0.8 Real estate sector GLP J-REIT The fund likely to

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08 July 2013

Asia Pacific/Japan

Equity Research

REITs (REIT (Japan)) / OVERWEIGHT

Real estate sector INITIATION

Initiate coverage of third logistics REIT; GLP is

our top pick

Figure 1: Catalyst calendar for logistics REITs in our coverage

0

0.2

0.4

0.6

0.8

1

1.2

Jul-1

3

Aug

-13

Sep

-13

Oct

-13

Nov

-13

Dec

-13

Jan-

14

Feb

-14

Mar

-14

Apr

-14

May

-14

Jun-

14

The fund likely to announce PO and property acquisitions in Aug. or Sep. 2013

Japan Logistics Fund

GLP J-REIT

Nippon Prologis REIT

The management is likely to explain about the progress of reconstruction PJ on analyst meeting in Sep. 2013 and Mar. 2014

Expectation for next property acquisition with PO is likely to rise from Sep. 2013

Source: Credit Suisse

■ Action: We initiated coverage of Japan Logistics Fund (JLF; 8967, TP ¥1,110,000) and GLP J-REIT (3281, TP ¥118,000), both with OUTPERFORM ratings, on 23 May 2013. We now initiate coverage of Nippon Prologis REIT, with a NEUTRAL rating and ¥980,000 target price.

■ Focal points: Below, we outline potential catalysts that we believe could drive unit price gains for the three logistics REITs in our coverage.

■ We look for sustained external growth at GLP supported by property acquisitions from its sponsor, and see a strong probability of the REIT announcing a capital increase to fund property acquisitions in August or September 2013, setting the stage for external growth.

■ We believe forthcoming results briefings at JLF will raise expectations of DPU growth. Specifically, we expect comments at the results briefing scheduled for September 2013 relating to progress with securing tenants for redevelopment projects due for completion in September 2014, and the briefing due in March 2014 to contain pointers to earnings contributions in FT1/15.

■ At Nippon Prologis, we anticipate that expectations of external growth based on a capital increase and property acquisitions will strengthen from September 2013, when properties currently under development by the REIT’s sponsor should start to reach completion.

■ Stock calls: Among the logistics REITs in our coverage, GLP is our top pick, followed by JLF.

■ Transfer of coverage: Effective as of this publication, Atsuro Takemura assumes coverage of the J-REIT sector.

Research Analysts

Atsuro Takemura

81 3 4550 7372

[email protected]

Masahiro Mochizuki

81 3 4550 7389

[email protected]

08 July 2013

Real estate sector 2

Recommend investment in two logistics REITs Logistics REITs differ from office REITs in that they generally benefit from comparatively

stable rental revenues and offer high distribution yields by virtue of the relatively high

liquidity risk premiums associated with logistics facilities. Although supply of such

properties could increase, we expect this to be offset by the demolition of older properties.

We believe Prologis’ portfolio surpasses that of its rivals in terms of property quality, but

believe that the market is likely to favor REITs offering substantial potential for DPU

growth. Among the logistics REITs in our coverage, we highlight GLP as our top pick, as

we expect the REIT to announce a capital increase to fund property acquisitions in August

or September. We also recommend JLF, as we see potential for accelerated DPU growth.

GLP our top pick among logistics REITs

Since GLP holds preferential negotiation rights for approximately ¥300bn in logistics

facilities owned by its sponsor, the REIT should be able to realize sustained external

growth. We see GLP outperforming the TSE REIT Index around end-FT8/13, when

management will likely announce a capital increase and property acquisitions.

If the REIT does not acquire additional properties, we expect GLP’s EPU to slide 15.0% in

FT8/14 due to the booking of property and other taxes. To soften the blow, we believe the

REIT will likely announce a capital increase to fund property acquisitions around the same

time.

Assuming a capital increase of ¥25bn funding the acquisition of ¥50bn in properties with

an NOI yield of 5.5% (yield after depreciation of 4.0%, borrowing costs 1.0%, management

fee 0.5%), we estimate DPU would increase by ¥159 (equivalent to 9% of our FT8/14 EPU

forecast).

Also recommend investment in JLF

We expect JLF’s work to redevelop portfolio properties (own book redevelopment, OBR)

and new acquisitions accompanied by a higher LTV to boost annualized DPU growth to

4%.

We believe that through OBR, JLF should be able to boost DPU by ¥5,046 over the next

10 years. In addition, we estimate that JLF could add a further ¥3,713 to DPU by raising

LTV from roughly 30% to about 43% over this period. A total increase of ¥8,759 (¥5,046 +

¥3,713) in DPU over the next 10 years implies an annualized DPU growth rate of 4%.

Figure 2: Ratings and valuations Real estate sector Share price (¥)

7/5/2013 H1 H2 H1 H2 H1 H2 H1 H2

J-REITs

8951 Nippon Building Fund 1,400,000 1,148,000 22.0% OUTPERFORM 27.8 29.0 34.4 35.0 1.5 1.5 2.2 2.8 1.4

8952 Japan Real Estate 1,360,000 1,085,000 25.3% OUTPERFORM 29.0 28.7 36.5 36.6 1.6 1.6 2.7 2.8 1.5

8955 Japan Prime Realty 430,000 302,500 42.1% OUTPERFORM 23.2 23.8 25.5 26.3 1.3 1.3 4.0 3.9 1.4

8957 Tokyo REIT 670,000 576,000 16.3% NEUTRAL 24.8 23.9 24.7 23.1 1.0 1.0 3.9 4.2 1.0

8959 Nomura Real Estate Office Fund 500,000 437,000 14.4% NEUTRAL 22.5 23.0 18.6 19.4 0.7 0.7 5.9 5.7 0.9

8960 United Urban 150,000 133,500 12.4% UNDERPERFORM 23.1 22.9 27.7 24.8 1.4 1.4 3.8 4.1 1.3

8964 Frontier Real Estate Investment 910,000 898,000 1.3% UNDERPERFORM 19.0 18.8 23.3 22.9 1.5 1.5 3.8 4.2 1.3

8967 Japan Logistics Fund 1,110,000 918,000 20.9% OUTPERFORM 23.5 21.2 27.8 23.9 1.4 1.4 4.0 3.9 1.0

3226 Nippon Accommodations Fund 760,000 674,000 12.8% NEUTRAL 24.3 23.2 25.0 23.8 1.2 1.2 4.2 3.8 1.3

3269 Advanced Residence 240,000 213,800 12.3% NEUTRAL 26.3 25.3 26.7 24.8 1.4 1.4 3.4 4.3 1.3

3281 GLP J-REIT 118,000 99,800 18.2% OUTPERFORM 24.6 34.1 25.4 59.7 1.7 1.7 1.9 4.3 1.6

3283 Japan Prologis REIT 980,000 870,000 12.6% NEUTRAL 39.9 23.3 59.6 26.3 - 1.4 2.0 4.3 1.4

Dividend yieldP/BP/NAVPS

Target

price (¥)

Chg to

TPRating

EV/EBITDA P/E

Source: Thomson Reuters, Credit Suisse estimates

OUTPERFORM ratings on

two logistics REITS

08 July 2013


Figure 3: Unit price performance

Real estate sector (Unit: ¥bn)

1 m 3 m 6 m 12 m 1 m 3 m 6 m 12 m

J-REITs

8951 Nippon Building Fund OUTPERFORM 794.4 4.6 11.6% -17.2% 27.3% 50.9% -0.9% -25.0% -7.9% -3.1%

8952 Japan Real Estate OUTPERFORM 644.6 3.3 9.6% -13.7% 26.0% 48.8% -2.9% -21.5% -9.2% -5.2%

8955 Japan Prime Realty OUTPERFORM 249.6 1.1 7.1% -18.6% 24.0% 37.3% -5.4% -26.4% -11.2% -16.7%

8957 Tokyo REIT NEUTRAL 97.6 0.6 7.5% -14.7% 20.8% 44.0% -5.0% -22.5% -14.5% -10.0%

8959 Nomura Real Estate Office Fund NEUTRAL 133.3 1.3 -14.6% -35.4% -11.2% -2.6% -27.1% -43.2% -46.4% -56.6%

8960 United Urban UNDERPERFORM 307.8 2.1 7.0% -16.1% 33.1% 53.8% -5.5% -24.0% -2.1% -0.2%

8964 Frontier Real Estate Investment UNDERPERFORM 222.7 0.8 2.0% -13.5% 17.8% 38.4% -10.4% -21.3% -17.4% -15.6%

8967 Japan Logistics Fund OUTPERFORM 135.9 0.7 6.3% -13.4% 18.8% 29.3% -6.2% -21.2% -16.5% -24.7%

3226 Nippon Accommodations Fund NEUTRAL 1,395.8 0.7 12.0% -9.7% 12.9% 27.2% -0.5% -17.5% -22.3% -26.8%

3269 Advanced Residence NEUTRAL 265.1 1.4 6.6% -11.6% 21.1% 37.1% -5.8% -19.4% -14.1% -16.9%

3281 GLP J-REIT OUTPERFORM 183.4 1.4 13.0% 0.6% 45.6% - 0.6% -7.2% 10.4% -

3283 Japan Prologis REIT NEUTRAL 159.0 3.0 9.7% -2.0% - - -2.7% -9.8% - -

Share price performance Share price performance (vs. TOPIX)Rating

Market

cap

Average trading

volume per day in last

6 months

Source: Thomson Reuters, Credit Suisse

Transfer fo coverage

Effective as of this publication, Atsuro Takemura assumes coverage of the J-REIT sector.

Masahiro Mochizuki maintains coverage of real estate developers, housing manufacturers,

and construction companies.

Unit price performance

Figure 5 shows unit price performance relative to the TSE REIT Index for five logistics

REITs since the listing of Nippon Prologis on 14 February 2013.

The three logistics REITs in our coverage largely trended in line with the index from

February to early May 2013.

All logistics REITs have outperformed the TSE REIT Index on expectations of external

growth since 16 May, when Nippon Prologis announced a capital increase and property

acquisitions.

Nippon Prologis further outperformed the TSE REIT Index following the announcement

after the close of trading on 7 June that the REIT would be added as a constituent to the

MSCI Global Standard Indices.

JLF also briefly outperformed the TSE REIT index after Nippon Prologis’ announcement of

a capital increase, on heightened expectations of external growth, but subsequently

reverted to trending in line with the index.

Figure 4: Unit price performances Figure 5: Unit price performances (relative to TOPIX)

85

95

105

115

125

135

145

155

2/1

4/2

013

2/2

1/2

013

2/2

8/2

013

3/7

/20

13

3/1

4/2

013

3/2

1/2

013

3/2

8/2

013

4/4

/20

13

4/1

1/2

013

4/1

8/2

013

4/2

5/2

013

5/2

/20

13

5/9

/20

13

5/1

6/2

013

5/2

3/2

013

5/3

0/2

013

6/6

/20

13

6/1

3/2

013

6/2

0/2

013

6/2

7/2

013

7/4

/20

13

Japan Logisticst Fund Industrial & Infrastructure FundDaiwa House REIT GLP J-REIT

Nippon Prologis REIT TSE REIT Index

85

90

95

100

105

110

115

120

125

130

2/1

4/2

013

2/2

1/2

013

2/2

8/2

013

3/7

/20

13

3/1

4/2

013

3/2

1/2

013

3/2

8/2

013

4/4

/20

13

4/1

1/2

013

4/1

8/2

013

4/2

5/2

013

5/2

/20

13

5/9

/20

13

5/1

6/2

013

5/2

3/2

013

5/3

0/2

013

6/6

/20

13

6/1

3/2

013

6/2

0/2

013

6/2

7/2

013

7/4

/20

13

Japan Logisticst Fund Industrial & Infrastructure Fund

Daiwa House REIT GLP J-REIT

Nippon Prologis REIT Source: Thomson Reuters, Credit Suisse Source: Thomson Reuters, Credit Suisse

08 July 2013


Characteristics of logistics facilities

Prospective stable rental revenues

A key characteristic of logistics REITs is that rental revenues tend to be more stable than

at office REITs. Figure 6 shows trends in rental revenues by underlying asset class (Jan

1990 = 100). While office rental revenues at one point rose to 122 and have declined to 87,

rental revenues for logistics facilities have consistently trended in the 100–110 range,

mirroring the trend for commercial facilities.

In addition, while office and housing leases typically extend over two to five years, logistics

facilities are often leased to single tenants for periods of over 10 years, generating stable

rental revenues.

Figure 6: Rent of logistics property remain almost flat

80

85

90

95

100

105

110

115

120

125

Jan-

90

Oct

-90

Jul-9

1

Apr

-92

Jan-

93

Oct

-93

Jul-9

4

Apr

-95

Jan-

96

Oct

-96

Jul-9

7

Apr

-98

Jan-

99

Oct

-99

Jul-0

0

Apr

-01

Jan-

02

Oct

-02

Jul-0

3

Apr

-04

Jan-

05

Oct

-05

Jul-0

6

Apr

-07

Jan-

08

Oct

-08

Jul-0

9

Apr

-10

Jan-

11

Oct

-11

Jul-1

2

Warehouse Office Residence Retail

Jan. 1990=100

Source: BoJ, MoF, Credit Suisse

Cap rate trends

Relatively high cap rate

According to a recent Japan Real Estate Institute investor survey, the expected yield on

logistics facilities located in the coastal area of Tokyo’s Koto district was 5.8% as of April

2013, above the 4.3% for office buildings (in Marunouchi and Otemachi) and the 4.5% for

commercial buildings (in Ginza). We assume the higher cap rate for logistics facilities

reflects a liquidity risk premium, because such properties tend to attract fewer investors.

Scope for price upside of over 29% if risk premiums come down

The risk premium (expected yield – 10-yr JGB yield) for logistics facilities located in the

coastal area of Tokyo’s Koto district was 5.2% as of April 2013, vs. the historical low of

3.9%, set in October 2007. Assuming a 10-yr JGB yield of 0.6% at end-March 2013, when

the latest survey on expected yield was conducted, and a risk premium reversal to the low

end of the historical range, we calculate real estate price upside of 29.3% for logistics

facilities ([5.2% + 0.6%] / [3.9% + 0.6%]). Assuming the end-June 2013 10-yr JGB yield of

0.8% still leaves upside of 27.7%.

Logistics facilities’ liquidity having risen, we believe that investors are demanding lower

liquidity risk premiums for such facilities. We note that when expected yields for logistics

facilities hit historical lows in October 2007, only two logistics REITs existed, but that

number has since expanded to six.

Stable rent revenues, longer

lease periods

08 July 2013


Figure 7: Expected cap rates Figure 8: Risk premiums

4.3%

4.5%

5.8%5.2%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

Oct

-99

Apr

-00

Oct

-00

Apr

-01

Oct

-01

Apr

-02

Oct

-02

Apr

-03

Oct

-03

Apr

-04

Oct

-04

Apr

-05

Oct

-05

Apr

-06

Oct

-06

Apr

-07

Oct

-07

Apr

-08

Oct

-08

Apr

-09

Oct

-09

Apr

-10

Oct

-10

Apr

-11

Oct

-11

Apr

-12

Oct

-12

Apr

-13

Office (Marunouchi/Otemachi) Residence (Southern Tokyo)

Retail (Ginza) Logistics (Koto)

Economy hotel (Tokyo)

3.7%

3.9%3.9%

5.2%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

Oct

-99

Apr

-00

Oct

-00

Apr

-01

Oct

-01

Apr

-02

Oct

-02

Apr

-03

Oct

-03

Apr

-04

Oct

-04

Apr

-05

Oct

-05

Apr

-06

Oct

-06

Apr

-07

Oct

-07

Apr

-08

Oct

-08

Apr

-09

Oct

-09

Apr

-10

Oct

-10

Apr

-11

Oct

-11

Apr

-12

Oct

-12

Apr

-13

Office (Marunouchi/Otemachi) Residence (Southern Tokyo)

Retail (Ginza) Logistics (Koto)

Economy hotel (Tokyo) Source: Japan Real Estate Institute, Credit Suisse Source: Japan Real Estate Institute, Credit Suisse

Valuation

Risk premium on distribution yield largely on par with office REITs

The risk premium on distribution yields (distribution yield – 10-year JGB yield) at logistics

and commercial facilities REITs has been broadly on par with the TOPIX REIT Index.

Figure 10 shows the spread between the overall TOPIX REIT Index and TOPIX logistics

and commercial facilities REITs (TOPIX REIT Index – TOPIX logistics and commercial

facilities REITs) in terms of the risk premium on distribution yield. The spread has

remained below 1ppt.

During the credit crunch triggered by the collapse of Lehman Brothers, the risk premium

on logistics and commercial facilities REITs trended below that for the TOPIX REIT Index,

due largely, in our view, to the former comprising mostly companies with relatively low

levels of leverage.

Figure 9: Risk premiums

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

Jan-

03

May

-03

Sep

-03

Jan-

04

May

-04

Sep

-04

Jan-

05

May

-05

Sep

-05

Jan-

06

May

-06

Sep

-06

Jan-

07

May

-07

Sep

-07

Jan-

08

May

-08

Sep

-08

Jan-

09

May

-09

Sep

-09

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Sep

-11

Jan-

12

May

-12

Sep

-12

Jan-

13

May

-13

Risk premium on all REITs (dividend yield - 10y JGB yield) Risk premium on office REITs (dividend yield - 10y JGB yield)

Risk premium on residential REITs (dividend yield - 10y JGB yield) Risk premium on retail/logistics REITs (dividend yield - 10y JGB yield) Note: Weighted average of individual names.

Source: Bloomberg, Credit Suisse

Risk premium trend

comparable to office REITs

08 July 2013


Figure 10: Gap between TSE REIT Index and TSE REIT retail/logistics Index (TSE REIT

Index – TSE REIT retail/logistics Index)

-1.0%

-0.8%

-0.6%

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

Feb

-03

Jun-

03

Oct

-03

Feb

-04

Jun-

04

Oct

-04

Feb

-05

Jun-

05

Oct

-05

Feb

-06

Jun-

06

Oct

-06

Feb

-07

Jun-

07

Oct

-07

Feb

-08

Jun-

08

Oct

-08

Feb

-09

Jun-

09

Oct

-09

Feb

-10

Jun-

10

Oct

-10

Feb

-11

Jun-

11

Oct

-11

Feb

-12

Jun-

12

Oct

-12

Feb

-13

Jun-

13

Average risk premium on all REITs - risk premium on retail/logistics REITs

Lehman's fall

BoJ has announced J-REITs purchase

Source: Company data, Credit Suisse estimates

Mounting expectations for a rise in real estate prices could lead to a slightly lower

P/NAVPS versus the TOPIX REIT Index

Figure 11 shows the P/NAVPS trend for component REITs of the TOPIX REIT indices in

each category. P/NAVPS of REITs constituting TOPIX logistics and commercial facilities

REITs remained 0.2 point below the TOPIX REIT Index between 2006–07, when unit

prices had rallied sharply. However, P/NAVPS valuations have remained more or less

comparable to TOPIX REIT Index since 2009, when a downturn set in for office rents. We

believe that TOPIX logistics and commercial facilities REITs could track slightly below the

broader TOPIX REIT Index when the uptrend in office rents gains momentum.

Figure 11: Unit price/NAVPS

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

May

-03

Sep

-03

Jan-

04

May

-04

Sep

-04

Jan-

05

May

-05

Sep

-05

Jan-

06

May

-06

Sep

-06

Jan-

07

May

-07

Sep

-07

Jan-

08

May

-08

Sep

-08

Jan-

09

May

-09

Sep

-09

Jan-

10

May

-10

Sep

-10

Jan-

11

May

-11

Sep

-11

Jan-

12

May

-12

Sep

-12

Jan-

13

May

-13

All REITs Office REITs Residential REITs Retail/Logistics REITs

(x)

Note: Weighted average of individual names


Upper end of P/NAVPS

valuations around 1.6x

08 July 2013


Operating environment As regards the logistics facility operating environment, we anticipate an uptrend in supply,

as demand tends to move in tandem with prevailing economic conditions. We also look for

a rebound in demand, driven by economic recovery. Also, with more logistics facilities

nearing the end of their serviceable life, we expect demolition of existing facilities to offset

growth in supply of new facilities.

Warehousing demand continues to be influenced by

economic conditions

Figure 13 shows the YoY change in warehousing volume and storage balance for the

warehousing industry in Japan. While warehousing volume has tended to move in tandem

with the economic climate, the storage balance of warehouses can be seen tracking

volume with a slight lag.

After the first oil-shock of 1973, warehousing volume swung to a YoY decline in 1975, and

the storage balance (excluding hazardous materials) contracted in 1976. Both

warehousing volume and the storage balance contracted during the financial crisis of 1998.

However, the former reverted to a YoY growth trend in 1999, followed by the latter in 2000.

Figure 12: Storage balance and warehousing volume Figure 13: Storage balance tends to lag behind

warehousing volume

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

storage balance (excluding hazardous item) warehousing volume

(1,000 t)

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

YoY growth in storage balance (excluding hazardous item)

YoY growth in warehousing volume

Source: MLIT, Credit Suisse Source: MLIT, Credit Suisse

We believe warehousing demand could start to pick up in tandem with economic recovery.

Yamato Holdings’ (9064) parcel delivery volume has grown at a double-digit YoY pace

since April 2013 (Figure 14).

Meanwhile, according to a METI study, the scale of online e-commerce transactions is on

a steady uptrend. Given that most e-commerce operations do not own bricks-and-mortar

stores, the demand for warehousing is likely to remain upbeat, and we see this supporting

warehousing demand (Figure 15).

Expect tenants currently

leasing older buildings to

absorb growth in supply

Warehouse demand

continues to be influenced

by prevailing economic

conditions

08 July 2013


Figure 14: Number of parcels handed by Yamato HDS

surged since April 2013

Figure 15: Market size for e-commerce expanding

12.9%

11.4%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13Total number of parcels handled by Yamato HDS

3,456 3,491

5,344

6,089 6,696

7,788

8,459

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2005 2006 2007 2008 2009 2010 2011

Market size of e-commerce

(Yen bn.)

Source: Yamato Holdings, Credit Suisse Source: METI, Credit Suisse

Increased demolition of old facilities should offset

growth in new supply

We expect supply of logistics facilities to increase. However, given that the number of

existing facilities reaching the end of their serviceable lives is also likely to rise, we see

little impact on the relatively newer and higher-grade properties owned by J-REITs.

As a result of both domestic and overseas developers stepping up investment in logistics

facilities in recent years, the floor area of warehouse construction starts making up new

supply has been on an uptrend after bottoming out in 2010 (Figure 16). However, 6mn

square meters of floor area in 2012 is less than a third of the area recorded in the peak

year of 1990, and barely two-thirds of the average for the last 50 years (10mn square

meters).

Moreover, we expect an increasing number of logistics facilities to reach the end of their

serviceable lives. The serviceable life of warehouses built with reinforced concrete (RC)

and steel-reinforced concrete (SRC), which constitute the bulk of supply, is 38 years.

Assuming their completion takes two years, such warehouses therefore reach the end of

their serviceable life in 40 years from the start of construction. As total warehouse

construction start floor area rose rapidly in the 1960s through the early 1970s, the number

of warehouses reaching the end of their serviceable lives is also on an uptrend.

Growing number of logistics

facilities reaching end of

serviceable life

08 July 2013


Figure 16: End-of-life warehouses are increasing while supply are increasing

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,00019

6119

6219

6319

6419

6519

6619

6719

6819

6919

7019

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

12

Warehouse construction starts (sq. m.) End-of-life warehouses (sq. m.)

(1,000㎡)

Historical average

Source: MLIT, Credit Suisse

Demand growth continues to offset increased supply

As regards large-scale logistics facilities in the Tokyo metropolitan area and the Osaka

area, a look at supply-demand conditions since 2008 shows that demand has to a large

extent absorbed the increase in supply, with evidence clearly pointing to a decline in

vacancy rates. Although there are cases where supply exceeding existing stock by 4%

triggered a one-time increase in vacancy rates, the occurrence of sustained demand

corresponding to 1–3% of existing stock has led to lower vacancy rates.

Assuming warehouse construction start floor area rises to the peak levels of the last ten

years (2006 and 2007) and assuming that it takes two years to complete warehouse

construction, supply could rise to levels seen around 2008. However, we believe that

sustained demand should ensure that there is no deterioration in supply-demand

conditions.

Logistics facility supply

Figures 17–18 show the impact of new supply on existing stock (quarterly basis, adjusted

for demolished warehouses) based on the floor area leased. Whereas leasing area of

existing stock rose by 1–3% in the Tokyo metropolitan area each quarter, leasing area

shows a sizable variation depending on the quarter in the Osaka area, due in part to its

relatively smaller market size.

Sustained demand of 1-3%

moving out of existing stock

has continued to absorb

new supply

08 July 2013


Figure 17: Net supply/existing stock in Tokyo area Figure 18: Net supply/existing stock in Osaka area

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%

2008

3Q

2008

4Q

2009

1Q

2009

2Q

2009

3Q

2009

4Q

2010

1Q

2010

2Q

2010

3Q

2010

4Q

2011

1Q

2011

2Q

2011

3Q

2011

4Q

2012

1Q

2012

2Q

2012

3Q

2012

4Q

2013

1Q

Net supply/total floor

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2008

3Q

2008

4Q

2009

1Q

2009

2Q

2009

3Q

2009

4Q

2010

1Q

2010

2Q

2010

3Q

2010

4Q

2011

1Q

2011

2Q

2011

3Q

2011

4Q

2012

1Q

2012

2Q

2012

3Q

2012

4Q

2013

1Q

Net supply/total floor Note: logistics properties with more than 10,000 sq.m of total floor.

1Q: Feb to Apr; 2Q: May to Jul.; 3Q: Aug to Oct.; 4Q: Nov. to Jan.

Source: Ichigo Real Estate Service, Credit Suisse

Note: logistics properties with more than 10,000 sq.m of total floor.



Logistics facility demand

Figures 19–20 show the impact of new demand on existing stock of logistics facilities

(quarterly, leased floor area basis). In both the Tokyo metropolitan area and the Osaka

area, we see evidence for an increase in leasing area equivalent to 1–3% of existing stock

each quarter.

Figure 19: New demand/existing stock in Tokyo area Figure 20: New demand/existing stock in Osaka area

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2008

3Q

2008

4Q

2009

1Q

2009

2Q

2009

3Q

2009

4Q

2010

1Q

2010

2Q

2010

3Q

2010

4Q

2011

1Q

2011

2Q

2011

3Q

2011

4Q

2012

1Q

2012

2Q

2012

3Q

2012

4Q

2013

1Q

New demand/total floor

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2008

3Q

2008

4Q

2009

1Q

2009

2Q

2009

3Q

2009

4Q

2010

1Q

2010

2Q

2010

3Q

2010

4Q

2011

1Q

2011

2Q

2011

3Q

2011

4Q

2012

1Q

2012

2Q

2012

3Q

2012

4Q

2013

1Q

New demand/total floor Note: logistics properties with more than 10,000 sq.m of total floor.






Supply–demand balance in logistics facilities

Figures 21–22 show the impact (quarterly, leased area basis) of excess supply or demand

versus existing stock (new supply – new demand). We see evidence for new demand

largely absorbing new supply in both the Tokyo metro area and the Osaka area.

08 July 2013


Figure 21: (Net supply – new demand)/existing stock in

Tokyo area

Figure 22: Net supply – new demand)/existing stock in

Osaka area

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2008

3Q

2008

4Q

2009

1Q

2009

2Q

2009

3Q

2009

4Q

2010

1Q

2010

2Q

2010

3Q

2010

4Q

2011

1Q

2011

2Q

2011

3Q

2011

4Q

2012

1Q

2012

2Q

2012

3Q

2012

4Q

2013

1Q

(Net supply - new demand)/total floor

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2008

3Q

2008

4Q

2009

1Q

2009

2Q

2009

3Q

2009

4Q

2010

1Q

2010

2Q

2010

3Q

2010

4Q

2011

1Q

2011

2Q

2011

3Q

2011

4Q

2012

1Q

2012

2Q

2012

3Q

2012

4Q

2013

1Q

(Net supply - new demand)/total floor Note: logistics properties with more than 10,000 sq.m of total floor.






Logistics facility vacancy rates

Figures 23–24 show the vacancy rate trend in logistics facilities (quarterly basis). We see

evidence for new demand largely absorbing new supply in both the Tokyo metro area and

the Osaka area.

Figure 23: Vacancy rate in Tokyo area Figure 24: Vacancy rate in Osaka area

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

2008

3Q

2008

4Q

2009

1Q

2009

2Q

2009

3Q

2009

4Q

2010

1Q

2010

2Q

2010

3Q

2010

4Q

2011

1Q

2011

2Q

2011

3Q

2011

4Q

2012

1Q

2012

2Q

2012

3Q

2012

4Q

2013

1Q

Vacancy rate

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2008

3Q

2008

4Q

2009

1Q

2009

2Q

2009

3Q

2009

4Q

2010

1Q

2010

2Q

2010

3Q

2010

4Q

2011

1Q

2011

2Q

2011

3Q

2011

4Q

2012

1Q

2012

2Q

2012

3Q

2012

4Q

2013

1Q

Vacancy rate

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

08 July 2013


Portfolio comparison In Figure 25, we compare and rank the portfolios of five J-REITs that mainly invest in

logistics facilities. For each item, we rank the best-performing REIT as 1 and the weakest

performer as 3. Although the list of items here is not comprehensive and merely provides a

point of reference, the REIT that has the least points in total can be seen as having

relatively less portfolio risk. The special characteristics of each REIT based on the

comparison are listed below.

Japan Logistics Fund (JLF)

(1) JLF has a high ratio of properties located in Tokyo area, which enables it to lease

properties falling vacant relatively quickly, but (2) most of its properties are located in the

Tokyo Bay area, which carries a relatively higher risk of damage to portfolio asset value in

the event of an earthquake.

GLP J-REIT

(1) Despite having the shortest average residual contract period, (2) GLP’s substantial

portfolio size limits the impact on leasing income if one tenant vacates leased premises.

Also, (3) most of its properties boast sizable total floor areas, which should enable the

REIT to leverage its advantage in leasing.


(1) Nippon Prologis REIT is least impacted in terms of leasing income by tenants vacating

leased premises, and (2) its sizable portfolio of large-scale, new properties make it highly

competitive in terms of leasing.

Figure 25: Score card of portfolio

Average

lease to

expiry

Dispersion

of tenants

Location of

portfolio

Size of

average

property

Age of

portfolioPML Total

Nomura RE Master Fund 2 2 1 2 2 2 11

Nippon Prologis REIT 2 1 2 1 1 1 8

GLP J-REIT 2 1 2 2 2 3 12

Daiwa House REIT 1 2 2 3 1 1 10

Industrial & Infrastructure Fund 1 3 1 3 3 1 12

Japan Logistics Fund 2 2 1 2 2 3 12 Source: Credit Suisse

08 July 2013


Detailed portfolio comparison

A comparison of asset weighting

Figure 26 compares the asset weighting of REITs mainly involved in logistics facilities

investment. Nippon Prologis REIT, GLP J-REIT, and JLF invest exclusively in logistics

facilities.

Figure 26: Composition ratio of portfolio by asset class

100%

50%

79%

100%

100%

53%

21% 29%

21%

47%

0% 20% 40% 60% 80% 100%


Industrial & InfrastructureFund

Daiwa House REIT

GLP J-REIT


Nomura RE Master Fund

Logistics Research institute/factory Infrastructure Retail

Note: appraisal value basis

Source: Company data, Credit Suisse

Nippon Prologis REIT leads the pack in terms of portfolio size

In Figure 27, we compare the asset size of REITs mainly involved in logistics facilities

investment. Nippon Prologis REIT is the only REIT with a portfolio worth over ¥300bn

based on acquisitions it announced in May 2013 and is followed by Nomura Real Estate

Master Fund (NMF), and GLP J-REIT in terms of asset size.

We expect external growth at Nippon Prologis REIT and GLP J-REIT to widen the gap

between the two and other logistics REITs.

Figure 27: Asset size comparison (acquisition price basis)

165,122

165,357

117,089

221,311

305,450

227,616

- 50,000 100,000 150,000 200,000 250,000 300,000 350,000


Industrial & Infrastructure Fund

Daiwa House REIT

GLP J-REIT



Total acquisition price

(Y mil.)

Source: Company data, Credit Suisse

All three REITs for which we

initiate coverage specialize

in logistics facilities

Nippon Prologis REIT the

top REIT in terms of

portfolio size

08 July 2013


REITs with shorter residual leasing contracts have a diversified tenant base

Although Nippon Prologis REIT, GLP J-REIT, and JLF have short average residual leasing

contracts, their relatively diversified tenant base limits the potential impact from an

individual tenant vacating leased premises.

In Figure 28, we compare the REITs’ average residual contract period with tenants. At

around 4.5–6.3 years, the average residual contract period is relatively short for Nippon

Prologis REIT, GLP J-REIT, and JLF.

Meanwhile, Figure 29 shows a comparison of leasing income impact from one tenant

vacating leased premises (leasing income per tenant divided by total leasing income). The

ratio stands at 1.0%–2.6% for Nippon Prologis REIT, GLP J-REIT, and JLF.

Figure 28: Average lease to expiry of portfolio Figure 29: Revenue per tenant/total revenue

6.3

10.3

13.0

4.5

5.2

6.7

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14



Daiwa House REIT

GLP J-REIT



Average lease to expiry

(years)

2.6%

4.3%

3.0%

1.9%

1.0%

2.0%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0%



Daiwa House REIT

GLP J-REIT


Nomura RE Master FundRevenue pertenant/totalrevenue

Note: based on recent IR material. The figure for Nomura Real Estate

Master Fund is our estimate.



JLF has the edge in terms of tenant location in our view

In terms of tenant leasing, we believe JLF holds the edge over rivals in terms of property

location.

Properties located in the Tokyo metropolitan area account for 83% of JLF’s portfolio of

logistics facilities. Japan’s largest concentration of industry and consumer base is located

in the Tokyo metropolitan area. This not only provides the REIT with a large number of

potential tenants, but also helps it reduce the time needed for leasing properties and cut

down rent-free period offered as an incentive to tenants.

Single tenant departures

have a modest impact on

leasing income at REITs

with shorter residual leasing

contracts

Most properties owned by

JLF are located in the Tokyo

metro area

08 July 2013


Figure 30: Composition ratio of portfolio by location

83%

79%

71%

59%

60%

94%

12%

20%

5%

27%

30%

5%

1%

24%

14%

10%

6%

0% 20% 40% 60% 80% 100%



Daiwa House REIT

GLP J-REIT



Tokyo area Osaka area Others



Nippon Prologis REIT has the edge in terms of property size

In terms of portfolio property size, Nippon Prologis REIT is well ahead of its rivals. Since

storage and handling work is more effective in larger properties, we see this as boosting

Nippon Prologis REIT’s competitive edge.

In Figure 31, we compare the portfolio property size of various REITs. The average

acquisition price per property totals ¥15.3bn for Nippon Prologis REIT, well over twice the

average acquisition price at rival REITs. As a result, Nippon Prologis REIT’s total floor

area exceeds 15,000 square meters at almost all its properties (Figure 32).

Figure 31: Average acquisition price of portfolio Figure 32: Composition ratio of portfolio by total floor

5,160

5,477

4,685

6,706

15,273

6,779

- 5,000 10,000 15,000 20,000



Daiwa House REIT

GLP J-REIT



Acquisition price per property

(Y mil.)

89%

69%

74%

93%

99.5%

91.3%

3%

21%

18%

7%

0.5%

5.6%

5%

10%

8%

2.8%

3%

0.3%

0% 50% 100%

Japan LogisticsFund

Industrial &Infrastructure Fund

Daiwa House REIT

GLP J-REIT

Nippon PrologisREIT

Nomura RE MasterFund

15,000 sq.m or more From 10,000 to 15,000 sq.m

From 5,000 to 10,000 sq.m Less than 5,000 sq.m

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Nippon Prologis REIT has relatively higher spec properties

In terms of property specs, we believe the edge lies with Nippon Prologis REIT. The

average property age of its portfolio is 4.7 years, the lowest among REITs investing mainly

in logistics facilities. Also, a comparison of portfolio weighting by property age shows that

almost the entire portfolio of Nippon Prologis REIT is less than ten years old. We

accordingly believe that the REIT has properties matching the specs that are most sought

after by tenants (i.e., property less than ten years old, effective ceiling height of more than

5.5m, and column span of more than 10m).

Floor area per property is

the largest at Nippon

Prologis REIT

Nippon Prologis REIT’s

portfolio consists mostly of

newer properties

08 July 2013


Figure 33: Average age of portfolio Figure 34: Composition ratio of portfolio by ages

12.6

17.4

5.7

11.3

4.7

7.6

0 5 10 15 20



Daiwa House REIT

GLP J-REIT



Average age of properties

(years)

15%

40%

13%

54%

26%

48%

21%

58%

58%

46%

55%

7%

17%

1%

7%

14%

31%

62%

22%

0.5%

6.2%

0% 20% 40% 60% 80% 100%



Daiwa House REIT

GLP J-REIT



Less than 5 years From 5 to 10 years

From 10 to 20 years 20 years or more




JLF and GLP J-REIT face a relatively high risk of asset damage due to earthquake

We believe that JLF and GLP J-REIT face relatively high risk of damage to assets due to

earthquakes. At more than 10%, the probable maximum loss (in case of earthquakes) is

relatively high at both REITs.

Figure 35: Average PML of portfolio

11.9%

4.9%

3.4%

10.8%

4.5%

7.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%



Daiwa House REIT

GLP J-REIT


Nomura RE Master FundAverage PML



PML value relatively high for

JLF and GLP J-REIT

08 July 2013


Companies Mentioned (Price as of 05-Jul-2013)

Daiwa House Reit (3263.T, ¥705,000) GLP J-REIT (3281.T, ¥99,800, OUTPERFORM[V], TP ¥118,000) Ind & Infra Fund (3249.T, ¥989,000) Japan Logistics (8967.T, ¥918,000, OUTPERFORM, TP ¥1,110,000) Nippon Prologis REIT (3283.T, ¥870,000, NEUTRAL[V], TP ¥980,000) Nomura REMF (3285.T, ¥100,200) Yamato Holding Co Ltd (9064.T, ¥2,218)

Disclosure Appendix

Important Global Disclosures

Atsuro Takemura and Masahiro Mochizuki, each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

3-Year Price and Rating History for GLP J-REIT (3281.T)

3281.T Closing Price Target Price

Date (¥) (¥) Rating

23-May-13 93,200 118,000 O *

* Asterisk signifies initiation or assumption of coverage.

O U T PERFO RM

3-Year Price and Rating History for Japan Logistics (8967.T)

8967.T Closing Price Target Price

Date (¥) (¥) Rating

23-May-13 920,000 1,110,000 O *

* Asterisk signifies initiation or assumption of coverage.

O U T PERFO RM

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the a nalyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms repr esenting the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms represe nting the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Lati n American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; Austr alia, New Zealand are, and prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a

08 July 2013


stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12 -month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cov er multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 43% (53% banking clients)

Neutral/Hold* 40% (49% banking clients)

Underperform/Sell* 15% (38% banking clients)

Restricted 3%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, an d Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdin gs, and other individual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research and analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Price Target: (12 months) for GLP J-REIT (3281.T)

Method: Our target unit price of ¥118,000 is derived using a DPU forecast of ¥3,869 for FT8/14 (calculated on an annualized basis) and a projected distribution yield of 3.29%.This yield derives from a risk-free rate of 0.62% and a risk premium of 2.67% (adjusted for an assumed 1% rate of increase in CPI and an unadjusted premium of 3.67%).

Risk: Downside risks include tenant vacancies and any obstacle to external growth caused by conflicts of interest with the sponsor.

Price Target: (12 months) for Nippon Prologis REIT (3283.T)

Method: We derive our target unit price of ¥980,000 using our DPU forecast of ¥37,186 for FT5/14 (calculated on an annualized basis) and a projected distribution yield of 3.79%.Our assumptions for the projected distribution yield of 3.79% are a risk-free rate of 0.62% and a 3.17% risk premium (inflation-adjusted, using an unadjusted risk premium of 4.17% and a CPI growth rate of 1.0%).

Risk: We see a PO to fund property acquisitions as a potential catalyst. Downside risks include the departure of major tenants and lower expectations of monetary easing.

Price Target: (12 months) for Japan Logistics (8967.T)

Method: Our ¥1,110,000 target price uses our outlook for an aggregate distribution of ¥38,462/unit in FT1/14 and FT7/14 and a distribution yield of

3.47%. This yield derives from a risk-free rate of 0.62%, an unadjusted 3.85% risk premium (average of 4.0% from 2009–2012 minus a

projected 0.15% DPU growth rate), and an assumed CPI growth rate 1.0%).

Risk: Risks include the departures of major tenants and lower expectations of upside from monetary easing.

08 July 2013


Please refer to the firm's disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

The subject company (3283.T) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (3283.T) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (3283.T) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (3283.T) within the next 3 months.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (3281.T, 3283.T, 8967.T) within the past 12 months

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

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As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Credit Suisse Securities (Japan) Limited ....................................................................................................Atsuro Takemura ; Masahiro Mochizuki

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.credit-suisse.com/researchdisclosures or call +1 (877) 291-2683.

08 July 2013


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Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments.

When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.

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