream-Song for you-Love in the Ice~ 9/19/07 41,978 SHINE-Ride on 9/26/07 43,524 LOVE LETTER 11/14/07 50,781 Forever Love 12/12/07 28,128 LOSE YOUR MIND 12/19/07 39,595 Together

Daewoo Securities Research 11 June 24, 2011 SM Entertainment

Release date BoA TVXQ GirlsÊ Generation SHINee Super Junior Title 1/16/08 48,543 Purple Line 1/23/08 158,524 ALBUM3: T 2/06/08 27,116 Two hearts-WILD SOUL 2/13/08 32,983 Runaway 2/20/08 15,636 be with you 2/27/08 185,338 ALBUM6: THE FACE 2/27/08 32,939 If Rainy Night 3/05/08 21,037 Close to you 3/12/08 29,122 Keyword-Maze 4/23/08 121,771 Beautiful you-千年恋歌 6/04/08 28,916 Vivid ~Kissing you,Sparkling,Joyful Smile~ 7/16/08 120,890 どうして君を好きになってしまったんだろう? 10/15/08 91,270 呪文-MIROTIC- 1/21/09 110,717 Bolero-Kiss The Baby Sky-忘れないで 2/18/09 22,354 永遠／UNIVERSE 3/11/09 100,313 Survivor 3/18/09 132,570 ALBUM: BEST2, BEST&USA 3/25/09 317,314 ALBUM4: The Secret Code 4/22/09 180,826 Share The World-위아! 7/01/09 233,057 Stand by U 10/28/09 13,898 BUMP BUMP! 12/09/09 50,613 まもりたい ~White Wishes~ 1/27/10 289,412 BREAK OUT! 2/10/10 59,408 ALBUM7: IDENTITY 2/17/10 560,113 ALBUM: BEST SELECTION 2010 3/24/10 228,448 時ヲ止メテ 7/21/10 12,459 WOO WEEKEND 8/11/10 138,302 New Beginning of Girls' Generation 9/08/10 146,540 Single1: Genie 10/20/10 200,392 Single2: Gee 12/22/10 134,664 Hoot license 1/26/11 284,410 Why? 4/27/11 153,327 Single3: Mr.taxi, RDR 6/01/11 378,534 ALBUM1: Girls' Generation 6/08/11 100,000 Single1: Bonamana 6/22/11 Single1: Replay 7/20/11 Superstar Note: Unofficial figures; Only includes CDs launched and sold in Japan Source: Oricon, Wikipedia Korea, Bestiz.net, All Kpop (allkpop.com), Daum Blog (music25, enhw4295-), Egloos Blog (yurui), Daewoo Securities Research

As of June 23rd: - Preorders for GirlsÊ GenerationÊs first album ÂGirls' GenerationÊ: 600,000 copies (released on June 1st) - Preorders for SHINeeÊs first single ÂReplayÊ: 120,000 copies (released on June 22nd) - TVXQÊs single ÂSuperstarÊ to be released on July 20th - Sales volume of Super JuniorÊs first single ÂBonamanaÊ is estimated at over 100,0000 copies (released on June 8th)

Daewoo Securities Research 12 June 24, 2011 SM Entertainment

Table 5. Concerts of SMÊs major artists in Japan (# of seats: maximum seating capacity) Date BoA TVXQ GirlsÊ Generation SHINee Super Junior Joint concert Place 3/27/03 2,700 Osaka 3/28/03 2,700 Osaka 3/30/03 3,012 Nagoya 3/31/03 3,012 Nagoya 4/05/03 13,000 Tokyo 4/06/03 13,000 Tokyo 3/20/04 37,000 Saitama 3/21/04 37,000 Saitama 3/26/04 10,000 Nagoya 3/27/04 10,000 Nagoya 4/03/04 11,000 Fukuoka 4/10/04 16,000 Osaka 4/11/04 16,000 Osaka 4/17/04 17,000 Yokohama 4/18/04 17,000 Yokohama 4/02/05 15,000 Fukuoka 4/07/05 13,000 Tokyo 4/09/05 13,000 Tokyo 4/10/05 13,000 Tokyo 4/16/05 16,000 Osaka 4/17/05 16,000 Osaka 4/23/05 10,000 Nagoya 4/24/05 10,000 Nagoya 5/13/06 500 Sapporo 5/18/06 1,500 Osaka 5/20/06 1,500 Osaka 5/21/06 1,700 Yokohama 5/22/06 1,700 Yokohama 5/23/06 800 Fukuoka 5/24/06 1,000 Nagoya 5/25/06 600 Niigata 5/26/06 700 Tokyo 5/27/06 2,700 Tokyo 5/28/06 2,700 Tokyo 9/29/06 2,000 Nagoya 9/30/06 2,000 Nagoya 10/07/06 2,000 Fukuoka 10/08/06 2,000 Fukuoka 10/13/06 2,000 Osaka 10/14/06 2,000 Osaka 10/17/06 2,000 Tokyo 10/18/06 2,000 Tokyo 10/21/06 2,000 Sendai 10/22/06 2,000 Sendai 10/28/06 2,000 Sapporo 10/29/06 2,000 Sapporo 11/05/06 2,000 Tokyo 3/31/07 17,000 Yokohama 4/01/07 17,000 Yokohama 4/07/07 15,000 Fukuoka 4/14/07 16,000 Osaka 4/15/07 16,000 Osaka 4/21/07 10,000 Nagoya 4/22/07 10,000 Nagoya

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Date BoA TVXQ GirlsÊ Generation SHINee Super Junior Joint concert Place 5/10/07 2,222 Nakano 5/12/07 2,400 Osaka 5/13/07 2,400 Osaka 5/16/07 1,730 Niigata 5/18/07 2,084 Tokyo 5/19/07 2,084 Tokyo 5/23/07 1,000 Sapporo 5/27/07 1,300 Sendai 5/29/07 2,100 Kobe 5/31/07 1,800 Shiga 6/02/07 2,500 Nagoya 6/03/07 2,500 Nagoya 6/15/07 2,300 Fukuoka 6/16/07 2,300 Fukuoka 6/18/07 14,900 Tokyo 6/19/07 14,900 Tokyo 3/19/08 17,000 Yokohama 3/20/08 17,000 Yokohama 3/26/08 16,000 Osaka 3/27/08 16,000 Osaka 3/29/08 16,000 Osaka 3/30/08 16,000 Osaka 4/01/08 11,093 Fukuoka 4/12/08 10,000 Hiroshima 4/13/08 10,000 Hiroshima 4/15/08 10,000 Nagoya 4/16/08 10,000 Nagoya 4/19/08 7,000 Sendai 4/20/08 7,000 Sendai 4/26/08 11,500 Sapporo 5/03/08 37,000 Saitama 5/05/08 37,000 Saitama 5/06/08 37,000 Saitama 5/08/08 1,527 Ichihara 5/10/08 2,488 Kanagawa 5/11/08 2,488 Kanagawa 5/15/08 3,012 Nagoya 5/16/08 3,012 Nagoya 5/21/08 1,730 Niigata 5/23/08 2,200 Toyama 5/28/08 2,001 Hiroshima 5/30/08 2,754 Osaka 5/31/08 2,754 Osaka 6/05/08 2,336 Shizuoka 6/06/08 2,112 Kobe 6/13/08 2,372 Sendai 6/17/08 1,966 Oita 6/18/08 2,316 Fukuoka 6/20/08 2,001 Kagawa 6/22/08 1,848 Shiga 6/26/08 2,505 Saitama 6/28/08 5,012 Tokyo 6/29/08 5,012 Tokyo 5/04/09 9,000 Kobe 5/05/09 9,000 Kobe

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Date BoA TVXQ GirlsÊ Generation SHINee Super Junior Joint concert Place 5/09/09 37,000 Saitama 5/10/09 37,000 Saitama 5/16/09 7,063 Sendai 5/17/09 7,063 Sendai 5/23/09 12,000 Hokkaido 5/24/09 12,000 Hokkaido 5/30/09 15,000 Fukuoka 5/31/09 15,000 Fukuoka 6/06/09 10,000 Hiroshima 6/07/09 10,000 Hiroshima 6/10/09 16,000 Osaka 6/11/09 16,000 Osaka 6/13/09 16,000 Osaka 6/14/09 16,000 Osaka 6/18/09 10,000 Nagoya 6/20/09 10,000 Nagoya 6/21/09 10,000 Nagoya 7/04/09 50,000 Tokyo Dome 7/05/09 50,000 Tokyo Dome 12/07/10 13,000 Tokyo 1/25/11 13,000 Tokyo 1/26/11 13,000 Tokyo 2/18/11 12,000 Yokohama 2/19/11 12,000 Yokohama 2/20/11 12,000 Yokohama 5/31/11 16,000 Osaka 6/01/11 16,000 Osaka 6/04/11 37,000 Saitama 6/05/11 37,000 Saitama 6/17/11 13,000 Tokyo 6/18/11 13,000 Tokyo 6/28/11 13,000 Tokyo 6/29/11 13,000 Tokyo 7/02/11 10,000 Hiroshima 7/03/11 10,000 Hiroshima 7/06/11 10,000 Nagoya 7/07/11 10,000 Nagoya 7/17/11 11,000 Fukuoka 7/18/11 11,000 Fukuoka 7/22/11 450 Fukuoka 7/23/11 2,000 Kansai 7/27/11 2,000 Tokyo 7/28/11 2,000 Tokyo 8/08/11 700 Sapporo 8/11/11 2,291 Nagoya 9/03/11 50,000 Tokyo Dome 9/04/11 50,000 Tokyo Dome 9/05/11 50,000 Tokyo Dome Note: Unofficial figures; Concert hallsÊ seating capacities can vary by seating plan (Osaka Hall's maximum capacity is 6,200 seats for A type, 11,200 seats for B type, and 16,000 seats for C type), Source: Wikipedia Korea, JNTO, SHINee Japanese official website (shinee.jp), Naver Blog (guduri44, forgotten_13), Egloos Blog (yurui), Daewoo Securities Research

As of June 23rd: - Super Junior to have a showcase in July; Other concert schedules in 2011 have yet to be determined - SHINeeÊs tour to begin on July 22nd

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IV. Earnings outlook

Digital music and SM EntertainmentÊs sales can be broken down into 1) CDs, 2) digital music, 3) overseas overseas business business and 4) management. The CD division, whose earnings are primarily attributable to divisions deliver high domestic CD sales, generates gross profit margin of 15~20%. Earnings at the digital music profitability division are attributable to downloads and streaming services. The division delivers a gross profit margin of around 80%. The overseas business division generates a gross profit margin of 70~80% based on exports (mostly royalty income). The management division recognizes fees generated from events, entertainment shows, TV dramas, movies and commercials, displaying a gross profit margin of 15~20%.

Profitability expected to We project the companyÊs sales will improve 4.5% in 2011, but operating profit and net deteriorate YoY in 2011 profit will decline 32.1% and 36.0%, respectively. Sales at the overseas division are primarily due to the expected to be sluggish in 2011, as sales are reflected into earnings two quarters after they Japanese earthquake are generated (artists only resumed their delayed Japanese schedules in June). In addition, the high-margin digital music divisionÊs contribution to earnings is also anticipated to shrink. In 2011, SMÊs profitability is expected to be weighed down by an increase in investment and personnel expenses, due to the companyÊs expansion into the U.S. and Europe and the debuts of new artists.

Japanese business to We project the Japanese business will make a full-scale contribution to earnings in 2012, (earnings drive earnings surprise should start to pick up in 4Q11). We forecast sales will climb 61.1% in 2012, with operating profit starting in 4Q11 and net profit soaring 202.1% and 193.7%, respectively. In addition, SMÊs market share in the Japanese music market is anticipated to increase to 5.7% with CD sales of 2.02mn copies in 2012.

Figure 15. 2008 Sales breakdown Figure 16. 2011F Sales breakdown

CD 18% CD 27% Management Management 35% 40% Digital 8% 2008 2011

Digital 12%

Overseas sales Overseas sales 39% 21%

Source: Company data, Daewoo Securities Research Source: Company data, Daewoo Securities Research

Table 6. Overseas sales assumptions (%, Wbn, Ê000 copies) 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F Market share 0.4 0.3 0.4 0.5 1.1 2.6 1.5 5.7 6.2 Royalties from Japan 3.7 3.0 3.5 5.3 9.7 22.6 19.3 68.4 73.2 Sales from Japan 18.3 14.8 17.4 26.4 48.6 113.2 64.2 228.0 244.0 Sales from other countries 2.3 1.9 2.2 3.3 6.1 14.1 16.3 17.9 19.7 # of CDs sold in Japan TVXQ (5) 300 940 - - - GirlsÊ Generation - - 300 930 740 SHINee - - - 470 740 Super Junior - - - 160 250 TVXQ (2) - - 250 470 470 Total 300 940 550 2,020 2,200 Source: Daewoo Securities Research

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Table 7. Annual earnings trends and forecasts (Wbn, %) 2005 2006 2007 2008 2009 2010 2011F 2012F 2013F Sales 20.7 29.3 31.3 40.1 61.8 86.4 90.3 145.5 158.6 CD 7.5 8.8 8.9 10.8 14.6 14.9 16.0 16.8 17.6 Digital music 1.9 4.0 4.4 4.8 9.5 8.5 7.2 9.4 13.3 Overseas 6.0 4.8 5.6 8.6 15.8 36.8 35.5 86.3 92.9 CD 0.1 0.3 0.7 0.8 0.7 1.2 2.2 2.7 2.8 Royalty 5.8 4.5 5.0 7.8 15.0 35.6 33.3 83.6 90.1 Management 5.4 11.7 12.4 16.0 21.9 26.2 31.6 33.0 34.8 Sales breakdown CD 36.2 29.9 28.4 26.9 23.7 17.3 17.7 11.5 11.1 Digital music 9.0 13.7 14.0 11.9 15.3 9.8 8.0 6.4 8.4 Overseas 28.8 16.5 18.0 21.4 25.5 42.6 39.4 59.3 58.6 Management 26.0 39.9 39.6 39.8 35.5 30.3 35.0 22.7 21.9 Albums sold (Â000) 1,010 1,180 1,200 1,280 1,740 1,780 1,900 2,000 2,100 ASP (W) 7,400 7,400 7,400 8,400 8,400 8,400 8,400 8,400 8,400 Digital/CD sales 24.9 45.7 49.4 44.3 64.8 57.0 45.4 55.7 75.4 Management/CD sales 71.8 133.5 139.7 148.0 149.7 175.4 197.7 196.6 197.1 COGS 15.6 25.4 29.1 35.8 41.8 48.7 57.7 72.7 76.7 Gross profit 6.5 4.5 4.2 7.6 20.0 37.7 32.6 72.8 81.9 Gross profit margin 29.4 15.1 12.5 17.5 32.3 43.6 36.1 50.0 51.6 Operating profit 1.2 -2.3 -3.7 -1.7 9.3 25.5 17.3 52.3 58.7 OP margin 5.6 -7.7 -11.2 -3.9 15.0 26.2 20.6 37.5 39.5 Pretax profit 1.1 -2.9 -7.1 4.5 6.1 22.6 18.6 54.5 62.6 Pretax margin 5.2 -9.6 -21.4 10.4 9.9 26.2 20.6 37.5 39.5 Net profit 1.2 -4.0 -7.6 4.3 4.5 21.8 14.8 43.6 50.1 Net margin 5.4 -13.5 -23.0 9.8 7.2 25.2 16.5 30.0 31.6 YoY growth Sales 41.6 7.1 27.9 54.1 39.9 4.5 61.1 9.0 CD 17.0 1.6 21.3 35.7 2.1 6.9 5.3 5.0 Digital music 115.1 9.7 8.9 98.1 -10.2 -14.9 29.3 42.1 Overseas -19.0 17.0 52.0 84.1 133.1 -3.4 142.9 7.7 Management 117.5 6.3 28.4 37.3 19.6 20.5 4.7 5.3 Operating profit TTR RR RR TTB 174.9 -32.1 202.1 12.4 Net profit TTR RR TTB 4.5 387.7 -31.9 193.7 14.9 Source: Company data, Daewoo Securities Research

Table 8. 2011~2012 Earnings forecast revisions (Wbn, W, %) Previous Revised % Diff. 11F 12F 11F 12F 11F 12F Sales 90 153 90 145 0.3 -4.9 Operating profit 17 60 17 52 0.6 -13.0 Net profit 18 50 15 44 -16.1 -12.1 EPS 1,077 3,012 901 2,637 -16.3 -12.5 OP margin 19.1 39.3 19.2 35.9 Net margin 19.7 32.4 16.5 30.0 Source: Daewoo Securities Research

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SM Entertainment (041510 KS/Buy/TP: W30,000)

Income Statement (Summarized) Balance Sheet (Summarized) (Wbn) 12/10 12/11F 12/12F 12/13F (Wbn) 12/10 12/11F 12/12F 12/13F Sales 86 90 145 159 Current Assets 74 124 192 242 Cost of Goods Sold 49 58 73 77 Cash and Cash Equivalents 10 59 107 152 Gross Profit 38 33 73 82 Accounts Receivable 6 6 9 10 SG&A 12 15 20 23 Inventories 2 2 4 4 Operating Profit 25 17 52 59 Other Current Assets 57 56 72 76 Non-Operating Income -3 1 2 4 Non-Current Assets 41 14 6 5 Interest Income/Expense 2 2 3 5 Investment Assets 34 9 3 3 F/X-Related Gain/Loss 0 0 0 0 Property, Plant and Equipment 3 3 2 1 Equity Method Gain/Loss -4 0 0 0 Intangible Assets 4 2 1 1 Asset Disposal Gain/Loss 0 0 0 0 Total Assets 115 138 197 247 Other Non-Operating Profit/Loss -1 -1 -1 -1 Current Liabilities 28 37 53 52 Pretax Profit 23 19 55 63 Accounts Payable 13 13 21 23 Tax 1 4 11 13 Short-Term Debt 2 7 7 7 Profit from Continuing Operation 22 15 44 50 Current Long-Term Debt 0 5 4 0 Profit from Discontinued Operation 0 0 0 0 Other Current Liabilities 12 13 20 22 Tax Effect 0 0 0 0 Non-Current Liabilities 1 1 2 2 Net Profit 22 15 44 50 Bonds 0 0 0 0 Residual Income 22 15 44 50 Long-Term Debt 0 0 0 0 EBITDA 28 20 54 60 Other Non-Current Liabilities 1 1 2 2 Free Cash Flow 23 21 43 51 Total Liabilities 29 38 54 54 Gross Profit Margin (%) 43.6 36.1 50.0 51.6 Paid-In Capital 8 8 8 8 EBITDA Margin (%) 32.4 22.0 37.3 37.8 Capital Surplus 55 55 55 55 Operating Margin (%) 29.5 19.2 35.9 37.0 Retained Earnings 31 44 87 137 Net Margin (%) 25.2 16.5 30.0 31.6 Stockholders' Equity 86 99 143 193

Cash Flow (Summarized) Forecasts/Valuations (Summarized) (Wbn) 12/10 12/11F 12/12F 12/13F 12/10 12/11F 12/12F 12/13F Cash Flow from Operating Activities 24 21 43 51 P/E (x) 12.6 21.0 7.2 6.2 Net Profit 22 15 44 50 P/CF (x) 12.0 19.9 7.1 6.2 Non-Cash Income and Expense 6 3 2 1 P/B (x) 3.3 3.2 2.2 1.6 Tangible Assets Depreciation 1 1 1 1 EV/EBITDA (x) 8.2 11.6 3.3 2.2 Intangible Assets Depreciation 2 2 1 0 EPS (W) 1,342 901 2,637 3,029 Others 3 1 0 0 CFPS (W) 1,404 962 2,711 3,072 Chg in Working Capital -4 2 -2 -1 BPS (W) 5,059 5,885 8,563 11,620 Chg in Accounts Receivable 0 0 -4 -1 DPS (W) 0 0 0 0 Chg in Inventories 1 0 -1 0 Payout Ratio (%) - - - - Chg in Accounts Payable 3 1 8 2 Dividend Yield (%) - - - - Others -7 2 -5 -1 Sales Growth (%) 39.8 4.5 61.1 9.0 Cash Flow from Investment Activities -24 35 4 -1 EBITDA Growth (%) 136.2 -29.1 173.0 10.6 Chg in Tangible Assets -2 0 0 0 Operating Profit Growth (%) 174.9 -32.1 202.1 12.4 Chg in Intangible Assets -1 1 0 0 EPS Growth (%) 382.6 -32.9 192.6 14.9 Chg in Investment Assets -5 28 7 0 Accounts Receivable Turnover (x) 14.8 15.8 19.1 16.2 Others -15 5 -3 -1 Inventory Turnover (x) 40.7 41.2 49.8 42.1 Cash Flow from Financing Acitivities 1 -5 0 -4 Accounts Payable Turnover (x) 7.6 6.9 8.4 7.1 Chg in Borrowings 0 1 0 -4 ROA (%) 21.5 11.8 26.0 22.6 Chg in Equity 0 -6 0 0 ROE (%) 29.1 16.0 36.0 29.8 Dividends 0 0 0 0 ROIC (%) 77.1 60.5 274.9 406.8 Others 1 0 0 0 Liability to Equity Ratio (%) 33.1 38.5 38.0 27.8 Chg in Cash 2 50 47 45 Current Ratio (%) 268.8 331.9 364.1 466.0 Beginning Cash Balance 7 10 59 107 Net Debt to Equity Ratio (%) - - - - Ending Cash Balance 10 59 107 152 Interest Coverage Ratio (x) - - - - Note: Parent basis under K-GAAP, Source: Company data, Daewoo Securities Research estimates

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Important Disclosures & Disclaimers As of the publication date, Daewoo Securities Co., Ltd and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of the subject company's shares outstanding. Analyst of the subject company or member of the analyst's household does not have any financial interest in the securities of the subject company and the nature of the financial interest (including without limitation, whether it consists of any option, right, warrant, future, long or short position). This report reflects the sole opinion of the analyst without any external influences by third parties.

Buy Relative performance of 20% or greater (W) S.M. Stock Trading Buy Relative performance of 10% or greater, but with volatility 40,000 Ratings Hold Relative performance of -10% and 10% 30,000

Sell Relative performance of -10% 20,000

Overweight Fundamentals are favorable or improving 10,000 Industry Neutral Fundamentals are steady without any material changes Ratings 0 6/09 12/09 6/10 12/10 6/11 Underweight Fundamentals are unfavorable or worsening * Ratings and Target Price History (Share price (----), Target price (----), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆)) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material development.

This report has been provided by the research division of Daewoo Securities Co., Ltd. The stock ratings, target prices, estimates and overall viewpoints are from the research division of Daewoo Securities. Investors can access Daewoo SecuritiesÊ research directly through our website (www.bestez.com), FirstCall Research, Reuters, FnGuide, WiseFn, FactSet and Bloomberg (DWIR). This document was prepared by Daewoo Securities Co., Ltd. („Daewoo‰). Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith. The information has not been independently verified. Daewoo makes no guarantee, representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information and opinions contained in this document. Daewoo accepts no responsibility or liability whatsoever for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. Information and opinions contained herein are subject to change without notice. This document is for information purposes only. It is not and should not be construed as an offer or solicitation of an offer to purchase or sell any securities or other financial instruments. This document may not be reproduced, further distributed or published in whole or in part for any purpose. Daewoo and/or other affiliate companies, their directors, representatives, or employees may have long or short positions in any of the securities or other financial instruments mentioned in this document or issuers described herein at any time and may purchase and/or sale, or offer to purchase and/or sale such securities or other financial instruments in the open market or otherwise, in each case either as principal or agent. This document is for distribution within the United Kingdom to persons authorized under the Financial Services Act 1986. Daewoo Securities is the sole provider of information contained in this document. DaewooÊs U.S. affiliate, Daewoo Securities (America) Inc., a member of FINRA/SIPC, is the sole distributor of this document within the U.S. This document may be distributed in the U.S. only to major U.S. institutional investors as defined in Rule 15a-6 of the U.S. Securities Exchange Act of 1934. Any U.S. recipient of this document wishing to effect any transactions in any securities discussed herein should contact and place orders with Daewoo Securities (America) Inc.

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