MAYBANK KIM ENG RESEARCHSEE PAGE 77 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS 2We are ASEAN2015 is set to be a watershed year as we enter the ASEAN Economic Community (AEC). To position for this, we are holding a series of conferences around the region. Our chief aim is to bring together the best companies, the top investors and infuential public offcials. We also engaged our research team to offer their insights on the opportunities that lie ahead in our AEC journey. This frst report sets the stage and is designed to both challenge and focus our thinking on the big picture as well as on key sectors.At Maybank Kim Eng, we continue to invest in research as we believe regional integration is the opportunity to adapt and grow. We intend to bring the best ASEAN growth ideas to the world.We believe in our shared ASEAN identity and look forward to exciting times ahead.Ami MorisRegional Head of EquitiesJohn ChongCEO3Thinking ASEANThe idea behind this chart book is to explore a few narratives as the AEC offers the opportunity for regional, rather than just country, growth. From a macro perspective, the region as a whole could be at an infection point given existing proftability, demographics and balance sheets.Yes, the infrastructure spending bill is large. There are, however, clear signs of catch-up by the less developed ASEAN countries in infrastructure, education and importantly, connectivity. We think connectivity and high education is a powerful cocktail for many sectors. It allows companies from the more developed markets to reach new consumers, and for less developed countries to beneft from technology leaps. In sum, it is about inclusion and that accelerates growth. From a practical standpoint, it implies that companies need a technology driven strategy. This is consistent with our fndings: the bulk of private equity fund raising in ASEAN has been consumer and technology based. Companies are already thinking regional.One of the most exciting trends is the emergence of a new generation of educated, employed and confdent ASEAN women who have a greater say in household fnances. We think this is a big theme. And it is here, now. A disappointing trend has been rising non-tariff barriers through much of the region. Change can be diffcult and as with opportunities, there is also competition. But governments need to be committed and companies must adapt. Further out, we suspect technology will continue to lower barriers. We are very thankful to those who have been helpful with discussions, their time and data, including McKinsey Global Institute, MasterCard International and J. Walter Thompson.Sadiq CurrimbhoyGlobal Strategist Willie ChanRegional StrategistSuhaimi IliasChief Economist41.2.3.4.5.6.Our Six Favourite ChartsThe six charts in this report we found most thought-provoking with typically multiple-sector implications:ASEANs capital investment cycle suggests we could be at a major infection point (Chart 1, page 9)ASEAN Prime Savers ratio a rising percentage of savers forecasted over the next two decades implies a big increase in the pool of investible capital (Chart 4, page 15)Assessment by sector of where there has been greatest progress on integration and where there is greatest potential impact, by McKinsey Global Institute (Chart 6, page 19)M-Commerce, the new way to buy. More ASEAN consumers use their mobile phones to purchase, even in countries where mobile broadband penetration rates are low (Chart 18, page 43)Women in ASEAN: The majority of women surveyed feel they have a say in fnancial matters at home and this empowerment measure correlates strongly to confdence (Chart 24, page 55)Rising non-tariff barriers: a sobering reminder of the work still ahead (Chart 28, page 63)56Charting ASEANThe case for an infection point in ASEANs capex cycle given where we are, proftability, leverage ratios and demographicsSectors with the greatest potential as integration increases, and where Private Equity and M&A money is goingTwo charts on the potential of mobile technology on Banking and Insurance Needs remain signifcant (housing included). Other logistics based indicators show marked improvements in recent years Digital Evolution Index and getting ready for the E-consumer & the ads ASEAN consumers likeMore educated, employed, empowered and confdentTwo charts on urbanization, airports and tourismRise in non-tariff barriers, bilateral trade agreements rather than multilateral, taxes, pollution and corruptionThe NAFTA ExperienceAppendix# Macro# Sector Opportunities# Financial Inclusion# Infrastructure Catch Up# M-Consumer & Digital ASEAN# ASEAN Women# Urbanization and Connectivity# Risks# Exclamation PointIIIIIIIVVVIVIIVIIIIX8.16.26.30.38.50.56.60.72.74.78When seen as one region, ASEANs capital expenditure as a share of GDP has only been gradually increasing. A rising share simply means that capex is driving growth. The potential going forward is for an acceleration as free trade kick starts new capital investment.While no comparison is perfect, an example is what happened in China following its WTO entry in 2001. As the chart shows, what was a gradual rise of capex as a share of GDP became an acceleration for the rest of the decade. China is now arguably over-invested.For ASEAN, the potential is if the region gets it right, we could see an infection point when capex drives growth.For investors in Asia, there is arguably a clear divergence: Chinas decelerating capex cycle and ASEANs accelerating capex cycle. I: The Opportunity: CAPEX Infection Point# 9The potential of AEC is capex driving growth over a multi-year periodSource: CEIC, Maybank Kim Eng ResearchChart 1: ASEANs Capex Cycle Compared to ChinasChinas capex acceleration in the last decade was arguably helped by its WTO entry in 2001. China now is arguably over-invested.For the AEC, the elimination of trade barriers has the potential to start a capex acceleration in under-invested ASEAN.10 15 20 25 30 35 40 45 50 85878991939597990103050709111315F (%) ASEAN 6 Capex share of GDP (%) China Capex Share of GDP (%) 10Rather than macro growth numbers, we looked at aggregated company operating margins. We used all the non-fnancials listed in the main indices together with companies that are also covered by Maybank Kim Eng equity analysts.The results show that operating margins for ASEAN non-fnancials have been consistently high. And for the consumer sector, they have been very stable as well. This is in contrast to the operating margins of Chinese companies, which again indicate little pricing power and are consistent with excess capacity. Our suspicion is if the margin series show higher returns even before going into the AEC, a move to freer markets could see even better margins, and consequently, more capital attracted to the region. I. Will Better Margins Attract Capital?# 11Source: FactSet, Maybank Kim Eng ResearchOperating margins for ASEAN companies have been consistently high and for the consumer sector, very stableChinese margins have been low and we shall see if the 2014 expected pick up happens given the overcapacity.In contrast, AEC has the potential to boost margins in the coming years for ASEAN companies.Chart 2: ASEAN Operating Margins 0% 2% 4% 6% 8% 10% 12% 14% 16% 200320042005200620072008200920102011201220132014E ASEAN Operating Margins (%) China Operating Margins (%) ASEAN Consumer Operating Margins (%) 12The ability to fund capex relies on both favourable demographics and under-leveraged balance sheets. The table shows the debt to GDP for the non-fnancial corporate sector and the public sector together with the aggregate debt to GDP. While there is much debate about the sustainability of debt ratios, we suspect that an aggregate debt to GDP of over 250% or so may be diffcult to sustain, particularly for emerging markets. Indeed, there is great discussion over whether Chinas number is nearer 250%. Under the aggregate debt to GDP measure, while Singapore and Malaysia, and less so Thailand are approaching levels of concern, the other economies are not. On average, the region is under-leveraged. I: And Leverage Lower# 13ASEAN is under-leveraged, particularly Indonesia, the Philippines and Vietnam. Both of ASEANs capex and credit cycles have capacity to accelerateSource: Deleveraging? What Deleveraging?, by Luigi Buttiglione, Philip R. Lane, Lucrezia Reichlin and Vincent Reinhart, International Center for Monetary and Banking Studies, September 2014, CEIC, World Bank, Maybank Kim Eng ResearchWe suspect that an aggregate debt to GDP of 250% is high enough for an emerging market.The developed markets may be struggling for growth given aggregate debt burdens.Chart 3: Debt to GDP by Sector, 2013% of GDP Total Private Sector Debt to GDP Total Government Debt to GDP Total Debt to GDP Japan168243411 US160105264 Eurozone16493257 China16849217 Indonesia552277 India6867135 Cambodia54n/an/a Malaysia17053223 Philippines445397 Singapore129105234 Thailand18132213 Vietnam11049159 14We selected three demographic indicators that are typically useful for anticipating stock-market performance and government expenditure on health, social security and education. Prime Savers is calculated as the ratio of those aged between 40-60 to the total population. This cohort would typically save for retirement and therefore constitute a pool of capital. ASEANs Prime Savers Ratio is forecast to continue to rise. The mid-young ratio looks at those aged 40-49 divided by those aged 20-29. A rising ratio would indicate the population has relatively more higher earners. The dependency group, those aged between 0-14 and over 65 to the total population is also rising, but at a very slow pace, indicating less pressure on government and household fnances. For 2010-30E, the rising trend of the Prime Savers and mid-young ratios in ASEAN economies has the potential to beneft growth and fnancial market performance.I: And Prime Savers Ratio Rising# 15ASEAN demographic positives include an expected surge in the Prime Savers Ratio, helping to fund future capexA potentially great demographic combination for the ASEAN for the coming decade or so: surging 40-60 year olds (savers), rising20-40 year olds (earners), and an almost fat dependency ratio.Source: UN Population Database, Maybank Kim Eng ResearchChart 4: Demographics Trend in ASEAN 30 80 130 180 230 280 10 12 14 16 18 20 22 24 26 28 19501960197019801990200020102020F2030F2040F2050F (%)(%) Prime savers ratioDependency ratio (RHS)Mid-young ratio (RHS) 16McKinsey Global Institute (MGI) suggests three potential drivers of returns for ASEAN companies, governments and investors: namely, globalization, urbanization and the deployment of disruptive technologies. Each is already a force, but could further signifcantly add to growth, as shown in the chart, taken from MGIs November 2014 report: South East Asia at the crossroads: Three Paths to Prosperity. Each force has both positive and negative impacts and requires adapting to the new environment. There is therefore a range of possible outcomes, dependent on the desire and initiative of both the private and public sectors to embrace change. Achieving the lower end of these targets we think would be disappointing. II: McKinseys Three Paths to Prosperity# 17These forces are already in place so opportunity + competition. Adapting to the changing environment suggests signifcant upside potentialSource: McKinsey Global Institute analysis. Taken from South East Asia at the crossroads: Three paths to prosperity, November 2014. Reproduced with permission by Maybank Kim Eng ResearchChart 5: MGIs Three Paths to Prosperity for South East Asia18On a sector basis, a chart from MGIs report also compares the potential benefts from integration with the progress on integration thus far. In general, integration is more entrenched in the goods sectors. In particular, the auto, consumer and technology sectors stand out. In mining and agriculture, the potential for the rollover of the super-cycle in commodities suggests a shift to consolidation themes. In services, progress on integration has been lagging. But there are opportunities, particularly in the fnancial sectors. This will arguably require the public and private sectors to work together to help with the mobilization and deployment of savings through the region. II: Sector Opportunities# 191 2013 sector GDP for Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. Tourism and e-ASEAN not included due to lack of available data. Agriculture-based sectors include fsheries.Source: Expert interviews; IHS; McKinsey Global Institute analysis. Taken from South East Asia at the crossroads: Three paths to prosperity November 2014. Reproduced with permission by Maybank Kim Eng ResearchSectors that stand out where there is further potential include auto, electronics and consumer goods. Financial services is an area where progress has been slow but potential benefts are substantialChart 6: MGIs Estimate of the Impact of Integration on Sectors20Private equity money has also been rapidly rising in the region, albeit from low levels. Capital raising for start-up investments more than tripled from USD3.2b in 2013 to USD10.6b last year. The bulk of the investments are in the tech and consumer spaces. Even in the consumer space, internet is driving investments. The sector distribution we suspect means that many of the businesses are scalable. Effectively, companies are building online and tech-based strategies as the economies become more digitized. And companies are already beginning to Think ASEAN.II: Private Equity Accelerating# 21Source: Techlist, Maybank Kim Eng ResearchPrivate equity investments are going into the technology and consumer sectors likely scalable as ASEAN opens upTotal ASEAN start-up investments in 2014 was three times that of 2013. The high-tech and consumer driven capital raised would suggest scalable investments.Chart 7: Private Equity Funding in ASEAN0500100015002000250030003500400045005000 Music & Entertainment Health Care Search & Discovery Gaming Cloud Computing General Software Ad Tech Big Data Social Networking Media Enterprise Solution Education Real Estate Travel Finance Lifestyle General Internet Hardware Consumer Internet E-Commerce Funding (US$mn) -2013 Funding (US$mn) -2014 22Merger and Acquisitions (M&A) have risen in recent years in the lead up to the launch of the AEC. We think total M&A is a better refection given the changing opportunities in the region. In the fve years prior to 2007, M&A, both within and outside the region, averaged USD23b a year. In the fve years to 2014, it averaged USD47b, slightly more than double. The sector composition is perhaps not too surprising, in that its dominated by the fnancials and consumer, particularly non-cyclical, sectors. The former arguably faces more regulatory scrutiny, but we reckon the consumer segment is set to continue to be a focus. II: Sector Distribution M&A# 23The consumer and fnancial sectors have seen the lions share of M&A in the region.Source: Bloomberg, Maybank Kim Eng ResearchM&A in the region has been dominated by the fnancials and consumer sectors.It will be interesting to see whether there will be greater M&A in the resources sector as the commodity cycle rolls over.Chart 8: Consumer and Financials Dominate Regional M&A0.010.020.030.040.050.060.070.080.090.0100.02008200920102011201220132014 Others Industrial Financial Energy and Utilities Diversified Consumer Communications & Technology Basic Materials %24At the company level too, using foreign direct investment (FDI) data, there are signs that investment share is turning regional. The chart shows the share of FDI that stays within the ASEAN region. In recent years, there has been a steady rise and one-ffth of all FDI is now inter-ASEAN. We had thought that 20% was a little low but then considering that many corporations have been looking to North and South Asia, and even to developed markets, that may not be too surprising. II: Intra-Regional FDI share rising# 25Source: ASEAN Secretariat, CEIC, Maybank Kim Eng ResearchCompanies in ASEAN are increasingly investing within the regionA bigger share of FDI is fnding opportunities within the ASEAN region.Chart 9: The Rising Trend of Intra-ASEAN FDI5.6 12.5 22.0 10.9 8.1 10.4 13.4 12.4 20.1 9.6 13.9 15.1 15.6 18.1 21.7 05101520252000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 26The relative under-leverage of the economies was shown on page 11. That offers opportunities for fnancials.A lot of the ASEAN region also continues to show low levels of fnancial inclusion. For example, less than 50% of adults in many countries have a formal bank account. With the development of technology, mobile banking strategies suggest we could see this improve sharply if banks start to offer customers the ability to use their phones for basic banking services and payments. As the savings profle changes, and fnancial inclusion improves, the potential appears greatest in Vietnam, Cambodia, Indonesia, Laos and even the Philippines. It will also be interesting to see the development of Islamic banking in markets such as Indonesia, where formal banking is relatively under-penetrated. III: Financial Inclusion# 27Source: World Bank Financial Inclusion Data, Maybank Kim Eng ResearchAn under-penetrated formal banking sector + demographics + mobile technology offer big upside for fnancials in Indonesia, Laos, the Philippines, Vietnam and Cambodia Chart 10: Formal Bank AccountsAustralia Bangladesh Cambodia China Hong Kong India Indonesia Japan Korea Laos Malaysia Mongolia Pakistan Philippines Singapore Sri Lanka Thailand Vietnam UK US 0 20 40 60 80 100 120 01000020000300004000050000600007000080000 GDP per capita, PPP, 2011 Adults with account at a formal financial institutional in 2011 (%) 28The insurance industry remains under-developed in many ASEAN countries. The contrast to developed North Asia is immense, as shown in the chart. As technology and markets deepen, the development of different products that mobilize savings suggests potentially signifcant upside to even the more developed of the ASEAN markets.III: Getting Insurance# 29Source: Swiss Re Sigma No 3/2014. Selected data published with permission granted to Maybank Kim Eng ResearchInsurance is another mobilizer of savings with technology and new products offering potential upside in the more developed ASEAN nations as wellThe scope for insurance growth also appears great, and in the more developed part of ASEAN as well.Chart 11: Insurance Penetration as a % of GDP0 2 4 6 8 10 12 14 16 Hong KongSouth KoreaJapanSingaporeThailandMalaysiaIndiaChinaIndonesiaPhilippinesVietnam Non-LifeLife 30There are various estimates for infrastructure needs for the ASEAN economies and MGIs estimate is that USD7t will be needed between 2014 and 2030.This is based on the need to get infrastructure stock to GDP to the 70% range. In many countries, this will require spending multiples on what has historically been spent. Given strong urbanization and demographic trends, such spending will need to occur to prevent growth from being curtailed by infrastructure bottlenecks. This spending estimate includes development of the housing stock, where in many ASEAN countries, a large share of the urban population is in substandard housing. Affordable housing could be an important theme in the region. IV. Infrastructure Needs# 31To achieve high levels of growth, ASEAN countries will need to prioritize infrastructure. Residential real estate is a potentially powerful themeSource: McKinsey Global Institute analysis. Taken from South East Asia at the crossroads: Three paths to prosperity November 2014. Reproduced with permission by Maybank Kim Eng ResearchChart 12: MGI Estimates of the Required Infrastructure and Real Estate Investment, USD trillion32While the infrastructure bill is large, there have been improvements. One way to measure this is by looking at logistics data. This data captures the effciency of customs clearance processes, the quality of infrastructure, shipment arrangement & services, ability to trace goods, and delivery within the scheduled time. The vertical axis on the chart shows the measure of Logistics Performance in 2014. The horizontal access shows the change in this performance over the past seven years. We chose seven years to capture the logistics development after the global fnancial crisis.Countries in the top-right corner will show those with strong logistics that have recently been upgraded. For ASEAN, while the levels are low, the Philippines, Cambodia and Vietnam have started to improve logistics performance signifcantly and are catching up. IV. Logistics Development# 33Source: World Bank, Maybank Kim Eng ResearchASEAN logistics performance is catching up with signifcant improvements in recent years in the Philippines, Vietnam and Cambodia. The top right hand of this chart is where you want to be strong logistics performance and rapid improvements in recent years.Chart 13: Logistics Performance Against Improvement since 2007Bangladesh Laos Sri Lanka Mongolia Cambodia Philippines Pakistan India Indonesia Vietnam Thailand MalaysiaChina Korea Hong Kong Australia Japan UK US Singapore 2 2.5 3 3.5 4 4.5 -0.3-0.2-0.100.10.20.30.4 Improvement of logistics performance index from 2007-2014 Logistics performance index in 2014 34The quality of port infrastructure is one component of the logistics performance indicator. The chart shows that the greatest improvements have been in Indonesia and Vietnam. There is still some way to go to reach the developed economies but the improvement in recent years has been impressive. In some countries, such as Thailand, there has been a decline in port infrastructure quality, illustrating the need for continued investment. IV. Quality of Port Infrastructure# 35The biggest improvements in port infrastructure in recent years has been Indonesia, Vietnam and the PhilippinesSource: World Bank, Maybank Kim Eng ResearchThe top right is where you want to be. The bulk of Asia has yet to take that leap up to the developed economy countries but are getting closer.And fast.Chart 14: Quality of Port Infrastructure and Change since 2007Thailand Japan Korea Malaysia, US Singapore Hong Kong Sri Lanka UK Cambodia India China Philippines Pakistan Vietnam Australia Indonesia Bangladesh 0 1 2 3 4 5 6 7 8 -0.4-0.200.20.40.60.811.21.4 The improvement of port infrastructure quality score from 2007-2014 Quality of port infrastructure in 2014 36There has been a rapid electrifcation of the ASEAN countries. As the chart to the right shows, many countries are over 80%, with the exception of Laos and Cambodia. The data source is the World Bank and we do not have data for Myanmar. Even then, Laos increased electricity access for a ffth of its total population from 2000 to 2010, based on the latest available data. IV. Access to Electricity # 37Electricity is broadly connected to most of the ASEAN households. Laos and Cambodias levels are low but increasing rapidlySource: World Bank, Maybank Kim Eng ResearchIn most of ASEAN, electricity access is no longer an issue. Where there is, we have seen big increases in electrifcation in recent years.Chart 15: Electricity and Change in Access from 2000 to 2010Bangladesh Cambodia China India Indonesia Japan, UK,Aus, HK, US, Singapore Korea Laos Malaysia Mongolia Pakistan Philippines Sri Lanka Thailand Vietnam 20 30 40 50 60 70 80 90 100 110 0510152025 Change of access to electricity as % of population from 2000 to 2010 (% pts) Access to electricity as % of population in 2010(%) 38To understand the extent to which the economies are prepared for the digital economy, we looked at the Digital Evolution Index. This Index was built by Tufts University in collaboration with MasterCard Worldwide and DataCash. The index tries to capture the drivers and barriers for this evolution looking at demand, supply, institutional environment and innovation.Like some of the other charts, higher up the vertical line is where you want to be. But if you are not, then you want to be on the right hand side, showing signifcant improvement in recent years.The bulk of Asia is either high up or in the North East part of the chart. This underscores the e-commerce potential of ASEAN. V: Digitalization of ASEAN# 39Source: Digital Planet Report, Tufts University, Maybank Kim Eng ResearchCountries higher up are better prepared for e-commerce. Those in the North East are the ones catching up fast and that is where many ASEAN countries are. The ASEAN countries are increasingly prepared for e-commerce with Singapore leading the way. Vietnam, the Philippines and Thailand are moving faster than Indonesia on this metric! Chart 16: Getting Ready for the e-consumerSingapore Sweden Hong Kong UK Switzerland US Finland Canada S. Korea Netherlands Denmark AustraliaGermany New Zealand Japan France Malaysia Estonia China Turkey Saudi Arabia South AfricaBrazil Thailand MexicoRussia India Vietnam Indonesia PhilippinesEgypt Kenya Nigeria 0 10 20 30 40 50 60 -8-6-4-20246810 Change of Digital Evolution index between 2008-2013 Digital Evolution Index 2013 vs the changes between now & 2008 40With the high costs of fxed line installation, the development of broadband is occurring via mobile. This is an example of a technology (fxed line) that could very well get mostly bypassed by mobile data as companies increase connectivity.The iPhone 3G was announced in 2008. It used a 3G network and it was able to transfer a lot more data for actual applications. Since then, the demand for smartphones and mobile broadband have increased exponentially.The chart shows that connectivity is still relatively low in ASEAN but on a per capita basis, mobile connectivity is higher than fxed-line connections for a number of countries. V: Broadband Mobile # 41Source: Think with Google - Our Mobile Planet Tool, World Bank, Maybank Kim Eng ResearchMobile broadband is driving electronic connectivity in ASEAN.The smartphone penetration rate in Thailand, Malaysia and the Philippines is already over 30%. In Singapore, its nearly 90%Chart 17: Smartphone Penetration Rate v Fixed Line Penetration RateAustralia China Hong Kong India Indonesia Japan Korea Malaysia Philippines Singapore Thailand Vietnam UK US - 10 20 30 40 50 60 70 80 900510152025303540 Fixed broadband peneration rate per capita in 2013 (%) Smartphone penetration rate in 2013 (%) 42M-commerce is the next-generation of e-commerce and enables users to access the internet without needing to fnd a place to plug-in. The industries affected by m-commerce include: fnancial & information services, retail and marketing. Smartphones are changing the retail landscape. They help shoppers to do research, compare and purchase products not just online but also in-store. Many ASEAN countries smartphone penetration rates are not as high as in developed countries. However, the percentage of users who made purchases via their smartphones are much higher than other countries with higher smartphone penetration rates. V: M-Commerce# 43Source: Think with Google - Our Mobile Planet Tool, World Bank, Maybank Kim Eng ResearchMany ASEAN consumers shop with their smartphones even though penetration rates are lowerCountries higher up are those where more smartphone users shop with their phones. Many ASEAN countries are in there even though their smartphone penetration rates are lower than developed markets.Chart 18: Smartphone Development and e-paymentsAustralia China Hong Kong India Indonesia Japan Korea Malaysia Philippines Singapore Taiwan Thailand UK US Vietnam 30 35 40 45 50 55 60 65 70 75 0102030405060708090 Smartphone peneration rate (%) Smartphone users made purchase via their phone (%) 44With how to build an ASEAN brand in mind, J Walter Thompson Asia Pacifcs ASEAN Consumers and the AEC is a particularly interesting report.One of their fndings was that many ASEAN consumers felt it was our time. Nearly 60% felt ASEAN was on precipice of a new era. In addition, they also conducted a survey on the types of advertising ASEAN consumers responded positively to as companies try to build a regional brand. One of the fndings is reproduced in the chart: consumers across the region responded best to ads with humour. And less so with celebrities and expert endorsers.V: Building an ASEAN BrandReach Out with Laughter# 45Source: ASEAN Consumers and the AEC by J. Walter Thompson Asia Pacifc, reproduced with permission by Maybank Kim Eng ResearchBuilding an ASEAN brand requires thinking ASEAN, fnding common threads and a regional identityWith mobile broadband, more ads will be seen. Common threads for ASEAN consumer is their love for ads with humour.Chart 19: Adverts that are Most Preferred0 10 20 30 40 50 60 IndonesiaMalaysiaPhilippines Singapore Thailand Vietnam With Humour/ Comedy That demonstrate the product or service That tell a story Slice of life advertising depicting mundane everyday life That are tearjerkers/heartwarming That are musical With expert endorsements With celebrities 46This link may be spurious: an increase in internet use and an increase in R&D as a percent of GDP.But we are happy to go with it: put educated people together and connect them, the impact is likely to be very positive. We feel that is why Frontier Markets are exciting: their growth we think will be accelerated as connectivity gives access to ideas that allow a leap frogging over technologies (e.g. straight to mobile broadband and e-banking). And this is before 3-D printing begins. And the real benefts of online education kicks in. V: Technology Driving Innovation?# 47The past 10 years has seen multiple increases in internet users throughout the region. And signifcant increases in R&D too.Education + Connectivity = Innovation. Malaysia and Thailand seeing greatest increases in R&D spend as a % of GDPSource: World Bank, Maybank Kim Eng ResearchChart 20: Connectivity and R&DAustralia China Hong Kong India Japan Korea Malaysia Mongolia Singapore Thailand UK US 0 1 2 3 4 5 6 7 8 9 10 0.51.01.52.02.5 Ratio of R&D expenditure as % of GDP between now & 10 yrs ago (x)Ratio of internet users (per 100 ppl) between now & 10 yrs ago(x)48With the rapid digitization of the economies, unsurprisingly, many of the entrepreneurs are young. The chart shows the age profles of those behind new start-ups, gathered from the Global Entrepreneurship Monitor. In Asia, 9% of 18-24 year olds will launch a start-up and 16% of 25-34 year olds. That compares favourably with North America and far ahead of Europe.While this data is all of Asia, we feel intuitively the picture is not far from what is happening in ASEAN.V: Asias Entrepreneurs by Age# 49Source: Global Entrepreneurship Monitor 2013 report, Maybank Kim Eng ResearchEntrepreneurs in Asia start young, similar to those in North America. This links in with the increased private equity fow into technologyIn Asia and the US, a great percent of the young will launch a start-up.Chart 21: Early-stage entrepreneurial activity rates within age groups, by geographic regions9 8 11 16 11 15 14 9 14 12 7 1010 4 5 0 2 4 6 8 10 12 14 16 18 Asia Pacific & South Asia Europe - EU 28 North America (%) 18-24 years25-35 years 35-44 years45-54 years 55-64 years Asia Pacific & South AsiaEuropean EU 28North America 50ASEAN has typically high education and literacy rates (see Appendix on page 75). What has also been happening are big increases in secondary and tertiary education enrollment rates. One of the most exciting trends has been the signifcant increase in female enrollment in secondary and tertiary education. The chart shows, in percentage point terms, that over the past decade, female secondary school enrollment has typically outpaced male enrollment.And in some places, this increase has been dramatic. In Indonesia, for example, 83% of the female cohort who can attend secondary school did so in 2012, compared to 58% in 2002. VI: ASEAN Women & Education# 51One exciting trend has been the sharp increase in women attending secondary school and then onto university. In ASEAN, this is being led by Indonesia, Thailand and MyanmarSource: UNESCO, Maybank Kim Eng ResearchThe y-axis shows the increase in the eligible female cohort going to secondary school.The broad rise in Asian education trends has been driven by more females attending secondary school.Chart 22: Education Statistics Driven by more Female EnrollmentChina HK Macau Germany India Indonesia Japan Malaysia Mexico Mongolia Myanmar Nepal Pakistan Philippines Korea South Africa Thailand UK US East Asia & Pacific -10 -5 0 5 10 15 20 25 30 35 -10-505101520253035 Change in enrolment rate by males 2002-2012, % pts Change in enrolment rate by females 2002-2012, % pts 52With higher education, we also found that women labour participation rates are rising.While overall female participation rates have been stable, looking at the 25-44 year old group, the overall trend has been rising labour participation. One reason for this may be as more women are educated, they want to enter the workforce. Another could be that some of the social pressure to stay at home is diminishing.Poorer countries tend to have higher female participation rates but the chart also shows the example of the US over the past 50 years. The current level of female participation is similar to what we see in Hong Kong and Singapore. VI: ASEAN Women & Participation# 53Labour participation rates among younger ASEAN women is rising, with the likelihood that they are also better educated. Noticeable increases are in Singapore and Malaysia Source: International Labour Organization, Maybank Kim Eng ResearchFemale labour participation rates for the younger cohort of 25-44 year olds continue to broadly increase. The US example is instructive of how that rate can change over time.Chart 23: Participation Rate for 25-44 year olds20 30 40 50 60 70 80 90 100 1995 2005 2013 1995 2005 2013 1995 2005 2013 1995 2005 2013 1995 2005 2013 1995 2005 2013 1995 2005 2013 1995 2005 2013 1995 2005 2013 1995 2005 2013 1995 2005 2013 1995 2005 2013 1995 2005 2013 1995 2005 2013 1995 2005 2013 1960 1980 1998 2012 AustraliaCambodia China Hong Kong India Indonesia Japan Korea Laos MalaysiaMyanmar Philippines SingaporeThailand Vietnam US AustraliaCambodiaChinaHong KongIndiaIndonesiaJapanKoreaLaosMalaysiaMyanmarPhilippinesSingaporeThailandVietnamUS 54MasterCard recently launched its Index of Well-Being for Women 2014. They asked a series of questions to women in the region on how much say they had in household fnancial affairs, household non-fnancial affairs, work, satisfaction, safety, their personal well-being among others.We plotted two series in particular: One, whether women surveyed felt their opinions on fnancial matters in the household were valued and two, how they felt about their own fve-year outlook. There are many observations but well make two: One, well over 50% of women felt their opinion on household fnancial matters was valued (they had a voice). Second, the more women felt they had such a voice, the more optimistic about the future they were. Given the importance of confdence in consumer purchases, and rising women education and labour earnings, corporations need to focus on women-decision makers.VI: ASEAN Women & Empowerment = Confdence# 55Wed say educated, working, confdent women increasing in number throughout ASEAN could be the consumer segment to focus onSource: MasterCard, Maybank Kim Eng ResearchEasily more than 50% of women feel they have a valued say in household fnancial matters. And their response is positively correlated to their longer-term outlook.Chart 24: Survey on Opinion Importance and ConfdenceAustralia Bangladesh China HK India Indonesia Japan Malaysia Myanmar New Zealand Philippines Singapore South Korea Taiwan Thailand Vietnam 50 55 60 65 70 75 80 85 90 95 100 405060708090100 5 year Life Situation Expectation Valued Opinion on Household Financial Matters 56The good correlation between urbanization increases and growth has been well documented.We decided to take a different tack and look at urbanization increases together with increases in paved airports. The idea is as cities grow, are we also seeing greater connectivity? Naturally, this is not a perfect measure as places such as Singapore and Hong Kong will be limited. But the increase in Vietnam and, to an extent, Indonesia is consistent with the greater logistical improvements these nations have made in recent years. VII: Urbanization with Connectivity# 57Source: World Bank, Nationmaster, Maybank Kim Eng ResearchIndonesia and Vietnam have added airports as they have grown, increasing connectivityIn many countries, more urbanization has coincided with more airports, but not everywhere. Indonesia and Vietnam have led the way.Chart 25: Urbanization and the Growth in AirportsAustralia Bangladesh Cambodia China Hong Kong India Indonesia Japan Korea Laos Malaysia Mongolia Pakistan Philippines Singapore Sri Lanka Thailand Vietnam 0 10 20 30 40 50 60 -1001020304050607080 Change of airport #s (paved runways) from 2005-2013 (units) % change of urban population from 2005-2013 (%) 58A 2014 research report by the World Travel and Tourism Council (WTTC) found that ASEAN stands to gain between 6m to 10m additional international tourist arrivals by 2016 from improved visa facilitation. The chart to the right shows travel and tourism total contribution to GDP for Southeast Asia along with capital spending and business travel spending. We also included the forecasts from the World Tourism Organization. Unless there is a crisis, travel and tourism spending rarely declines. With AEC opening up, there is a possibility of further travel and tourism growth. Capital spending is forecast to rise from USD49b in 2013 to USD85b in 2019. VII: Business Travel Boom# 59Except for the Asian and global fnancial crises, travel and tourism has consistently added to GDP in ASEANSource: World Tourism Organization, Maybank Kim Eng ResearchThis is one of the few charts in this report where we have included forecasts, this time by the WTTC.Business travel and tourism spending is forecast to double from USD41b in 2009 to USD82b by 2016.Chart 26: Travel, Tourism and Investment0 100 200 300 400 500 600 0 20 40 60 80 100 120 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F 2020F Travel & Tourism Total Contribution to GDP (US$ bn) RHS Business Travel & Tourism Spending (US$ bn) Capital Investment (US$bn) 60The good news is that we are seeing the decline in tariff rates. The chart to the right shows this trend, a key part of the AEC.VIII: Average Tariff Rates Collapse# 61Source: ASEAN Tariff Database, Maybank Kim Eng ResearchCLMV represents Cambodia, Laos, Myanmar and Vietnam. The ASEAN 6 are Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand.The good news is that ASEAN tariff rates have indeed declinedChart 27: Intra-ASEAN average tariff rate, 2000-20130.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 20002001200220032004200520062007200820092010201120122013 percent ASEAN6ASEANCLMV 62The bad news is that countries are putting up non-tariff barriers. Examples of such barriers include ownership restrictions, requirements for domestic inputs, extended approval processes, customs charges, technical measures on products and price controls to name a few.Indonesia has added the most number of non-tariff barriers, but we are seeing sharp increases in the larger economies too, save the Philippines. Malaysia has the greatest increase in percentage terms. VIII: But Non-Tariff Barriers Rise# 63Source: Global Trade Alert, Maybank Kim Eng ResearchThe bad news is that non-tariff barriers are rising, slowing potential integration gains. Indonesia has added the most measures, with the strongest growth rate in MalaysiaIndonesia has added the most number of non-tariff barriers but Malaysias percentage increase has been the greatest.Chart 28: Non-Tariff Barriers in the ASEAN countries0 20 40 60 80 100 120 140 IndonesiaVietnamMalaysiaThailandSingaporePhilippines No. of measures 20122015 64Another potentially worrying trend is the development of visible groupings within the AECMalaysia and Singapores historical bilateral link has been strengthened by an improved political relationship and strategic initiatives, such as Iskandar Malaysia and the KL-Singapore high-speed rail link.Further north, Thailand, Cambodia, Laos, Vietnam and Myanmar, together with Chinas Yunnan and Guangxi-Zhuang Autonomous regions constitute the Greater Mekong Sub-region (GMS). The GMS is also trying to improve trade and infrastructure links between these countries. We held an investor conference in Bangkok this January together with the Stock Exchange of Thailand entitled Thailand: ASEANs Gateway to GMS.VIII: Bilateral Trade rather than the AEC?# 65Source:Maybank Kim Eng ResearchAnother risk is that governments fnd it easier to deal bi-laterally rather than multi-laterally, slowing the benefts of the AECChart 29: Is the AEC breaking up into sub-regions?Vietnam Cambodia Laos Thailand Myanmar Malaysia Singapore Indonesia Philippines 66One tool to gain advantage over other countries is via taxes. Governments can adjust taxes to attract investment capital. The chart to the right is from the World Bank Doing Business Report and shows income tax and total effective tax rates. The highest rates are in Myanmar, Vietnam and the Philippines at over 40%. The large economies of China and India have, on the surface, rates exceeding 60%. Cambodia, Laos and Thailand have the most competitive corporate tax rates. VIII: Taxes as a Competition Tool# 67Source: World Bank Doing Business Report, Maybank Kim Eng ResearchTax rates offer another tool for governments to attract capital: Singapore, Cambodia, Laos and Thailand have the lowest ratesChart 30: Tax Burdens VaryPayments (number per year) Time (hours per year) Profit tax (%) Labor tax and contributions (%) Other taxes (%) Total tax rate (% profit) Cambodia40173201121 China7261849765 Hong Kong SAR, China378185023 India3324325211662 Indonesia652541711331 Lao PDR35362176426 Malaysia131332216139 Myanmar311552502248 Philippines361932181443 Singapore582215118 Taiwan, China112211318334 Thailand22264204327 Vietnam328721724041 68Rising pollution could translate into much higher future healthcare costs and the high levels in mainland Chinese cities are a cause for concern.The chart on the right shows annual average levels of PM10 and PM2.5 ug/m3 from the World Health Organization.While the current levels in ASEAN capitals are not great, other cities have been able to grow strongly without it being a major issue. We dont see much sign anything is being done to curtail pollution. As such, it is set to be a longer-term risk for ASEAN rather than the nearer-term threat to other Asian countries.VIII: And Pollution is Lurking# 69Pollution is a long-term worry and unfortunately it may not improve anytime soon.Source: World Health Organization, Maybank Kim Eng ResearchPollution levels are not ideal, but its a bigger worry in India and China than it is in ASEANChart 31: Pollution Statistics by city5 17 17 20 21 21 22 22 27 28 30 36 56 45 9 27 36 38 45 48 49 49 58 64 69 79 121 136 020406080100120140160 Sydney Singapore Petaling Jaya Bangkok Hong Kong Jakarta Manila Seoul Ho Chi Minh Colombo Mandalay Shanghai Beijing Mumbai PM10 ug/m3PM 2.5 ug/m3 70Another worrisome aspect is that corruption remains an issue in the region. We used historical Transparency International ranking data, which we converted into percentiles. That is, the higher the percentile, the less corrupt the country. Singapore and Hong Kong are predictably those high up the list. With Cambodia, Laos and Myanmar showing lowest rankings, though we have seen improvement in the latter two. The Philippines has seen the greatest improvement in recent years while there has also been a recent decline in China. VIII: Corruption Remains An Issue# 71Greatest improvement from a ranking perspective is the Philippines, but improving trends in Laos and Myanmar. Source: Transparency International, Maybank Kim Eng ResearchCorruption undoubtedly remains an issue for the region. But we have seen improvements, particularly in the PhilippinesChart 32: Corruption Percentiles0 0.2 0.4 0.6 0.8 1 1.2 2004 Percentile 2009 Percentile 2014 Percentile AustraliaCambodiaChinaHong Kong IndiaIndonesiaJapanSouth Korea LaosMalaysiaMyanmarPhilippinesSingaporeTaiwanThailandUSAVietnam 72Our last chart looks at the impact of the North American Free Trade Agreement (NAFTA) from a US perspective in terms of trade and FDI fows since its formation in 1993. We reckoned NAFTA was a better point of comparison than the European Economic Community where there was an underlying desire to have a single currency. Within fve years, total trade had risen 66%, or at a 10.7% CAGR. FDI grew 9.5% CARR.Over the 20 years, the CAGR of total merchandise and services trade was 6.9%. Over the same period, the compound annual growth rates of FDI was 8.9%. IX: Exclamation Point: If ASEAN Gets It Right# 73Source: Congressional Research Service, Nafta at 20: Overview and Trade Effects, M. Angeles Villarreal and Ian F. Fergusson, April 2014, Maybank Kim Eng ResearchIn the frst 10 years of NAFTA, total merchandise trade rose 109% and intra-regional FDI rose 176%We thought NAFTA might be a better comparison for the AEC given the economies continue to have separate exchange rates. Chart 33: The NAFTA case study0 200 400 600 800 1000 1200 1400 19931998200320082013 Total Merchandise and Services Trade, US$bn Total FDI, US$ bn 74Appendix75Source: Bloomberg, IMF, Worldbank, CIA Factbook, UNESCO, MayBank Kim Eng*Singapore secondary and tertiary enrollment rate is based on net enrollment rate %CambodiaIndonesiaLaosMalaysiaMyanmarPhilippinesSingaporeThailandVietnam GDP, US$ bn189151337674330320397207 GDP, per capita (US$) 1,1813,5871,82412,1271,4203,25658,1855,7722,234GDP, per capita PPP 3,53410,7595,35725,8335,2087,41284,82115,3205,983GDP Growth 20147.25.17.45.88.56.12.80.76.0 GDP Growth 2015 (%)7.35.57.24.58.57.03.04.06.2 Inflation 20144.56.45.53.26.64.21.21.91.8 Inflation 20153.57.35.34.06.33.51.02.34.8 Current Account, % of GDP(7.7)(2.5)(21.2)3.5(5.1)2.8 19.0 0.3 5.3FX Rate, end 2014 4,07312,3888,0993.51,03344.71.332.921,388Savings Rate (%)1.21.83.11.19.00.70.10.85.8 Population (mn) 162557315310166991Median Age242922282824343629 Literacy Rate (%)749373939395969494 Secondary School Enrollment, male (%)498150684981528574 Secondary School Enrollment, female (%)418443665188488981 Tertiary School Enrollment, male (%)203118331225514424 Tertiary School Enrollment, female (%)123215391631495925 Macro Forecast TableOur Research TeamREGIONAL WONG Chew Hann, CARegional Head of Institutional Research(603) 2297 8686 wchewh@maybank-ib.com ONG Seng YeowRegional Head of Retail Research(65) 6432 1453ongsengyeow@maybank-ke.com.sg Alexander GARTHOFFInstitutional Product Manager(852) 2268 0638alexgarthoff@kimeng.com.hk ECONOMICS Suhaimi ILIASChief EconomistSingapore | Malaysia(603) 2297 8682suhaimi_ilias@maybank-ib.com Luz LORENZOPhilippines(63) 2 849 8836luz_lorenzo@maybank-atrke.com Tim LEELAHAPHANThailand(66) 2658 6300 ext 1420tim.l@maybank-ke.co.th JUNIMANChief Economist, BIIIndonesia(62) 21 29228888 ext 29682Juniman@bankbii.com STRATEGY Sadiq CURRIMBHOYGlobal Strategist(65) 6231 5836sadiq@maybank-ke.com.sg Willie CHANHong Kong / Regional(852) 2268 0631williechan@kimeng.com.hkMALAYSIA WONG Chew Hann, CA Head of Research(603) 2297 8686 wchewh@maybank-ib.com Strategy Construction & Infra-structure Desmond CHNG, ACA(603) 2297 8680desmond.chng@maybank-ib.com Banking & Finance LIAW Thong Jung(603) 2297 8688 tjliaw@maybank-ib.com Oil & Gas - Regional Shipping ONG Chee Ting, CA(603) 2297 8678 ct.ong@maybank-ib.com Plantations - Regional Mohshin AZIZ(603) 2297 8692 mohshin.aziz@maybank-ib.com Aviation - Regional Petrochem YIN Shao Yang, CPA(603) 2297 8916 samuel.y@maybank-ib.com Gaming Regional Media TAN Chi Wei, CFA(603) 2297 8690chiwei.t@maybank-ib.com Power Telcos WONG Wei Sum, CFA(603) 2297 8679 weisum@maybank-ib.com Property & REITs LEE Yen Ling(603) 2297 8691 lee.yl@maybank-ib.com Building Materials Glove Producers CHAI Li Shin, CFA(603) 2297 8684 lishin.c@maybank-ib.com Plantation Construction & Infra-structure Ivan YAP(603) 2297 8612ivan.yap@maybank-ib.com Automotive Kevin WONG(603) 2082 6824 kevin.wong@maybank-ib.com REITs LEE Cheng Hooi Regional Chartist(603) 2297 8694 chenghooi.lee@maybank-ib.com Tee Sze Chiah Head of Retail Research(603) 2297 6858szechiah.t@maybank-ib.comHONG KONG / CHINA Howard WONG Head of Research(852) 2268 0648 howardwong@kimeng.com.hk Oil & Gas Regional Alexander LATZER(852) 2268 0647 alexanderlatzer@kimeng.com.hk Metals & Mining Regional Jacqueline KO, CFA(852) 2268 0633 jacquelineko@kimeng.com.hk Consumer Staples & DurablesKa Leong LO, CFA(852) 2268 0630 kllo@kimeng.com.hk Consumer Discretionary & Auto Benjamin HO(852) 2268 0632 benjaminho@kimeng.com.hk Consumer & Auto Karen KWAN(852) 2268 0640 karenkwan@kimeng.com.hk Property & REITs Osbert TANG, CFA(86) 21 5096 8370osberttang@kimeng.com.hk Transport & IndustrialsOsbert TANG, CFA(86) 21 5096 8370osberttang@kimeng.com.hk Transport & Industrials Ricky WK NG, CFA(852) 2268 0689 rickyng@kimeng.com.hk Utilities & Renewable Energy Steven ST CHAN(852) 2268 0645 stevenchan@kimeng.com.hk Banking & Financials - Regional Warren LAU(852) 2268 0644 warrenlau@kimeng.com.hk Technology Regional Mitchell KIM(852) 2268 0634 mitchellkim@kimeng.com.hk Internet TelcosINDIA Jigar SHAH Head of Research(91) 22 6632 2632jigar@maybank-ke.co.in Oil & Gas Automobile Cement Anubhav GUPTA(91) 22 6623 2605anubhav@maybank-ke.co.in Metal & Mining Capital Goods Property Urmil SHAH(91) 22 6623 2606 urmil@maybank-ke.co.in Technology Media Vishal MODI(91) 22 6623 2607vishal@maybank-ke.co.in Banking & Financials Abhijeet Kundu(91) 22 6623 2628 Abhijeet@maybank-ke.co.in Consumer SINGAPORE NG Wee Siang Head of Research(65) 6231 5838 ngweesiang@maybank-ke.com.sg Banking & Finance Gregory YAP(65) 6231 5848 gyap@maybank-ke.com.sg SMID Caps Regional Technology & Manufacturing Telcos YEAK Chee Keong, CFA(65) 6231 5842 yeakcheekeong@maybank-ke.com.sg Offshore & Marine Derrick HENG, CFA(65) 6231 5843 derrickheng@maybank-ke.com.sg Transport (Land, Shipping & Aviation) WEI Bin(65) 6231 5844 weibin@maybank-ke.com.sg Commodity Logistics S-chips John CHEONG(65) 6231 5845 johncheong@maybank-ke.com.sg Small & Mid Caps Healthcare TRUONG Thanh Hang (65) 6231 5847 hang.truong@maybank-ke.com.sg Small & Mid CapsINDONESIA Wilianto IE Head of Research(62) 21 2557 1125 wilianto.ie@maybank-ke.co.id Strategy Rahmi MARINA(62) 21 2557 1128 rahmi.marina@maybank-ke.co.id Banking & Finance Aurellia SETIABUDI(62) 21 2953 0785 aurellia.setiabudi@maybank-ke.co.id Property Isnaputra ISKANDAR(62) 21 2557 1129 isnaputra.iskandar@maybank-ke.co.id Metals & Mining CementPandu ANUGRAH(62) 21 2557 1137 pandu.anugrah@maybank-ke.co.id Infra Construction Transport TelcosJanni ASMAN(62) 21 2953 0784 janni.asman@maybank-ke.co.id Cigarette Healthcare Retail Adhi Tasmin(62) 21 2557 1209 adhi.tasmin@maybank-ke.co.id Plantations PHILIPPINES Luz LORENZO Head of Research(63) 2 849 8836 luz_lorenzo@maybank-atrke.com Strategy Utilities Conglomerates Telcos Lovell SARREAL(63) 2 849 8841 lovell_sarreal@maybank-atrke.com Consumer Media Cement Rommel RODRIGO(63) 2 849 8839 rommel_rodrigo@maybank-atrke.com Conglomerates Property Gaming Ports/ Logistics Katherine TAN(63) 2 849 8843 kat_tan@maybank-atrke.com Banks Construction Ramon ADVIENTO(63) 2 849 8845 ramon_adviento@maybank-atrke.com Mining Michael BENGSON(63) 2 849 8840michael_bengson@maybank-atrke.com Conglomerates Jaclyn JIMENEZ(63) 2 849 8842jaclyn_jimenez@maybank-atrke.com ConsumerArabelle MAGHIRANG(63) 2 849 8838arabelle_maghirang@maybank-atrke.com Banks76DisclaimerThis research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fuctuate and that each securitys price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different meth-odologies and are purely based on price and volume-related information extracted from the relevant jurisdictions stock exchange in the equity analysis. Accordingly, investors returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specifc investment objectives, the fnancial situation and the particular needs of persons who may receive or read this report. 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