CONVERTIBLE BOND RESEARCH

17 October 2011

CONVERTIBLE WEEKLY
In Convertible Outlook Q4 2011 EMEA and Asia Pacific: Tectonic shifts, 12 October 2011, our key themes are the positive convexity and attractive valuation of the asset class. Our trade ideas include Air France, Inmarsat, WPP, Subsea 7, Aquarius, IAG, CASHES, Western Areas, China Unicom, Gome, San Miguel and Bumi. Our credit strategists note that credit markets have recently underperformed equity markets on a beta-adjusted basis, both through sell-offs and rallies. We update our analysis on convertible-specific disconnections. We highlight the potential returns on the SGL Carbon 2013 and 2016 convertibles, were a change of control to occur, with the 2016 standing to potentially gain more. Our equity analysts have lowered their price target on AU Optronics to NT$12. They continue to see it as a long-term play on advanced displays technology. We view the 9.5% yield on its 0% 2015 convertible as attractive given its current strong fundamentals and recommend a switch out of the equity for potential 11 points of upside supported by the recent company buyback. Chinese property straight bonds are trading wider than fundamentals dictate in our credit analysts view. On a credit relative value basis, we find current levels for the Agile and Kaisa convertibles as attractive versus their respective straight bonds. Our Chart of the Week shows the positive convexity of potential convertible returns. Our modelling indicates potential total returns of -6.1%, +0.7% and +9.0% for EMEA convertibles, and -3.5%, +0.6% and +6.4% for Asia Pacific convertibles, in the scenarios of -25%, flat and +25% equity moves through year-end. Figure 1: Chart of the Week Projected potential convertible returns through year-end for +/-25% equity moves, EMEA (left) and Asia Pacific (right)
15% 10% 5% 0.7% 0% -5% -6.1% -10% -15% -25% 0% 25% -10% -15% -25% 0% 25% 0% -5% -3.5% 9.0% 15% 10% 5% 0.6%

CB InsightTM
https://live.barcap.com/keyword/CBINSIGHT Our online convertibles portal, providing interactive analytical tools, market data and research Angus Allison +44 (0) 20 7773 5379 angus.allison@barcap.com Barclays Capital, London Heather Beattie, CFA +44 (0) 20 7773 5859 heather.beattie@barcap.com Barclays Capital, London Luke Olsen +44 (0) 20 7773 8310 luke.olsen@barcap.com Barclays Capital, London www.barcap.com

6.4%

Note: Assumes credit would tighten/widen when equities rise/fall, with a k-factor of 0.5. For details, please see Convertible Outlook Q4 2011 EMEA and Asia Pacific: Tectonic shifts, 12 October 2011. Source: Barclays Capital

Barclays Capital does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. This research report has been prepared in whole or in part by research analysts based outside the US who are not registered/qualified as research analysts with FINRA.
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 17

Barclays Capital | Convertible Weekly

MARKET MOVERS
Global equity indices (rebased as of 7 October 2011)
S&P 500 FTSE 100 Nikkei STOXX 50 Hang Seng
20 15 10

Cumulative change in global government bond yields (bp)

Gilt 5 yr Bund 5 yr UST 5 yr HK 5 yr

Global currency moves over the past week (versus USD)

4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0%

106 104 102 100 07 Oct

5 0

10 Oct

11 Oct

12 Oct

13 Oct

14 Oct

07 Oct

10 Oct

11 Oct

12 Oct

13 Oct

14 Oct

-3.0% EUR GBP SGD INR JPY

Commodity price moves over the past week

6% 4% 2% 0% Gold Aluminium Copper Palm Oil Zinc Oil

Global credit spreads (bp)

BBB z-spreads (left) JACI Quasi-Sov spread (left) iTraxx Xover (right) 420 400 380 360 340 320 300 280 260 240 07 10 11 12 13 14 Oct Oct Oct Oct Oct Oct 820 800 780 760 740 720

Term structure of STOXX implied volatility

Min (6M) Week ago Max (6M) Current

48% 44% 40% 36% 32% 28% 24% 20% 16% 12% 1M

3M

6M

1YR

3YR 5YR

Source: Bloomberg, Barclays Capital

For details of the major economic releases due this week, slease refer to the Global Traders' Guide, 14 October 2011, and The week ahead: Emerging Asia, 17 October 2011.

Market commentary
Q4 outlook
Convexity is king
EMEA and Asia Pacific convertibles offer positive convex potential returns and attractive valuations, in our view

In our latest quarterly market report, Convertible Outlook Q4 2011 EMEA and Asia Pacific: Tectonic shifts, 12 October 2011, our key themes are the positive convexity and attractive valuation of the asset class: The outlook for risky assets remains balanced on a knife-edge, in our view, although the probability of a positive outcome is now higher, following moves towards a comprehensive and coordinated policy response to the euro area debt crisis. Convertibles now offer compelling relative value according to our analysis, having cheapened significantly in Q3 see, for details, Asia Pacific Convertible Snapshot, 16 September 2011 and EMEA Convertible Snapshot, 20 September 2011. Our modelling indicates potential total returns of -6.1%, +0.7% and +9.0% for EMEA convertibles, and -3.5%, +0.6% and +6.4% for Asia Pacific convertibles, in the scenarios of -25%, flat and +25% equity moves through year-end; see Chart of the Week, Figure 1.

17 October 2011

Barclays Capital | Convertible Weekly

This suggests that convertibles do offer positive asymmetric exposure to large equity moves in Q4. We view this as critical given the uncertain backdrop. We identify bonds with the most convex potential returns using modelled projections. We also provide screens for defensive, balanced and aggressive convertibles, using our new Custom Query tool on our CBInsight website on Barclays Capital Live. Other themes we explore are prospects for convertible issuance post the market shift in Q3, credit-equity correlation and mapping out bond redemptions into 2012.

Trade ideas
In our quarterly, we provide several conviction trade ideas with differing risk profiles: EMEA: Air France 20, Inmarsat 17, WPP 14, Subsea 7 13, Aquarius 15, IAG 14 and CASHES. Asia Pacific: Western Areas 12, China Unicom 15, Gome 14, San Miguel 14 and Bumi 14.

Q3 review
EMEA convertibles returned -10.3% in the year to end-Q3, compared with -9.3% for Asia ex-Japan. This is relative to equity declines of -15.8% and -19.9%, respectively. Year-to-date new issuance in EMEA has been only 6.6bn with 11.0bn of redemptions, for 4.4bn of negative net supply. Asia Pacific has seen $9.7bn of new issuance and $14.4bn of redemptions, hence $4.7bn of negative net supply. Given that we ascribe 600bp of the fall in each regions convertibles to the equity move, and delta is now lower at 33% for EMEA and 21% for Asia Pacific, we believe that the universe is also more defensively positioned than previously. Despite the severity of the moves in fundamental drivers, we have not seen a return to the asset class-specific distress of 2008. The market now has less leverage and a more balanced investor mix.

EMEA activity
Our credit strategists note that

credit markets have recently underperformed equity markets on a beta-adjusted

basis, both through sell-offs and rallies

Our credit strategists note that credit markets have recently underperformed equity markets on a beta-adjusted basis, both through sell-offs and rallies. For details, please see European Credit Alpha: A sustainable rally?, 14 October 2011. We identified a similar trend in our Convertible Outlook Q4 2011 EMEA and Asia Pacific: Tectonic shifts, 12 October 2011, and take the opportunity to refresh our analysis. We also highlight the Overweight and Underweight recommendations of our credit analysts that cross over with our European convertibles universe we believe that these may be of use in determining which way a credit-equity dislocation may resolve itself, if at all. Figure 2: Credit analyst rating summary for convertible names
Overweight Underweight

Axa Clariant Glencore IAG (nee British Airways) International Power ITV
Source: Barclays Capital

Air France ArcelorMittal Michelin Publicis

17 October 2011

Barclays Capital | Convertible Weekly

Anglo Americans credit-equity disconnection has softened, whereas ArcelorMittals relationship remains distinct from the historical pattern

Anglo Americans credit no longer seems as disconnected to the wide-side from its equity relative to when we published our convertibles outlook. ArcelorMittals credit still looks tight relative to its historical levels. Our credit analysts are Underweight ArcelorMittal and we caution that a loss of its investment grade rating could have implications for inclusion in indices that require an investment grade rating. Figure 4: ArcelorMittal 5y CDS (bp) versus equity (EUR)
1200 y = 7E+06x
2 -1.3725

Figure 3: Anglo American 5y CDS (bp) versus equity (GBp)

800 700 600 500 400 300 200 100 0 0 1000 2009 to present
Source: Bloomberg, Barclays Capital

1000 800 600 400 200 0

y = 66071x
2

-1.7181

R = 0.798

R = 0.5506

2000

3000

4000

10 2009 to present

20

30 14-Oct-11

40

Past 2 months

14-Oct-11

Past 2 months

Source: Bloomberg, Barclays Capital

The credit of Axa and Unibail Rodamco may have been oversold amid broader European concerns

The credit of Axa and Unibail Rodamco may have been oversold amid broader European concerns. For example, Axa seems to be disconnected with credit to the wide-side of the historical relationship, though its credit has tightened since we published our convertibles outlook on 12 October. We reiterate that our credit analysts are Overweight the cash bonds. As such, we believe the correction might continue we note that the Axa 2014/17 convertibles were both well-insulated from the equity fall seen from the end of 2008 through to March 2009. A similar picture can be seen for Unibail Rodamco ie, its credit is wide of the historically observed relationship. Figure 6: Unibail Rodamco 5y CDS (bp) versus equity (EUR)
600 y = 5671.9x
2 -1.4648

Figure 5: Axa 5y CDS (bp) versus equity (EUR)

500 450 400 350 300 250 200 150 100 50 0 0 5 10

500 400 300 200 100 0

R = 0.5042

y = 8E+06x
2

-2.3349

R = 0.6911

15 Past 2 months

20 14-Oct-11

25

50 2009 to present

100

150 14-Oct-11

200

2009 to present
Source: Bloomberg, Barclays Capital

Past 2 months

Source: Bloomberg, Barclays Capital

17 October 2011

Barclays Capital | Convertible Weekly

This also seems to be the case for Publicis, but as our credit analysts are Underweight, we see this as more justified; our equity analysts have also recently lowered their price target on the stock

Given that our credit analysts are Underweight Publicis cash bonds and our equity analysts recently moved their price target to 31.70 from 42.00, implying downside to the current share price, we believe that the convertible should be approached with caution; we prefer WPP within the sector. Similarly, our equity analysts have a 1-Overweight stock rating on Sainsbury and should the credit-equity relationship persist, then a stock increase could feed through to an additional (beyond the modelled delta) positive impact on the bond through credit tightening. Our equity analysts note that the Sainsburys real estate portfolio is valued at significantly more than the entire companys enterprise value which seems illogical. This is well-known and unlikely to drive a re-rating, but could provide downside protection. Figure 8: Sainsbury 5y CDS (bp) versus equity (GBp)
250 200 150 100 50 0 y = 31.319x
2 0.2245

Figure 7: Publicis 5y CDS (bp) versus equity (EUR)

250 200 150 100 50 0 0 10 20 30 Past 2 months 40 14-Oct-11 50 y = 1576.1x
2 -0.8459

R = 0.5842

R = 0.0065

100

200

300 Past 2 months

400 14-Oct-11

500

2009 to present
Source: Bloomberg, Barclays Capital

2009 to present
Source: Bloomberg, Barclays Capital

Spiegel reported that BMW plans to buy a stake in SGL Carbon and that Volkswagen may increase its stake We highlight the potential returns on the SGL Carbon 2013 and 2016 convertibles, were a change of control to occur

Spiegel reported that BMW plans to buy a stake in the company. BMW may buy a stake of slightly more than 20% to gain a majority by pooling the holding with BMW heiress Susanne Klattens stake, the magazine said. Volkswagen AG may increase its investment in SGL Carbon, Spiegel said. SGL Carbons 2013 and 2016 convertible bonds each have stepped conversion price ratchets and par puts upon a change of control (defined as a party acquiring 30% of the voting rights, or if a tender offer, 50% of the rights and the offer becoming unconditional). The ratchet on the 2013 convertible last stepped down in May 2011, to zero, and hence is not relevant. The ratchet on the 2016 convertible would currently result in a 16.2% decrease to the conversion price (19.3% conversion ratio increase), stepping down from 30 June 2012 to a 13.0% price decrease (15.0% ratio increase). Below we show the potential returns based on close indications from today of 121 versus parity 117.1 (2013 bond) and 157 versus parity 145.5 (2016 bond). These compare to levels from Friday of 110.1 versus parity 104.0 (2013 bond) 139.3 versus parity 129.3 (2016 bond). As such, the 2016 bond, although clearly having the greater potential upside, also has further to potentially retrace. Figure 9: Potential returns on SGL Carbon bonds for a change of control
Equity bid premium 10% 15% 20% 25% 30%

2013 O/R pts 2013 O/R % 2013 net pts (65% delta) 2013 D/N ROCE % (65% delta) 2016 O/R pts 2016 O/R % 2016 net pts (78% delta) 2016 D/N ROCE % (78% delta)

7.4 6.1 -0.2 -0.4 32.8 20.8 21.5 48.1

13.3 11.0 1.9 4.2 41.5 26.2 24.5 54.8

19.2 15.8 3.9 8.7 50.2 31.7 27.5 61.6

25.0 20.6 6.0 13.2 58.8 37.2 30.5 68.3

30.9 25.4 8.0 17.8 67.5 42.7 33.5 75.0

Note: Deltas are model deltas, assumes a change of control occurring in 90 days. Source: Barclays Capital

17 October 2011

Barclays Capital | Convertible Weekly

A second placing of Glencores 2014 convertible added to stock borrow pressures and the bond lost four points relative to a three point fall in parity this does now present a better entry point, in our view

A second placing of Glencores 2014 convertible bond took place last week: $136.5mn from Zijins (according to IFR) holding was placed with investors at a price of 128.3, compared to the $800mn First Reserve holding that was placed at a price of 134.3. At the time (Glencore 5% 2014 convertible bond offering by First Reserve: Fair value, but potential overhang caps the valuation, 8 September 2011) of the First Reserve placing, we highlighted the potential for further supply as a key concern. With the additional supply, stock borrow already limited has seen increased pressure. However, given that the bonds lost four points following the placing (parity down three points), they now offer a more attractive entry point, in our view. At a price of 125.5, the premium is 6.5%, and the yield to maturity -2.6%, the 5% coupon offsetting part of the 26 points that the price is above par. There is 20% headroom from the bond price to the 150 call trigger, which doesnt become effective until November 2012. According to the Glencore IPO terms from May 2011, the 6-month lock-up for cornerstone equity investors is due to expire next month. This could, in our view, catalyse an increase in stock liquidity and at least a partial thaw in the stock borrow, depending on whether and how much of these stock holdings are disposed. The Parpublica 2017 bond exchangeable into Galp recorded the four largest discounts to parity in its history last week, reaching 13.5 points on Monday, trimming slightly to 12.0 points on Friday (price 85.5 versus parity 97.6). This represents 12% of parity. Our equity analysts believe that Galp's trading update is slightly negative, with both upstream and downstream volumes in 3Q below the levels achieved in 2Q. However, our analysts expect very little weight to be attached to the upcoming 3Q results on 28 October. Instead they see the news flow surrounding the potential sale of a EUR2bn stake in its Brazilian assets, now planned for the end of October/early November, as the key driver for the shares and one which they expect to be positive. Our analysts current valuation for the Brazil assets is $12.5bn. For details, please see GALP (1-OW, PT EUR19): Mark to market - a busy quarter ahead, 17 October 2011. The near-term headwinds but strengthening longer-term outlook for Subsea 7, fits well with the convexity of potential returns offered by the 2013 convertible, in our view. The bond is one of our conviction trade ideas. Last week, our equity analysts hosted a series of group meetings with Subsea 7, which highlighted a two-fold view of the company at present. Investors whose sights are firmly set on the magnitude of the headwinds that are set to temper 2012 earnings, were always likely to come away partly unsatisfied, given that guidance is due on 2 November. Investors with a longer-term horizon should feel comforted by an outlook that appears to be going from strength to strength. For details, please see Subsea 7 (1-OW, NOK190): On the road with Barclays Capital - 2012 worry obscures bright future, 17 October 2011. Our equity strategists recently commented that while euro area PMI surveys threaten recession, recent hard activity data such as industrial production have diverged of late, surprising to the upside. The euro area can still avoid double-dip recession, particularly given better activity data coming out of the US recently. Details: European Strategy Elements: Not all gloom and doom in Euroland.

The Parpublica 2017 bond exchangeable into Galp recorded the four largest discounts to parity in its history last week, though our equity analysts remain positive on the shares with a Brazilian stake sale catalyst on the horizon

The near-term headwinds but strengthening longer term outlook for Subsea 7, fits well with the convexity of potential returns offered by the 2013 convertible, in our view

17 October 2011

Barclays Capital | Convertible Weekly

Asia Pacific activity

Our equity analysts lower their price target on AU Optronics to NT$12 from NT17. They continue to see AU Optronics as a long-term play on the AMOLED and other advanced displays technology revolution in Taiwan

We recommend equity investors switch out of AU Optronics shares into its zero-coupon 2015 convertible to benefit from a 9.8% yield in light of our equity analysts 3-UnderWeight rating and lowered price target (12-month price target lowered to NT$12 from NT17, 6% below where the shares closed today at N$12.75.). This morning, our analysts cut their FY11-12 EPS forecast and price target for AU Optronics ahead of Q3 results. According to channel checks both panel average selling prices (ASPs) and shipments are worse than they expected. Our analysts now forecast net losses of NT$11.0bn for AU Optronics (versus consensus NT$8.7bn) and believe we have not yet reached the inflection point. They do not expect panel prices to improve significantly until H2 2012 but continue to see AU Optronics as a long-term play on the AMOLED and other advanced displays technology revolution in Taiwan. Please see Asia ex-Japan LCD Displays: Not yet at an inflection point; CBs more attractive, 17 October 2011 for full details. The $700mn AU Optronics 0% 2015 convertible is currently indicated at 80.3 versus a share price of NT$12.75, ie, parity is 32.5. The bond is yielding 9.5% to its October 2015 maturity date, when it will redeem at 115.34. This yield compares favourably with other Taiwanese technology convertibles. As of 30 June 2011, AU Optronics has NT$87.4bn in cash and cash equivalents, with total debt of NT$153bn (US$5bn) due between now and 2016. We estimate that NT$133bn is due for redemption prior to the 2015 convertible, which comprises primarily of bank loans. AU Optronics also has a number of unused credit facilities, which total approximately NT$60bn. Given our equity analysts view that AU Optronics has a proven track record of disciplined utilisation, good cost control capability, management execution and the potential to generate a free cash flow yield of +14% in 2012 following negative free cash flow in 2011, we view the 9.8% yield on its convertible as attractive given its current strong fundamentals. AU Optronics was previously rated BB- by Fitch until its rating was withdrawn by the company in August this year. AU Optronics Total Debt/EBITDA as of 30 June 2011 is 3.4x, which is still in line with a BB rating, in our view, while its interest coverage is 11.1x, which is in line with a BBB rating. Our analysis shows that 4y global technology BB-rated bonds are trading with a zspread to maturity of 650bp, with BBB-rated bonds trading with a z-spread to maturity of 190bp. Using a 500bp credit spread assumption, 27% volatility and 2% borrow, we value the AU Optronics 0% 2015 convertible bond at 91.2. Hence, we see upside 11 points of potential upside to its market price. We would recommend equity investors switch out of AU Optronics shares into the convertible at current levels to benefit from a 9.5% yield in light of our equity analysts 3-UnderWeight rating and lowered price target. Lastly, on 23 September, AU Optronics repurchased $100mn of the convertible at 78.667, which we view as positive and in addition provides support to the bond price. AU Optronics will hold its investor meeting on 25 October. Our equity analysts expect China Unicom to release its Q3 11 results by the end of this month. Beyond the usual profitability and margin trends, they would look for two specific trends in the results: 3G average revenue per user (ARPU) trends our analysts will be interested in how 3G ARPU has trended in Q3 given that China Unicom has aggressively promoted its newly launched WoPai service, which is targeted at college students. They want to see how ARPU trends from low-end smartphones such as the ZTE V880 have continued into the Q3 as well. 3G MoU trend They will also start watching for 3G MoU trends our analysts believe most of China Unicoms 3G subscribers are also keeping their China Mobile number as mobile number portability is still not available in China. A consistently rising MoU trend is positive for China Unicom as it would indicate that users are getting more comfortable with their Unicom device and number for calls, thus that they may gradually get rid of their second device and fully switch to the China Unicom network. Please refer to China Unicom: Expensive and undervalued, 12 October 2011 for further details. Our analysts reiterate their 1-Overweight rating and 12-month price target of HK$21.
7

We view the 9.5% yield on its convertible as attractive given its current strong fundamentals

We recommend equity investors switch out of AU Optronics shares into the convertible supported by 11 points of potential upside to the convertible valuation and the recent company buyback

Our equity analysts expect Q3 to highlight sustained momentum for China Unicom, reminding investors why China Unicom could be an undervalued stock long term, though still expensive on near-term profits

17 October 2011

Barclays Capital | Convertible Weekly

China Unicoms 0.75% convertible due 2015 is trading at 111.3 versus a share price of HK$15.08 or parity of 94.9, resulting in a premium of 17%. 100-, 260-, 520- and 999-day realised volatilities in USD are currently 46%, 38%, 36% and 53%, respectively. Median 90and 260-day historical volatilities for the past five years have both been 44%. December 2011 at-the-money call options on China Unicoms ordinary shares are currently indicated on Bloomberg with an implied volatility of 34%. Taken together, we use 33% as our volatility assumption for a credit calibrated model, or 31% in a non-calibrated model.
China Unicom's 0.75% 2015 convertible looks inexpensive on a theoretical and an implied volatility basis. It provides an attractive asymmetric profile

Using a 200bp credit spread assumption (China 5y CDS is indicated at 132-137bp), 50bp stock borrow fee and 31% volatility, we value the 2015 convertible at 115.7, which equates to an implied volatility of 24%. The bond has a delta of 59%, higher than the realised delta of 41% it has traded on year to date. Using our analysts HK$21 price target, the theoretical valuation would increase to 139.2, potential 20% upside to current market value. The bond provides 16% potential upside and 8% downside for a +/-25% move in the stock over a one-year horizon assuming all other inputs remain constant. This equates to a participation ratio of 2.3x. The bond is puttable at par in October 2013. Our Chinese real estate credit analysts believe concerns about liquidity and financing options have driven valuations of Chinese property straight bonds wider than fundamentals dictate. With the broader equity and bond markets stabilising, they expect a continued recovery in the property sector. The property market is slowing but not collapsing. Based on National Bureau of Statistics data, sales volume is still growing. Figure 10: Monthly contracted sales for Chinese real estate convertibles (CNY bn)
Company Sep-10 Aug-11 Sep-11 y/y m/m 9M 11 y/y % of target

Chinese property straight bonds are trading wider than fundamentals dictate, in our credit analysts view

Agile COLI Kaisa Yanlord

Total

3.1 7.0 0.6 1.4

53.6

2.3 3.7 2.0 0.6

51.4

2.8 5.4 2.0 1.8

54.6

-10% -22% 219% 26%

10%

22% 48% 0% 187%

13%

22.9 59.7 10.3 6.0

33% 55% 48% 3%

62% 88% 69% 55%

Note: Total refer to sales for all names under credit coverage. Source: Company data, Barclays Capital

Our analysts performed a H2 11 liquidity analysis, pro forma for Q3 sales as listed in Figure 11. The quantitative liquidity assessment provides a snapshot of the liquidity situation, but it tends to over-penalize the developers. For example, most companies have some flexibility to delay construction. In addition, the short-term debt data include debt due in the next 12 months, but the cash inflows data include only projected H2 cash flow. Furthermore, our analysts also believe most of the companies short-term debt will be rolled over, as it is mainly construction loans. Other funding options, via banks or asset sales, also are available. Land acquisitions, which are unpredictable, have not been factored in and for now our analysts expect developers to prioritise preserving liquidity over growth. For full details please see Asia HY Research: Chinese Real Estate - Slowing growth, 17 October 2011 Figure 11: H2 11 liquidity analysis, pro forma for Q3 sales, CNY mn
Unrestricted cash Cash **Short SG&A, and restricted cash 3Q sales and and -term interest Construction for construction, extrapolated *Other cash debt, and Jun 11 4Q sales revenue inflows Jun 11 costs taxes

Company

Land premium

Cash outflows

Liquidity buffer

Agile COLI Kaisa Yanlord

6,875 14,948 4,249 5,364

14,400 31,514 11,634 5.972

211 645 123 130

21,486 47,108 16,006 11,466

5,946 10,805 2,503 2,109

8,000 10,913 3,200 3,000

4,000 6,000 2,900 2,300

208 4,595 3,700 2,626

18,154 32,313 12,303 10,035

18% 46% 30% 14%

Note: Liquidity buffer is defined as cash inflows minus cash outflows, expressed as a percentage of cash outflows * Based on 1H 11. ** Next 12 months (July 2011 to June 2012). Source: Company data, Barclays Capital

17 October 2011

Barclays Capital | Convertible Weekly

On a credit relative value basis, we find current levels for the Agile and Kaisa convertibles as attractive versus their respective straight bonds

Our analysts believe the valuation on the Kaisa 2015 straight bond is attractive. We view the current levels for the Agile and Kaisa convertible bonds as attractive versus their respective straight bonds, particularly given the shorter-dated nature of the convertibles owing to the presence of a bondholders put option.

Figure 12: Credit relative value between Chinese real estate straight and convertible bonds
Straight bond Redemption date Mid Price Mid z-spread Convertible bond Currency Price Parity Redemption date Z-spread

Agile 10% 2016 Agile 8.875% 2017 COLI 5.5% 2020 Kaisa 13.5% 2015 Yanlord 9.5% 2017 Yanlord 10.625% 2018

14-Nov-16 28-Apr-17 10-Nov-20 28-Apr-15 04-May-17 29-Mar-18

90.0 82.9 93.6 70.7 69.0 83.1

1135 1185 422 2589 1724 1311

Agile 4% 2016

USD

78.3

37.1

28-Apr-14

1385

COHL - COLI 0% 2014 Kaisa 8% 2015 Yanlord Land 5.85% 2014

USD CNY SGD

121.2 85.9 70.3 55.6

14-May-12 20-Dec-13 13-Jul-12

201 2694 526

100.1 40.6

Source: Bloomberg, Barclays Capital

In India, Plethico Pharmaceuticals looks to restructure its $75mn FCCB due in October 2012

According to an article in Bloomberg this morning, Plethico Pharmaceuticals has sought approval from the Indian central bank to reset the terms of its $75mn foreign currency convertible bond, which is due to redeem at 145.9 on 23 October 2012. In our Convertible Outlook Q4 2011 EMEA and Asia Pacific: Tectonic shifts, 12 October 2011 we list the maturing Indian FCCBs in 2012. We highlight the bonds where the current price is less than 90% of the early redemption amount, those bonds where the convertible amount outstanding is greater than 25% of the company's market cap and the bonds where the amount outstanding is greater than the cash and cash equivalents as reported by Bloomberg. Plethico Pharmaceuticals triggered all three of these criteria, as did Subex Azure and Sterling Biotech.

Figure 13: Corporate actions

Date Company/issue Action Details

14 Oct 14 Oct 13 Oct 12 Oct 12 Oct

Epistar 0% 2016 Intime 1.75% 2013 PetroBakken 3.125% 2016

Repurchase

Repurchased $6.8mn of its convertible bonds due 2016. $273.2mn remains outstanding.

Conversion price Conversion price adjusted to HK$13.09 from HK$13.31 due to dividend effective 17 adjustment October 2011. Conversion price Conversion price adjusted to $36.27 from $39.61 due to dividend effective 1 October adjustment 2011.

Paladin Energy 3.625% 2015 Conversion price Conversion price adjusted to US$5.608 from US$5.665 due to issue of shares at less adjustment than 95% of CMP, effective 12 October 2011. Paladin Energy 5.0% 2013 Conversion price Conversion price adjusted to US$6.523 from US$6.59 due to issue of shares at less adjustment than 95% of CMP, effective 12 October 2011.

Source: Bloomberg, Reuters, listing exchanges

Figure 14: Ratings actions

Date Company/Issue Agency Rating Action

17 Oct 13 Oct

Emaar Industrivarden

Moodys S&P

Upgraded rating to Baa3 from B1. The outlook is Stable. Placed A corporate credit rating on CreditWatch with negative implications.

Source: Bloomberg, Reuters, listing exchanges

17 October 2011

Barclays Capital | Convertible Weekly

LOOKING AHEAD
1 November 2011 Nobel Biocare 1% 2011: Final conversion. The bond is indicated today at 101.8 versus parity of 11.1. Maturity is 8 November 2011 at 102.05. 2 November 2011 UMC - Novatek 0% 2014: final put notice date. The bond is puttable at 99.0 on 2 December 2011. It is currently trading at 107.1 versus parity of 85.7, at these levels we do not expect bondholders to exercise their put option. 2 November 2011 UMC - Unimicron 0% 2014: final put notice date. The bond is puttable at 99.0 on 2 December 2011. It is currently trading at 109.9 versus parity of 95.4, at these levels we do not expect bondholders to exercise their put option. 4 November 2011 Walsin Lihwa 0% 2011: Final conversion. The bond is indicated at 100.5 versus parity of 60.1. Maturity is 14 November 2011 at 100. 6 November 2011 E-Ton Solar 0% 2011: Final conversion. The bond is indicated at 97.5 on mids versus parity of 12.8. Maturity is 16 November 2011 at 100. 7 November 2011 Yue Yuen 0% 2011: Final conversion. The bond closed today at 112.8 versus parity of 80.2. Maturity is 17 November 2011 at 113.2.

17 October 2011

10

Barclays Capital | Convertible Weekly

CCI
CCI mixed as credit tightens and volatility declines

The cost of convertible issuance, as measured by our CCITM, fell in the euro area and Hong Kong, but rose in the US and UK. With volatility down across the board, the degree of credit tightening was responsible for the discrepancies. CCI levels at the end of last week were 4.13% (down 8bp), 0.96% (up 12bp), 3.88% (up 9bp), 2.98% (down 22bp) in the euro area, US, UK and Hong Kong respectively.

Figure 15: Global CCI performance for the past month

Euro area
6.5% 6.0% 1.80% 5.5% 2.0% 5.0% 4.5% 1.60% 4.0% 3.5% 16-Sep 1.50% 14-Oct 1.0% 1.7% 1.70% 1.5% 1.8% 1.90%

US
3.0% 2.0%

2.5%

1.9%

23-Sep

30-Sep

07-Oct

0.5% 16-Sep

23-Sep

30-Sep

07-Oct

1.6% 14-Oct

UK
6.0% 1.90%

HK
5.5% 5.0% 1.80% 4.5% 1.9% 1.8% 1.7% 1.6% 1.70% 4.0% 1.5% 3.5% 1.60% 3.0% 1.50% 14-Oct 2.5% 16-Sep 1.4% 1.3% 1.2% 14-Oct

5.5%

5.0%

4.5%

4.0%

3.5% 16-Sep

23-Sep

30-Sep

07-Oct

23-Sep

30-Sep

07-Oct

Cost of issuing convertible bond

Source: Bloomberg, Barclays Capital

Cost of issuing equivalent straight debt

Interest saving

INTELLECTUAL PROPERTY NOTICE: The Convertible Cost Index (CCI) contains intellectual property rights of Barclays Bank PLC, including database rights and copyright. Barclays Bank PLC reserves all rights in the Convertible Cost Index. Redistribution of the Convertible Cost Index is prohibited. Convertible Cost Index is a trade mark of Barclays Bank PLC.

17 October 2011

11

Barclays Capital | Convertible Weekly

NEW ISSUES
Figure 16: New convertible issuance 2011 YTD
Size Date 21 Sep 04 Aug 21 Jul 14 Jul 08 Jul 06 Jul 29 Jun 28 Jun 23 Jun 21 Jun 16 Jun 15 Jun 15 Jun 07 Jun 07 Jun 03 Jun 03 Jun 26 May 24 May 17 May 17 May 17 May 16 May 20 Apr 19 Apr 15 Apr 14 Apr 13 Apr 12 Apr 12 Apr 08 Apr 07 Apr 06 Apr 04 Apr 31 Mar 31 Mar 29 Mar 22 Mar 10 Mar 10 Mar 10 Mar 08 Mar 03 Mar 03 Mar 17 Feb 02 Feb 31 Jan 25 Jan 20 Jan 19 Jan 18 Jan 18 Jan 18 Jan 11 Jan Issuer-underlying REXLot POSCO-SK Telecom Taiwan Glass Radiant Opto-electronic Solar Applied Materials Hanjin Shipping Osung Assystem GDH-Guangdong Inv CFS Retail Property Sekisui House Lotte Shopping Lotte Shopping Swiss Prime OSIM Asia Cement Horizon Oil Sporting Bet Aabar - Daimler Derwent Wharf Holdings UMC Fonciere Des Regions San Miguel Corp Mingfa Cofinimmo TPK China Power Intl Pescanova Polarcus China Huiyuan Juice Shangri-La Asia Agile Property Suzlon Tsinlien - Tianjin Sacyr Celesio Tatung CapitaMall Trust IHI Steinhoff TUI Ingenico Immofinanz Yamato Ship Finance London Mining Pierre et Vacances Asia Cement - FENC CGGVeritas Epistar BTS Essar Energy Industrivarden Country Hong Kong Korea Taiwan Taiwan Taiwan Korea Korea France Hong Kong Australia Japan Korea Korea Switzerland Singapore Taiwan Australia UK UAE UK Hong Kong Taiwan France Philippines Hong Kong Belgium Taiwan Hong Kong Spain Norway Hong Kong Hong Kong Hong Kong India Hong Kong Spain Germany Taiwan Singapore Japan Sth Africa Germany France Austria Japan Bermuda UK France Taiwan France Taiwan Thailand UK Sweden Ccy Coupon Maturity HKD 6.00% 28 Sep 2016 JPY 0.00% 18 Aug 2016 USD 0.00% 28 Jul 2014 USD 0.00% 21 Jul 2016 USD 0.00% 22 Jul 2016 USD 4.00% 20 Jul 2016 USD 4.00% 07 Jul 2016 EUR 4.00% 01 Jan 2017 USD 3.00% 21 Jul 2016 AUD 5.75% 04 Jul 2016 JPY 0.00% 05 Jul 2016 JPY 0.00% 05 Jul 2016 USD 0.00% 05 Jul 2016 CHF 1.88% 21 Jun 2016 SGD 2.75% 05 Jul 2016 USD 0.00% 07 Jun 2016 USD 5.50% 17 Jun 2016 GBP 7.00% 08 Jun 2016 EUR 4.00% 27 May 2016 GBP 2.75% 15 Jul 2016 HKD 2.30% 07 Jun 2014 USD 0.00% 24 May 2016 EUR 3.34% 01 Jan 2017 USD 2.00% 05 May 2014 HKD 5.25% 23 May 2016 EUR 3.13% 28 Apr 2016 USD 0.00% 20 Apr 2014 RMB 2.25% 17 May 2016 EUR 5.13% 20 Apr 2017 USD 2.88% 27 Apr 2016 USD 4.00% 29 Apr 2016 USD 0.00% 12 May 2016 USD 4.00% 28 Apr 2016 USD 5.00% 13 Apr 2016 CNY 1.25% 13 Apr 2016 EUR 6.50% 01 May 2016 EUR 2.50% 07 Apr 2018 USD 0.00% 25 Mar 2014 SGD 2.13% 19 Apr 2014 JPY 0.00% 29 Mar 2016 EUR 4.50% 31 Mar 2018 EUR 2.75% 24 Mar 2016 EUR 2.75% 01 Jan 2017 EUR 4.25% 08 Mar 2018 JPY 0.00% 07 Mar 2016 USD 3.75% 10 Feb 2016 USD 8.00% 15 Feb 2016 EUR 4.00% 01 Oct 2015 USD 0.00% 27 Jan 2016 EUR 1.75% 01 Jan 2016 USD 0.00% 27 Jan 2016 THB 1.00% 25 Jan 2016 USD 4.25% 01 Feb 2016 EUR 1.88% 27 Feb 2017 Yield Premium (mn) 6.00% 30.0% 817 1.00% 32.0% 24526 0.00% 26.0% 300 0.00% 30.0% 100 0.00% 28.0% 115 4.00% 20.0% 150 4.00% 20.0% 70 4.00% 27.4% 80 3.00% 30.0% 300 5.75% 27.7% 250 -0.50% 31.6% 50000 -0.25% 23.8% 32500 0.00% 23.8% 500 1.88% 15.0% 190 2.75% 25.0% 120 0.30% 24.5% 173 7.00% 29.0% 80 7.00% 20.0% 65 4.00% 30.0% 1250 2.75% 30.0% 175 2.30% 65.0% 6220 -0.25% 29.0% 500 3.34% 20.0% 550 2.00% 25.0% 600 9.50% 20.0% 1560 3.13% 15.0% 173 0.00% 32.0% 400 2.25% 25.0% 982 6.75% 30.0% 180 2.88% 32.5% 125 5.00% 30.0% 150 2.25% 35.0% 500 4.00% 40.0% 500 6.50% 10.0% 175 1.25% 32.0% 1638 6.50% 25.0% 200 2.50% 30.0% 350 0.00% 20.0% 150 2.13% 24.0% 350 -0.50% 35.4% 23000 5.75% 32.0% 450 2.75% 30.0% 339 2.75% 40..0% 220 4.25% 32.5% 515 -0.50% 40.9% 20000 3.75% 35.0% 125 8.00% 38.0% 110 4.00% 25.0% 115 0.00% 30.0% 375 1.75% 25.0% 315 0.00% 30.0% 280 1.00% 13.0% 10,000 4.25% 30.0% 500 1.88% 35.0% 550 Senior unsecured issuer rating S&P NR A NR NR NR NR NR NR NR A NR NR NR NR NR NR NR NR NR BBB NR NR NR BBNR BBB NR NR NR NR NR NR BB NR NR NR NR NR NR NR NR BNR NR NR BB NR NR NR BBNR NR NR A Moodys NR A3 NR NR NR NR NR NR NR NR A3 A3 A3 NR NR NR NR NR NR NR NR NR NR Ba3 NR NR NR NR NR NR NR NR Ba3 NR NR NR NR NR A2 NR Ba1 Caa1 NR NR NR Ba3 NR NR NR Ba3 NR NR NR NR Issue rating S&P NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR BBB NR NR NR NR NR BBB NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR BNR NR NR NR NR NR NR NR NR NR NR NR Moodys NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR

Note: Ratings at time of issue. Source: Bloomberg, Barclays Capital

17 October 2011

12

Barclays Capital | Convertible Weekly

Figure 17: Monthly (left) and cumulative monthly (right) convertible issuance
EMEA ( bn)
2011 2011 Cumulative (RHS) 7 6 5 4 3 2 1 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct* Nov Dec
Note: *Denotes month to date. Source: Barclays Capital

Asia Pacific ($ bn)

2010 2010 Cumulative (RHS) 16 14 12 10 8 6 4 2 0
7 6 5 4 3 2 1 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct* Nov Dec 2011 2011 Cumulative (RHS) 2010 2010 Cumulative (RHS) 16 14 12 10 8 6 4 2 0

17 October 2011

13

Barclays Capital | Convertible Weekly

Figure 18: Top and bottom EMEA convertible performers

Top convertible performers Closing price Weekly % chg Weekly DN % chg Parity Weekly % Conversion Weekly chg premium chg Crncy Amount out (mn)

REC 6.5% 2014 Ageas FRESH Subsea 7 3.5% 2014 Faurecia 4.5% 2015 Fortis CASHES Clariant 3% 2014 Alcatel 5% 2015 Essar 4.25% 2016 Seadrill 3.375% 2017 ASMI 6.5% 2014
Bottom convertible performers

57.50 38.00 143.27 22.88 39.00 128.21 3.25 65.00 108.82 138.14
Closing price

19.3 11.8 10.0 8.9 8.3 7.5 7.2 6.6 6.6 6.3
Weekly % chg

19.3 11.4 -0.2 0.5 7.9 1.5 3.2 5.3 1.3 -2.5
Weekly DN % chg

11.68 4.44 129.70 18.88 5.85 113.33 2.20 40.28 88.41 124.12
Parity

-1.0 9.2 14.7 16.2 9.2 11.0 9.7 7.6 9.2 14.4

392.23 755.00 10.46 21.22 566.90 13.12 47.99 61.38 23.09 11.29

83.7 19.6 -4.7 -8.1 -5.4 -3.7 -3.5 -1.6 -3.0 -8.5

EUR EUR USD EUR EUR CHF EUR USD USD EUR
Crncy

320 1,250 275 211 3,000 300 1,000 550 650 150
Amount out (mn)

Weekly % Conversion Weekly chg premium chg

Q-Cells 6.75% 2015 IVG Immobilien 1.75% 2017 Q-Cells 1.375% 2012 Marine Harvest 4.5% 2015 International Power 3.25% 2013 Industrivarden 1.875% 2017 Artemis - Vinci 4.25% 2015 Steinhoff International 5% 2016 Glencore 5% 2014 Swiss Prime 1.875% 2015

1.28 70.00 39.50 74.06 106.81 86.16 51.81 93.56 128.16 103.58

-11.0 -2.8 -2.5 -2.2 -1.5 -1.1 -0.8 -0.7 -0.6 -0.4

-10.8 -2.8 -2.5 -2.6 -0.9 -1.7 -2.2 0.1 -1.6 0.1

0.53 6.23 0.94 45.77 101.59 46.78 35.57 76.47 118.27 101.96

-11.0 11.4 -11.0 1.3 -1.9 8.9 6.5 -2.0 1.5 -1.1

140.09 1,024.38 4,088.18 61.80 5.14 84.16 45.65 22.34 8.36 1.59

0.1 -163.5 366.3 -5.9 0.5 -18.5 -10.7 1.6 -2.2 0.7

EUR EUR EUR EUR EUR EUR EUR EUR USD CHF

129 400 211 225 230 550 300 390 2,300 300

Note: Based on closing prices on 14 October 2011. Source: Barclays Capital

Figure 19: Top and bottom Asia Pacific convertible performers

Top convertible performers Closing price Weekly % chg Weekly DN % chg Parity Weekly % Conversion Weekly chg premium chg Crncy Amount out (mn)

Bumi Resources 9.25% 2014 Tata Motors 4% 2014 Hidili 1.5% 2015 Epistar 0% 2016 Hengdeli 2.5% 2015 Jaiprakash Power Ventures 5% 2015 Agile 4% 2016 GDH-Guangdong Investment 3.0% 2016 Paladin Energy 3.625% 2015 GOME Electrical 3% 2014
Bottom convertible performers

100.74 141.74 80.00 86.00 96.91 78.00 77.95 102.30 71.50 102.95
Closing price

13.5 10.8 6.7 6.5 5.9 5.4 5.3 5.2 5.1 5.0
Weekly % chg

7.9 1.3 6.7 5.3 2.7 5.2 4.9 4.0 4.2 4.1
Weekly DN % chg

75.07 140.29 23.92 47.00 61.79 39.27 35.29 87.13 30.07 72.07
Parity

18.0 13.2 34.2 19.0 17.2 3.9 5.0 3.0 11.5 4.0

34.19 1.03 234.46 82.99 56.84 98.63 120.85 17.41 137.78 42.86

-5.3 -2.1 -86.2 -21.4 -16.8 2.8 0.6 2.4 -14.3 1.5

USD USD CNY USD HKD USD USD USD USD CNY
Crncy

375 120 1,707 280 2,500 200 500 250 300 2,357
Amount out (mn)

Weekly % Conversion Weekly chg premium chg

Sawai Pharma 0% 2015 Hongkong Land 2.75% 2012 Anritsu Corporation 0% 2015 Asia Cement - FENC 0% 2016 Aeon 0% 2012 Kaisa 8% 2015 China Unicom 0.75% 2015 Aeon 0.3% 2013 Elpida 0.7% 2016 Square Enix 0% 2015

103.20 120.76 139.26 91.50 119.68 69.06 109.62 119.63 90.50 98.39

-3.0 -2.1 -1.8 -1.6 -1.4 -1.3 -1.1 -0.9 -0.8 -0.7

-1.4 -0.6 -0.1 -1.7 -0.0 -0.5 0.5 0.3 -1.4 -0.2

76.97 122.08 136.88 51.76 117.95 55.25 92.62 115.03 53.95 52.80

-7.2 -2.1 -2.0 1.1 -1.8 -4.6 -3.2 -1.8 2.6 -4.8

34.09 -1.08 1.73 76.79 1.46 24.99 18.36 3.99 67.75 86.34

5.9 -0.0 0.3 -4.9 0.3 4.1 2.5 0.8 -5.7 7.8

JPY USD JPY USD JPY CNY USD JPY JPY JPY

30,000 117 10,000 375 49,985 1,500 1,839 49,985 27,500 35,000

Note: Based on closing prices on 14 October 2011. Source: Barclays Capital

17 October 2011

14

Barclays Capital | Convertible Weekly

CALENDAR
Monday, 17 October 2011 GMT Data/event Previous Market F/C BarCap F/C

Ascendas Real Estate Investment Welspun Gujarat 4.5% 2014 US

Tuesday, 18 October 2011

Q2 Coupon 13:15
GMT

Industrial production, % m/m

Data/event

0.2
Previous

0.2
Market F/C

0.2
BarCap F/C

USG 3% 2012 CapitaMall Trust China Overseas Land & Investment China Unicom 0.75% 2015 China China China China Germany UK UK US US US
Wednesday, 19 October 2011

Coupon Q3 Q3 Coupon 02:00 02:00 02:00 02:00 09:00 08:30 08:30 16:30 12:30 14:00
GMT

GDP, % y/y Industrial production, % y/y Fixed asset investments YTD, % y/y Retail sales, % y/y ZEW economic expectations index CPI, % m/m (y/y) RPI, % m/m (y/y) Fed Chairman Bernanke speaks at Boston PPI, % m/m (y/y) NAHB housing market index
Data/event

9.6 13.5 25 17 -43.3 0.6 (4.5) 0.6 (5.2) 0.0 (6.5) 14

Previous

9.5 13.3 24.8 17 -45 0.4 (4.9) 0.5 (5.4) 0.3 (6.4) 15
Market F/C

9.2 13.2 24.7 17.2 -47 0.5 (5.0) 0.7 (5.5) 0.3 (6.6) 14
BarCap F/C

Euronav CapitaMall Trust 2.125% 2014 Keppel Land Belgium UK UK US US US

Thursday, 20 October 2011

Q3 (Est) Coupon Q3 13:00 08:30 08:30 12:30 12:30 12:30

GMT

Consumer confidence index MPC minutes, Bank Rate vote MPC minutes, Asset purchase vote CPI, % m/m (y/y) Housing starts, k saar Building permits, k saar
Data/event

-9 36770 40756 0.4 (3.8) 571 625

Previous

36770 0.3 (3.8) 592 613

Market F/C

36770 36770 0.4 (3.9) 595 BarCap F/C

Pescanova 5.125% 2017 Actelion Aegis 2.5% 2015 E-Ton Solar Tech Co GuocoLand Hengdeli 2.5% 2015 Hyundai Merchant Marine Co Brazil E17 UK UK UK US US US 11:00 14:00 08:30 08:30 23:01 12:30 14:00 14:00

Coupon Q3 Coupon Q3 (Est) Ex-Dividend Coupon Q3 (Est) IPCA-15 inflation, % m/m Flash' consumer confidence, index Retail sales, % m/m (y/y) Retail sales exl. fuel, % m/m (y/y) Nationwide consumer confidence, index Initial jobless claims, k (4wma) Philadelphia Fed mfg index Existing home sales, mn saar 0.53 -19.1 -0.2 (0.0) -0.1 (-0.1) 48 404 (408) -17.5 5.03 0.44 -20 0.0 (0.6) 0.2 (0.6) 49 -9.5 4.9 0.5 -20.7 0.1 (0.8) 0.1 (0.5) 400 (401) -10 4.85

17 October 2011

15

Barclays Capital | Convertible Weekly Friday, 21 October 2011 GMT Data/event Previous Market F/C BarCap F/C

Q-Cells 6.75% 2015 3i Infotech Acer CapitaCommercial Trust 2.7% 2015 CapitaLand JSW Steel Osung LST Co E17 Germany Germany Germany 07:40 08:00 08:00 08:00

Coupon Q2 Q3 (Est) Coupon Q3 Q2 Q3 (Est) ECB President Trichet speaks at a conference in Warsaw IFO business climate, index IFO current assessment, index IFO business expectations, index 107.5 117.9 98 106.3 116.5 97 107.3 117.5 98

Source: Bloomberg, Reuters, Barclays Capitals Global Traders' Guide, 14 October 2011

17 October 2011

16

Barclays Capital | Convertible Weekly

CONVERTIBLE BOND RESEARCH ANALYSTS

Barclays Capital 5 The North Colonnade London E14 4BB Luke Olsen +44 (0)20 7773 8310 luke.olsen@barcap.com Barclays Capital, London Heather Beattie, CFA +44 (0)20 7773 5859 heather.beattie@barcap.com Barclays Capital, London Angus Allison +44 (0)20 7773 5379 angus.allison@barcap.com Barclays Capital, London

17 October 2011

17

Barclays Capital | Convertible Weekly Analyst Certification(s)

We, Angus Allison, Luke Olsen and Heather Beattie, hereby certify (1) that the views expressed in this research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report.
Important Disclosures

Barclays Capital, the Investment Banking Division of Barclays Bank PLC, is acting as corporate broker to Subsea 7 S.A. For current important disclosures regarding companies that are the subject of this research report, please send a written request to: Barclays Capital Research Compliance, 745 Seventh Avenue, 17th Floor, New York, NY 10019 or refer to https://ecommerce.barcap.com/research/cgibin/all/disclosuresSearch.pl or call 1-212-526-1072. The analysts responsible for preparing this research report have received compensation based upon various factors including the firms total revenues, a portion of which is generated by investment banking activities. Research analysts employed outside the US by affiliates of Barclays Capital Inc. are not registered/qualified as research analysts with FINRA. These analysts may not be associated persons of the member firm and therefore may not be subject to NASD Rule 2711 and incorporated NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analysts account. Barclays Capital produces a variety of research products including, but not limited to, fundamental analysis, equity-linked analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differ from recommendations contained in other types of research products, whether as a result of differing time horizons, methodologies, or otherwise.
Risk Disclosure(s)

The convertible valuations are based on Barclays Capital proprietary convertible valuation model, under which key assumptions relate to credit spread and equity volatility metrics. Material changes in any of these variables can have a significant impact on valuation. Upside/downside analysis takes into consideration likely future valuation and expected trading patterns, among others. It is based on a total return participation of the convertible relative to a +/- 25% (unless otherwise specified) change in the common stocks price over a oneyear investment horizon. A material change in the companys financial situation can significantly alter this assessment.
Mentioned Stocks (Ticker, Date, Price)

AU Optronics Corp. (2409.TW, 17-Oct-2011, TWD 12.75), 3-Underweight/1-Positive China Unicom (0762.HK, 17-Oct-2011, HKD 15.38), 1-Overweight/2-Neutral Galp Energia (GALP.LS, 14-Oct-2011, EUR 14.91), 1-Overweight/2-Neutral Publicis Groupe SA (PUBP.PA, 14-Oct-2011, EUR 34.78), 2-Equal Weight/1-Positive Sainsbury (J) plc (SBRY.L, 14-Oct-2011, GBP 2.99), 1-Overweight/1-Positive Subsea 7 SA (SUBC.OL, 14-Oct-2011, NOK 122.90), 1-Overweight/1-Positive Other Material Conflicts: Barclays Capital is acting as Corporate Broker to Subsea7 SA.
Guide to the Barclays Capital Fundamental Equity Research Rating System:

Our coverage analysts use a relative rating system in which they rate stocks as 1-Overweight, 2- Equal Weight or 3-Underweight (see definitions below) relative to other companies covered by the analyst or a team of analysts that are deemed to be in the same industry sector (the sector coverage universe). To see a list of companies that comprise a particular sector coverage universe, please go to http://publicresearch.barcap.com. In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral or 3-Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system. Investors should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings alone.
Stock Rating

1-Overweight - The stock is expected to outperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon. 2-Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the sector coverage universe over a 12-month investment horizon. 3-Underweight - The stock is expected to underperform the unweighted expected total return of the sector coverage universe over a 12-month investment horizon. RS-Rating Suspended - The rating and target price have been suspended temporarily due to market events that made coverage impracticable or to comply with applicable regulations and/or firm policies in certain circumstances including when Barclays Capital is acting in an advisory capacity in a merger or strategic transaction involving the company.
Sector View

1-Positive - sector coverage universe fundamentals/valuations are improving.

17 October 2011

18

Barclays Capital | Convertible Weekly

2-Neutral - sector coverage universe fundamentals/valuations are steady, neither improving nor deteriorating. 3-Negative - sector coverage universe fundamentals/valuations are deteriorating.
Distribution of Ratings:

Barclays Capital Inc. Equity Research has 1881 companies under coverage. 44% have been assigned a 1-Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 58% of companies with this rating are investment banking clients of the Firm. 41% have been assigned a 2-Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating; 51% of companies with this rating are investment banking clients of the Firm. 12% have been assigned a 3-Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 36% of companies with this rating are investment banking clients of the Firm.
Guide to the Barclays Capital Price Target:

Each analyst has a single price target on the stocks that they cover. The price target represents that analyst's expectation of where the stock will trade in the next 12 months. Upside/downside scenarios, where provided, represent potential upside/potential downside to each analyst's price target over the same 12-month period.
Barclays Capital offices involved in the production of equity research:

London Barclays Capital, the investment banking division of Barclays Bank PLC (Barclays Capital, London) New York Barclays Capital Inc. (BCI, New York) Tokyo Barclays Capital Japan Limited (BCJL, Tokyo) So Paulo Banco Barclays S.A. (BBSA, So Paulo) Hong Kong Barclays Bank PLC, Hong Kong branch (Barclays Bank, Hong Kong) Toronto Barclays Capital Canada Inc. (BCC, Toronto) Johannesburg Absa Capital, a division of Absa Bank Limited (Absa Capital, Johannesburg) Mexico City Barclays Bank Mexico, S.A. (BBMX, Mexico City) Taiwan Barclays Capital Securities Taiwan Limited (BCSTW, Taiwan) Seoul Barclays Capital Securities Limited (BCSL, Seoul) Mumbai Barclays Capital Securities (India) Private Limited (BSIPL, Mumbai) Singapore Barclays Bank PLC, Singapore branch (Barclays Bank, Singapore)

17 October 2011

19

Disclaimer This publication has been prepared by Barclays Capital, the investment banking division of Barclays Bank PLC, and/or one or more of its affiliates as provided below. It is provided to our clients for information purposes only, and Barclays Capital makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to any data included in this publication. Barclays Capital will not treat unauthorized recipients of this report as its clients. Prices shown are indicative and Barclays Capital is not offering to buy or sell or soliciting offers to buy or sell any financial instrument. Without limiting any of the foregoing and to the extent permitted by law, in no event shall Barclays Capital, nor any affiliate, nor any of their respective officers, directors, partners, or employees have any liability for (a) any special, punitive, indirect, or consequential damages; or (b) any lost profits, lost revenue, loss of anticipated savings or loss of opportunity or other financial loss, even if notified of the possibility of such damages, arising from any use of this publication or its contents. Other than disclosures relating to Barclays Capital, the information contained in this publication has been obtained from sources that Barclays Capital believes to be reliable, but Barclays Capital does not represent or warrant that it is accurate or complete. The views in this publication are those of Barclays Capital and are subject to change, and Barclays Capital has no obligation to update its opinions or the information in this publication. The analyst recommendations in this publication reflect solely and exclusively those of the author(s), and such opinions were prepared independently of any other interests, including those of Barclays Capital and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all investors. Barclays Capital recommends that investors independently evaluate each issuer, security or instrument discussed herein and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. This communication is being made available in the UK and Europe primarily to persons who are investment professionals as that term is defined in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion Order) 2005. It is directed at, and therefore should only be relied upon by, persons who have professional experience in matters relating to investments. The investments to which it relates are available only to such persons and will be entered into only with such persons. Barclays Capital is authorized and regulated by the Financial Services Authority ('FSA') and member of the London Stock Exchange. Barclays Capital Inc., U.S. registered broker/dealer and member of FINRA (www.finra.org), is distributing this material in the United States and, in connection therewith accepts responsibility for its contents. Any U.S. person wishing to effect a transaction in any security discussed herein should do so only by contacting a representative of Barclays Capital Inc. in the U.S. at 745 Seventh Avenue, New York, New York 10019. Non-U.S. persons should contact and execute transactions through a Barclays Bank PLC branch or affiliate in their home jurisdiction unless local regulations permit otherwise. This material is distributed in Canada by Barclays Capital Canada Inc., a registered investment dealer and member of IIROC (www.iiroc.ca). To access Barclays Capital policy on the dissemination of research reports, please go to http://www.barcap.com/Client+offering/Research/Research+Policy. Subject to the conditions of this publication as set out above, Absa Capital, the Investment Banking Division of Absa Bank Limited, an authorised financial services provider (Registration No.: 1986/004794/06), is distributing this material in South Africa. Absa Bank Limited is regulated by the South African Reserve Bank. This publication is not, nor is it intended to be, advice as defined and/or contemplated in the (South African) Financial Advisory and Intermediary Services Act, 37 of 2002, or any other financial, investment, trading, tax, legal, accounting, retirement, actuarial or other professional advice or service whatsoever. Any South African person or entity wishing to effect a transaction in any security discussed herein should do so only by contacting a representative of Absa Capital in South Africa, 15 Alice Lane, Sandton, Johannesburg, Gauteng 2196. Absa Capital is an affiliate of Barclays Capital. In Japan, foreign exchange research reports are prepared and distributed by Barclays Bank PLC Tokyo Branch. Other research reports are distributed to institutional investors in Japan by Barclays Capital Japan Limited. Barclays Capital Japan Limited is a joint-stock company incorporated in Japan with registered office of 6-10-1 Roppongi, Minato-ku, Tokyo 106-6131, Japan. It is a subsidiary of Barclays Bank PLC and a registered financial instruments firm regulated by the Financial Services Agency of Japan. Registered Number: Kanto Zaimukyokucho (kinsho) No. 143. Barclays Bank PLC, Hong Kong Branch is distributing this material in Hong Kong as an authorised institution regulated by the Hong Kong Monetary Authority. Registered Office: 41/F, Cheung Kong Center, 2 Queen's Road Central, Hong Kong. This material is issued in Taiwan by Barclays Capital Securities Taiwan Limited. This material on securities not traded in Taiwan is not to be construed as 'recommendation' in Taiwan. Barclays Capital Securities Taiwan Limited does not accept orders from clients to trade in such securities. This material may not be distributed to the public media or used by the public media without prior written consent of Barclays Capital. All equity research material is distributed in India by Barclays Securities (India) Private Limited (SEBI Registration No: INB/INF 231292732 (NSE), INB/INF 011292738 (BSE), Registered Office: 208 | Ceejay House | Dr. Annie Besant Road | Shivsagar Estate | Worli | Mumbai - 400 018 | India, Phone: + 91 22 67196363). Other research reports are distributed in India by Barclays Bank PLC, India Branch. Barclays Bank PLC Frankfurt Branch distributes this material in Germany under the supervision of Bundesanstalt fr Finanzdienstleistungsaufsicht (BaFin). This material is distributed in Malaysia by Barclays Capital Markets Malaysia Sdn Bhd. This material is distributed in Brazil by Banco Barclays S.A. This material is distributed in Mexico by Barclays Bank Mexico, S.A. Barclays Bank PLC in the Dubai International Financial Centre (Registered No. 0060) is regulated by the Dubai Financial Services Authority (DFSA). Barclays Bank PLC-DIFC Branch, may only undertake the financial services activities that fall within the scope of its existing DFSA licence. Barclays Bank PLC in the UAE is regulated by the Central Bank of the UAE and is licensed to conduct business activities as a branch of a commercial bank incorporated outside the UAE in Dubai (Licence No.: 13/1844/2008, Registered Office: Building No. 6, Burj Dubai Business Hub, Sheikh Zayed Road, Dubai City) and Abu Dhabi (Licence No.: 13/952/2008, Registered Office: Al Jazira Towers, Hamdan Street, PO Box 2734, Abu Dhabi). Barclays Bank PLC in the Qatar Financial Centre (Registered No. 00018) is authorised by the Qatar Financial Centre Regulatory Authority (QFCRA). Barclays Bank PLC-QFC Branch may only undertake the regulated activities that fall within the scope of its existing QFCRA licence. Principal place of business in Qatar: Qatar Financial Centre, Office 1002, 10th Floor, QFC Tower, Diplomatic Area, West Bay, PO Box 15891, Doha, Qatar. This material is distributed in Dubai, the UAE and Qatar by Barclays Bank PLC. Related financial products or services are only available to Professional Clients as defined by the DFSA, and Business Customers as defined by the QFCRA. This material is distributed in Saudi Arabia by Barclays Saudi Arabia ('BSA'). It is not the intention of the Publication to be used or deemed as recommendation, option or advice for any action (s) that may take place in future. Barclays Saudi Arabia is a Closed Joint Stock Company, (CMA License No. 09141-37). Registered office Al Faisaliah Tower | Level 18 | Riyadh 11311 | Kingdom of Saudi Arabia. Authorised and regulated by the Capital Market Authority, Commercial Registration Number: 1010283024. This material is distributed in Russia by OOO Barclays Capital, affiliated company of Barclays Bank PLC, registered and regulated in Russia by the FSFM. Broker License #17711850-100000; Dealer License #177-11855-010000. Registered address in Russia: 125047 Moscow, 1st Tverskaya-Yamskaya str. 21. This material is distributed in Singapore by the Singapore branch of Barclays Bank PLC, a bank licensed in Singapore by the Monetary Authority of Singapore. For matters in connection with this report, recipients in Singapore may contact the Singapore branch of Barclays Bank PLC, whose registered address is One Raffles Quay Level 28, South Tower, Singapore 048583. Barclays Bank PLC, Australia Branch (ARBN 062 449 585, AFSL 246617) is distributing this material in Australia. It is directed at 'wholesale clients' as defined by Australian Corporations Act 2001. IRS Circular 230 Prepared Materials Disclaimer: Barclays Capital and its affiliates do not provide tax advice and nothing contained herein should be construed

to be tax advice. Please be advised that any discussion of U.S. tax matters contained herein (including any attachments) (i) is not intended or written to be used, and cannot be used, by you for the purpose of avoiding U.S. tax-related penalties; and (ii) was written to support the promotion or marketing of the transactions or other matters addressed herein. Accordingly, you should seek advice based on your particular circumstances from an independent tax advisor. Barclays Capital is not responsible for, and makes no warranties whatsoever as to, the content of any third-party web site accessed via a hyperlink in this publication and such information is not incorporated by reference. Copyright Barclays Bank PLC (2011). All rights reserved. No part of this publication may be reproduced in any manner without the prior written permission of Barclays Capital or any of its affiliates. Barclays Bank PLC is registered in England No. 1026167. Registered office 1 Churchill Place, London, E14 5HP. Additional information regarding this publication will be furnished upon request.

EU17387