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1 Important Information: This document is for information only with no consideration given to the specific investment objective, financial situation and particular needs of any specific person. Any securities mentioned herein are for illustration purposes only and should not be construed as a recommendation for investment. You should seek advice from a financial adviser before making any investment. In the event that you choose not to do so, you should consider whether the investment selected is suitable for you. Investments in unit trusts are not deposits in, obligations of, or guaranteed or insured by Nikko Asset Management Asia Limited ( Nikko AM Asia ). Past performance or any prediction, projection or forecast is not indicative of future performance. The information contained herein may not be copied, reproduced or redistributed without the express consent of Nikko AM Asia. While reasonable care has been taken to ensure the accuracy of the information as at the date of publication, Nikko AM Asia does not give any warranty or representation, either express or implied, and expressly disclaims liability for any errors or omissions. Information may be subject to change without notice. Nikko AM Asia accepts no liability for any loss, indirect or consequential damages, arising from any use of or reliance on this document. Nikko Asset Management Asia Limited, Registration Number H ART BY LÉ GILL nikkoam.com.sg

2 JAPAN s Prime Minister, Shinzo Abe, won a landslide victory in parliamentary elections in December 2014, after his victory in the upper house elections in In firm control of both houses till December 2016 and as Japan s Prime Minister for several more years, Abe would have three years to implement his radical, and much-needed, economic plans. He remains unusually popular in a country which has had 15 Prime Ministers in 20 years prior to Abe also found a supportive ally in Haruhiko Kuroda, the Bank of Japan Governor, who has religiously kept faith with Abe s bold revolution. THE early results of Abenomics were startling. The Nikkei 225 Index rallied nearly 70% 6 in less than 12 months, and a restrained yen has boosted exports and raised corporate earnings. Prices of household durable goods in Tokyo rose in November 2013 for the first time in two decades! An air of optimism has returned to Japan. Hitting the early targets has given Abe enormous cachet to push through his reform agenda with greater conviction. 6 money.cnn.com/2013/05/24/ investing/markets-stocks-outlook/, 27 May

3 OVER a five-year timeline, Abe has targeted corporate tax to be reduced from about 36% to 24%. The existing rate is currently the 2nd highest in the Group of Seven, after the U.S., and compares with 23% in the U.K and 24% in South Korea. 7 Wages will also be adjusted upwards to boost consumption and drive growth. Womenomics bringing more women into the workforce as well as into the boardrooms is a vital component of Abe s reform package to combat a shrinking and ageing labour pool. Of the one million new entrants to the workforce in 2013, some 70% 8 were women. In September 2014, Abe named five women to his new 18-strong cabinet, leading the way to make better use of its highly-educated but underemployed women. IN APRIL 2014, a sales tax hike was introduced to help rein in massive public debt and fund the bulging social security costs. The levy was raised from 5% to 8% the first increase since In doing so, Abe has managed to escape the traditional kiss of political death for past premiers who introduced the unpopular hike. Once again, it bears testament to the confidence Japan has in Abenomics, and the ability of Abe to unite his people for the common goal of digging themselves out of a 15-year downward economic spiral skeptics.html, 25 June online.barrons.com/articles/ SB , 24 May

4 STOCK VALUATIONS REMAIN LOW WHILE Corporate Japan is delivering positive returns, equity valuations remain below their historical average. The Japanese market currently trades on an estimated one-year price-to-earnings ratio of times, largely below its long-term average of times. 9 Over 50% of companies are trading below the value of their assets. Bargain hunters who exercise stringent due diligence would be able to pick up some exceptional value buys. 9 Bloomberg, 22 October 2014 WITH clearer signs of sustained economic recovery, the overall level of Japanese equity ownership by individuals and institutions should increase over time. Currently only 8% of roughly USD15 trillion 10 in aggregate Japanese household assets are invested in equities and large institutions have similarly low equity exposure in their portfolios. With the introduction of the Nippon Individual Savings Account (NISA) to incentivise the historically risk-averse Japanese, Nomura Research Institute estimates that a figure as high as USD690 billion 10 could be drawn into the market. 10 hennessyfunds.com/resources/docs/press/japan -whitepaper.pdf, February

5 Invest in Japan s new corporate ethos The JPX-Nikkei Index 400, a new stock price index focused on the return on equity (ROE) and management quality of its underlying companies, was launched at the start of It comprises 400 companies selected from about 3,400 stocks listed on the Tokyo Stock Exchange, including those listed on the markets for start-ups. The index components are subject to an annual review. The jpx px- nikkei index 400 Stocks are selected through a rigorous selection process based on ROE, which measures how efficiently shareholder capital is being used, and on the quality of each firm s corporate governance frameworks both criteria considered vital by global investors. As such, the JPX-Nikkei Index 400 is now being used as an investment benchmark by Japan's Government Pension Investment Fund (GPIF), the world's largest pension fund. Exchange traded funds linked to the index are also expected to grow. For investors with a mid- to long-term investment horizon, the index offers broad exposure to Japan's corporate A-listers an elite class with the potential to further boost their intrinsic value and shareholder returns.

6 The 3RD3 Arrow of the Abenomics Growth Trillions Strategy of Yen Companies Cash and Deposits * (FY2000 FY2013) Aspiring to be included in the index, Japanese corporations are expected to take greater care in how they allocate their resources and, as a result, many will adopt a more positive stance on shareholder return. The index is therefore expected to enhance the corporate value of Japanese firms in general, not just those included in the index. In addition, Japan s Prime Minister Abe is exhorting companies to make better use of their abundant cash reserves by increasing wages and improving shareholder returns through dividend hikes or share buybacks. It is hoped that this will result in sustained economic growth and ultimately push up stock prices. The JPX-Nikkei Index 400, one of the components in Abe s 3rd arrow strategy, ultimately aims to bring investors into the market. *Firms in all industries, excluding finance and insurance, with more than 1 billion (approx. US$ 9.8 million) in capital. Source: Nikko AM; Financial Statements Statistics of Corporations by Industry, Ministry of Finance, July Stock Selection Process Quantitative Evaluation Based On: 3-year average ROE 3-year average Operating Profit Market Capitalisation Qualitative Criteria: Appointment of independent external directors Employment of global accounting standards Disclosure of financial statements in English to be continued...