Construction & real estate / Hong Kong 10 May 2012

Hysan Development 14 HK | HYSNY US

Target price: HK$41.00  HK$41.00 Up/downside: +23.9% Share price (10 May): HK$33.10

substantial proportion of the on a 30% discount to our end-2012E Is a break- property to be leased. NAV of HK$58.60. A risk to our call would be a sharp decline in retail through near Some positive signs have emerged spending in Hong Kong. for office space. We note some of the for leasing major office-space deals that have  How we differ been signed recently (see page 2). We are not as bearish as many Hysan Place There have also been some major brokers on the outlook for the deals in the investment market as grade-A office sector. We are also office space? well, with 50 Connaught Road being more optimistic about the outlook sold recently for a record price for a for Hysan’s achieved rent in its Hong Kong office building of Causeway Bay retail-property Jonas Kan, CFA (852) 2848 4439 HK$4.88bn, and some eight floors portfolio. [email protected] of SHK Properties’ (16 HK, HK$89.25, 3) KCC Building in Kwai Forecast revisions (%) Alex Ye Year to 31 Dec 12E 13E 14E (852) 2848 4471 Chung were sold to an investment Revenue change 0.0 0.0 0.0 [email protected] fund for HK$1.3bn, according to the Net-profit change 0.0 0.0 0.0 Hong Kong Economic Times. EPS change 0.0 0.0 0.0 Source: Daiwa forecasts  One office floor in Hysan Place Latest developments bode well for was leased out at a record level the prospects of leasing out the rest Share price performance  A breakthrough in the leasing of Hysan Place’s office space. We (HK$) (% ) think there is pent-up demand for 44 140 of the office space may be office spaces from industries such as 38 120 coming retailing and legal, and that there is 32 100  Reiterate Buy rating also new demand from corporations 26 80 from China, and probably some 20 60 May-11 Aug-11 Nov-11 Feb-12 May-12  What's new other countries as well. Hysan Development (LHS) Wuliangye, a major alcohol brand in Relative to HSI (RHS) China, has leased one floor of Hysan The way office demand works is that 12-month range 23.00-39.10 Place (16,000 sq ft) at about once the inertia and wait-and-see Market cap (US$bn) 4.50 HK$75/sq ft, according to the Hong sentiment has been removed, Average daily turnover (US$m) 7.38 Kong Economic Times. demand could re-emerge rather Shares outstanding (m) 1,056 quickly, as many of the corporations Major shareholder Lee Hysan Estate Company  What's the impact that have been waiting for the best (40.9%) Should reduce concerns about the time to sign may decide not to wait leasing of Hysan Place office space. any longer. Given this, the rents Financial summary (HK$) While there has been concern in the achieved in many of the recent deals Year to 31 Dec 12E 13E 14E Revenue (m) 2,193 2,607 2,822 market that Hysan Place has signed are not low (the reported achieved Operating profit (m) 1,806 2,203 2,410 up only one tenant (KPMG), we rent for Hysan Place is above our think this concern will ease if the Net profit (m) 1,591 1,900 2,091 forecast of HK$60/sq ft and would Core EPS 1.507 1.800 1.980 report is correct. be a new record for Causeway Bay) EPS change (%) 21.5 19.4 10.0 and the leases are spread over Daiwa vs Cons. EPS (%) 21.6 5.8 7.2 We note that Hysan Place has only several buildings and districts. PER (x) 22.0 18.4 16.7 15 floors. With KPMG taking five Dividend yield (%) 3.0 3.9 4.7 floors, and one floor potentially  What we recommend DPS 1.000 1.300 1.550 being taken by Wuliangye, the We continue to see Hysan PBR (x) 0.7 0.7 0.7 building would be about 40% leased, Development (Hysan) as an EV/EBITDA (x) 20.5 16.4 14.7 with nine floors left to fill. As such, undervalued asset play, and ROE (%) 3.2 3.8 4.2 probably only a handful of sizeable reiterate our Buy (1) rating and six- Source: Bloomberg, Daiwa forecasts tenants would be sufficient for a month target price of HK$41, based

Important disclosures, including any required research certifications, are provided on the last two pages of this report. Construction & real estate / Hong Kong 14 HK | HYSNY US 10 May 2012

ƒ Hysan: price to NAV ƒ Hysan: PBR (Disc)/prem (% ) PBR (x ) Current NAV disc: -41.9% 1.4 10% 0% 1.2 Current PBR: 0.72x (10% ) 1.0 (20% ) +1SD: -26.1% +1SD: 0.78x (30% ) 0.8 (40% ) Average since 0.6 (50% ) 1991: -42.4% (60% ) 0.4 Average since -1SD: -58.7% (70% ) 1990: 0.62x -1SD: 0.47x 0.2 (80% ) (90% ) 0.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Thomson Reuters, Daiwa estimate Source: Thomson Reuters, Daiwa

ƒ Major office leasing deals in recent weeks Rental Area Date Tenants Industry Building District HK$/sq ft (sq ft) Remarks Early May Wuliangye Liquor Hysan Place Causeway Bay 75 10,000-20,000 The second office tenant in the building following KPMG Early May Lenovo Technology Lincoln House, Taikoo Place Quarry Bay 50 10,000-20,000 The whole 21st floor Early May Harvest Capital Real estate investment Two Exchange Square Central 120 10,000-20,000 Has rented the whole 31st floor 23/F, Manchester United has leased the top floor (28/F) at about Early May Meridian Capital Investment 50 Connaught Road Central 135 5,000-10,000 HK$130/sq ft in 2011 Late April Quam Investment Aon China Building Central 60 10,000-20,000 18/F & 19/F Late April Harvest Capital Real estate investment Two Exchange Square Central 120 5,000-10,000 31/F 23/F & 24/F, a new type of tenant for the Central-Admiralty office Late April Neo Derm Retail (beauty) Two Pacific Place Admiralty 120 20,000-50,000 market Early April A fund house Investment LHT Tower Central 85 5,000-10,000 Relocating out of One IFC Late March HK Exchange Exchange and Clearing Two Exchange Square Central 100 10,000-20,000 6/F Source: HK Economic Journal, HK Economic Time, SCMP

ƒ Major en-bloc transactions of offices in recent years Transacted Total GFA price Average price Date of Building (sq ft) (HK$bn) (HK$/sq ft) transaction Buyer 8 floors in Tower B, Kowloon Commerce Centre (KCC), Kwai Chung (葵涌九龍貿易中心 ) * 208,000 1.3 6,500 May 12 An investment fund 50 Connaught Road, Central (中環干諾道中 50 號) 175,000 4.88 27,800 May 12 Agricultural Bank of China 18 Kowloon East, Kowloon Bay (九龍灣東匯 18 號) 348,600 2.51 7,200 Mar 12 China Construction Bank PCCW Tower, Quarry Bay (鰂魚涌電訊盈科中心 )** 620,000 4.388 7,077 Nov 12 Grosvenor (UK real estate fund) Infinitus Plaza, Sheung Wan (上環維德廣場 ) 390,000 4.35 11,154 Jul 12 Lee Kum Kee Family and related party Nexxus Building, Central (中環盈置大廈 ) 260,000 3.6 13,846 Sep 12 Vietnamese investor Source: HKET *A major recent deal but not an en-bloc transaction. Sold by SHKP (16 HK, HK$89.25, Hold [3]). *Swire sold 50% stake of the property to Grosvenor. HK$4.388bn is the translated price for the whole building

- 2 - Construction & real estate / Hong Kong 14 HK | HYSNY US 10 May 2012

Financial summary

ƒ Key assumptions Year to 31 Dec 2007 2008 2009 2010 2011 2012E 2013E 2014E Completed investment properties (m sq.ft) 3.7 3.7 3.7 3.7 3.7 4.4 4.4 4.4 Blended average office rent (on GFA) 23.7 29.2 30.3 31.3 34.6 36.4 38.4 41.4 (HK$/sq.ft.) Blended average retail rent (on GFA) 49.3 59.2 61.2 66.2 66.0 69.8 76.7 84.8 (HK$/sq.ft.) Blended average residential rent (on GFA) 27.7 30.8 30.1 31.1 32.3 32.9 33.3 33.9 (HK$/sq.ft.) Pay-out ratio (%) 54 59 64 68 65 66 72 78

ƒ Profit and loss (HK$m) Year to 31 Dec 2007 2008 2009 2010 2011 2012E 2013E 2014E Property rental - office 584 720 747 770 820 953 1,066 1,148 Property rental - retail 522 626 648 700 789 928 1,225 1,354 Others 262 292 285 294 313 312 316 321 Total revenue 1,368 1,638 1,680 1,764 1,922 2,193 2,607 2,822 Other income 98 63 38 49 90 92 94 98 COGS (208) (217) (235) (250) (262) (284) (295) (301) SG&A (106) (134) (133) (140) (173) (187) (194) (202) Other op. expenses (4) (2) (7) (8) (8) (8) (8) (8) Operating profit 1,148 1,348 1,343 1,415 1,569 1,806 2,203 2,410 Net-interest inc./(exp.) (175) (155) (131) (117) (122) (121) (120) (118) Assoc/forex/extraord./others 447 326 161 133 170 262 227 248 Pre-tax profit 1,420 1,519 1,373 1,431 1,617 1,947 2,311 2,539 Tax (185) (264) (189) (201) (226) (273) (324) (355) Min. int./pref. div./others (77) (54) (71) (82) (81) (84) (87) (93) Net profit (reported) 1,158 1,201 1,113 1,148 1,310 1,591 1,900 2,091 Net profit (adjusted) 1,158 1,201 1,113 1,148 1,310 1,591 1,900 2,091 EPS (reported) (HK$) 1.101 1.156 1.064 1.091 1.240 1.507 1.800 1.980 EPS (adjusted) (HK$) 1.101 1.156 1.064 1.091 1.240 1.507 1.800 1.980 EPS (adjusted fully-diluted) (HK$) 1.101 1.156 1.064 1.091 1.240 1.507 1.800 1.980 DPS (HK$) 0.600 0.680 0.680 0.740 0.800 1.000 1.300 1.550 EBIT 1,148 1,348 1,343 1,415 1,569 1,806 2,203 2,410 EBITDA 1,152 1,350 1,350 1,423 1,577 1,814 2,211 2,418

ƒ Cash flow (HK$m) Year to 31 Dec 2007 2008 2009 2010 2011 2012E 2013E 2014E Profit before tax 1,420 1,519 1,373 1,431 1,617 1,947 2,311 2,539 Depreciation and amortisation 4 2 7 8 8 8 8 8 Tax paid (140) (183) (469) (161) (181) (204) (245) (291) Change in working capital 31 64 24 72 5 81 79 41 Other operational CF items (271) (223) (55) (51) (82) (141) (107) (129) Cash flow from operations 1,044 1,179 880 1,299 1,367 1,691 2,046 2,168 Capex 0 0 (242) (871) (980) (880) (380) (80) Net (acquisitions)/disposals 172 (759) 959 (274) (551) 233 309 277 Other investing CF items 0 0 0 0 0 0 0 0 Cash flow from investing 172 (759) 717 (1,145) (1,531) (647) (71) 197 Change in debt 0 765 179 632 0 0 0 0 Net share issues/(repurchases) (498) 2 1 1 0 0 0 0 Dividends paid (497) (641) (642) (733) (790) (853) (1,096) (1,422) Other financing CF items (162) (140) (127) (109) (154) (135) (130) (128) Cash flow from financing (1,157) (14) (589) (209) (944) (988) (1,226) (1,550) Forex effect/others 0 0 0 0 0 0 0 0 Change in cash 59 406 1,008 (55) (1,108) 56 749 815 Free cash flow 1,044 1,179 638 428 387 811 1,666 2,088

Source: Company, Daiwa forecasts

- 3 - Construction & real estate / Hong Kong 14 HK | HYSNY US 10 May 2012

Financial summary continued …

ƒ Balance sheet (HK$m) As at 31 Dec 2007 2008 2009 2010 2011 2012E 2013E 2014E Cash & short-term investment 484 1,015 1,984 1,993 2,961 3,017 3,017 3,017 Inventory 0 0 0 0 0 0 0 0 Accounts receivable 66 94 83 98 134 120 143 155 Other current assets 686 1,331 489 320 507 876 829 825 Total current assets 1,236 2,440 2,556 2,411 3,602 4,013 3,989 3,997 Fixed assets 196 203 396 429 530 560 590 620 Goodwill & intangibles 0 0 0 0 0 0 0 0 Other non-current assets 39,458 38,893 41,090 45,714 55,236 56,625 56,837 57,061 Total assets 40,890 41,536 44,042 48,554 59,368 61,199 61,416 61,677 Short-term debt 0 550 400 650 1,507 1,507 758 758 Accounts payable 278 320 314 433 532 541 643 696 Other current liabilities 761 836 499 552 589 1,297 1,604 1,769 Total current liabilities 1,039 1,706 1,213 1,635 2,628 3,345 3,005 3,223 Long-term debt 2,861 3,201 3,491 3,937 5,156 5,156 5,156 4,341 Other non-current liabilities 4,142 3,919 606 665 840 1,332 1,270 1,573 Total liabilities 8,042 8,826 5,310 6,237 8,624 9,833 9,430 9,137 Share capital 5,187 5,206 5,253 5,267 5,299 5,299 5,299 5,299 Reserves/R.E./others 26,465 26,263 31,963 35,410 43,454 43,989 44,517 44,971 Shareholders' equity 31,652 31,469 37,216 40,677 48,753 49,288 49,816 50,270 Minority interests 1,196 1,241 1,516 1,640 1,991 2,077 2,170 2,270 Total equity & liabilities 40,890 41,536 44,042 48,554 59,368 61,199 61,416 61,677 EV 37,376 36,629 35,537 36,034 37,224 37,101 36,314 35,455 Net debt/(cash) 2,377 2,736 1,907 2,594 3,702 3,646 2,897 2,082 BVPS (HK$) 30.094 30.278 35.571 38.674 46.168 46.674 47.174 47.604

ƒ Key ratios (%) Year to 31 Dec 2007 2008 2009 2010 2011 2012E 2013E 2014E Sales (YoY) 7.9 19.7 2.6 5.0 9.0 14.1 18.9 8.3 EBITDA (YoY) 8.3 17.2 0.0 5.4 10.8 15.0 21.9 9.3 Operating profit (YoY) 8.3 17.4 (0.4) 5.4 10.9 15.1 22.0 9.4 Net profit (YoY) 53.4 3.7 (7.3) 3.1 14.1 21.5 19.4 10.0 EPS (YoY) 53.7 5.0 (7.9) 2.6 13.6 21.5 19.4 10.0 Gross-profit margin 84.8 86.8 86.0 85.8 86.4 87.1 88.7 89.3 EBITDA margin 84.2 82.4 80.4 80.7 82.0 82.7 84.8 85.7 Operating-profit margin 83.9 82.3 79.9 80.2 81.6 82.4 84.5 85.4 ROAE 3.9 3.8 3.2 2.9 2.9 3.2 3.8 4.2 ROAA 3.0 2.9 2.6 2.5 2.4 2.6 3.1 3.4 ROCE 3.4 3.7 3.4 3.2 3.0 3.1 3.8 4.2 ROIC 3.0 3.2 3.0 2.8 2.7 2.8 3.4 3.8 Net debt to equity 7.5 8.7 5.1 6.4 7.6 7.4 5.8 4.1 Effective tax rate 13.0 17.4 13.8 14.0 14.0 14.0 14.0 14.0 Accounts receivable (days) 30.0 17.8 19.2 18.7 22.0 21.2 18.4 19.2 Payables (days) 70.8 66.6 68.9 77.3 91.6 89.3 82.8 86.6 Net interest cover (x) 6.6 8.7 10.3 12.1 12.9 15.0 18.4 20.4 Net dividend payout 54.5 58.8 63.9 67.8 64.5 66.4 72.2 78.3 Source: Company, Daiwa forecasts

ƒ Company profile Hysan Development (Hysan) was founded by the Lee family in 1970 to redevelop the Lee family’s properties and was listed on the Hong Kong Stock Exchange in 1981. Hysan currently owns an investment-property portfolio in Hong Kong comprising 4.4m sq ft (4.2m sq ft on an attributable basis), of which 3.7m sq ft is at Causeway Bay. In addition, the group owns 0.69m sq ft of luxury residential properties in Hong Kong’s Mid-level area and has a 24.7% stake in Grand Gateway 66, one of the largest and most prominent mixed commercial-property complexes in Shanghai.

- 4 -

Disclaimer This publication is produced by Daiwa Securities Group Inc. and/or its non-U.S. affiliates, and distributed by Daiwa Securities Group Inc. and/or its non-U.S. affiliates, except to the extent expressly provided herein. This publication and the contents hereof are intended for information purposes only, and may be subject to change without further notice. Any use, disclosure, distribution, dissemination, copying, printing or reliance on this publication for any other purpose without our prior consent or approval is strictly prohibited. Neither Daiwa Securities Group Inc. nor any of its respective parent, holding, subsidiaries or affiliates, nor any of its respective directors, officers, servants and employees, represent nor warrant the accuracy or completeness of the information contained herein or as to the existence of other facts which might be significant, and will not accept any responsibility or liability whatsoever for any use of or reliance upon this publication or any of the contents hereof. Neither this publication, nor any content hereof, constitute, or are to be construed as, an offer or solicitation of an offer to buy or sell any of the securities or investments mentioned herein in any country or jurisdiction nor, unless expressly provided, any recommendation or investment opinion or advice. Any view, recommendation, opinion or advice expressed in this publication may not necessarily reflect those of Daiwa Securities Capital Markets Co. Ltd., and/or its affiliates nor any of its respective directors, officers, servants and employees except where the publication states otherwise. This research report is not to be relied upon by any person in making any investment decision or otherwise advising with respect to, or dealing in, the securities mentioned, as it does not take into account the specific investment objectives, financial situation and particular needs of any person.

Daiwa Securities Group Inc., its subsidiaries or affiliates, or its or their respective directors, officers and employees from time to time have trades as principals, or have positions in, or have other interests in the securities of the company under research including derivatives in respect of such securities or may have also performed investment banking and other services for the issuer of such securities. The following are additional disclosures.

Japan Daiwa Securities Co. Ltd. and Daiwa Securities Group Inc. Daiwa Securities Co. Ltd. is a subsidiary of Daiwa Securities Group Inc. Investment Banking Relationship Within the preceding 12 months, The subsidiaries and/or affiliates of Daiwa Securities Group Inc. * has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: SBI Holdings Inc. (6488 HK); Shunfeng Photovoltaic International Ltd. (1165 HK); Rexlot Holdings Limited (555 HK); China Outfitters Holdings Limited (1146 HK); Beijing Jingneng Clean Energy Co. Limited (579 HK); Infraware Inc. (041020 KS) *Subsidiaries of Daiwa Securities Group Inc. for the purposes of this section shall mean any one or more of: • Daiwa Capital Markets Hong Kong Limited • Daiwa Capital Markets Singapore Limited • Daiwa Capital Markets Australia Limited • Daiwa Capital Markets India Private Limited • Daiwa-Cathay Capital Markets Co., Ltd. • Daiwa Securities Capital Markets Korea Co., Ltd.

Hong Kong This research is distributed in Hong Kong by Daiwa Capital Markets Hong Kong Limited (“DHK”) which is regulated by the Hong Kong Securities and Futures Commission. Recipients of this research in Hong Kong may contact DHK in respect of any matter arising from or in connection with this research. Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Investment Banking Relationship For “Investment Banking Relationship”, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. Relevant Relationship (DHK) DHK may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage. DHK market making DHK may from time to time make a market in securities covered by this research.

Singapore This research is distributed in Singapore by Daiwa Capital Markets Singapore Limited and it may only be distributed in Singapore to accredited investors, expert investors and institutional investors as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. By virtue of distribution to these category of investors, Daiwa Capital Markets Singapore Limited and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of Daiwa Capital Markets Singapore Limited’s interest and/or its representative’s interest in securities). Recipients of this research in Singapore may contact Daiwa Capital Markets Singapore Limited in respect of any matter arising from or in connection with the research.

Australia This research is distributed in Australia by Daiwa Capital Markets Stockbroking Limited and it may only be distributed in Australia to wholesale investors within the meaning of the Corporations Act. Recipients of this research in Australia may contact Daiwa Capital Markets Stockbroking Limited in respect of any matter arising from or in connection with the research. Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

India This research is distributed by Daiwa Capital Markets India Private Limited (DAIWA) which is an intermediary registered with Securities & Exchange Board of India. This report is not to be considered as an offer or solicitation for any dealings in securities. While the information in this report has been compiled by DAIWA in good faith from sources believed to be reliable, no representation or warranty, express of implied, is made or given as to its accuracy, completeness or correctness. DAIWA its officers, employees, representatives and agents accept no liability whatsoever for any loss or damage whether direct, indirect, consequential or otherwise howsoever arising (whether in negligence or otherwise) out of or in connection with or from any use of or reliance on the contents of and/or omissions from this document. Consequently DAIWA expressly disclaims any and all liability for, or based on or relating to any such information contained in or errors in or omissions in this report. Accordingly, you are recommended to seek your own legal, tax or other advice and should rely solely on your own judgment, review and analysis, in evaluating the information in this document. The data contained in this document is subject to change without any prior notice DAIWA reserves its right to modify this report as maybe required from time to time. DAIWA is committed to providing independent recommendations to its Clients and would be happy to provide any information in response to any query from its Clients. This report is strictly confidential and is being furnished to you solely for your information. The information contained in this document should not be reproduced (in whole or in part) or redistributed in any form to any other person. We and our group companies, affiliates, officers, directors and employees may from time to time, have long or short positions, in and buy sell the securities thereof, of company(ies) mentioned herein or be engaged in any other transactions involving such securities and earn brokerage or other compensation or act as advisor or have the potential conflict of interest with respect to any recommendation and related information or opinion. DAIWA prohibits its analyst and their family members from maintaining a financial interest in the securities or derivatives of any companies that the analyst cover. This report is not intended or directed for distribution to, or use by any person, citizen or entity which is resident or located in any state or country or jurisdiction where such publication, distribution or use would be contrary to any statutory legislation, or regulation which would require DAIWA and its affiliates/ group companies to any registration or licensing requirements. The views expressed in the report accurately reflect the analyst’s personal views about the securities and issuers that are subject of the Report, and that no part of the analyst’s compensation was, is or will be directly or indirectly, related to the recommendations or views expressed in the Report. This report does not recommend to US recipients the use of Daiwa Capital Markets India Private Limited or any of its non – US affiliates to effect trades in any securities and is not supplied with any understanding that US recipients will direct commission business to Daiwa Capital Markets India Private Limited.

Taiwan This research is distributed in Taiwan by Daiwa-Cathay Capital Markets Co., Ltd and it may only be distributed in Taiwan to institutional investors or specific investors who have signed recommendation contracts with Daiwa-Cathay Capital Markets Co., Ltd in accordance with the Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. Recipients of this research in Taiwan may contact Daiwa-Cathay Capital Markets Co., Ltd in respect of any matter arising from or in connection with the research.

Philippines This research is distributed in the Philippines by DBP-Daiwa Capital Markets Philippines, Inc. which is regulated by the Philippines Securities and Exchange Commission and the Philippines Stock Exchange, Inc. Recipients of this research in the Philippines may contact DBP-Daiwa Capital Markets Philippines, Inc. in respect of any matter arising from or in connection with the research. DBP-Daiwa Capital Markets Philippines, Inc. recommends that investors independently assess, with a professional advisor, the specific financial risks as well as the legal, regulatory, tax, accounting, and other consequences of a proposed transaction. DBP-Daiwa Capital Markets Philippines, Inc. may have positions or may be materially interested in the securities in any of the markets mentioned in the publication or may have performed other services for the issuers of such securities. For relevant securities and trading rules please visit SEC and PSE Link at http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf and http://www.pse.com.ph/ respectively.

- 5 -

United Kingdom This research report is produced by Daiwa Securities Capital Markets Co., Ltd and/or its affiliates and is distributed by Daiwa Capital Markets Europe Limited in the European Union, Iceland, Liechtenstein, Norway and Switzerland. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Services Authority (“FSA”) and is a member of the London Stock Exchange, Chi-X, Eurex and NYSE Liffe. Daiwa Capital Markets Europe Limited and its affiliates may, from time to time, to the extent permitted by law, participate or invest in other financing transactions with the issuers of the securities referred to herein (the “Securities”), perform services for or solicit business from such issuers, and/or have a position or effect transactions in the Securities or options thereof and/or may have acted as an underwriter during the past twelve months for the issuer of such securities. In addition, employees of Daiwa Capital Markets Europe Limited and its affiliates may have positions and effect transactions in such securities or options and may serve as Directors of such issuers. Daiwa Capital Markets Europe Limited may, to the extent permitted by applicable UK law and other applicable law or regulation, effect transactions in the Securities before this material is published to recipients.

This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FSA 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.

Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. Our conflict management policy is available at http://www.uk.daiwacm.com/about-us/corporate-governance-and-regulatory. Regulatory disclosures of investment banking relationships are available at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

United States This report is distributed in the U.S. by Daiwa Capital Markets America Inc. (DCMA). It may not be accurate or complete and should not be relied upon as such. It reflects the preparer’s views at the time of its preparation, but may not reflect events occurring after its preparation; nor does it reflect DCMA’s views at any time. Neither DCMA nor the preparer has any obligation to update this report or to continue to prepare research on this subject. This report is not an offer to sell or the solicitation of any offer to buy securities. Unless this report says otherwise, any recommendation it makes is risky and appropriate only for sophisticated speculative investors able to incur significant losses. Readers should consult their financial advisors to determine whether any such recommendation is consistent with their own investment objectives, financial situation and needs. This report does not recommend to U.S. recipients the use of any of DCMA’s non-U.S. affiliates to effect trades in any security and is not supplied with any understanding that U.S. recipients of this report will direct commission business to such non-U.S. entities. Unless applicable law permits otherwise, non-U.S. customers wishing to effect a transaction in any securities referenced in this material should contact a Daiwa entity in their local jurisdiction. Most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as a process for doing so. As a result, the securities discussed in this report may not be eligible for sales in some jurisdictions. Customers wishing to obtain further information about this report should contact DCMA: Daiwa Capital Markets America Inc., Financial Square, 32 Old Slip, New York, New York 10005 (telephone 212-612-7000).

Ownership of Securities For “Ownership of Securities” information please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Investment Banking Relationships For “Investment Banking Relationships” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

DCMA Market Making For “DCMA Market Making” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

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 analysts[s] is named on the report); and no part of the compensation of such analyst(s) (or no part of the compensation of the firm if no individual analyst[s)] 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, 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 six months. "2": the security is expected to outperform the local index by 5-15% over the next six months. "3": the security is expected to perform within 5% of the local index (better or worse) over the next six months. "4": the security is expected to underperform the local index by 5-15% over the next six months. "5": the security could underperform the local index by more than 15% over the next six months.

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, Financial Futures Association of Japan Japan Securities Investment Advisers Association Type II Financial Instruments Firms Association

- 6 -