Hong Kong Real Estate 30 January 2018

Hang Lung Properties (101 HK)

Target price: HKD25.10 (from HKD23.70) Share price (30 Jan): HKD20.10 | Up/downside: +24.9%

Foundation for an upturn looks to be coming into place

 Financial figures yet to fully reflect operating progress seen in 2017 Jonas Kan, CFA (852) 2848 4439  Plaza 66 is strong and it may have found the way out for tier-2 cities [email protected]  Reiterating our Buy (1) rating; lifting TP to HKD25.10

What's new: Hang Lung Properties’ 2017 underlying net profit fell by 13% Forecast revisions (%) YoY to HKD5,530m, mainly on a 36% YoY decline in property sales profit. Year to 31 Dec 18E 19E 20E We see HLP’s rental business and earnings mix as currently in transition, Revenue change 8.1 15.2 n.a. Net profit change - 10.8 n.a. with aggregate financial results yet to reflect more significant fundamental Core EPS (FD) change - 10.8 n.a. improvement in its leasing business in both China and Hong Kong. Source: Daiwa forecasts

What's the impact: Actual performance was better than what the figures Share price performance may suggest, given that HLP’s aggregate results were affected by quite a (HKD) (%) few transitional factors such as AEIs and tenants repositioning. Our read is 22.0 105 that HLP has been very active in revamping its operations during the soft 20.8 96 market in the past few years and that important progress has been made – 19.5 88 we think some initial signs of turnaround had already emerged in its 1H17 18.3 79 17.0 70 results (please see our note Initial turnaround looks to be underway from Feb-17 May-17 Aug-17 Nov-17 28 July 2017) and our read is that such trend has continued into 2H17. HLung Prop (LHS) Relative to HSI (RHS) Although this does not show up clearly in its financial numbers yet, we think this is normal for landlord companies. Overall, our read is that HLP’s rental 12-month range 17.36-21.65 income is poised for a more notable pick-up especially from 2019 onwards Market cap (USDbn) 11.52 – hence, we raise our FY19E EPS by 11%. 3m avg daily turnover (USDm) 13.05 Shares outstanding (m) 4,479 Plaza 66 is strong and appears to have finally found the way out for assets Major shareholder (55.7%) outside Shanghai. While pure luxury malls seldom work in most markets, we take the view that Plaza 66 is an exception (26% YoY sales growth in Financial summary (HKD) 2017) and looks like it can stay as the strongest pure luxury mall in Year to 31 Dec 18E 19E 20E Revenue (m) 10,080 10,329 11,229 Shanghai in terms of tenant sales. Meanwhile, after having visited nearly all Operating profit (m) 7,704 7,845 8,473 of HLP’s malls outside Shanghai in the past few months, our read is that Net profit (m) 4,955 5,030 5,476 the group may have finally found a way out for its assets outside Shanghai, Core EPS (fully-diluted) 1.106 1.123 1.223 achieving a YoY tenants sales growth of 1-99% for 2017 (see P.2). Overall, EPS change (%) (10.4) 1.5 8.9 Daiwa vs Cons. EPS (%) 2.8 12.8 n.a. we expect to see improved news-flow related to HLP’s ex-Shanghai malls PER (x) 18.2 17.9 16.4 in the coming years, and we believe that there could be a gradual Dividend yield (%) 3.8 3.9 4.0 turnaround in the market’s perception about its assets outside Shanghai. DPS 0.770 0.780 0.800 PBR (x) 0.7 0.6 0.6 EV/EBITDA (x) 13.0 13.0 12.2 We see stronger prospects for rental businesses in the years ahead, as we ROE (%) 3.6 3.6 3.9 expect its rental properties in both HK and China to achieve sustained Source: FactSet, Daiwa forecasts growth in sales. This could be supplemented by gains from disposals of non-core assets or a new round of property sales projects from China.

What we recommend: We reaffirm Buy (1) and raise our 12-month TP to HKD25.10 (from HKD23.70), still on a 40% discount to our end-2018E NAV of HKD41.8 (previously based on end-2017E). Key risk: inability to ramp up mall sales in tier-2 cities.

How we differ: We have visited most of HLP’s malls in recent months and believe that many of their challenges have been already overcome. We think is it normal that it will take time for this to show up in its financial results, but this has yet to be recognised by the market.

See important disclosures, including any required research certifications, beginning on page 5

Hang Lung Properties (101 HK): 30 January 2018

HLP: 2017 results highlights Our current views on HLP’s various malls and offices in China YoY (in CNY Asset Comments (HKDm) 1H16 2H16 2016 1H17 2H17 2017 chg terms) Plaza 66 mall The strongest pure luxury mall in Shanghai. Total revenue Grand Gateway Looks to be on its way to become one of the two major malls in the Rental income from HK 1,869 1,873 3,742 1,886 1,935 3,821 2% 66 Xujiahui area which could become the largest retail hub in Shanghai inner Rental income from China 2,038 1,957 3,995 1,949 2,009 3,958 -1% 0.4% ring. Property sales from HK 2,404 2,918 5,322 2,523 897 3,420 -36% Plaza 66 office Tenant adjustment was over by end-2017; remains a prestigious office 6,311 6,748 13,059 6,358 4,841 11,199 -14% building in the Nanjing Road West cluster of the Shanghai office market. Operating profit Palace 66, Has kept on progressing as a mall for the mass market, especially young families and the middle class. Rental income from HK 1,604 1,592 3,196 1,625 1,593 3,218 1% Forum 66, Repositioning continues and could gradually evolve into a luxury mall Rental income from China 1,327 1,187 2,514 1,274 1,180 2,454 -2% -1% Shenyang serving more comprehensive needs (including education, gym, etc.) of a Property sales from HK 1,389 1,820 3,209 1,642 596 2,238 -30% selected group of wealthy, as well as the professionals working and living 4,320 4,599 8,919 4,541 3,369 7,910 -11% in the complex. Other income Centre 66, Re-positioning seems to have worked and now with solid credentials to - Disposals of inv prop 2 6 8 2 462 464 58x become the number one mall in Wuxi, with a luxury component but also - Bank interest income 470 324 794 312 236 548 -31% other floors serving the mass as well. - Net exchange gain (7) 4 (3) 73 16 89 nm Parc 66, Repositioning is going on, with solid credentials to become the number - Others 164 39 203 (5) 1 (4) nm one mall in Jinan, being gradually upgraded to take in higher-end tenants. 629 373 1,002 382 715 1,097 9% Could have some luxury components eventually. Administrative expenses (307) (300) (607) (293) (287) (580) -4% Riverside 66, Able to avoid issues faced by Forum 66 and Centre 66 when the first Tianjin lease expires. Could evolve into like Grand Gateway 66 in Tianjin, and EBIT 4,642 4,672 9,314 4,630 3,797 8,427 -10% may eventually have some luxury components. Finance cost (540) (571) (1,111) (622) (580) (1,202) 8% Olympia 66, Able to avoid issues faced by Forum 66 and Center 66 when the first Share of asso & joint cos. 30 31 61 28 25 53 -13% lease expires. Solid credentials to become the number one mall in Dalian, Profit before tax 4,132 4,132 8,264 4,036 3,242 7,278 -12% with some luxury components alongside with more floors for the mass Tax (760) (760) (1,520) (797) (556) (1,353) -11% market. Minority interests (205) (198) (403) (199) (196) (395) -2% Center 66 office Solid credentials to be a top-tier office building in Wuxi. Underlying net profit 3,167 3,174 6,341 3,040 2,490 5,530 -13% Forum 66 office Solid credentials to be a top-tier office building in Shenyang.

EPS (underlying, HKD) 0.70 0.71 1.41 0.68 0.55 1.23 -13% DPS (HKD) 0.17 0.58 0.75 0.17 0.58 0.75 0% BVPS (HKD) 28.42 28.14 28.14 28.86 30.27 30.27 8%

Source: Company, Daiwa Source: Daiwa

HLP: price/NAV multiple HLP: PBR (Disc)/prem Hang Lung Properties (disc)/prem to NAV PBR (x) Hang Lung Properties PBR 40% 3.5 over- over- returning Current NAV disc: -50.4% optimistic? pessimistic? to normal? 20% 3.0 2.5 0% +1SD: -15.9% 2.0 Current PBR: 0.66x (20%) Avg since 1990= -36.1% 1.5 +1SD: 1.35x (40%) average since 1.0 1990: 0.96x (60%) -1SD: -56.4% 0.5 -1SD: 0.56x (80%) 0.0

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

1999 2001 2010 1992 1993 1994 1995 1996 1997 1998 2000 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 2013 2014 2015 2016 2017 2018 1991 Source: Datastream, Daiwa estimates Source: Datastream, Company, Daiwa

Operating performance of HLP’s various properties Gross rental income Occupancy Retail sales YoY chg Year of 1H15 2H15 1H16 2H16 1H17 2H17 YoY HoH 2016 2017 YoY Jun Dec Jun Dec Jun Dec YoY HoH Property City opening (HKDm) (HKDm) (CNYm) (CNYm) (CNYm) (CNYm) chg chg (CNYm) (CNYm) chg 15 15 16 16 17 17 chg chg 2016 1H17 2017 Palace 66 Shenyang 2010 84 86 70 72 77 78 8% 1% 142 155 9% 84% 90% 89% 93% 88% 90% -3pp +2pp slight +ve +12% +8% Parc 66 Jinan 2011 168 167 135 127 133 138 8% 4% 262 271 3% 90% 88% 84% 91% 92% 94% +3pp +2pp slight -ve +8% +12% Forum 66 (mall) Shenyang 2012 127 111 80 68 58 53 -22% -9% 148 111 -25% 88% 87% 84% 84% 77% 83% -1pp +6pp slight -ve +2% +1% Forum 66 (office) Shenyang 2015 9 35 40 42 47 55 30% 17% 82 102 24% 30% 42% 49% 58% 69% 80% +22pp +11pp na na na Center 66 (mall) Wuxi 2013 125 92 78 72 68 74 3% 9% 150 142 -5% 80% 72% 76% 80% 84% 87% +7pp +3pp slight +ve +19% +16% Center 66 (office) Wuxi 2014 30 49 41 33 37 40 22% 8% 74 77 4% 60% 70% 58% 65% 77% 87% +22pp +10pp na na na Riverside 66 Tianjin 2014 121 120 96 95 90 91 -4% 1% 191 181 -5% 88% 86% 82% 82% 87% 89% +7pp +2pp slight +ve +14% +8% Grand Gateway 66 Shanghai 2001 607 589 484 490 451 432 -12% -4% 974 883 -9% 98% 97% 96% 96% 81% 77%* -19pp -4pp slight +ve +7% slight +ve Plaza 66 (mall) Shanghai 2002 452 433 332 346 409 421 22% 3% 678 830 22% 100% 97% 83% 93% 89% 96% +3pp +7pp slight +ve +29% +26% Plaza 66 (office) Shanghai 2002 395 389 322 305 301 278 -9% -8% 627 579 -8% 96% 98% 96% 95% 86% 89% -6pp +3pp na na na Olympia 66 Dalian 2015 na 5 36 52 52 47 -9% -10% 88 99 13% na 54% 62% 66% 64% 71% +5pp +7pp na na +99% HK portfolio (HKDm) HK Various 1,744 1,813 1,869 1,873 1,886 1,935 3% 3% 3,742 3,821 2% nd nd nd nd nd nd na na nd nd nd

Source: Company, Daiwa Note: nd = not disclosed

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Hang Lung Properties (101 HK): 30 January 2018

Financial summary Key assumptions Year to 31 Dec 2013 2014 2015 2016 2017 2018E 2019E 2020E Gross rental income (HKDm) 6,642 7,216 7,751 7,737 7,779 8,231 8,939 9,839 Rental EBIT (HKDm) 5,286 5,589 5,704 5,710 5,672 5,941 6,427 7,077 Property sales profit (HKDm) 1,511 7,419 844 3,209 2,238 1,303 978 978

Profit and loss (HKDm) Year to 31 Dec 2013 2014 2015 2016 2017 2018E 2019E 2020E Rental income 6,642 7,216 7,751 7,737 7,779 8,231 8,939 9,839 Property sales 2,496 9,814 1,197 5,322 3,420 1,849 1,390 1,390 Other Revenue 0 0 0 0 0 0 0 0 Total Revenue 9,138 17,030 8,948 13,059 11,199 10,080 10,329 11,229 Other income 829 922 1,104 1,002 1,097 1,058 1,060 1,081 COGS (2,301) (3,995) (2,400) (4,140) (3,289) (2,836) (2,924) (3,174) SG&A (642) (644) (622) (572) (544) (560) (581) (623) Other op.expenses 0 0 (33) (35) (36) (38) (39) (40) Operating profit 7,024 13,313 6,997 9,314 8,427 7,704 7,845 8,473 Net-interest inc./(exp.) (437) (698) (1,041) (1,111) (1,202) (1,155) (1,218) (1,267) Assoc/forex/extraord./others 96 75 59 63 78 83 88 93 Pre-tax profit 6,683 12,690 6,015 8,266 7,303 6,632 6,715 7,299 Tax (1,088) (2,146) (1,184) (1,513) (1,352) (1,227) (1,209) (1,314) Min. int./pref. div./others (545) (522) (444) (412) (421) (450) (476) (509) Net profit (reported) 5,050 10,022 4,387 6,341 5,530 4,955 5,030 5,476 Net profit (adjusted) 5,050 10,022 4,387 6,341 5,530 4,955 5,030 5,476 EPS (reported)(HKD) 1.128 2.238 0.979 1.416 1.235 1.106 1.123 1.223 EPS (adjusted)(HKD) 1.128 2.238 0.979 1.416 1.235 1.106 1.123 1.223 EPS (adjusted fully-diluted)(HKD) 1.128 2.238 0.979 1.416 1.235 1.106 1.123 1.223 DPS (HKD) 0.750 0.760 0.750 0.750 0.750 0.770 0.780 0.800 EBIT 7,024 13,313 6,997 9,314 8,427 7,704 7,845 8,473 EBITDA 7,024 13,313 7,030 9,349 8,463 7,742 7,884 8,513

Cash flow (HKDm) Year to 31 Dec 2013 2014 2015 2016 2017 2018E 2019E 2020E Profit before tax 6,683 12,690 6,015 8,266 7,303 6,632 6,715 7,299 Depreciation and amortisation 29 31 33 35 36 38 39 40 Tax paid (1,088) 1,741 (1,650) (1,513) (1,352) (1,227) (1,209) (1,314) Change in working capital 314 740 (486) (560) 2,456 1,125 646 732 Other operational CF items 266 543 897 958 1,032 978 1,035 1,078 Cash flow from operations 6,204 15,745 4,809 7,186 9,475 7,546 7,226 7,835 Capex (9,274) (6,620) (7,380) (4,555) (5,478) (5,658) (5,020) (5,035) Net (acquisitions)/disposals 0 0 0 0 0 0 0 0 Other investing CF items 134 136 140 145 148 149 150 152 Cash flow from investing (9,140) (6,484) (7,240) (4,410) (5,330) (5,509) (4,870) (4,883) Change in debt 0 0 0 0 0 0 0 0 Net share issues/(repurchases) 0 0 0 0 0 0 0 0 Dividends paid (3,582) (3,313) (3,582) (3,582) (3,626) (3,671) (3,716) (3,761) Other financing CF items (430) (442) (317) (470) (475) (478) (482) (485) Cash flow from financing (4,012) (3,755) (3,899) (4,052) (4,101) (4,149) (4,198) (4,246) Forex effect/others 0 0 0 0 0 0 0 0 Change in cash (6,947) 5,506 (6,330) (1,276) 44 (2,112) (1,842) (1,294) Free cash flow (3,070) 9,125 (2,571) 2,631 3,997 1,888 2,206 2,800 Source: FactSet, Daiwa forecasts

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Hang Lung Properties (101 HK): 30 January 2018

Financial summary continued … Balance sheet (HKDm) As at 31 Dec 2013 2014 2015 2016 2017 2018E 2019E 2020E Cash & short-term investment 34,321 39,946 31,289 24,325 22,106 22,172 19,922 19,560 Inventory 5,695 4,046 3,830 2,352 1,612 1,010 502 0 Accounts receivable 2,865 1,916 1,173 3,939 2,036 1,505 1,320 0 Other current assets 0 0 0 0 214 0 0 0 Total current assets 42,881 45,908 36,292 30,616 25,968 24,687 21,744 19,560 Fixed assets 138,354 146,048 146,470 143,030 156,256 161,254 165,364 170,317 Goodwill & intangibles 0 0 0 0 0 0 0 0 Other non-current assets 1,045 1,223 1,256 1,261 1,362 1,390 1,420 1,430 Total assets 182,280 193,179 184,018 174,907 183,586 187,331 188,528 191,307 Short-term debt 1,657 5,657 4,693 568 2,112 368 352 340 Accounts payable 5,977 7,906 6,806 6,327 6,673 6,817 7,023 7,045 Other current liabilities 633 1,581 501 932 504 531 542 550 Total current liabilities 8,267 15,144 12,000 7,827 9,289 7,716 7,917 7,935 Long-term debt 33,322 29,441 28,078 26,514 22,708 26,630 26,238 27,181 Other non-current liabilities 9,524 9,591 9,048 8,421 9,344 9,450 9,512 9,580 Total liabilities 51,113 54,176 49,126 42,762 41,341 43,796 43,667 44,696 Share capital 4,479 4,479 4,479 4,479 4,479 4,479 4,479 4,479 Reserves/R.E./others 120,055 127,848 124,510 122,086 131,679 132,963 134,277 135,992 Shareholders' equity 124,534 132,327 128,989 126,565 136,158 137,442 138,756 140,471 Minority interests 6,633 6,676 5,903 5,580 6,087 6,093 6,105 6,140 Total equity & liabilities 182,280 193,179 184,018 174,907 183,586 187,331 188,528 191,307 EV 97,319 91,856 97,413 98,365 98,829 100,947 102,801 104,129 Net debt/(cash) 658 (4,848) 1,482 2,757 2,714 4,826 6,668 7,961 BVPS (HKD) 27.816 29.544 28.799 28.257 30.399 30.686 30.979 31.362

Key ratios (%) Year to 31 Dec 2013 2014 2015 2016 2017 2018E 2019E 2020E Sales (YoY) 24.0 86.4 (47.5) 45.9 (14.2) (10.0) 2.5 8.7 EBITDA (YoY) (11.0) 89.5 (47.2) 33.0 (9.5) (8.5) 1.8 8.0 Operating profit (YoY) (11.0) 89.5 (47.4) 33.1 (9.5) (8.6) 1.8 8.0 Net profit (YoY) (18.3) 98.5 (56.2) 44.5 (12.8) (10.4) 1.5 8.9 Core EPS (fully-diluted) (YoY) (18.3) 98.4 (56.2) 44.5 (12.8) (10.4) 1.5 8.9 Gross-profit margin 74.8 76.5 73.2 68.3 70.6 71.9 71.7 71.7 EBITDA margin 76.9 78.2 78.6 71.6 75.6 76.8 76.3 75.8 Operating-profit margin 76.9 78.2 78.2 71.3 75.2 76.4 76.0 75.5 Net profit margin 55.3 58.8 49.0 48.6 49.4 49.2 48.7 48.8 ROAE 4.2 7.8 3.4 5.0 4.2 3.6 3.6 3.9 ROAA 2.9 5.3 2.3 3.5 3.1 2.7 2.7 2.9 ROCE 4.4 7.8 4.1 5.7 5.2 4.6 4.6 4.9 ROIC 4.7 8.3 4.2 5.6 4.9 4.3 4.3 4.5 Net debt to equity 0.5 n.a. 1.1 2.2 2.0 3.5 4.8 5.7 Effective tax rate 16.3 16.9 19.7 18.3 18.5 18.5 18.0 18.0 Accounts receivable (days) 82.6 51.2 63.0 71.4 97.4 64.1 49.9 21.5 Current ratio (x) 5.2 3.0 3.0 3.9 2.8 3.2 2.7 2.5 Net interest cover (x) 16.1 19.1 6.7 8.4 7.0 6.7 6.4 6.7 Net dividend payout 66.5 34.0 76.6 53.0 60.7 69.6 69.5 65.4 Free cash flow yield n.a. 10.1 n.a. 2.9 4.4 2.1 2.5 3.1 Source: FactSet, Daiwa forecasts

Company profile

Hang Lung Properties (HLP) is the property arm of Hang Lung Group, which is one of the most established property developers in Hong Kong. In the 1990s, it invested in 2 major commercial property projects in Shanghai, which later became among the most popular commercial property assets in Shanghai and China. Since the early 2000s, it has been pursuing a strategy of focusing on the commercial property sector in China, and has subsequently acquired 8 major sites outside Shanghai. It now has a stated strategy to transform itself into a leading player in commercial property in Greater China.

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Hang Lung Properties (101 HK): 30 January 2018

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Hang Lung Properties (101 HK): 30 January 2018

Markets Europe Limited is authorised and regulated by The Financial Conduct Authority (“FCA”) and is a member of the London Stock Exchange and Eurex. This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FCA and should not therefore be distributed to such Retail Clients in the United Kingdom. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom, we are obliged to advise that the protection afforded by the United Kingdom regulatory system may not apply; in particular, the benefits of the Financial Services Compensation Scheme may not be available.

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Research Analyst Conflicts For updates on “Research Analyst Conflicts” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The principal research analysts who prepared this report have no financial interest in securities of the issuers covered in the report, are not (nor are any members of their household) an officer, director or advisory board member of the issuer(s) covered in the report, and are not aware of any material relevant conflict of interest involving the analyst or DCMA, and did not receive any compensation from the issuer during the past 12 months except as noted: no exceptions.

Research Analyst Certification For updates on “Research Analyst Certification” and “Rating System” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The views about any and all of the subject securities and issuers expressed in this Research Report accurately reflect the personal views of the research analyst(s) primarily responsible for this report (or the views of the firm producing the report if no individual analyst is named on the report); and no part of the compensation of such analyst (or no part of the compensation of the firm if no individual analyst is named on the report) was, is, or will be directly or indirectly related to the specific recommendations or views contained in this Research Report.

The following explains the rating system in the report as compared to relevant local indices, unless otherwise stated, based on the beliefs of the author of the report. "1": the security could outperform the local index by more than 15% over the next 12 months. "2": the security is expected to outperform the local index by 5-15% over the next 12 months. "3": the security is expected to perform within 5% of the local index (better or worse) over the next 12 months. "4": the security is expected to underperform the local index by 5-15% over the next 12 months. "5": the security could underperform the local index by more than 15% over the next 12 months.

Disclosure of investment ratings Rating Percentage of total Buy* 67.3% Hold** 20.9% Sell*** 11.7% Source: Daiwa Notes: data is for single-branded Daiwa research in Asia (ex Japan) and correct as of 31 December 2017. * comprised of Daiwa’s Buy and Outperform ratings. ** comprised of Daiwa’s Hold ratings. *** comprised of Daiwa’s Underperform and Sell ratings.

Additional information may be available upon request.

Japan - additional notification items pursuant to Article 37 of the Financial Instruments and Exchange Law (This Notification is only applicable where report is distributed by Daiwa Securities Co. Ltd.)

If you decide to enter into a business arrangement with us based on the information described in materials presented along with this document, we ask you to pay close attention to the following items.  In addition to the purchase price of a financial instrument, we will collect a trading commission* for each transaction as agreed beforehand with you. Since commissions may be included in the purchase price or may not be charged for certain transactions, we recommend that you confirm the commission for each transaction.  In some cases, we may also charge a maximum of ¥ 2 million (including tax) per year as a standing proxy fee for our deposit of your securities, if you are a non-resident of Japan.  For derivative and margin transactions etc., we may require collateral or margin requirements in accordance with an agreement made beforehand with you. Ordinarily in such cases, the amount of the transaction will be in excess of the required collateral or margin requirements.  There is a risk that you will incur losses on your transactions due to changes in the market price of financial instruments based on fluctuations in interest rates, exchange rates, stock prices, real estate prices, commodity prices, and others. In addition, depending on the content of the transaction, the loss could exceed the amount of the collateral or margin requirements.  There may be a difference between bid price etc. and ask price etc. of OTC derivatives handled by us.  Before engaging in any trading, please thoroughly confirm accounting and tax treatments regarding your trading in financial instruments with such experts as certified public accountants. *The amount of the trading commission cannot be stated here in advance because it will be determined between our company and you based on current market conditions and the content of each transaction etc.

When making an actual transaction, please be sure to carefully read the materials presented to you prior to the execution of agreement, and to take responsibility for your own decisions regarding the signing of the agreement with us. Corporate Name: Daiwa Securities Co. Ltd. Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.108 Memberships: Japan Securities Dealers Association, The Financial Futures Association of Japan Japan Securities Investment Advisers Association Type II Financial Instruments Firms Association

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