Barclays Capital -Convertible Outlook Q2 2013 by riteshbhansali

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									                                                                                                                                           Equity Research
                                                                                                                                                 15 April 2013


Convertible Outlook Q2 2013
EMEA and Asia Pacific: Differentiation                                                                          CB InsightTM
                                                                                                                https://live.barcap.com/keyword/
                                                                                                                CBINSIGHT
Different parts of the convertible market will likely exhibit very different return, risk                       Our online convertibles portal, providing
and net supply profiles in Q2, in our view, as they did in Q1. Differentiation was                              interactive analytical tools, market data
                                                                                                                and research
particularly evident by region: the Japan convertible index YTD return is a strong 25%,
fueled by rallying equities and richening, whereas EMEA and Asia ex-Japan convertible
                                                                                                                Luke Olsen
index returns are 0.6% and 1.5% YTD, respectively. Our full-year convertible total return
                                                                                                                +44 (0) 20 7773 8310
projections are c.5% in EMEA and c.8% in Asia Pacific. We advocate diversity in
                                                                                                                luke.olsen@barclays.com
convertible positioning, with a bias towards delta, caution on over stretched valuations,
                                                                                                                Barclays, London
and sector selectivity. Key themes in this report include convexity, gamma, volatility
relative value, Japan, South Africa and UK convertibles. EMEA issuance is €7.4bn YTD,
                                                                                                                Angus Allison
while Asia Pacific stands at $4.0bn. Issuance should pick up, in our view, given higher
                                                                                                                +44 (0) 20 7773 5379
equities, richer valuations and ongoing redemptions. We anticipate 2013 redemptions
                                                                                                                angus.allison@barclays.com
and conversions of €11bn in EMEA and $22bn in Asia Pacific.
                                                                                                                Barclays, London
Projections: Mid-to-high single digit returns for the full year
• Our 2013 convertible total return projections are c. 5% for EMEA and c. 8% for Asia                           Kim Berg

    Pacific, driven mainly by equities.                                                                         +44 (0)20 3555 0289
                                                                                                                kim.berg@barclays.com
• Convexity has improved in both regions since the end of 2012, although theta decay                            Barclays, London
    risk has increased. We project convertible 12m total returns of 10.4%, 0.2% and -
    7.4% in EMEA and 10.7%, -0.1% and -8.3% in Asia Pacific, for equity return                                  www.barclays.com
    scenarios of 25%, 0% and -25%, respectively.

Themes: Convexity, gamma, volatility, yields, Japan, South Africa and the UK
• New themes for this quarterly report include our Gamma Scores screen, and an
   overview of topical convertible markets in South Africa, Japan and the UK.

Positioning: Equities to outperform fixed-income, convertible valuations stretched
• We advocate diverse exposures, with country and sector selectivity. Equities should
    outperform fixed-income, helped by ‘yieldfall’ and monetary policy.

• In volatility relative value terms, EMEA convertible richness is little changed from
    end-2012, and we believe it is sustainable. Asia Pacific richness, however, and Japan
    in particular, has increased substantially YTD and looks prone to some reversion.

Issuance outlook: Positive net supply in EMEA, at least
• EMEA issuance is €7.4bn YTD compared to €2.1 of redemptions, conversions and
    buybacks. Asia Pacific issuance is $4.0bn, compared to $7.1bn of redemptions.

• We project €11bn of 2013 redemptions in EMEA and $22bn in Asia Pacific, with
    Japan contributing $14bn. Issuance should pick up, helped by higher equities and
    improved valuations. We expect positive FY net supply in EMEA, at least.


Barclays Capital Inc. and/or one of its affiliates 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 equity research analysts based outside the
US who are not registered/qualified as research analysts with FINRA.
PLEASE SEE ANALYST(S) CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 60.
Barclays | Convertible Outlook Q2 2013


CONTENTS

                                   Performance expectations .............................................................................. 4 
                                   Base-case projection ................................................................................................................................. 4 
                                   Convexity scenario projections ............................................................................................................... 4 
                                   Observed convexity ................................................................................................................................... 6 

                                   Positioning .......................................................................................................... 7 
                                   Convertibles with the best convexity profiles ...................................................................................... 7 
                                   Convertibles for investors new to the asset class ............................................................................. 10 
                                   Macro view: Cyprus contagion limited and BoJ goes for it ............................................................. 12 
                                   Pan-asset class views .............................................................................................................................. 13 

                                   Themes for Q2 2013.......................................................................................16 
                                   Volatility relative value ............................................................................................................................ 16 
                                   Convertibles for yield ............................................................................................................................... 20 
                                   Focus on South Africa ............................................................................................................................. 23 
                                   Focus on Japan .......................................................................................................................................... 28 
                                   Focus on the UK ........................................................................................................................................ 33 
                                   Gamma scores .......................................................................................................................................... 34 
                                   Ratchets ...................................................................................................................................................... 37 
                                   Sector calls in Europe .............................................................................................................................. 38 

                                   Net supply outlook ..........................................................................................40 
                                   EMEA off to a promising start ............................................................................................................... 40 
                                   Asia Pacific issuance set to rise? ........................................................................................................... 43 

                                   Review of Q1 2013 ..........................................................................................46 
                                   Convertibles performance versus other asset classes ..................................................................... 46 
                                   Rich/cheapness between the regions ................................................................................................. 47 
                                   Convertibles performance across regions .......................................................................................... 49 
                                   Universe profiles ....................................................................................................................................... 50 
                                   EMEA new issuance ................................................................................................................................. 52 
                                   Asia Pacific new issuance ....................................................................................................................... 53 
                                   Defaulted convertibles list ...................................................................................................................... 55 
                                   Convertible-related equity and credit views....................................................................................... 56 




15 April 2013                                                                                                                                                                                     2
Barclays | Convertible Outlook Q2 2013


DIFFERENTIATION

                                   Our theme for this quarterly report is differentiation, not only in observed performance but
                                   also in the potential for future positioning.

Extraordinarily easy monetary      Japan’s adoption of 2% inflation targeting has led to a c. 30% increase in the Nikkei 225 and
policy has provided a              c.15% weakening of the yen versus the dollar year-to-date. Combined with the continuation
springboard for sentiment and      of quantitative easing in the US, the springboard for equities has fed through to convertibles
fed through to superior            with our Japan and US convertible indices returning 17.6% and 7.4%, respectively, in Q1.
convertible returns in Japan,      Even in USD terms, the Japan convertible index Q1 return was impressive, at 8.1%. However,
the US and the UK                  the trend has not been universal with the Stoxx 600 index gaining only 5% in Q1 and the
                                   Hang Seng index down 2.5%. Within the UK, we observed a distinct difference between the
                                   performance for convertibles of UK companies relative to those that might be considered
                                   only UK-listed. Therefore, though the climate feels favourable, the Q1 performance of our
                                   EMEA (+1.0%) and Asia ex-Japan (+1.4%) convertible indices is underwhelming, hampered
                                   further by the compression of yields prior to the start of the year.

Though equity markets may          The main risk we now see is investor sentiment having become overly optimistic with some
have come too far too fast, we     equity markets arguably having come too far too fast. Nonetheless, the implication of the
continue to prefer equities over   inflationary actions leads us to continue to prefer equities over credit, and we believe that
credit                             financial conditions in the euro area should gradually become more supportive to growth. In
                                   China, the new political appointments should ensure continuity, though authorities may be
                                   constrained by the desire to contain inflation yet adjust to the ‘new normal’ growth rate.

                                   Indeed, though broader markets are benefiting from extraordinarily easy monetary policy,
                                   underlying fundamentals arguably remain strained and certainly differentiated. Recent
                                   weeks have provided stark reminders of the continued refinancing challenges facing some
                                   corporates, and of the risk of generically assuming credit improvements.

The drivers for issuance remain    Convertible issuance began the year very strongly in EMEA and ends Q1 at €7.4bn. Asia
positive and so too for            Pacific experienced a slower start; though, three Japanese convertibles in as many days in
currently under-represented        April, including the first with USD denomination in many years, illustrates the potential: the
markets                            Japanese convertible market has previously been an order of magnitude larger than its
                                   current size. The global drivers for issuance remain positive, in our view: issuers could be
                                   motivated either to lock in extremely low coupons, or to effectively sell stock at a further
                                   premium to the preceding rally. We also believe that under-represented markets such as
                                   South Africa have great potential, with relatively higher swap rates adding to the case for
                                   convertible issuance.

There are undoubtedly              Our greatest comfort heading into Q2 13 is the inherent differentiation that the convertible
challenges ahead though we         asset class continues to offer via its convexity. The equity rally has restored variety to the
believe convertibles remain        bond profiles now available throughout regions. However, this arguably also represents the
well positioned to face            greatest challenge: should one focus on higher yields for fear of a snap back in equities,
uncertainty                        though with the associated credit risks, prefer higher delta names to assuage the risk of
                                   missing further inflation in asset prices, or focus on balanced bonds though arguably
                                   therefore face the most risk of theta decay. Though convertible implied volatility is at a
                                   premium to short-dated realised volatility, we do not believe that valuations themselves are
                                   universally excessive and wonder whether this is more a symptom of rising volatility
                                   expectations; albeit this would bring its own challenge should it be realised.

                                   We hope that this report aids investors in addressing these uncertainties and wish you all
                                   the best for the coming quarter.




15 April 2013                                                                                                                   3
Barclays | Convertible Outlook Q2 2013


PERFORMANCE EXPECTATIONS

                                   Base-case projection
                                   We forecast 12m convertible total returns of c. 6% for both the EMEA and Asia Pacific
                                   markets. This is based on high single-digit potential upside for equities and modest credit
                                   spread tightening, in line with our strategists’ forecasts, and interpolating from our scenario
                                   analysis, shown below.

                                   Our forecasts are based on the c.12-13% potential upside to our equity strategists’ target of
                                   330 for the Stoxx Europe 600 index by end-2013, based on its 293 level on 11 April. We
                                   then add our convertible indices’ dividend yield, 2.4% for EMEA and 1.4% for Asia Pacific.
                                   This gives a potential total return of 15% for EMEA convertible underlyings and 14% for
                                   Asia Pacific. Last, we use our convexity projections below to interpolate between the 0%
                                   and +25% equity scenarios. These give our ‘base-case’ projections for convertible 12m total
                                   returns of 6.2% for EMEA and 6.0% for Asia Pacific.

We forecast 2013 convertible       2013 total return projection, combining YTD and projected returns
total returns of c. 5% for EMEA    We assume that the Q2-Q4 return will be three quarters of our 12m projected return, ie,
and c. 8% for Asia Pacific,        c.4.5% in both regions.
based on projected modeled
returns plus YTD index returns     The YTD EMEA and Asia Pacific (including Japan) index returns to 10 April are 0.4% and
                                   3.8%, respectively.

                                   Combining these two components gives projected 2013 total returns of c. 5% for EMEA and
                                   c. 8% for Asia Pacific. Within the latter, the greater contribution has so far come from Japan.


                                   Convexity scenario projections
2.6pts of convexity differential   • We project EMEA convertible 12m total return scenarios of -7.4%, 0.2% and 10.4% for
in both EMEA and APAC                    average equity return scenarios of -25%, 0% and 25% (Figure 1), respectively. Our
                                         modelled convexity differential is therefore 2.6pts.

                                   • In Asia Pacific including Japan, we project potential convertible returns of -8.3%, -0.1%
                                         and 10.7%, respectively (Figure 2). Hence, the convexity differential is again 2.6pts.

                                   • We also see substantial differences between Asia ex-Japan and Japan, as the two regions
                                         now have very different deltas, post the sharp Japanese rally (Figure 3. and Figure 4).

                                   • There are currently 54 bonds in EMEA with a convexity differential of more than 3%
                                         (sample size 188) and also 54 in Asia Pacific (sample size 146). This compares to 37 in
                                         EMEA and 44 in Asia Pacific, at the end of 2012. Hence, both regions offer more
                                         convexity, which we attribute both to new issuance and to the equity rally.

                                   • The ‘index’ method produces similar convexity results, as shown in Figure 5 and Figure
                                         6. As a reminder, the index method uses our indices’ average levels, greeks and yields to
                                         derive scenario returns. By contrast, the ‘individual bond projections’ method uses a
                                         value-weighted average of individually modelled bond returns.




15 April 2013                                                                                                                      4
Barclays | Convertible Outlook Q2 2013


FIGURE 1                                                                    FIGURE 2
Projected potential convertible 12m total returns for average               Projected potential convertible 12m total returns for average
+/-25% equity returns, EMEA                                                 +/-25% equity returns, Asia Pacific (including Japan)

  12%                                                          10.4%          15%
  10%                                                                                                                                      10.7%
   8%                                                                         10%
   6%
   4%
                                                                               5%
   2%                                     0.2%
   0%
                                                                               0%
  -2%
                                                                                                                      -0.1%
  -4%
  -6%                                                                         -5%
  -8%
                  -7.4%
 -10%                                                                        -10%           -8.3%
             Equities -25%             Equities flat        Equities +25%                Equities -25%             Equities flat        Equities +25%

Source: Bloomberg, Barclays Research                                        Source: Bloomberg, Barclays Research

FIGURE 3                                                                    FIGURE 4
Projected potential convertible 12m total returns for average               Projected potential convertible 12m total returns for average
+/-25% equity returns, Asia Pacific ex-Japan                                +/-25% equity returns, Japan

   8%                                                           7.0%          20%                                                          16.4%

   6%                                                                         15%

                                                                              10%
   4%
                                                                               5%
   2%
                                          0.2%                                 0%
   0%                                                                                                                 -0.6%
                                                                              -5%
  -2%
                                                                             -10%
  -4%                                                                        -15%
                  -4.0%                                                                     -14.8%
  -6%                                                                        -20%
            Equities -25%              Equities flat        Equities +25%                Equities -25%             Equities flat        Equities +25%

Source: Bloomberg, Barclays Research                                        Source: Bloomberg, Barclays Research

FIGURE 5                                                                    FIGURE 6
Projected potential convertible 12m total returns using the                 Projected potential convertible 12m total returns using the
‘index analytics method’, EMEA                                              ‘index analytics method’, Asia Pacific (including Japan)
  15%                                                                         15%
                                                            10.4% 10.8%                                                                 10.7% 10.7%
  10%                                                                         10%


    5%                                                                          5%
                                               1.6%
                                   0.2%
    0%                                                                          0%
                                                                                                               -0.1% -0.2%

   -5%                                                                         -5%
                      -4.2%
                                                                                                  -5.5%
 -10%        -7.4%                                                           -10%        -8.3%
             Equities -25%             Equities flat        Equities +25%                Equities -25%             Equities flat        Equities +25%
                Individual bond projections            Index method                        Individual bond projections             Index method
Source: Bloomberg, Barclays Research                                        Source: Barclays Research


15 April 2013                                                                                                                                           5
Barclays | Convertible Outlook Q2 2013


                                                                             Observed convexity
                                                                             The convexity of convertibles with a ‘Typical’ profile (we define this for our index as a
                                                                             conversion premium of 20-70%, amortised over the final two years of the bond’s life) is
                                                                             apparent when observing the participation ratio of the index to moves in the Stoxx 600 total
                                                                             return index, for EMEA convertibles for example.

                                                                             The chart below also highlights how convertibles have outperformed equities in times of
                                                                             significant draw-downs (eg, Q2 10, Q3 11 and Q2 12), delivering equity-like returns with
                                                                             greatly reduced volatility.


FIGURE 7                                                                                                                               FIGURE 8
EMEA Convertible index (Typical profile) versus Stoxx 600                                                                              EMEA Convertible index (Typical profile) participation ratios
total return index                                                                                                                     versus Stoxx 600 index, highlighting empirical convexity

 130
 125                                                                                                                                                                      1.0
 120                                                                                                                                                                      0.9
 115                                                                                                                                                                      0.8
 110                                                                                                                                                                      0.7
 105                                                                                                                                                                      0.6
 100
                                                                                                                                                                          0.5
  95
                                                                                                                                                                          0.4
  90
                                                                                                                                                                          0.3
  85
  80                                                                                                                                                                      0.2
                                                                                                                                                                          0.1
       Dec-09



                           Jun-10

                                    Sep-10

                                             Dec-10



                                                               Jun-11

                                                                        Sep-11

                                                                                 Dec-11




                                                                                                                     Dec-12
                Mar-10




                                                      Mar-11




                                                                                          Mar-12

                                                                                                   Jun-12

                                                                                                            Sep-12



                                                                                                                              Mar-13




                                                                                                                                                                          0.0
                                                                                                                                         -20%              -10%                 0%             10%              20%
                         EMEA Converts: Typical                                     Stoxx 600 total return
Note: Total return indices rebased to 100 at 31 Dec 2009. Indices are available                                                        Note: Rolling 3-month returns from Mar 2010. Equity index moves of less than
on Bloomberg via tickers BEU2TREU and SXXR.                                                                                            3% are disregarded. Ratios are convertible index returns divided by equity index
Source: Bloomberg, Barclays Research                                                                                                   returns. Source: Barclays Research




15 April 2013                                                                                                                                                                                                             6
Barclays | Convertible Outlook Q2 2013


POSITIONING

                                       Convertibles with the best convexity profiles
                                       Following the convexity scenario analysis presented earlier, we now identify specific bonds
                                       with attractive long-term potential convexity profiles. The generally attractive convexity
                                       profiles we look for include (these are shaded in Figure 9):

                                       • High convexity differential, ie, substantially more deviation from the flat scenario to the
                                          upside than to the downside, ie, at least 3% differential.

                                       • Total return not worse than -1% in the flat scenario. We had previously used 0%, but
                                          with the equity rally and yield compression, we have broadened the filtering range.

                                       • Mild return in the downside scenario, eg, convertible return of not worse than -6%.

                                       The bonds that meet these criteria are shaded in Figure 9 and Figure 10.

FIGURE 9
EMEA convertibles with modelled projected convexity differentials above 3%, for average +/-25% equity returns

                                                                                                     Convexity         Convexity ratio:
                                                               Downside     Flat     Upside    differential: (up-flat) (up-flat) / (flat-
Name                                        Price     Parity    return     return    return        - (flat-down)           down)

Capgemini 3.5% 2014                         38.5       35.3      -10%       -7%        16%             20%                    6.7
Subsea 7 2.25% 2013                         111.8     109.0      -12%       -4%        20%             16%                    3.0
Swiss Prime 1.875% 2015                     106.8     108.8      -12%       -3%        19%             14%                    2.7
Pennon 4.625% 2014                          120.0     110.8      -12%       -4%        19%             14%                    2.6
Shire 2.75% 2014                            107.7      91.4       -4%       -4%        8%              12%                    58.5
Sainsbury 4.25% 2014                        110.6      92.5       -3%       -2%        10%             12%                    20.4
Temasek - Standard Chartered 0% 2014        106.4      87.5       -3%       -2%        8%               9%                    10.6
Eurazeo - Danone 6.25% 2014                 58.7       57.0      -17%       -1%        22%              9%                    1.6
Hera 1.75% 2013                             99.8       86.1       1%         1%        9%               8%                    n/a
TUI Travel 6% 2014                          108.9      88.5       -3%       -1%        8%               7%                    5.5
Maurel et Prom 7.125% 2014                  18.6       15.9      -10%       -4%        9%               7%                    2.2
CA Immobilien 4.125% 2014                   105.5      91.8       -7%       -2%        11%              7%                    2.5
Swiss Prime 1.875% 2016                     103.5      93.1       -6%       -1%        11%              7%                    2.6
Industrivarden 2.5% 2015                    128.0     129.2      -19%       -2%        22%              7%                    1.4
UCB 4.5% 2015                               129.3     122.3      -15%       -2%        18%              7%                    1.5
BNP - Pargesa 0.25% 2015                    101.9      87.5       -5%       -2%        8%               7%                    2.8
Lukoil 2.625% 2015                          109.9      88.5       -5%       -1%        9%               6%                    2.6
KfW - Deutsche Post 1.5% 2014               127.3     128.5      -22%       -4%        21%              6%                    1.3
Artemis - PPR 3.25% 2016                    178.1     167.9      -15%       -1%        18%              6%                    1.4
GBL - Suez Environment 0.125% 2015          106.2      89.2       -8%       -3%        8%               6%                    2.1
ENI - Snam 0.625% 2016                      99.9       85.0       -4%       -1%        7%               6%                    3.1
Publicis 1% 2018                            58.5       53.0       -9%        0%        14%              6%                    1.7
SGL Carbon 3.5% 2016                        116.9     105.4      -10%        1%        17%              6%                    1.6
BNP - Pargesa 0.25% 2016                    100.4      85.5       -6%       -2%        9%               6%                    2.2
Technip 0.5% 2016                           97.9       82.5      -11%       -2%        12%              5%                    1.6
BES - Bradesco 3.5% 2015                    118.2     116.0      -14%        0%        19%              5%                    1.4
International Airlines 5.8% 2014            138.9     132.8      -19%       -2%        21%              5%                    1.3


15 April 2013                                                                                                                               7
Barclays | Convertible Outlook Q2 2013


                                                                                                                              Convexity         Convexity ratio:
                                                                               Downside         Flat        Upside      differential: (up-flat) (up-flat) / (flat-
Name                                                   Price        Parity      return         return       return          - (flat-down)           down)

Solidium - TeliaSonera 0.5% 2015                      102.7          82.4          -3%          -1%           5%                   5%                       3.9
Gecina 2.125% 2016                                    125.1         108.7         -10%          -1%          12%                   5%                       1.6
GBL - GDF 1.25% 2017                                  102.3          87.1          -6%          -2%           8%                   5%                       2.0
Deutsche Post 0.6% 2019                               111.4          85.3          -7%          -1%           9%                   5%                       1.8
Steinhoff International 9.625% 2015                   126.1         100.3          -1%          4%           13%                   5%                       2.0
British Land 1.5% 2017                                102.6          82.6          -4%          0%            9%                   4%                       2.0
adidas 0.25% 2019                                     118.5          93.4         -10%          -1%          12%                   4%                       1.5
ENI - Galp 0.25% 2015                                 102.3          77.4          -4%          -1%           6%                   4%                       2.3
Technip 0.25% 2017                                    107.6          82.5          -8%          -1%          10%                   4%                       1.5
Atos 2.5% 2016                                         56.2          54.0         -13%          1%           18%                   4%                       1.3
Unibail Rodamco 0.75% 2018                            234.1         184.7          -8%          -1%          11%                   4%                       1.5
Conwert Immobilien 5.25% 2016                         104.0          79.0          -3%          2%           10%                   4%                       1.9
Marine Harvest 4.5% 2015                              123.5         117.8         -14%           1%          19%                   4%                       1.2
Drillisch - freenet 3.375% 2017                       131.9         132.7         -21%          -2%          21%                   4%                       1.2
Siemens 1.05% 2017 b+w                                104.1          77.8          -3%          0%            6%                   4%                       2.3
Salzgitter - Aurubis 2% 2017                          117.0         107.5         -14%          -1%          16%                   4%                       1.3
Derwent 2.75% 2016                                    114.2          99.0         -11%          -1%          12%                   4%                       1.4
Ingenico 2.75% 2017                                    52.8          45.6         -16%          -2%          16%                   3%                       1.2
Industrivarden 1.875% 2017                            109.2          79.3          -4%          -1%           7%                   3%                       1.9
TUI 5.5% 2014                                          86.2          81.1         -21%          -2%          20%                   3%                       1.2
Subsea 7 3.5% 2014                                    148.5         144.5         -22%          -4%          19%                   3%                       1.2
Shoprite 6.5% 2017                                   11983.7       10535.1        -11%           2%          17%                   3%                       1.3
Deutsche Euroshop 1.75% 2017                          105.2          88.6         -11%           1%          15%                   3%                       1.3
Maurel et Prom 7.125% 2015                             17.4          15.5         -13%          -2%          13%                   3%                       1.3
Atos 1.5% (S) 2016                                     55.7          53.4         -14%           0%          17%                   3%                       1.2
Note: Based on prices and theoretical valuations as of 10 April 2013; “n/a” indicates that the downside and flat returns are similar. Source: Barclays Research


FIGURE 10
Asia Pacific convertibles with modelled projected convexity differentials above 3%, for average +/-25% equity returns

                                                                                                                             Convexity            Convexity ratio:
                                                                              Downside          Flat       Upside        differential: (up-       (up-flat) / (flat-
Name                                                  Price       Parity       return          return      return       flat) - (flat-down)           down)

COHL - COLI 0% 2014                                   145.2        136.1         -13%           -7%          15%                16%                       3.8
Asahi Breweries 0% 2023                               116.4        113.1         -13%           -2%          23%                13%                       2.2
Nippon Meat (2282) 0% 2014                            120.5        113.1         -14%           -3%          21%                13%                       2.2
Bank Of Kyoto 0% 2014                                 109.0        90.5           -2%           -2%          11%                13%                      n/a
Cathay Financial 0% 2014                              114.3        107.6         -12%           -3%          19%                13%                       2.5
Kadokawa Holdings 1% 2014                             118.3        105.7         -11%           -2%          21%                13%                       2.4
China Merchant Hldgs Pac 1.25% 2017                   108.3        103.7          -7%            1%          21%                13%                       2.7
SK Telecom 1.75% 2014                                 120.2        115.1         -13%            0%          24%                12%                       1.9
San Miguel Corp 2% 2014                               111.5        116.7         -15%           -2%          23%                11%                       1.8
Yamato 0% 2016                                        120.2        101.9          -9%           -2%          16%                11%                       2.5
Nipro 0% 2015                                         116.0        103.1         -12%           -4%          14%                10%                       2.2
Asahi Breweries 0% 2028                               122.5        116.2         -17%           -2%          23%                10%                       1.6

15 April 2013                                                                                                                                                          8
Barclays | Convertible Outlook Q2 2013


                                                                                                                             Convexity            Convexity ratio:
                                                                              Downside          Flat       Upside        differential: (up-       (up-flat) / (flat-
Name                                                  Price       Parity       return          return      return       flat) - (flat-down)           down)

DISCO Corp 0% 2014                                    115.0        93.8          -10%           -4%          11%                 9%                       2.4
AREIT 1.6% 2017                                       122.0        119.7         -17%           -1%          22%                 9%                       1.6
China Power Int 2.25% 2016                            120.3        120.5         -14%            2%          26%                 8%                       1.5
Soho China 3.75% 2014                                 125.8        122.8         -18%           -2%          23%                 8%                       1.5
YTL Corp 1.875% 2015                                  112.9        100.1          -9%           -1%          14%                 8%                       1.9
Suntec REIT 1.4% 2018                                 101.6        87.3           -2%            1%          11%                 7%                       3.6
Nichias Corp 0% 2017                                  123.1        105.6         -13%           -3%          15%                 7%                       1.7
China Power Int 2.75% 2017                            112.9        98.3           -6%            2%          18%                 7%                       1.9
Nagoya Railroad 0.5% 2015                             128.4        124.1         -18%           -2%          22%                 7%                       1.4
CapitaCommercial Trust 2.5% 2017                      112.3        101.0         -10%            0%          17%                 7%                       1.7
Sawai Pharma 0% 2015                                  131.8        126.6         -19%           -1%          24%                 7%                       1.4
Posco - SK Telecom 0% 2016                            122.8        111.4         -12%           -1%          16%                 7%                       1.6
CPA 5.25% 2016                                        113.5        99.1           -6%            1%          15%                 7%                       1.9
China Overseas Grand Oceans 2% 2017                   125.4        131.0         -17%            0%          23%                 7%                       1.4
Mingfa 5.25% 2016                                     107.0        95.8           1%             7%          18%                 7%                       2.3
Asia Cement 0% 2016                                   104.0        80.2           0%             1%           8%                 6%                      n/a
CFS Retail 5.75% 2016                                 106.8        87.1           0%             2%          11%                 6%                       3.3
Pegatron 0% 2017                                      117.0        104.7         -11%            0%          16%                 6%                       1.5
ABC-Mart 0% 2018                                      114.5        85.7           -5%           -1%           9%                 6%                       2.3
Shizuoka Bank 0% 2018                                 112.7        85.5           -7%           -1%          11%                 5%                       1.8
Kuroda Electric 0% 2017                               121.8        112.2         -12%           -2%          14%                 5%                       1.5
Fukuyama Transporting 0% 2017                         117.3        102.5         -12%           -2%          13%                 5%                       1.5
Far Eastern Intl Bank 0% 2018                         104.1        78.0           -2%            0%           9%                 5%                       2.7
GDH - Guangdong Investment 3% 2016                    134.6        131.8         -19%           -2%          20%                 5%                       1.3
IHI 0% 2016                                           131.4        114.3         -16%           -3%          15%                 5%                       1.4
China Unicom 0.75% 2015                               101.4        64.5           -1%           -1%           4%                 5%                      n/a
Hynix 2.65% 2015                                      110.1        81.5           -5%           -1%           7%                 5%                       2.2
KDDI 0% 2015                                          144.0        143.6         -23%           -3%          22%                 5%                       1.2
Sekisui House 0% 2016                                 149.6        145.6         -24%           -3%          22%                 5%                       1.2
Lotte Shopping 0% 2016 JPY                            99.3         72.3           0%             0%           5%                 4%                      n/a
Park24 0% 2018                                         0.0         75.8           -4%           -1%           6%                 4%                       2.5
Senko 0% 2017                                         130.8        123.4         -17%           -2%          18%                 4%                       1.3
Agile 4% 2016                                         101.2        56.2           2%             2%           7%                 4%                      n/a
Lotte Shopping - Himart 0% 2018                       99.7         81.3           -6%            0%          10%                 4%                       1.6
Takashimaya 0% 2014                                   138.3        133.8         -23%           -2%          23%                 4%                       1.2
TPK 0% 2017                                           135.9        135.9         -19%            0%          22%                 3%                       1.2
Shui On Land 4.5% 2015                                99.8         54.7           4%             4%           7%                 3%                      n/a
CapitaCommercial Trust 2.7% 2015                      133.7        134.3         -23%           -1%          24%                 3%                       1.2
OSG Corp 0% 2022                                      118.0        83.8           -8%           -1%           9%                 3%                       1.5
ENN Energy 0% 2018                                    113.0        91.7          -11%           -1%          12%                 3%                       1.3
Kureha 0% 2018                                        112.5        77.6           -7%           -1%           7%                 3%                       1.6
Pacific Basin Shipping 1.75% 2016                     101.0        61.4           2%             2%           5%                 3%                      n/a
Note: Based on prices and theoretical valuations as of 10 April 2013; “n/a” indicates that the downside and flat returns are similar. Source: Barclays Research



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Barclays | Convertible Outlook Q2 2013


                                               Convertibles for investors new to the asset class
                                               Screening for bonds with the character of a convertible
                                               We screen for EMEA convertibles with:

                                               • Conversion premium between 10-50%;

                                               • Credit spread < 500bp;

                                               • At least one year to the first call date and maturity; and

                                               • Size above $250mn equivalent.

A screen of convertibles                       We believe that this screening currently produces a representative basket of convertibles, ie,
representing the premise of                    a decent expected equity upside participation given the conversion premium range, but also
upside participation /                         relatively greater downside protection given the credit spread threshold. By specifying a first
downside protection                            call date and maturity, we allow at least a year for parity to rise unbounded.

FIGURE 11
A screen of EMEA convertibles for investors new to the asset class
                                                                                           Conv                                    Equity
                                                     Amt                 Price Parity YTP/ Prem Credit Implied Equity Delta Equity Price Upside
Name                                ISIN        Ccy Out mn Price Parity (norm) (norm) M %   %    Rtg     Vol 100d Vol % Rating Target to target

adidas 0.25% 2019              DE000A1ML0D9 EUR        500    117.9 92.3    117.9   92.3    -2.4   28   NR   34   21   52   EW    80      4%
Baloise 1.5% 2016              CH0107130822 CHF        243    103.8 72.6    103.8   72.6    0.4    43   NR   24   15   18
Beni Stabili 3.375% 2018       XS0874832826 EUR        225    101.8 78.9    101.8   78.9    3.0    29   NR   24   33   50   OW    0.62    31%
BNP - Pargesa 0.25% 2015       XS0827817221 EUR        325    101.5 86.2    101.5   86.2    -0.4   18   IG   18   16   34
BNP - Pargesa 0.25% 2016       XS0906876114 EUR        250    100.0 84.2    100.0   84.2    0.3    19   IG   18   16   34
British Land 1.5% 2017         XS0827594762 GBP        400    102.2 80.3    102.2   80.3    0.8    27   NR   23   16   24   EW    6.09    9%
Derwent 2.75% 2016             XS0628102112 GBP        175    113.3 96.7    113.3   96.7    -1.2   17   IG   22   13   53   OW    23.8    11%
Deutsche Post 0.6% 2019        DE000A1R0VM5 EUR       1000    110.3 83.1    110.3   83.1    -0.9   33   IG   35   18   33   OW    18.5    7%
Elekta 2.75% 2017              SE0004548030 SEK       1894    124.4 100.2 124.4     100.2   -2.9   24   NR   35   23   60   OW    111     14%
ENI - Galp 0.25% 2015          XS0860994200 EUR       1028    102.0 76.2    102.0   76.2    -0.5   34   IG   24   21   31   OW    17      44%
ENI - Snam 0.625% 2016         XS0877820422 EUR       1250    99.7   84.8   99.7    84.8    0.8    18   IG   15   17   24   OW     4      9%
Fonciere d Reg. 3.34% 2017 FR0011050111 EUR            550    90.5   61.1   105.4   71.2    2.1    48   IG   11   16   18   EW    64.5    6%
GBL - GDF 1.25% 2017           XS0882243453 EUR       1000    101.5 84.3    101.5   84.3    0.8    20   NR   24   30   26   EW    16      4%
Immofinanz 4.25% 2018          XS0592528870 EUR        515     4.3   3.3    104.9   80.0    3.3    31   NR   13   23   51   OW    51      13%
Industrivarden 1.875% 2017 XS0579438663 EUR            550    109.1 77.9    109.1   77.9    -0.4   40   IG   29   18   27
Ingenico 2.75% 2017            FR0011018902 EUR        250    52.6   45.4   140.6   121.2   -6.4   16   NR   38   24   70   OW    51      13%
INTU 2.5% 2018                 XS0834486796 GBP        300    104.7 77.0    104.7   77.0    1.4    36   NR   21   16   43   OW    4.09    23%
Prysmian 1.25% 2018            XS0901332337 EUR        300    101.9 69.6    101.9   69.6    0.9    47   NR   36   23   37   OW    16      3%
Seadrill 3.375% 2017           NO0010590565 USD        650    131.6 116.3 131.6     116.3   -3.0   13   NR   21   16   75   OW    48      32%
SGL Carbon 2.75% 2018          DE000A1ML4A7 EUR        240    103.7 70.1    103.7   70.1    1.9    48   HY   32   22   28
Shoprite 6.5% 2017 (list. D)   ZAE000166997 ZAR 4700 11901 10397 119.0              104.0   1.6    14   NR   20   26   66   OW    207     18%
Solid. – TeliaSon. 0.5% 2015 XS0761797868 EUR          600    102.4 80.4    102.4   80.4    -0.5   27   NR   25   17   18   EW    45      4%
Steinhoff Int. 5% 2016         XS0542360770 EUR        390    108.7 72.9    108.7   72.9    4.3    49   HY        22   23   EW    27      15%
Subsea 7 1% 2017               NO0010661168 USD        700    102.3 77.6    102.3   77.6    0.5    32   NR   27   20   54   OW    195     46%
Technip 0.25% 2017             FR0011163864 EUR        498    107.4 82.4    111.8   85.8    -2.7   30   IG   38   24   45   OW    113     37%
TUI Travel 4.9% 2017           XS0503743949 GBP        400    110.5 79.2    110.5   79.2    2.2    40   NR   23   25   33   OW    3.25    7%
Unibail Rodamc 0.75% 2018 FR0011321330 EUR             750    232.9 181.9 107.2     83.7    -0.7   28   IG   22   19   47   EW   176.41   1%
Note: Data as at close on 9 April 2013. Source: Barclays Research




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Barclays | Convertible Outlook Q2 2013


                                   We also calculate the total return on the bonds featured in the same-criteria screen that we
                                   introduced in our Convertible Outlook 2013 EMEA and Asia Pacific: Surprising strength, 14
                                   December 2012, p. 13. The lowest total return over Q1 13 was -7% (CGG Veritas 2019 and
                                   compared to a -21% move in parity and starting delta of 62%), while the highest total return
                                   was 12% (Emaar Properties 2015 compared to a 35% move in parity and starting delta of
                                   31%). Note, these changes are measured from 31 December 2012 to 27 March 2013.

                                   Plotting the total return of the bonds versus their expected move given the change in parity
                                   and delta (horizontal axis measures Start Delta% * Parity Change%) illustrates the convexity
                                   of realised returns with respect to their initial sensitivity to changes in parity. Specifically:

                                   • There was a strong relationship between the realised return, and the move in parity and
                                          the modelled sensitivity of the bond price to changes in parity (delta %).

                                   • 64% of bonds realised a return above that which would be predicted simply by Start
                                          Delta% * Parity Change%, and 36% underperformed the prediction.

                                   • Richening and cheapening of bonds seemed to be a significant driver of this
                                          out/underperformance.


                                   FIGURE 12
                                   Total return of convertible bonds %, versus delta % * parity change %


                                                                                    15        y = 0.0131x2 + 0.7829x + 0.8138
                                                                                                        R² = 0.8179
                                                                                    10

                                                                                      5

                                                                                      0

                                                                                     -5

                                                                                   -10

                                                                                   -15
                                         -15           -10              -5                0               5              10     15



                                   Note: Changes measured from 31 December 2012 to 27 March 2013. Source: Barclays Research




                                   For Asia Pacific, our screening criteria return fewer bonds, so we extend them slightly:

                                   • Conversion premium between 5% and 60%;

                                   • Credit spread < 450bp;

                                   • At least 0.6 years to the first call date, and one year to put and maturity; and

                                   • Size above $200mn equivalent.




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Barclays | Convertible Outlook Q2 2013


FIGURE 13
A screen of Asia Pacific convertibles for investors new to the asset class
                                                                                                                         Equity
                                                    Amt Out            YTP/M Conv Credit Implied Equity           Equity Price Upside to
Name                                  ISIN       Ccy (mn) Price Parity   %   Prem % Quality Vol  100d Vol Delta % Rating Target target

ABC-Mart 0% 2018                XS0876187815 JPY        33000       114.0   84.6   -2.7   35   NR   34   29       34
Asahi Breweries 0% 2028         XS0364004712 JPY        35000       120.8 114.0    -1.2   6    NR   34   22       34
Capitaland 2.875% 2016          XS0444106644 SGD         1200       105.1   73.5   1.3    43   NR   24   22       24    OW     4.64    35%
CFS Retail 5.75% 2016           XS0641119812 AUD         300        106.5   85.8   3.6    24   IG   17   18       17
CPA 5.25% 2016                  XS0470187815 AUD         200        113.5 100.4    1.5    13   IG   23   21       23
Ebara 0% 2018                   JP316600PD34      JPY   20000       113.0   80.0   -2.4   41   NR   42   36       42
ENN Energy 0% 2018              XS0884410019 USD         500        110.9   87.5   -1.6   27   IG   29   28       29
Hong Kong Exch. 0.5% 2017       XS0836237213 USD         500        108.8   79.9   -0.8   36   NR   31   22       31
IHI 0% 2016                     XS0603093450 JPY        23000       129.0 110.5    -8.2   17   NR   44   38       44    OW     410     29%
Lotte Shop. - Himart 0% 2018 XS0877989763 KRW 321200                99.9    81.7   0.0    22   IG   30   31       30
Lotte Shopping 0% 2016 JPY      XS0640924998 JPY        32500       99.3    71.8   0.0    38   IG   22   23       22    OW    420000    5%
Pegatron 0% 2017                XS0724674931 USD         300        117.5 106.5    -2.2   10   NR   31   28       31     EW     40     -12%
Posco - SK Telecom 0% 2016      XS0658205280 JPY        24526       122.2 111.8    -4.4   9    IG   18   21       18    OW    200000   11%
Shanghai Industrial 0% 2018     XS0878021913 HKD         3900       100.8   65.6   0.9    54   NR   33   21       33
Suntec REIT 1.4% 2018           XS0894197606 SGD         280        101.8   88.0   1.0    16   IG   18   15       18
Tsinlien - Tianjin 1.25% 2016   XS0612388321 CNY         1638       98.8    65.7   2.4    50   NR   33   40       33
Note: Data as at close on 9 April 2013. Source: Barclays Research


                                               Macro view: Cyprus contagion limited and BoJ goes for it
Cyprus contagion has so far                    Europe once again took centre stage over the past few weeks on the back of the Cypriot
proved fairly limited and our                  bank bail in. Any potential contagion has so far proved fairly limited and our view is that it
view is that it will remain so                 will remain so. Communication from the Eurogroup has been mixed recently, but the
                                               direction is clear according to our analysts: more burden sharing for banks. We see very little
                                               anecdotal evidence of deposit runs, and there are also few signs of increased reliance on
                                               ECB funding by the weaker banks, apart from Cyprus. We expect limited fall-out on the
                                               peripheral deposit side in the near term.

We keep our above-consensus                    Recent focus, however, has turned towards Japan and the stimulus by BoJ, which is now
CPI/GDP forecasts for Japan                    officially targeting 2% year-on-year CPI inflation in two years. We keep our above-
                                               consensus CPI and GDP forecasts of 0% and 1.1% for 2013, respectively, increasing to 2.3%
                                               and 2.6% in 2014. Details can be found in Japan Outlook: The BoJ goes for it, 5 April 2013.

Overall we see financial                       Overall we see financial conditions improving significantly, counteracting fiscal tightening.
conditions improving                           The US recently came out with stronger than expected consumption growth and inventory
significantly, counteracting                   accumulation and we raised our Q1 GDP forecast to 3.5% q/q leading to a 2013 GDP
fiscal tightening                              forecast of 2.1%. In the euro area financial and fiscal conditions should gradually become
                                               more supportive to growth in 2013 and into 2014, whereas in the UK there is a risk of
                                               downside to GDP in Q1. In China the new political appointments should ensure continuity
                                               and we keep our below-consensus GDP forecast of 7.9% and above-consensus CPI forecast
                                               of 3.2% for 2013. A summary of our economics views can be found in Global Economics
                                               Weekly: Bold action from the BoJ, 5 April 2013.

                                               In Figure 14 we provide our economic forecasts for 2013 and 2014. More details regarding
                                               our economic views can be found in European Economics Quarterly: Recovery hinges on
                                               policy action, 10 April 2013.




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Barclays | Convertible Outlook Q2 2013


                                   FIGURE 14
                                   The economic outlook – Barclays Research forecasts

                                                         Real GDP % y/y           Real GDP % y/y   CPI inflation % y/y CPI inflation % y/y
                                   Region                     2013                     2014               2013                2014

                                    Global                       3.2                     4.0               2.9                 3.1
                                    US                           2.1                     2.3               2.1                 2.2
                                    Euro area                    -0.3                    1.4               1.7                 1.5
                                    Asia/Pacific                 5.6                     6.3              2.6                  3.3
                                    France                       0.0                     1.4               1.3                 1.3
                                    Germany                      1.0                     2.0               1.9                 2.3
                                    Greece                       -6.3                    -0.4             -0.3                 -0.8
                                    Ireland                      1.0                     2.3               0.8                 1.3
                                    Italy                        -1.7                    0.8              2.0                  1.9
                                    Portugal                     -2.5                    0.5               0.3                 -0.4
                                    Russia                       3.0                     3.5               6.6                 5.6
                                    South Africa                 2.7                     3.4               6.0                 5.8
                                    Spain                        -1.6                    0.8               2.1                 1.1
                                    United Kingdom               0.6                     1.8               2.9                 2.6
                                    China                        7.9                     8.1               3.2                 3.5
                                    India                        5.6                     7.0               6.4                 5.7
                                    Japan                        1.1                     2.6              0.0                  2.3
                                   Note: Data as of 10 April 2013.Source: Barclays Research


                                   Pan-asset class views
Equities to outperform fixed       Our view for 2013, found in Global Outlook: Stay with equities for now (21 March 2013)
income by a wide margin            remains intact from the last Global Outlook published 13 December 2012. Namely for
                                   mediocre economic growth, tight fiscal policy and extraordinarily easy monetary policy,
                                   which will lead to low volatility and inter-market correlations, as well as equities
                                   outperforming fixed income by a wide margin.

                                   The main risk we see is that investor sentiment may have become overly optimistic with equity
                                   markets having come too far too fast. Further, we are more bearish on Emerging Market equities
                                   and hence prefer developed markets, especially the US, Japan, the UK and Spain.

                                   Equities – Policy remains supportive of Yieldfall
Next trigger for Yieldfall:        The rally in European equities since mid-2012 has been driven by ‘Yieldfall’ or, in other
reduction in headline risk and     words, a compression in the equity risk premium, not through an improvement in the
a bottoming of profit margins.     prospects of profitability. The next trigger for Yieldfall would be a reduction in headline risk
We see signs of the latter         and a bottoming of profit margins. Our analysis suggests that the latter may already be
                                   under way with profit margins approaching a cyclical trough. Hence we upgrade our STOXX
                                   600 price target to 330, implying c.12% upside potential at the time of writing. We have an
                                   overweight strategy view on Banks, Insurance, Real Estate and Financial Services versus an
                                   underweight view on Food & Beverages, Personal & Household Goods and Healthcare.

                                   The US market remains compelling compared with other advanced economies but we are
                                   slightly cautious in the near term, as the S&P 500 has already exceeded our target and the
                                   outlook for growth and earnings has not improved. As for Emerging Market equities, we
                                   continue to recommend a neutral allocation due to markets still adjusting to China’s much
                                   lower ‘new normal’ growth rate, and authorities there may be constrained by the desire to
                                   contain both CPI and property price inflation.



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Barclays | Convertible Outlook Q2 2013


                                    Credit – Successful sector selection obscured in Europe
Europe: be defensive at senior      In Europe optimal sector positioning continues to be obscured by the valuation gap between
unsecured level, balance with       peripheral and non-peripheral credits. Hence we recommend investors to be defensive at
longs in sub. debt, and tactical    the senior unsecured level, and balance this with longs in subordinated debt, and tactical
exposure to peripherals             exposure to peripherals.

                                    In European IG we are overweight Insurers and corporate hybrids of high rated core issuers;
                                    Underweight Autos, Retail, peripheral banks versus a barbell in “core” banks – Underweight
                                    senior debt and overweight subordinated debt. Over the full year we expect peripheral credit
                                    to outperform but are cautious in the near term. European HY recommendations are as
                                    follows; overweight Wireless, Retailers, Gaming; underweight Automotive, Paper and Metals
                                    and Mining.

Cyprus bail-in increased the        Further, the bail-in of Cypriot depositors has increased the risk that bank creditors, up to
risk for bank creditors             and including uninsured depositors, will share in losses at failed banks. For more details on
                                    this please see Where do bank depositors and debt holders stand post Cyprus?, 4 April 2013.

We see current valuations as        Asia credit has been lagging US/European credit lately on the back of strong
attractive for a selective switch   underperformance of the sovereign segment. For China high grade we believe there could
out of Chinese property into        be some spread tightening. We are neutral India high grade, whereas in Korea high grade we
industrials                         recommend staying in the quasi-sovereigns/policy banks. We are comfortable owning the
                                    Chinese high yield property sector in the near term, but may look to pare back exposure
                                    after the market prices in the strong full-year results delivered, and positive credit rating
                                    actions. We see current valuations as attractive for a selective switch out of Chinese
                                    property into industrials. The outlook for Indonesian high yield coal is bleak and we see the
                                    sector as a whole unattractive.

                                    Commodities – Still missing out on the party
Sell base metals on any             The recovery in investor risk appetite has not spilled over to the commodities market due to
significant rally, we favour        a weak growth outlook. Positioning seems to be stretched to the short side but any rebound
platinum and expect range           in Q2 is likely to be limited by a stronger dollar plus accelerating supply growth in markets
bound trading in oil                such as crude oil and copper. We recommend investors to sell base metals on any
                                    significant rally. Within precious metals we see platinum as offering the most upside
                                    potential in the next few months. We forecast range trading as the most likely case for oil
                                    prices over the coming quarters but highlight that this is based on a highly fragile
                                    equilibrium. Further, we recently lowered our forecasts for the average 2013 Brent crude
                                    price from $125 per barrel to $112 and for WTI from $108 per barrel to $95. For more in
                                    depth analysis please see Metals Magnifier: End of an era for the copper bulls, 4 April 2013
                                    and see Energy Flash: Oil: Balancing on a higher wire, 3 April 2013.

                                    Interest rates – Stuck in a range
ECB 25bp refi rate cut at May       The risks in core Europe are skewed towards higher yields and a steeper curve, in our view.
meeting seems more likely           Additional unconventional measures and a 25bp refi rate cut by the ECB appear more likely
                                    now than in the past months, possibly at the May meeting (details in Euro Money Markets
                                    Weekly: ECB - Active easing or passive tightening?, 9 April 2013). We view the balance
                                    between the US and Chinese data as having more of an (indirect) effect on euro area rates
                                    than euro area data. We reiterate our positive view on peripheral markets, especially at the
                                    short end and recommend being long the 3-5y sector in Italy and Spain.

                                    Foreign exchange – Opportunities emerge as correlation falls
Highest conviction positions        Lower correlations continue to reveal interesting opportunities in global FX markets.
are short GBP/USD and long          Markets can now look into more idiosyncratic, albeit still fundamental, global issues. We do
USD/JPY                             not see any FX trends from major blocks and hold a downward bias in EUR/USD mainly due
                                    to a stronger USD in H2 (we are looking for a 4% appreciation of USD over the coming


15 April 2013                                                                                                                  14
Barclays | Convertible Outlook Q2 2013


                                                year). We expect further downside, of c.7%, to the JPY in the near term, exacerbated by the
                                                recent BoJ move, and we forecast a weaker GBP which leads us to our highest conviction
                                                positions: short GBP/USD and long USD/JPY. For details on FX implications of the BoJ action
                                                please see A textbook response to deflation; more JPY weakness to come, 4 April 2013.

                                                Summary of asset allocation recommendations
                                                In Figure 15, we present a table, reproduced from the Global Outlook: Stay with equities for
                                                now, 21 March 2013, with our asset allocation recommendations.

FIGURE 15
Global asset allocation recommendations (table from Global Outlook)

Asset class                        Tactical bias*            Strategic bias*         Comments

Developed market equities                over                       over             Valuation gap between risky and safe assets
 US                                     neutral                     over             Near-term fiscal risks may lead to investors’ downgrading growth
 UK                                      over                       over             Cheap valuation, cheap currency, potential for more QE
 Europe                                  over                       over             Lower tail risk, valuation gap relative to US
   Germany                              neutral                   neutral
   Spain                                 over                       over             Deep value, further policy progress, growth stabilization, OMT
 Japan                                  neutral                   neutral            Upside risk from aggressive policy easing
Emerging market equities                under                     neutral            Idiosyncratic drivers, some cyclical vulnerability, heavy positioning


Global government bonds                  over                     neutral
 Safe-havens                             over                     neutral            Negative beta with global equities
 Peripheral Europe                      neutral                   neutral            Further policy progress
 EM sovereign credit                    neutral                   neutral
   Brazil                               neutral                   neutral
   Russia                                over                     neutral            High yields, strong currency, current account surplus
Global credit                           under                      under
 Investment grade                       under                      under             Rich valuation, favor financials over industrials
 High yield                             neutral                   neutral            More upside than in investment grade
 US MBS                                 neutral                   neutral            US housing recovery, but valuations becoming full
Commodities                             neutral                   neutral
 Gold                                   neutral                   neutral            Market expectation that Fed will taper asset purchases in 2014
Note: Bold indicates change in bias from previous publication. *Tactical refers to investment horizons of up to 3m and strategic to horizons beyond 1y.
Source: Barclays Research




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Barclays | Convertible Outlook Q2 2013


THEMES FOR Q2 2013

                                    Volatility relative value
                                    EMEA market relative value
EMEA convertible-implied            Our analysis shows that average EMEA convertible-implied volatility ticked fractionally lower
volatility ticked lower in Q1,      in Q1, while option-implied volatility was little changed and realised volatility declined
option-implied volatility was       substantially (Figure 16). Thus, volatility-sensitive convertibles still look stretched in volatility
flat and realised volatility fell   relative terms, on average, particularly relative to 100-day realised volatility.

                                    Note, there are several exchangeable bonds in our ‘volatility-sensitive convertibles’ list. The
                                    implied volatilities for these use our exchangeables valuation model on the Bond Pricer on
                                    our website, CBInsight™, on Barclays Live.

                                    As at 8 April 2013, compared with 3 December 2012:

                                    • convertible-implied volatility is 26.5%, up by 0.1 volatility points;

                                    • credit-calibrated convertible-implied volatility is 30.0%, down by 1.0 pts;

                                    • 12m at-the-money option-implied volatility is 27.6%, down by 0.3 pts;

                                    • 100-day realised volatility is 23.0%, down by 4.8 pts;

                                    • 999-day realised volatility is 33.6%, down by 3.5 pts – as the very high volatility period in
                                         Q1 09 has exited the observation period; and

                                    • credit spreads are 253bp, tighter by 87bp.

EMEA volatility-sensitive           Thus, as of 8 April 2013, EMEA convertible-implied volatilities using a credit-calibrated
convertibles are now 2.4 vol        model are 2.4 volatility points above option-implied volatilities, on average, versus 3.1
pts rich versus options and 7.0     volatility points above in December 2012. Hence, volatility-sensitive convertibles look
pts rich versus 100d vol            stretched versus options and particularly versus 100-day realised volatility in relative terms.

                                    However, average convertible-implied volatility is at its lowest quarterly level in the past
                                    three years, so we do not view the EMEA convertible asset class as rich versus recent
                                    history. Further, we attribute the compression in realised volatility (and issuer credit
                                    spreads) over recent months partly to some of the new issues, as well as more existing
                                    convertibles achieving a more balanced profile, among low-volatility/spread names (eg,
                                    Sainsbury, BNP-Pargesa, ENI-Snam and GBL-GDF).

We believe that current             In our view, current relative valuations in EMEA convertibles are sustainable. Positives
convertible-implied volatility      include technicals: the heavy pace of issuance seen in January has moderated and
levels are sustainable              redemptions/conversions could pick up as several bonds are close to their call triggers; the
                                    fact that convertible-implied volatilities are low relative to recent history and relative to other
                                    regions; and our macro view that financial market conditions will likely remain benign.




15 April 2013                                                                                                                         16
Barclays | Convertible Outlook Q2 2013


                                                                                                                                        FIGURE 16
                                                                                                                                        EMEA convertible-implied, option-implied and realised volatilities
                                                                                                                                             55%

                                                                                                                                             50%

                                                                                                                                             45%

                                                                                                                                             40%

                                                                                                                                             35%

                                                                                                                                             30%

                                                                                                                                             25%

                                                                                                                                             20%
                                                                                                                                               Mar-10                                                     Sep-10                                    Feb-11                                         Aug-11                                           Jan-12                                     Jun-12                                     Dec-12
                                                                                                                                                                                                          CB-implied (calibrated)                                                                                    Option-implied (12m atm)                                                                                             Realised (100-day)


                                                                                                                                        Source: Bloomberg, Barclays Research


                                                                                                                                        EMEA convertible-specific volatility relative value
                                                                                                                                        Figure 17 and Figure 18 show convertible-implied (using a calibrated model), option-
                                                                                                                                        implied and realised volatilities for EMEA convertibles as of 8 April 2013. Here, we list the
                                                                                                                                        most undervalued (or, ‘least overvalued’) and most overvalued convertibles on this basis.

                                                                                                                                        • Undervalued EMEA convertibles in implied-volatility terms: BNP-Pargesa EBs, ENI-
                                                                                                                                                         Snam ’16, Unibail ’18, Swiss Prime ’16, GBL-GDF ’17, Gecina ’16, IAG ’14, Shoprite ’17,
                                                                                                                                                         Subsea 7 CBs, Tui Travel and TUI CBs, Seadrill ’17, Melia ’14, Parpublica-Galp ’17,
                                                                                                                                                         Immofinanz ’18 and Steinhoff ’17.

                                                                                                                                        • Overvalued EMEA convertibles in implied-volatility terms: Deutsche Post ’19,
                                                                                                                                                         Sainsbury ’14, Temasek-Stand Chart ’14, adidas ’19, Technip CBs, GBL-Suez ’15, Elekta
                                                                                                                                                         ’17, Pennon ’14, Ingenico ’17, Prysmian ’18, CGG CBs, Premier Oil ’18 and Salzgitter-
                                                                                                                                                         Aurubis ’17.

FIGURE 17
Non-calibrated and credit-calibrated convertible-implied, 12-month at-the-money option-implied, 100-day and 999-day
realised volatilities, for volatility-sensitive EMEA convertibles (ascending credit spread order, left to right)

 60%
 50%
 40%
 30%
 20%
 10%
  0%
                                                                                                                                                                                                                                                                   Brit Land '17




                                                                                                                                                                                                                                                                                                                                                                                 Derwent '16
                                                                                                                                                             ENI-Snam '16




                                                                                                                                                                                                                                                                                                              Pennon '14




                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Impala ZAR
                       Sainsbury '14




                                                                                                                                                                            Unibail '18
                                                                                                                                                                                          Swiss Pri '16




                                                                                                                                                                                                                                                                                                                                       Gecina '16


                                                                                                                                                                                                                                                                                                                                                               Lufth-Jblue '17


                                                                                                                                                                                                                                                                                                                                                                                               Ingenico '17
                                                                                                                                                                                                                                                                                                                                                                                                              Inmarsat '17
                                                                                                                                                                                                                                                                                                                                                                                                                             Lukoil '15
                                                                                                                                                                                                                                                                                                                                                                                                                                          Shoprite '17




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             Intu '18
                                                      Industriv '15
                                                                      Siemens '17




                                                                                                                Siemens '19




                                                                                                                                                                                                           Technip '16


                                                                                                                                                                                                                                      Technip '17




                                                                                                                                                                                                                                                                                                GBL-GDF '17




                                                                                                                                                                                                                                                                                                                                                                                                                                                         Subsea '13


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   UCB '15
        Deu Post '19




                                                                                                                              ENI-Galp '15




                                                                                                                                                                                                                                                                                   Elekta '17




                                                                                                                                                                                                                                                                                                                           Shire '14


                                                                                                                                                                                                                                                                                                                                                     IAG '14
                                       BNP-Parg '15




                                                                                    Tem-Stan '14
                                                                                                   adidas '19




                                                                                                                                              BNP-Parg '16




                                                                                                                                                                                                                         Capgem '14


                                                                                                                                                                                                                                                    GBL-Suez '15




                                                                                                                                   CB IV uncal                                            CB IV calib                                       Opt IV 12m ATM                                                        100d vol                              999d vol

Note: Data as of 8 April 2013. Option IVs are 12m at-the-money. 100-day and 999-day realised volatility are in the bond currency. Source: Barclays Research




15 April 2013                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      17
Barclays | Convertible Outlook Q2 2013


FIGURE 18
Non-calibrated and credit-calibrated convertible-implied, 12-month at-the-money option-implied, 100-day and 999-day
realised volatilities, for volatility-sensitive EMEA convertibles (ascending credit spread order, left to right), continued

 60%
 50%
 40%
 30%
 20%
 10%
  0%
                                                                             Prysmian '18




                                                                                                                                                                                                                                                                                                                                                                                                                        Air France '23
                                                                                                         TUI '14


                                                                                                                                    Cofinim '16




                                                                                                                                                                                                                                                                                                                  Parp-Galp '17
                                                                                                                                                                                                                                     TUI '16
                                                   Atos (S) '16




                                                                                                                                                                                                                                               Beni Stab '18




                                                                                                                                                                                                                                                                                                                                                                                                            Nokia '17




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  Marine Har '15
                                                                                            Subsea '17




                                                                                                                                                  Subsea '14




                                                                                                                                                                                           Premier '18
                                                                                                                                                                                                         Nexans '16




                                                                                                                                                                                                                                                                                                                                                                Maurel '14
                                                                                                                                                                                                                                                                         Melia '14


                                                                                                                                                                                                                                                                                                    Art-PPR '16




                                                                                                                                                                                                                                                                                                                                                                             Steinhoff '17
                                                                                                                                                                                                                                                                                                                                                                                             Siem-Sub '19
                                      Impala USD




                                                                                                                                                                                                                                                               GSW '19
        Qiagen '26




                                                                                                                                                                                                                                                                                                                                                 Immofinz '18
                     Tui Travel '14




                                                                                                                   Tui Travel '17




                                                                                                                                                                                                                                                                                                                                                                                                                                         Faurecia '18
                                                                  Atos '16




                                                                                                                                                               CGG Ver '16
                                                                                                                                                                             CGG Ver '19




                                                                                                                                                                                                                                                                                                                                  Faurecia '15




                                                                                                                                                                                                                                                                                                                                                                                                                                                        OHL-Mex '18
                                                                                                                                                                                                                                                                                                                                                                                                                                                                      Golar '17
                                                                                                                                                                                                                      Seadrill '17




                                                                                                                                                                                                                                                                                     Salz-Aur '17
                                                                                                                        CB IV uncal                                          CB IV calib                                    Opt IV 12m ATM                                                100d vol                                     999d vol

Note: Data as of 8 April 2013. Option IVs are 12m at-the-money. 100-day and 999-day realised volatility are in the bond currency. Source: Barclays Research


                                                                                                                               Asia Pacific market relative value
APAC convertible-implied                                                                                                      Our analysis shows that average Asia Pacific convertible-implied volatility climbed sharply in
volatility climbed sharply in Q1,                                                                                             Q1 13, while option-implied and realised volatilities only moved modestly higher (Figure 19).
while option-implied and                                                                                                      Thus, volatility-sensitive convertibles now look quite expensive versus both option-implied
realised volatilities moved only                                                                                              and realised volatilities.
modestly higher
                                                                                                                              As at 8 April 2013, compared with 3 December 2012:

                                                                                                                               • convertible-implied volatility is 30.8%, up by 6.4 volatility points;
                                                                                                                               • credit-calibrated convertible-implied volatility is 33.1%, up by 6.0 pts;
                                                                                                                               • 12m at-the-money option-implied volatility is 24.7%, up by 1.7 pts;
                                                                                                                               • 100-day realised volatility is 25.8%, also up by 1.7 pts;
                                                                                                                               • 999-day realised volatility is 30.2%, down by 3.7 pts – as the very high volatility period in
                                                                                                                                              Q1 09 has exited the observation period; and

                                                                                                                               • credit spreads are 159bp, tighter by 54bp.
Asia Pacific volatility-sensitive                                                                                             Thus, Asia Pacific convertible-implied volatilities using a credit-calibrated model are now 8.4
convertibles are now 8.4 vol                                                                                                  volatility points above option-implied volatilities on average, as of 8 April, versus 2.4 volatility
pts rich versus options and 7.3                                                                                               points in December 2012. Hence, volatility-sensitive convertibles have richened further
pts rich versus 100d vol                                                                                                      compared to options, by 6 volatility points, and also to 100-day volatility, in relative terms.
                                                                                                                              Japan convertibles in particular have seen a sharp richening in valuations since the start of the
                                                                                                                              year, with further impetus from the recently-announced ‘reflation’ policy actions.

We expect some mean-                                                                                                          We expect some reversion of this trend in Q2, as such expensiveness has not persisted for
reversion, probably triggered                                                                                                 long in the past, and its quantum is unprecedented in the post-crisis era. The most likely
by plentiful issuance                                                                                                         catalyst for a reduction in expensiveness would be plentiful new issuance, in our view.
                                                                                                                              Alternatively, a sustained bout of macro-related risk-aversion (as seen in 2010/11) could
                                                                                                                              also drive some relative cheapening, although this is not our base case scenario.




15 April 2013                                                                                                                                                                                                                                                                                                                                                                                                                                                                                18
Barclays | Convertible Outlook Q2 2013



                                                                                                                                                   FIGURE 19
                                                                                                                                                   Asia Pacific convertible-implied, option-implied and realised volatilities
                                                                                                                                                    45%


                                                                                                                                                    40%


                                                                                                                                                    35%


                                                                                                                                                    30%


                                                                                                                                                    25%


                                                                                                                                                    20%
                                                                                                                                                      Mar-10                                                       Sep-10                                           Feb-11                                     Aug-11                                                    Jan-12                                          Jun-12                                  Dec-12

                                                                                                                                                                                                    CB-implied (calibrated)                                                                                         Option-implied (12m atm)                                                                                                      Realised (100-day)
                                                                                                                                                   Source: Bloomberg, Barclays Research




                                                                                                                                                   Asia Pacific convertible-specific volatility relative value
                                                                                                                                                   Figure 20 shows convertible-implied (using a calibrated model), option-implied and realised
                                                                                                                                                   volatilities for Asia Pacific volatility-sensitive, hedgeable convertibles as of 8 April 2013.
                                                                                                                                                   Here, we list the most undervalued (or, ‘least overvalued’) and most overvalued convertibles
                                                                                                                                                   on this basis:

                                                                                                                                                   • Undervalued Asia Pacific convertibles in implied-volatility terms: Posco - SK Telecom
                                                                                                                                                                  ’16, CFS Retail ’16, Lotte Shopping ’16, Cathay Fin ’14, AREIT ’17, Suntec ’18,
                                                                                                                                                                  CapitaCommercial ’17, COLI ’14 and CapitaMall ‘14.

                                                                                                                                                   • Overvalued Asia Pacific convertibles in implied-volatility terms: Virtually all of the
                                                                                                                                                                  Japanese convertibles, notably OSG ’22, Asahi ’18, Bank of Kyoto ’14, Disco ’14, IHI ’16,
                                                                                                                                                                  Makino ’18, Ebara ’18 and Kadokawa ’14. In APAC ex-Japan, HKEx ’17, Hynix ’15 and
                                                                                                                                                                  Asia Cement ’16.

FIGURE 20
Non-calibrated and credit-calibrated convertible-implied, 12-month at-the-money option-implied, 100-day and 999-day
realised volatilities, for volatility-sensitive Asia Pacific convertibles (ascending credit spread order, left to right)

 60%
 50%
 40%
 30%
 20%
 10%
  0%
                                                           Nippon Me '14



                                                                                                          Yaskawa '17
                                                                                                                        Nipro '15



                                                                                                                                                                  Bk Kyoto '14




                                                                                                                                                                                                                                                                                        CFS '16
                                                                                                                                                                                                                                                                                                  CPA '16
                                                                                                                                                                                                                                                                                                            Lotte Sh '16 Y
                                                                                                                                                                                 HKEx '17




                                                                                                                                                                                                                                                                                                                                                                                     AREIT '17
                                                                                                                                                                                                                                                                                                                                                                                                 FEIB '18
                                                                                                                                                                                                                                                                                                                                                                                                            Suntec '18
                                    Kureha '18




                                                                                                                                                                                                                                                                                                                                                                                                                                                            Sony '17
                                                                                                                                                                                                                                                                         Kadokawa '14
                     ABC-Mart '18




                                                                                                                                                                                                                                             Posco-SKT '16




                                                                                                                                                                                                                                                                                                                                                                                                                                                                       CMT '14
        Yamato '16




                                                                                                                                                                                                                                Makino '18
                                                                                                                                                                                            Disco '14
                                                                                                                                                                                                         IHI '16




                                                                                                                                                                                                                                                                                                                                           ENN En '18
                                                                                                                                                                                                                                                                                                                                                        Cathay Fin '14
                                                                                                                                                                                                                                                                                                                                                                         Hynix '15




                                                                                                                                                                                                                                                                                                                                                                                                                                   CAP '16 new
                                                                                                                                                                                                                                                                                                                                                                                                                                                 COLI '14



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Asia Cem '16
                                                                           Fukuyama '17




                                                                                                                                                                                                                   SK Tel '14
                                                 OSG '22



                                                                                          Nagoya Ra '15



                                                                                                                                    Sawai Ph '15




                                                                                                                                                                                                                                                                                                                             Nichias '17




                                                                                                                                                                                                                                                                                                                                                                                                                         CCT '17




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                GDH - GIL '16
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                Soho China '14
                                                                                                                                                   Asahi Br '28




                                                                                                                                                                                                                                                             Ebara '18




                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 Pac Basin '18




                                                                                                                                            CB IV uncal                                                 CB IV calib                                      Opt IV 12m ATM                                                          100d vol                                            999d vol

Note: Data as of 8 April 2013. Option IVs are 12m at-the-money. 100-day and 999-day realised volatility are in the bond currency. Source: Barclays Research




15 April 2013                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            19
Barclays | Convertible Outlook Q2 2013


                                          Convertibles for yield
                                          Busted convertible yields compete with straight high-yield bonds
                                          The yield of busted convertibles in EMEA and Asia Pacific remain equivalent to that of high-
                                          yield corporate bonds in EMEA. Historically, this was not the case and busted convertible
                                          yields on average tended to lie between straight IG and HY bonds. In Asia, the average yield
                                          on convertibles has declined sharply in the past few months.

FIGURE 21
Yields of EMEA (LHS, %) and Asia Pacific ex-Japan (RHS, %) convertible and straight bond indices

 12                                                                     20

 10
                                                                        15
  8

  6                                                                     10

  4
                                                                        5
  2

  0                                                                     0
  Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12                      Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12

              EMEA Convertibles: Busted - Cvt Yield                           APAC ex Jpn Convertibles: Busted - Cvt Yield
              Pan Euro HY 3% Iss Constraint excl Fin - Yield to Worst         EM Asia USD Credit Corporate High Yield - Yield to Worst
              Euro-Aggregate: Corporates - Yield to Worst                     EM Asia USD Credit Corporate High Grade - Yield to Worst
Source: Barclays Research


                                          Convertibles that still yield more than 5%
                                          The credit rally has been significant and, coupled with low rates, has led to the erosion in
                                          opportunities for those hunting yield. However, close to 40 EMEA convertibles still yield
                                          above 5% to the put date or maturity, and more than 20 in Asia Pacific. Below, we screen
                                          for these bonds and overlay filtering for those that have seen sizeable yield compression or
                                          expansion relative to the highs and lows observed over the past six months.




15 April 2013                                                                                                                            20
Barclays | Convertible Outlook Q2 2013


FIGURE 22
EMEA convertibles that still yield more than 5%
Name                                           Price         Parity          Running Yield               YTP/M %                 High Yield               Low Yield
Frontline 4.5% 2015                             48.3           5.8                  9.3                     53.1                     54.3                    31.5
IVG Immobilien 1.75% 2017                       69.0           1.8                  2.5                     49.6                     70.8                     9.2
REC 6.5% 2014                                   73.0           3.9                  8.9                     41.7                     65.1                    28.3
Theolia 2.7% 2015                               10.5           6.5                  4.9                     29.5                     36.3                    27.7
Sacyr 6.5% 2016                                 60.0          14.4                 10.8                     28.4                     34.7                    28.2
Talvivaara 4% 2015                              69.5          12.5                  5.8                     25.8                     38.3                    19.2
SAS 7.5% 2015                                   84.1          26.3                  8.9                     18.3                     27.0                    16.2
Soitec 6.25% 2014                               7.8            3.0                  7.1                     16.7                     23.5                    12.6
Aquarius Platinum 4% 2015                       76.2          10.2                  5.3                     15.7                     23.0                    10.4
EFG Eurobank 1.7% 2014                          82.0           1.3                  2.1                     15.7                     22.7                    13.8
FCC 6.5% 2014                                   89.4          17.8                  7.3                     14.9                     14.9                     9.9
Essar 4.25% 2016                                82.2          19.3                  5.2                     12.3                     20.0                    11.9
Abengoa 4.5% 2017                               89.2          30.5                  5.0                     11.6                     11.6                     6.1
Petrominerales 3.25% 2017                       75.6          34.5                  4.3                     10.9                     11.5                     5.9
London Mining 8% 2016                           93.9          23.5                  8.5                     10.8                     11.1                     9.0
Petrominerales 2.625% 2016                      97.4          18.5                  2.7                     10.3                     10.3                     6.3
Abengoa 6.25% 2019                              85.5          55.7                  7.3                      9.8                     10.2                     7.3
African Minerals 8.5% 2017                      97.2          31.3                  8.7                      9.6                     9.8                      7.1
Petropavlovsk 4% 2015                           91.9          16.1                  4.4                      9.1                     9.5                      6.4
Abengoa 6.875% 2014                             98.3          43.6                  7.0                      8.5                     8.9                      3.8
JD Group 7.5% 2017                              99.3          61.4                  7.5                      7.8                     7.9                      5.8
Gulf Keystone 6.25% 2017                        99.2          62.7                  6.3                      6.6                     9.4                      4.5
Peugeot 4.45% 2016                              24.6           6.8                  4.6                      5.9                     7.7                      4.5
Steinhoff 4.5% 2018                            102.4          60.5                  4.4                      5.9                     6.6                      5.0
Air Berlin 6% 2019                             101.2          88.3                  5.9                      5.9                     7.5                      5.8
Impala Platinum 5% 2018                       9748.5         5921.4                 5.2                      5.9                     6.1                      4.5
Steinhoff 9.625% 2015                          126.2         100.4                  7.6                      5.6                     5.8                      3.2
Alcatel 5% 2015                                 3.2            1.1                  5.0                      5.6                     19.7                     4.8
BCP - Portugal Telecom 2.75% 2015               95.5          43.4                  2.9                      5.4                     7.8                      4.6
Steinhoff 6.375% 2017                          105.5          62.6                  6.0                      5.0                     5.7                      4.0
Melia Hotels 4.5% 2018                          98.5          74.5                  4.6                      5.0                     5.2                      4.9
Note: Data as at close on 9 April. Light blue indicates a yield greater than 0.85x the high yield over the past six months. Grey shading indicates a yield less than 0.6x
the high yield over the past six months. Source: Barclays Research




15 April 2013                                                                                                                                                               21
Barclays | Convertible Outlook Q2 2013


FIGURE 23
Asia Pacific convertibles that still yield more than 5%
Name                                                                                               Price                        Parity     Running Yield                      YTP/M (%)                         High Yield                            Low Yield
Bumi Resources 9.25% 2014                                                                          79.5                         21.9               11.6                              32.0                                32.0                             22.3
Mingfa 5.25% 2016                                                                                  107.0                        97.7                 4.9                             20.3                                20.3                                  9.5
China Huiyuan Juice 4% 2016                                                                        95.0                         45.8                 4.2                             12.5                                19.0                             11.2
United Labs 7.5% 2016                                                                              98.4                         51.3                 7.6                             10.7                                30.0                                  7.1
Jaiprakash Power Ventures 5% 2015                                                                  102.0                        23.7                 4.9                             10.0                                11.5                                  9.5
Paladin Energy 3.625% 2015                                                                         86.8                         17.8                 4.2                              9.8                                14.8                                  8.3
361 Degrees 4.5% 2017                                                                              91.2                         62.0                 4.9                              9.7                                10.8                                  9.1
Welspun Gujarat 4.5% 2014                                                                          95.7                         16.3                 4.7                              9.6                                11.4                                  8.6
Paladin Energy 6% 2017                                                                             90.6                         45.7                 6.6                              9.0                                11.6                                  6.8
China Precious Metals 7.25% 2018                                                                   97.0                         76.1                 7.5                              8.7                                8.8                                   7.4
Olam 6% 2016                                                                                       93.0                         63.4                 6.5                              8.5                                11.2                                  3.4
AU Optronics 0% 2015                                                                               96.5                         32.9                 0.0                              7.4                                12.3                                  7.2
Chaowei Power 7.25% 2017                                                                           100.2                        72.2                 7.2                              7.3                                9.7                                   6.2
Western Areas 6.4% 2015                                                                            99.6                         48.1                 6.4                              6.7                                6.9                                   3.8
Jaiprakash 5.75% 2017                                                                              98.4                         84.5                 5.8                              6.3                                6.7                               -2.0
Western Areas 6.375% 2014                                                                          100.3                        41.3                 6.4                              6.2                                7.1                                   5.4
China Hongqiao 6.5% 2017                                                                           101.5                        57.7                 6.4                              6.2                                9.9                                   6.2
Yanlord Land 5.85% 2014                                                                            100.0                        55.3                 5.8                              5.9                                5.9                                   5.9
Celltrion 2.75% 2018                                                                               94.0                         67.2                 2.9                              5.0                                5.2                                   3.7
Note: At least 0.5 years to put/maturity. Data as at close on 9 April. Light blue indicates a yield greater than 0.85x the high yield over the past six months. Grey
shading indicates a yield less than 0.6x the high yield over the past six months. Source: Barclays Research


                                                                                Given our macro call for equities to outperform bonds, below we illustrate the evolution of
                                                                                the EMEA as well as the Asia Pacific Convertible index delta.


FIGURE 24                                                                                                                                FIGURE 25
EMEA Convertible market delta, %                                                                                                         Asia Pacific Convertible market delta, %

   55                                                                                                                                       40

   50                                                                                                                                       35
   45
                                                                                                                                            30
   40
                                                                                                                                            25
   35

   30                                                                                                                                       20

   25                                                                                                                                       15
        Jan-10
                 Apr-10


                                   Oct-10

                                            Jan-11
                                                     Apr-11


                                                                       Oct-11

                                                                                 Jan-12
                                                                                          Apr-12


                                                                                                              Oct-12

                                                                                                                       Jan-13




                                                                                                                                                 Jan-10
                                                                                                                                                          Apr-10



                                                                                                                                                                            Oct-10

                                                                                                                                                                                     Jan-11
                                                                                                                                                                                              Apr-11



                                                                                                                                                                                                                Oct-11

                                                                                                                                                                                                                          Jan-12

                                                                                                                                                                                                                                   Apr-12



                                                                                                                                                                                                                                                      Oct-12

                                                                                                                                                                                                                                                                 Jan-13
                          Jul-10




                                                              Jul-11




                                                                                                    Jul-12




                                                                                                                                                                   Jul-10




                                                                                                                                                                                                       Jul-11




                                                                                                                                                                                                                                            Jul-12




                   EMEA Convertibles: Cvt Stk Delta                                                          HoH average                                    APAC Convertibles: Cvt Stk Delta                                                         HoH average
Source: Barclays Research                                                                                                                Source: Barclays Research




15 April 2013                                                                                                                                                                                                                                                             22
Barclays | Convertible Outlook Q2 2013



                                       Focus on South Africa
                                       Two new issues from Impala Platinum in February, a dollar bond and a Rand bond, follow
                                       new convertibles from JD Group, Shoprite and Steinhoff in 2012. We believe that the South
                                       African convertible market has the potential to grow further – issuance drivers from the
                                       equity rally and tight credit spreads complemented by relatively high swap rates – and
                                       survey the currently available opportunities for investors.

                                       Although the number of convertible bonds outstanding is only nine from five distinct
                                       issuers, they encompass a variety of investment profiles and relatively high yields. The
                                       recent retracing of the equities of each issuer combined with a stabilisation of the Rand
                                       might present a more opportune entry point than three to six months ago. That said, prices
                                       seem to have held up reasonably well relative to the parity falls, highlighting how
                                       convertibles continue to outperform equities to the downside – please see charts on the
                                       following page.


FIGURE 26                                                            FIGURE 27
Convertible price (vert) versus parity (horiz)                       USDZAR over the past six months

 160
 140                                                                  9.4

 120                                                                  9.2
 100                                                                  9.0
  80                                                                  8.8
  60                                                                  8.6
  40                                                                  8.4
  20                                                                  8.2
    0
                                                                      8.0
        0                   50            100               150
                                                                        Oct-12      Nov-12 Dec-12           Jan-13     Feb-13 Mar-13          Apr-13
                09-Apr-13        Max over past six months

Source: Barclays Research                                            Note: The dashed line at 9.0 is for legibility only. Source: Bloomberg


                                       We note that the share price falls since the end of 2012 (-15% Steinhoff, -14% Shoprite, -
                                       24% JD Group, -24% Impala, -22% AngloGold) have been in the context of a broadly stable
                                       global macroeconomic environment – at least in terms of share price indices (+10% S&P
                                       500, -2% Top40). We find this interesting, first because it adds to the case for a potentially
                                       more preferable entry point and secondly as it may have limited the credit widening that
                                       can accompany a fall in the share price. In this regard, we also note that credit can be
                                       perceived differently by domestic versus international investors, as evidenced for example in
                                       the Impala ZAR and USD bonds. This combination of decoupling, cross-currency impacts
                                       and technical factors, combined with the country and sector diversification, adds up to
                                       South African convertibles meriting consideration, in our view.




15 April 2013                                                                                                                                      23
Barclays | Convertible Outlook Q2 2013


                                   FIGURE 28
                                   Credit-equity correlation: itrx 5y Crossover index (bp) versus Stoxx 600 index


                                     900
                                     800
                                                                                            y = 6E+08x-2.496
                                     700
                                                                                              R² = 0.5198
                                     600
                                     500
                                     400
                                     300
                                     200
                                     100
                                         0
                                             200       220   240        260       280        300          320       340


                                   Source: Bloomberg




15 April 2013                                                                                                             24
Barclays | Convertible Outlook Q2 2013


FIGURE 29
South African convertibles
Name                      ISIN           Bond     Parity   YTP/M %    Conv    Ccy   Amt out Delta % Rho Comment
                                         price                       Prem %          (mn)           units

JD Group 7.5% 2017        ZAE000168415   99.34    61.38     7.83     61.84    ZAR    1,000   29    -2.7 Close to 8% yield p.a. to maturity in 2017. Equity option not irrelevant
                                                                                                        given the 4y tenor, though the shares need to rise 60% to move into
                                                                                                        the money. Although the bond therefore seems to have low sensitivity
                                                                                                        to share price moves, we would expect a fairly high degree of
                                                                                                        correlation between the share price and credit spread. Our equity
                                                                                                        analysts believe that the market is not ready to award credit until all
                                                                                                        the moving parts are bedded down. However, they see little downside
                                                                                                        risk from here, with a dividend yield of 5.2%. If the equity case is
                                                                                                        indeed predicated on the income, then the convertible might appeal
                                                                                                        as an alternative given its coupon outweighs the equity dividend and
                                                                                                        the bond is senior in the capital structure. In a rebound, the credit-
                                                                                                        equity correlation and not entirely busted conversion option should
                                                                                                        provide some participation. For our equity analysts’ view on Shoprite,
                                                                                                        please see JD Group Ltd.: No benefit of the doubt just yet, 11 March
                                                                                                        2013.
Steinhoff International   XS0605635787   102.40   60.50     5.91     69.26    EUR    468     23    -4.0 Three EUR denominated Steinhoff bonds, the yield to maturity
4.5% 2018                                                                                               increasing by about a point for each year further out one is willing to
                                                                                                        tolerate the credit risk: c. 6% for the 5y 2018 paper, or c. 4% for the
                                                                                                        3y 2016 bond. We note that both the 16s and 18s redeem at a
                                                                                                        premium to par (107.5 and 110.7 respectively) and therefore pay
                                                                                                        lower coupons than the 2017 bond. Conversion prices 50-70% north
                                                                                                        of the current share price appear substantial, though this is a stock
                                                                                                        that rose 50% from 2010-2013 and is now 20% off that recent high.
                                                                                                        That said, the cross-currency of the bonds (EUR bond and ZAR stock
                                                                                                        imply that parity - value of the shares relative to par) would be
                                                                                                        suppressed should EURZAR strengthen. A serial repeat issuer, holders
                                                                                                        should not ignore reissuance risk, which could cause valuations to
                                                                                                        cheapen on existing bonds, although at present the bonds do not
                                                                                                        have a profile akin to a new issue (higher premium on 17s and 18s,
                                                                                                        shorter tenor on 16s). For our equity analysts' view on Steinhoff,
                                                                                                        please see Steinhoff International Holdings Ltd.: French furniture retail
                                                                                                        market in decline, 30 November 2012.
Steinhoff International   XS0834606104   105.48   62.61     4.95     68.45    EUR    420     22    -3.3
6.375% 2017
Steinhoff International   XS0542360770   108.73   72.89     4.30     49.16    EUR    390     23    -2.7
5% 2016




15 April 2013                                                                                                                                                                  25
Barclays | Convertible Outlook Q2 2013


Name                      ISIN             Bond     Parity     YTP/M %    Conv    Ccy   Amt out Delta % Rho Comment
                                           price                         Prem %          (mn)           units

Steinhoff International   XS0366360252    126.18    100.39      5.65     25.70    ZAR    1,600   39    -1.6 The sole remaining ZAR denominated Steinhoff convertible. It has the
9.625% 2015                                                                                                 nearest maturity, in 2015, and offers not only a 5.6% yield to maturity but
                                                                                                            a more relevant equity option than the other Steinhoff bonds, with a
                                                                                                            conversion premium of 26%. The bond redeems at a premium to par, a
                                                                                                            redemption price of 120; therefore including the final semi-annual
                                                                                                            coupon, parity would need to rise beyond 125 for holders to convert at
                                                                                                            maturity, equivalent to the share price rising beyond ZAR 29.2. Although
                                                                                                            we have concerns around the number of shares underlying the Steinhoff
                                                                                                            convertibles in aggregate – and the overall debt burden – we note that the
                                                                                                            company used the proceeds of its recently issued 2017 convertible to
                                                                                                            repurchase the 2013 bond, and could not rule out something similar here.
                                                                                                            Given it is the nearest maturity and relatively small, we see this bond as a
                                                                                                            decent yield on short-dated paper, with the potential for further upside
                                                                                                            from the conversion option.
Shoprite 6.5% 2017        ZAE000166997   11,900.97 10,397.18    1.60     14.46    ZAR    4,700   66   -161.0 Similar to Steinhoff 2015, the Shoprite convertible offers a balance
                                                                                                             between some yield (1.6% p.a. to maturity) and a relevant conversion
                                                                                                             option (14% premium). Notable differences are the longer tenor (4y
                                                                                                             versus 2y of credit exposure), the lower absolute yield (1.6% versus 5.6%)
                                                                                                             though arguably lower credit risk, and the smaller conversion premium
                                                                                                             (14% versus 26%). Year to date, the Shoprite bonds have exhibited a c.
                                                                                                             55% participation to changes in parity, broadly in line with the modelled
                                                                                                             delta, and to the upside also provides a 5.5% p.a. income from the
                                                                                                             coupon, superior to the foregone c. 2% dividend yield. Therefore, we see
                                                                                                             the bond as a compelling equity alternative, offering c. 50% participation
                                                                                                             to equity moves with an enhanced income kicker. To the downside, the
                                                                                                             bond should offer far superior protection relative to the equity, given its
                                                                                                             bond floor. For our equity analysts’ view on Shoprite, please see Shoprite
                                                                                                             Holdings Ltd.: Interims 1H13 - Investing for the future, 19 February 2013.
Impala Platinum 5%        ZAU000013013   9,748.49 5,921.36      5.87     64.63    ZAR    2,672   46   -264.5 Two bonds, two currencies, one decision to make. The 3.5% yield pickup on
2018                                                                                                         the ZAR bond indicates that investors with a neutral view on USDZAR
                                                                                                             should choose to invest in the rand convertible. Should the rand be
                                                                                                             expected to weaken by less than 3.5% p.a. then the ZAR bond would be
                                                                                                             preferred. We note that the USDZAR rate also acts on the equity option: a
                                                                                                             weakening rand would reduce parity (value of the shares relative to par) on
                                                                                                             the dollar bond and vice versa. Given the broadly positive correlation
                                                                                                             between Impala Platinum's share price and the strength of the rand versus
                                                                                                             USD, we believe that the dollar bond could have greater sensitivity to
                                                                                                             changes in the share price, though this is in part reliant on the past
                                                                                                             relationship continuing. We also believe that the USD bond merits a higher
                                                                                                             volatility input for modelling, given that Impala's share price volatility
                                                                                                             measured in USD is higher than in ZAR (for example, 45% versus 36% on a
                                                                                                             999day measure). For our equity analysts’ view on Impala, please
                                                                                                             see Impala: 1H 2013 results in line with expectations; convertible bond
                                                                                                             provides flexibility but guidance likely to disappoint, 14 February 2013.




15 April 2013                                                                                                                                                                        26
Barclays | Convertible Outlook Q2 2013


Name                        ISIN           Bond     Parity   YTP/M %    Conv    Ccy   Amt out Delta % Rho Comment
                                           price                       Prem %          (mn)           units

Impala Platinum 1%          XS0891408469   93.30    59.02     2.49     58.09    USD    200     37    -3.1
2018
AngloGold 3.5% 2014         XS0430548056   101.58   48.26     2.06     110.47   USD    733     3     -1.1 The USD denominated bond yields 2% to maturity next year. For our
REGS                                                                                                      credit analysts’ view, please see HG Research: AngloGold Ashanti Limited
                                                                                                          (ANGSJ): Lower to Market Weight, 8 April 2013, and HG Research:
                                                                                                          AngloGold Ashanti Limited (ANGSJ): 4Q12 Weak, as Expected, 20 February
                                                                                                          2013. The 110% conversion premium is prohibitive: far above the upside
                                                                                                          that our equity analysts see (price target ZAR315) although they see
                                                                                                          multiple catalysts for outperformance, expect the stock to re-rate as
                                                                                                          improved cash flows are delivered over the next 12 months, and see an
                                                                                                          upside case of ZAR425. For our equity analysts’ view on AngloGold, please
                                                                                                          see AngloGold Ashanti Ltd.: Multiple catalysts for outperformance, 22
                                                                                                          February 2013.
Source: Barclays Research




15 April 2013                                                                                                                                                                   27
Barclays | Convertible Outlook Q2 2013


                                           Focus on Japan
                                           In light of investors’ heightened focus on Japan, we provide a Japanese convertible market
                                           update and a refresher on key features of Japanese convertibles, and CoCos in particular.

                                           Convertible market update: Up, up and up
Japan takes centre stage                   Japan is firmly in focus for convertible investors as well as for broader global economics,
following BoJ bold actions to              after the Bank of Japan announced stronger actions than markets had expected to help
combat deflation                           target 2% inflation within two years. For further details, see Global Economics Weekly: Bold
                                           action from the BoJ, 5 April 2013.

                                           These actions include nearly doubling the monetary base by end-2014 to 55% of GDP from
                                           29% currently, accelerating monthly government bond purchases to more than JPY7trn
                                           from JPY4trn, extending the maturity of residual JGB purchases to the 40y sector from the
                                           3y sector, stepping up purchases of ETFs and J-REITs, and pledging to continue these
                                           measures until the price stability target has been achieved and is sustainable.

We expect strong Japanese                  Our economists believe these actions will help combat deflation, with inflation moving into
equities and weak JPY as a                 modest positive territory in H2 13. They also forecast stronger equities as a result of these
result                                     policy actions, and further JPY depreciation from current levels, reiterating their USD/JPY 3m
                                           target of 103. However, they also believe that achieving sustained 2% inflation within two
                                           years will prove difficult without fiscal measures, particularly on labour market flexibility.

Japan convertible index total              Our Japan convertible index YTD total return was +24.1% as of 10 April, compared to the
return is 24% YTD versus 29%               Nikkei index total return of +28.8%. This participation ratio of 83% is much higher than that
for the Nikkei index                       predicted by the delta and parity, evidencing how many convertibles have richened.

Japanese convertible market                Figure 30 shows how strikingly the Japan convertible universe has changed over the past six
has become more equity-                    months. The median price and parity has moved from 101 and 77, to 118 and 103,
sensitive, lower premium,                  respectively, during this period. The median conversion premium compressed from 32% to
higher delta and somewhat                  just 13%, despite the valuation richening. Median delta has jumped from 27% to 59%. The
richer in implied volatility terms         median delta-neutral gain was 3.6 bond points, while the average was 4.3 points, although this
                                           was positively skewed by Sharp Corp. Median implied volatility rose from 25% to 33% over
                                           the past 6 months. Among bonds that had a moderate premium and hence a ‘valid’ implied
                                           volatility both 6 months ago and now, the median implied volatility rose 9 volatility points.

FIGURE 30
Evolution of Japanese convertible bond price (vertical, pts) versus parity (horizontal, pts) distribution, now and 6m ago
  Now                                                                      Six months ago

   200                                                                      200



   150                                                                      150



   100                                                                      100



     50                                                                      50



      0                                                                       0
          0             50           100          150          200                0          50          100         150          200

Source: Barclays Research




15 April 2013                                                                                                                           28
Barclays | Convertible Outlook Q2 2013


                                          Japanese convertible structures: A mini-primer
                                          In Figure 31 we summarise the key features of Japanese convertibles, to help investors who
                                          are new to Japanese convertibles, or who have not been involved in this market for a while.

                                          We also provide a Japanese convertible universe page, Figure 32. Note, a customisable
                                          universe page, as well as market data, analytical tools, valuation models and a global
                                          custom query tool is available on our convertibles website, CBInsight™, on Barclays Live.

FIGURE 31
Japanese convertibles: Key terms and features
Feature                       Description and our thoughts

Tenor                         5 year maturity is standard, some deals include a holders’ put, often (but not always) at the end of year 3.
Currency                      JPY is standard, although the recent Shizuoka Bank convertible was USD-denominated. The previous USD-
                              denominated Japanese convertible, according to our records, was Orix’s 2022 convertible, issued 13 years ago.
Coupon                        0%, or very close to zero, has been the norm for some time, given the very low JPY interest rates and credit spreads.
                              The average coupon in the current universe is only 0.06%, with only four bonds having a positive coupon.
Offer price                   102.5 offer price is standard, although a recent deal, Nippon Ceramic, came at 103.0. Again, the above-par offer
                              price is an artifice of very low Japanese rates and spreads.
Reference share price         Like most Asia Pacific convertibles, this is typically the closing price on the day that the deal is launched. This
                              means that the next-day stock skid can be an important consideration for investors.
‘Soft’ (triggered) call       Some bonds have an issuer’s call option after the first few years, subject to a trigger, often 120% or 130%. These
                              usually force early conversion. Unicharm recently called its 0% 2013 convertible, for example.
Net-share settled             Some bonds, including two recent deals (Shizuoka Bank and Park24), permit the issuer to repurchase the bond at
acquisition, or ‘hard’ call   par plus net share settlement if and to the extent that parity is above par. This usually only applies for the final few
                              months and can, in our view, be modelled as an issuer ‘hard’ call. This has little theoretical impact at the time of
                              issuance, but could have more of an impact as maturity approaches if the bond is close to at-the-money.
Conversion and CoCos          Generally the bond is convertible for most of its life, although some bonds have a contingent conversion (‘CoCo’),
                              whereby holders may only convert if the shares have reached a certain trigger level. Again, CoCos rarely have a
                              significant impact at issuance, but could be more significant later in the life of the bond. We provide detailed
                              thoughts on CoCos below. An issuer hard-call should begin after the CoCo period has ended, otherwise the issuer
                              could potentially call without holders being able to convert. Shizuoka Bank and Park24 are recent examples of
                              bonds with CoCos.
Conversion resets             Some bonds have one or more conversion resets, usually a few years into the life of the bond. Here, the conversion
                              price is adjusted downwards according to the prevailing average share price, subject to a floor, which is typically
                              80% of the original conversion price. Nippon Ceramic is a recent example, with a reset after two years.
Change of control             Table of ‘corporate event redemption’ prices is standard. This covers events including a change of control, and is
protection                    detailed in the terms and conditions. The table relates to the date and parity level when the event occurs, and is
                              theoretically calculated to compensate holders for foregone option value. A recent example of this was eAccess,
                              which Softbank acquired in December 2012.
Dividend protection           The most common forms are either a fixed annual dividend threshold, or a growing schedule of annual dividend
                              thresholds. The conversion price is adjusted for the excess above this amount. Note, these dividend protection
                              threshold levels may be adjusted downward for other conversion price adjustment events, eg, stock splits.
Asset swaps                   Although not usually part of the terms of the bond, many deals come with asset swaps arranged by the lead
                              manager. Here, investors can swap the bond to a credit purchaser, in exchange for an option to repurchase the
                              convertible (‘Ascot’) by paying 100 minus the present value of a swap based on the fixed strike spread. Please also
                              see our primer, An Introduction to Convertible Bond Asset Swaps, August 2002.
Source: Barclays Research




15 April 2013                                                                                                                                        29
Barclays | Convertible Outlook Q2 2013


FIGURE 32
Japanese convertibles: Universe sheet
                                                                              Impl                                                                                     Price Parity DN Chg
                                         Amt                  Premium Delta    Vol 100d 260d                 Trigger                                 Moody's S&P Chg (%) Chg (%) (%)
Name                          Code Ccy   (mn)    Price Parity   (%)    (%)     (%) Vol (%) Vol (%) Call Date   (%)   Put Date    Maturity Reset Date (Issuer) (Issuer) YTD    YTD    YTD

ABC-Mart 0% 2018              2670 JPY 33,000 114.5 85.7       33.7    36     35     29     24    05 Feb 16    130   05 Feb 16 05 Feb 18                             11.7    9.6     9.1
Aeon 0.3% 2013                8267 JPY 49,985 147.3 147.2      0.0    100     32     24     18                                   22 Nov 13                    A-     31.0    37.0    1.3
Aeon Credit 0% 2016           8570 JPY 15,000 209.5 209.6      -0.0   100            38     30                                   23 Mar 16                           69.6    73.6    8.2
Aeon Credit 0% 2017           8570 JPY 15,000 214.8 214.9      -0.1   100            38     30                                   23 Mar 17                           70.1    73.6    6.0
Asahi Breweries 0% 2023       2502 JPY 35,000 116.4 113.1      2.9    100            22     18   Date passed         29 May 13 26 May 23                             16.1    29.7    2.8
Asahi Breweries 0% 2028       2502 JPY 35,000 122.5 116.2      5.4     77     34     22     18    29 May 14          27 May 16 26 May 28                             19.8    29.7    4.2
Asahi Glass 0% 2014           5201 JPY 50,000 102.0 61.0      67.1     13     41     28     32                                   14 Nov 14             A2     A-      2.7    6.7     2.2
Bank Of Kyoto 0% 2014         8369 JPY 29,953 109.0 90.5       20.5    40     41     29     24   Date passed 120                 31 Mar 14                     A      9.5    42.3    2.6
DISCO Corp 0% 2014            6146 JPY 10,000 115.0 93.8       22.6    50     43     30     33   Date passed 130                 16 Dec 14                           11.5    28.0    3.8
Ebara 0% 2018                 6361 JPY 20,000 113.5 80.9       40.4    49     43     36     37    19 Mar 16    130               19 Mar 18                           13.5    3.4    12.2
Foster Electric 0% 2017       6794 JPY   6,000 105.5 75.0      40.7    39     33     35     42     17 Jun 14   120   16 Dec 16 15 Dec 17
Fukuyama Transporting 0% 2017 9075 JPY 20,000 117.3 102.5      14.4    55     30     22     19                       20 Mar 15 22 Mar 17                             15.5    22.8    7.5
IHI 0% 2016                   7013 JPY 23,000 131.4 114.3      14.9    68     44     38     35    28 Mar 14    130               29 Mar 16                           25.1    47.7    6.3
Kadokawa Holdings 1% 2014     9477 JPY 11,000 118.3 105.7      11.9    62     35     24     30                                   18 Dec 14                            9.8    15.0    3.4
KDDI 0% 2015                  9433 JPY 200,000 144.0 143.6     0.3    100     26     23     21    16 Dec 13    120               14 Dec 15                           27.5    35.1    0.9
Kureha 0% 2018                4023 JPY 15,000 112.5 77.6       45.0    40     38     28     29    14 Mar 16    130   14 Mar 16 14 Mar 18                              9.8    -5.4   11.5
Kuroda Electric 0% 2017       7517 JPY   7,000 121.8 112.2     8.6     66     25     32     28    03 Dec 15    130   03 Dec 15 01 Dec 17 03 Dec 14
Makino Milling 0% 2018        6135 JPY 12,000 111.5 72.4       53.9    36     47     39     46    18 Mar 16    130   18 Mar 16 19 Mar 18                              8.8    -3.7    9.8
Matsumotokiyoshi 0% 2013      3088 JPY   4,828 147.5 146.7     0.6    100            23     19                                   23 Aug 13                           22.5    32.8   -3.0
Mitsubishi Chemical 0% 2013   4188 JPY 70,000 99.3     38.4   158.4    0             35     35   Date passed 130                 22 Oct 13                            2.4    6.1     2.4
Nagoya Railroad 0.5% 2015     9048 JPY 10,000 128.4 124.1      3.4     79     26     22     17                                   31 Mar 15                           23.1    32.2    4.9
Nichias Corp 0% 2017          5393 JPY 10,000 123.1 105.6      16.6    61     42     33     34    02 Aug 15    130   31 Jul 15   02 Aug 17 02 Aug 13                 14.0    24.0    5.2
Nidec 0% 2015                 6594 JPY 100,000 101.5 54.2      87.2    4      37     33     30                       20 Sep 13 18 Sep 15                              1.8    14.7    1.6
Nippon Ceramic 0% 2018        6929 JPY   8,000                                       46     40                                   24 Apr 18 24 Apr 15
Nippon Meat (2282) 0% 2014    2282 JPY 30,000 120.5 113.1      6.5     77     36     29     26                                   03 Mar 14                           15.6    23.9    3.6
Nipro 0% 2015                 8086 JPY 15,000 116.0 103.1      12.5    57     34     33     28                                   12 Mar 15                           14.5    36.9    3.2
Orix 1% 2014                  8591 JPY 149,988 204.4 204.6     -0.1   100            41     31                                   31 Mar 14             Baa2   A-     43.8    44.5    1.0
OSG Corp 0% 2022              6136 JPY 15,000 118.0 83.8       40.8    43     41     33     30                       02 Apr 15 04 Apr 22                             12.6    15.6    8.4
Park24 0% 2018                4666 JPY 20,000                                                      25 Jan 18         26 Apr 16 26 Apr 18
Sato Corporation 0% 2017      6287 JPY   5,000 129.0 120.2     7.3     72     32     34     32                       13 Apr 15 13 Apr 17                             20.3    26.6    6.3
Sawai Pharma 0% 2015          4555 JPY 30,000 131.8 126.6      4.1     82     33     29     23    17 Sep 13    130   17 Sep 13 17 Sep 15                             20.6    38.3    0.7
Sekisui House 0% 2016         1928 JPY 50,000 149.6 145.6      2.7     97     35     37     27                       07 Jul 14   05 Jul 16                           36.5    54.6    3.2
Senko 0% 2017                 9069 JPY   5,000 130.8 123.4     6.0     73     30     32     30     21 Jul 15   130               20 Jul 17                           23.1    28.6    6.7


15 April 2013                                                                                                                                                                              30
Barclays | Convertible Outlook Q2 2013


                                                                                       Impl                                                                                    Price Parity DN Chg
                                                Amt                  Premium Delta      Vol 100d 260d                 Trigger                                Moody's S&P Chg (%) Chg (%) (%)
Name                              Code Ccy      (mn)    Price Parity   (%)    (%)       (%) Vol (%) Vol (%) Call Date   (%)   Put Date   Maturity Reset Date (Issuer) (Issuer) YTD    YTD    YTD

Sharp 0% 2013                     6753 JPY 199,997 85.0           11.5   641.8   -0           70     77                                  30 Sep 13                    B+     32.8    -4.3   32.8
Shizuoka Bank 0% 2018             8355 USD       500    112.7 85.5       31.8    41    38     24     20     25 Jan 18                    25 Apr 18             Aa3    A+     10.0    0.9     9.7
Sony 0% 2017                      6758 JPY 150,000 176.8 173.2            2.0    89    42     54     46    30 Nov 15    130              30 Nov 17             Baa3   BBB    56.9    73.1    7.3
Square Enix 0% 2015               9684 JPY 35,000 99.0            43.1   129.8   5     48     39     35   Date passed 130                04 Feb 15                            1.6    -1.6    1.6
Takashimaya 0% 2014               8233 JPY 20,000 138.3 133.8             3.3    91    34     37     28                       16 May 13 14 Nov 14                            35.5    76.8    4.5
Toray 0% 2014                     3402 JPY 50,000 101.0 61.4             64.6    3     43     29     26                                  12 Mar 14                            1.5    24.7    1.3
Unicharm 0% 2013                  8113 JPY 16,220 156.8 157.1            -0.2    100          20     18   Date passed 120                24 Sep 13                           35.0    35.7    0.9
Unicharm 0% 2015                  8113 JPY 46,000 157.2 157.1             0.0    100   25     20     18    24 Sep 13    120              24 Sep 15                           32.2    35.7    1.6
Yamada Denki 0% 2015              9831 JPY 59,000 98.8            33.6   194.1   3     43     42     41                                  31 Mar 15                            0.6    38.9    0.4
Yamato 0% 2016                    9064 JPY 20,000 120.2 101.9            17.9    56    35     26     21                       07 Mar 14 07 Mar 16                            19.0    44.2    7.7
Yaskawa Electric 0% 2017          6506 JPY 15,000 124.5 93.7             32.9    57    45     39     39    16 Mar 15    130              16 Mar 17 27 Mar 14                 13.5    26.0    4.8
Note: As of 10 April 2013. Source: Bloomberg, Barclays Research




15 April 2013                                                                                                                                                                                      31
Barclays | Convertible Outlook Q2 2013


                                   CoCo (contingent conversion) features revisited
CoCos are seen in some             Contingent conversion features have long been present in Japanese convertibles. Several
Japanese convertible issues,       recent issues included CoCos, such as Shizuoka Bank 0% 2018 and, Park24 0% 2018. Some
and have become more               of last year’s issuances also included CoCos, eg, OSG Corp 0% 2022 and Aeon Credit Service
relevant given the recent          0% 2016 and 2017.
market rally
                                   We also flag a particular concern with CoCos for investors: namely, if the market rises
                                   sharply from one quarter to the next, holders may be unable to convert, eg, ahead of a
                                   dividend. This has been relevant recently, given the upward market moves.

                                   Key points on CoCos:

                                   • CoCos prevent conversion unless the stock price has exceeded a set trigger, which is
                                         usually 120% or 130% of the conversion price.

                                   • The trigger is typically tested over a 30 trading day period at the end of the quarter,
                                         and the condition must be met for at least 20 of those days. In this case, the bond is
                                         convertible at the holder’s option during the ensuing quarter.

                                   • The CoCo restriction usually ends before maturity, eg, 3 months for Shizuoka Bank and
                                         for Park24. This is to minimise the potential loss of option value: if the Coco were to
                                         persist until maturity then holders wishing to convert a slightly in the money convertible
                                         (less than 20 or 30%) could not do so. One dramatic and atypical example was Toshiba
                                         0% due July 2011, whose 120% CoCo continued through to maturity. For the final year,
                                         its CoCo only required a single-day trigger. But, as parity climbed to par in early-2011,
                                         the premium compressed aggressively almost to zero, as investors weighed the
                                         probabilities that parity might either exceed 120, allowing holders to convert, or not,
                                         with the bond therefore redeeming at only 100. Ultimately, post-Fukushima, parity
                                         declined and the bond matured out of the money. We valued this particular CoCo as a
                                         barrier option, but it was a very rare example.

                                   • Some CoCos’ restrictions fall away under certain circumstances, eg, if there is an issuer
                                         call, specified corporate events, a sufficient credit rating downgrade, or the bond trades at
                                         a certain discount to parity, etc. Aeon Credit’s convertibles have the first three of these, for
                                         example. In general, we advise investors to check carefully the terms and conditions.

                                   When do CoCos matter?

                                   • Because it is not generally optimal to exercise an option early, CoCos often have minimal
                                         theoretical value impact at issuance.

                                   • However, early conversion may become optimal if the net carry is negative and its net
                                         present value exceeds the remaining embedded option value in the convertible. Net
                                         carry is the coupon, if any, minus the foregone (unprotected) dividend plus stock
                                         borrowing cost.

                                   • The remaining option value will generally only be low if parity is high. If parity is below
                                         the CoCo trigger, say 120 or 130, it is likely that the option value would exceed the net
                                         carry, especially if there is also significant time to maturity. That said, a high foregone
                                         dividend, or high stock borrow cost, could in theory make early conversion optimal,
                                         even if the bond is not very far in the money.

                                   • One major concern is the time delay between the CoCo trigger testing period (normally
                                         30 trading days at the end of a quarter) and the time when holders may decide whether
                                         to convert, eg, ahead of a dividend. This is particularly acute if parity rises sharply during
                                         this time, as happened for many Japanese names between late-2012 and now. A recent


15 April 2013                                                                                                                         32
Barclays | Convertible Outlook Q2 2013


                                                   example were Aeon Credit’s 0% 2016 and 2017 convertibles: we believe it was optimal
                                                   for holders to convert ahead of the dividend at the end of March, as parities on the two
                                                   bonds were between 165 and 190 in the second half of March. However, we also believe
                                                   conversion was not possible because of the CoCo, as parities were below the 120 trigger
                                                   at the end of the previous quarter, ie, November-December 2012.


                                              Focus on the UK
UK convertibles have                          UK convertibles account for 12% of the EMEA market by value or 14% by count. The index
outperformed the EMEA                         performance of the UK subset has exceeded that of the EMEA composite index, returning
composite index…                              3.9% and 1.0%, respectively, in Q1 13.


FIGURE 33                                                                   FIGURE 34
UK convertible index total return versus the EMEA composite                 Price versus parity of UK convertibles

105                                                                          200
104                                                                          180
103                                                                          160
102                                                                          140
101                                                                          120
100                                                                          100
 99                                                                            80
 98                                                                            60
 97                                                                            40
 96                                                                            20
 95                                                                             0
  Dec-12               Jan-13             Feb-13                Mar-13              0              50          100         150           200
                   EMEA Convertibles               UK Convertibles                             UK focussed companies   UK listing only

Note: Indices rebased to 100 at 31 December. Source: Barclays               Source: Barclays


…driven by a dichotomy of                     However, the drivers of performance and current profile of the convertibles within the
parity increases for ‘UK                      region have been and remain dichotomous, in our view. We identify two distinct groups
focussed’ companies and                       within UK convertibles: corporates that are ostensibly ‘UK focussed’, namely those either
credit tightening and yield from              whose costs are primarily in GBP or whose demand base is primarily domestic; and those
those corporates that are                     with a UK listing but whose operations, costs and revenues are mainly international. We also
purely ‘UK listed’                            acknowledge the influence of sector; the UK-listing group being composed solely of
                                              companies involved in mining, oil and gas.

                                              The average total return of both groups of convertibles year to date is the same at 5.3%
                                              (median return for ‘UK focussed’ at 2.4% and for ‘UK listed’ at 1.7%). However, the drivers
                                              of this performance are clearly more credit based for the UK listed group with an average
                                              parity change over the period of -12% (-10% median) as compared to a +10% change for
                                              the UK focussed group (+11% median). We also note that both Aegis and SportingBet were
                                              UK companies that saw a change of control triggered on their convertibles.




15 April 2013                                                                                                                              33
Barclays | Convertible Outlook Q2 2013


FIGURE 35
Summary of UK convertible profiles and returns
Name                                            Ccy                 Sector                Price         Parity       YTP/M Conv         Parity     Total
                                                                                                                       %   Prem %       chg %    return %
WPP 5.75% 2014                                  GBP        Media And Publishing           183.90       183.67         -39.9        0     21.62     20.72
International Airlines 5.8% 2014                GBP        Transport And Leisure          139.07       133.02         -17.8        5     36.04     18.68
ITV 4% 2016                                     GBP        Media And Publishing           185.77       183.62         -13.3       1      20.44    14.55
TUI Travel 4.9% 2017                            GBP        Transport And Leisure          111.70        81.92           1.9       36     10.87      4.98
TUI Travel 6% 2014                              GBP        Transport And Leisure          109.27        89.67          -0.3       22     10.87      3.43
Temasek-Standard Chartered 0% 2014              SGD            Public Sector              106.23        86.79          -3.9      22       1.34     2.50
Pennon 4.625% 2014                              GBP              Utilities                118.90       109.82          -8.1       8       5.04     2.37
Derwent 2.75% 2016                              GBP             Real Estate               114.68       100.59          -1.6       14      6.13      2.24
Inmarsat 1.75% 2017                             USD             Telecoms                  132.19        84.75           1.7      56      11.96     2.06
INTU 2.5% 2018                                  GBP             Real Estate               105.44        79.10           1.3       33     -2.66      1.66
British Land 1.5% 2017                          GBP             Real Estate               102.99        83.76           0.6      23       3.29     1.06
Shire 2.75% 2014                                USD       Pharmaceuticals/Biotech         108.12        92.01          -4.6      18      -1.03     -2.42
Sainsbury 4.25% 2014                            GBP           Food And Retail             110.38        93.00          -3.7       19     11.30     -3.60
Talvivaara 4% 2015                              EUR         Mining, Oil and Gas            69.43        12.12         25.91      473    -19.46    32.83
Talvivaara 5.25% 2013                           EUR         Mining, Oil and Gas            98.50        13.69         23.11      620    -19.42    21.77
Essar 4.25% 2016                                USD         Mining, Oil and Gas            82.66        20.01         12.05      313     14.78    15.32
Gulf Keystone 6.25% 2017                        USD         Mining, Oil and Gas            99.66        63.48          6.44      57      -2.66     7.70
Premier Oil 2.5% 2018                           USD         Mining, Oil and Gas           121.46        87.49         -1.40      39      12.53     6.30
Aquarius Platinum 4% 2015                       USD         Mining, Oil and Gas            76.47        11.12         15.56      588    -14.69     5.59
Vedanta Finance 5.5% 2016                       USD         Mining, Oil and Gas           103.10        50.61          4.51      104     -3.91     1.80
London Mining 8% 2016                           USD         Mining, Oil and Gas            94.23        24.36         10.67      287    -21.39     1.56
Vedanta Finance 4% 2017                         USD         Mining, Oil and Gas            99.95        35.55          5.52      181     -3.91     1.32
Soco 4.5% 2013                                  USD         Mining, Oil and Gas            99.50        60.27         10.86      65       4.31     1.27
Salamander Energy 5% 2015                       USD         Mining, Oil and Gas           107.17        70.66          1.28      52       3.00     1.25
Petropavlovsk 4% 2015                           USD         Mining, Oil and Gas            91.78        15.30          9.14      500    -48.03     -1.40
African Minerals 8.5% 2017                      USD         Mining, Oil and Gas            98.57        35.90          9.14      175    -23.31     -2.22
Hochschild 5.75% 2014                           USD         Mining, Oil and Gas           103.53        68.90          3.36      50     -45.49    -18.01
Note: Levels as at close on 11 April 2013. Parity changes and total returns measured from 31 December 2012. Source: Barclays Research


                                              Gamma scores
Low(er) volatility benign                     The market may have transitioned into a new post-crisis low-volatility regime, characterised
market regime, but bouts of                   by ‘yieldfall’ (the compression of excess returns) and benign financial market conditions, but
volatility remain prevalent                   volatility events have not gone completely. During Q1 for example, short-term bouts of
                                              volatility arose from US fiscal negotiations, Italian elections, Cyprus bank proposals, Chinese
                                              new leadership policy, the Bank of Japan’s reflation actions, Korean tensions and
                                              (idiosyncratically) the earnings season. Some of these, as well as some other, potential
                                              catalysts for temporarily elevated volatility will likely persist, in our view.

‘Gamma scores’ help find                      To help find convertible gamma ideas to benefit from this, we recently introduced a new
convertibles that could benefit               quantitative screen: Gamma scores: Convertibles that could benefit from near-term bouts of
from short-term volatility,                   volatility, 7 March 2013.
using quantitative criteria
                                              As a reminder, we first filter for bonds with 25-80% delta, >$100mn outstanding, stock
                                              borrow <5%, credit spread <=500bp and premium <70%. Then, for each of the criteria
                                              below, we score each convertible 0-5 (5 being the best in terms of the gamma score).
                                              Convertibles with the highest average score across the criteria represent the best potential
                                              short-term gamma opportunities, in our view. The criteria are:

                                              • Parity close to redemption price: At-the-money convertibles generally have greater
                                                   convexity and gamma, and are less affected by falling bond floor or call risk.
                                              • Implied volatility below 260-day realised volatility: Signifies an attractive relative
                                                   valuation, particularly for bonds with low credit spread or short tenor.


15 April 2013                                                                                                                                          34
Barclays | Convertible Outlook Q2 2013


                                               •    High 100-day realised volatility: Indicates more gamma capture, all else equal.
                                               • Low credit spread multiplied by the number of years to maturity or put: Indicates less
                                                    total credit (bond floor) risk.
                                               • Low delta-hedged position value, ie, price minus delta multiplied by parity: Greater
                                                    capital efficiency/potential return on invested capital.

                                               Here, we add a new, extra component to the average score, as we believe it is important:

                                               • Number of days average trading volume (ATV, 6-month average) into which a bond
                                                    converts: Fewer days indicates better stock liquidity and less risk of strike-pinning.
                                               We also provide the next earnings reporting date, for information (not included in the
                                               average score), as this may contribute idiosyncratic gamma.

                                               The results of the screen are shown in Figure 36 and Figure 37, for convertibles with
                                               gamma scores in excess of 3.0.

FIGURE 36
Top scoring gamma convertibles according to our quantitative criteria, EMEA

                                                                                      100-day   260-day   Implied   Days avg    Next     GAMMA
Name                                               Price        Parity   Delta (%)      vol       vol       vol     volume     report     SCORE
Lufthansa - JetBlue 0.75% 2017                      123.6        103.9      74          29        33        15         13      26 Apr        3.9
Swiss Prime 1.875% 2015                             105.7        106.9      56          14        15                  123       05 Jul       3.8
Subsea 7 2.25% 2013                                 111.8        108.4      67          20        31        24        33       12 Sep        3.7
Eurazeo - Danone 6.25% 2014                          58.5         56.9      62          17        21                  19       16 May        3.7
Emaar Properties 7.5% 2015                          128.5        122.2      62          26        25                   30      10 May        3.6
International Airlines 5.8% 2014                    134.2        125.5      69          34        35        28        28       29 Apr        3.6
Shoprite 6.5% 2017                                 11,901       10,397      66          26        25        20        58       05 Sep        3.6
Capgemini 3.5% 2014                                  38.0         34.5      51          21        31        32        10        29 Jul       3.5
Technip 0.5% 2016                                    97.9         82.4      54          24        30        39        21        25 Jul       3.5
Elekta 2.75% 2017                                   124.4        100.2      60          23        25        35        80       15 Aug        3.4
Maurel et Prom 7.125% 2014                           18.6         15.8      48          24        35        30        15       25 Apr        3.3
Pennon 4.625% 2014                                  119.1        109.2      61          22        19        28         61       23 Jul       3.3
Publicis 1% 2018                                     58.2         52.3      41          16        19        25        45       26 Apr        3.3
GBL - GDF 1.25% 2017                                101.5         84.3      26          30        26        24        104      29 May        3.3
GBL - Suez Environment 0.125% 2015                  105.5         87.0      37          26        32        33        13       05 Jun        3.2
SGL Carbon 3.5% 2016                                116.9        105.2      55          22        23        22         15      23 May        3.2
Gecina 2.125% 2016                                  124.1        106.6      52          18        24        20        27        31 Jul       3.2
Temasek - Standard Chartered 0% 2014                106.0         86.1      26          21        32        33         36      10 May        3.2
Artemis - PPR 3.25% 2016                            175.9        164.7      65          23        25        28        23        25 Jul       3.2
Atos 2.5% 2016                                       55.8         53.3      56          16        24        16         23       25 Jul       3.2
Atos 1.5% (S) 2016                                   55.4         52.8      63          16        24        18        16        26 Jul       3.2
adidas 0.25% 2019                                  117.9         92.3       52          21        24        34        20       02 May        3.2
Shire 2.75% 2014                                    107.8         90.6      40          18        24        27         4        19 Jul       3.2
TUI Travel 6% 2014                                  108.4         86.7      29          25        27        24         77      29 May        3.2
Swiss Prime 1.875% 2016                             103.1         91.6      31          14        15        12         6       01 Aug        3.2
Technip 0.25% 2017                                  107.4         82.4      45          24        30        38        105      08 May        3.2
Unibail Rodamco 0.75% 2018                          232.9        181.9      47          19        20        22        18       12 Sep        3.1
Steinhoff International 9.625% 2015                 126.2        100.4      39          22        21        20        52       01 Aug        3.1
Ingenico 2.75% 2017                                  52.6         45.4      70          24        30        38         7       03 May        3.1
Polarcus 2.875% 2016                                102.3         69.4      41          33        51        29        25        31 Jul       3.1
Lukoil 2.625% 2015                                  110.0         88.7      45          16        24        30        12       25 Apr        3.1
Faurecia 4.5% 2015                                   19.4         12.3      28          37        43        32         26       25 Jul       3.1
CA Immobilien 4.125% 2014                           105.1         88.9      45          23        29        20        47       29 Apr        3.0
UCB 4.5% 2015                                       129.5        122.2      68          20        20        24         79      08 May        3.0
Impala Platinum 5% 2018                            9,748        5,921       46          34        33        29         5       22 Aug        3.0
ENI - Galp 0.25% 2015                              102.0         76.2       31          21        29        24        47       29 Apr        3.0
Note: Levels as of close on 9 April 2013. Source: Barclays Research


15 April 2013                                                                                                                                      35
Barclays | Convertible Outlook Q2 2013


FIGURE 37
Top scoring gamma convertibles according to our quantitative criteria, Asia Pacific
                                                                                      100-day   260-day   Implied   Days avg    Next    GAMMA
Name                                                Price        Parity   Delta (%)     vol       vol       vol     volume     report    SCORE

COHL - COLI 0% 2014                                 145.2        136.1       62         30        30        29        12       18 Apr    3.8
Yaskawa Electric 0% 2017                            124.5         93.7       57         39        39        45         4       18 Apr    3.8
Nipro 0% 2015                                       116.0        103.1       57         33        28        34        15       14 May    3.8
IHI 0% 2016                                         131.4        114.3       68         38        35        44         6       08 May    3.7
Cathay Financial 0% 2014                            114.3        107.6       66         25        24        27         8       24 Apr    3.7
Nippon Meat 0% 2014                                 120.5        113.1       77         29        26        36        16       13 May    3.7
Posco - SK Telecom 0% 2016                          122.8        111.4       64         21        22        19         9       02 May    3.6
SK Telecom 1.75% 2014                               120.2        115.1       75         21        22        26        13       02 May    3.5
DISCO Corp 0% 2014                                  115.0         93.8       50         30        33        43         8       09 May    3.5
Yamato 0% 2016                                      120.2        101.9       56         26        21        35         6       30 Apr    3.5
Nichias Corp 0% 2017                                123.1        105.6       61         33        34        42        41       13 May    3.4
Kadokawa Holdings 1% 2014                           118.3        105.7       62         24        30        35        45       25 Apr    3.4
Soho China 3.75% 2014                               125.8        122.8       71         29        29        26        51       16 Aug    3.4
Sawai Pharma 0% 2015                                131.8        126.6       80         29        23        33        29       14 May    3.4
Ebara 0% 2018                                       113.5         80.9       49         36        37        43         9       10 May    3.3
Hynix 2.65% 2015                                    110.1         81.5       35         27        36        34         4       26 Apr    3.3
Makino Milling 0% 2018                              111.5         72.4       36         39        46        47         9       30 Apr    3.3
Nagoya Railroad 0.5% 2015                           128.4        124.1       79         22        17        26        26       09 May    3.3
CapitaMall Trust 2.125% 2014                        104.0         97.2       42         16        15        18        18       19 Apr    3.3
ENN Energy 0% 2018                                  113.0         91.7       57         28        29        29        37       27 Aug    3.2
OSG Corp 0% 2022                                    118.0         83.8       43         33        30        41        22       02 Jul    3.2
CPA 5.25% 2016                                      113.5         99.1       39         21        19        24        16       19 Aug    3.2
Asahi Breweries 0% 2028                             122.5        116.2       77         22        18        34         8       02 May    3.2
AREIT 1.6% 2017                                     122.0        119.7       80         15        16        19        21       15 Apr    3.2
ABC-Mart 0% 2018                                    114.5         85.7       36         29        24        35        25       10 Apr    3.1
Bank Of Kyoto 0% 2014                               109.0         90.5       40         28        24        41        31       13 May    3.1
CapitaCommercial Trust 2.5% 2017                    112.3        101.0       52         14        16        20        11       19 Apr    3.1
Lotte Shopping 0% 2016 JPY                           99.3         72.3       25         23        26        23        14       15 May    3.1
CFS Retail 5.75% 2016                               106.8         87.1       25         18        17        17        15       20 Aug    3.0
Golden Agri-Resources 2.5% 2017                      93.4         64.6       26         23        26                   9       10 May    3.0
Hong Kong Exchanges 0.5% 2017                       109.0         80.3       40         21        25        32         5       08 May    3.0
Kureha 0% 2018                                      112.5         77.6       40         28        29        38        41       15 May    3.0
Note: Levels as of close on 9 April 2013. Source: Barclays Research
                                                Please note, we do not use the gamma from a standard model, because it can give
                                                unrealistic results. For example, high theoretical gammas for long-dated, out-of-the money,
                                                high volatility, weaker credit bonds. In practice, such bonds tend to exhibit low or negative
                                                gamma, due to the domination of the credit risk/bond floor component




15 April 2013                                                                                                                                  36
Barclays | Convertible Outlook Q2 2013


                                       Ratchets
                                       Q1 2013 saw change-of-control conclusions on Aegis and SportingBet’s convertibles. We
                                       continue to believe that ratchets might provide selective additional upside for convertible
                                       investors in 2013. Below, we screen for the potential return on convertibles from their
                                       change-of-control protection.

FIGURE 38
Ratchets, bonds that potentially have attractive change-of-control protection
                                                     Conv     Points
                                                     ratio      (or      O/R            Pts (or     Net pts Hedged D/N
                                    CB               boost    units)    return   Delta units) loss (or units) capital ROCE
Name                               Price    Parity    (%)      gain      (%)      (%)    short       Gain    employed (%) Mechanism

Atos 1.5% (S) 2016                 55.39    52.80    21.8     21.78      39.3    62.55      6.6      15.18      22.37     67.9    Ratchet
Industrivarden 2.5% 2015           126.51 126.94     10.2     41.73      32.8    78.41     19.9      21.82      27.88     78.3    Ratchet
Shoprite 6.5% 2017                 11,901 10,397     23.4    3,819.08    32.1    66.34    1,379.4   2,439.65   5,003.82   48.8    Ratchet
Atos 2.5% 2016                     55.79    53.33    13.7     16.98      30.4    55.83      6.0      11.03      26.01     42.4    Ratchet
Air Berlin 6% 2019                 101.22   88.30    22.5     30.99      30.4    56.49     10.0      21.02      51.94     40.5    Ratchet
Emaar Properties 7.5% 2015         128.46 122.21     11.0     37.58      29.2    62.49     15.3      22.31      52.54     42.5    Ratchet
Swiss Prime 1.875% 2015            105.72 106.95      5.8     29.59      27.9    56.15     12.0      17.58      46.10     38.1    Ratchet
WPP 5.75% 2014                     175.74 175.51      6.1     48.23      27.1    96.76     34.0      14.26      8.20      174.0   Ratchet
Ingenico 2.75% 2017                52.64    45.39    22.2     13.93      26.5    69.63      6.3       7.61      21.04     36.2    Ratchet
UCB 4.5% 2015                      129.54 122.21     11.9     34.63      26.3    67.53     16.5      18.12      49.14     36.9    Ratchet
Marine Harvest 4.5% 2015           123.79 117.96      8.3     31.14      25.0    64.55     15.2      15.91      48.24     33.0    Ratchet
Salzgitter - Aurubis 2% 2017       116.38 106.41     14.6     29.08      24.8    62.00     13.2      15.88      51.26     31.0    Ratchet
Subsea 7 3.5% 2014                 148.50 143.75      7.6     37.08      24.7    83.49     24.0      13.08      30.22     43.3    Ratchet
BES - Bradesco 3.5% 2015           116.73 113.83      0.0     28.84      24.4    63.12     14.4      14.47      46.11     31.4     Cash
Seadrill 3.375% 2017               131.56 116.35     17.3     32.41      24.4    74.63     17.4      15.05      46.28     32.5    Ratchet
Essar 4.25% 2016                   82.16    19.32    13.9     19.93      24.0     0.90      0.0      19.89      82.83     24.0     Put
adidas 0.25% 2019                  117.89   92.32    31.4     27.74      23.5    51.66      9.5      18.20      70.47     25.8    Ratchet
Maurel et Prom 7.125% 2015         17.30    15.38    10.8     4.06       23.5    65.47      2.0      2.05       7.23      28.3    Ratchet
SAS 7.5% 2015                      84.07    26.34     8.9     19.62      23.3     1.02      0.1      19.56      84.03     23.3     Put
Ship Finance 3.25% 2018            101.53   80.25    28.4     23.15      22.7    62.81     10.1      13.07      51.75     25.3    Ratchet
Sainsbury 4.25% 2014               110.30   90.80    21.5     23.18      20.8    25.65      4.7      18.52      88.02     21.0    Ratchet
Infineon 7.5% 2014                 270.78 263.94      3.1     56.78      20.8    99.55     52.6      4.22       10.86     38.9    Ratchet
Drillisch - freenet 3.375% 2017    130.82 131.62      0.0     27.05      20.7    76.23     20.1      6.99       30.55     22.9 Bid Premium
Abengoa 6.25% 2019                 85.47    55.66    22.0     17.75      20.4    54.36      6.1      11.70      56.68     20.6     Put
International Airlines 5.8% 2014   134.19 125.50      5.8     27.09      20.0    68.53     17.2      9.89       49.12     20.1    Ratchet
Inmarsat 1.75% 2017                131.96   82.50    60.0     26.56      20.0    30.92      5.1      21.46     107.17     20.0    Ratchet
Unibail Rodamco 0.75% 2018         232.88 181.90     28.0     46.55      20.0    47.37     17.2      29.32     146.71     20.0    Ratchet
ITV 4% 2016                        177.55 174.49      1.8     35.81      20.0    94.74     33.1      2.74       13.93     19.7    Ratchet
Qiagen 1.5% 2024                   160.98 160.35      0.0     32.04      19.9    100.00    32.1      -0.03       0.85     -3.5    Ratchet
SGL Carbon 3.5% 2016               116.88 105.15     10.7     23.58      19.7    55.12     11.6      11.99      61.66     19.4    Ratchet
Mobimo Holding 2.125% 2014         102.77 102.41      0.0     20.58      19.7    54.32     11.1      9.46       48.80     19.4 Bid Premium
Derwent 2.75% 2016                 113.27   96.67    16.2     22.23      19.5    52.79     10.2      12.03      62.91     19.1    Ratchet
TUI 5.5% 2014                      84.09    78.70     4.4     16.08      19.1    83.54     13.1       2.93      18.34     15.9    Ratchet
Beni Stabili 3.375% 2018           101.85   78.90    27.4     19.62      19.1    50.13      7.9      11.71      63.09     18.6    Ratchet
ENI - Snam 0.625% 2016             99.65    84.76     0.0     18.89      18.9    24.40      4.1      14.76      79.11     18.7     Cash
Artemis - PPR 3.25% 2016           175.86 164.70      0.0     32.23      18.3    64.58     21.3      10.96      69.49     15.8     Cash
British Land 1.5% 2017             102.16   80.29    24.5     18.42      18.0    23.89      3.8      14.58      83.12     17.5    Ratchet
Siem - Subsea 7 1% 2019            103.10   80.55    25.4     18.53      18.0    57.70      9.3      9.23       56.70     16.3    Ratchet

15 April 2013                                                                                                                               37
Barclays | Convertible Outlook Q2 2013


                                                              Conv      Points
                                                              ratio       (or          O/R            Pts (or     Net pts Hedged D/N
                                          CB                  boost     units)        return   Delta units) loss (or units) capital ROCE
Name                                     Price     Parity      (%)       gain          (%)      (%)    short       Gain    employed (%) Mechanism

Publicis 1% 2018                         58.20      52.25      9.4          10.36      17.8    40.81     4.3           6.10      36.88       16.5   Ratchet
Subsea 7 2.25% 2013                     111.84 108.45          0.0          19.46      17.4    67.03    14.5           4.92      39.15       12.6   Ratchet
Melia Hotels 4.5% 2018                   98.50      74.47      26.9         17.07      17.3    52.37     7.8           9.27      59.59       15.5   Ratchet
Gecina 2.125% 2016                      124.09 106.60          13.6         21.24      17.1    51.95    11.1           10.16     68.71       14.8   Ratchet
Pennon 4.625% 2014                      119.06 109.23          5.0          20.29      16.9    60.82     13.3          7.00      53.28       13.1   Ratchet
Soitec 6.25% 2014                        7.81       3.01       6.0          1.32       16.9    1.81      0.0           1.31       7.75       16.9     Put
Deutsche Euroshop 1.75% 2017            104.71      87.54      16.5         17.80      16.9    59.75     10.5          7.34      53.10       13.8   Ratchet
Swiss Prime 1.875% 2016                 103.06      91.57      8.1          16.08      15.4    31.48     5.8           10.31     75.75       13.6   Ratchet
Technip 0.5% 2016                        97.88      82.41      13.9         14.77      15.1    53.71     8.9           5.92      53.62       11.0   Ratchet
Note: Data as at close on 9 April. Assumes a 20% equity bid premium, with a change of control occurring in six months. Source: Barclays Research


                                                Sector calls in Europe
                                                Our equity strategists highlighted in European Strategy Elements – Next catalyst: Bottoming
                                                of Profitability (21 March 2013) that there is a skew in sector valuations in Europe. The
                                                valuation premium that currently exists between the six most expensive sectors versus the
                                                six cheapest, see Figure 39, was last seen during the tech bubble. The trigger for a reversal
                                                of this trend might be an inflection in profitability, something our analysts call for.
                                                Therefore, we are Overweight Banks, Insurance, Financial Services and Real Estate versus
                                                Underweight Food & Bev, Personal & Hhld Gds and Healthcare. In Figure 40, we present
                                                convertibles that can be used to position for these calls. We limit the set of bonds based on
                                                the following criteria: parity greater or equal to 50; delta greater or equal to 25; and amount
                                                outstanding above €100mn.

                                                FIGURE 39
                                                Expensive sectors trade at a c.135% CAPE premium versus the six cheapest

                                                                            Expensive                                                Cheap

                                                 Bbg Ticker                  Name                               Bbg Ticker            Name

                                                 SX3P                        Food and Beverages                 SX7P                  Banks
                                                 SXQP                        Personal & Household Goods         SXIP                  Insurance
                                                 SX4P                        Chemical                           SX6P                  Utilities
                                                 SXDP                        Health Care                        SXEP                  Oil & Gas
                                                 SX8P                        Technology                         SXOP                  Construction & Materials
                                                 SXRP                        Retail                             SXKP                  Telecommunications
                                                Source: Barclays Research




15 April 2013                                                                                                                                                 38
Barclays | Convertible Outlook Q2 2013


FIGURE 40
Convertible candidates to position for our equity strategists’ sector recommendations
                                                                                 Conv       Implied Eq 100                  Equity Upside
                                                                    Bond              YTP/M                    Delta Equity
                Name                             GIC Industry             Parity Prem       Volatility day vol               Price   to
                                                                    Price              (%)                     (%) Rating
                                                                                  (%)         (%)       (%)                 Target Target

Convertibles in Overweight sectors

BES - Bradesco 3.5% 2015             COMMERCIAL BANKS               118.2 115.9     2    -3.0    25      30     65    EW     40     16%
GSW Immobilien 2% 2019               RE MANAGEMENT & DEV.           106.2   81.9    30    1.0    23      20     63    OW     36.7   25%
Emaar Properties 7.5% 2015           RE MANAGEMENT & DEV.           127.6 120.0     6    -2.4    10      27     61
Deutsche Euroshop 1.75% 2017 RE MANAGEMENT & DEV.                   105.2   88.6    19    0.6    19      18     61
Mobimo Holding 2.125% 2014           RE MANAGEMENT & DEV.           103.7 104.3     -1   -0.9     6      12     61
Swiss Prime 1.875% 2015              RE MANAGEMENT & DEV.           106.8 108.8     -2   -1.9            14     60
Derwent 2.75% 2016                   RE INVESTMENT TRUSTS (REITS)   114.2   99.0    15   -1.5    21      14     55    OW     23.8   11%
Immofinanz 4.25% 2018                RE MANAGEMENT & DEV.            4.4    3.4     28    3.0    13      23     54
Gecina 2.125% 2016                   RE INVESTMENT TRUSTS (REITS)   125.1 108.7     15   -2.1    19      18     54    EW     81.1   -10%
Beni Stabili 3.375% 2018             RE INVESTMENT TRUSTS (REITS)   102.6   79.8    28    2.8    24      33     51    OW     0.62   31%
Unibail Rodamco 0.75% 2018           RE INVESTMENT TRUSTS (REITS)   234.1 184.7     27   -0.8    22      19     49    EW    176.4   1%
CA Immobilien 4.125% 2014            RE MANAGEMENT & DEV.           105.5   91.8    15    0.6    18      23     47
INTU 2.5% 2018                       RE INVESTMENT TRUSTS (REITS)   105.2   78.5    34    1.3    21      16     45    OW     4.09   23%
Swiss Prime 1.875% 2016              RE MANAGEMENT & DEV.           103.5   93.1    11    0.7    12      14     34
Conwert Immo 5.25% 2016              RE MANAGEMENT & DEV.           104.0   79.0    32    3.8     5      21     33
British Land 1.5% 2017               RE INVESTMENT TRUSTS (REITS)   102.6   82.6    24    0.7    22      16     26    EW     6.09   9%
Temasek-Std Chart 0% 2014            COMMERCIAL BANKS               106.4   87.2    22   -4.0    33      21     26    OW     16     -3%
Convertibles in Underweight sectors

Shoprite 6.5% 2017                   FOOD & STAPLES RETAILING       11,984 10,535   14    1.4    20      26     67    OW     207    18%
Marine Harvest 4.5% 2015             FOOD PRODUCTS                  123.5 117.5     5    -7.0    24      21     64
Eurazeo - Danone 6.25% 2014          FOOD PRODUCTS                   58.7   57.0    3    -12.2           17     62    EW     58     8%
Elekta 2.75% 2017                    HEALTH CARE EQUIPMENT & SUP. 124.9 101.0       24   -3.0    35      23     61    OW     111    14%
adidas 0.25% 2019                    TEXTILES, APPAREL, & LUXURY    118.5   93.4    27   -2.5    34      21     53    EW     80     4%
Steinhoff Int. 9.625% 2015           HOUSEHOLD DURABLES             126.1 100.3     26    5.7    19      22     39    EW     27     15%
Orpea 3.875% 2016                    HEALTH CARE PROVIDERS & SER.    47.7   34.7    37    1.3    25      19     34
Sainsbury 4.25% 2014                 FOOD & STAPLES RETAILING       110.6   92.5    20   -3.8    28      16     29    OW     3.8    1%
Celesio 2.5% 2018                    HEALTH CARE PROVIDERS & SER.   102.6   67.3    52    1.9    35      22     25
Note: RE denotes Real Estate. Source: Barclays Research




15 April 2013                                                                                                                          39
Barclays | Convertible Outlook Q2 2013


NET SUPPLY OUTLOOK

                                              EMEA off to a promising start
                                              Issuance drivers
                                              Equity rally and low absolute coupon cost remain short-term drivers
                                              In Figure 41 below, we highlight the ongoing correlation between the volume of
                                              convertibles issued in EMEA, and the preceding two months’ moves in equities. Issuers of
                                              convertibles can thereby effectively sell their equity at an additional premium to an already
                                              elevated level.

                                              From Figure 42 below, we observe that, though the potential coupon saving from issuing a
                                              convertible, as opposed to a straight bond, has been higher in the past, the absolute coupon
                                              cost is currently near its lows of the past 10 years. We believe this has, and should continue to,
                                              incentivise corporates to lock in the low rates on offer now for the next 3-5 years.


FIGURE 41                                                                              FIGURE 42
EMEA monthly issuance volume vs preceding equity move                                  EMEA convertible cost index (CCI)

                                                                                       10%                                                                     4.0%
                                   6                                                    8%
                                                                                                                                                               3.0%
                                   5                                                    6%
                                                                                                                                                               2.0%
                                   4                                                    4%
                                                                                                                                                               1.0%
                                                                                        2%
                                   3
                                                                                        0%                                                                     0.0%
                                   2                                                         Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan
                                                                                             01 02 03 04 05 06 07 08 09 10 11 12 13
                                   1
                                                                                                        Interest saving of issuing convertible bond (right)
                                   0                                                                    Cost of issuing straight bond (left)
  -30%        -20%          -10%       0%       10%          20%          30%
                                                                                                        Cost of issuing convertible bond (left)
                  2002-2012            2012          2013 YTD
Source: Barclays Research                                                              Source: Barclays Research



                                              FIGURE 43
                                              EMEA historical convertible issuance (€bn)
                                               35

                                               30                                            28.7

                                               25                                                                    23.6
                                                                                 19.6
                                               20                                                                                                 17.7
                                                         14.5                                                                 13.9
                                               15
                                                                     9.8                                 10.6
                                                                            9.5
                                               10                                                                                      7.5               7.1
                                                                                           5.7                              5.7                5.3
                                                                   3.8                                                               3.7
                                                 5                                                     2.0
                                                       1.3                                                         1.3
                                                 0
                                                       2004        2005         2006       2007        2008        2009     2010     2011      2012      2013
                                                                                                  Q1     FY
                                              Source: Barclays Research




15 April 2013                                                                                                                                                    40
Barclays | Convertible Outlook Q2 2013



                                   Market size scenarios
                                   EMEA
                                   Potential redemptions for the remainder of 2013 are frontloaded owing to the large volume
                                   of bonds that are close their call triggers. There is a relative paucity of redemptions
                                   scheduled for 2013 outside these. Hence, only limited issuance would be required for flat
                                   net supply should these bonds not be called. In 2014, many of the bonds issued in the wave
                                   of 2009 would reach maturity, resulting in c. €16bn of forecast redemptions, higher still if
                                   the bonds not called live on to maturity.

                                   FIGURE 44
                                   EMEA 2013 - 2015 forecast redemptions versus issuance volume scenarios (€bn)

                                     140      9.4                                                                                 10
                                                                                                                                  9
                                     120
                                                                                                                                  8
                                     100                                                                                          7
                                                                             5.9                                          5.7
                                         80                                                 4.9                                   6
                                                                                     4.2                                          5
                                                                                                    3.8
                                         60                                                                                       4
                                                               2.3                                           2.6
                                         40                                                                        2.1            3
                                                       1.5                                                                        2
                                                                      1.1
                                         20
                                                                                                                                  1
                                         0                                                                                        0
                                               Q2      Q3       Q4     Q1     Q2     Q3     Q4      Q1      Q2      Q3     Q4
                                              2013    2013     2013   2014   2014   2014   2014    2015    2015    2015   2015

                                                     Redemptions        €0nbn volume          €15bn volume         €30bn volume
                                   Source: Barclays Research



                                   YTD realised issuance and redemptions
                                   We calculate that YTD there was:

                                   • €7.4bn of new issuance, of which IG was €1.7bn;

                                   • €2.1bn of redemptions, of which IG was €0.7bn; hence

                                   • €5.3bn of positive net supply and €1.1bn of positive IG net supply.

                                   2013 redemptions projection:
                                   Projecting for the full year 2013, we estimate that there could be:

                                   • €11.0bn of FY scheduled redemptions in EMEA, with €8.9bn projected for the remainder
                                         of the year. Hence we require €0.4bn of monthly issuance for flat FY net supply; and

                                   • €5.1bn of FY scheduled IG redemptions, with €4.4bn projected for the remainder of the year.
                                         Hence we require €0.4bn of monthly issuance for flat FY IG net supply.




15 April 2013                                                                                                                     41
Barclays | Convertible Outlook Q2 2013


FIGURE 45                                                                             FIGURE 46
2012 issuance versus redemptions (€bn)                                                2013 projected redemptions and break-even issuance (€bn)

    6.0                                                                                   2.0
    5.0
                                                                                          1.0
    4.0
    3.0                                                                                   0.0
    2.0
    1.0                                                                                  -1.0
    0.0
                                                                                         -2.0
   -1.0
   -2.0                                                                                  -3.0
   -3.0
   -4.0                                                                                  -4.0
           Jan        Mar        May          Jul        Sep        Nov                          Jan        Mar        May          Jul        Sep         Nov

          Issuance     Conversion      Buyback       Maturity     Call    Put                                        IG issuance      IG redemptions

Source: Barclays Research                                                             Source: Barclays Research


                                               Potential redemptions and action dates through 2013
Action dates                                   Action dates in Q2 include a number of bonds approaching their call triggers and potential
                                               voluntary early conversions. This could add c.€2bn to the projected redemptions for the
                                               remainder of 2013. Outside this, however, there are relatively few forecast redemptions, given
                                               that 2013 is five years since the issuance of 2008 – a relatively low volume year. Vedanta 2017
                                               (€675mn) has its put date in April, as does BES – EDP 2015 (€498mn) in May, and KfW –
                                               Deutsche Telekom 2013 (€3.3bn) is due to mature in June: we wonder if each could be a
                                               potential reissuance candidate.

FIGURE 47
Potential redemptions and key action dates through 2013
Name                                                        Price               Parity          Red value €mn           Action date                  Action
Qiagen 1.5% 2024                                            162.1               161.4                180                  Q2 13                  Potential call
KfW - Deutsche Post 1.5% 2014                               125.4               126.6               975                   Q2 13                  Potential call
Eurazeo - Danone 6.25% 2014                                  58.9                57.7                910                  Q2 13                  Potential call
Marine Harvest 4.5% 2015                                    122.6               116.0                293                  Q2 13                  Potential call
Atos 2.5% 2016                                               56.0                53.6                325                  Q2 13                  Potential call
ITV 4% 2016                                                 178.6               175.7                278                  Q2 13                  Potential call
Pargesa 1.7% 2013                                            99.9                39.4                444                27-Apr-13                   Maturity
Vedanta Finance 4% 2017                                     100.0                32.0                678                29-Apr-13                   Put date
BES - EDP 3% 2015                                            99.8                61.4                500                29-Apr-13               Final put notice
SGL Carbon 0.75% 2013                                        99.8                83.2                146                30-Apr-13              Final conversion
Industrivarden 2.5% 2015                                    125.6               125.8               650                 08-May-13              Ex-dividend date
Soco 4.5% 2013                                               99.5                57.1                 36                16-May-13                   Maturity
Talvivaara 5.25% 2013                                       98.5                12.5                 77                 20-May-13                   Maturity
WPP 5.75% 2014                                              176.2               175.9                929                05-Jun-13              Ex-dividend date
KfW - Deutsche Telekom 3.25% 2013                           100.6               62.7                3300                27-Jun-13                   Maturity
Atos 1.5% (S) 2016                                           55.6                53.1                325                 01-Jul-13               First call date
Rallye - Casino 3.25% 2013                                   99.7                86.2                300                 01-Jul-13                  Maturity
UBI Banca 5.75% 2013                                        100.2                21.3                639                 10-Jul-13                  Maturity
Petrominerales 2.625% 2016                                  97.4                17.6                155                  10-Jul-13              Final put notice
Maurel et Prom 7.125% 2015                                   17.3                15.3                 91                20-Aug-13                First call date
Hera 1.75% 2013                                              99.8               81.2                140                 24-Sep-13              Final conversion
Subsea 7 2.25% 2013                                         111.4               107.8                414                04-Oct-13              Final conversion
UCB 4.5% 2015                                               130.4               123.6                559                12-Nov-13                First call date
Capgemini 3.5% 2014                                          38.0               34.4                581                 18-Dec-13              Final conversion
Intralot 2.25% 2013                                         106.0                12.4                230                20-Dec-13                   Maturity
Emaar Properties 7.5% 2015                                  127.0               119.7                499                20-Dec-13                First call date
IGD 3.5% 2013                                                97.0                31.2                230                28-Dec-13                   Maturity
Note: Data as at close on 8 April 2013. Redemption value is the greater of parity and redemption price. Highlighted rows are investment grade as rated by credit
agencies. Source: Barclays Research

15 April 2013                                                                                                                                                      42
Barclays | Convertible Outlook Q2 2013


                                        Asia Pacific issuance set to rise?
                                        YTD realised issuance and redemptions
YTD net supply is slightly              We calculate that YTD to 10 April there was:
positive for Asia ex-Japan but
sharply negative for Japan
                                        • $4.0bn of new issuance from 15 deals, of which IG was $1.5bn from four deals;

                                        • $7.1bn of redemptions, of which IG was $3.2bn; hence

                                        • $3.1bn of negative net supply and $1.7bn of negative IG net supply.

                                        We also find that YTD net supply has been slightly positive for Asia ex-Japan but sharply
                                        negative for Japan convertibles:

                                        • Asia ex-Japan YTD issuance of $2.3bn compares with YTD redemptions of $1.8bn.

                                        • Japan YTD issuance of $1.7bn compares with YTD redemptions of $5.3bn.

We project $22.3bn of                   2013 FY redemptions projection:
redemptions for 2013, we                Projecting ahead for the full year 2013, we estimate that there could be:
require $2.1bn per month of
                                        • $22.3bn of FY scheduled redemptions in Asia Pacific as a whole, with $15.2bn projected
new issuance for full-year flat
                                            for the remainder of the year. Hence we require $2.1bn of monthly issuance for flat FY
net supply
                                            net supply (Figure 48); and

                                        • $13.8bn of FY scheduled redemptions in Japan, with $8.5bn projected for the remainder of
                                            the year. Hence, we require $1.4bn of monthly issuance for flat FY net supply (Figure 49).

                                        • This also suggests that Japan may account for almost two thirds of total Asia Pacific
                                            redemptions this year.

Issuance is set to accelerate           This represents a formidable requirement for breakeven net supply in 2013, particularly in
significantly, in our view              Japan. Yet we do not rule this out entirely: the sharp rally in Japanese convertibles, together
                                        with the heavy redemptions schedule (realised and projected) combined with the dramatic
                                        improvement in secondary valuations could drive a significant issuance pick-up, in our view.


FIGURE 48                                                              FIGURE 49
2013 projected redemptions and break-even issuance, Asia               2013 projected redemptions and break-even issuance, Japan
Pacific

 $ bn                                                                    $ bn
  3.0                                                                    2.0
  2.0                                                                    1.0
  1.0
                                                                         0.0
  0.0
                                                                        -1.0
 -1.0
                                                                        -2.0
 -2.0
                                                                        -3.0
 -3.0
 -4.0                                                                   -4.0

 -5.0                                                                   -5.0
         Jan Feb Mar Apr May Jun       Jul Aug Sep Oct Nov Dec                  Jan Feb Mar Apr May Jun       Jul Aug Sep Oct Nov Dec
        Issuance      Conv   Buyback    Maturity   Call    Put                  Issuance     Conv   Buyback    Maturity   Call    Put
Source: Barclays Research                                              Source: Barclays Research




15 April 2013                                                                                                                            43
Barclays | Convertible Outlook Q2 2013


                                               Potential redemptions and action dates in the remainder of 2013
                                               In Figure 50 we show the key convertible bond events and dates in Asia Pacific for investors
                                               to keep aware of. For example, potential final conversion dates and final put notice dates.

                                               For the remainder of Q2, projected redemptions are actually quite light – most of the large
                                               maturities in Japan were in the past couple of weeks. Large redemptions still to come in Q2
                                               include QBE Insurance ($0.6bn) and Champion REIT ($0.7bn). The heaviest months for
                                               redemptions in the remainder of 2013 are September (eg, potentially Nidec, Sharp and
                                               Unicharm), October (eg, Hon Hai) and December (eg, KDDI).

FIGURE 50
Potential redemptions and key action dates for the remainder of 2013
Name                                                         Price           Parity         Red value ($mn)              Action date                Action

Takashimaya 0% 2014                                          141.5           137.4                  243                     26 Apr              Final put notice
Bharat Forge 0% 2013 (B)                                     142.0            25.8                  63                      28 Apr                  Maturity
Asahi Breweries 0% 2023                                      116.4            113.0                 426                     29 Apr              Final put notice
Unicharm 0% 2013                                             160.1            160.4                 450                     5 May               Final conv date
QBE Insurance 0% 2030                                         65.4            33.7                  557                    09 May               Final put notice
Mingfa 5.25% 2016                                            107.0            96.6                  207                    24 May               Final put notice
Champion REIT 1% 2013                                        126.2            119.4                 736                     03 Jun                  Maturity
Osung 4% 2016                                                 92.0            23.3                  70                      07 Jun              Final put notice
Horizon Oil 5.5% 2016                                        121.1            83.2                                          17 Jun                Reset date
Keppel Land 2.5% 2013                                        100.5            71.3                  245                     23 Jun                  Maturity
China Agri 1% 2015                                           100.9            72.3                  515                     29 Jun              Final put notice
CapitaMall Trust 1% 2013                                     106.8            64.9                  103                     02 Jul                  Maturity
Acer 0% 2015 (A)                                              99.5            26.2                  304                     11 Jul              Final put notice
Nichias Corp 0% 2017                                         122.8           105.1                                         02 Aug                 Reset date
Nidec 0% 2015                                                101.6            56.0                 1216                    21 Aug               Final put notice
Matsumotokiyoshi 0% 2013                                     147.4           146.5                  182                    21 Aug               Final conv date
Maoye 3% 2015                                                112.0            74.0                  150                     13 Sep              Final put notice
Capitaland 2.1% 2016                                         100.3            58.7                  347                     16 Sep              Final put notice
Hengdeli 2.5% 2015                                           101.9            48.7                  333                     20 Sep              Final put notice
Sharp 0% 2013                                                 92.5            12.4                 2432                     30 Sep                  Maturity
Vingroup 5% 2017                                             112.3           107.0                                          03 Oct                Reset date
Hon Hai 0% 2013                                              100.0            75.3                 1000                     12 Oct                  Maturity
United Labs 7.5% 2016                                         98.7            52.0                  126                     15 Oct              Final put notice
Mitsubishi Chem 0% 2013                                      107.0            96.6                  851                     22 Oct                  Maturity
Intime 1.75% 2013                                            105.9            73.6                  268                     27 Oct                  Maturity
Kaisa 8% 2015                                                109.0            73.0                  239                    20 Nov               Final put notice
Aeon 0.3% 2013                                               145.3           144.8                  610                    20 Nov               Final conv date
Temasek - Li & Fung 0% 2013                                   99.3            42.7                  409                    14 Dec                   Maturity
Asia Cement - FENC 0% 2016                                    98.0            54.4                  375                     28 Dec              Final put notice
Epistar 0% 2016                                               97.0            39.1                  273                    28 Dec               Final put notice
Note: Prices as of 11 April 2013. Redemption value is the greater of parity and redemption price. Highlighted rows are investment grade as rated by credit agencies
Source: Bloomberg, Barclays Research


                                               We forecast above-average issuance, but will it grow the market?
Issuance YTD is annualising at                 C. $4bn of Asia Pacific convertible issuance YTD implies c. $13-14bn for the full year. This
above the 5y average…                          would be above the 5-year historical average of $11.5bn (Figure 51). In this scenario,
                                               however, organic market shrinkage would still be c. $9bn, given the c. $22bn of expected
                                               scheduled redemptions for 2013. This shrinkage would equate to about one seventh of the
                                               current total Asia Pacific market value.

15 April 2013                                                                                                                                                         44
Barclays | Convertible Outlook Q2 2013


… yet we are more bullish on       However, we are more bullish on prospects for issuance. The sharp rally in Japanese
issuance, given the supply-        convertibles, in particular, fuelled by higher equities, together with the heavy redemptions
demand imbalance and the           schedule and richer secondary valuations across the region will likely spur a significant
market rally                       issuance pick-up, in our view. We expect this to be concentrated around Japan (in
                                   particular) and HK/China in the near term.

                                   If, hypothetically, the pace of issuance were to double for the remainder of the year, then FY
                                   issuance could reach c. $23bn. This would approximately equal the volume of projected FY
                                   redemptions. That is a formidable issuance target, and it would be the highest FY issuance
                                   total since 2007. Yet, given that we expect current market conditions to persist, we would
                                   be surprised if FY issuance did not at least achieve the high-teens in $bn.

                                   FIGURE 51
                                   Asia Pacific historical convertible issuance ($bn)
                                     35
                                                                       29.0
                                     30

                                     25                    21.7
                                     20
                                                                                                               14.7
                                     15                                             12.2                                12.7
                                                9.9                                             9.1
                                     10                                                                                          8.6
                                                                     5.7         6.1
                                         5   3.3        3.8                                              3.2          2.2
                                                                                                                               3.4      3.24.0
                                                                                             0.3
                                         0
                                             2005        2006        2007        2008         2009        2010        2011     2012    2013 YTD
                                                                                       Q1     FY
                                   Note: 2013 YTD is up to and including 10 April. Source: Barclays Research




15 April 2013                                                                                                                                    45
Barclays | Convertible Outlook Q2 2013


REVIEW OF Q1 2013

                                   Convertibles performance versus other asset classes
                                   EMEA convertible performance versus credit and equity
EMEA convertibles returned         In Q1 EMEA convertibles have returned 1.0%, versus 5.7% for a broad measure of equities
1.0% compared to 5.7% for          (the Stoxx Europe 600 index); however, at a much lower volatility of 3.9% versus 10.6%.
equities in Q1, but at a           The return for HY credit (Barclays Pan-European High Yield 3% Capped Ex-Financials index)
significantly lower volatility     was 1.1% and 0.6% for IG credit (Barclays Euro Aggregate Corporates index), with a
                                   volatility of 2.3% and 1.9%, respectively.

                                   FIGURE 52
                                   Performance of EMEA convertibles, credit and equity indices Q1
                                     108
                                     107
                                     106
                                     105
                                     104
                                     103
                                     102
                                     101
                                     100
                                      99
                                      98
                                       31-Dec         14-Jan          28-Jan         11-Feb          25-Feb         11-Mar         25-Mar
                                                     EMEA Convertibles: Composite                      Euro-Aggregate: Corporates
                                                     PE HY 3% Cap ex-Financials                        Stoxx600
                                   Note: Rebased to 100 at 31 Dec 2012 and measured until 29 Mar 2013. Source: Bloomberg, Barclays Research


                                   Asia Pacific convertible performance versus credit and equity
Asia ex-Japan convertibles         In Q1, Asia Pacific ex-Japan convertibles (2.6% volatility) have returned 1.4% versus: -0.5%
returned 1.4% in Q1 with a         for a broad measure of equities, the MSCI Asia Pacific ex-Japan index (10.6% volatility);
volatility of only 2.6%            2.0% (3.2% volatility) for HY credit (Barclays EM Asia USD Credit Corporate HY index); and
                                   1.0% (2.7% volatility) for IG credit (Barclays EM Asia USD Credit Corporate HG index).

                                   FIGURE 53
                                   Performance of Asia Pacific ex-Japan convertibles, credit and equity indices year to date
                                    103

                                    102

                                    101

                                    100

                                     99

                                     98

                                     97
                                      31-Dec          14-Jan          28-Jan         11-Feb         25-Feb          11-Mar         25-Mar
                                                 Asia ex-Japan Convertibles                          EM Asia USD IG Corporate Credit
                                                 EM Asia USD HY Corporate Credit                     MSCI Asia Pacific ex-Japan


                                   Note: Rebased to 100 at 31 Dec 2012 and measured until 29 Mar 2013. Source: Bloomberg, Barclays Research




15 April 2013                                                                                                                                 46
Barclays | Convertible Outlook Q2 2013


                                   In Q1, Japan convertibles (12.6% volatility) have returned 17.6%, versus 20.1% for the
                                   Nikkei stock index (24.4% volatility) and 0.8% for credit (Barclays Asian-Pacific Japan
                                   Corporate index). Index returns were to a large extent driven by the top 4 constituents; KDDI
                                   0% 2015, Orix 1% 2014, Sony 0% 2017 and Sharp 0% 2013 with returns of 20.6%, 22.0%,
                                   55.3% and 33.6% respectively.

                                   FIGURE 54
                                   Performance of Japan convertibles, credit and equity indices year to date
                                    123

                                    120

                                    117

                                    114

                                    111

                                    108

                                    105

                                    102

                                     99
                                      31-Dec           14-Jan          28-Jan           11-Feb          25-Feb           11-Mar          25-Mar
                                                         Japan Convertibles               Japan Corporate Credit                 NKY Index
                                   Note: Rebased to 100 at 31 Dec 2012 and measured until 29 Mar 2013. Source: Bloomberg, Barclays Research


                                   Rich/cheapness between the regions
                                   Looking at the first quarter (Figure 55), Asia Pacific convertibles have richened. After
                                   cheapening substantially on 15 January 2013, mainly driven by a large move in the Sharp
                                   0% 2013 convertible, Japan has shown a trend of richening over the period in line with the
                                   returns seen. The rich/cheapness charts below have all been created using the “Chart” tool
                                   on Barclays Live (https://live.barcap.com/keyword/CHART).

                                   Only the EMEA region experienced a cheapening, 0.35%, in Q1. This move has made EMEA
                                   the cheapest region based on this metric; however, we believe that the trend of the indices
                                   is more informative than their absolute values.

                                   FIGURE 55
                                   Rich/cheapness of the Barclays convertible composite indices
                                     0.8
                                     0.6
                                     0.4
                                     0.2
                                     0.0
                                    -0.2
                                    -0.4
                                    -0.6
                                    -0.8
                                    -1.0
                                    -1.2
                                    -1.4
                                         31-Dec        14-Jan          28-Jan           11-Feb          25-Feb          11-Mar           25-Mar
                                                                          EMEA              APAC ex Jpn             Japan
                                   Note: More negative values in the lower part of the chart indicate increasing cheapness. Click chart to view dynamic
                                   data on Barclays Live. Source: Barclays Live - Chart




15 April 2013                                                                                                                                             47
Barclays | Convertible Outlook Q2 2013


                                   EMEA and Asia Pacific ex-Japan differs in its distribution of fairness
                                   As seen in Figure 56, the different sub-indices in EMEA have widened in terms of fairness
                                   with IG being the only one to richen in Q1.

                                   In Asia Pacific ex-Japan, we note that investment grade and non-rated convertibles richened
                                   in Q1.


                                   FIGURE 56
                                   Rich/cheapness of the EMEA index and quality sub-indices
                                     1.5

                                     1.0

                                     0.5

                                     0.0

                                    -0.5

                                    -1.0

                                    -1.5

                                    -2.0
                                         31-Dec        14-Jan          28-Jan           11-Feb          25-Feb          11-Mar           25-Mar
                                                    EMEA              Investment Grade                Non-Invest Grade               Non-Rated
                                   Note: More negative values in the lower part of the chart indicate increasing cheapness. Click chart to view dynamic
                                   data on Barclays Live. Source: Barclays Live - Chart




                                   FIGURE 57
                                   Rich/cheapness of the Asia ex-Japan index and quality sub-indices

                                     1.0
                                     0.8
                                     0.6
                                     0.4
                                     0.2
                                     0.0
                                    -0.2
                                    -0.4
                                    -0.6
                                    -0.8
                                    -1.0
                                         31-Dec        14-Jan           28-Jan          11-Feb           25-Feb           11-Mar           25-Mar


                                                          APAC ex Jpn                    Investment Grade                      Non-Rated
                                   Note: More negative values in the lower part of the chart indicate increasing cheapness. Click chart to view dynamic
                                   data on Barclays Live. Source: Barclays Live - Chart




15 April 2013                                                                                                                                             48
Barclays | Convertible Outlook Q2 2013



                                   Convertibles performance across regions
                                   Figure 58 highlights convertible performance from a global perspective. In the first quarter
                                   the Barclays Japan convertible index has the highest relative total return of 17.6%, followed
                                   by the US with 7.3%. The return for Asia ex-Japan was 1.4%, whereas EMEA returned 1.0%.

                                   In Q1 the Japanese yen has weakened by 8.6% versus the US dollar, whereas the euro
                                   weakened by 2.9%. This suggests that in US dollar terms, the Japanese index (which is in ¥)
                                   and the EMEA index (which is in €) would have delivered a lower return (total return of
                                   c.8% and c.-2%, respectively, in US$ according to our Global Convertible index).

                                   The highest volatility of returns is found in the Japan index (17.6%). EMEA and Asia ex-
                                   Japan returns volatility was 3.9% and 2.7%, respectively. Japan was the outperforming
                                   market both on a total return basis as well as on a risk adjusted basis.


                                   FIGURE 58
                                   Total Q1 returns of the Barclays convertible composite indices: EMEA, Japan, Asia ex-
                                   Japan and the US
                                     20%


                                     15%


                                     10%


                                         5%


                                         0%


                                     -5%
                                       31-Dec           14-Jan         28-Jan          11-Feb         25-Feb          11-Mar         25-Mar
                                                    EMEA (169)               Asia ex-Japan (100)                Japan (35)            US (514)
                                   Note: EMEA index total returns are in EUR, Japan in JPY, Asia ex-Japan and US in USD. Numbers of index constituents
                                   are in parentheses. Source: Barclays Indices


                                   FIGURE 59
                                   Summary of Barclays convertible composite indices
                                                                                       EMEA              Japan        Asia ex-Japan          US
                                    Total return (Q1)                                   1.0%            17.6%                1.4%           7.3%
                                    Volatility of returns (annualised)                  3.9%            12.8%                2.7%           6.8%
                                    Total return / volatility                            0.3              1.4                0.5             1.1
                                    Index currency                                      EUR               JPY                USD            USD
                                    FX rate vs. USD                                     0.78             94.22                1               1
                                    FX rate change vs. USD (Q1)                         2.9%             8.6%
                                    Market value of index (bn)                           77              2180                37              219
                                    Market value (USD bn)                                99               23                 37              219
                                    Delta of index (wtd avg)                            34%              62%                 25%            64%
                                    Number of index constituents                         169              35                 100             514
                                   Note: Index data as at 29 March 2013. Source: Bloomberg, Barclays Research




15 April 2013                                                                                                                                            49
Barclays | Convertible Outlook Q2 2013


                                              Universe profiles
                                              EMEA convertibles universe profiles
                                              The EMEA convertible bond market’s value is currently (5 April 2013) €84.3bn ($109.1bn),
                                              relative to a nominal value of €81.6bn ($105.6bn). This represents an increase in market
                                              value of €2.4bn since the end of 2012. A diversity of investment profiles remains, but since the
                                              end of 2012 the portion of typical bonds has grown to 46%. Based on our estimates, the median
                                              YTM/P, delta and average rho are 2.1%, 31% and 3.6, respectively. The rho has increased from
                                              2.4 at the end of 2012.


FIGURE 60                                                                   FIGURE 61
EMEA universe market value by country                                       EMEA universe market value by sector

                                                                                                                                 Mining, Oil
                                                    France                                                                        and Gas
                                                     22%                                    Others                                 20%
                Others                                                                       29%
                 33%



                                                         UK
                                                        12%                         Miscellaneo                                       Industrial
              Spain
                                                                                        us                                              21%
               2%
               Portugal                                                                 6%
                 3%                                                                         Banking
                    Switzerland              Germany                                          5% Real Estate            Public
                        6%                     22%                                                  9%                  Sector
                                                                                                                         10%

Note: Data as on the index level March month end.                           Note: Data as on the index level March month end.
Source: Barclays Research                                                   Source: Barclays Research



FIGURE 62                                                                   FIGURE 63
EMEA universe market value by rating                                        EMEA universe market value by profile

                                                                                                           Distressed
             Non-Invest                                                                      Equity
                                                                                                              2%
               Grade                                                                        Sensitive
               25%                                                                            19%
                                                       Investment
                                                          Grade
                                                          36%
                                                                                                                                       Typical
                                                                                                                                        46%




                                                                                              Busted
                    Non-Rated                                                                  33%
                      39%


Note: Data as on the index level March month end.                           Note: Data as on the index level March month end.
Source: Barclays Research                                                   Source: Barclays Research




15 April 2013                                                                                                                                      50
Barclays | Convertible Outlook Q2 2013


                                              Asia Pacific convertibles universe profiles
                                              The Asia Pacific convertible bond market’s value is currently (5 April 2013) $64.5bn, relative to
                                              a nominal value of $57.8bn. This represents a decline in market value of $1.1bn since the end
                                              of 2012. Japan remains the dominate force in the Asia Pacific universe accounting for 38%. In
                                              terms of profile, the portion of busted convertibles have shrunk to 47% from 54% at the end
                                              of 2012. Based on our estimates, the median YTM/P, delta and average rho are 0.1%, 27%
                                              and 1.3, respectively. Delta exhibited the biggest change with a rise of 7 volatility points.


FIGURE 64                                                                    FIGURE 65
Asia Pacific universe market value by country                                Asia Pacific universe market value by sector
                                                                                                                            Food And
                            Others
                                                                                                                              Retail
                             7%                                                                 Others
                  Taiwan                                                                                                      12%
                                                     Hong Kong                                   23%
                   10%
                                                       27%
                                                                                                                                      Industrial
                                                                                                                                        12%
         Singapore
            10%
                                                                                       Telecoms                                         Banking
                                                        India                                                                             7%
              Korea                                                                       8%
                                                         3%
               5%


                                                                                            Technology                           Real Estate
                                      Japan                                                    18%                                 20%
                                   Convertibles
                                       38%

Note: Data as on the index level March month end.                            Note: Data as on the index level March month end.
Source: Barclays Research                                                    Source: Barclays Research



FIGURE 66                                                                    FIGURE 67
Asia Pacific universe market value by rating                                 Asia Pacific universe market value by profile
                     Non-Invest                                                                               Distressed
                       Grade                                                                                     0%              Typical
                       10%                            Investment                                                                  20%
                                                         Grade                             Equity
                                                         30%                              Sensitive
                                                                                            33%




                Non-Rated
                                                                                                                             Busted
                  60%
                                                                                                                              47%


Note: Data as on the index level March month end.                            Note: Data as on the index level March month end.
Source: Barclays Research                                                    Source: Barclays Research




15 April 2013                                                                                                                                      51
Barclays | Convertible Outlook Q2 2013


                                   EMEA new issuance
                                   Figure 68 displays issuance in Q1 13, and we note:

                                   • There has been €7.4bn of EMEA issuance from 18 deals. The size, sector, rating and
                                          geographic blend remained mixed and included the first new issue into a Mexican
                                          underlying stock.

                                   • Arcelor Mittal’s mandatory convertible contributed €2.2bn of the new issuance,
                                          following Volkswagen’s €2.5bn mandatory convertible last year. We are curious as to
                                          whether we shall see further large mandatory convertible bonds.

                                   • The first quarter’s volume was the second highest Q1 volume in the past ten years.
                                          Though primary markets have been quieter of late, elevated equity markets and low
                                          interest rates remain compelling drivers for issuance, in our view.


                                   FIGURE 68
                                   EMEA new issuance in Q1 2013 versus 2012 (€bn)

                                    5.0                                                                                                                    18
                                    4.5                                                                                                                    16
                                    4.0                                                                                                                    14
                                    3.5                                                                                                                    12
                                    3.0
                                                                                                                                                           10
                                    2.5
                                                                                                                                                           8
                                    2.0
                                    1.5                                                                                                                    6
                                    1.0                                                                                                                    4
                                    0.5                                                                                                                    2
                                    0.0                                                                                                                    0
                                             Jan      Feb      Mar         Apr*    May         Jun      Jul      Aug       Sep     Oct    Nov      Dec


                                                    2013             2012               2013 Cumulative (RHS)                  2012 Cumulative (RHS)

                                   Note: * month to date. Source: Barclays Research



                                   FIGURE 69
                                   EMEA historical new issuance (€bn)
                                     35

                                     30                                             28.7

                                     25                                                                       23.6
                                                                       19.6
                                     20                                                                                                     17.7
                                               14.5                                                                     13.9
                                     15
                                                            9.8                                  10.6
                                                                     9.5
                                     10                                                                                            7.5              7.1
                                                                                  5.7                                5.7                  5.3
                                                       3.8                                                                       3.7
                                         5                                                     2.0
                                             1.3                                                         1.3
                                         0
                                             2004       2005         2006         2007         2008      2009          2010      2011     2012      2013
                                                                                          Q1     FY
                                   Source: Barclays Research




15 April 2013                                                                                                                                              52
Barclays | Convertible Outlook Q2 2013


FIGURE 70
EMEA new convertible issuance in Q1 2013
                                                                                                                    Senior unsecured       Issue rating
                                                                                                                      issuer rating
                                                                                                      Size
Date      Issuer - underlying      Country     Ccy Coupon          Maturity       Yield      Premium (mn)            S&P    Moody’s        S&P    Moody’s
26 Mar     OHL Conc. - OHL Mexico    Mexico    EUR     4.00%      25 Apr 2018     4.00%         25.0%       275      NR        NR          NR        NR
21 Mar     Melia Hotels               Spain    EUR     4.50%      04 Apr 2018     4.50%         30.0%       200      NR        NR          NR        NR
20 Mar     Air France                France    EUR     2.03%      28 Mar 2013     2.03%         32.5%       550      NR        NR          NR        NR
14 Mar     BNP - Pargesa           Switzerland EUR     0.25%      27 Sep 2016     0.25%         15.0%       250      A+        A2          NR        NR
5 Mar      Prysmian                    Italy   EUR     1.25%      08 Mar 2018     1.25%         33.8%       300      NR        NR          NR        NR
27 Feb     Air Berlin               Germany    EUR     6.00%      06 Mar 2019     6.00%         25.0%       140      NR        NR          NR        NR
14 Feb     Impala Platinum        South Africa ZAR     5.00%      21 Feb 2018     5.00%         35.0%      2672      NR        NR          NR        NR
14 Feb     Impala Platinum        South Africa USD     1.00%      21 Feb 2018     1.00%         35.0%       200      NR        NR          NR        NR
6 Feb      Kuka                     Germany    EUR     2.00%      12 Feb 2018     2.00%         26.0%        59      NR        NR          NR        NR
25 Jan     Ship Finance             Bermuda    USD     3.25%      01 Feb 2018     3.25%         33.0%       350      BB-       B1          NR        NR
24 Jan     Astaldi                     Italy   EUR     4.50%      31 Jan 2019     4.50%         35.0%       130      NR        NR          NR        NR
24 Jan     GBL - GDF                 France    EUR     1.25%      07 Feb 2017     1.25%         20.0%      1000      NR        NR          NR        NR
17 Jan     GVM - Obrascon             Spain    EUR     5.75%      14 Feb 2018     5.75%         30.0%       150      NR        NR          NR        NR
15 Jan     Eni - Snam                  Italy   EUR     0.63%      18 Jan 2016     0.63%         20.0%      1250       A        A3          A         NR
9 Jan      ArcelorMittal (MCS)    Luxembourg USD       6.00%      15 Jan 2016     6.00%         25.0%      2250      BB+       Ba1         B+        NR
9 Jan      Abengoa                    Spain    EUR     6.25%      17 Jan 2019     6.25%         25.0%       400       B+       B1          NR        NR
8 Jan      Beni Stabili                Italy   EUR     3.38%      17 Jan 2018     3.38%         32.0%       225      NR        NR          NR        NR
Source: Barclays Research


                                       Asia Pacific new issuance
                                       Figure 71 displays issuance year to date, and we note:

                                       • There has been $4.0bn of Asia Pacific issuance from 15 deals. Q1 volume was $3.2bn
                                             from 11 deals, which is close to the Q1 11 and Q1 12 levels, but below typical pre-crisis
                                             Q1 issuance levels.

                                       • The largest deals YTD were from Shanghai Industrial, ENN Energy and Shizuoka Bank,
                                             each being $0.5bn in size.

                                       • Japanese issuance has materially picked up, particularly since late-February. YTD Japan
                                             issuance has been $1.7bn from 7 deals, including the first USD issuance for more than a
                                             decade, on our records (Shizuoka Bank).


                                       FIGURE 71
                                       Asia Pacific new issuance in 2013 versus 2012 ($bn)
                                        3.0                                                                                                          10
                                                                                                                                                     9
                                        2.5
                                                                                                                                                     8
                                                                                                                                                     7
                                        2.0
                                                                                                                                                     6
                                        1.5                                                                                                          5
                                                                                                                                                     4
                                        1.0
                                                                                                                                                     3
                                                                                                                                                     2
                                        0.5
                                                                                                                                                     1
                                        0.0                                                                                                          0
                                                 Jan     Feb     Mar     Apr*    May        Jun      Jul    Aug      Sep    Oct      Nov    Dec

                                                       2013            2012               2013 cumulative (right)          2012 cumulative (right)

                                       Note: * month to date. Source: Barclays Research


15 April 2013                                                                                                                                             53
Barclays | Convertible Outlook Q2 2013



                                         FIGURE 72
                                         Asia Pacific historical new issuance ($bn)
                                             35
                                                                                  29.0
                                             30

                                             25                      21.7
                                             20
                                                                                                                         14.7
                                             15                                              12.2                                      12.7
                                                         9.9                                               9.1
                                             10                                                                                                     8.6
                                                                                5.7        6.1
                                               5     3.3           3.8                                                 3.2           2.2
                                                                                                                                                  3.4          3.24.0
                                                                                                      0.3
                                               0
                                                     2005          2006         2007        2008       2009            2010          2011         2012        2013 YTD
                                                                                                 Q1    FY
                                         Source: Barclays Research



FIGURE 73
Asia Pacific new convertible issuance in 2013
                                                                                                                             Senior unsecured           Issue rating
                                                                                                                               issuer rating
                                                                                                              Size
Date      Issuer - underlying       Country        Ccy Coupon            Maturity        Yield Premium       (mn)             S&P      Moody’s          S&P    Moody’s

16 Jan     Lotte - Himart            Korea         KRW     0.00%         24 Jan 2018     0.00%     27.5%    321,200           NR           Baa1         NR       NR
16 Jan     Shanghai Industrial     Hong Kong HKD           0.00%     18 Feb 2018         1.00%     32.0%     3,900            NR            NR          NR       NR
17 Jan     ABC-Mart                  Japan         JPY     0.00%     05 Feb 2018 -0.50%            28.0%    33,000            NR            NR          NR       NR
28 Jan     China Precious Metals Hong Kong HKD             7.25%     04 Feb 2018         7.25%     25.0%     1,028            NR            NR          NR       NR
29 Jan     ENN Energy              Hong Kong USD           0.00%         26 Jan 2018     0.50%     30.0%         500          BBB-         Baa3         NR       NR
31 Jan     Far Eastern Intl Bank    Taiwan         USD     0.00%     07 Feb 2018         0.38%     27.5%         150          NR            NR          NR       NR
19 Feb     Suntec REIT             Singapore       SGD     1.40%     18 Mar 2018 1.40%             20.0%         280          NR           Baa2         NR       NR
26 Feb     Kureha                    Japan         JPY     0.00%     14 Mar 2018 -0.50%            22.0%    15,000            NR            NR          NR       NR
27 Feb     Celltrion                 Korea         USD     2.75%     27 Mar 2018 2.75%             25.0%         300          NR            NR          NR       NR
28 Feb     Makino Milling            Japan         JPY     0.00%     19 Mar 2018 -0.50%            33.0%    12,000            NR            NR          NR       NR
05 Mar     Ebara                     Japan         JPY     0.00%     19 Mar 2018 -0.50%            27.9%    20,000            NR            NR          NR       NR
27 Mar     Linc Energy             Australia       USD     7.00%     10 Apr 2018         7.00%     27.5%         200          NR            NR          NR       NR
08 Apr     Nippon Ceramic            Japan         JPY     0.00%     24 Apr 2018 -0.60%            20.0%     8,000            NR            NR          NR       NR
09 Apr     Shizuoka Bank             Japan         USD     0.00%     25 Apr 2018 -0.50%            18.0%         500          A+           Aa3          NR       Aa3
10 Apr     Park24                    Japan         JPY     0.00%     26 Apr 2018 -0.50%            32.0%    20,000            NR            NR          NR       NR
Source: Barclays Research




15 April 2013                                                                                                                                                           54
Barclays | Convertible Outlook Q2 2013


Defaulted convertibles list
FIGURE 74
Defaulted convertibles in EMEA and Asia Pacific

Date                    Name                                                   ISIN                      Currency       Size (mn)    Country
17 Jan 2000             Thai Petrochemical 3.5% 2003                           XS0045181368                 USD            48        Thailand
26 Jul 2000             Land & General 4.5% 2004                               USY51735AA99                 USD           100        Malaysia
31 Oct 2000             Dong-AH Construction 1.25% 2004                        XS0015100612                 USD            50         Korea
30 Apr 2001             APP Finance 3.5% 2003                                  USV03230AA39                 USD           500        Indonesia
06 Oct 2001             Swiss Air 0.125% 2005                                  CH0009173045                  CHF          706       Switzerland
17 Dec 2001             Elektrim 3.75% 2004                                    XS0099212069                  EUR          400         Poland
22 Jan 2002             Tanayong 3.5% 2004                                     XS0048734163                 USD           130        Thailand
28 Jan 2002             ADI Corp 1.5% 2003                                     XS0067154194                 USD            60         Taiwan
21 Mar 2002             Holzmann 3.25% 2003                                    DE0003504981                 DEM           500        Germany
19 Jun 2002             Versatel Telecom 4% 2004                               XS0105468341                  EUR          225       Netherlands
19 Jun 2002             Versatel Telecom 4% 2005                               XS0109726710                  EUR          360       Netherlands
07 Jan 2003             Telewest 6% 2005                                       USG8742UAA00                 USD           450           UK
19 Feb 2003             Telewest 5.25% 2007                                    XS0094678587                  GBP          300           UK
24 Dec 2003             Parmalat 0% 2022                                       XS0158370121                  EUR          246          Italy
24 Dec 2003             Parmalat 1% 2005                                       XS0084903847                  EUR          281          Italy
24 Dec 2003             Parmalat 0.875% 2021                                   XS0124248922                  EUR          350          Italy
24 Dec 2003             Parmalat 6.125% 2032 Pref                              XS0146388656                  EUR          307          Italy
19 Jun 2007             Torex Retail 5.5% 2011                                 XS0259948254                  GBP           65           UK
29 Aug 2008             Alitalia 7.5% 2010                                     IT0003331888                  EUR          714          Italy
03 Jan 2009             Pyramid Saimira 1.75% 2012                             XS0306488890                 USD            90          India
18 May 2009             Wockhardt 0% 2009                                      XS0201687570                 USD           110          India
09 Jun 2009             Arcandor - Thomas Cook 8.875% 2013                     DE000A0N0N07                  EUR          275        Germany
07 Aug 2009             Sino Environment 4% 2013                               XS0368978135                 SGD           145       Singapore
16 Sep 2009             China Sun 0% 2011                                      XS0267604964                 USD           100       Singapore
18 Sep 2009             Cranes Software 2.5% 2011                              XS0244289152                 USD            42          India
20 Oct 2009             Fu Ji 0% 2009                                          XS0265209162                 HKD           462       Hong Kong
20 Oct 2009             Fu Ji 0% 2010                                          XS0325832375                 CNY          1,500      Hong Kong
12 Apr 2010             IIG sukuk 2012                                         XS0303097157                 USD           200         Kuwait
20 Oct 2010             A-TEC 8.75% 2014                                       AT0000A0F795                  EUR          110         Austria
20 Oct 2010             A-TEC 2.75% 2014                                       AT0000A05CS2                  EUR           92         Austria
02 Nov 2010             Celestial Nutrifoods 0% 2011                           XS0254854838                 SGD           235       Singapore
11 Nov 2011             China Milk 0% 2012                                     XS0278964720                 USD           146       Singapore
13 Dec 2011             Solon 1.375% 2012                                      DE000A0S9JG3                  EUR          132        Germany
24 Jan 2012             Petroplus 4% 2015                                      CH0105325853                 USD           150       Switzerland
27 Feb 2012             Berlian Laju Tanker 12% 2015                           XS0485132046                 USD           125        Indonesia
27 Feb 2012             Elpida 0.5% 2015                                       JP316764PAA2                  JPY         60,000       Japan
27 Feb 2012             Elpida 0.7% 2016                                       JP316764PB87                  JPY         27,500       Japan
03 Apr 2012             Q-Cells 1.375% 2012                                    DE000A0LMY64                  EUR          202        Germany
03 Apr 2012             Q-Cells 5.75% 2014                                     DE000A1AGZ06                  EUR          247        Germany
03 Apr 2012             Q-Cells 6.75% 2015                                     DE000A1E8HF6                  EUR          129        Germany
16 May 2012             Sterling Biotech 0% 2012                               XS0298125351                 USD           135          India
19 Jun 2012             Moser Baer India 0% 2012 (A)                           XS0304908600                 USD            33          India
19 Jun 2012             Moser Baer India 0% 2012 (B)                           XS0304909673                 USD            37          India
11 Oct 2012             Suzlon 0% 2012                                         XS0323163526                 USD           121          India
11 Oct 2012             Suzlon 7.5% 2012                                       XS0426742572                 USD            21          India
31 Oct 2012             Dana Gas 7.5% 2012 sukuk                               XS0325413218                 USD           920          UAE
05 Apr 2013             Pescanova 6.75% 2015                                   XS0482733945                  EUR           45         Spain
05 Apr 2013             Pescanova 5.125% 2017                                  XS0617215099                  EUR          164         Spain
05 Apr 2013             Pescanova 8.75% 2019                                   XS0746573897                  EUR          160         Spain
Note: Only includes bonds that incurred an event of default under the terms and conditions. Source: Barclays Research


15 April 2013                                                                                                                                     55
Barclays | Convertible Outlook Q2 2013


Convertible-related equity and credit views
FIGURE 75
Summary of convertible-related EMEA equity views

                                                                        Sector      Company        Barclays    Upside to
Ticker          Company                        Sector
                                                                         View        Rating       Target Price Target

AQP.L           AQUARIUS PLATINUM LTD          BASIC MATERIALS          Neutral    Overweight        0.56        28%
ATOS.PA         ATOS                           TECHNOLOGY               Neutral    Overweight         64         22%
BNSI.MI         BENI STABILI SPA               FINANCIAL                Neutral    Overweight        0.62        31%
CAPP.PA         CAP GEMINI                     TECHNOLOGY               Neutral    Overweight         43         25%
DLN.L           DERWENT LONDON PLC             FINANCIAL                Neutral    Overweight        23.8        11%
DPWGn.DE        DEUTSCHE POST AG-REG           INDUSTRIAL               Positive   Overweight        18.5         7%
DLGS.DE         DIALOG SEMICONDUCTOR PLC       TECHNOLOGY               Neutral    Overweight        19.5        85%
EKTAb.ST        ELEKTA AB-B SHS                CONSUMER, NON-CYCLICAL   Neutral    Overweight        111         14%
ESSR.L          ESSAR ENERGY PLC               ENERGY                   Negative   Overweight         1.7        21%
GALP.LS         GALP ENERGIA SGPS SA           ENERGY                   Neutral    Overweight         17         44%
GIBG.DE         GSW IMMOBILIEN AG              FINANCIAL                Neutral    Overweight        36.7        25%
IFXGn.DE        INFINEON TECHNOLOGIES AG       TECHNOLOGY               Neutral    Overweight         8.2        40%
INGC.PA         INGENICO                       TECHNOLOGY               Neutral    Overweight         51         13%
ISA.L           INMARSAT PLC                   COMMUNICATION            Negative   Overweight        7.05         5%
ICAG.L          INTL CONSOLIDATED AIRLINE-DI   CONSUMER, CYCLICAL       Positive   Overweight          3         27%
INTUP.L         INTU PROPERTIES PLC            FINANCIAL                Neutral    Overweight        4.09        23%
LKOHyq.L        LUKOIL OAO-SPON ADR            ENERGY                   Neutral    Overweight         74         17%
PLCS.OL         POLARCUS LTD                   ENERGY                   Positive   Overweight         11         79%
PRTP.PA         PPR                            CONSUMER, CYCLICAL       Neutral    Overweight        215         31%
PMO.L           PREMIER OIL PLC                ENERGY                   Positive   Overweight          6         55%
PRY.MI          PRYSMIAN SPA                   INDUSTRIAL               Neutral    Overweight         16          3%
PUBP.PA         PUBLICIS GROUPE                COMMUNICATION            Positive   Overweight         55          5%
QGEN            QIAGEN                         CONSUMER, NON-CYCLICAL   Positive   Overweight         21          3%
SBRY.L          SAINSBURY (J) PLC              CONSUMER, NON-CYCLICAL   Positive   Overweight         3.8         1%
SMDR.L          SALAMANDER ENERGY PLC          ENERGY                   Positive   Overweight         2.9        40%
SDRL            SEADRILL LTD                   ENERGY                   Positive   Overweight         48         32%
SHP.L           SHIRE PLC                      CONSUMER, NON-CYCLICAL   Neutral    Overweight        23.5        21%
SHPJ.J          SHOPRITE HOLDINGS LTD          CONSUMER, NON-CYCLICAL   Neutral    Overweight        207         18%
SRG.MI          SNAM SPA                       UTILITIES                Neutral    Overweight          4          9%
STAN.L          STANDARD CHARTERED PLC         FINANCIAL                Neutral    Overweight         16         -3%
SUBC.OL         SUBSEA 7 SA                    ENERGY                   Positive   Overweight        195         46%
TEGG.DE         TAG IMMOBILIEN AG              FINANCIAL                Neutral    Overweight        11.2        28%
TECF.PA         TECHNIP SA                     ENERGY                   Positive   Overweight        113         37%
TT.L            TUI TRAVEL PLC                 CONSUMER, CYCLICAL       Negative   Overweight        3.25         7%
VED.L           VEDANTA RESOURCES PLC          BASIC MATERIALS          Neutral    Overweight        14.45       30%
SGEF.PA         VINCI SA                       INDUSTRIAL               Neutral    Overweight         45         27%
VOWG_p.DE       VOLKSWAGEN AG-PREF             CONSUMER, CYCLICAL       Negative   Overweight        192         26%
WPP.L           WPP PLC                        COMMUNICATION            Positive   Overweight        12.3        19%
ADSGn.DE        ADIDAS AG                      CONSUMER, CYCLICAL       Neutral    Equal Weight       80          4%
AIRF.PA         AIR FRANCE-KLM                 CONSUMER, CYCLICAL       Positive   Equal Weight        8         21%




15 April 2013                                                                                                          56
Barclays | Convertible Outlook Q2 2013


                                                                                     Sector      Company        Barclays    Upside to
Ticker           Company                                    Sector
                                                                                      View        Rating       Target Price Target

ALUA.PA          ALCATEL-LUCENT                             COMMUNICATION            Neutral    Equal Weight      1.36        25%
AOILsdb.ST       ALLIANCE OIL COMPANY LTD-SDR               ENERGY                   Neutral    Equal Weight       62         20%
BBDC4.SA         BRADESCO                                   FINANCIAL                Positive   Equal Weight       40         16%
BLND.L           BRITISH LAND CO PLC                        FINANCIAL                Neutral    Equal Weight      6.09         9%
DAIGn.DE         DAIMLER AG-REGISTERED SHARES               CONSUMER, CYCLICAL       Negative   Equal Weight       43          5%
DANO.PA          DANONE                                     CONSUMER, NON-CYCLICAL   Neutral    Equal Weight       58          8%
DTEGn.DE         DEUTSCHE TELEKOM AG-REG                    COMMUNICATION            Negative   Equal Weight        9          7%
EPED.PA          FAURECIA                                   CONSUMER, CYCLICAL       Negative   Equal Weight       13         10%
FDR.PA           FONCIERE DES REGIONS                       FINANCIAL                Neutral    Equal Weight      64.5         6%
GSZ.PA           GDF SUEZ                                   UTILITIES                Neutral    Equal Weight       16          4%
GFCP.PA          GECINA SA                                  FINANCIAL                Neutral    Equal Weight      81.1        -10%
IMPJ.J           IMPALA PLATINUM HOLDINGS LTD               BASIC MATERIALS          Neutral    Equal Weight      145         14%
ITV.L            ITV PLC                                    COMMUNICATION            Positive   Equal Weight      1.15        -5%
JBLU             JETBLUE                                    INDUSTRIALS              Positive   Equal Weight        7          4%
JDGJ.J           JD GROUP LTD                               CONSUMER, CYCLICAL       Neutral    Equal Weight      42.06       23%
MICP.PA          MICHELIN (CGDE)                            CONSUMER, CYCLICAL       Negative   Equal Weight       71         13%
PNN.L            PENNON GROUP PLC                           UTILITIES                Neutral    Equal Weight       6.7         3%
PTC.LS           PORTUGAL TELECOM SGPS SA-REG               COMMUNICATION            Negative   Equal Weight       4.4        11%
CHMFq.L          SEVERSTAL - GDR REG S                      BASIC MATERIALS          Neutral    Equal Weight      13.73       64%
SIEGn.DE         SIEMENS AG-REG                             INDUSTRIAL               Neutral    Equal Weight      83.5         4%
SHFJ.J           STEINHOFF INTL HOLDINGS LTD                CONSUMER, CYCLICAL       Positive   Equal Weight       27         15%
SEVI.PA          SUEZ ENVIRONNEMENT CO                      UTILITIES                Neutral    Equal Weight        8         -20%
TLSN.ST          TELIASONERA AB                             COMMUNICATION            Negative   Equal Weight       45          4%
UCB.BR           UCB SA                                     CONSUMER, NON-CYCLICAL   Neutral    Equal Weight       46         -3%
UL.PA            UNIBAIL-RODAMCO                            FINANCIAL                Neutral    Equal Weight     176.41        1%
AXAF.PA          AXA SA                                     FINANCIAL                Neutral    Underweight       13.6         3%
CASP.PA          CASINO GUICHARD PERRACHON                  CONSUMER, NON-CYCLICAL   Positive   Underweight        60         -26%
GEPH.PA          CIE GENERALE DE GEOPHYSIQUE                ENERGY                   Positive   Underweight        22         28%
HOCM.L           HOCHSCHILD MINING PLC                      BASIC MATERIALS          Neutral    Underweight        4.6        59%
MOLB.BU          MOL HUNGARIAN OIL AND GAS PL               ENERGY                   Neutral    Underweight      17500         7%
NOK1V.HE         NOKIA OYJ                                  COMMUNICATION            Neutral    Underweight        2.5        -1%
OTPB.BU          OTP BANK PLC                               FINANCIAL                Neutral    Underweight       4680         2%
PEUP.PA          PEUGEOT SA                                 CONSUMER, CYCLICAL       Negative   Underweight         2         -64%
PECI.MI          PIRELLI & C.                               CONSUMER, CYCLICAL       Negative   Underweight         8          6%
SIA.L            SOCO INTERNATIONAL PLC                     ENERGY                   Positive   Underweight       3.85         2%
Note: Data as of 10 April 2013. Source: Barclays Research




15 April 2013                                                                                                                        57
Barclays | Convertible Outlook Q2 2013


FIGURE 76
Summary of convertible-related Asia Pacific equity views

                                                                         Sector      Company        Barclays    Upside to
Ticker          Company                         Sector
                                                                          View        Rating       Target Price Target

2502.T          ASAHI GROUP HOLDINGS LTD        CONSUMER, NON-CYCLICAL   Neutral    Overweight        2550         9%
2409.TW         AU OPTRONICS CORP               INDUSTRIAL               Positive   Overweight         14          9%
BFRG.NS         BHARAT FORGE LTD                INDUSTRIAL               Neutral    Overweight        313         49%
CACT.SI         CAPITACOMMERCIAL TRUST          FINANCIAL                Neutral    Overweight        1.87        12%
CATL.SI         CAPITALAND LTD                  FINANCIAL                Neutral    Overweight        4.64        35%
2882.TW         CATHAY FINANCIAL HOLDING CO     FINANCIAL                Positive   Overweight        48.6        25%
1378.HK         CHINA HONGQIAO GROUP LTD        BASIC MATERIALS          Neutral    Overweight         7.5        91%
0081.HK         CHINA OVERSEAS GRAND OCEANS     FINANCIAL                Neutral    Overweight        12.3        16%
2448.TW         EPISTAR CORP                    TECHNOLOGY               Neutral    Overweight         87         70%
2317.TW         HON HAI PRECISION INDUSTRY      INDUSTRIAL               Neutral    Overweight        113         40%
7013.T          IHI CORP                        INDUSTRIAL               Positive   Overweight        410         29%
JAIA.NS         JAIPRAKASH ASSOCIATES LTD       INDUSTRIAL               Neutral    Overweight         98         53%
JAPR.NS         JAIPRAKASH POWER VENTURES LT    UTILITIES                Neutral    Overweight         39         62%
023530.KS       LOTTE SHOPPING CO               CONSUMER, CYCLICAL       Neutral    Overweight       420000        5%
3034.TW         NOVATEK MICROELECTRONICS        TECHNOLOGY               Positive   Overweight        150         18%
6176.TW         RADIANT OPTO-ELECTRONICS COR    INDUSTRIAL               Positive   Overweight        138         21%
1928.T          SEKISUI HOUSE LTD               CONSUMER, CYCLICAL       Neutral    Overweight        1300        -11%
9069.T          SENKO CO LTD                    INDUSTRIAL               Positive   Overweight        520          3%
000660.KS       SK HYNIX INC                    TECHNOLOGY               Positive   Overweight       33000        19%
017670.KS       SK TELECOM                      COMMUNICATION            Neutral    Overweight       200000       11%
9984.T          SOFTBANK CORP                   COMMUNICATION            Positive   Overweight        4500        -3%
3673.TW         TPK HOLDING CO LTD              INDUSTRIAL               Positive   Overweight        680         12%
8113.T          UNICHARM CORP                   CONSUMER, NON-CYCLICAL   Neutral    Overweight        6000         0%
3037.TW         UNIMICRON TECHNOLOGY CORP       TECHNOLOGY               Positive   Overweight         35         18%
4958.TW         ZHEN DING TECHNOLOGY HOLDING    INDUSTRIAL               Positive   Overweight         92         27%
2353.TW         ACER INC                        TECHNOLOGY               Neutral    Equal Weight       24         -2%
3383.HK         AGILE PROPERTY HOLDINGS LTD     FINANCIAL                Neutral    Equal Weight      10.5        12%
BUMI.JK         BUMI RESOURCES TBK PT           ENERGY                   Neutral    Equal Weight      875         22%
CMLT.SI         CAPITAMALL TRUST                FINANCIAL                Neutral    Equal Weight       2.3         6%
0688.HK         CHINA OVERSEAS LAND & INVEST    FINANCIAL                Neutral    Equal Weight       24         15%
0762.HK         CHINA UNICOM HONG KONG LTD      COMMUNICATION            Neutral    Equal Weight       13         29%
1402.TW         FAR EASTERN NEW CENTURY CORP    CONSUMER, CYCLICAL       Neutral    Equal Weight      36.5        22%
9433.T          KDDI CORP                       COMMUNICATION            Positive   Equal Weight      3800        -9%
LART.NS         LARSEN & TOUBRO LTD             INDUSTRIAL               Neutral    Equal Weight      1715        30%
0494.HK         LI & FUNG LTD                   CONSUMER, CYCLICAL       Neutral    Equal Weight      12.5        22%
4188.T          MITSUBISHI CHEMICAL HOLDINGS    BASIC MATERIALS          Neutral    Equal Weight      440          1%
2282.T          NIPPON MEAT PACKERS INC         CONSUMER, NON-CYCLICAL   Neutral    Equal Weight      1330        -11%
8086.T          NIPRO CORP                      CONSUMER, NON-CYCLICAL   Positive   Equal Weight      760         -19%
2343.HK         PACIFIC BASIN SHIPPING LTD      INDUSTRIAL               Neutral    Equal Weight      4.18        -5%
4938.TW         PEGATRON CORP                   INDUSTRIAL               Neutral    Equal Weight       40         -12%
TTPW.NS         TATA POWER CO LTD               UTILITIES                Neutral    Equal Weight       95          1%
TISC.NS         TATA STEEL LTD                  BASIC MATERIALS          Neutral    Equal Weight      403         32%




15 April 2013                                                                                                            58
Barclays | Convertible Outlook Q2 2013


                                                                                                      Sector         Company          Barclays    Upside to
Ticker           Company                                        Sector
                                                                                                       View           Rating         Target Price Target

3402.T           TORAY INDUSTRIES INC                           CONSUMER, CYCLICAL                    Neutral      Equal Weight            520         -20%
9064.T           YAMATO HOLDINGS CO LTD                         INDUSTRIAL                            Positive     Equal Weight            1550        -18%
8369.T           BANK OF KYOTO LTD/THE                          FINANCIAL                             Neutral      Underweight             600         -39%
3368.HK          PARKSON RETAIL GROUP LTD                       CONSUMER, CYCLICAL                    Neutral      Underweight             3.8         -15%
SESA.NS          SESA GOA LTD                                   BASIC MATERIALS                       Neutral      Underweight             176          21%
TAMO.NS          TATA MOTORS LTD                                CONSUMER, CYCLICAL                    Neutral      Underweight             253          -4%
3231.TW          WISTRON CORP                                   TECHNOLOGY                            Neutral      Underweight              27         -11%
YNLG.SI          YANLORD LAND GROUP LTD                         FINANCIAL                             Neutral      Underweight             1.39         -2%
Note: Data as of 10 April 2013. Source: Barclays Research



                                               Summary of convertible-related credit views
                                               FIGURE 77
                                               Summary of convertible-related EMEA credit views

                                               Overweight                            Market Weight                       Underweight

                                               AXA                                   BNP Paribas                         Air France ('14 & '16s)
                                               ITV                                   ENI                                  Alcatel (‘16s)
                                                                                     IAG                                 ArcelorMittal
                                                                                     Nokia ('14s)                        Faurecia
                                                                                     Portugal Telecom                    Lufthansa
                                                                                     Peugeot                              Michelin
                                                                                     Vedanta Resources (‘16s)            Nokia ('19s)
                                                                                     WPP                                 Volkswagen
                                                                                                                         Vedanta Resources ('18s/21s)
                                               Note: Recommendations are relative to the benchmark indices and are for cash bonds. Source: Barclays Research


                                               In Emerging Markets, our credit coverage of convertible-related names includes Lukoil,
                                               National Bank of Abu Dhabi, Severstal, and TMK.

                                               FIGURE 78
                                               Summary of convertible-related Asia Pacific credit views

                                               Overweight                            Market Weight                       Underweight

                                               China Overseas Land & Inv.            Agile Property (‘17s old and        Agile Property (‘16s)
                                                                                     new, perp c18)
                                               Kaisa Group (‘17s and ‘20s)           Beijing Enterprises Holdings        Bumi Resources
                                                                                     ENN Energy Holdings                 POSCO
                                                                                     Kaisa Group (‘15s)
                                                                                     Noble Group
                                                                                     Wharf Holdings                      SK Telecom
                                                                                     Yanlord Land
                                               Note: Recommendations are relative to the benchmark indices and are for cash bonds. Source: Barclays Research




15 April 2013                                                                                                                                                  59
Barclays | Convertible Outlook Q2 2013


ANALYST(S) CERTIFICATION(S)
We, Luke Olsen, Angus Allison and Kim Berg, 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 CONTINUED
When an equity research report covers six or more subject companies, Barclays generally does not include specific conflict of interest disclosures
regarding the subject companies and instead provides the reader with instructions about how to view or obtain the applicable conflict of interest
disclosures. In order to comply with the requirements of the Korea Financial Investment Association, specific disclosures about subject
companies with securities listed on the Korea Exchange are included herein. To access important disclosures, including, where relevant, price
targets, regarding other companies that are the subject of this research report, please send a written request to: Barclays Research Compliance,
745 Seventh Avenue, 17th Floor, New York, NY 10019 or refer to http://publicresearch.barclays.com or call 1-212-526-1072.
The analysts responsible for preparing this research report have received compensation based upon various factors including the firm's 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 analyst’s account.
Analysts regularly conduct site visits to view the material operations of covered companies, but Barclays policy prohibits them from accepting
payment or reimbursement by any covered company of their travel expenses for such visits.
In order to access Barclays Statement regarding Research Dissemination Policies                             and    Procedures,    please    refer   to
https://live.barcap.com/publiccp/RSR/nyfipubs/disclaimer/disclaimer-research-dissemination.html.
The Corporate and Investment Banking division of Barclays 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.
The Corporate and Investment Banking division of Barclays is acting as Financial Advisor to Rabobank Nederland in relation to their potential sale
of Robeco Groep NV to Orix Corp. The rating, price targets and estimates (as applicable) on Orix Corp issued by the Firm's Research department
have been temporarily suspended due to Barclays' role in this potential transaction.


Materially Mentioned Stocks (Ticker, Date, Price)
Acer Inc. (2353.TW, 11-Apr-2013, TWD 25.15), Equal Weight/Neutral, J
adidas AG (ADSGn.DE, 10-Apr-2013, EUR 77.94), Equal Weight/Neutral, C/D/F/J/K/L/M
Agile Property Holdings (3383.HK, 11-Apr-2013, HKD 9.67), Equal Weight/Neutral, D/J/K/L/M
Air France-KLM (AIRF.PA, 10-Apr-2013, EUR 7.09), Equal Weight/Positive, C/D/J/K/L/M
Alcatel-Lucent (ALUA.PA, 10-Apr-2013, EUR 1.14), Equal Weight/Neutral, C/D/J/K/L/M/O
Alliance Oil (AOILsdb.ST, 11-Apr-2013, SEK 53.40), Equal Weight/Neutral, J
Aquarius Platinum Ltd. (AQP.L, 10-Apr-2013, GBp 45.0), Overweight/Neutral, E/F/J/L/Q
Asahi Group Holdings, Ltd. (2502.T, 11-Apr-2013, JPY 2381), Overweight/Neutral, J/K/M
AtoS (ATOS.PA, 10-Apr-2013, EUR 52.90), Overweight/Neutral, D/F/J/K/L/M
AU Optronics Corp. (2409.TW, 11-Apr-2013, TWD 13.25), Overweight/Positive, J
AXA (AXAF.PA, 10-Apr-2013, EUR 13.71), Underweight/Neutral, A/C/D/J/K/L/M
Other Material Conflicts: The Corporate and Investment Banking division of Barclays is providing investment banking services to Protective Life
Corporation (PL) in its announced acquisition of MONY Life Insurance Company ("MONY") from AXA SA. The ratings, price targets and estimates
on AXA SA do not incorporate the potential transaction.
Bank of Kyoto Ltd. (8369.T, 11-Apr-2013, JPY 1041), Underweight/Neutral, J/K/M
Beni Stabili (BNSI.MI, 10-Apr-2013, EUR 0.48), Overweight/Neutral, J
Bharat Forge (BFRG.NS, 11-Apr-2013, INR 215.25), Overweight/Neutral, C/J
Bradesco (BBDC4.SA, 10-Apr-2013, BRL 34.50), Equal Weight/Positive, C/J/K/M
British Land (BLND.L, 10-Apr-2013, GBp 573.0), Equal Weight/Neutral, C/D/E/J/K/L/M
Bumi Resources Tbk PT. (BUMI.JK, 11-Apr-2013, IDR 710.00), Equal Weight/Neutral, J/K/M
Capgemini (CAPP.PA, 10-Apr-2013, EUR 35.32), Overweight/Neutral, C/D/J/K/L/M
CapitaCommercial Trust (CACT.SI, 11-Apr-2013, SGD 1.66), Overweight/Neutral, J
CapitaLand (CATL.SI, 11-Apr-2013, SGD 3.53), Overweight/Neutral, J

15 April 2013                                                                                                                                       60
Barclays | Convertible Outlook Q2 2013


IMPORTANT DISCLOSURES CONTINUED
CapitaMall Trust (CMLT.SI, 11-Apr-2013, SGD 2.20), Equal Weight/Neutral, J
Casino (CASP.PA, 10-Apr-2013, EUR 82.49), Underweight/Positive, D/F/J/K/L/M
Cathay Financial Holding (2882.TW, 11-Apr-2013, TWD 38.90), Overweight/Positive, D/J/K/L/M
CGGVeritas (GEPH.PA, 10-Apr-2013, EUR 17.30), Underweight/Positive, D/J/L
China Hongqiao Group Ltd. (1378.HK, 11-Apr-2013, HKD 4.00), Overweight/Neutral, D/E/J/K/L/M
China Overseas Grand Oceans Group (0081.HK, 11-Apr-2013, HKD 11.02), Overweight/Neutral, J
China Overseas Land & Investment (0688.HK, 11-Apr-2013, HKD 21.60), Equal Weight/Neutral, C/J
China Unicom (0762.HK, 11-Apr-2013, HKD 9.95), Equal Weight/Neutral, C/J
Daimler AG (DAIGn.DE, 10-Apr-2013, EUR 42.66), Equal Weight/Negative, A/C/D/F/J/K/L/M
Danone (DANO.PA, 10-Apr-2013, EUR 53.67), Equal Weight/Neutral, A/C/D/F/J/K/L/M
Derwent London (DLN.L, 10-Apr-2013, GBp 2199.0), Overweight/Neutral, J/K/M
Deutsche Post AG (DPWGn.DE, 10-Apr-2013, EUR 17.68), Overweight/Positive, C/D/F/J/K/L/M
Deutsche Telekom AG (DTEGn.DE, 10-Apr-2013, EUR 8.61), Equal Weight/Negative, A/C/D/F/J/K/L/M
Dialog Semiconductor (DLGS.DE, 10-Apr-2013, EUR 11.05), Overweight/Neutral, D/J/L
Other Material Conflicts: The Corporate and Investment Banking Division of Barclays Bank PLC is acting as equity advisor to Dialog
Semiconductor Plc.
Elekta AB (EKTAb.ST, 11-Apr-2013, SEK 99.40), Overweight/Neutral, J
Epistar Corporation (2448.TW, 11-Apr-2013, TWD 50.70), Overweight/Neutral, J
Essar Energy (ESSR.L, 10-Apr-2013, GBp 141.0), Overweight/Negative, D/E/J/L/N
Far Eastern New Century Corp. (1402.TW, 11-Apr-2013, TWD 30.40), Equal Weight/Neutral, D/J/K/L/M
Faurecia (EPED.PA, 10-Apr-2013, EUR 12.51), Equal Weight/Negative, D/J/K/L/M
Fonciere des Regions (FDR.PA, 10-Apr-2013, EUR 62.33), Equal Weight/Neutral, E/J/L
Galp Energia (GALP.LS, 10-Apr-2013, EUR 12.00), Overweight/Neutral, D/J/L
GDF Suez SA (GSZ.PA, 10-Apr-2013, EUR 15.96), Equal Weight/Neutral, C/D/J/K/L/M
Gecina SA (GFCP.PA, 10-Apr-2013, EUR 91.36), Equal Weight/Neutral, A/D/E/J/K/L/M
Other Material Conflicts: The Corporate and Investment Banking Division of Barclays is acting as advisor to Gecina in the potential sale of its
logistics business to the Blackstone Group.
GSW Immobilien AG (GIBG.DE, 10-Apr-2013, EUR 29.66), Overweight/Neutral, E/J/L
Hochschild Mining (HOCM.L, 10-Apr-2013, GBp 280.0), Underweight/Neutral, J
Hon Hai Precision Industry Co., Ltd. (2317.TW, 11-Apr-2013, TWD 80.50), Equal Weight/Neutral, A/D/J/K/L/M
IHI (7013.T, 11-Apr-2013, JPY 346), Overweight/Positive, D/F/J/L
Impala Platinum Holdings Ltd. (IMPJ.J, 11-Apr-2013, ZAR 127.20), Equal Weight/Neutral, D/J/L
Infineon Technologies AG (IFXGn.DE, 10-Apr-2013, EUR 5.96), Overweight/Neutral, C/D/F/J/L
Ingenico (INGC.PA, 10-Apr-2013, EUR 45.38), Overweight/Neutral, J/K/M
Inmarsat plc (ISA.L, 10-Apr-2013, GBP 6.84), Overweight/Negative, A/D/J/K/L/M
International Consolidated Airlines Group (ICAG.L, 10-Apr-2013, GBp 251.0), Overweight/Positive, C/D/J/K/L/M/Q
Intu Properties Plc (INTUP.L, 10-Apr-2013, GBp 339.0), Overweight/Neutral, A/D/F/J/K/L/M
ITV Plc (ITV.L, 10-Apr-2013, GBp 124.0), Equal Weight/Positive, C/D/J/K/L/M
Jaiprakash Associates Ltd. (JAIA.NS, 11-Apr-2013, INR 67.25), Overweight/Neutral, A/D/E/J/K/L/M
Jaiprakash Power Ventures Ltd. (JAPR.NS, 11-Apr-2013, INR 24.35), Overweight/Neutral, D/E/J/K/L/M
JD Group Ltd. (JDGJ.J, 11-Apr-2013, ZAR 35.00), Equal Weight/Neutral, D/F/J/K/L/M
JetBlue Airways (JBLU, 10-Apr-2013, USD 6.99), Equal Weight/Positive, J
KDDI Corp. (9433.T, 11-Apr-2013, JPY 4155), Equal Weight/Positive, J
Larsen & Toubro Ltd. (LART.NS, 11-Apr-2013, INR 1377.70), Equal Weight/Neutral, A/D/J/K/L/M
Li & Fung Limited (0494.HK, 11-Apr-2013, HKD 10.52), Equal Weight/Neutral, D/J/K/L/M
Other Material Conflicts: The Corporate and Investment Banking division of Barclays is acting as financial advisor to Lornamead Acqusiitions Ltd
and its shareholders, on the sale of their entire share capital to LF Europe Limited, a subsidiary of Li & Fung Limited.

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IMPORTANT DISCLOSURES CONTINUED
Lotte Shopping (023530.KS, 11-Apr-2013, KRW 401000.00), Overweight/Neutral, J
LUKOil (LKOHyq.L, 10-Apr-2013, USD 62.90), Overweight/Neutral, D/J/K/L/M
Michelin (MICP.PA, 10-Apr-2013, EUR 62.75), Equal Weight/Negative, C/D/F/J/L
Mitsubishi Chemical Holdings (4188.T, 11-Apr-2013, JPY 461), Equal Weight/Neutral, F/J
MOL (MOLB.BU, 11-Apr-2013, HUF 16500.00), Underweight/Neutral, D/J/K/L/M
Nippon Meat Packers, Inc. (2282.T, 11-Apr-2013, JPY 1475), Equal Weight/Neutral, J
NIPRO Corp. (8086.T, 11-Apr-2013, JPY 839), Equal Weight/Positive, J
Nokia (NOK1V.HE, 10-Apr-2013, EUR 2.61), Underweight/Neutral, A/C/D/F/J/K/L/M/O
Novatek Microelectronics Corp. (3034.TW, 11-Apr-2013, TWD 134.00), Overweight/Positive, J
OTP (OTPB.BU, 11-Apr-2013, HUF 4648.00), Underweight/Neutral, D/J/K/L/M
Pacific Basin Shipping Ltd. (2343.HK, 11-Apr-2013, HKD 4.55), Equal Weight/Neutral, C/J
Parkson Retail Group Ltd. (3368.HK, 11-Apr-2013, HKD 4.49), Underweight/Neutral, J
Pegatron Corp. (4938.TW, 11-Apr-2013, TWD 45.25), Overweight/Neutral, J
Pennon Group Plc (PNN.L, 10-Apr-2013, GBp 663.0), Equal Weight/Neutral, A/D/E/J/K/L/M
Peugeot SA (PEUP.PA, 10-Apr-2013, EUR 5.86), Underweight/Negative, D/J/K/L/M
Pirelli (PECI.MI, 10-Apr-2013, EUR 7.63), Underweight/Negative, D/J/K/L/M
Other Material Conflicts: The Corporate and Investment Banking division of Barclays has provided investment banking services to Pirelli's
Committee for Internal Control, Risks and Compliance on the recapitalisation and restructuring of Prelios S.p.A. ("Prelios")
Polarcus (PLCS.OL, 10-Apr-2013, NOK 6.25), Overweight/Positive, J
Portugal Telecom SGPS SA (PTC.LS, 10-Apr-2013, EUR 4.04), Equal Weight/Negative, A/D/E/F/J/K/L/M
Other Material Conflicts: The Corporate and Investment Banking division of Barclays is acting as adviser to Citic Telecom International Holdings
Limited on a proposed acquisition of a stake in Companhia De Telecomunicacoes De Macau SARL (CTM) from Cable & Wireless Communications
Plc and Portugal Telecom.
PPR SA (PRTP.PA, 10-Apr-2013, EUR 167.85), Overweight/Neutral, C/D/F/J/K/L/M
Premier Oil (PMO.L, 10-Apr-2013, GBP 3.93), Overweight/Positive, A/D/F/J/K/L/M
Prysmian SpA (PRY.MI, 10-Apr-2013, EUR 16.21), Overweight/Neutral, D/J/K/L/M
Publicis Groupe SA (PUBP.PA, 10-Apr-2013, EUR 53.03), Overweight/Positive, C/D/J/K/L/M
QIAGEN N.V. (QGEN, 10-Apr-2013, USD 20.64), Overweight/Positive, D/E/J/K/L/M
Radiant Opto-Electronics Corp. (6176.TW, 11-Apr-2013, TWD 118.50), Overweight/Positive, C/J
Sainsbury (J) plc (SBRY.L, 10-Apr-2013, GBP 3.82), Overweight/Positive, C/D/J/K/L/M
Salamander Energy (SMDR.L, 10-Apr-2013, GBP 2.10), Overweight/Positive, A/D/J/L
Seadrill Limited (SDRL, 10-Apr-2013, USD 36.72), Overweight/Positive, J
Sekisui House Ltd. (1928.T, 11-Apr-2013, JPY 1419), Overweight/Neutral, J
Senko (9069.T, 11-Apr-2013, JPY 480), Overweight/Positive, J
Sesa Goa (SESA.NS, 11-Apr-2013, INR 147.20), Underweight/Neutral, D/J/K/L/M
Severstal (CHMFq.L, 11-Apr-2013, USD 8.79), Equal Weight/Neutral, D/J/K/L/M
Shire (SHP.L, 10-Apr-2013, GBP 19.48), Overweight/Neutral, C/D/E/J/K/L/M
Other Material Conflicts: The Corporate and Investment Banking division of Barclays is providing investment banking services to Shire Plc on their
potential acquisition of Sarcode Biosciences.
Shoprite Holdings Ltd. (SHPJ.J, 11-Apr-2013, ZAR 180.00), Overweight/Neutral, D/J/L
Siemens AG (SIEGn.DE, 10-Apr-2013, EUR 82.09), Equal Weight/Neutral, A/C/D/F/J/K/L/M
SK Hynix (000660.KS, 11-Apr-2013, KRW 29000.00), Overweight/Positive, J
SK Telecom (017670.KS, 11-Apr-2013, KRW 175000.00), Overweight/Neutral, A/D/E/J/L
Snam (SRG.MI, 10-Apr-2013, EUR 3.68), Overweight/Neutral, D/E/J/K/L/M
Soco International (SIA.L, 10-Apr-2013, GBP 3.84), Underweight/Positive, J
SoftBank Corp. (9984.T, 11-Apr-2013, JPY 4765), Overweight/Positive, D/E/F/J/K/L/M
Standard Chartered PLC (STAN.L, 10-Apr-2013, GBp 1668.0), Overweight/Neutral, A/D/F/J/K/L/M


15 April 2013                                                                                                                                  62
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IMPORTANT DISCLOSURES CONTINUED
Steinhoff International Holdings Ltd. (SHFJ.J, 11-Apr-2013, ZAR 23.94), Equal Weight/Positive, D/J/K/L/M
Subsea 7 SA (SUBC.OL, 10-Apr-2013, NOK 134.00), Overweight/Positive, D/J/L
Suez Environnement (SEVI.PA, 10-Apr-2013, EUR 10.21), Equal Weight/Neutral, D/J/L
TAG Immobilien AG (TEGG.DE, 10-Apr-2013, EUR 8.99), Overweight/Neutral, A/D/J/L
Tata Motors Ltd. (TAMO.NS, 11-Apr-2013, INR 278.15), Underweight/Neutral, C/D/J/L/O
Tata Power Co., Ltd. (TTPW.NS, 11-Apr-2013, INR 94.05), Equal Weight/Neutral, D/J/K/L/M
Tata Steel (TISC.NS, 11-Apr-2013, INR 298.70), Equal Weight/Neutral, D/J/L
Technip (TECF.PA, 10-Apr-2013, EUR 82.47), Overweight/Positive, A/C/D/J/K/L/M
TeliaSonera AB (TLSN.ST, 11-Apr-2013, SEK 44.14), Equal Weight/Negative, A/C/D/E/J/K/L/M
Toray Industries Inc. (3402.T, 11-Apr-2013, JPY 676), Equal Weight/Neutral, D/F/J/K/L/M
TPK Holding Co., Ltd. (3673.TW, 11-Apr-2013, TWD 635.00), Overweight/Positive, J/K/M
TUI Travel Plc (TT.L, 10-Apr-2013, GBP 3.09), Overweight/Negative, C/J/K/L/M/Q
UCB SA (UCB.BR, 10-Apr-2013, EUR 47.38), Equal Weight/Neutral, D/E/J/K/L/M
Unibail-Rodamco (UL.PA, 27-Feb-2013, EUR 174.00), Equal Weight/Neutral, A/C/D/J/K/L/M
Unicharm Corp. (8113.T, 11-Apr-2013, JPY 6230), Overweight/Neutral, J
Unimicron Technology Corp. (3037.TW, 11-Apr-2013, TWD 29.90), Overweight/Positive, J
Vedanta Resources plc (VED.L, 10-Apr-2013, GBp 1179.0), Overweight/Neutral, C/D/E/J/K/L/M
Vinci SA (SGEF.PA, 10-Apr-2013, EUR 36.00), Overweight/Neutral, A/C/D/F/J/K/L/M
Other Material Conflicts: The Corporate and Investment Banking division of Barclays is providing Investment Banking services to the Portuguese
Government on the potential sale of ANA Aeroportos De Portugal SA to Vinci SA
Volkswagen AG-PFD Preferred (VOWG_p.DE, 10-Apr-2013, EUR 152.70), Overweight/Negative, A/C/D/E/F/J/K/L/M
Wistron Corporation (3231.TW, 11-Apr-2013, TWD 30.70), Underweight/Neutral, D/J/L
WPP (WPP.L, 10-Apr-2013, GBp 1051.0), Overweight/Positive, A/C/D/J/K/L/M
Yamato Holdings Co., Ltd. (9064.T, 11-Apr-2013, JPY 1900), Equal Weight/Positive, J
Yanlord Land Group (YNLG.SI, 11-Apr-2013, SGD 1.44), Underweight/Neutral, J
Zhen Ding Technology (4958.TW, 11-Apr-2013, TWD 72.10), Overweight/Positive, J




Disclosure Legend:
A: Barclays Bank PLC and/or an affiliate has been lead manager or co-lead manager of a publicly disclosed offer of securities of the issuer in the
previous 12 months.
B: An employee of Barclays Bank PLC and/or an affiliate is a director of this issuer.
C: Barclays Bank PLC and/or an affiliate is a market-maker and/or liquidity provider in securities issued by this issuer or one of its affiliates.
D: Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from this issuer in the past 12 months.
E: Barclays Bank PLC and/or an affiliate expects to receive or intends to seek compensation for investment banking services from this issuer
within the next 3 months.
F: Barclays Bank PLC and/or an affiliate beneficially owned 1% or more of a class of equity securities of the issuer as of the end of the month prior
to the research report's issuance.
G: One of the analysts on the coverage team (or a member of his or her household) owns shares of the common stock of this issuer.
H: This issuer beneficially owns 5% or more of any class of common equity securities of Barclays Bank PLC.
I: Barclays Bank PLC and/or an affiliate has a significant financial interest in the securities of this issuer.
J: Barclays Bank PLC and/or an affiliate trades regularly in the securities of this issuer.
K: Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from this issuer within the past 12 months.
L: This issuer is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate.
M: This issuer is, or during the past 12 months has been, a non-investment banking client (securities related services) of Barclays Bank PLC
and/or an affiliate.
N: This issuer is, or during the past 12 months has been, a non-investment banking client (non-securities related services) of Barclays Bank PLC
and/or an affiliate.

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IMPORTANT DISCLOSURES CONTINUED
O: Barclays Capital Inc., through Barclays Market Makers, is a Designated Market Maker in this issuer's stock, which is listed on the New York
Stock Exchange. At any given time, its associated Designated Market Maker may have "long" or "short" inventory position in the stock; and its
associated Designated Market Maker may be on the opposite side of orders executed on the floor of the New York Stock Exchange in the stock.
P: A partner, director or officer of Barclays Capital Canada Inc. has, during the preceding 12 months, provided services to the subject company for
remuneration, other than normal course investment advisory or trade execution services.
Q: The Corporate and Investment Banking division of Barclays Bank PLC, is a Corporate Broker to this issuer.
R: Barclays Capital Canada Inc. and/or an affiliate has received compensation for investment banking services from this issuer in the past 12
months.
S: Barclays Capital Canada Inc. is a market-maker in an equity or equity related security issued by this issuer.


Guide to the Barclays Fundamental Equity Research Rating System:
Our coverage analysts use a relative rating system in which they rate stocks as Overweight, Equal Weight or 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 (the "industry coverage
universe").
In addition to the stock rating, we provide industry views which rate the outlook for the industry coverage universe as Positive, Neutral or
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
Overweight - The stock is expected to outperform the unweighted expected total return of the industry coverage universe over a 12-month
investment horizon.
Equal Weight - The stock is expected to perform in line with the unweighted expected total return of the industry coverage universe over a 12-
month investment horizon.
Underweight - The stock is expected to underperform the unweighted expected total return of the industry coverage universe over a 12-month
investment horizon.
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 where the Corporate and Investment Banking Division
of Barclays is acting in an advisory capacity in a merger or strategic transaction involving the company.
Industry View
Positive - industry coverage universe fundamentals/valuations are improving.
Neutral - industry coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.
Negative - industry coverage universe fundamentals/valuations are deteriorating.
Below is the list of companies that constitute the "industry coverage universe":

African Precious Metals
Anglo American Platinum Ltd. (AMSJ.J)                AngloGold Ashanti Ltd. (ANGJ.J)               Aquarius Platinum Ltd. (AQP.L)
Eastern Platinum Ltd. (ELR.TO)                       Gold Fields Ltd. (GFIJ.J)                     Harmony Gold Mining (HARJ.J)
Impala Platinum Holdings Ltd. (IMPJ.J)               Lonmin PLC (LMI.L)                            Northam Platinum Ltd. (NHMJ.J)
Sibanye Gold Ltd. (SGLJ.J)
Asia ex-Japan Autos & Auto Parts
Ashok Leyland Ltd. (ASOK.NS)                         Bajaj Auto Ltd. (BAJA.NS)                     Bharat Forge (BFRG.NS)
Cheng Shin Rubber Industry Co., Ltd. (2105.TW)       Exide Industries (EXID.NS)                    Hankook Tire Co., Ltd. (161390.KS)
Hero Motocorp Ltd. (HROM.NS)                         Hyundai Glovis Co., Ltd. (086280.KS)          Hyundai Mobis (012330.KS)
Hyundai Motor Company (005380.KS)                    Hyundai Wia Corp. (011210.KS)                 Kia Motors Corporation (000270.KS)
Mahindra & Mahindra Ltd. (MAHM.NS)                   Mando Corp. (060980.KS)                       Maruti Suzuki India Limited (MRTI.NS)
Motherson Sumi Systems (MOSS.NS)                     Nexen Tire Corp. (002350.KS)                  Tata Motors Ltd. (TAMO.NS)
TVS Motor Co., Ltd. (TVSM.NS)
Asia ex-Japan Capital Goods
ABB Ltd. (ABB.NS)                                    Alstom T&D India Ltd. (ALST.NS)               BGR Energy Systems Ltd. (BGRE.NS)
Bharat Heavy Electricals Ltd. (BHEL.NS)              China Automation Group Ltd. (0569.HK)         China High Speed Transmission Equipment
                                                                                                   Group Co. Ltd. (0658.HK)



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IMPORTANT DISCLOSURES CONTINUED
Crompton Greaves Ltd. (CROM.NS)                   CSR Corp. Ltd. (1766.HK)                    Cummins India Ltd. (CUMM.NS)
Dongfang Electric Corp. Ltd. (1072.HK)            Harbin Electric Co. Ltd. (1133.HK)          Havells India Ltd. (HVEL.NS)
KEC International Ltd. (KECL.NS)                  Larsen & Toubro Ltd. (LART.NS)              Lonking Holdings Limited (3339.HK)
Sany Heavy Equipment Int'l Holdings Co., Ltd.     Shanghai Electric Group Co. Ltd. (2727.HK) Siemens Ltd. (SIEM.NS)
(0631.HK)
Sinotruk (Hong Kong) Limited (3808.HK)            Thermax Ltd. (THMX.NS)                      Voltas Ltd. (VOLT.NS)
Weichai Power Co., Ltd. (2338.HK)                 Xinjiang Goldwind Science & Technology      Zhuzhou CSR Times Electric (3898.HK)
                                                  Co. Ltd. (2208.HK)
Zoomlion Heavy Industry Science and Technology
Co., Ltd. (1157.HK)
Asia ex-Japan General Retail
Anta Sports Products Ltd. (2020.HK)               Belle International Holdings Ltd. (1880.HK) China Dongxiang (Group) Co., Ltd. (3818.HK)
Chow Tai Fook Jewellery Group Ltd. (1929.HK)      CJ O Shopping (035760.KQ)                   E-Mart (139480.KS)
Esprit Holdings Limited (0330.HK)                 Golden Eagle Retail Group Ltd. (3308.HK)    Gome Electrical Appliances (0493.HK)
Gourmet Master (2723.TW)                          GS Home Shopping (028150.KQ)                GS Retail (007070.KS)
Hyundai Department Store (069960.KS)              Hyundai Home Shopping (057050.KS)           L'Occitane International (0973.HK)
Li & Fung Limited (0494.HK)                       Li Ning Co., Ltd. (2331.HK)                 Lifestyle International Holdings Ltd. (1212.HK)
Lotte Shopping (023530.KS)                        New World Department Store China Ltd.       Parkson Retail Group Ltd. (3368.HK)
                                                  (0825.HK)
PRADA S.p.A. (1913.HK)                            President Chain Store (2912.TW)             Sa Sa International (0178.HK)
Samsonite International (1910.HK)                 Shinsegae (004170.KS)                       Trinity Ltd. (0891.HK)
Wowprime (2727.TW)
Asia ex-Japan Infrastructure & Transport
Adani Ports and SEZ Ltd. (APSE.NS)                Air China (0753.HK)                         Anhui Expressway Co., Ltd. (0995.HK)
Beijing Capital International Airport (0694.HK)   Cathay Pacific Airways (0293.HK)            China COSCO Holdings Co., Ltd. (1919.HK)
China Eastern Airlines (0670.HK)                  China Merchants Holdings (International)    China Rongsheng Heavy Ind. (1101.HK)
                                                  Co., Ltd. (0144.HK)
China Shipping Container Lines Co., Ltd.          China Shipping Development Co., Ltd.        China Southern Airlines (1055.HK)
(2866.HK)                                         (1138.HK)
ComfortDelGro (CMDG.SI)                           COSCO Pacific Limited (1199.HK)             Essar Ports Ltd. (ESRS.NS)
Gujarat Pipavav Port Ltd. (GPPL.NS)               GVK Power & Infrastructure Ltd. (GVKP.NS) Hopewell Highway Infrastructure Ltd. (0737.HK)
Hutchison Port Holdings Trust (HPHT.SI)           International Container Terminal Services   IRB Infrastructure Developers Ltd. (IRBI.NS)
                                                  Inc. (ICT.PS)
Jaiprakash Associates Ltd. (JAIA.NS)              Jiangsu Expressway Co., Ltd. (0177.HK)      Macquarie Korea Infrastructure Fund
                                                                                              (088980.KS)
Neptune Orient Lines Ltd. (NEPS.SI)               Orient Overseas (International) Ltd.        Pacific Basin Shipping Ltd. (2343.HK)
                                                  (0316.HK)
Reliance Infrastructure Ltd. (RLIN.NS)            Shenzhen Expressway Co., Ltd. (0548.HK)     Sichuan Expressway Co., Ltd. (0107.HK)
Singamas Container Holdings Ltd. (0716.HK)        Sinotrans Shipping Ltd. (0368.HK)           Yangzijiang Shipbuilding (Holdings) Ltd.
                                                                                              (YAZG.SI)
Zhejiang Expressway Co., Ltd. (0576.HK)
Asia ex-Japan Insurance
Bajaj Finserv (BJFS.NS)                           Cathay Financial Holding (2882.TW)          Fubon Financial Holding (2881.TW)
Max India (MAXI.NS)                               Reliance Capital Ltd. (RLCP.NS)             Shin Kong Financial Holding (2888.TW)
Asia ex-Japan IT Hardware
Acer Inc. (2353.TW)                               Asustek Computer Inc. (2357.TW)             Cheng Uei Precision Industry (2392.TW)
Chicony Electronics (2385.TW)                     Compal Electronics Inc. (2324.TW)           Darfon Electronics (8163.TW)
Delta Electronics Inc. (2308.TW)                  Digital China Holdings Ltd. (0861.HK)       Dynapack Int'l Technology Corp. (3211.TWO)
Epistar Corporation (2448.TW)                     Foxconn Technology Co., Ltd. (2354.TW)      Hon Hai Precision Industry Co., Ltd. (2317.TW)

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IMPORTANT DISCLOSURES CONTINUED
Inventec Inc. (2356.TW)                       Lenovo Group Ltd. (0992.HK)                LG Innotek (011070.KS)
Pegatron Corp. (4938.TW)                      Quanta Computer Inc. (2382.TW)             Samsung Electro-Mechanics (009150.KS)
Samsung SDI (006400.KS)                       Shin Zu Shing Co., Ltd. (3376.TW)          Simplo Technology Co., Ltd. (6121.TWO)
Skyworth Digital Holdings Ltd. (0751.HK)      Sunrex Technology (2387.TW)                Synnex Technology International (2347.TW)
TPV Technology Ltd. (0903.HK)                 Wistron Corporation (3231.TW)
Asia ex-Japan LCD Displays
Asia Pacific Systems (054620.KQ)              AU Optronics Corp. (2409.TW)               Cheil Industries (001300.KS)
Coretronic Corporation (5371.TWO)             E Ink Holdings Inc. (8069.TWO)             G-TECH Optoelectronics Corp. (3149.TW)
Iljin Display (020760.KS)                     Innolux Corp. (3481.TW)                    LG Display (034220.KS)
Melfas (096640.KS)                            Radiant Opto-Electronics Corp. (6176.TW) SFA Engineering (056190.KQ)
Taiwan Surface Mounting Technology (6278.TW) TPK Holding Co., Ltd. (3673.TW)             Wintek Corporation (2384.TW)
Asia ex-Japan Metals & Mining
Adaro Energy Tbk PT. (ADRO.JK)                Aluminum Corporation of China Ltd.         Angang Steel Co., Ltd. (0347.HK)
                                              (2600.HK)
Anhui Conch Cement Co., Ltd. (0914.HK)        BHP Billiton Ltd. (BHP.AX)                 Bumi Resources Tbk PT. (BUMI.JK)
China Coal Energy Co., Ltd. (1898.HK)         China Hongqiao Group Ltd. (1378.HK)        China National Building Material Co., Ltd.
                                                                                         (3323.HK)
China Resources Cement Holdings Ltd. (1313.HK) China Shanshui Cement Group Ltd.          China Shenhua Energy Co., Ltd. (1088.HK)
                                               (0691.HK)
China Steel Corp. (2002.TW)                   Coal India (COAL.NS)                       CST Mining Group Ltd. (0985.HK)
Harum Energy Tbk PT. (HRUM.JK)                Hindalco Industries Ltd. (HALC.NS)         Hindustan Zinc Ltd. (HZNC.NS)
Hyundai Steel Co. (004020.KS)                 Indo Tambangraya Megah Tbk PT.             IRC Ltd. (1029.HK)
                                              (ITMG.JK)
Jiangxi Copper Co., Ltd. (0358.HK)            Jindal Steel & Power (JNSP.NS)             JSW Steel (JSTL.NS)
Korea Zinc Co., Ltd. (010130.KS)              Maanshan Iron & Steel Co., Ltd. (0323.HK) MMG Limited. (1208.HK)
National Aluminium Co., Ltd. (NALU.NS)        NMDC Ltd. (NMDC.NS)                        POSCO (005490.KS)
Sesa Goa (SESA.NS)                            Steel Authority of India (SAIL.NS)         Tata Steel (TISC.NS)
TB Bukit Asam Tbk PT. (PTBA.JK)               UC Rusal (0486.HK)                         Yanzhou Coal Mining Co., Ltd. (1171.HK)
Asia ex-Japan Power & Utilities
Adani Power Ltd. (ADAN.NS)                    Jaiprakash Power Ventures Ltd. (JAPR.NS)   NTPC Ltd. (NTPC.NS)
Reliance Power Ltd. (RPOL.NS)                 Tata Power Co., Ltd. (TTPW.NS)
Asia ex-Japan Real Estate
Agile Property Holdings (3383.HK)             Ananda Development PCL (ANAN.BK)           CapitaCommercial Trust (CACT.SI)
CapitaLand (CATL.SI)                          CapitaMall Trust (CMLT.SI)                 CapitaMalls Asia (CMAL.SI)
China Overseas Grand Oceans Group (0081.HK)   China Overseas Land & Investment           China Resources Land (1109.HK)
                                              (0688.HK)
Chong Hong Construction Co. (5534.TW)         Country Garden Holdings (2007.HK)          Evergrande Real Estate Group (3333.HK)
Far Eastern New Century Corp. (1402.TW)       Farglory Land Development Co., Ltd.        Guangzhou R&F Properties Co., Ltd. (2777.HK)
                                              (5522.TW)
Huaku Development Co., Ltd. (2548.TW)         Hung Poo Real Estate Development Corp.     Kindom Construction (2520.TW)
                                              (2536.TW)
KWG Property Holding (1813.HK)                Longfor Properties (0960.HK)               Prince Housing & Development Corp. (2511.TW)
Taiwan Fertilizer Co., Ltd. (1722.TW)         Yanlord Land Group (YNLG.SI)
Asia ex-Japan Semiconductors
Advanced Semiconductor Engineering (2311.TW) Chipbond Technology (6147.TWO)              Chroma ATE Inc. (2360.TW)
Hermes Microvision Inc. (3658.TWO)            Kinsus Interconnect Technology (3189.TW) MediaTek Inc. (2454.TW)
MStar Semiconductor, Inc. (3697.TW)           Nan Ya Printed Circuit Board (8046.TW)     Novatek Microelectronics Corp. (3034.TW)
RichTek Technology (6286.TW)                  Samsung Electronics (005930.KS)            Siliconware Precision Industries (2325.TW)

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Barclays | Convertible Outlook Q2 2013


IMPORTANT DISCLOSURES CONTINUED
SK Hynix (000660.KS)                             TSMC (2330.TW)                         United Microelectronics Corp. (2303.TW)
Vanguard International Semiconductor             Visual Photonics Epitaxy Co., Ltd.     Win Semiconductors Corp. (3105.TWO)
(5347.TWO)                                       (2455.TW)
Asia ex-Japan Telecom Services
Advanced Info Services (ADVA.BK)                 Bharti Airtel Ltd. (BRTI.NS)           Bharti Infratel Ltd. (BHRI.NS)
China Mobile (0941.HK)                           China Telecom (0728.HK)                China Unicom (0762.HK)
Chunghwa Telecom (2412.TW)                       Far EasTone (4904.TW)                  HKT Trust and HKT Limited (6823.HK)
Hutchison Telecom HK (0215.HK)                   Idea Cellular Ltd. (IDEA.NS)           KT Corp. (030200.KS)
LG Uplus Corp. (032640.KS)                       M1 (MONE.SI)                           PCCW Limited (0008.HK)
PT Indosat (ISAT.JK)                             PT Telkom (TLKM.JK)                    PT XL Axiata (EXCL.JK)
Reliance Communications Ltd. (RLCM.NS)           Singapore Telecom (STEL.SI)            SK Telecom (017670.KS)
SmarTone Telecommunications Holdings Ltd.        StarHub Limited (STAR.SI)              Taiwan Mobile (3045.TW)
(0315.HK)
Total Access Communication (DTAC.BK)
Asia ex-Japan Wireless Equipment & Products
AAC Technologies Holdings (2018.HK)              Career Technology (6153.TW)            Catcher Technology Co., Ltd. (2474.TW)
Compal Communications Inc. (8078.TW)             Flexium Interconnect (6269.TW)         Foxconn International Holdings (2038.HK)
HTC Corp. (2498.TW)                              Largan Precision Co., Ltd. (3008.TW)   LG Electronics (066570.KS)
Lite-on Technology Corp. (2301.TW)               Silitech Technology Corp. (3311.TW)    Tripod Technology Corp. (3044.TW)
TXC Corp. (3042.TW)                              Unimicron Technology Corp. (3037.TW)   Wistron NeWeb Corp. (6285.TW)
Young Fast Optoelectronics (3622.TW)             Zhen Ding Technology (4958.TW)         ZTE Corporation (0763.HK)
CEEMEA Oil & Gas
Alliance Oil (AOILsdb.ST)                        Bashneft (BANE.RTS)                    Gazprom Neft (SIBNq.L)
Gazprom OAO (GAZPq.L)                            LUKOil (LKOHyq.L)                      Novatek (NVTKq.L)
Rosneft (ROSNq.L)                                Sasol Limited (SOLJ.J)                 Surgutneftegas (SNGSyq.L)
Tatneft (TATNxq.L)
Emerging Europe Banks
Akbank (AKBNK.IS)                                Bank Alior S.A. (ALRR.WA)              Bank Pekao (PEO.WA)
Bank Saint Petersburg (BSPB.MM)                  Bank Vozrozhdenie (VZRZ.MM)            Erste Group Bank (ERST.VI)
Garanti Bank (GARAN.IS)                          Halkbank (HALKB.IS)                    Isbank (ISCTR.IS)
Komercni Banka (BKOMsp.PR)                       OTP (OTPB.BU)                          PKO BP (PKO.WA)
Raiffeisen Bank International (RBIV.VI)          Sberbank (SBER.MM)                     Sberbank (SBNCyq.L)
VTB Bank (VTBRq.L)                               VTB Bank (VTBR.MM)                     Yapi Kredi (YKBNK.IS)
European Autos & Auto Parts
BMW (BMWG.DE)                                    Continental (CONG.DE)                  Daimler AG (DAIGn.DE)
Faurecia (EPED.PA)                               Fiat SpA (FIA.MI)                      GKN plc (GKN.L)
Michelin (MICP.PA)                               Peugeot SA (PEUP.PA)                   Pirelli (PECI.MI)
Porsche Automobil Holding SE (PSHG_p.DE)         Renault SA (RENA.PA)                   Valeo (VLOF.PA)
Volkswagen AG (VOWG.DE)                          Volkswagen AG-PFD Preferred
                                                 (VOWG_p.DE)
European Banks
Banco Bilbao Vizcaya Argentaria S.A. (BBVA.MC)   Banco Popular (POP.MC)                 Banco Sabadell (SABE.MC)
Banco Santander SA (SAN.MC)                      BNP Paribas (BNPP.PA)                  Commerzbank AG (CBKG.DE)
Credit Agricole SA (CAGR.PA)                     Credit Suisse Group AG (CSGN.VX)       Danske Bank (DANSKE.CO)
Deutsche Bank AG (DBKGn.DE)                      Deutsche Postbank AG (DPBGn.DE)        DNB (DNB.OL)
HSBC Holdings PLC (HSBA.L)                       ING (ING.AS)                           Intesa Sanpaolo (ISP.MI)
Julius Baer (BAER.VX)                            KBC (KBC.BR)                           Lloyds Banking Group PLC (LLOY.L)

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IMPORTANT DISCLOSURES CONTINUED
Nordea (NDA.ST)                          Royal Bank of Scotland Group PLC (RBS.L) Skandinaviska Enskilda Banken AB (SEBa.ST)
Société Générale (SOGN.PA)               Standard Chartered PLC (STAN.L)          Svenska Handelsbanken (SHBa.ST)
Swedbank AB (SWEDa.ST)                   UBS AG (UBSN.VX)                         UniCredit (CRDI.MI)
European Capital Goods
ABB Ltd. (ABBN.VX)                       Alfa Laval AB (ALFA.ST)                  Alstom (ALSO.PA)
Assa Abloy AB (ASSAb.ST)                 Atlas Copco AB (ATCOa.ST)                Electrolux AB (ELUXb.ST)
GEA Group AG (G1AG.DE)                   IMI Plc (IMI.L)                          Invensys PLC (ISYS.L)
Legrand SA (LEGD.PA)                     Metso OYJ (MEO1V.HE)                     Philips Electronics N.V. (PHG.AS)
Prysmian SpA (PRY.MI)                    Rotork PLC (ROR.L)                       Sandvik AB (SAND.ST)
Schneider Electric SA (SCHN.PA)          Siemens AG (SIEGn.DE)                    SKF AB (SKFa.ST)
Smiths Group PLC (SMIN.L)                Sulzer AG (SUN.VX)                       Vestas Wind Systems A/S (VWS.CO)
Vesuvius plc (VSVS.L)                    Weir Group (WEIR.L)
European Food
Associated British Foods (ABF.L)         Danone (DANO.PA)                         Nestle SA (NESN.VX)
Suedzucker AG (SZUG.DE)
European Food Retail
Ahold (AHLN.AS)                          Carrefour (CARR.PA)                      Casino (CASP.PA)
Colruyt (COLR.BR)                        Delhaize (DELB.BR)                       DIA (DIDA.MC)
Jeronimo Martins (JMT.LS)                Metro AG (MEOG.DE)                       Morrison (MRW.L)
Ocado (OCDO.L)                           Rallye (GENC.PA)                         Sainsbury (J) plc (SBRY.L)
Tesco (TSCO.L)
European Infrastructure
Abertis Infraestructuras SA (ABE.MC)     ADP (ADP.PA)                             Atlantia SpA (ATL.MI)
Flughafen Wien AG (VIEV.VI)              Flughafen Zurich (FHZN.S)                Fraport AG (FRAG.DE)
GEMINA (GEMI.MI)                         Groupe Eurotunnel SA (GET) (GETP.PA)     SIAS (SIS.MI)
Vinci SA (SGEF.PA)
European Insurance
Admiral Group plc (ADML.L)               AEGON N.V. (AEGN.AS)                     Allianz SE (ALVG.DE)
Amlin plc (AML.L)                        Aviva plc (AV.L)                         AXA (AXAF.PA)
Catlin Group Ltd. (CGL.L)                CNP Assurances (CNPP.PA)                 Fondiaria-SAI SpA (FOSA.MI)
Generali (GASI.MI)                       Gjensidige Forsikring ASA (GJFS.OL)      Hannover Re (HNRGn.DE)
Hiscox Ltd. (HSX.L)                      Lancashire Holdings (LRE.L)              Legal & General (LGEN.L)
Mapfre (MAP.MC)                          Mediolanum (MED.MI)                      Munich RE (MUVGn.DE)
Old Mutual PLC (OML.L)                   Phoenix (PHNX.L)                         Prudential Plc (PRU.L)
PZU SA (PZU.WA)                          Resolution Ltd. (RSL.L)                  RSA Insurance Group plc (RSA.L)
Sampo (SAMAS.HE)                         St. James's Place (SJP.L)                Standard Life (SL.L)
Swiss Re (SRENH.VX)                      Talanx (TLXGn.DE)                        Topdanmark (TOP.CO)
Tryg (TRYG.CO)                           Unipol (UNPI.MI)                         Vienna Insurance Group (VIGR.VI)
Zurich Insurance Group AG (ZURN.VX)
European Integrated Oil
BG Group (BG.L)                          BP (BP.L)                                Eni (ENI.MI)
Galp Energia (GALP.LS)                   MOL (MOLB.BU)                            OMV (OMVV.VI)
Repsol (REP.MC)                          Royal Dutch Shell A (RDSa.L)             Royal Dutch Shell B (RDSb.L)
Statoil ASA (STL.OL)                     Total (TOTF.PA)
European Leisure
888 Holdings plc (888.L)                 Accor SA (ACCP.PA)                       Betfair Group PLC (BETF.L)

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IMPORTANT DISCLOSURES CONTINUED
Bwin.Party Digital Entertainment PLC (BPTY.L)   Carnival PLC (CCL.L)                        Compass Group PLC (CPG.L)
Edenred (EDEN.PA)                               InterContinental Hotels Group Plc (IHG.L)   Ladbrokes Plc (LAD.L)
Sodexo SA (EXHO.PA)                             Thomas Cook Group Plc (TCG.L)               TUI Travel Plc (TT.L)
Whitbread PLC (WTB.L)                           William Hill PLC (WMH.L)
European Luxury Goods
adidas AG (ADSGn.DE)                            Burberry (BRBY.L)                           Hugo Boss (BOSSn.DE)
Luxottica Group SpA (LUX.MI)                    LVMH (LVMH.PA)                              Mulberry (MUL.L)
PPR SA (PRTP.PA)                                Puma SE (PUMG.DE)                           Richemont (CFR.VX)
Salvatore Ferragamo (SFER.MI)                   Swatch Group AG (UHR.VX)                    Tod's (TOD.MI)
European Media
Antena 3 de Television SA (A3TV.MC)             Axel Springer AG (SPRGn.DE)                 British Sky Broadcasting Group PLC (BSY.L)
Daily Mail & General Trust PLC (DMGOa.L)        Eutelsat Communications (ETL.PA)            Havas SA (EURC.PA)
hibu plc (HIBU.L)                               Informa PLC (INF.L)                         ITV Plc (ITV.L)
JC Decaux SA (JCDX.PA)                          Lagardere SCA (LAGA.PA)                     M6-Metropole Television SA (MMTP.PA)
Mediaset Espana (TL5.MC)                        Mediaset SpA (MS.MI)                        PagesJaunes Groupe SA (PAJ.PA)
Pearson plc (PSON.L)                            ProsiebenSat. 1 Media AG (PSMG_p.DE)        Publicis Groupe SA (PUBP.PA)
Reed Elsevier NV (ELSN.AS)                      Reed Elsevier PLC (REL.L)                   Rightmove Plc (RMV.L)
RTL Group PLC (AUDKt.BR)                        SES SA (SESFd.PA)                           Sky Deutschland AG (SKYDn.DE)
Television Francaise 1 SA (TFFP.PA)             Thomson Reuters Corp. (TRI)                 Trinity Mirror PLC (TNI.L)
UBM Plc (UBM.L)                                 Vivendi SA (VIV.PA)                         Wolters Kluwer NV (WLSNc.AS)
WPP (WPP.L)
European Medical Supplies & Devices
Coloplast (COLOb.CO)                            Elekta AB (EKTAb.ST)                        Essilor (ESSI.PA)
Fresenius Medical Care (FMEG.DE)                Fresenius SE & Co KGaA (FREG.DE)            GN Store Nord (GN.CO)
Nobel Biocare (NOBN.S)                          Smith & Nephew (SN.L)                       Sonova (SOON.VX)
Straumann Holding AG (STMN.S)                   William Demant (WDH.CO)
European Mining
African Barrick Gold (ABGL.L)                   Anglo American plc (AAL.L)                  Antofagasta (ANTO.L)
BHP Billiton plc (BLT.L)                        Bumi Plc (BUMIP.L)                          Eurasian Natural Resources (ENRC.L)
First Quantum Minerals (FQM.L)                  Fresnillo (FRES.L)                          Hochschild Mining (HOCM.L)
Kazakhmys (KAZ.L)                               Polymetal International (POLYP.L)           Polyus Gold (PGIL.L)
Randgold Resources (RRS.L)                      Rio Tinto plc (RIO.L)                       Vedanta Resources plc (VED.L)
European Oil & Gas: E&P
Afren Plc (AFRE.L)                              Bowleven PLC (BLVN.L)                       Cairn Energy (CNE.L)
Enquest (ENQ.L)                                 Premier Oil (PMO.L)                         Rockhopper Exploration (RKH.L)
Salamander Energy (SMDR.L)                      Soco International (SIA.L)                  Tullow Oil (TLW.L)
European Oil Services & Drilling
Aker Solutions (AKSO.OL)                        AMEC plc (AMEC.L)                           CGGVeritas (GEPH.PA)
Dockwise (DOCKW.AS)                             Hunting (HTG.L)                             Maire Tecnimont (MTCM.MI)
Petrofac (PFC.L)                                Petroleum Geo-Services (PGS.OL)             Polarcus (PLCS.OL)
Saipem (SPMI.MI)                                SBM Offshore (SBMO.AS)                      Subsea 7 SA (SUBC.OL)
Technip (TECF.PA)                               Tecnicas Reunidas (TRE.MC)                  TGS (TGS.OL)
Wood Group (WG.L)
European Pharmaceuticals
Actelion (ATLN.VX)                              Almirall SA (ALM.MC)                        AstraZeneca (AZN.L)
Bayer AG (BAYGn.DE)                             GlaxoSmithKline (GSK.L)                     Ipsen (IPN.PA)

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Barclays | Convertible Outlook Q2 2013


IMPORTANT DISCLOSURES CONTINUED
Merck KGaA (MRCG.DE)                          Novartis (NOVN.VX)                        Novo Nordisk (NOVOb.CO)
Roche (ROG.VX)                                Sanofi (SASY.PA)                          Shire (SHP.L)
UCB SA (UCB.BR)
European Real Estate
Alstria Office REIT-AG (AOXG.DE)              Beni Stabili (BNSI.MI)                    Big Yellow (BYG.L)
British Land (BLND.L)                         Capital & Counties Properties (CAPCC.L)   Corio (COR.AS)
Derwent London (DLN.L)                        Deutsche Wohnen AG (DWNG.DE)              Development Securities (DSC.L)
Fonciere des Regions (FDR.PA)                 Gecina SA (GFCP.PA)                       Great Portland Estates (GPOR.L)
GSW Immobilien AG (GIBG.DE)                   Hammerson (HMSO.L)                        Helical Bar (HLCL.L)
Icade SA (ICAD.PA)                            Intu Properties Plc (INTUP.L)             Klepierre (LOIM.PA)
Land Securities (LAND.L)                      Quintain Estates & Development (QED.L)    Safestore (SAFE.L)
SEGRO (SGRO.L)                                Shaftesbury (SHB.L)                       Silic SA (SILP.PA)
TAG Immobilien AG (TEGG.DE)                   Unibail-Rodamco (UL.PA)
European Refining & Marketing
Essar Energy (ESSR.L)                         Grupa Lotos (LTSP.WA)                     Hellenic Petroleum (HEPr.AT)
Motor Oil (MORr.AT)                           Neste Oil (NES1V.HE)                      PKN Orlen (PKN.WA)
Saras (SRS.MI)
European Software & IT Services
Amadeus (AMA.MC)                              Anite (AIE.L)                             AtoS (ATOS.PA)
Aveva (AVV.L)                                 Capgemini (CAPP.PA)                       Dassault Systèmes (DAST.PA)
Hexagon AB (HEXAb.ST)                         Indra (IDR.MC)                            Micro Focus (MCRO.L)
Monitise (MONI.L)                             Sage Group Plc (SGE.L)                    SAP AG (SAPG.DE)
Software AG (SOWG.DE)                         Spirent (SPT.L)                           Steria (TERI.PA)
Temenos (TEMN.S)                              Wirecard (WDIG.DE)
European Technology Hardware
Aixtron AG (AIXGn.DE)                         Alcatel-Lucent (ALUA.PA)                  ARM Holdings PLC (ARM.L)
ASML Holding NV (ASML.AS)                     CSR plc (CSR.L)                           Dialog Semiconductor (DLGS.DE)
Ericsson (ERICb.ST)                           Gemalto (GTO.PA)                          Imagination Technologies (IMG.L)
Infineon Technologies AG (IFXGn.DE)           Ingenico (INGC.PA)                        Logitech International SA (LOGN.S)
Nokia (NOK1V.HE)                              Pace plc (PIC.L)                          STMicroelectronics NV (STM.PA)
TomTom NV (TOM2.AS)
European Telecom Services
Belgacom (BCOM.BR)                            Bouygues SA (BOUY.PA)                     BT Group PLC (BT.L)
Cable & Wireless Communications PLC (CWC.L)   Colt (COLT.L)                             Daisy (DAY.L)
Deutsche Telekom AG (DTEGn.DE)                Elisa Oyj (ELI1V.HE)                      France Telecom SA (FTE.PA)
Iliad SA (ILD.PA)                             Inmarsat plc (ISA.L)                      InterXion Holding NV (INXN)
Jazztel Plc (JAZ.MC)                          Kabel Deutschland (KD8Gn.DE)              KCOM (KCOM.L)
KPN (KPN.AS)                                  Liberty Global, Inc. (LBTYA)              Mobistar (MSTAR.BR)
OTE (OTEr.AT)                                 Portugal Telecom SGPS SA (PTC.LS)         Sonaecom SGPS SA (SNC.LS)
Swisscom (SCMN.VX)                            TalkTalk Telecom Group (TALK.L)           TDC (TDC.CO)
Tele2 AB (TEL2b.ST)                           TeleCity Group Plc (TCY.L)                Telecom Italia SpA (TLIT.MI)
Telecom Italia-RSP (TLITn.MI)                 Telefonica Deutschland (O2Dn.DE)          Telefónica SA (TEF.MC)
Telekom Austria (TELA.VI)                     Telenet Group Holding NV (TNET.BR)        Telenor ASA (TEL.OL)
TeliaSonera AB (TLSN.ST)                      Virgin Media Inc. (VMED.L)                Vodafone Group Plc (VOD.L)
Ziggo (ZIGGO.AS)                              Zon Multimedia (ZON.LS)
European Transportation

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Barclays | Convertible Outlook Q2 2013


IMPORTANT DISCLOSURES CONTINUED
Air France-KLM (AIRF.PA)                      Deutsche Lufthansa AG (LHAG.DE)             Deutsche Post AG (DPWGn.DE)
DSV A/S (DSV.CO)                              easyJet PLC (EZJ.L)                         FirstGroup Plc (FGP.L)
Go-Ahead Group Plc (GOG.L)                    International Consolidated Airlines Group   International Consolidated Airlines Group
                                              (ICAG.L)                                    (ICAG.MC)
Kuehne & Nagel International AG (KNIN.VX)     National Express Group Plc (NEX.L)          Panalpina (PWTN.S)
PostNL NV (PTNL.AS)                           Ryanair Holdings PLC (RYA.L)                Stagecoach Group Plc (SGC.L)
TNT Express NV (TNTE.AS)
European Utilities
Centrica (CNA.L)                              Drax Group (DRX.L)                          E.ON (EONGn.DE)
EDF (EDF.PA)                                  EDP Renovaveis S.A. (EDPR.LS)               Enagas SA (ENAG.MC)
Endesa S.A. (ELE.MC)                          Enel Green Power SpA (EGPW.MI)              Enel SpA (ENEI.MI)
Fortum (FUM1V.HE)                             Gas Natural SDG SA (GAS.MC)                 GDF Suez SA (GSZ.PA)
Iberdrola SA (IBE.MC)                         National Grid Plc (NG.L)                    Pennon Group Plc (PNN.L)
Red Electrica Corporacion SA (REE.MC)         Redes Energeticas Nacionais (RENE.LS)       RWE (RWEG.DE)
Seche Environnement (CCHE.PA)                 Severn Trent Plc (SVT.L)                    Snam (SRG.MI)
SSE (SSE.L)                                   Suez Environnement (SEVI.PA)                Terna SpA (TRN.MI)
United Utilities Group Plc (UU.L)             Veolia Environnement (VIE.PA)               Verbund (VERB.VI)
Japan Building Products & Homebuilders
Daito Trust Construction Co., Ltd. (1878.T)   Daiwa House Industry Co., Ltd. (1925.T)     LIXIL Group Corp. (5938.T)
Rinnai Corporation (5947.T)                   Sekisui Chemical Co., Ltd. (4204.T)         Sekisui House Ltd. (1928.T)
Sumitomo Forestry Co., Ltd. (1911.OS)         TOTO Ltd. (5332.T)
Japan Chemicals
AIR WATER Inc. (4088.T)                       Asahi Kasei Corp. (3407.T)                  Daicel Corporation (4202.T)
Hitachi Chemical Co., Ltd. (4217.T)           JSR Corp. (4185.T)                          Kuraray Co., Ltd. (3405.T)
Mitsubishi Chemical Holdings (4188.T)         Mitsubishi Gas Chemical Co., Inc. (4182.T) Mitsui Chemicals Inc. (4183.T)
Nippon Shokubai Co., Ltd. (4114.T)            Nitto Denko Corp. (6988.T)                  Shin-Etsu Chemical Co., Ltd. (4063.T)
Showa Denko (4004.T)                          SUMCO Corporation (3436.T)                  Sumitomo Chemical Co., Ltd. (4005.T)
Taiyo Nippon Sanso Corporation (4091.T)       Teijin Limited (3401.T)                     Toray Industries Inc. (3402.T)
Tosoh Corp. (4042.T)                          Ube Industries (4208.T)                     Zeon Corp. (4205.T)
Japan Cosmetics and HPC
Kao Corp. (4452.T)                            Shiseido Co., Ltd. (4911.T)                 Unicharm Corp. (8113.T)
Japan Food, Beverages & Tobacco
Ajinomoto Co., Inc. (2802.T)                  Asahi Group Holdings, Ltd. (2502.T)         Coca-Cola West (2579.T)
Japan Tobacco Inc. (2914.T)                   Kirin Holdings Co., Ltd. (2503.T)           Nippon Meat Packers, Inc. (2282.T)
Nissin Foods Holdings Co., Ltd. (2897.T)      Yakult Honsha Co., Ltd. (2267.T)
Japan Heavy Industries
Chiyoda Corp. (6366.T)                        IHI (7013.T)                                JGC (1963.T)
Kawasaki Heavy Industries (7012.T)            Mitsubishi Heavy Industries (7011.T)        Mitsui Engineering & Shipbuilding (7003.T)
MODEC (6269.T)                                Sumitomo Heavy Industries (6302.T)          Toyo Engineering (6330.T)
Japan Medical Supplies & Devices
BML Inc. (4694.T)                             Fukuda Denshi Company Ltd. (6960.OS)        Hitachi Medical Corp. (6910.T)
Miraca Holdings Inc. (4544.T)                 NIHON KOHDEN CORP. (6849.T)                 NIPRO Corp. (8086.T)
SYSMEX CORP. (6869.T)                         TERUMO Corp. (4543.T)
Japan Regional Banks
Bank of Kyoto Ltd. (8369.T)                   Bank of Yokohama Ltd. (8332.T)              Chiba Bank Ltd. (8331.T)
Fukuoka Financial Group Inc. (8354.T)         Shizuoka Bank Ltd. (8355.T)                 Suruga Bank Ltd. (8358.T)


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Barclays | Convertible Outlook Q2 2013


IMPORTANT DISCLOSURES CONTINUED
Japan Telecom Services
KDDI Corp. (9433.T)                              NTT (9432.T)                                 NTT docomo Inc. (9437.T)
SoftBank Corp. (9984.T)
Japan Transportation
All Nippon Airways Co., Ltd. (9202.T)            Central Japan Railway Co. (9022.T)           East Japan Railway Co. (9020.T)
Hankyu Hanshin Holdings Inc. (9042.T)            Hitachi Transport System (9086.T)            Japan Airlines (9201.T)
Kamigumi (9364.T)                                Kawasaki Kisen Kaisha Ltd. (9107.T)          Kintetsu World Express (9375.T)
Mitsubishi Logistics (9301.T)                    Mitsui OSK Lines Ltd. (9104.T)               Mitsui-Soko (9302.T)
Nippon Express Co., Ltd. (9062.T)                Nippon Konpo Unyu Soko (9072.T)              Nippon Yusen KK (9101.T)
Odakyu Electric Railway Co., Ltd. (9007.T)       Sankyu Inc. (9065.T)                         Seino Holdings (9076.T)
Senko (9069.T)                                   Sumitomo Warehouse (9303.T)                  Tokyu Corp. (9005.T)
West Japan Railway Co. (9021.T)                  Yamato Holdings Co., Ltd. (9064.T)           Yusen Logistics (9370.T)
Latin America Banks
ABC Brasil (ABCB4.SA)                            Banco de Chile (BCH)                         Banco do Brasil (BBAS3.SA)
Banco Santander Chile (BSAC)                     Bancolombia SA (CIB)                         Banorte (GFNORTEO.MX)
Banrisul (BRSR6.SA)                              Bicbanco (BICB4.SA)                          Bradesco (BBDC4.SA)
Bradesco (BBD)                                   Compartamos (COMPARC.MX)                     Credicorp Ltd. (BAP)
Daycoval (DAYC4.SA)                              Intercorp Financial Services Inc. (IFS.LM)   Itausa (ITSA4.SA)
Itaú Unibanco (ITUB)                            Itaú Unibanco (ITUB4.SA)                     Santander Brasil (SANB11.SA)
Santander Brasil (BSBR)                          Santander Mexico (BSMX)                      Santander Mexico (SANMEXB.MX)
Russian Steel
EVRAZ plc (EVRE.L)                               NLMK (NLMKq.L)                               Severstal (CHMFq.L)
South Africa Food Retail
Pick n Pay Stores Ltd. (PIKJ.J)                  Shoprite Holdings Ltd. (SHPJ.J)              Spar Group Ltd. (SPPJ.J)
South Africa General Industrials & Support Services
Barloworld Ltd. (BAWJ.J)                         Bidvest Group Ltd. (BVTJ.J)                  Eqstra Holdings Ltd. (EQSJ.J)
Grindrod Ltd. (GNDJ.J)                           Imperial Holdings Ltd. (IPLJ.J)              KAP Industrial Holdings Ltd. (KAPJ.J)
Steinhoff International Holdings Ltd. (SHFJ.J)
South Africa General Retail
Foschini Group Ltd. (TFGJ.J)                     JD Group Ltd. (JDGJ.J)                       Lewis Group Ltd. (LEWJ.J)
Mr Price Group Ltd. (MPCJ.J)                     Truworths International Ltd. (TRUJ.J)        Woolworths Holdings Ltd. (WHLJ.J)
U.S. Airlines
AerCap Holdings (AER)                            Air Lease Corp. (AL)                         Aircastle Ltd. (AYR)
Alaska Air Group (ALK)                           Allegiant Travel Co. (ALGT)                  Delta Air Lines (DAL)
JetBlue Airways (JBLU)                           Southwest Airlines (LUV)                     Spirit Airlines (SAVE)
United Continental Holdings (UAL)                US Airways Group (LCC)
U.S. Life Science Tools & Diagnostics
Agilent Technologies (A)                         ILLUMINA Inc. (ILMN)                         Life Technologies Corp. (LIFE)
QIAGEN N.V. (QGEN)                               Thermo Fisher Scientific Inc. (TMO)          Waters Corporation (WAT)
U.S. Oil Services & Drilling
Atwood Oceanics Inc. (ATW)                       Baker Hughes (BHI)                           Basic Energy Services (BAS)
Bristow Group Inc. (BRS)                         Cameron International (CAM)                  CARBO Ceramics (CRR)
Chart Industries Inc. (GTLS)                     Core Laboratories (CLB)                      Diamond Offshore Drilling (DO)
Dresser-Rand Group Inc. (DRC)                    Dril-Quip Inc. (DRQ)                         Ensco plc (ESV)
Exterran Holdings Inc. (EXH)                     FMC Technologies (FTI)                       Global Geophysical Services (GGS)
GulfMark Offshore, Inc. (GLF)                    Halliburton Co. (HAL)                        Helmerich & Payne Inc. (HP)

15 April 2013                                                                                                                         72
Barclays | Convertible Outlook Q2 2013


IMPORTANT DISCLOSURES CONTINUED
Hercules Offshore (HERO)                            Hornbeck Offshore Services (HOS)             ION Geophysical Corp. (IO)
Key Energy Services (KEG)                           Lufkin Industries, Inc. (LUFK)               MRC Global (MRC)
Nabors Industries (NBR)                             National Oilwell Varco (NOV)                 Noble Corp. (NE)
Ocean Rig UDW Inc. (ORIG)                           Oceaneering International (OII)              Oil States International, Inc. (OIS)
Pacific Drilling SA (PACD)                          Parker Drilling (PKD)                        Patterson-UTI Energy (PTEN)
Rowan Companies (RDC)                               Schlumberger Ltd. (SLB)                      SEACOR Holdings, Inc. (CKH)
Seadrill Limited (SDRL)                             Superior Energy Services Inc. (SPN)          Tenaris S.A. (TS)
Tetra Technologies Inc. (TTI)                       Thermon Group Holdings (THR)                 Tidewater Inc. (TDW)
Transocean Ltd. (RIG)                               Vantage Drilling Co. (VTG)                   Weatherford International (WFT)


Distribution of Ratings:
Barclays Equity Research has 2448 companies under coverage.
43% have been assigned an Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Buy rating; 52% of
companies with this rating are investment banking clients of the Firm.
41% have been assigned an Equal Weight rating which, for purposes of mandatory regulatory disclosures, is classified as a Hold rating; 47% of
companies with this rating are investment banking clients of the Firm.
13% have been assigned an Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as a Sell rating; 42% of
companies with this rating are investment banking clients of the Firm.
Guide to the Barclays Research 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 offices involved in the production of equity research:
London
Barclays Bank PLC (Barclays, London)
New York
Barclays Capital Inc. (BCI, New York)
Tokyo
Barclays Securities Japan Limited (BSJL, Tokyo)
São Paulo
Banco Barclays S.A. (BBSA, São Paulo)
Hong Kong
Barclays Bank PLC, Hong Kong branch (Barclays Bank, Hong Kong)
Toronto
Barclays Capital Canada Inc. (BCCI, 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 Securities (India) Private Limited (BSIPL, Mumbai)
Singapore
Barclays Bank PLC, Singapore branch (Barclays Bank, Singapore)


15 April 2013                                                                                                                                    73
Barclays | Convertible Outlook Q2 2013


IMPORTANT DISCLOSURES CONTINUED
Lotte Shopping (023530 KS / 023530.KS)                                                     Stock Rating                                Industry View
KRW 401000.00 (11-Apr-2013)                                                                OVERWEIGHT                                     NEUTRAL
Rating and Price Target Chart - KRW (as of 11-Apr-2013)                                    Currency=KRW

                                                                                           Date           Closing Price     Rating      Price Target
                                                                                           20-Feb-2013     379000.00                     420000.00
   0.56M
                                                                                           08-Feb-2013     394500.00                     402000.00
                                                                                           29-Aug-2012     323000.00      Overweight     370000.00

   0.48M




   0.40M




   0.32M




   0.24M



           Jul- 2010      Jan- 2011    Jul- 2011   Jan- 2012    Jul- 2012      Jan- 2013

                       Closing Price       Target Price        Rating Change


Link to Barclays Live for interactive charting

J: Barclays Bank PLC and/or an affiliate trades regularly in the securities of Lotte Shopping.
Valuation Methodology: Our 12-month price target of KRW 420,000 forr Lotte Shopping is based on our target P/E of 11x (the same target
multiple we apply for Hyundai Department Store, which its historical six-year average P/E), to our adjusted EPS estimate for 2013. We apply same
target multiple with HDS as we view valuation discount to narrow given 1) Lotte's exposure to higher growth Home Shopping, CVS, Outlet
formats, 2) upside risk to consensus and 3) smaller earnings drag from overseas business from 2014.
Risks which May Impede the Achievement of the Barclays Research Price Target: The key downside risks to our price target being achieved, in
our view, include worse-than-expected execution in overseas markets, potential pricy acquisitions and lower-than-expected same-store-sales
growth (SSSG) for the domestic businesses.




15 April 2013                                                                                                                                     74
Barclays | Convertible Outlook Q2 2013


IMPORTANT DISCLOSURES CONTINUED
SK Hynix (000660 KS / 000660.KS)                                                           Stock Rating                                Industry View
KRW 29000.00 (11-Apr-2013)                                                                 OVERWEIGHT                                     POSITIVE
Rating and Price Target Chart - KRW (as of 11-Apr-2013)                                    Currency=KRW

                                                                                           Date           Closing Price     Rating      Price Target
  38,000
                                                                                           20-Mar-2013     28650.00                        33000.00
  36,000
                                                                                           13-Sep-2012     22200.00                        28000.00
  34,000
                                                                                           24-Jul-2012     20350.00                        30000.00
  32,000
                                                                                           03-Feb-2012     27300.00                        33000.00
  30,000
                                                                                           21-Nov-2011     22900.00       Overweight       27000.00
  28,000

  26,000

  24,000

  22,000

  20,000

  18,000

  16,000

  14,000
           Jul- 2010   Jan- 2011   Jul- 2011   Jan- 2012    Jul- 2012      Jan- 2013

                   Closing Price      Target Price         Rating Change


Link to Barclays Live for interactive charting

J: Barclays Bank PLC and/or an affiliate trades regularly in the securities of SK Hynix.
Valuation Methodology: Our 12-month price target of W33,000 for SK Hynix is based on a P/B multiple of 2.25x, which we apply to 2013E BVPS.
Our target multiple corresponds to the stock's 3 years historical average multiple of 2.0x, as we expect an upcycle for NAND and a bottoming-out
for DRAM. We believe P/B provides a cyclical context.
Risks which May Impede the Achievement of the Barclays Research Price Target: Downside risks to our 12-month price target of W33,000 for
SK Hynix are: 1) given the fairly aggressive smartphone sell-in process in 2Q, we could see an inventory correction from late 2Q13 or early 3Q13
unless smartphone sell-through is strong enough; 2) 2x transition of Mobile DRAM; and 3) aggressive capex by Japanese makers backed by a
weak yen.




15 April 2013                                                                                                                                     75
Barclays | Convertible Outlook Q2 2013


IMPORTANT DISCLOSURES CONTINUED
SK Telecom (017670 KS / 017670.KS)                                                         Stock Rating                                Industry View
KRW 175000.00 (11-Apr-2013)                                                                OVERWEIGHT                                     NEUTRAL
Rating and Price Target Chart - KRW (as of 11-Apr-2013)                                    Currency=KRW

   0.21M                                                                                   Date           Closing Price     Rating      Price Target
                                                                                           28-Feb-2013     176000.00                     200000.00
   0.20M
                                                                                           08-Jan-2013     154500.00                     190000.00
   0.19M
                                                                                           09-Oct-2012     146000.00                     160000.00
   0.18M                                                                                   03-Aug-2012     142000.00                     170000.00
                                                                                           30-May-2012     122500.00      Overweight     163000.00
   0.17M


   0.16M


   0.15M


   0.14M


   0.13M


   0.12M



           Jul- 2010      Jan- 2011    Jul- 2011   Jan- 2012    Jul- 2012      Jan- 2013

                       Closing Price       Target Price        Rating Change


Link to Barclays Live for interactive charting

A: Barclays Bank PLC and/or an affiliate has been lead manager or co-lead manager of a publicly disclosed offer of securities of SK Telecom in the
previous 12 months.
D: Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from SK Telecom in the past 12 months.
E: Barclays Bank PLC and/or an affiliate expects to receive or intends to seek compensation for investment banking services from SK Telecom
within the next 3 months.
J: Barclays Bank PLC and/or an affiliate trades regularly in the securities of SK Telecom.
L: SK Telecom is, or during the past 12 months has been, an investment banking client of Barclays Bank PLC and/or an affiliate.
Valuation Methodology: Our 12-month price target of W200,000 for SKT is based on sum-of-the-parts (SOTP), using DCF to value the
standalone wireless business (based on standalone financials) and adding back the market value of its subsidiaries and investments. For our DCF
analysis, we apply a WACC to 8.2% and long-term nominal FCF growth rate of -1%, implying a terminal-year FCF multiple of 11x. Our longer-
term forecasts incorporate revenue growth of -2%, operating margins falling to 13% levels and RONTA (including spectrum) falling to 16% after
peaking at 22% in 2015. We assume a capex/sales ratio normalising at 15% over the long term.
Risks which May Impede the Achievement of the Barclays Research Price Target: Key risks to our price target include: 1) introduction of new
government regulations (e.g. tariff cuts, capex pressure, new regulations on net neutrality, etc.) lowering the company's return profile; 2)
competitive dynamics resulting in pricing pressure, especially for the higher-priced LTE services; 3) competitive capex resulting in lower returns
and decreased free cash flow; and 4) further capital injections in Hynix or other projects with uncertain return profiles.




15 April 2013                                                                                                                                     76
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