Asian Business Outlook Part of the Global Business Outlook A joint survey effort between Duke University, PwC China and CFO magazine Asian Business Outlook Duke University /CFO Magazine June 2017

Top Concerns of Asian CFOs 1. Economic Uncertainty 2. Difficulty attracting qualified employees 3. Currency risk 4. Government policies 5. Employee productivity 6. Weak demand for product/services 7. Data security 8. Employee morale 9. Geopolitical/Health crises 10. Access to capital Asian Business Outlook Duke University /CFO Magazine June 2017

Business Optimism Index Asia registers strong growth in optimism in June 2017, with notable gains in India, China, Singapore Global Trends June 2017 Response Country Business Optimism Index Country / Region Own-Firm Business Optimism Index Within Asia itself, there’s a varying level of business optimism. China & India CFOs seem most optimistic. CFOs are relatively optimistic about the future of their own firms in Asia. Own firm-optimism is highest in China, India and then Australia. CFOs in Japan and Singapore are less optimistic. Own Company Notes: Presented data are the mean value for each region or country, Scale from 0-100 Asian Business Outlook Duke University /CFO Magazine June 2017

Expected Product Price Inflation Overall Asian inflation outlook is flat, as modest inflation expectations in India and Singapore is offset by negative expectations in Japan and China Global Trends June 2017 Outlook Product Prices Relative to other regions, inflation expectations currently are the lowest in Asia and highest in LATAM Low inflation expectations in India and Singapore are tempered by negative expectations in Japan and China Inflation expectations decline across many Asian countries Within Asia, India has the highest expected inflation, even though the Indian outlook is down from last quarter. CFOs in Japan and China expect prices of their products to fall, while CFOs in Singapore are expecting a reversal with a price increase this year Notes: Presented data are the mean or median values for each region or country. Asian Business Outlook Duke University /CFO Magazine June 2017

Expected Growth in Sales Revenue CFOs in Asia expect modest growth in sales revenue of 3.6%, the lowest among the regions surveyed Global Trends June 2017 Outlook Revenue Asian revenue growth expectations are similar to those of the previous quarter CFO’s revenue growth expectations remained flat/declined across all regions Overall, Asian revenue growth expectations are the lowest, with Latin America a close second China expects the most rapid revenue growth, followed by Singapore Overall Asian growth is pulled down by Japan and India China has the highest revenue growth outlook at 11.9%, followed by Singapore at 10.3% India’s sales revenue expectations have dropped since last quarter’s survey March 2017: India already using median, mean = 20.1% Notes: Presented data are the mean or median values for each region or country. Asian Business Outlook Duke University /CFO Magazine June 2017

Capital Spending Plans Asian capital spending is on the upswing, while Latin America and the US are scaling back on future expansion Global Trends June 2017 Outlook Capital Spending Capital spending plans on the rise Asian CFOs expect rise in business spending growth, signaling a shift from the flat/decline in the past 2 quarters Business spending is expected to increase in Europe and Asia, while expectations have dropped in the US, partially because of greater uncertainty in regulatory policy, and in Latin America, partially because of the Odebrecht corruption scandal and the economic crisis in Venezuela Business spending is largely positive in Asia Except China, many of the other Asian countries such as Japan, India, and Singapore anticipate growth in capital expenditures In Singapore, expectations indicate a significant boost in capital spending June 2017: China, using median. Mean=-10.34 Notes: Presented data are the mean or median values for each region or country. Asian Business Outlook Duke University /CFO Magazine June 2017

Expected Change in Earnings Earnings growth is expected to increase in Asia, in spite of significant decline in India’s earnings outlook Global Trends June 2017 Outlook Earnings Outlook positive for Asia and Africa Asian earnings are expected to grow but at a lower pace compared to Africa United States earnings expectations have softened this quarter, even more so in Europe and Latin America Earnings growth outlook mostly positive across Asia, except India Japan, Singapore and China anticipate earnings growth increases, while expectations outlook in India are negative Notes: Presented data are the mean public company value for each region or country. Asian Business Outlook Duke University /CFO Magazine June 2017

Fulltime Employment Outlook Asian, European and US CFOs expect fulltime employment to grow moderately next year Global Trends June 2017 Outlook # FT Employees Employment outlook in Asia is positive but declining Africa and Latin America expect no growth in employment Europe registers positive growth in employment outlook, while the US saw a marginal increase q-o-q, now leading the world in employment growth expecations CFOs in Africa are optimistic about reversing the negative outlook in FTE employment India and China lead employment growth in Asia China and India expect strong growth in fulltime employment, increasing relative to March 2017 levels and among the highest in Asia Japan’s outlook is marginally positive at 0.7% but declined by 2.1 percentage points as compared to the previous quarter June 2017: all mean China: Median=12.55 India: Median = 10.94 Notes: Presented data are the mean value for each region or country #FT=Number of Fulltime Employees Asian Business Outlook Duke University /CFO Magazine June 2017

Notes: Presented data are the mean value for each region or country Expected Wage and Salary Increases While Asian wages and salaries are projected to increase by 3% over the next year, there are notable variations among its constituent countries Global Trends June 2017 Outlook Wages & Salaries Wage growth converging to 3-4% range across regions Wage growth outlook is the highest for the US at 4.1%, lowest for Asia at 3% Asia’s wage growth has been volatile, and June 2017 is the lowest it has been in the past 5 quarters Europe saw the greatest uptick in wage growth q-o-q across regions China’s wage growth much higher than other countries and regions China’s wage growth outlook has risen from 7.7% during the previous quarter to 9.1% in June 2017 Wages in Japan are expected to increase by 1.1% over the next 12 months Notes: Presented data are the mean value for each region or country Asian Business Outlook Duke University /CFO Magazine June 2017

How Uncertain is the Current Business Climate? Compared to the typical amount of uncertainty that your company faces, how would you rank the current level of uncertainty facing your firm? Asian Business Outlook Duke University /CFO Magazine June 2017

Actions Taken in Response to Uncertainty Compared to an average or normal amount of uncertainty, has the current amount of uncertainty about governmental policies and/or economic conditions led your firm to? Asian Business Outlook Duke University /CFO Magazine June 2017

Best Practices When Uncertainty is High What are the best practices for running a company when uncertainty is high about governmental policies and/or economic conditions? Stay the course Continue to pursue core strategies built on the companies’ strengths. For the most part, don’t expand into new projects that stretch the firm in new directions. Focus on what you can control. Be cautious Many firms pull back and operate very cautiously, making changes slowly. Some cut existing projects or cancel new projects but this is the exception rather than the rule Focus on the short-term Focus on getting through the short-term, remain flexible, but don’t lose sight of long-run objectives Reduce costs Carefully study analyses and scenarios Have a plan and contingencies for how to react if various scenarios occur. Hire consultants or other experts. Engage in risk management Be more active in risk management and hedging. Understand the economic outlook of various scenarios very well. Accumulate liquid assets Reduce financial risk by accumulating liquid assets, especially cash. Don’t increase debt loads. Take care of the customer Communicate more with, and take extra care of, key customers. -The most common strategy is to “stay the course”. By this companies mean not to become frozen into inaction, but to continue to pursue core strategies built on the companies’ strengths, focusing on what is under their control. For the most part, when uncertainty is high, this also means don’t expand into new projects that stretch the firm in new directions -Focus on getting through the short-term, remaining flexible, without losing sight of long-run objectives -Many firms pull back and operate very cautiously, making changes slowly … some cut or cancel projects but this is the exception rather than the rule -Reduce costs, though continue to take care of the core -Be more active in risk management and hedging.  Understand the economic outlook of various scenarios very well. -Many firms highlight the need to reduce financial risk by accumulating liquid assets, especially cash. Try not to increase debt loads. Asian Business Outlook Duke University /CFO Magazine June 2017

Uncertainty About Policies/Conditions Slowing Expansion About which if any of the following items is uncertainty (about policy details or timing, etc.) holding back your company's plans for expansion and new projects? Health: delay hiring, except perhaps health experts Regulatory: wait and see, monitor til dust settles Econ: delay investment, and a little less so: reduce hiring Tax: delay investment Asian Business Outlook Duke University /CFO Magazine June 2017

Uncertainty About Policies/Conditions Slowing Expansion About which if any of the following items is uncertainty (about policy details or timing, etc.) holding back your company's plans for expansion and new projects? Asian Business Outlook Duke University /CFO Magazine June 2017

Hurdle Rates and Investment Decisions What hurdle rate does your company use to evaluate investment projects? (red line) Does your company pursue all projects that are expected to earn a return > the hurdle rate? (gray and blue rectangles) Asian Business Outlook Duke University /CFO Magazine June 2017

Asian Business Outlook Duke University /CFO Magazine June 2017 Why Not Pursue All Value-Enhancing Projects? What prevents you from pursuing all projects that are expected to earn a return > hurdle rate? Asian Business Outlook Duke University /CFO Magazine June 2017

Why Not Pursue All Value-Enhancing Projects? What prevents you from pursuing all projects that are expected to earn a return > hurdle rate? Asian Business Outlook Duke University /CFO Magazine June 2017

Why Not Pursue All Value-Enhancing Projects? What prevents you from pursuing all projects that are expected to earn a return > hurdle rate? Asian Business Outlook Duke University /CFO Magazine June 2017

Weighted Average Cost of Capital US Europe Asia Latin America Africa What is your company's overall weighted average cost of capital (WACC) for 2017? 10.6 8.8 9.3 11.7 13.4 What cost of debt do you use in your WACC calculation? 7.1 6.7 6.5 12.2 Cost of equity? 11.8 10.7 8.2 13.7 Approximately what proportion of debt financing do you use in your WACC calculation? 36.4 30.9 29.8 33.4 28.3 Asian Business Outlook Duke University /CFO Magazine June 2017

WACC vs Hurdle Rate Asian Business Outlook Duke University /CFO Magazine June 2017

Asian Business Outlook Duke University /CFO Magazine June 2017 Why Do You Set Your Hurdle Rate > WACC? So that we choose only the best available projects To ration – because we can’t pursue all projects To account for riskiness of projects being evaluated To account for costs not captured by WACC To provide a margin of error in calculations and in investment outcomes So that we earn excess return and increase firm value Hurdle rate is cost of equity, to ensure we create value for shareholders To help us select projects that are profitable every year Expect cost of capital/mkt conditions to increase/change in near future To preserve funding (because we have limited access to funds) Asian Business Outlook Duke University /CFO Magazine June 2017

Asian Business Outlook Duke University /CFO Magazine June 2017 Chinese CFOs’ Opinion on Most Important Financial Functions Which three finance functions do you believe are most important to your firm? Asian Business Outlook Duke University /CFO Magazine June 2017

Asian Business Outlook Duke University /CFO Magazine June 2017 Japanese CFOs’ Opinion on Institutional Investors In last two years, institutional investors have submitted a greater number of specific requests to our company, relative to before the governance reforms. In the last two years, specific requests submitted by institutional investors generally support the direction and types of policies our management team thinks are best for our company. In the last two years, specific requests submitted by institutional investors have influenced or changed our company's policies. Asian Business Outlook Duke University /CFO Magazine June 2017

Return on Assets (ROA) Return on Assets in Asia expected to remain the highest relative to other regions Return on assets are expected to rise in all regions, relative to 2016 Regional ROAs expected to rise between 1.0 and 1.4 percentage points in 2017 versus 2016 CFOs in most Asian countries expect ROA to be same or higher in 2017 relative to 2016 CFOs in China expect the highest ROA in 2017 among Asian countries while Japan Asian Business Outlook Duke University /CFO Magazine June 2017

Asian Business Outlook Part of the Global Business Outlook A joint survey effort between Duke University, PwC China and CFO magazine Asian Business Outlook Duke University /CFO Magazine June 2017