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

No Matter How Bad Things Are You Can Always Make them Worse
Todays Market Headline
Spain Officially Requests Aid from Europe Cyprus Requested EU Aid, Citing Financial Sectors Large Exposure to Greek Economy Moodys Cuts Long-Term Debt, Deposit Ratings on 28 Spain Banks Spain Economy Minister De Guindos to Explain Bailout in Parliament (8:30GMT) Spain to sell 3 and 6 month Bills (8:30GMT) Italy to sell Up to EUR3b zero 2014 bonds, 2.1% I/L 2016 bonds, 3.1% I/L 2026 bonds (9:00GMT) German & French Confidence Surveys, Italian Retail Sales US S&P Case/Shiller Home Price Index, Richmond Fed & Consumer Confidence AB InBev NV to buy half of Grupo Modelo SAB for $20bln (Risk Arbitrage News)

Market Overview
Good morning, equities ended the day massively lower, the USD and Japanese Yen were higher all across the board, even though the USD was stronger Commodities were mostly higher and the safe haven assets, German bonds & US Treasuries were stronger (higher yield) as the 2/10 yield curve continued to flatted. The Vix was up 12.53% and closed at 20.38. The European banking sector got hit the hardest, especially in Italy due to rumors about Moodys downgrading Italian banks after the close (which ended being half true as Moodys downgraded the Spanish and not Italian banks after the US close). Yesterdays price action can be related to the EU Summit held later this week and to the fact that investors have very low expectations from its results. On the macro field, US data was mixed and included a weaker Chicago Fed Index (-0.45 vs. 0.30), better New Home sales for June but downwards revisions for May (+7.6% vs. +1.0% in June but May figures were revised from +3.3% to -1.2%) & better Dallas Fed Index (5.8 vs. -2.0 expected). Even though some of the figures were better it is hard to say they had an impact on yesterdays price action. Today, Asian markets are lower, US Futures are flat & European markets are set to open near flat. Spain Officially requests Aid from Europe; Luis De Guindos, the Spanish Economy Minister handed a formal request asking for aid to recapitalize the banks. Although it remains unclear where is the funding going to come from (EFSF or ESM) the funding is going to be transferred to the Fund for Orderly Bank Restructuring (FROB) which would be used to channel the bailout money. Final details of the bailout agreement should be published by July 9 after the next EU financial Minister meeting. 1 PROBE: a proprietary index measuring the break-even probability of a given deal. 26 June 2012
th

Cyprus requested EU aid, citing financial sectors large exposure to Greek economy; Cyprus has officially became the 5

th

Euro Zone member to request a bailout (after Ireland, Portugal, Greece & Spain). Although the official statement from the Cypriot government did not mention the sum it needs the main cause for it is said to be the loss its financial institutions suffered from the Greek debt Write-down. Euro Zone head Jean-Claude Juncker said he expected Cyprus to act with "strong determination" to carry out the economic measures it will have to take to receive an EU bailout. Moodys Cuts Long-Term Debt, Deposit Ratings on 28 Spain Banks; the actions follow Spains downgrade from A3 to Baa3 on June 13 . Moodys cited the weakness of the Spanish government creditworthiness which reflects the government ability to support the banks and weigh on banks standalone credit assessments and also cited banks exposer to the commercial real-estate which will likely cause more losses which increase the odds that these banks will require more support in the future. Economic data today offers German & French Confidence Surveys, Italian Retail Sales, US S&P Case/Shiller Home Price Index, US Richmond Fed & US Consumer Confidence, and Good luck!
th

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

The Telegraph: In a meeting with Vladimir Putin, the Russian president, Mr. Netanyahu said: We expect to work together with the new administration on the basis of our peace treaty. I believe that peace is important to Israel. I believe that peace is important to Egypt. I believe that peace is a vital interest for both countries and I believe that peace is the foundation of stability in our region. An Israeli official, speaking earlier on condition of anonymity, said the Netanyahu government hoped Mr Morsi and the Muslim Brotherhoods parliamentary bloc would put the need to tend to Egypts ailing economy ahead of any revision of bilateral ties. US aid to Cairo hinges on keeping the peace with Israel. Earlier, Iran's Fars news agency claimed Mr Morsi wanted closer ties with Iran to create strategic "balance" in the region.

Risk Arbitrage
Bloomberg: Anheuser-Busch InBev NV may spend about $20 billion buying the half of Grupo Modelo SAB it doesnt already own, according to a person with knowledge of the matter. Thats the enterprise value for the transaction and would include a premium for the Corona maker as well as a payment to Constellation Brands Inc. to buy a stake in a distribution joint venture, said the person, who declined to be identified because the matter is private. AB InBev and Modelo confirmed the talks in statements today. Reuters: Shareholders are betting Shell will up the stakes in a bid battle for explorer Cove Energy after Thailand's PTT Exploration and Production extended the deadline for investors to accept its $1.9 billion offer. Cove shares were up 0.3 percent to 265.5 pence at 1021 EDT on Monday, still above the 240 pence per share PTT has offered, as investors eyed a potentially higher bid from Shell. PTT said on Monday that investors would now have until July 6 to accept its offer, after it won acceptances from only 0.25 percent of Cove shares by last Friday's deadline. Reuters: Quest Software Inc has received an improved bid from Dell Inc to buy the maker of enterprise management software for about $2.32 billion, a source close to the matter said on Monday. Two bidders have recently been competing to buy Quest: a buyout group led by private investment firm Insight Venture Partners, and an undisclosed bidder. On Monday, 26 June 2012

a source close to the matter told Reuters that the mystery bidder was actually Dell. Quest disclosed on Monday that it had received an improved bid of $27.50 per share in cash from the mystery bidder, but did not reveal the bidder's identity. Bloomberg: Quest Software Inc., the software maker that agreed to be bought by a group led by Insight Venture Partners, said it has received a higher offer of $27.50 a share in cash, the third buyout increase announced this year. The bid from an unidentified strategic suitor is superior to a $25.75-a-share offer Quest accepted from Insight last week, the Aliso Viejo, California-based software company said today in a statement . Dell Inc. had previously offered to acquire Quest, according to a person familiar with the matter.

Corporate News & Equity Highlights

Financial Times: A New York jury has told Vivendi to pay damages of 765m to Liberty Media in a case dating back to a $10.3bn TV network deal the two companies struck when the French group was run by Jean-Marie Messier a decade ago. Liberty, John Malones media holding company, sold most of its stake in USA Networks in 2002 for cash and about 3.5 per cent of Vivendi, which Mr Messier transformed from a utility company to a media and telecoms group. Reuters: Linn Energy LLC will buy natural gas acreage in southwest Wyoming from BP America Production Co for $1.03 billion, its second such deal with the British company this year at a time when prices for the fuel have hit decade-lows. Weak prices have prompted several companies to sell off natural gas properties, presenting a bargain for those willing to wait for a turnaround. "Linn is very opportunistic and they are in a very good position to acquire assets from forced sellers," said National Securities analyst Boris Pialloux. Bloomberg: Hershey Co. Chief Executive Officer John P. Bilbrey said acquisitions will be the priority for the chocolate makers cash as the company looks to take confectionery-market share in North America and expand abroad. The company sees $10 billion in potential local and regional acquisitions across the globe, Chief Growth Officer Michele Buck said today during an investor meeting in New York that was webcast. Including other categories such as sweet snacks, acquisition opportunities total as much as $30 billion, Buck said. Financial Times: Microsoft has agreed to pay $1.2bn for Yammer, which runs a Twitter-like service for office workers, in an attempt to take advantage of the business worlds social networking boom. The cash purchase of the four-year-old start-up, which follows the $8.5bn acquisition last year of internet communications company Skype, will give the worlds biggest software company a new weapon as it tries to use internet services to reinforce a core part of its traditional software business. It aims to use Yammer to bolster some of its biggest money-earners, including Office, its suite of productivity tools, and Sharepoint, which helps workers collaborate. Financial Times: Bloomberg plans to announce that it has hired more than 100 research professionals for a global industry research service that will provide much of what was once the preserve of equity analysts on Wall Street and in the City of London. The Bloomberg Industries service will combine interactive, real-time data on more than 100 industry sectors in North America, Europe and Asia with analysis from a team including 30 former senior analysts in buyside and sell-side firms.

26 June 2012

Broker Recommendations
Positive Negative US: Dow Chemical Cut to 'Neutral' at JPMorgan BMW CUT TO NEUTRAL VS BUY AT CITI PUBLIC SERVICE CUT TO HOLD VS BUY AT JEFFERIES PEREGRINE HOLDINGS CUT TO NEUTRAL VS BUY AT CITI Informa Cut to Equalweight from Overweight at Morgan Stanley BofA Upgrades European Utilities; E.ON, GDF, Endesa Up to Buy Shire Raised to 'Buy' at Societe Generale SHIRE UPGRADED TO BUY FROM HOLD AT BERENBERG WILLIAM HILL UPGRADED TO OVERWEIGHT FROM NEUTRAL AT JPMORGAN TALKTALK UPGRADED TO NEUTRAL FROM UNDERWEIGHT AT JPMORGAN LADBROKES UPGRADED TO NEUTRAL FROM UNDERWEIGHT AT JPMORGAN CRODA UPGRADED TO OVERWEIGHT FROM NEUTRAL AT JPMORGAN CATLIN RAISED TO BUY VS NEUTRAL AT CITI Stockmann Raised to 'Hold' at Nordea

Economic Calendar Key Events

Time (GMT) 6:00 6:45 8:00 8:00 8:30 8:30 8:30 9:00 9:00 13:00 13:00 13:00 14:00 14:00 Country GE FR IT IT UK UK UK IT IT US US US US US Event GfK Consumer Confidence Survey Consumer Confidence Indicator Retail Sales s.a. (MoM) Retail Sales (YoY) Public Finances (PSNCR) PSNB ex Interventions Public Sector Net Borrowing Hourly Wages (MoM) Hourly Wages (YoY) S&P/CS 20 City MoM% SA S&P/CS Composite-20 YoY S&P/CaseShiller Home Price Ind Consumer Confidence Richmond Fed Index Period JUL JUN APR APR MAY MAY MAY MAY MAY APR APR APR JUN JUN Survey 5.6 89 -0.60% -0.10% 4.0B 14.8B 14.0B --0.30% -2.50% 134.85 63.5 3 Actual --------------Prior 5.7 90 -0.20% 1.70% -23.2B -16.5B -18.8B 0.30% 1.40% 0.09% -2.57% 134.1 64.9 4 Revised ---------------

26 June 2012

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

26 June 2012