Proxy for Iskandar's Industrial Boom

REIT MALAYSIA March 18, 2013

Axis REIT COMPANY NOTE AXRB MK / AXSR.KL Current RM3.34 SHORT TERM (3 MTH) LONG TERM Market Cap Avg Daily Turnover Free Float Target RM3.68 US$488.2m US$0.38m 83.8% Previous Target N/A RM1,525m RM1.16m 989.7 m shares Up/downside 10.3%

Conviction| |

Notes from the Field Proxy for Iskandar's industrial

boom Axis REIT is the first listed Islamic industrial/office REIT globally. We like the stock as it offers exposure to the industrial property boom in Iskandar Malaysia. Management's proactive style means that growth

will be driven by acquisitions, apart from organic enhancement plans.

Foong Wai Mun, CFA We initiate coverage with an serves as an attractive low-cost T (60) 3 20849277 E [email protected] Outperform and a target price based alternative for firms seeking to on its DDM value. Rerating catalysts relocate out of Singapore. Axis AME are 1) further yield-accretive asset IP plans to expand the development

Company Visit Expert Opinion acquisitions, and 2) upside surprises of its “clean and green” industrial to rental rates post asset parks under the brand names i-Park Channel Check Customer Views enhancement initiatives. and SME City nationwide. We are positive as such plans will give more

“Singapore faces land Malaysia's largest industrial visibility to potential future asset constraints and there is a REIT injections for Axis REIT. big industrial component Axis REIT is Malaysia's largest Proven acquisition track there. It's getting industrial REIT with a total portfolio record expensive to do business size of RM1.5bn (31 assets). Its portfolio is occupied by quality Axis REIT has a strong and proven in Singapore and that tenants, comprising a mix of MNCs, acquisition track record. Since listing, makes Johor the default local companies and GLCs. its portfolio has grown more than choice for companies to fourfold from RM0.3bn to RM1.5bn move across. Demand is Proxy for boom in industrial in seven years. Currently, it has plans going through the roof property in Iskandar to buy nine assets worth a total RM660m, of which RM350m (23% and availability is quite We believe Axis REIT is a good proxy for the boom in industrial properties increase) is expected to be added this constrained. It's a big in Iskandar Malaysia as its promoter year. Funding will come from the opportunity for us to look (Axis Group) is aggressively placement of 90.8m new units, of at some of the assets that co-developing industrial parks and which approval has already been are being built there.” properties in Johor under the JV secured from the regulator. The REIT company Axis AME IP Sdn Bhd, usually matches the timing of – Dato' Stewart LaBrooy, specifically i-Park in Indahpura, placement with new acquisitions to CEO Iskandar. Due to its location, i-Park minimise dilution.

Price Close Relative to FBMKLCI (RHS) Financial Summary 3.5 126 123 Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F 3.3 120 117 Gross Property Revenue (RMm) 114.7 133.1 141.0 146.0 151.1 3.1 114 111 Net Property Income (RMm) 97.0 112.5 119.3 123.7 128.0 2.9 108 105 Net Profit (RMm) 68.71 78.04 82.53 86.80 91.04 2.7 102 99 Distributable Profit (RMm) 65.80 84.81 82.53 86.80 91.04 2.53 96 2 Core EPS (RM) 0.17 0.17 0.18 0.19 0.20 2 Core EPS Growth 7.20% 3.52% 5.44% 5.17% 4.88% Vol m Vol 1 1 FD Core P/E (x) 20.17 19.48 18.47 17.57 16.75

Mar-12 Jun-12 Sep-12 Dec-12 DPS (RM) 0.17 0.19 0.18 0.19 0.20 Source: Bloomberg Dividend Yield 5.01% 5.58% 5.41% 5.69% 5.97%

52-week share price range Asset Leverage 24.0% 34.5% 34.3% 34.3% 34.3% 3.34 BVPS (RM) 2.08 2.17 2.20 2.20 2.20 2.62 3.36 P/BV (x) 1.61 1.54 1.52 1.52 1.52 Recurring ROE 8.09% 8.07% 8.29% 8.66% 9.08% 3.68 % Change In DPS Estimates Current Target CIMB/consensus EPS (x) 0.96 0.99 0.93 SOURCE: CIMB, COMPANY REPORTS

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Sources: CIMB. COMPANY REPORTS Designed by Eight, Powered by EFA

Axis REIT March 18, 2013

PEER COMPARISON

Research Coverage Bloomberg Code Market Recommendation Mkt Cap US$m Price Target Price Upside Ascendas REIT AREIT SP SG OUTPERFORM 4,575 2.55 2.79 9.3% Axis REIT AXRB MK MY OUTPERFORM 488 3.34 3.68 10.3% Cambridge Industrial Trust CREIT SP SG OUTPERFORM 750 0.77 0.81 5.3% Mapletree Industrial Trust MINT SP SG NEUTRAL 1,815 1.38 1.50 8.4%

Mapletree Logistics Trust MLT SP SG NEUTRAL 2,280 1.17 1.20 2.9%

Rolling P/BV (x) Rolling Dividend Yield 1.8 30% 1.6 25% 1.4 1.2 20% 1.0 15% 0.8 0.6 10% 0.4 5% 0.2 0.0 0% Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Ascendas REIT Axis REIT Ascendas REIT Axis REIT Cambridge Industrial Trust Mapletree Industrial Trust Cambridge Industrial Trust Mapletree Industrial Trust Mapletree Logistics Trust Mapletree Logistics Trust

Peer Aggregate: P/BV vs Asset Leverage Peer Aggregate: Dividend Yield 1.4 37.5% 14%

1.2 36.8% 12%

1.0 36.1% 10%

0.8 35.4% 8%

0.6 34.6% 6%

0.4 33.9% 4%

0.2 33.2% 2%

0.0 32.5% 0% Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13

Rolling P/BV (x) (lhs) Asset Leverage (rhs) Rolling Dividend Yield

Valuation Dividend Yield P/BV (x) P/E (FD) (x) Dec-12 Dec-13 Dec-14 Dec-12 Dec-13 Dec-14 Dec-12 Dec-13 Dec-14 Ascendas REIT 5.48% 5.54% 5.94% 1.31 1.29 1.28 14.59 17.38 16.69 Axis REIT 5.58% 5.41% 5.69% 1.54 1.52 1.52 19.48 18.47 17.57 Cambridge Industrial Trust 6.25% 6.56% 6.86% 1.18 1.19 1.19 10.28 16.88 16.04 Mapletree Industrial Trust 6.46% 6.62% 6.77% 1.36 1.36 1.36 13.63 15.68 15.31 Mapletree Logistics Trust 6.00% 6.14% 6.23% 1.29 1.29 1.29 16.94 16.57 16.30

Growth and Returns DPS Growth Asset Leverage Fully Diluted EPS Growth Dec-12 Dec-13 Dec-14 Dec-12 Dec-13 Dec-14 Dec-12 Dec-13 Dec-14 Ascendas REIT 3.9% 1.0% 7.3% 33.1% 31.3% 34.6% -33.8% -16.1% 4.2% Axis REIT 11.3% -3.0% 5.2% 34.5% 34.3% 34.3% 3.5% 5.4% 5.2% Cambridge Industrial Trust 12.9% 4.9% 4.5% 37.8% 37.9% 38.0% -1.9% -39.1% 5.2% Mapletree Industrial Trust 24.4% 2.4% 2.3% 38.8% 39.6% 39.7% -28.6% -13.1% 2.4% Mapletree Logistics Trust 7.5% 2.2% 1.6% 36.1% 36.5% 36.5% 7.2% 2.2% 1.6%

SOURCE: CIMB, COMPANY REPORTS

Calculations are performed using EFA™ Monthly Interpolated Annualisation and Aggregation algorithms to December year ends

Axis REIT March 18, 2013

BY THE NUMBERS

Share price info P/BV vs Asset Leverage Dividend Yield vs Net DPS Share px perf. (%) 1M 3M 12M 1.80 40% 0.20 6.0% Relative 7.1 12.8 20.6 1.60 36% 0.18 5.4% 1.40 31% 0.16 4.8% Absolute 7.1 11.3 23.7 1.20 27% 0.14 4.2% 1.00 22% 0.12 3.6% Major shareholders % held 0.10 3.0% 0.80 18% 0.08 2.4% Employees Provident Fund (EPF) 10.8 0.60 13% 0.06 1.8% 0.40 9% 0.04 1.2% Tew Peng Hwee 6.0 0.20 4% 0.02 0.6% 0.00 0% 0.00 0.0%

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Rolling P/BV (x) (lhs) Asset Leverage (rhs) DPS (lhs) Dividend Yield (rhs)

Profit & Loss

(RMm) Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F Only factored in organic Rental Revenues 114.7 133.1 141.0 146.0 151.1 growth from rental Other Revenues 0.0 0.0 0.0 0.0 0.0 reversions. Have not Gross Property Revenue 114.7 133.1 141.0 146.0 151.1 Total Property Expenses (17.8) (20.5) (21.7) (22.3) (23.1) included contributions from Net Property Income 97.0 112.5 119.3 123.7 128.0 any new acquisitions. Axis General And Admin. Expenses 0.0 0.0 0.0 0.0 0.0 REIT is planning to buy Management Fees (7.7) (9.6) (10.0) (10.0) (10.0) Trustee's Fees (0.4) (0.5) (0.5) (0.5) (0.5) RM350m in properties this Other Operating Expenses (2.1) (7.0) (2.8) (2.9) (3.0) year EBITDA 86.7 95.4 105.9 110.2 114.4 Depreciation And Amortisation (0.0) (0.1) (0.1) (0.1) (0.1) EBIT 86.7 95.4 105.9 110.1 114.4 Net Interest Income (21.5) (20.9) (23.3) (23.3) (23.3) Associates' Profit Other Income/(Expenses) 3.4 3.6 0.0 0.0 0.0 Exceptional Items Pre-tax Profit 68.7 78.0 82.5 86.8 91.0 Taxation 0.1 0.0 0.0 0.0 0.0 Minority Interests Preferred Dividends Net Profit 68.7 78.0 82.5 86.8 91.0 Distributable Profit 65.8 84.8 82.5 86.8 91.0

Cash Flow

(RMm) Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F Pre-tax Profit 68.7 78.0 82.5 86.8 91.0 Expecting 100% dividend Depreciation And Non-cash Adj. 21.5 21.0 23.4 23.4 23.4 pay-out Change In Working Capital Tax Paid Others 0.2 (3.1) 12.5 (0.1) (0.1) Cashflow From Operations 90.3 95.9 118.5 110.1 114.4 Capex (13.2) (18.1) (15.0) (15.0) (15.0) Net Investments And Sale Of FA (68.1) (200.1) 0.0 0.0 0.0 Other Investing Cashflow (0.1) (0.9) 0.0 0.0 0.0 Cash Flow From Investing (81.4) (219.1) (15.0) (15.0) (15.0) Debt Raised/(repaid) (32.7) 237.6 0.0 0.0 0.0 Equity Raised/(Repaid) 184.2 7.2 0.0 0.0 0.0 Dividends Paid (72.8) (65.5) (82.5) (86.8) (91.0) Cash Interest And Others (96.6) (20.9) (23.3) (23.3) (23.3) Cash Flow From Financing (17.9) 158.4 (105.9) (110.1) (114.4) Total Cash Generated (9.1) 35.2 (2.4) (15.0) (15.0) Free Cashflow To Firm 10.3 (121.8) 104.8 96.5 100.7 Free Cashflow To Equity (45.3) 93.5 80.1 71.8 76.0

SOURCE: CIMB, COMPANY REPORTS

Axis REIT March 18, 2013

BY THE NUMBERS

Balance Sheet

(RMm) Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F Total Investments 1,276 1,520 1,520 1,520 1,520 Axis REIT is negotiating to Intangible Assets 0 0 0 0 0 buy RM661m worth of assets Other Long-term Assets 0 1 16 31 46 Total Non-current Assets 1,276 1,520 1,535 1,550 1,565 Total Cash And Equivalents 7 43 40 25 10 Inventories Trade Debtors 15 27 27 27 27 Other Current Assets 0 0 0 0 0 Total Current Assets 22 69 67 52 37 Trade Creditors 16 24 24 24 24 Short-term Debt 162 341 341 341 341 Other Current Liabilities 0 0 0 0 0 Total Current Liabilities 178 365 365 365 365 Long-term Borrowings 149 208 208 208 208 Other Long-term Liabilities 27 27 27 27 27 Total Non-current Liabilities 176 235 235 235 235 Shareholders' Equity 944 990 1,002 1,002 1,002 Minority Interests Preferred Shareholders Funds Total Equity 944 990 1,002 1,002 1,002

Key Ratios

Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F Gross Property Revenue Growth 28.6% 16.0% 6.0% 3.5% 3.5% NPI Growth 27.1% 16.1% 6.0% 3.6% 3.5% Net Property Income Margin 84.5% 84.6% 84.6% 84.7% 84.7% DPS Growth 4.6% 11.3% (3.0%) 5.2% 4.9% Gross Interest Cover 3.79 4.29 4.29 4.46 4.63 Effective Tax Rate 0% 0% 0% 0% 0% Net Dividend Payout Ratio 111% 109% 100% 100% 100% Current Ratio 0.12 0.19 0.18 0.14 0.10 Quick Ratio 0.12 0.19 0.18 0.14 0.10 Cash Ratio 0.04 0.12 0.11 0.07 0.03 ROIC (%) 803% (8782%) 3318% 605% 345% Return On Average Assets 5.48% 5.40% 5.17% 5.42% 5.68%

Key Drivers

Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F Rental Rate Psf Pm (RM) N/A N/A N/A N/A N/A Acq. (less development) (US$m) N/A N/A N/A N/A N/A RevPAR (RM) N/A N/A N/A N/A N/A Net Lettable Area (NLA) ('000 Sf) 4,450 5,372 5,372 5,372 5,372 Occupancy (%) 97.2% 96.2% 97.0% 97.0% 97.0% Assets Under Management (m) (RM) N/A N/A N/A N/A N/A Funds Under Management (m) (RM) N/A N/A N/A N/A N/A

SOURCE: CIMB, COMPANY REPORTS

Axis REIT March 18, 2013

Proxy for Iskandar's industrial

Table of Contents boom 1. BACKGROUND p.5 2. OUTLOOK p.10 1. BACKGROUND 3. RISKS p.15 4. VALUATION AND RECOMMENDATION p.15 1.1 Malaysia's first Islamic office/industrial REIT

Axis REIT is the first listed Islamic office/industrial REIT globally. It was also the first REIT to list on Bursa Malaysia Securities Berhad, going public on 3 Aug 2005. On 11 Dec 2008, Axis REIT was reclassified as an Islamic REIT, which means that it can now appeal to Shariah funds. It is an actively growing REIT as it started with only a modest portfolio of five properties in 2005 and this has now grown to 31 properties. Over seven years, assets under management (AUM) has risen from RM300m to RM1.59bn, with a total NLA of 5.5m sq ft.

Figure 1: Portfolio at a glance Portfolio size 31 properties Total area under management 5,463,599 sq ft Number of tenants 135 tenants Occupancy (%) 96.21% 2012 Gross Income RM132.7m 2012 Net Property Income (NPI) RM112.5m Average Rental Rate (ARR): - Office properties RM 4.20psf - Office industrial properties RM 2.30psf - Across the portfolio RM 2.00psf SOURCES: CIMB, COMPANY REPORTS

1.2 Properties mostly located in Klang Valley, Johor and Penang Axis REIT's 31 properties are situated in good locations. 37% of its properties are located in Petaling Jaya, 18% in Johor and 14% in Penang. The bulk (43%) of its properties is warehouses and other logistics facilities.

Figure 2: Breakdown of portfolio (by property type)

7% Title: 8% Source:

Please fill in the values above to have them entered in your report

11% 43%

31%

Warehouse logistics Office/industrial Office Light industrial Warehouse retail

SOURCES: CIMB, COMPANY REPORTS

Axis REIT March 18, 2013

Figure 3: Breakdown of properties (by geographical location)

3% 2% Title: 5% Source:

8% Please fill in the values above to have them entered in your report 37%

13%

14%

18%

Petaling Jaya Johor Penang Shah Alam Klang Nilai Kedah Cyberjaya

SOURCES: CIMB, COMPANY REPORTS

Figure 4: Occupancy rates as at 31 Dec 2012

SOURCES: CIMB, COMPANY REPORTS

Axis REIT March 18, 2013

Figure 5: Portfolio details

No. Name 2012 NLA (sq ft) Occupancy Major tenants Book Purchase Purchase Gross rate as at Value price (RM m) date Revenue Dec 2012 (RM m) (RM m) (%) 1 Menara Axis 11.0 182,859 100.0% Fujifilm (M) Sdn Bhd 108.0 71.4 3/8/2005 American International Assurance Berhad Sportathlon (M) Sdn Bhd Phillips Malaysia Sdn Bhd DHL Asia Pacific Shared Services Sdn Bhd 2 Crystal Plaza 10.3 205,102 100.0% Tenaga Nasional Bhd 103.1 56.4 3/8/2005 Scope International (M) Sdn Bhd DHL Asia Pacific Shared Services Sdn Bhd Asiaworks Training Sdn Bhd 3 Axis Business Park 11.2 341,467 100.0% Fuji Xerox Asia Pacific Pte Ltd 109.0 84.6 3/8/2005 Invida (Singapore) Pte Ltd Hitachi eBworx Sdn Bhd Honeywell Engineering Sdn Bhd Johnson and Johnson 4 Infinite Centre 3.7 143,681 95.6% UTAR 38.0 25.5 3/8/2005 Konica Minolta Business Solutions (M) Sdn Bhd FJ Benjamin (M) Sdn Bhd C Melchers Gmbh & Co 5 Axis Plaza 3.1 117,450 89.3% Ricoh (Malaysia) Sdn Bhd 31.0 22.5 3/8/2005 CSE Automotive Technologies Sdn Bhd Electrolux Commercial Products Sdn Bhd EMS Asia Group Sdn Bhd 6 Wisma Kemajuan 5.6 199,008 88.0% Goucera Marketing Sdn Bhd 55.3 29.0 16/12/2005

Hong Leong Marketing Sdn Bhd Fossil Time Malaysia Sdn Bhd Silverlake Infrastructure & Logistics Sdn Bhd 7 Axis Business Campus (formerly 1.9 172,967 15.7% Tenaga Nasional Bhd 48.0 32.5 30/6/2006 known as Wisma Bintang) 8 Axis Shah Alam DC1 1.7 110,406 100.0% Upeca Aerotech Sdn Bhd 21.5 18.5 1/8/2007 9 Giant Hypermarket 3.2 138,000 100.0% GCH Retail (Malaysia) Sdn Bhd 39.6 38.0 7/7/2007 10 FCI Senai 1.5 136,619 100.0% FCI Connectors Malaysia Sdn Bhd 15.0 12.3 15/11/2007

11 Fontera HQ (formerly known as 0.9 36,310 85.0% Fonterra Brands (M) Sdn Bhd 13.5 7.2 16/11/2007 Nestle Office and Warehouse) 12 Quattro West 5.0 104 100.0% Mangosteen Beverages (M) Sdn Bhd 53.0 39.8 30/11/2007

Kenanga Investment Bank Bhd Vads Business Process Sdn Bhd 13 Strateq Data Centre (formerly known 4.4 104,196 100.0% Strateq Data Centre Sdn Bhd (formerly known as 52.0 37.0 25/1/2008 as Strateq HQ) Kompakar CRC Sdn Bhd 14 BMW Centre 3.4 161,474 100.0% BMW Asia Technology Centre Sdn Bhd 29.0 27.0 30/4/2008

15 Niro Warehouse 1.7 167,193 100.0% Niro Ceramic (M) Sdn Bhd 16.2 14.5 30/4/2008

16 Delfi Warehouse 1.3 130,743 100.0% Delfi Cocoa (Malaysia) Sdn Bhd 14.0 12.5 4/8/2008 17 Axis Vista 3.0 130,743 100.0% Skyhutch Line Sdn Bhd 36.0 32.0 9/12/2008 Melco Sales Malaysia Sdn Bhd Samsung Malaysia Electronics (SME) Sdn Bhd 18 Axis Steel Centre 7.1 366,839 100.0% Konsortium Logistik Berhad 75.4 65.0 20/10/2009

19 Bukit Raja Distribution Centre 6.0 456,435 100.0% LF Logistics (M) Sdn Bhd 90.0 71.8 14/12/2009

20 Seberang Prai Logistic Warehouse 1 1.5 106,092 100.0% LF Logistics (M) Sdn Bhd 19.6 17.4 5/3/2010 21 Seberang Prai Logistic Warehouse 2 0.6 41,893 100.0% LF Logistics (M) Sdn Bhd 7.7 6.9 5/3/2010 22 Tesco Bukit Indah 6.2 233,579 100.0% Tesco Stores (M) Sdn Bhd 87.0 75.6 1/10/2010 23 Axis PDI Centre 8.6 58,009 100.0% Konsortium Logistik Bhd 92.0 85.0 15/10/2010

24 Axis Technology Centre 4.9 170,730 98.1% Packet One Networks (M) Sdn Bhd 52.0 49.0 15/11/2010

Fresenius Kabi Malaysia Sdn Bhd Fresenius Medical Care Malaysia Sdn Bhd Sigma Elevator (M) Sdn Bhd 25 D8 Logistics Warehouse 3.3 171,000 100.0% Nippon Express (M) Sdn Bhd 31.6 30.0 1/3/2011 26 Axis Eureka 5.9 116,883 91.6% Scicom (MSC) Berhad 53.7 51.3 18/4/2011

Multimedia Development Corporation Sdn Bhd Wolters Kluwer Enterprise Services Partners Sdn Bhd 27 Bayan Lepas Distribution Centre 4.4 205,151 100.0% DHL Properties (M) Sdn Bhd 49.5 48.5 17/1/2012

28 Seberang Prai Logistic Warehouse 3 7.0 395,225 100.0% Schenker Logistics (M) Sdn Bhd 63.0 59.0 15/2/2012

29 Emerson Industrial Facility Nilai 0.9 291,642 100.0% Emerson Process Management Manufacturing (M) 27.8 26.5 30/8/2012 Sdn Bhd K Plastic Industries Sdn Bhd 30 Wisma Academy Parcel 1.9 234,326 100.0% Dataprep Holdings Sdn Bhd 73.0 73.0 1/10/2012 Ban Leong Technologies Sdn Bhd Tenaga Nasional Berhad Ingram Micro (M) Sdn Bhd 31 The Annex 0.2 45,400 100.0% Allrounder Indoor Soccer Sdn Bhd 15.0 12.0 1/10/2012 Chong Tin Sam Total 131.1 5,371,526 1,519.5 1,231.5

SOURCES: CIMB, COMPANY REPORTS

Axis REIT March 18, 2013

Figure 6: REIT structure

SOURCES: CIMB, COMPANY REPORTS

1.3 Quality tenants Axis REIT's portfolio is occupied by quality tenants, comprising a mix of multi-national companies (MNCs), local companies as well as government-linked companies (GLCs). The top ten tenants made up about 48.9% of total revenue in 2012. Portfolio risk is well-managed as the tenants are in diverse industries. Thus the REIT is not exposed to any particular sector. There is also a good mix of single-tenanted properties (usually longer-term leases) and multi-tenanted properties (usually shorter-term leases). The single-tenanted properties provide a steady, long-term revenue stream as they have pre-agreed rental increases over the fixed period of the lease whereas the multi-tenanted properties give the REIT an opportunity to leverage on the prevailing market rates for exposure to positive rental reversions in the market. All the single-tenanted properties in the portfolio are occupied by high-quality tenants who have signed long-term tenancies and, thus, have much lower maintenance costs as a percentage of revenue.

Axis REIT March 18, 2013

Figure 7: Top 10 tenants 1 Konsortium Logistik 2 LF Logistics (M) Sdn Bhd 3 Schenker Logistics (M) Sdn Bhd 4 Tenaga Nasional Bhd 5 Tesco Stores (M) Sdn Bhd 6 Fuji Xerox Asia Pacific Pte Ltd 7 Strateq Data Center Sdn Bhd 8 DHL Properties (M) Sdn Bhd 9 BMW Asia Technology Centre Sdn Bhd 10 Scope International (M) Sdn Bhd SOURCES: CIMB, COMPANY REPORTS

Figure 8: Breakdown of tenants (single-tenant vs. multi-tenant)

Title: Source:

Please fill in the values above to have them entered in your report

42%

Multi-tenant Single tenant

SOURCES: CIMB, COMPANY REPORTS

1.4 Lease expiry profile The weighted average lease expiry (WALE) for the entire portfolio is 4.43 years (by NLA) and 4.17 years (by rental income). The long expiry period of its leases suggests that Axis REIT's earnings are more resilient compared to other REITs. The lease expiry profile is quite balanced with 22%, 29% and 17% of rental revenue expiring in 2013, 2014 and 2015 respectively. There is a higher percentage of leases expiring in 2014 as a few single-tenant leases are due for renewal but the REIT is confident about renewing them as these properties are built to suit the tenant's operations.

Axis REIT March 18, 2013

Figure 9: Lease expiry profile

Property 2013 2014 2015 % of NLA % of Rental income/month % of NLA % of Rental income/month % of NLA % of Rental income/month Menara Axis 1.4% 2.6% 1.0% 2.2% - - Crystal Plaza 2.2% 4.0% 0.2% 0.3% 1.4% 2.3% Axis Business Park 1.6% 1.9% 4.1% 5.1% 0.3% 0.3% Infinite Centre 1.8% 1.8% 0.5% 0.5% 0.2% 0.2% Axis Plaza 1.9% 2.0% - - 0.0% 0.0% Wisma Kemajuan 1.7% 2.0% 0.2% 0.3% 0.8% 0.8% Axis Business Campus 0.5% 0.7% - - - - Axis Vista 1.1% 1.3% 1.1% 0.9% 0.0% 0.0% Quattro West 1.1% 2.1% 0.6% 1.2% 0.2% 0.3% Axis Technology Centre 1.7% 1.5% 0.0% 0.0% 1.4% 1.5% Axis Eureka 0.3% 0.5% 1.1% 3.0% 0.0% 0.0% Emerson Industrial Facility Nilai 0.4% 0.1% 0.0% 0.0% 0.0% 0.0% Wisma Academy Parcel 1.1% 1.3% 1.1% 1.3% 2.1% 2.1% The Annex 0.5% 0.4% 0.3% 0.3% - - Axis Steel Centre - - 6.7% 5.0% - - Niro Warehouse - - 3.1% 1.2% - - Seberang Prai Logistic Warehouse 3 - - 7.2% 4.9% - - Fontera HQ - - 0.0% 0.0% - - Axis PDI Centre - - - - 1.1% 6.1% Axis Shah Alam DC1 - - - - 2.0% 1.2% FCI Senai - - - - 2.5% 1.2% Delfi Warehouse - - - - 2.4% 1.0% BMW Centre PTP - - 3.0% 2.4% - Total 17.2% 22.1% 30.2% 28.7% 14.2% 17.0%

SOURCES: CIMB, COMPANY REPORTS

Figure 10: SWOT analysis Strengths Opportunities • Status as an Islamic REIT will help to attract Shariah funds. • Benefits from the trend of Singapore companies re-locating their business to a cheaper cost alternative like Johor. • Proven acquisition track record. Since listing, management has been aggressively buying yield- • RM661m worth of properties are currently under negotiation to be injected into the REIT. accretive assets to grow its asset portfolio. • Boasts of quality tenants including some of the best multi-national companies, local companies and • Conversion of its commercial assets to MSC compliant buildings which could help it to fetch higher GLCs. rentals. • Experienced management team. • Opportunities for organic growth through re-development of some of its older buildings in Petaling Jaya. • Actively recycling unitholders' capital to seek better growth opportunities. • Future upgrading works of its assets could include a Green agenda in order to fetch a premium. • Refinancing of existing loans with Sukuk bond could help lower financing cost. • Shortage of well-developed industrial properties that cater to large multi-national companies (MNCs).

Weaknesses Threats • Some single-tenanted properties are locked under long-term tenancies, which means lower chance • May be affected by the introduction of new or changes in existing laws and REIT code regulations in of marking to market the rental rates. Malaysia. • Weak macro-economy hampering industrial activities. SOURCES: CIMB, COMPANY REPORTS

Axis REIT March 18, 2013

2. OUTLOOK 2.1 Proxy for Iskandar's industrial boom We believe Axis REIT is also a good proxy for the boom in industrial properties in Iskandar Malaysia as its promoter (Axis Group) is aggressively co-developing industrial parks and properties in Johor. The promoter of Axis REIT (Axis Group) and Johor-based AME Group are jointly developing a 230-acre (93.08ha) industrial city in the flagship Zone E of Iskandar Malaysia in Johor. The project has a total GDV of RM600m and is a 50:50 joint venture (JV) between Axis Group and AME Group’s AME Construction Sdn Bhd. The development will be under the brands “i-PARK” and “SME City”. The i-PARK brand will house multinationals while SME City is being developed while keeping in mind the small and medium enterprises. The construction is expected to be completed by 2014. Boasting excellent connectivity, i-Park@Indahpura is strategically located in the Indahpura township and is easily accessible via a network of prominent highways and roads. i-Park guarantees easier and faster accessibility through the New Indahpura Interchange, the Second Link Expressway Interchange and the North-South Highway. i-Park is only just 10 minutes away from the Senai International Airport and 20 minutes from the Second Link CIQ complex. Additionally, i-Park provides swift access to important locations, such as the Port of Tanjung Pelepas (PTP), the MSC Cyberport and the MSC Cybercity, which is within Indahpura. As the first Malaysian cybercity, the Cybercity is designed to have comprehensive infrastructure that would be an enabling environment to nurture technopreneurs and grow businesses. The main focus of the i-PARK is to provide multinational companies, manufacturers, logistics providers, food manufacturers and hi-tech industries a place to set up their businesses as the industrial park is designed to international standards. These industries will then act as a catalyst for the creation of jobs in new small and medium industries while driving demand for housing and commercial spaces in Indahpura. The park has a secure gated and guarded environment with perimeter fencing and closed-circuit camera surveillance. A unique aspect of the i-PARK concept is the option for investors to choose a "build to sell" or "build to lease" strategy. Due to its location, the development also serves as an attractive low-cost alternative to firms in nearby Singapore. According to the joint venture company (Axis AME IP), some business associations from Singapore have already visited the company to express their interest in relocating to the industrial city because the cost of doing business is much lower in Johor. With Singapore companies looking to relocate their operations out of Singapore to a lower-cost substitute, we believe there will be demand for industrial hubs in Johor and other parts of Malaysia. Axis AME IP plans to expand the development of its “clean and green” industrial parks under the brand names i-Park and SME City nationwide after Johor. We are positive as such plans will give more visibility to potential future asset injections for Axis REIT.

Axis REIT March 18, 2013

Figure 11: Location of i-Park and SME City

SOURCES: CIMB, COMPANY REPORTS

2.2 Pipeline assets A total of RM661m worth of properties are currently under negotiation to be injected into the REIT. Out of these RM661m properties, Axis REIT plans to acquire RM350m of them this year. Axis REIT will continue to use the model of raising equity (via placements) to pare down borrowings and then subsequently leverage up for future acquisitions. Axis REIT will be focussing on: 1) Properties that house Shariah-compliant businesses. 2) Logistics facilities with long leases from grade A tenants. 3) Primary locations, namely Petaling Jaya, Klang Valley, Johor and Penang.

Figure 11: Summary of target acquisitions No. What? Location 1 Newly-built warehouse North Port, Port Klang 2 Factory SLiC, Johor 3 3 warehouses Shah Alam 4 Great Avenue warehouses Shah Alam 5 Logistics warehouse Shah Alam 6 Factory Senai, Johor Baru 7 Hypermarket Melaka 8 Distribution centre (DC) Sepang 9 Logistics warehouse PTP, Johor SOURCES: CIMB, COMPANY REPORTS

Axis REIT March 18, 2013

Figure 12: Assets under management (sq ft)

6,000,000 Title: 5,463,599 Source:

5,000,000 4,449,580 4,288,054 Please fill in the values above to have them entered in your report

4,000,000 3,679,796

3,000,000 2,858,121

2,175,522

2,000,000 1,656,943 1,186,052 1,000,000

- 2005 2006 2007 2008 2009 2010 2011 2012

SOURCES: CIMB, COMPANY REPORTS

2.3 Asset enhancement initiatives (AEI) Axis REIT is constantly planning for AEI activities to upgrade and enhance the properties under its portfolio so as to command higher rental rates. The company is also looking at the possibility of converting some of its commercial assets into MSC-compliant buildings, which would help it fetch higher rentals. There could also be re-development opportunities for some of its older buildings in Section 13, Petaling Jaya. In future, upgrading works involving its assets could include a green agenda as a way of fetching premiums. In 2013, the REIT plans to reposition the existing Wisma Bintang site into Axis Business Campus (ABC). The plan is to tap the growing demand for business park-styled commercial/industrial facilities, which are becoming rare in the Petaling Jaya vicinity but in high demand. Axis REIT expects a significant increase in rentals at the campus upon completion of this rebranding exercise. NLA will rise by 29% to 223k sq ft and 140 additional car parks will be created. The plan is to complete the West Block and the South Block by Apr and May 2013, respectively, while the new six-storey East Block is targeted to complete by July 2014.

Figure 13: Current building complex at Axis Business Campus (formerly known as Wisma Bintang)

SOURCES: CIMB, COMPANY REPORTS

Axis REIT March 18, 2013

Figure 14: Artist impression of exterior of proposed Axis Figure 15: Artist impression of interior of proposed Axis Business Campus Business Campus

SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS

2.4 Achieved 10% rental reversion in 2012 We believe organic growth could also come from rental reversions as and when tenancies expire. In 2012, Axis REIT successfully renewed 508k sq ft (9.3% of NLA) at a 10% higher rental rate.

Figure 16: Rental reversions in 2012

Property Space renegotiated (sq ft) % rental reversion Menara Axis - 7.1% Crystal Plaza 12,433 10.6% Axis Business Park 34,142 3.6% Infinite Centre 14,200 3.1% Axis Plaza 50,192 0.1% Wisma Kemajuan 14,575 6.5% FCI Senai 136,619 25.0% Axis Technology Centre 75,165 8.5% Axis Eureka 23,283 3.0% Delfi Warehouse 130,743 20.1% Quattro West 16,489 11.3% SOURCES: CIMB, COMPANY REPORTS

2.5 Actively recycling unitholders' capital to seek better growth opportunities We believe Axis REIT is active and savvy about recycling its capital by disposing of matured and underperfoming assets in return for higher-growth assets. This is positive as it enables unitholders to benefit from capital gains of the portfolio from time to time. In addition, the investment recovered can be redeployed in new properties with higher growth potential, hence maximising the unitholders' capital. Properties disposed of after five years also do not attract any real property gains tax (RPGT), which is positive. Dividends from these capital gains are exempted from the withholding tax. Since listing, Axis REIT has disposed of two properties. Last year, Axis REIT decided to part ways with Kayangan Depot, a 3-storey office-cum-warehouse complex located in Shah Alam. It was purchased for RM16.1m in June 2006 but disposed of on Dec 2012 for RM23.6m, netting the REIT a capital gain of RM5.93m (distributed to unitholders by way of a tax-exempt DPU of 1.30 sen/unit) after taking into account other incidental costs. In disposing of the

Axis REIT March 18, 2013

asset, management believes that it has optimised the potential of the property after owning it for 6 years and given that there is limited upside for future rental growth. In 2011, Axis REIT sold Axis North Port Logistics Centre 1 for RM14.5m and netted a gain on disposal of RM0.79m, which was distributed to unitholders.

Figure 17: Disposal of Kayangan Depot

SOURCES: CIMB, COMPANY REPORTS

3. RISKS 3.1 Macro weakness causing slowdown in industrial activities Axis REIT's portfolio is made up mostly of industrial properties, which are subjected to macro risks that could stem from a slowdown in industrial activities. However, this is mitigated by the fact that the company has locked in long-term leases with quality tenants. The weighted average lease expiry (WALE) for the entire portfolio is 4.43 years (by NLA) and 4.17 years (by rental income). The long expiry period of its leases suggest that Axis REIT's earnings are more resilient compared to other REITs. 3.2 REITs could underperform in a bullish market Should there be an increase in investor risk appetite, REITs in general, including Axis REIT, may not perform as well.

4. VALUATION AND RECOMMENDATION 4.1 Start coverage with Outperform We begin coverage on Axis REIT with an Outperform call and a DDM-based target price of RM3.68. Our target price implies a total return of 10%. We believe that our target price is justified by Axis REIT's status as the largest industrial REIT in Malaysia by market cap. The company also offers investors exposure to the thriving industrial activity currently seen in Iskandar Malaysia as more and more Singapore companies relocate their operations to a lower-cost alternative, which also solves the problem of space constraints in Singapore. Potential rerating catalysts are 1) further yield-accretive acquisitions, and 2) upward rent reversions after enhancements made to existing assets.

Axis REIT March 18, 2013

Figure 18: CIMB REIT Overview Last Target Total return reported Last Price / Price (Prospective SREIT Bloomberg Price as of Mkt Cap asset stated Stated (DDM- 2013 2014 price upside + Ticker 15 Mar 13 (LC $m) leverage NAV NAV based) Rec. Yield Yield 2013 yield) Hospitality Ascott Residence Trust ART SP $1.35 $1,701 40.1% 1.35 1.00 $ 1.39 N 6.4% 7.0% 9.3% Ascendas Hospitality Trust ASHT SP $1.06 $853 37.5% 0.77 1.38 NA NR 6.5% 7.2% CDL Hospitality Trust CDREIT SP $2.11 $2,047 25.5% 1.60 1.32 $ 2.10 N 5.6% 5.8% 5.0% Far East Hospitality Trust FEHT SP $1.22 $1,960 30.4% 0.93 1.31 NA NR 5.0% 5.3% Simple Average 33.4% 1.25 5.9% 6.3% Industrial AIMS AMP AAREIT SP $1.59 $712 31.5% 1.44 1.10 NA NR 7.3% 7.5% Ascendas Reit AREIT SP $2.55 $5,709 32.8% 1.88 1.36 $ 2.79 O 5.5% 5.9% 14.8% Cache Logistics Trust CACHE SP $1.32 $928 31.7% 0.96 1.38 $ 1.36 O 6.6% 6.9% 9.7% Cambridge Industrial Trust CREIT SP $0.77 $936 38.6% 0.65 1.18 $ 0.81 O 6.6% 6.9% 11.8% Mapletree Logistics Trust MLT SP $1.17 $2,845 35.9% 0.90 1.30 $ 1.20 N 6.1% 6.2% 9.1% Mapletree Industrial Trust MINT SP $1.38 $2,265 37.8% 1.02 1.35 $ 1.50 N 6.6% 6.8% 15.0% Sabana Shariah SSREIT SP $1.27 $815 37.6% 1.07 1.19 NA NR 7.6% 7.4% Simple Average 35.1% 1.29 6.5% 6.7% Office Frasers Commercial Trust FCOT SP $1.36 $891 29.2% 1.50 0.91 $ 1.55 O 5.9% 6.7% 19.6% CapitaCommercial Trust CCT SP $1.59 $4,509 30.1% 1.62 0.98 $ 1.69 U 5.1% 5.0% 11.9% Keppel REIT KREIT SP $1.33 $3,560 42.9% 1.30 1.02 $ 1.33 N 5.9% 6.0% 6.1% Suntec REIT SUN SP $1.72 $3,863 38.3% 2.07 0.83 $ 1.80 N 5.4% 5.6% 10.4% Simple Average 35.1% 0.93 5.6% 5.8% Retail CapitaMall Trust CT SP $2.11 $7,294 36.7% 1.64 1.29 $ 2.23 U 4.8% 5.2% 10.4% Frasers Centrepoint Trust FCT SP $2.13 $1,755 30.1% 1.53 1.39 $ 2.18 O 5.0% 5.1% 7.4% Starhill Global REIT SGREIT SP $0.91 $1,758 30.3% 0.97 0.93 $ 0.84 N 5.7% 5.9% -1.3% Mapletree Commercial Trust MCT SP $1.30 $2,688 40.8% 1.06 1.23 $ 1.39 N 5.0% 5.2% 11.8% Simple Average 34.5% 1.21 5.1% 5.3% Healthcare Parkway Life REIT PREIT SP $2.38 $1,440 32.9% 1.57 1.52 $ 2.32 N 4.6% 5.0% 2.0% Simple Average 32.9% 1.52 4.6% 5.0% Simple average for SIN 34.5% 1.20 5.8% 6.1%

Last Target Total return reported Last Price / Price (Prospective MREIT Price as of Mkt Cap asset stated Stated (DDM- 2013 2014 price upside + Bbg Code 15 Mar 13 (LC $m) leverage NAV NAV based) Rec. Yield Yield 2013 yield) Retail Capitamalls Malaysia Trust CMMT MK $1.79 $3,165 27.9% 1.15 1.55 $ 1.99 O 5.0% 5.3% 16.3% IGB REIT IGBREIT MK $1.45 $4,938 24.7% 1.02 1.42 $ 1.50 O 4.6% 4.9% 8.5% Sunway REIT SREIT MK $1.53 $4,464 37.6% 1.10 1.40 $ 1.63 O 5.2% 5.6% 12.1% Pavilion REIT PREIT MK $1.65 $4,963 16.7% 1.10 1.50 $ 1.59 O 4.5% 4.7% 1.1% Simple Average 26.7% 1.47 4.8% 5.1% Industrial Axis REIT AXRB MK $3.34 $1,525 34.5% 2.11 1.58 $ 3.68 O 5.4% 5.7% 15.9% Simple Average 34.5% 1.58 5.4% 5.7% Simple average for MAL 28.3% 1.49 4.9% 5.2% Simple average for ALL 33.5% 1.26 5.6% 5.9% SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG

4.2 Dividend policy Axis REIT has a distribution policy of paying dividends every quarter. From 1Q to 3Q, its policy is to distribute out at least 95% of current year-to-date distributable income while, in the final quarter, it aims to distribute out at least 99% of current year-to-date distributable income.

Axis REIT March 18, 2013

Figure 19: Annual DPU

20.00 18.60 Title: 18.00 17.20 Source: 15.80 16.00 15.27 16.00 Please fill in the values above to have them entered in your report 13.63 14.00 12.95

12.00

10.00

8.00

6.00 4.70 4.00

2.00

0.00 2005 2006 2007 2008 2009 2010 2011 2012

SOURCES: CIMB, COMPANY REPORTS

4.3 Optimal gearing of 35% Axis REIT adopts a prudent capital management policy. Although the maximum gearing level allowable by the Securities Commission is 50%, the company maintains gearing in the 28-38% range. Whenever the gearing touches 35%, the REIT will place out new units to pare down the borrowings and to fund new acquisitions.

Figure 20: Breakdown of loans

Title: 9% Source:

Please fill in the values above to have them entered in your report 18%

53%

20%

Revolving credit 10-year Sukuk 5-year fixed term financing 3-year fixed term financing

SOURCES: CIMB, COMPANY REPORTS

4.4 Planning a placement in 2013 Axis REIT obtained approval for the placement of 90.8m new units (19.9% of existing unit base of 456.5m units) from the Securities Commission in Dec 2012. The next step is to seek unitholders' approval at the upcoming AGM in April. Based on the market price of RM3.13 as at 31 Dec 2012, the new placement will be able to raise gross proceeds of approximately RM284m. This will enable the REIT to acquire RM437m worth of properties before the gearing level rises back to 35% again. For future related-party transactions (RPT), Axis REIT is examining the possibility of exchanging the assets for units in lieu of payment. This is in order to maintain the promoters' stake at levels that will assure investors that there is an alignment of interest between the promoters and the minorities.

Axis REIT March 18, 2013

4.5 First sukuk programme In July 2012, Axis REIT successfully launched its first Islamic medium-term note (sukuk) programme in order to refinance its loans. It started off by issuing RM110m of 10-year sukuk at an attractive fixed profit rate of 4.61% p.a. last year. This year, the company plans to roll out the remaining RM190m from the sukuk programme. The advantages of a sukuk programme are that it enables the REIT to lock in fixed interest rates on bonds with tenures that are more than five years long. Also, it gives flexibility to the REIT to tap the debt capital market based on its funding needs. For instance, it could issue either short-tenured commercial papers (CPs) to fund immediate capital requirements or long-tenured medium-term notes (MTNs) for longer-term capex plans.

Figure 21: Breakdown of the RM110m Sukuk issuance First Sukuk issue Rating Issue Amount (RM m) Financing rate (%) Expected Maturity Class A AAA 95 4.50% 13 July 2022 Class B AA1 5 4.95% 14 July 2022 Class C AA2 5 5.30% 15 July 2022 Class D AA3 5 5.60% 16 July 2022 SOURCES: CIMB, COMPANY REPORTS

4.6 Income distribution reinvestment plan (IDRP) Axis REIT is the only M-REIT to introduce the innovative income distribution reinvestment plan (IDRP) and the third listed entity on the Bursa securities to do so. IDRP is a plan whereby unitholders are given an option to reinvest income distribution in new units instead of receiving cash. IDRP is a win-win plan for both unitholders and the REIT. Unitholders benefit as they get to invest in new units at a discount to the existing share price while the REIT gets to retain the cash for any AEI activities. The board of directors has decided that future IDRP will only be done for the 1Q and 3Q distributions (in every April and October).

Figure 22: Income distribution reinvestment plan (IDRP) No. Take-up rate (%) No. of IDRP units (m) Listing date 1 86% 2.732896 12-Dec-11 2 79% 2.703125 12-Sep-12 SOURCES: CIMB, COMPANY REPORTS

Axis REIT March 18, 2013

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Axis REIT March 18, 2013

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Axis REIT March 18, 2013

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Spitzer Chart for stock being researched ( 2 year data )

Price Close

3.6 3.4 3.2 3.0 2.8 2.6 2.4 2.2 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12

Distribution of stock ratings and investment banking clients for quarter ended on 28 February 2013 959 companies under coverage Rating Distribution (%) Investment Banking clients (%) Outperform/Buy/Trading Buy 51.7% 8.6% Neutral 35.0% 4.3% Underperform/Sell/Trading Sell 13.3% 7.1%

Recommendation Framework #1 * Stock Sector OUTPERFORM: The stock's total return is expected to exceed a relevant benchmark's total return OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to by 5% or more over the next 12 months. outperform the relevant primary market index over the next 12 months. NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant benchmark's total NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in return. line with the relevant primary market index over the next 12 months. UNDERPERFORM: The stock's total return is expected to be below a relevant benchmark's total UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to return by 5% or more over the next 12 months. underperform the relevant primary market index over the next 12 months. TRADING BUY: The stock's total return is expected to exceed a relevant benchmark's total return TRADING BUY: The industry, as defined by the analyst's coverage universe, is expected to by 5% or more over the next 3 months. outperform the relevant primary market index over the next 3 months. TRADING SELL: The stock's total return is expected to be below a relevant benchmark's total TRADING SELL: The industry, as defined by the analyst's coverage universe, is expected to return by 5% or more over the next 3 months. underperform the relevant primary market index over the next 3 months.

* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Korea Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. CIMB Research Pte Ltd (Co. Reg. No. 198701620M)

Axis REIT March 18, 2013

Recommendation Framework #2 ** Stock Sector OUTPERFORM: Expected positive total returns of 10% or more over the next 12 months. OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +10% or better over the next 12 months. NEUTRAL: Expected total returns of between -10% and +10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i) an equal number of stocks that are expected to have total returns of +10% (or better) or -10% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +10% to -10%; both over the next 12 months. UNDERPERFORM: Expected negative total returns of 10% or more over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -10% or worse over the next 12 months. TRADING BUY: Expected positive total returns of 10% or more over the next 3 months. TRADING BUY: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +10% or better over the next 3 months. TRADING SELL: Expected negative total returns of 10% or more over the next 3 months. TRADING SELL: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -10% or worse over the next 3 months.

** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2011. AAV – not available, ADVANC - Excellent, AMATA - Very Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCH - Good, BEC - Very Good, BECL - Very Good, BGH - not available, BH - Very Good, BIGC - Very Good, BTS - Very Good, CCET - Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN - Excellent, DELTA - Very Good, DTAC - Very Good, GLOBAL - not available, GLOW - Very Good, GRAMMY – Excellent, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, INTUCH – Very Good, ITD - Good, IVL - Very Good, JAS – Very Good, KAMART – not available, KBANK - Excellent, KK – Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR - Very Good, MCOT - Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - not available, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, RS – Excellent, SC – Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI - Very Good, SPALI - Very Good, STA - Very Good, STEC - Very Good, TCAP - Very Good, THAI - Very Good, THCOM – Very Good, TICON – Good, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Very Good, TUF - Very Good, WORK – Good.