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

Saying Nothing Sometimes Says the Most

Todays Market Headline
EU Leaders end 18 Summit in Two Years Without no Result China HSBC Manufacturing PMI at 48.7 in May vs. 49.3 in April German IFO Survey, Privet Consumption & GDP revision France Business Confidence & Production Outlook European PMI Manufacturing & Services data UK GDP, Privet Consumption & Durable Goods orders US Jobless & Continuing Claims & Kansas Manufacturing Index
th

Equity
DOW JONES NASDAQ S&P 500 Euro Stoxx50 FTSE 100 DAX 30 CAC 40 RDXUSD NIKKEI 226

Last
12,496.15 2,850.12 1,318.86 2,134.05 5,266.41 6,285.75 3,003.27 1,399.23 8,578.25

Change
-0.05% 0.39% 0.17% -2.68% -2.53% -2.33% -2.62% -5.07% 0.25%

Market Overview
Good Morning, equities in Europe traded lower all day and closed the day massively lower, in the US equities started the day lower but managed to erase those losses towards the close and close the day near flat, the USD and Yen were higher all across the board, commodities were lower and the safe haven assets were mixed with German Bonds higher (lower yield) & US Treasuries ended the day basically unchanged. The Vix was up 0.67% to close at 22.33 and Facebook for a change, ended the day 3.23% higher at $32.00. News wise, yesterdays price action was driven by renewed worries over Greece leaving the Euro Zone and by the understanding the European leaders will fail to agree about any king of action that would address the debt crisis and its economic meltdown. On the macro field, UK retail sales fell more than expected (-1.0% in April) and in the US, new home sales data suggested that the housing market continues to stabilize (New Home sales up 3.3% in April and rose to an annual pace of 343K). There was also the Bank of Japan monthly meeting which delivered no news and in Mid-day there was the Bank of England Minutes which made it pretty clear that further easing measures despite outside pressure is unlikely at the moment. Asian markets are lower today, US Futures are slightly negative (-0.3%) and European shares for a higher open despite yesterdays Summit Results (Euro Stoxx futures currently up 0.70%). EU Leaders end 18
th

Commodities
Gol d Na tura l Ga s Crude Oi l 1,556.93 2.72 90.29 -0.29% -0.55% 0.43%

Currencies
EUR/USD GBP/USD EUR/GBP EUR/CHF USD/JPY 1.2567 1.567 0.80195 1.20102 79.49 -0.12% -0.14% -0.01% 0.00% 0.03%

US Rates
US 2Y US 10Y 0.29 1.74 0.00% -0.04%

Europe Spreads (vs. Germany)

Fra nce 2Y Spa i n 2Y Ita l y 2Y Fra nce 10Y Spa i n 10Y Ita l y 10Y 0.52 45.89 -4.6 -12.4 -9.4 -2.9 -5.1 -4.6 4.08 402.56 3.56 349.65 2.72 132.80 6.16 476.91 5.63 423.69

Summit in Two Years Without no Result; the summit delivered

World Spreads (vs. US)

Germa ny 2Y 0.06 -23.04 UK 2Y 0.24 -4.45 0.7 -1.5 0.4 -0.6

absolutely no news besides highlighting the difference of opinion between Germany and other Euro Zone countries. All leaders expressed the importance of Greece remaining in the Euro Zone but there was no word about Bank deposit guarantee or anything else. Focus now
1

Germa ny 10Y 1.39 -34.73 UK 10Y 1.77 3.10

PROBE: a proprietary index measuring the break-even probability of a given deal. 24 May 2012

shifts to the 19 Summit in the last two year which is scheduled for June 28-29 . After yesterdays summit focus today will shift to the PMI Manufacturing & Services data and German IFO survey - weak figures today will be something investors will have a hard time handling. China HSBC Manufacturing PMI at 48.7 in May vs. 49.3 in April; it is the seventh consecutive month the index remains below 50 increasing the pressure on Chinese policy makers to put more easing into the economy. Economic data today offers German IFO Survey, Privet Consumption & GDP revision, France Business Confidence & Production Outlook, European PMI Manufacturing & Services data, UK GDP, Privet Consumption & Durable Goods orders and US Jobless & Continuing Claims & Kansas Manufacturing Index. Good luck!

th

th

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

Bloomberg: Western powers and Iran will resume nuclear talks today in Baghdad after a first day of discussions, according to a Western official. Chinese, French, German, Russian, British and U.S. negotiators -- the so-called P5+1 group - and Irans representatives didnt issue a public statement as daylong talks recessed yesterday at almost midnight. Talks will resume at 8 a.m. Baghdad time, according to the Western official, who spoke on condition of anonymity because the deliberations are being conducted privately. The meeting was convened in an effort to forestall a military strike against Iran, a prospect Israel hasnt ruled out. While the Persian Gulf nation, target of a probe by the United Nations International Atomic Energy Agency since 2003, denies it wants to make nuclear weapons, it has refused to cooperate with inspectors and is under multiple international sanctions. The negotiators convened a day after IAEA inspectors bridged an impasse with Iranian authorities over wider access to suspected nuclear sites, including the Parchin military complex. IAEA Director General Yukiya Amano said he expected the accord to be signed quite soon. It could take some time before we see that there is really an agreement, Olli Heinonen, the IAEAs former chief Iran inspector and now a visiting professor at Harvard University, said on Bloomberg Televisions Last Word yesterday. We have an ample amount of time, at least until the end of this year, to solve this problem.

Risk Arbitrage
Reuters: GlaxoSmithKline said it would not proceed with its $2.6 billion offer for Human Genome Sciences unless the U.S. biotechnology company dropped a "poison pill" shareholder rights plan imposed to block the deal. Human Genome adopted the stockholder rights plan earlier this month in an attempt to ward off GSK in what is becoming an increasingly acrimonious battle between the companies that together sell new Lupus drug Benlysta. The British company is taking its $13-a-share offer direct to investors after Human Genome's board said it was inadequate. Reuters: The takeover battle for Cove Energy looks set to run after Thailand's PTT Exploration and Production trumped Royal Dutch Shell with a $1.9 billion offer, underscoring interest in new east African gas finds. Shares in Mozambiquefocused Cove jumped as much as 12 percent to 250.5 pence on Wednesday, above PTT's offer of 240 pence a share and signaling investors expect Shell to come back with a higher bid. Exclusive: Shell said this morning that 4.83% of Cove shares have been tendered to their offer. They extended the offer period that was supposed to end yesterday by 20 days to June 13. 24 May 2012

Wall Street Journal: Oracle wasnt sitting quietly by yesterday after rival SAP bought a cloud-computing company Tuesday. It is buying cloud-based social-marketing company Vitrue for an undisclosed amount. The move comes only hours after SAP spent $4.3 billion on Ariba and marks yet another shot fired in the Great Cloud Computing Mobilization. This is Oracles third deal this year after making a large deal last year. CEO Larry Ellison has in the past dismissed cloud computing as gibberish, but it appears Oracle is now gathering as much cloud as it can. Bloomberg: The takeover of Cooper Industries Plc at the highest price tag for an electrical-equipment deal in more than a decade is turning Hubbell Inc. and Acuity Brands Inc. into the next potential targets. Eaton Corp. agreed this week to buy Cooper, the maker of products from LED lighting to industrial circuit breakers, for $12.8 billion including net debt in the biggest electrical- components, electronics or diversified-manufacturing acquisition since 1999, according to data compiled by Bloomberg. With ABB Ltd. also buying Thomas & Betts Corp this year, the wave of consolidation may sweep up Hubbell, another large independent U.S. electrical company, said Macquarie Group Ltd., or Acuity, the biggest U.S. lighting-fixture maker, said JMP Securities. Bloomberg: SAP AG, largest maker of enterprise-applications software, agreed to buy Ariba Inc. for $4.3 billion in the German companys second multi-billion purchase in cloud computing to take on Oracle Corp. SAP will pay $45 a share, or 20 percent more than Aribas May 21 closing price, Walldorf, Germany-based SAP said yesterday. The transaction, subject to approval by Ariba shareholders and regulators, will probably be completed by the end of August, SAP Chief Financial Officer Werner Brandt said on a conference call. Exclusive: Mexichem announced the results of their offer to buy Wavin this morning. At the end of the offer period, 97.26% of Wavin shares have been tendered to the offer.

Corporate News & Equity Highlights

Financial Times: BAE Systems, Europes largest defence manufacturer by sales, has won a 1.6bn contract to help train Saudi Arabias air force. The contract includes the supply of 55 Pilatus aircraft, made by the eponymous Swiss manufacturer, and 22 BAE Hawk jet training aircraft, as well as flight simulators. It is a substantial win for BAE, which has been negotiating the deal with Saudi Arabia for months. Like other western defence companies, BAE has been hit by cuts in military spending in European countries, such as the UK, as well as a slowdown in spending by the US, the worlds largest defence spender. Financial Times: High-spending consumers have helped insulate Burberry Group from the worst of the global economic downturn, boosting full-year revenues at the British luxury goods brand by almost a quarter. So-called travelling luxury consumers wealthy shoppers from Asia, the Middle East and the Bric economies have continued to open their purses at Burberrys stores in London, Paris, Hong Kong and Las Vegas. Bloomberg: Guess? Inc. is turning into the cheapest takeover candidate in the fashion industry. After slumping to an almost three-year low on Tuesday, the Los Angeles-based clothing designer and retailer was valued at 3.5 times earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. Thats the lowest of any apparel retailer or clothing-brand owner in the U.S. and less than half the industry median. While Guess faces its first consecutive drop in annual profit in eight years as demand in Europe slumps and competition erodes operating margins, Jefferies Group Inc. and Morningstar Inc. say the retailer may still entice leveraged buyout firms. Guess has a higher free 24 May 2012

cash flow yield than 97 percent of its rivals, the data show. It also holds a half-billion dollars in cash, has almost no debt and owns a globally recognized brand name that is driving growth in markets such as China. Bloomberg: Morgan Stanley, Goldman Sachs Group Inc., JPMorgan Chase & Co. and other underwriters along with Facebook Inc. were sued by investors who claimed they were misled in the purchase of the social network firms stock. The plaintiffs, who are seeking to proceed on behalf of a class of Facebook investors, said the company and the banks didnt disclose lower revenue estimates before the share sale. The members of the proposed class have lost more than $2.5 billion since the initial public offering last week, according to a complaint filed today in Manhattan federal court. Bloomberg: CVC Capital Partners Ltd., the private-equity firm whose investments include Formula One racing and Samsonite luggage, is planning what may become the largest buyout fund on the market, said two people briefed on the matter. The firm, based in London, may seek as much as 10.75 billion euros ($13.5 billion) for its next European fund, said the people, who asked not to be named because the plans are private. That would be the same amount raised for CVCs previous fund focused on European buyouts. Financial Times: Hewlett-Packard has confirmed it will make 27,000 job cuts in a major restructuring of its struggling computer business. An immediate and high-profile casualty is Mike Lynch, founder of Autonomy, the enterprise search company acquired for $10.3bn by HP last year.

Broker Recommendations
Positive Negative US: Nasdaq Cut to Market Perform vs Outperform at Raymond James Meda AB Cut to Underperform from Neutral at BofA HHLA Cut to 'Sector Perform' at RBC Capital Cherkizovo Group Cut to Underweight from Neutral at JPMorgan Salzgitter Raised to Buy vs Neutral at UBS LDC Raised to 'Buy' at Societe Generale Sonova Raised to Overweight From Neutral at HSBC Tele2 Raised to 'Buy' at Jefferies Tatneft Raised to Neutral vs Sell at UBS Intrum Justitia Raised to to Strong Buy From Buy at Swedbank

24 May 2012

Economic Calendar Key Events

Time (GMT) 6:00 06:00 06:00 6:45 06:45 07:00 07:00 07:30 7:30 08:00 08:00 08:00 08:00 08:00 08:00 08:30 08:30 8:30 08:30 12:30 12:30 12:30 12:30 12:30 12:30 13:45 15:00 Country GE GE GE FR FR FR FR GE GE EC GE GE GE EC EC UK UK UK UK US US US US US US US US Event Private Consumption GDP s.a. (QOQ) GDP wda (YoY) Production Outlook Indicator Business Confidence Indicator PMI Manufacturing PMI Services PMI Manufacturing PMI Services PMI Composite IFO - Business Climate IFO - Current Assessment IFO - Expectations PMI Manufacturing PMI Services GDP (QoQ) GDP (YoY) Private Consumption Government Spending Durable Goods Orders Durables Ex Transportation Cap Goods Orders Nondef Ex Air Cap Goods Ship Nondef Ex Air Initial Jobless Claims Continuing Claims Bloomberg Consumer Comfort Kansas City Fed Manf. Activity Period 1Q 1Q F 1Q F MAY MAY MAY P MAY P MAY A MAY A MAY A MAY MAY MAY MAY A MAY A 1Q P 1Q P 1Q P 1Q P APR APR APR APR 19-May 12-May 20-May MAY Survey Actual 0.20% 0.50% 1.20% -94 47 45.7 47 52 46.6 109.4 117.1 102 46 46.7 -0.20% 0.00% 0.30% 0.00% 0.20% 0.80% 0.80% -1.00% 370K 3250K -5 ---------------------------Prior Revised 0.20% -0.50% -1.20% --14 -95 -46.9 -45.2 -46.2 -52.2 -46.7 -109.9 -117.5 -102.7 -45.9 -46.9 -0.20% -0.00% -0.40% -0.50% -4.20% -3.90% 1.10% -1.30% 0.80% -3.60% 2.60% 1.70% 370K -3265K --43.6 -3 --

24 May 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

24 May 2012