Makor Securities Dover House 34 Dover Street W1S 4NG London England +44 207 290 5782 Prepared

by Makor Capital Research Team

Makor Capital Rogovin Tower 11 Menahem Begin Road 52681 Ramat Gan Israel +972 2 545 3777

Makor Capital Markets 11, rue de la Rotisserie 1204 Geneva Switzerland +41 223 10 6916 Barry Lyss Nils Hayat Alexandre Dahan

Ink me the Money

Todays Market Headline
Moodys downgrades long-term debt ratings of 9 European, 5 US & 1 Canadian bank Spains banks would need up to 62bln Euro in capital IMF sees euro crisis at critical stage, cites bank stress EU-27 Finance ministers meet in Luxembourg (7:00GMT) Monti, Merkel, Hollande and Rajoy Meet in Rome (12:00GMT), News Conference scheduled for 14:00GMT German IFO Survey (8:00GMT) & Italian Consumer Confidence (8:00GMT) Sweden and Finland Equity Markets are closed today

Market Overview
Good Morning, equities ended the day lower (US equities sold-off aggressively), the USD was higher against all major currencies, commodities were hit hard and the so called safe haven assets, German bonds & US Treasuries were stronger (lower yield). The Vix was up 16.47% and closed at 20.08. The market actually held pretty well throughout most of the day and started to sell-off only 90 minutes before the European close after the release of the US Philadelphia Fed Index (-16.6 in June) & Existing Home sales (-1.5% vs. -1.1% expected). There were many rumors about the ECB easing market money conditions, about the Greek bailout terms being re-negotiated and about a possible downgrade of UK banks by Moodys. Unfortunately only the later rumor was the closes to reality as Moodys did downgrade 15 banks credit rating after the US close but not only UK banks. On the Macro field, European PMIs were mixed (German PMI Manufacturing at 44.7 vs. 45.2 expected & French PMI Manufacturing at 45.3 vs. 44.5 expected) & UK Retail Sales were slightly better (0.9% vs. 0.7% expected in May). In the US besides the Philadelphia Fed & existing home sales there was also the Initial Jobless claims (387k vs. 383k expected with upside revisions) & the PMI Index which was weaker as well (52.9 vs. 53.3 expected in June vs. 54.0 in May). Today, Asian markets are catching up with yesterdays sell-off and are trading lower, US Futures are slightly higher (S&P Futures +0.2%) & European markets are set for a lower open on the day (Euro Stoxx Futures -1.00%). Moodys downgrades long-term debt ratings of 9 European, 5 US & 1 Canadian bank; Credit Suisse cut 3 levels; UBS, Deutsche Bank, BNP Paribas, Credit Agricole lowered 2 steps. RBS & SocGen cut one grade. Moodys said in its statement All of the banks affected by todays actions have significant exposure to the volatility and risk of outsized losses inherent to capital-markets activities.
1

PROBE: a proprietary index measuring the break-even probability of a given deal. 22 June 2012

Spains banks would need up to 62bln Euro in capital; the numbers come from by two privet firms which were hired by the Government last month to conduct stress test on the Spanish banks. According to Spains economic minister Spain will use these results to determine how much money it will draw from the 100bln Euro bailout money. Spain has also hired four accounting firms to review how individual banks account for doubtful loans. Results of the second round of the auditing process are due July 31. IMF sees euro crisis at critical stage, cites bank stress; Despite extraordinary policy actions, bank and sovereign markets in many parts of the euro area remain under acute stress, raising questions about the viability of the monetary union itself. According to the IMF one of the solutions is that the EU should issue common debt. Europes monetary system needs a closer union of its banks and more fiscal integration to arrest the decline in confidence engulfing the region, the IMF said. EU Financial Minister Meeting in Luxemburg & Hollande, Monti, Merkel and Rajoy Meeting in Rome; the Spanish bailout terms havent been decided yet and it remains unclear from where the 100bln Euro is going to come from. Some talks suggest that the money is going to come from the EFSF which has about 200bln Euro in it which is supposed to be used for Ireland, Portugal and Greece or the ESM which eventually will have 500bln Euro in it but isnt up and running yet. Other issues which are likely to be addressed are to allow the EU bailout funds to buy sovereign bonds and finding a solution for boosting growth. Monti, Merkel, Hollande and Rajoy are expected to attend a news conference following their meeting at 14:00GMT. Todays meetings come ahead of the EU Summit in Brussels scheduled for next week (June 28-29 ). Economic data today offers German IFO Survey (8:00GMT), Italian Consumer Confidence (8:00GMT) and Good luck!
th

Middle East Focus on Israel/Palestinian relations & the Iranian Story

Bloomberg: Chinas imports of crude from Iran rose to the highest level this year even as Western nations stepped up pressure to cut purchases of the commodity from the Persian Gulf nation. China, the worlds second-biggest crude consumer, bought 2.22 million tons of oil from Iran in May, according to a report e-mailed by the Beijing-based General Administration of Customs today. Thats equivalent to more than 524,000 barrels a day, up 35 percent from the 390,000 barrels a day purchased in April. It imported 2.27 million tons, or about 537,000 barrels a day, in May last year.

Risk Arbitrage
Bloomberg: Invensys Plc, the two-century-old company that makes software used to run the London Undergrounds subway trains, stands to reap a gain of at least 32% for shareholders by putting itself up for sale. Invensys, which has fallen almost 10 times as much as the FTSE All-Share Index of U.K.-listed companies since naming Wayne Edmunds its chief executive officer last year, said yesterday it had been approached by Emerson Electric Co. and other potential bidders. After preliminary talks ended without an agreement and Invensys said no discussions are ongoing, the 1.79 billion pound ($2.79 billion) company could now attract Siemens AG or General Electric Co., according to Huntington Asset Advisors. Reuters: Mineral explorer INV Metals Inc said it would buy a gold property in Ecuador from Iamgold Corp in a deal that would give Iamgold a 40-45 percent in the company, driving INV's shares up as much as 36 percent. The deal could help the junior explorer become a gold producer in the "shortest possible time frame," INV said in a statement. INV said it would issue

22 June 2012

150 million of its shares to Iamgold to gain control of the Quimsacocha gold project in Ecuador. The shares were valued at C$16.5 million based on INV's Wednesday closing price. Bloomberg: Cabot Corp., a U.S. maker of carbon black used in rubber tires, agreed to buy Norit NV for $1.1 billion to become the largest producer of activated carbon, which is used to cleanse smokestack emissions and water. Private-equity firms Doughty Hanson & Co. and Euroland Investments BV are selling Amersfoort, Netherlands-based Norit. Cabot will finance the deal with $200 million in cash, $300 million from an existing credit facility and about $600 million of long-term debt, the Boston-based company said today in a statement. The purchase should close in 2012 and add 20 cents to 25 cents to earnings in the fiscal year that begins in October, Cabot said. Reuters: Mexican tycoon Carlos Slim on Thursday looked well placed to succeed in a bid for a major stake in Royal KPN NV after the Dutch telecoms group failed to find a buyer or partner for its coveted German unit E-Plus. KPN's talks with cashstrapped Spanish peer Telefonica SA over a German deal - intended to unlock value, push up KPN's shares and ward off the unsolicited approach by Slim's America Movil - fell through just days before the Mexican company's offer closes on June 27. Bloomberg: Xstrata Plc, battling opposition to its $17.7 billion pound ($28 billion) takeover by Glencore International Plc, faces added pressure to cut executive payments after a governance warning from an investor group. Payments of 172.8 million pounds to Xstrata personnel as part of the deal prompted a so-called red top warning, the most serious corporate governance sanction, from the Association of British Insurers, whose members represent about 17 percent of the U.K. stock market. The London-based association highlights corporate governance issues without directly advising investors how to proceed. The payments, which must be approved at a July 12 meeting by Xstrata shareholders for the deal to proceed, have already been criticized as excessive by investors including Standard Life Plc and Fidelity Worldwide Investment. Glencore yesterday fell to the second lowest relative to Xstrata shares since the offer, signalling a heightened risk of the bid failing. Bloomberg: Navistar International Corp. is turning into the cheapest takeover target in the world among commercial truckmakers as billionaire Carl Icahn and his former protege push the company to boost its valuation. Icahn increased his stake to 11.9 percent this month and hedge fund manager Mark Rachesky disclosed he had taken an even bigger position as Navistar slumped to a three-year low, prompting the company to adopt a poison pill to help fend off hostile bids. Even after rebounding 18 percent, the $1.9 billion company trades at an 86 percent discount to its sales, the least expensive among commercial truckmakers with market values higher than $1 billion, according to data compiled by Bloomberg.) Bloomberg: Charterhouse Capital Partners LLP approached shareholders of Sorin SpA about buying the Italian maker of cardiovascular devices in a deal that would value the company at about 960 million euros ($1.2 billion), said people with knowledge of the matter. Charterhouse, a London-based private-equity firm, contacted owners including Mittel SpA to discuss a 2-euro-a-share offer, said the people, who asked not to be named because the talks arent public. Milan-based Sorin rose the most in more than three years. The Economic Times: Google intends to allow its newly acquired Motorola Mobility to keep its autonomy as it battles in the hotly contested smartphone market, executives said on Thursday. Google chief finance officer Patrick Pichette told the company's annual shareholder meeting that there is unlikely to be a integration of the mobile products firm. "It's important it stays on its own battlefield," he said. "We are not integrating Motorola with Google, we're making sure it has everything it needs to win in its own space. You shouldn't expect a full integration of the two companies." He added that the mobile 22 June 2012

products firm has "fantastic assets that need to be reset, reprioritized... and in that context think of Google in a way taking Motorola private."

Corporate News & Equity Highlights

Bloomberg: Billionaire Carlos Slim succeeded in his quest for an influential stake in Royal KPN NV, more than doubling his shares after the former Dutch phone monopoly failed to persuade investors to refuse his advances. America Movil SAB, Slims wireless carrier, yesterday disclosed a 21 percent stake in KPN, up from 8.7 percent the previous day. KPN earlier ended talks on a combination of its German business with a rival, a deal the company had sought to convince shareholders would provide greater value than Slims offer of 8 Euro a share. Slim, who agreed to acquire 21 percent of Telekom Austria AG last week, is taking advantage of bargain prices in Europe to expand America Movils assets beyond Latin America, where its the biggest carrier. America Movil said yesterday it wants a long-term partnership with KPN and is ready to begin working with its executives. Bloomberg: French carmaker Renault SA will halt production at its Dacia plant in Romania for two more days this month after another two-day stop on June 18 and June 19, Ziarul Financiar reported today, citing unidentified company officials. Renault wont manufacture cars on June 25 and June 26 after a strike at one of its French suppliers caused supplying difficulties, according to the Bucharest-based newspaper. Reuters: The French and German owners of Britain's largest mobile operator, Everything Everywhere, are not interested in selling and have enough cash to invest in the business, France Telecom's chief executive said on Thursday. Investment banking sources had told Reuters last week that former chief executive Tom Alexander approached private equity groups six months ago to gauge interest in an 8 billion pound ($12.6 billion) offer for the France Telecom and Deutsche Telekom joint venture. Bloomberg: The Cabot Corporation agreed on Thursday to buy Norit, a Dutch manufacturer of activated carbon that is used in chemical reactions, for $1.1 billion. The deal for Norit is the latest example of companies looking to complete bolt-on acquisitions that will help support their existing business operations. Cabot, a chemicals company based in Boston, said the transaction would bolster its presence in high-margin businesses, like the food and beverage industries, and would add up to 25 cents a share to the companys earnings by 2013. Bloomberg: Spains banks would need as much as 62 billion euros ($78 billion) in capital to withstand a worst-case economic scenario, according to two consulting firms hired by the government to conduct stress tests on the lenders. Oliver Wyman Ltd. estimated banks would need between 51 billion euros and 62 billion euros should Spanish gross domestic product shrink by 6.5 percent and house prices drop 60 percent from the peak. Roland Berger Strategy Consultants said lenders would need 51.8 billion euros under those conditions.

22 June 2012

Broker Recommendations
Positive Negative Vodafone Removed From Conviction Buy List at Goldman DUERR CUT TO HOLD FROM BUY AT DEUTSCHE BANK SOLVAY CUT TO SELL FROM NEUTRAL AT CITI MICHAEL PAGE CUT TO UNDERPERFORM VS NEUTRAL AT CREDIT SUISSE PLAYTECH CUT TO NEUTRAL VS BUY AT GOLDMAN SSE CUT TO UNDERWEIGHT FROM NEUTRAL AT HSBC MICHELIN RAISED TO NEUTRAL VS SELL AT GOLDMAN NOKIAN RENKAAT RAISED TO BUY VS NEUTRAL AT GOLDMAN Domino's Pizza Group PLC Raised to 'Buy' at Canaccord Genuity

Economic Calendar Key Events

Time (GMT) 8:00 8:00 8:00 8:00
Research Disclaimer
This publication has been prepared by Makor Capital Limited (Makor Capital) and is intended for professional or qualified investors only. Makor Securities LLP (Makor Securities)is distributing this material to its clients who are Eligible Counterparties or Professional Clients under FSA Rules. It may also be disseminated to persons who are Investment Professionals within the meaning of the Financial Services and Markets Act 2000 (Financial Promotion) order 2005. If you do not fall into any of these categories you should disregard it. This research material is a marketing communication. It is not investment research and has not been prepared in accordance with legal requirements designed to promote the independence of investment research. It is not subject to any prohibition on dealing ahead of the dissemination of investment research. It has not been produced by Makor Securities. This material does not take into account the particular investment objectives, financial situation or needs of individual clients or other recipients. Before acting on this material, clients and other recipients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. This material should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This material is produced by research providers which Makor Securities believes to be reliable, but Makor Securities does not warrant or represent (expressly or impliedly) that it is accurate, complete, not misleading or as to its fitness for the purpose intended and it should not be relied upon as such. Opinions expressed will be the current opinions of those producing the research as of the date appearing on this material only. We expect those producing the material in this report to update it on a timely basis but can give no undertaking that they will do so and regulatory compliance or other reasons may prevent them from doing so (or us from disseminating updated material). Members and employees of Makor Securities LLP, employees of Makor Capital, Makor Capital Markets and any firm producing this material (including Alternative Investment Management Research SA (AIM&R),) may from time to time have long or short positions in securities, warrants, futures, options, derivatives or other financial instruments referred to in this material. For Makor Securities, this information is set out in our Conflicts of Interest Policy which is available on request. Policies for the production of research from research providers (including AIM&R) are available on request. Unless otherwise stated, share prices provided within this material are as at the close of business on the day prior to the date of the material. Neither the whole nor any part of this material may be duplicated in any form or by any means. Neither should any of this material be redistributed or disclosed to anyone without prior consent. This material is issued for general information and discussion purposes only. None of Makor Securities, Makor Capital, Makor Capital Markets nor AIM&R accepts liability whatsoever for any direct, indirect or consequential loss or damage of any kind arising out of the use of all or any of this material. The services, securities and investments discussed in this material may not be available to, nor are suitable for all investors. Investors should make their own investment decisions based upon their own financial objectives and financial resources and it should be noted that investment involves risk, including the risk of capital loss. Past performance is no guide to future performance. In relation to securities denominated in foreign currency, movements in exchange rates will have an effect on the value, either favourable or unfavourable. Entities Makor Securities LLP is authorised and regulated by the Financial Services Authority (FSA registration number 556034) of Dover House, 34 Dover Street, London W1S 4NG. Makor Capital, company number 514456466, is incorporated in Israel and is a 100% held subsidiary of Makor Holdings Pte Ltd incorporated in Singapore. Makor Capital Markets SA, company number CH-660.2.999.011-0 is incorporated in Switzerland and is also a 100% held subsidiary of Makor Holdings Pte Ltd. AIM&R is incorporated in Switzerland; company number CH-660.1.533.997-8

Country GE GE GE IT

Event IFO - Business Climate IFO - Current Assessment IFO - Expectations Consumer Confidence Ind. sa

Period JUN JUN JUN JUN

Survey 105.6 112 99.8 86

Actual -----

Prior 106.9 113.3 100.9 86.5

Revised -----

22 June 2012