JUL 30 UniCredit Credit Research

30 July 2010 Credit Research
Daily Credit Briefing
Credit Strategy Highlights Credit drivers
■ Market activity continues to feel the summer lull, with daily moves on current 1D 1W
synthetic indices being very moderate. Nevertheless, the tone remained EuroStoxx 2,753 -13 39
positive, supported by encouraging data releases in the eurozone DAX 6,135 -44 -7
yesterday; besides several corporate earnings reports, the better-than- VDAX [%] 20.6 0.3 -0.2
expected German unemployment data were the most prominent macro S&P 1,102 -5 8
releases. The XO tightened 7bp to 480bp, the Main as well as the VIX [%] 24.1 -0.1 -0.5
DJUBS Index 131.8 1.9 1.5
FinSen tightened by 1bp to 105bp and 115bp, respectively, while the
Crude Oil Ft 78.2 -0.2 -0.8
FinSub remained flat at 183bp. However, this morning, disappointing
EUR-USD 1.308 .000 .017
Japanese industrial production (1.5% mom decline vs. 0.2 consensus)
and higher-than-expected unemployment rate (5.3%) as well as
iTraxx Europe (Series 13), Thursday closing
disappointing German retail sales (-0.9% mom vs. -0.2% expected) 5Y chg*
highlight the vulnerability of the recovery and are likely to slightly dampen Europe Benchmark 105 -24
sentiment in the early trading session. Later in the day, the focus will be Financials Sen 115 -48
on the US 2Q GDP data, where our economists expect a slightly more Financials Sub 181 -64
pronounced growth deceleration to 2.3% versus the consensus (2.5%) Crossover 478 -96
following 2.7% in 1Q. (Continued on the next page) SovX WE 109 -54
■ iTraxx opening: Main 103.5/104.5bp, XO 475/478bp, Sen 113/115bp, ASW spreads by quality/sector
Sub 180/183bp current 1d 1w
iBoxx ALL 100.9 -2.1 -10.0
iBoxx AAA 27.1 -2.1 0.1
Relative Value Trading Idea
AA 53.2 -1.6 -6.3
We recommend a CDS pair trade on Bayer (A3s/A-n/A-n) and Merck KGaA A 78.5 -1.9 -7.3
(Baa2s/BBB+s/---): Sell 5Y CDS on Merck KGaA at 83bp and buy 5Y CDS BBB 146.8 -2.7 -15.0
on Bayer at 62bp for a pick-up of 21bp. iBoxx FIN 201.6 -1.0 -20.5
ATO 82.0 -1.8 -10.6
TEL 117.4 -2.6 -14.4
Top Credit Stories
UTI 91.4 -2.2 -8.8
■ TMT: BT Group releases slightly better-than-expected 1Q10/11 results 3 IGS 123.7 -3.3 -9.1
PHG 82.3 -1.2 -5.0
■ Energy: Repsol, Enel and Vattenfall show improved credit ratios _____ 4
TAL 162.2 -1.6 -14.3
■ Industrials: Saint Gobain rebound in operating performance in 2Q; OIG 101.4 -2.2 -11.5
EADS raises FY10 guidance; Schneider: excellent results and higher Hybrids 286.4 0.7 -27.0
margin guidance ___________________________________________ 6
Yields in %
■ Autos: MAN's, VW's and Continental's 2Q10 credit metrics improve __ 8 current 1d 1w
2Y Bund 0.833 -1.7 13.0
■ Consumers: Japan Tobacco with weaker 1Q10/11 results; AstraZeneca
5Y Bund 1.713 -3.0 9.9
with strong 1H10 figures; PPR with solid 1H10 results ____________ 10
10Y Bund 2.717 -3.2 5.2
■ High Yield: Rhodia with strong 2Q10; Heidelberg with strong 2Q10; 2Y TSY 0.562 -1.6 -2.2
Wind with decent 2Q10 _____________________________________ 12 5Y TSY 1.655 -0.3 -7.7
10Y TSY 2.970 -0.9 -2.4
■ Banks: Caja Madrid's low-quality 2Q10; Pastor's 2Q10/1H10; Erste's
2Q10 ___________________________________________________ 15 Swap spreads
current 1d 1w
■ Insurance: SCOR reports a good set of 1H10 figures ____________ 18
5Y EUR 45.56 0.00 -5.82
■ Corporate Snapshots: EDF & EDP 1H10, Vale 2Q10, Mondi 1H10, 10Y EUR 25.48 -0.28 0.80
Rentokil 1H10 , Anglo 1H10, Sanofi (potential USD 20bn+ bid for
Genzyme), Belgacom 1H10, Renault, Michelin 1H10 ______________ 20
Bloomberg
UCCR
Market Overview
Internet
iTraxx Page / Traders' Comment / Primary Market __________________ 21 www.research.unicreditgroup.eu
Rating Actions / Recent Credit Research Publications _______________ 22
UniCredit Research page 1 See last pages for disclaimer.

Credit Strategy Highlights<BOOKMARK>

Corporates earnings continue A bunch of earnings results from large firms in Europe such as Siemens, BASF, Volkswagen,
surprising on the positive side
and Royal Dutch Shell yesterday added to a similar picture observed also in the US:
corporate results continue, on balance, to surprise on the positive side. So far, 298 out of S&P
500 companies have reported 2Q results. Looking at the S&P 500 as a broad-based index,
most of them surprised positively, particularly on net income (72%), while 62% surprised on
sales revenues. Sector-wise, on the net income side, most positive surprises are coming from
industrials, consumers, and financials and to a lesser extent from utilities and the oil&gas
sector. On the sales side, most positive surprises came also from consumer services,
industrials, technology and financials sectors.
Our view The continuous outperformance of net income over sales reflects cost-saving measures on
the corporate side and also deleveraging where companies have been much more successful
than, for example, private households. It is noteworthy that cyclical sectors still surprised more
on the positive side than non-cyclicals. However, we would not interpret this as a harbinger for
stronger economic and corporate recovery in 2H. The strong performance of cyclical sectors
is reflecting, in particular, exposure of multinational firms to large and rapidly growing
emerging markets in Asia and LatAm, which is proving extremely beneficial, particularly for
investment demand-related industrials and technology sectors. The overall positive corporate
newsflow contrasts, to some extent, with the rather mixed macro data, which continue to
reaffirm consumer spending weakness. Besides a more advanced deleveraging process on
the corporate side, there is another important difference between consumers (and also
governments) on the one hand and large firms on the other, which is diversification of their
revenues. While the former two have a very narrow spectrum of revenue sources, large US
and European corporations have fairly well geographically-diversified revenues. Thus, the
exposure to Emerging Markets allows notably European firms to weather the adverse impact
of austerity measures on demand in the eurozone. Going forward, however, there is
substantial risk that firms will feel the economic slowdown: (1) austerity measures in the
eurozone periphery economies are just starting to feed through, and will have a more
pronounced impact on demand in 2H. (2) Also large Emerging Markets are feeling a slowing
growth momentum, e.g. China and also Brazil, whose central bank indicated yesterday that
growth has slowed down recently.
Today's data releases Today, Chevron reports quarterly results. In regard to macro data, the 2Q US GDP reading is
in the limelight. In the eurozone, we have the eurozone unemployment rate.
Dr. Stefan Kolek (UniCredit Bank)

+49 89 378-12495
stefan.kolek@unicreditgroup.de
Relative Value Trading Idea <BOOKMARK>

Trade idea We recommend a CDS pair trade on Bayer (A3s/A-n/A-n) and Merck KGaA
(Baa2s/BBB+s/---): Sell 5Y CDS on Merck KGaA at 83bp and buy 5Y CDS on Bayer at
62bp for a pick-up of 21bp.
Rationale Bayer reported 1H10/2Q10 results which missed analysts' estimates. Fundamentally, Bayer
remains optimistic for 2010 on the back of the favorable developments in its MS business
segment, where sales and earnings should increase significantly. However, the weak spot in
Bayer's business portfolio remains the HC unit, where the sales forecast was reduced to 3%
yoy (initially 5%), which remains well below the industry average. We expect the designated
CEO and successor of Mr. Wenning, Mr. Dekker, to address this issue sooner or later and
would, hence, not be surprised to see a large-scale acquisition to foster growth, which could

happen sooner rather than later. We maintain our underweight recommendation for Bayer on
the back of tight spread levels and heightened event risk.
Merck KGaA reported strong 2Q10 results above market expectations and raised its guidance
for FY10. The raised guidance for FY10 will support Merck's ability to deleverage its balance
sheet more quickly than initially expected. Despite the recent pipeline setbacks and
heightened competition in the Liquid Crystals business (which reached a pre-crisis operating
margin of 53%+!), we take comfort from the highly cash-generative acquired Millipore
business, expected free cash flow of more than EUR 500mn after dividend payments from
FY10 onwards (management expects to repay the EUR 500mn bond due in 11/2010 by free
cash flow), and from our impression that management will focus on deleveraging and refrain
from larger M&A activity during the next few years. We keep our overweight recommendation
and we are a protection seller on the name.
Rocco Schilling (UniCredit Bank) Jochen Schlachter (UniCredit Bank)

+49 89 378-15449 +49 89 378-13212
rocco.schilling@unicreditgroup.de jochen.schlachter@unicreditgroup.de
TMT<BOOKMARK>
Event Yesterday, BT Group (Baa2n/BBB-s/BBBs) released slightly better-than-expected
1Q10/11 results and confirmed its outlook for FY10/11. Revenues (Retail -7%, Wholesale
-6%, Global Services -3%, Openreach -4%) decreased by 4% yoy to GBP 5,006mn
(consensus of GBP 4.97bn) and adjusted EBITDA post leaver costs (Retail -2%, Wholesale
0.0%, Openreach +8%) rose by 6% yoy to GBP 1,399mn (consensus of GBP 1.39bn), as the
Global Services EBITDA rose to GBP 130mn from GBP 62mn in 2Q09. Excluding the Global
Services segment, EBITDA was flattish yoy, mainly thanks to cost reduction measures. The
adjusted EBITDA margin was 27.9% compared to 28.2% in 4Q09/10 or 25.3% in 1Q09/10.
Impact FCF (defined as OCF minus capex) strongly increased yoy to GBP 415mn in 1Q10/11 from
minus GBP 122mn, mainly due to lower W/C-related cash outflows (GBP 449mn), which
benefitted from the receipt of a major customer contract. In addition, FCF benefitted from a
capex decline (GBP 71mn) and improved profitability. We are still skeptical about the
sustainability of FCF improvements, but admit that the company's FCF target for FY10/11 is
achievable. The usually weak first quarter FCF reduced reported net debt from GBP 9.3bn to
GBP 8.9bn. According to our calculations, adjusted net debt to adjusted EBITDA declined to
2.9x qoq from 3.0x, which should be in line with a BBB- rating at S&P.
BT confirmed its outlook for FY10/11: Revenues are expected to decline yoy by 4.4% to EUR
20bn and adjusted EBITDA is expected at the same level as in FY09/10 at around GBP 5.8bn.
Capex should be around GBP 2.6bn and free cash flow at GBP 1.8bn (before pension deficit
payments of GBP 525mn but after the cash flows related to specific items of around GBP
150mn) versus GBP 1.9bn in FY09/10. The company has indicated in the past that it may roll
out fiber to around two-thirds of the UK by 2015, with total fiber investments of GBP 2.5bn,
while these investments should be covered by the above-mentioned annual capex guidance.
The company further targets to reduce net debt to below GBP 9.0bn in FY10/11, which it has
already reached.
The net pension deficit remained qoq stable at GBP 5.7bn. During the conference call,
management was unable to provide additional details regarding the ongoing discussions with
the pension regulator about the crown guarantee (not expected to have an impact on pension
valuations nor payments) or the potential change in indexation (may lead to a reduction in
pension liabilities).
Further significant topics during the conference call included discussions with the UK

government regarding potential measures to reduce public spending. The U.K. government's
cost-cutting plan already resulted in Cable & Wireless Worldwide issuing a profit warning last
week. However, it is worth noting that C&W has a greater percentage of its sales derive from
government contracts than BT does. BT stated that only 10% of its revenues are government
related and that these are mainly in the Global Services segment. Another point of concern
was increasing competition from Sky and Virgin, signaled by their rising marketing spending.
Name recommendation We change our underweight recommendation for BRITEL bonds to marketweight based
on the improving operating performance of the company, while we remain skeptical
about reduced public spending, increasing competition, and negative headline risk
from BT's pensions.
Stephan Haber, CFA (HVB)

+49 89 378-15192
stephan.haber@unicreditgroup.de
Energy<B
Event Repsol (Baa1n/BBBs/BBB+s) released sound 2Q10 results above market expectations
on the back of higher oil prices and improved downstream margins. Sales increased by
26% yoy (+ 8.5% qoq) to EUR 14.7bn, whereas reported EBITDA surged by 58% yoy to EUR
4,869mn. Clean EBIT more than doubled from EUR 696mn in 2Q09 to EUR 1,466mn,
showing growth across all segments. Not surprisingly, it increased in the E&P business by
115% yoy to EUR 370mn, on the back of higher oil prices. Total production in the quarter was
flat yoy at 340,000 boe/d (barrels of oil equivalent per day), despite weaker gas production in
Trinidad & Tobago and Algeria. Production benefited from the start-up of the Shenzi field in
the US, an increased quota in Libya, and the incorporation of a new field in Venezuela. YPF,
the Argentinean subsidiary, also reported an increase in EBIT of +126% yoy to EUR 420mn,
primarily due to higher domestic prices for fuels and other products. EBIT was also strong in
the volatile R&M division with EUR 538mn (+ 66% yoy).
FFO in 1H10 rose by 71% yoy to EUR 1.8bn. Net debt reported (including preference shares
and finance leases) increased from EUR 18.0bn at FYE09 to EUR 18.7bn, also affected by
negative working capital movements (EUR 1.0bn). Due to the higher cash-flow generation,
the ratio of FFO to net debt (adj.) stands at 30% versus 24% at FYE09. If adjusted for
approximately EUR 5.5bn in non-recourse debt at the Gas Natural level, this ratio is around
43%. This should be in line with the rating requirement. S&P requires Repsol to reach a target
ratio of FFO to net debt in the high 30s in 2010, and of 40% by 2011 (excluding Gas Natural).
Expected development of credit We expect the company's cash-flow generation to remain at current levels in the next few
profile/rating
quarters due to stabilizing oil prices. The upstream business will remain the key driver for the
group performance. We expect the downstream business to remain volatile, although a return
of the flat margins seen last year appears unlikely. Repsol's refining margin in 2Q10 had been
a still poor USD 3.3 per barrel, but this was already a strong improvement compared to the
previous two quarters. In its downstream business, Repsol has no competitive advantage
from land-locked refineries (as its big refineries are close to the sea). Therefore, the company
is always exposed to global competition. We tend to exclude the Gas Natural (proportionally
consolidated) debt from the ratio calculation (as does S&P). In its latest note on Repsol in
January 2010, S&P confirmed the stable outlook, also providing the group with some
additional leeway for the recovery of its financial metrics. We regard these targets as
achievable.
Recommendation We regard credit spreads of Repsol as still fair for the rating, although there is a 50bp gap
versus the sovereign CDS (5Y CDS Spain currently trade at around 200bp). The Repsol 5Y

CDS now trades at around 140/155bp. In the past, Repsol's CDS already traded 40-50bp
below those of Spain. As we believe in the positive trend in Repsol's credit ratios, we keep our
marketweight recommendation for the name. We assume that in the current environment the
discount versus the sovereign CDS might be lowered, but Repsol's CDS should not exceed
those of Spain. In any case, the company is not really dependent on the Spanish market. In
FY09, Repsol generated around 52% of its revenues outside Spain.
Christian Kleindienst (UniCredit Bank)

+ 49 89 378-12650
christian.kleindienst@unicreditgroup.de
Event Vattenfall (A2s/An/An) released improved 2Q10 figures. Sales increased by 18% yoy to
SEK 49.7bn, whereas reported EBIT was SEK 9.0bn, +52% yoy. Main drivers were the
company's nuclear power plants, which benefited from higher generation volumes and prices
as well as lower maintenance costs. Furthermore, the Nordic hydro plants contributed
positively to the results, as did the trading business of the newly acquired Dutch utility Nuon.
These improvements offset the weak performance of the first quarter, which was primarily
related to impairments on the sold German transmission grid. For the first six months,
reported EBIT therefore consequently rose by 2% yoy to SEK 19.1bn (clean EBIT was even
up 30% yoy to SEK 24.3bn)
Cash-flow generation in 2Q was also strong, offsetting the weak FFO in the first three
months, which was primarily affected by a one-off tax payment (Swedish withholding tax).
FFO in 1H09 was therefore flat yoy at SEK 21.5bn. Net debt stood at SEK 148.2bn versus
SEK 151.4bn at YE09 (treating the Vattenfall hybrid as 50% debt). Credit ratios have
improved versus 1Q10, and are now very close to the thresholds set by the agencies. The
ratio of FFO/net debt adj. at the end of 2Q10 was 19.4% versus 13.8% at the end of March
(YE09: 19.5%). The company has hedged 84% of its Scandinavian production in 2010 at
average prices of EUR 46/MWh (Continental Europe 94% at EUR 57/MWh).
Strategic review: Management is not satisfied with the current profitability, especially with the
RoE of just 8.7% in 1H10 versus a target of 15%. A revision of the current corporate strategy
is to be announced soon (presumably at the CMD in September) including asset disposals.
Expected development of credit Given the pending strategic review, any forecast for the medium-term development of the
profile/rating
credit profile remains difficult. Nevertheless, we assume that a possible strategic shift should
be (credit) positive. In the conference call, management clearly stated that it regards current
debt levels as too high, as well as the current investment program (which foresees
investments of SEK 200bn until 2015). In the short term, we also expect a stabilization of the
credit ratios. We expect FFO to net debt to exceed S&P's threshold for the current rating of
20% by YE10. A revision of the negative outlook at S&P to stable appears less likely for this
year, but rating pressure has definitely abated with the sound 2Q figures.
Recommendation Given stabilized cash-flow generation, the improved credit metrics and an expected shift in
corporate strategy, which could lead to a further improvement of the company's credit profile,
we change our recommendation from marketweight to overweight. Vattenfall's bonds are
trading at tight levels but we regard the name as attractive as it is less exposed to sovereign
risk than many of its peers. We note that the company is less affected by the newly-proposed
nuclear tax (EUR 2.3bn p.a.) in Germany, as its share in total German nuclear capacity is just
7%. Our favorite (senior) bond is the VATFAL 01/19, trading at indicative levels of 66/57bp
(ASW).

+ 49 89 378-12650

Event Enel (A2n/A-s/A-s) reported a solid set of 1H10 results, above expectations in terms of
EBITDA. 1H10 sales were up by 22% yoy to EUR 34.8bn, while EBITDA increased by 12%
yoy to EUR 8,878mn (consensus: EUR 8,675mn; UniCredit: EUR 8,756mn), still influenced by
consolidation effects as Endesa was fully consolidated as of June 2009. Electricity sold by
Enel surged by 15% yoy to 150.1 TWh, sold gas volume (to end users) was even up by 29%
yoy to 5.3bn cubic meters. Within the segments, the lower trading margin in the (Italian)
Generation and Energy Management division (1H10 EBITDA: EUR 1,229mn, vs. 1H09
EBITDA of EUR 1,877mn) was offset by a better operating performance at Endesa and the
consolidation effects. Operating cash flow was EUR 4.0bn, up by 37% yoy and indicating a
strong improvement in the second quarter (OCF in 1Q10 was just EUR 0.4bn), but it was
completely offset by capex and dividend payouts. Reported net debt was almost EUR 54bn
vs. EUR 51bn at FYE09. Credit ratios show some stability: Net debt/EBITDA is around 3.9x,
whereas FFO to net debt now is now around 17%, both ratios unchanged to YE09.
Asset disposals: The IPO of Enel Green Power is expected to occur in October.
Management is confident of its ability to sell a stake in its renewable subsidiary which might
generate proceeds of up to EUR 4bn to be used for debt reduction. Compared to the EGP
IPO, Enel has more certainty about the disposal of Endesa's high voltage grid in Spain, as it
has already come to an agreement with Red Electrica (transaction announced on July 1,
proceeds of EUR 1.4bn). Gas distribution activities in Spain might generate a further amount
in the upper triple-digit million EUR area. A further cash inflow should come from the
securitization of the tariff deficit. Enel still expects a first tranche between EUR 4 and EUR
6bn to come to the market in October 2010 (Endesa's share is around 44%).
Expected development of credit Despite a slightly increased net debt level during 1H10, the credit profile remained stable due
profile/rating
to consolidation affects. Credit ratios are fully commensurate with the current A- rating at S&P
and Fitch. Adjusted net leverage should decline to ca. 3.2x, once the asset disposal program
is completed and proceeds from the securitization of the Spanish tariff deficit arrive. In the
conference call, CEO Fulvio Conti was confident about meeting the EUR 45bn net debt target
by YE10 (but net of exchange effects).
Recommendation We keep our marketweight recommendation for the name. The deleveraging story is still
intact, although there is some event risk regarding the IPO of EGP and the securitization of
the tariff deficit. The 5Y CDS of Enel trades at around 143/153bp, which is slightly below that
of Italy (5Y CDS at around 165bp).

+ 49 89 378-12650
Industrials<BOOKMARK>
Event Saint Gobain reported a significant rebound in its operating performance thanks to initiated
cost savings measures as well as an improvement in trading conditions in 2Q10 relative to
1Q10 and the prior year. 1H10 sales increased 1.0% like-for-like (0.9% volumes and 0.1%
price) and 4.3% in reported terms to EUR 19,529mn, boosted by a positive (+3.0%) currency
impact and a recovery of demand in businesses benefitting from industrial manufacturing.
This is especially true for its Innovative Material segment, where sales grew 14% organically,
while sales in Construction Products remained largely stable and Building Distribution
revenues fell by 4.1%, reflecting the continuously difficult trading conditions in construction
markets. After a slow start into the year with a volume decline of 1.7%, volumes recovered, in
particular in the second quarter (+3.1%), helped by the rise in working days. Thanks to Saint

Gobain's cost cutting efforts with EUR 450mn in savings realized in 1H10, EBITDA increased
32% to EUR 2,220mn, with the margin recovering to 11.4% vs. 9.0%. EBIT doubled to EUR
1,445mn, helped by lower one-off items related to restructuring (EUR 193mn vs. EUR 264mn
yoy). Operating free cash flow was a negative EUR 386mn, reflective of a significant
investment in working capital as volumes increased and sales rose. Earlier in the quarter,
Saint Gobain announced that more than two thirds of shareholders have opted to receive a
script dividend. Net debt stood at EUR 9.1bn, down EUR 1.8bn yoy but up from EUR 7.6bn at
FYE09 as a result of seasonal patterns. Leverage improved to 2.1x, down from 2.7x yoy.
Expected development of credit In 2H10, we expect Saint Gobain to continue to benefit from robust growth in emerging
profile/rating
markets (Asian and Lat Am) as well as a continuing albeit - fragile - recovery in more mature
markets. With construction activity continuing to remain in the doldrums, the further
development in global industrial manufacturing (for example, the automotive industry) will
remain a key driver for Saint Gobain's operating performance, as a sharp rebound in housing
markets and in commercial construction remains doubtful, in our view. Cost savings will likely
account for a significant part of the expected improvement in the operating performance in its
Construction Products and Building Distribution segments. With EUR 450mn in cost savings
already realized in 1H10, the company has a further EUR 150 mn of identified savings to go in
the second half to achieve its EUR 600mn target by FYE10. All in all, the company sees
slightly higher operating income for 2H and a resulting significant yoy increase in operating
profits. Better earnings, a continuing restraint in capex and tight working capital should further
boost cash-flow generation in the seasonally stronger second half of any given year (in cash
flow terms). The company has already increased its free cash flow target (being defined as
FFO – capex) from EUR 1.0bn (already realized in 1H10) to EUR 1.4bn for the full year. Debt
levels are also likely to come down towards year-end as a result of seasonal cash flow
patterns, probably further helped by disposal proceeds from its Packaging unit, for which the
company sees the right timing for a disposal coming closer. In addition, Saint Gobain
announced the disposal of its Ceramics business for USD 245mn in 2Q. We do not expect
larger acquisitions for the time being, as its M&A activity is largely on hold, but Saint Gobain
hinted that smaller bolt-on transactions in growth markets are again possible going forward.
With respect to ratings, we do not see any rating pressure arising at this juncture.
Recommendation We maintain our marketweight recommendation on Saint Gobain's bonds. However, we

believe that, given the solid operating performance as well as our expectation of further
improving credit metrics, Saint Gobain's bonds offer value relative to other Baa2 rated issues,
for example in the chemicals universe such as Akzo Nobel, Lanxess, Solvay and K+S.
Jochen Schlachter (UniCredit Bank)

+49 89 378-13212
jochen.schlachter@unicreditgroup.de
Event EADS released 1H results largely in line with expectations, but raised its full year
guidance. On stable revenues of EUR 20.3bn in 1H, EBIT before one-offs halved yoy to EUR
0.6bn. As expected, the operating performance was trimmed by hedge rate deterioration and
higher R&D expenses, with the A380 continuously weighing on the results. Cash generation
was nevertheless better yoy, attributable to lower working capital financing needs, with free
cash flow at a minus EUR 0.7bn vs. an outflow of EUR 1.1bn a year ago. The company
continues to run a net cash position of EUR 8.9bn at the end of 1H (vs. EUR 8.1bn in 1H09),
confirming its strong financial position.
Credit profile/ Rating On the back of a higher number of expected deliveries and hence upside to the company's
development
profitability, management raised its FY10 guidance (now based on an assumption of a
EUR/USD 1.35 rate, previously 1.40). In detail, it now expects: i) revenues of more than EUR
44bn (previously stable), and ii) an EBIT before one-offs of about EUR 1.2bn (previously EUR
1bn). As already visible in the published results, EBIT will be increasingly impacted by a

deterioration of hedge rates and higher R&D in 2H that should more than offset positive
impacts from higher volumes and better pricing. The company kept its free cash flow before
customer financing guidance at break-even. Customer financing is, however, expected to be
lower than anticipated at the beginning of the year, i.e. at around EUR 0.6bn (previously EUR
1bn). Also positive was the company's reported surge in new orders by 79% yoy to EUR
30.8bn. Given the recent success at Farnborough, the company raised its order forecast with
gross orders expected above 400 (previously 250-300).
Name recommendation We keep our marketweight recommendation on the name.
Jana Arndt, CFA (UniCredit Bank)

jana.arndt@unicreditgroup.de
+49 89 378-13211
Event Schneider released excellent 1H results well above market expectations (net income of
EUR 735mn vs. expected EUR 572mn) that prompted the company to raise its full year
margin guidance. In 1H, sales increased by 10.5% (6.4% organically) to EUR 8.6bn. Top-line
growth accelerated in 2Q, with organic sales growth at 10% (2% in 1Q), primarily driven by the
industrial market and data-centers that rebounded first. Mirroring the benefit of the company's
One program, 1H EBITA before restructuring costs and Areva Distribution integration costs
jumped by 44% to EUR 1.3bn, translating into a margin of 15.2% (11.6%). Free cash flow
totaled EUR 457mn, trimmed by a working capital build-up of EUR 492mn. Despite the
acquisition payment for Areva Distribution of EUR 1bn, net debt remained at EUR 4bn, with
the net debt to EBITDA ratio staying at a robust 1.4x.
Credit profile/ Rating For 2H, Schneider expects organic sales growth to progress broadly in line with the level of
development
1H, with the later-cycle segments Buildings and Medium Voltage expected to show sequential
recovery. By region, growth momentum in the new economies should remain strong, but
demand in mature markets should also slowly improve. On the back of the strong
performance seen to date, Schneider raised its EBITA margin target from 14% to 15.5%.
Name recommendation Overall, the company's operating performance remains strong, which is, however,
already reflected in spread levels. We keep our marketweight recommendation on the
name.
Jana Arndt, CFA (UniCredit Bank)

+49 89 378-13211
Automotive<BOOKMARK>
Event MAN (A3s/BBB+s) reported 2Q10 results. For details, please refer to yesterday's Credit
Flash. In 2Q10, (industrial) revenues increased by 16% yoy (1H10: +19%) to EUR 3.6bn
(1H10: EUR 6.7bn), new orders increased by 64% yoy (1H10: +59%) and the order backlog
was unchanged at EUR 7.7bn qoq. In 2Q10, industrial EBITDA improved to EUR 384mn
(1H10: EUR 600mn) vs. EUR 213mn (1H09: EUR 404mn) yoy and industrial FCF (after div.)
improved to EUR 59mn (1H10: EUR 469mn) vs. EUR -214mn (1H09: EUR -149mn) yoy.
Industrial net debt decreased to EUR 1,280mn vs. EUR 1,385mn qoq. In LTM1H10, industrial
FFO/net debt (adj.) improved to 25% vs. 21% in FY09 and net debt/EBITDA (adj.) improved to
1.3x vs. 1.7x in FY09. At 2Q10, MAN Group had cash and marketable securities of EUR
1,019mn (vs. EUR 988mn qoq) at short-term group debt of EUR 1,324mn (vs. EUR 1,137mn
qoq). MAN's next capital market maturities are EUR 240mn in bonds in December 2010 and a
EUR 1.5bn undrawn loan in December 2011. In addition, the company has an undrawn EUR
300mn EIB loan, unused bilateral committed credit lines of about EUR 0.5bn, plus further
uncommitted credit lines and a pan-European ABS platform.

Impact On 7 April, S&P downgraded MAN by one notch to BBB+ with a stable outlook given the weak
FY09 results and a lower assessment of MAN's (truck) business risk profile. S&P's hurdle
ratios for MAN are a group industrial operating margin improving to a mid-single-digit level in
2010, markedly improved debt protection measures with industrial FFO/industrial debt of
about 40% and industrial debt/EBITDA ≤ 2.0x. Moody's expects: (a) the company to achieve
an average EBIT margin of around 6.0% through the business cycle and generate FCF over
such a period, and (b) Debt/EBITDA ≤ 2.0x. We expect MAN's FY10 credit metrics to be in
line with these hurdle ratios, but see no rating upgrade potential.
Recommendation We continue to have an overweight recommendation for MAN bonds in the iBoxx € Industrial
Goods & Services model portfolio based on: (a) the company's positive credit profile
momentum, and (b) as we believe that if VW (A3s/A-n/BBB+p) were to increase its
shareholding in MAN to a majority, this would mean a rating alignment with VW and tightening
potential of MAN bonds and CDS spreads by around 10-20bp. MAN 5Y CDS trades at
125/145bp, which is wider than VW's 110/115bp or Scania's 78/88bp and a convergence
trade looks attractive. Our favorite on the cash curve is still the MANAG 7.25% 05/16 bond.
Dr. Sven Kreitmair, CFA (UniCredit Bank)

+49 89 378-13246
sven.kreitmair@unicreditgroup.de
Event Continental (B1s/Bs/B+s) reported 2Q10 results. For details, please refer to yesterday's
Credit Flash. In 2Q10, revenues increased by 40% (1H10: 40%) yoy to EUR 6,658 mn
(1H10: EUR 12,654mn). Group EBITDA improved to EUR 936mn (EUR 1,824mn) yoy vs.
EUR 448mn (EUR 697mn) yoy. EBITDA in the Automotive Group again improved significantly
to EUR 478mn (EUR 950mn) vs. EUR 128mn (EUR 174mn) yoy, but also developed
positively in the more stable Rubber Group to EUR 497mn (EUR 913mn) vs. EUR 331mn
(EUR 547mn) yoy. FCF in 2Q10 weakened to EUR 274mn (EUR -101mn) vs. EUR 1,094mn
(EUR 553mn) on a working capital build-up. Reported net debt decreased to EUR 8.0bn vs.
EUR 8.2bn qoq, given the positive FCF generation in 2Q10. Credit metrics in LTM1H10
improved slightly, to FFO/net debt (adj.) of 20% from 19% qoq. At 1Q10, Conti's cash position
was EUR 1.2bn plus EUR 2.6bn in unutilized credit lines. Conti's debt maturities in 2010/11
are EUR 1.1bn. In August 2012, Conti will see a peak in debt maturities with EUR 7.4bn.
Conti's intention is to further balance its 2012 debt maturities. Conti's bank loan covenant
headroom is significant, with net debt/EBITDA of 2.28x (vs. 2.68x qoq) vs. the covenant of
4.25x. The covenant schedule is: 2Q-4Q10: 4.25x, 1Q-2Q11: 3.75x, 3Q-4Q11: 3.5x, 1Q12:
3.25x, 2Q12: 3x.
Impact Conti increased its OE production and RT market expectations for 2010, e.g., PCLT
production of +6% (previously: +2%) in Europe and +35% (previously: +26%) in NAFTA and
RT markets, with now +4-6% in Europe and NAFTA from previously +4%., Truck production
Europe from +9% to +46%, TT RT market Europe from +7% to +9% and NAFTA from +8% to
+16%. Subsequently, Conti already increased in early July its 2010 guidance and currently
expects sales growth of between +15% yoy (previously: 5-10%) and an adj. EBIT margin of
8%-8.5%; Automotive Group adj. EBIT of more than EUR 768mn vs. previous guidance of
"around EUR 576mn" (FY09: EUR 192mn); Rubber Group to sustain adj. EBIT (FY09: EUR
1,036mn) despite raw material price burden for tires at the current natural rubber price (> 3
USD/kg) of EUR 250mn in 2H10 vs. a relief of EUR 250mn in FY09; Total special items are
expected to be around EUR 100mn (FY09: EUR 1,755mn); interest result might increase to
EUR -750mn (previously: EUR 750-800mn) depending on the HY bond issue (FY09: EUR
-720.8mn). Conti stated that in FY10 its ability to generate FCF will be limited as capex will
rise (by EUR 400mn to around EUR 1.26bn), the restructuring of 2009 (special items: EUR
754mn excl. impairments) becomes cash effective (EUR 300mn in 2010) and due to a
working capital build-up as a result of the sales increase. Conti plans to pay no dividend in

FY11 for its FY10.
Recommendation Based on the further improved 2010 guidance and consensus expectations, we expect an
improvement of Conti's FFO/debt (adj.) to around 20% in FY10, which is closer to the BB
rating range. However, Conti's rating development is also influenced by the potential
combined debt leverage (capped by HY bond covenants) in a merger with Schaeffler.
According to a press comment of Schaeffler's CEO Geißinger (Source: Bloomberg), a merger
with Continental could begin in late 2011. Given the good liquidity situation of the company
and demonstrated access to HY bond markets, we continue to have a hold recommendation
on the name.

+49 89 378-13246
Event Volkswagen (A3s/A-n/BBB+s) reported 2Q10 results with a net income of EUR 1.25bn,
which was above the expected EUR 721mn. In 2Q10, automotive revenues increased by
23.5% (1H10: + 23%) to EUR 29.6bn (1H10: EUR 55.0bn). Automotive FCF improved to EUR
4.5bn in 1H10 versus EUR 2.2bn yoy. Reported automotive net cash increased to EUR
15.8bn vs. EUR 12.7bn qoq. In LTM1H10, automotive FFO/net debt (adj.) improved to 111%
vs. 45% at FYE09, which is significantly above the required hurdle ratios for VW's rating (excl.
the impact of the planned Porsche transactions, however).
Impact Main rating driver for VW is obviously the extent of a recovery in industry conditions, also in
2H10 on incentive expirations, but also the planned transactions regarding Porsche and the
commercial vehicle activities with MAN (A3s/BBB+s) and Scania (--/A-n). In 4Q09, VW took a
49.9% stake in Porsche AG for EUR 3.9bn. The current high level of automotive net cash
position safeguards VW's rating and opens the way to purchase Porsche Holding GmbH,
Austria, from the Porsche & Piech families for an EV of EUR 3.55bn in 2011. This in turn
enables the capital increase of Porsche SE by EUR 2.5bn in common shares and by EUR
2.5bn in preferred shares scheduled for 1H11. The put and call option for the Porsche
Zwischenholding GmbH for the remaining 50.1% stake on behalf of Porsche SE can be
exercised starting from 15 November 2012. The final stage is a merger between Porsche SE
and VW AG. Given the positive performance in 1H10, we believe that VW is on the way to a
stable rating outlook at S&P, assuming that all Porsche transactions will be executed as
planned and the company will not spend larger debt-financed cash amounts for its truck
activities (MAN/Scania cooperation). Nevertheless, we note that there is some litigation risk
and legal disputes for VW and Porsche regarding their M&A activities during 2008.
Recommendation We continue to have an overweight recommendation for VW bonds given that VW's 5Y CDS
trade wider than similar-rated BMW (A3n/A-n) and Daimler (A3n/BBB+n/BBB+p). On VW's
cash curve, most attractive in our view are the VW 5.375% 01/12 and VW 5.625% 02/12
bonds.

+49 89 378-13246
Consumers<BOOKMARK>
Event Japan Tobacco (Aa3s/A+s/A+s) reported 1Q10/11 results that were again burdened by
declining domestic tobacco consumption but were broadly in line with market
expectations in terms of operating profit. 1Q10/11 sales remained almost stable at JPY
474bn while EBITDA was down by 6.5% yoy to JPY 133bn. Sold cigarette volumes declined

in line with those of other tobacco firms. While the domestic cigarette volume declined by 3%
yoy to 35.9bn sticks, the volume of international cigarette business dropped by 6.9% yoy to
94.1bn sticks. However, price increases abroad were able to more than offset the declining
cigarette volume, in general reflecting the same picture seen at other tobacco companies. In
the domestic market, it was not possible to adjust cigarette prices to the same extent as
abroad. Operating cash flow decreased from JPY 33bn to JPY 27.5bn, which was fully
consumed by capex. Hence, dividend payments were fully financed via debt. However,
reported net debt decreased by JPY 152bn to JPY 704bn. The outlook for FY10/11 is very
cautious as the company expects a weaker EBITDA than reported for FY09/10 (JPY 513bn
vs. JPY 527bn). While EBITDA of the domestic tobacco business should drop by 13% yoy,
international tobacco activities should perform better (+8% yoy). With the planned tobacco
excise tax increase (JPY 3.50 per stick), which will become effective as of October 2010,
demand for cigarettes should further decline in Japan.
Expected development of credit For 1Q10/11, we calculate adj. net debt to EBITDA of 1.8x (FY08/09: 2.1x) and adj. FFO to
profile/rating
net debt of 35.1% (28%), similar to BAT's (Baa1s/BBB+s/BBB+s) credit profile. In our view,
credit metrics are more commensurate with a weak single A rating. Given the huge tax hike in
Japan from October 2010 onwards, we do not think that the credit profile is likely to improve in
FY10/11. In addition to the weak outlook, event risk might also be a trigger for spread levels.
First, the company has already stated that it is seeking further growth opportunities to offset
the weakening domestic tobacco business. Second, the Japanese government still holds a
50% stake in Japan Tobacco and might reduce this stake in the medium term. We note that
Moody's assigned an A1 rating on a stand-alone basis (baseline credit assessment of 5) in
May 2010, which might result in negative rating actions in case of a disposal of the 50% stake
by the Japanese government.
Name recommendation We keep our underweight recommendation on Japan Tobacco given the tight spread levels of
the outstanding bonds, the expected weak operating performance in FY10/11 and the
heightened event risk. 5Y CDS trade at +39/45bp (BBG).
Rocco Schilling (UniCredit Bank)

+49 89 378-15449
rocco.schilling@unicreditgroup.de
Event AstraZeneca's (A1s/AA-s/AA-s) 1H10 results beat market expectations in terms of sale
and operating profit. Despite the large exposure to the US (41% of sales), the first impact of
the health-care reform on the pharma industry and generic competition, the company was
able to report a solid operating performance in 1H10. Sales were up by 4% yoy to USD
16.8bn, supported by strong demand from emerging markets (+18% yoy), while the US and
Western Europe fell short with respect to the average sector growth rate which is expected to
stay between 4-6% in 2010. With respect to its blockbusters, sales of its Crestor (cholesterol
reducer; patent expiration: 2016; FY09 sales: USD 4.5bn) and Seroquel (treatment of
schizophrenia; patent expiration: 2011; FY09: USD 4.9bn) were up 25% and 10%,
respectively. Operating profit improved by 5% yoy to USD 7.5bn, resulting in an operating
margin of an impressive 45%. Due to higher working capital, operating cash flow decreased
but was large enough to cover capex, share buybacks and dividend payments. Net debt
remained almost unchanged at USD 1.2bn. The company updated its guidance for FY10 and
now expects an EPS of USD 6.35 to USD 6.65, up from USD 6.05 to USD 6.35. Future top-
line volume should be supported by the positive voting of the FDA advisors committee on
AZN's blood thinner Brilinta (competing drug: Plavix from Sanofi/BMS) and a favorable
decision of a US court regarding an end of patent protection on blockbuster Crestor.
Expected development of credit Although reported figures were good and an improvement of the credit profile made progress
profile/rating
during 1H10, the medium-term outlook provided in early 2010 is anything but rosy for
bondholders. With expected sales of USD 28 to USD 34bn by 2014, the top-line volume is
close to that reported for FY09 (USD 32.8bn), making bolt-on acquisitions necessary to satisfy

shareholders. The credit profile on a total debt basis continued to improve during 2Q10. We
calculate adj. total debt to EBITDA of 0.9x (FY09:1.0x) and adj. FFO to total debt of 80%
(72%). Although the company made good progress in deleveraging its balance sheet
following the acquisition of MedImmune for almost USD 15bn in 2007, headroom under
current ratings would be up to ca. USD 8-10bn, depending on the cash-flow generation at the
acquired target. At current multiples (EV/sales) of 2.5x to 3.0x, the company might only
acquire a sales volume of ca. USD 4bn under current ratings (assuming a fully debt-financed
acquisition).
Name recommendation We keep our underweight recommendation on the name given the tight spread levels and the
elevated event risk. 5Y CDS trade at +54/59bp (BBG).
Rocco Schilling (UniCredit Bank)

+49 89 378-15449
Event PPR's (---/BBB-s/---) 1H10 results published this morning beat market expectations in
terms of sale and EBITDA. 1H10 sales were up by 3.6% yoy to EUR 8.1bn (+1.7% on a
comparable basis) while EBITDA surged by 14.1% to EUR 895mn (consensus: EUR 877mn),
reflecting the recovery of its mature markets and the strong performance in Emerging
Markets, where sales increased by 11.3% yoy in 1H10 to EUR 1.1bn (13.4% of PPR's total
sales). The EBITDA margin improved from 10% to 11% yoy. Within the segments, Gucci
Group and Conforama reported organic growth of 8.5% and 4.4% in 1H10 while sales of
Puma and Redcats Group showed a weaker performance (sales: -5.1% and -1.2% yoy,
respectively). Operating cash flow (adjusted by interest payments) improved from EUR 35mn
to EUR 259mn as cash flow in 1H09 was burdened by higher investments in working capital.
Capex and payouts for acquisitions fully consumed the generated cash. Hence, dividends had
to be financed via additional debt. Reported net debt therefore increased from EUR 4.4bn to
EUR 4.9bn. At 1H10, PPR had cash of EUR 927mn and unused credit facilities of EUR 6.3bn.
The company refrained from providing a quantified outlook for the remainder of the year.
Development of credit For 1H10, we calculated adj. net debt to EBITDA of 3.0x (1H09: 3.7x) and adj. FFO to net
profile/rating
debt of 24.4% (17.9%), reflecting the massive reduction of net debt yoy (EUR 4.8bn vs. EUR
6.5bn). Rating pressure therefore further diminished and credit metrics are now fully in line
with S&P's requirements to keep the current rating. In May 2010, S&P affirmed PPR's rating.
During the last few years, management has repeatedly stated that it is committed to keeping
the investment grade rating, which, however, was not "bought" by the market when looking at
spread developments (for example, in comparison with Groupe Casino).
Name recommendation We remain on overweight for the issuer and have a positive stance towards CDS. 5Y CDS
trade at 153/158bp, wider than 5Y CDS of Imperial Tobacco (102/107bp) which is rated with
Baa3s/BBBs/BBB-s.
Rocco Schilling (UniCredit Bank) Carmen Hummel (UniCredit Bank)

+49 89 378-15449 +49 89 378-12252
rocco.schilling@unicreditgroup.de carmen.hummel@unicreditgroup.de
High Yield <BOOKMARK>

Event Rhodia announced strong 2Q results with strong cash generation and a further reduction in
net debt. Sales were EUR 1,330mn, up 25% excluding FX effects on higher volumes (+16%)
and firm pricing (+12%). Recurring EBITDA was a strong EUR 226mn at a margin of 17% as
higher raw material costs could be passed on to customers. Main drivers were Polyamide, the
care chemicals unit Novecare and Silicea. Free cash flow of EUR 101mn in the quarter was
used for a dividend of EUR 35mn as well as debt reduction, taking net debt levels to EUR

883mn (down from EUR 949mn).
Credit profile development The company does not see a slowdown of the strong trading environment and sees recurring
EBITDA at a level of more than EUR 200mn in 3Q. Debt levels will increase in 2H10 to
around EUR 1.2bn owing to the acquisition of 87.5% of Chinese specialty amines and
surfactants manufacturer Feixiang Chemicals, valued at USD 489mn. The company, which
generated 56% of its sales with intermediates for surfactants and 23% directly in the Home &
Personal Care, will be integrated into Rhodia's Novecare segment. Feixiang Chemicals will
continue to strengthen Rhodia's footprint in the fast growing emerging market and China in
particular. The deal is expected to close in 2H10.
Recommendation Overall, we see little reason to change our buy recommendation on the name. The RHA FRN
was quoted at 96.75/97.75 (cash) and the newly-issued RHA 05/18 at 100.75/101.75 (cash).
We continue to be sellers of protection at 345/375bp for the 5Y CDS.

+49 89 378-13212
Event HeidelbergCement released 2Q results which slightly exceeded analysts' forecast in terms
of sales and OIBD (gathered by Bloomberg). 2Q turnover increased by 10% to EUR 3,296mn
(forecast EUR 3,147mn), OIBD by 9% to EUR 693mn (forecast EUR 673mn), while operating
income rose 10% to EUR 492mn. The company reported a return to growth in the North
American market, a continuing recovery in Eastern Europe and Central Asia while in Asia
Pacific adverse weather conditions impacted volumes. Operating free cash flow after capex
reached EUR 161mn. Net debt rose slightly to EUR 9,066mn from EUR 8,964mn as a result
of dividend payments, FX effects and working capital requirements, overall in line with
seasonal patterns.
Credit profile development In 2H10, HC expects a continuing volume recovery in North America as stimulus programs
kick in. In Europe, the trend reveals a mixed picture (Northern Europe and the UK good,
Germany and Benelux slightly weakening, Central Asia recovering and a robust development
in Poland). Asia is expected to continue to grow. HC reiterated its focus on cost and
operational excellence and confirmed its cost savings target of EUR 300mn (EUR 250mn)
after delivering EUR 124mn in savings in 1H10. All in all, we expect HC to continue on its
deleveraging path, seeking to further improve its credit metrics. Asset disposals might offer
some upside potential in the medium term, but fire sales are clearly not on the agenda.
Following the recent refinancing, liquidity has significantly improved with EUR 1.7bn in short-
term maturities being covered by EUR 2.9bn in available liquidity (cash EUR 961mn and
headroom of EUR 2,502mn under credit facilities pro forma the recent EUR 650mn bond
issue).
Recommendation We continue to have a buy recommendation on HEIGR issues, expecting further deleveraging
going forward.

+49 89 378-13212
Event Wind Telecommunicazioni SpA (Ba3s/B+s/BB-s) released decent 2Q10 results, given
the challenging market environment and the results of VOD Italy published recently (TI
will publish its results on 5 August). In 2Q10, revenues and EBITDA increased yoy on a
comparable basis by 2.6% and 2.7% to EUR 2,892mn and EUR 1,065mn, respectively. By
this calculation, 1H09 EBITDA was revised upwards by EUR 41mn, as the company has
revised its approach to customer acquisition costs beginning 1 January 2010, which are
capitalized over a period of 18 months. Of course, this has positive implications on EBITDA

without any operating merits and will provide a more positive net debt to EBITDA ratio than
the company would have shown otherwise. If we annualize the 1H10 effect, it would improve
EBITDA by around EUR 80mn on a full-year basis. Given the revised treatment of SACs, the
company revised its full-year guidance for EBITDA and capex from April this year upwards:
WIND TELECOMUNICAZIONI: FY10 GUIDANCE DEVELOPMENT
as of Apr-10 10-Jul
Revenues low-to-mid single digit revenue growth low-to-mid single digit revenue growth
EBITDA EUR 2,050 - 2,100mn EUR 2,120 - 2,170mn
Capex EUR 850 - 900mn EUR 900 - 1,000mn
Source: Company info, UniCredit Research
The company's net debt declined by EUR 250mn to EUR 8,291mn in 1H10, reflecting
relatively good FCF generation during the quarter. However, we do not expect that this FCF
can be annualized going forward. Given that the company has a capex target of at least EUR
950mn and spent only EUR 339mn in 1H10, we assume that the FCF of 1H10 will be used for
additional capex in 2H10. Moreover, FCF benefitted from W/C-related cash inflows in 1H10,
which cannot be expected to be repeated in 2H10. Hence, we expect no or even slightly
negative FCF in 2H10. The reported net debt/EBTDA improved slightly to 3.9x from 4.0x qoq,
but one should keep in mind that without the above-mentioned revised treatment of SACs the
leverage would have been closer to 4.0x.
Expected development of credit Wind repaid in advance in January 2010 loan maturities scheduled in June 2011 (Tranche A1)
profile/rating
for an amount of EUR 336mn, and has now requested early repayment of an additional EUR
360mn, including the remaining Tranche A1 of senior debt (EUR 337mn in December 2011).
Wind's cash position at the end of 1H10 was EUR 438mn versus EUR 584mn at YE09. We
note that Wind has remaining scheduled repayments of EUR 494mn in 2012 and EUR 1.5bn
in 2013 as well as in 2014 plus second lien notes (~EUR 664mn), which will lead to
refinancing needs. The main question is when? Obviously, the above-mentioned early
repayments move the next scheduled repayment to 2012 and with the company's expected
FCF of roughly EUR 225-250mn p.a. (UniCredit estimate), it will likely be in a position to meet
this repayment (2012) unless extraordinary cash outflows occur (see below). Hence,
theoretically the company could wait to refinance its 2013 maturities until 2012. However, this
might not be the case and the company might likely start to refinance its second lien first due
in 2014 to make a refinancing of its senior debt possible. Moreover, the company may
consider the use of senior secured bonds to refinance its senior bonds to receive more
financial flexibility via the absence of amortization payments.
As already mentioned in the press recently, Wind confirmed that a tax audit on Wind
confirmed the view that Wind has to pay 12.5% withholding taxes on investigated interest
payments, which could lead to a potential cash outflow of EUR 70mn. The tax assessment
has not yet been issued by the tax authority, and as such no payment obligation has been
realized. We assume that it is unlikely that Wind would have to pay the amount in a lump sum
but that it would pay the amount in installments over a couple of years. Hence, we do not see
a significant threat from this potential tax payment.
Another potential cash outflow could stem from the WIND-Fastweb-Vodafone NGN initiative.
A few months ago, Wind, Fastweb and Vodafone proposed to develop a new generation
network, i.e. FTTH network. It is envisioned that the initial rollout will involve the 15 largest
Italian cities (approximately 10mn inhabitants) over a period of five years with a corresponding
investment of EUR 2.5bn. The company commented that this project would not increase
capex over time, while it requires more of an equity investment in a new JV. Wind brought
forward a simple calculation to demonstrate the potential financial impact from such an

initiative if it is accepted by the Italian government and regulatory authorities: EUR 2.5bn
divided by three involved parties over five years would mean a maximum investment of EUR
167mn per annum for Wind, if the JV would not make use of debt investments. Wind indicated
that this would be an annual investment, which is covered by internal cash flows, even though
it would delay deleveraging. According to our calculations, it would reduce FCF generation
significantly and would make the above-mentioned refinancing need a more urgent topic.
In our opinion, the company's operating performance is still healthy, especially in comparison
to Vodafone's Italian mobile business: Vodafone won 396,000 subscribers in 1H10, while
Wind had 858,000 net adds. Vodafone's service revenues in Italy declined by 2.9% in 1H10,
while Wind increased its mobile service revenues by 6.0% yoy. While mobile ARPUs were
under pressure due to mobile termination rate cuts, this is an even bigger achievement of
Wind SpA.
Name recommendation We continue to have a hold recommendation for WINDIM bonds, given the resilient
operating performance of the company and the current valuations, which already
discount for the above-mentioned risks.
Stephan Haber, CFA (UniCredit Bank)

+49 89 378-15192
stephan.haber@unicreditgroup.de
Banks<BOOKMARK>
Event Caja Madrid (A1n/Awn/An) reported slightly better-than-expected results, but low
quality 2Q10 numbers due to boosted trading income, which absorbed a substantial
increase in impairments on financial as well as also on non-financial assets. Net profits
increased by 67% to EUR 122mn (down 44% yoy) in 2Q10. Total revenues increased by 34%
qoq to EUR 1,055mn (down 10% yoy), despite the continuation of the declining trend in net
interest income (down 5% qoq to EUR 468mn) as particularly trading income was boosted (up
1.5x qoq and still 82% yoy to EUR 358mn), which we consider as unsustainable. On a
positive note, opex declined qoq by over 7% to EUR 398mn, thus driving pre-provision
income much higher (up 82% qoq, and only down 16% yoy to EUR 657mn). Loan-loss
provisions increased surprisingly strong qoq (up 60%) to EUR 450mn. In addition, Caja
Madrid recorded EUR 95mn in provisions for non-financial assets (probably real estate on the
balance sheet), which was partly funded by EUR 43mn in capital gains. In this context, the
caja reported a declining NPA ratio to 5.39% from 5.43% in 1Q10, due to the second quarter
in a row with declining NPL formation (down EUR 88mn in 2Q10 after a reduction of EUR
82mn in 1Q10 and an increase of EUR 88mnn in 4Q09 and an increase of EUR 131mn in
2Q09). We note, however, that the NPA figure includes all interest bearing items of the
balance sheet (i.e., securities portfolio) and off-balance sheet credit risk. We calculate the
NPL ratio by dividing non-performing loans with the gross loan book, getting 6.0% in 2Q10,
down from 6.2% in 1Q10 and 6.4% in 2Q09. This reduction might, however, be driven by
major write-offs (EUR 367mn vs. EUR 204mn in 1Q10), reducing the amount of NPLs to EUR
7,248mn from EUR 7,361mn in 1Q10. Furthermore, these NPLs are covered by a meager
45% (up from 43%) with generic (EUR 765mn) and specific provisions (EUR 2,762mn).
Foreclosed assets increased slightly qoq (up EUR 49mn to EUR 1,098mn), while acquired
real estate assets even declined marginally qoq (down EUR 42mn to EUR 1,265mn) in 2Q10
and the total provisioning coverage was 26%. The breakdown of real estate assets on the
balance sheet is dominated by terminated living units (54.5%), followed, however, by not built-
up land (42.3%), which certainly will require additional provisioning under the new
provisioning requirements in FY11. Caja Madrid's core Tier-1 ratio declined by 30bp to 6.6%,
while the Tier-1 ratio dropped by 20bp to 8.7% due to a reduction of EUR 412mn in core Tier-
1 capital (nota bene: the Tier-2 capital increased by EUR 489mn, which is why the total
capital ratio increased by 16bp to 10.76%. Regarding the current funding issue for Spanish

banks, we point out that the caja's maturities within the residual 2H10 and FY11 period
amount to EUR 5,624mn, while liquidity reserves with the ECB amounted to EUR 11.4bn.
In addition, Caja Madrid announced yesterday that its board of directors approved the "cold"
merger (Sistema Institutional de Proteccion, SIP) with Caja de Ahorros de Valencia, Castellón
y Alicante (Bancaja, A3n/--/BBBs), Caja Insular de Ahorros de Canarias (Baa1n/--/--), Caja de
Ahorros y Monte de Piedad de Ávila (Baa3s/--/--), Caixa d’Estalvis Laietana (--/--/BBB-wn),
Caja de Ahorros y Monte de Piedad de Segovia (Baa3s/--/--), and Caja de Ahorros de La
Rioja (A3n/--/--).
Impact Caja Madrid's 2Q10 results are credit negative as the loss-absorption capacity of the
P&L continues to weaken and the pressure from asset quality deterioration has not
declined, despite the decreasing NPL ratio. In particular, the new provisioning requirement
will put additional pressure on Caja Madrid's profitability and without such strong trading
income, these additional provisions might be difficult to absorb in FY11. We note that the
merger still requires the more challenging approvals from the general assemblies. Overall, we
believe that CAJAMM will not benefit from the current momentum due to the fact that: (i)
JUPITER (the new caja group) just passed the EU stress test with a not so comfortable Tier-1
ratio of 6.3% and (ii) we have our concerns regarding the quality of the bank's loss-absorbing
capacity: the EU stress test assumes an adverse 2Y cumulative pre-impairment income of
EUR 5,543mn, which compares with EUR 1,017mn in 1H10 – a figure, which will not be
drastically increased in the near future, if any, in our view.
CAJA MADRID: KEY FINANCIAL HIGHLIGHTS
Figures in EUR million 2Q09 1Q10 2Q10 qoq yoy 1H09 1H10 yoy
Net interest income 716 492 468 -4.8% -34.6% 1,471 960 -34.7%
Net fees & commissions 219 177 199 12.6% -9.0% 405 376 -7.1%
Trading income 197 103 358 248.7% 82.0% 392 461 17.7%
Other income 44 18 29 65.8% -33.8% 84 47 -44.4%
Total income 1,176 789 1,055 33.7% -10.3% 2,352 1,844 -21.6%
Operating expenses -394 -429 -398 -7.2% 1.1% -812 -827 1.9%
Pre-provision income 782 360 657 82.4% -16.0% 1,540 1,017 -34.0%
Loan loss provisions -476 -282 -450 59.7% -5.5% -800 -731 -8.6%
Attributable net income 218 73 122 66.8% -44.2% 575 195 -66.1%
Cost-income ratio 33.5% 54.4% 37.8% -16.6 pp 4.3 pp 34.5% 44.9% 10 pp
Figures in EUR billion 2Q09 1Q10 2Q10 qoq yoy - - -
Total assets 191.7 191.1 199.1 4.2% 3.9% - - -
NPA ratio 5.55% 5.43% 5.39% -4 bp -16 bp - - -
NPA coverage 41.0% 44.8% 46.5% 2 pp 6 pp - - -
Shareholders’ equity 10.5 10.3 10.4 0.4% -1.6% - - -
Core Tier-1 ratio 6.5% 6.90% 6.60% -30 bp 9 bp
Tier-1 ratio 8.6% 8.90% 8.70% -20 bp 13 bp
Source: Caja Madrid, UniCredit Research
Dr. Dietmar Tzschentke (UniCredit Bank)

+49 89 378-12960
dietmar.tzschentke@unicreditgroup.de
Event Banco Pastor (A3n/--/--) just reported net profits of EUR 61mn in 1H10 (down 25% yoy).
The reduced bottom-line result is a combination of weaker core income (NII down 4.2% yoy to
EUR 261mn) and plummeted trading gains, which supported the prior year's result (down
76% yoy to EUR 77mn). Thus, even much lower loan-loss provisions (down 69% yoy to EUR
120mn) could not reverse the trend. The reported NPL-ratio stood at 5.04%, slightly up from
4.9% in 1Q10, while NPL coverage declined by 5pp to 51% due to the much lower LLPs. The

core Tier-1 ratio reached a sound 8.31% and the Tier-1 ratio stood at a strong 10.43%.
Impact At first glance, Pastor's results are credit negative due to the expected weakening of
core income and the unexpected low LLPs, which negatively impacted the NPL
coverage. Pressure from asset quality is only taking a breather, in our view. Like BBVA, we
would have liked to see a strengthening of the provisioning base.
BANCO PASTOR: KEY FINANCIAL HIGHLIGHTS
Figures in EUR million 2Q09 1Q10 2Q10 qoq yoy 1H09 1H10 yoy
Net interest income 137 137 128 -6.5% -6.4% 273 265 -3.0%
Net fees & commissions 41 35 35 -1.9% -14.6% 82 70 -14.7%
Trading income 265 56 21 -61.7% -92.0% 289 77 -73.4%
Other income 11 2 -2 -176.5% -115.9% 28 1 -98.0%
Total income 453 230 182 -20.9% -59.8% 672 412 -38.6%
Operating expenses -92 -91 -98 7.1% 6.7% -180 -189 5.1%
Pre-provision income 362 139 84 -39.3% -76.7% 492 223 -54.6%
Loan loss provisions and other impairments -371 -90 -30 -66.8% -92.0% -398 -120 -69.9%
Attributable net income 37 34 27 -21.3% -26.7% 82 62 -25.0%
Cost-income ratio 20.2% 39.7% 53.7% 1404 bp 3349 bp 26.8% 45.9% 1910 bp
Figures in EUR billion 2Q09 1Q10 2Q10 qoq yoy
Total assets n.a. n.a. n.a. n.m. n.m.
Loan-deposit ratio 148% 145.39% 143.24% -215 bp -440 bp
NPL ratio (reported) 4.64% 4.9% 5.4% 46 bp 76 bp
NPL coverage (reported) 54.0% 56.1% 51.0% -510 bp -300 bp
Risk Weighted Assets 19.2 18.9 18.9 -0.2% -1.8%
Core Tier-1 ratio 7.4% 8.30% 8.30% 0 bp 90 bp
Tier-1 ratio 10.0% 10.5% 10.4% -10 bp 40 bp
Source: Banco Pastor, UniCredit Research

+49 89 378-12960
Event Erste Group Bank (Aa3n/An/As) reported EUR 217mn in net attributable profit for 2Q10
(down 17% qoq and 15% yoy), slightly missing market consensus of EUR 221mn,
apparently only due to higher taxes and higher profits attributable to non-controlling
interests. Pre-tax profits of EUR 363mn exceeded consensus of EUR 341mn. On a y-o-y
comparison, the bottom-line result declined by 4% to EUR 472mn. The resilient 2Q10 result
was driven by sound net interest income and higher fees & commissions (up 3% qoq or 6%
yoy to EUR 1,361mn and 5% qoq or 11% yoy to EUR 494mn, respectively). In addition, lower
opex strengthened pre-provision income, enabling the bank to absorb further increasing loan-
loss provisions (up 4% qoq and 6% yoy to EUR 553mn). On the back of a slowdown of new
NPL formation (up 5.9% qoq), the NPL ratio increased to 7.3%. The higher provisioning
increased the NPL coverage, which reached 59.7% in 2Q10. Solvency ratios continued to
improve, with the core Tier-1 ratio reaching 8.6%, up 30bp YTD, and the Tier-1 ratio
increasing 20bp qoq and 40bp yoy to 9.6% (calculated based on total risk; only based on
credit risk, the Tier-1 ratio stood at 11.2%, up from 10.8% in FY09). Liquidity risk was further
contained due to an increasing deposit base (loan-deposit ratio down to 112%). In addition,
the bank mentioned that it already covered more than 50% of LT funding.
Impact Erste Bank's results are credit positive, as core income showed the required
improvements to absorb still increasing loan-loss provisions. Management expects
elevated risk costs for FY10 at similar levels of FY09, which means a substantial slowdown in
2H10 as LLPs in 1H10 were 22% higher yoy. However, risk is tilted rather to the downside in

this respect, but the improved risk-absorbing capacity of the P&L might offset it.
ERSTE BANK: FINANCIAL HIGHLIGHTS
Figures in EUR million 2Q09 1Q10 2Q10 yoy qoq

Net interest income 1,279 1,324 1,361 6.4% 2.8%
Net commission income 444 472 494 11.2% 4.7%
Trading income 199 141 99 -50.4% -30.0%
Other revenues -24 -50 50 n.m. n.m.
Total revenues 1,898 1,886 2,003 5.6% 6.2%
Operating expenses -984 -953 -945 -4.0% -0.8%
Loan-loss provisions -522 -531 -553 6.0% 4.1%
Pre-tax income 392 402 505 29.0% 25.6%
Attributable net income 260 255 217 -16.7% -15.1%
Return on Equity (net) 10.3% 7.7% 6.7%
Cost-income ratio 51.9% 50.5% 47.2%
Figures in EUR billion 2Q09 1Q10 2Q10 yoy qoq
Total assets 204.2 208.0 209.1 2.4% 0.5%
Risk weighted assets 107.8 105.9 104.9 -2.7% -1.0%
Shareholders’ equity 10.1 13.3 12.9 27.7% -3.1%
Tier-1 ratio 7.3% 9.4% 9.6%
Total capital ratio 11.1% 12.8% 12.9%
Source: Erste Bank, UniCredit Research

+49 89 378-12960
Insurance<BOOKMARK>
Event SCOR (A2s/As/As), France's largest reinsurer, reported 2Q10 net income of EUR
120mn, up 31.9% from EUR 91mn in 2Q09, above market expectations. Results were
driven by rising income from financial investments amid higher market volatility. SCOR
posted a net income of EUR 156mn in 1H10, compared to EUR 184mn in 1H09. During 1H10,
SCOR had premium income of EUR 3,258mn, up 8% yoy (+5% at constant exchange rates)
excluding equity-indexed annuity business in the US and after normalizing the level of
Property & Casualty business in 1H09. The operating margin was 6.0% for SCOR Global Life,
while return on invested assets (excluding funds withheld by cedants) was 4.0%, and
annualized ROE reached 7.7%. Shareholders’ equity rose to EUR 4.2bn, +8.1% compared to
EUR 3.9bn at 31 December 2009, equivalent to EUR 23.2 book value per share, while
operating cash flow was EUR 208mn. In addition, SCOR says that the first quarter
demonstrated the Group's ability to absorb an abnormally high concentration of natural
catastrophes (Chile, Haiti, Xynthia, etc.).
Gross written premiums for Life and Property & casualty reached EUR 3,258mn, remaining
stable compared to 1H09 when they were EUR 3,254mn (+0.1% but -2.7% at constant
exchange rates). This stability is principally due to the unfavorable impact of the planned and
deliberate reduction in equity-indexed annuity business and the development of Property &
Casualty reinsurance. Excluding equity-indexed annuities business in the US and by
normalizing the level of Property & Casualty business in 1H09 to the annual growth rate of
2009, premium income grew by 8% yoy (+5% at constant exchange rates). Bolstered by
positive renewals, SCOR Global P&C's (SGPC) premium income recorded growth of +3.8%
at EUR 1,764mn over 1H10 (+0.5% at constant exchange rates). The net combined ratio
stands at 102.8% in 1H10, compared to 108.6% in 1Q10 and 97.5% in 1H09. Natural
catastrophes contributed 13.1 points of net combined ratio over 1H10 (vs. 20.2 points in

1Q10), while 2Q10 saw natural catastrophe losses in line with the budget (6 points).
The Annual General Meeting of 28 April 2010 decided on a dividend payment of EUR 1 per
share, i.e., a payout ratio of 48%. The total sum of dividends distributed for 2009 reached
EUR 179mn, EUR 42mn being paid in shares and EUR 137mn in cash. During 1H10, the
Group continued to reduce its debt ratio and currently has a leverage position of 10.6%
compared to 14.6% at the end of 2009. Net investments, including cash, stood at EUR 21.7bn
at 30 June 2010 (December 2009: EUR 20.0bn), consisting of bonds (48.1%), funds withheld
by cedants (37.4%), cash and short-term investments (6.3%), equities (4.4%), real estate
(2.1%) and other alternative investments (1.7%). Liquidity reached EUR 1.4bn at 30 June
2010, (December 2009: EUR 1.7bn). SCOR says its high-quality fixed income portfolio
(average rating AA) maintains a relatively short duration of 3.4 years (excluding cash and
short-term investments; December 2009: 3.7 years). Investments in inflation-linked bonds
amounted to EUR 1.0bn at 30 June 2010.
Impact SCOR is on track with its integration, while its resilient operating performance and
consistently positive quarterly results are supported by its conservative business and
investment model, and solid financials. We have a marketweight recommendation on the
name. The reinsurer's sub-debt bond SCOR 6.154% 07/16-49 is part of our recommended
portfolio in "Bank & Insurance Watch".
SCOR: FINANCIAL HIGHLIGHTS
Figures in EUR millions 1H10 1H09 % change 2Q10 1Q09 % change

Gross written premiums 3,258 3,254 0.1% 1,645 1,693 -2.8%
Property & casualty 1,764 1,699 3.8% 855 831 2.9%
Life 1,494 1,555 -3.9% 790 862 -8.4%
Operating income excl impairments 234 312 -25.0% 178 159 11.9%
Net income 156 184 -15.2% 120 91 31.9%
Investment income 356 149 NM 184 153 20.3%
Net return on investments 4.0% 1.0% 4.1% 3.6%
Property & casualty combined ratio 102.8% 97.5% 97.0% 95.8%
Life operating margin 6.0% 5.1% 6.0% 5.5%
Return on equity 7.7% 10.6% 11.9% 10.5%
Investments (excl participations) 21,663 19,542
Reserves (gross) 23,194 20,848
Shareholders' equity 4,216 3,635
Source: Company data; UniCredit Research
Luis Maglanoc, CFA (UniCredit Bank)

+49 89 378-12708
luis.maglanoc@unicreditgroup.de

Corporate Snapshots<BOOKMARK>
Company Comment Company Comment
(Analyst) (Analyst)
ELEPOR 1H10 EBITDA of EDP (A3s/A-n/A-s) increased by 14% yoy to AALLN Anglo published strong 1H10 results above market consensus.
(CK) EUR 1,830mn (UniCredit (E): EUR 1,756mn), supported by (JA) In 1H, revenues advanced by 35% to USD 15bn, while
stronger Brazilian activities, and the higher installed capacities EBITDA surged 81% to USD 5.4bn. Besides improving trading
in its wind business. Furthermore, acquired network assets conditions, the strong result was supported by benefits from
from Gas Natural also propelled 1H10 earnings as these the company's asset optimization and procurement programs
activities were consolidated for the first time. FFO was EUR with a run rate of USD 1bn in 1H. Owing to strong cash
1,439mn, + 12% yoy. Free cash flow was negative, also due to generation that could finance capex and the company's
extraordinary tax payments in Portugal. Net debt consequently subscription to the De Beers rights issue, net debt decreased
rose by EUR 2.1bn to EUR 16.1bn. On a reported basis, net from USD 11.3bn at FYE09 to USD 10.9bn. In view of the
debt to EBITDA was 4.4x, unchanged versus YE 09 and YE08. strong performance, the company's reinstatement of dividend
EDP spreads are still influenced by economic uncertainties in payments is also of no concern. The outlook for FY10 remains
the countries located in the European periphery and a potential vague on the back of an increasingly uncertain outlook for the
reduction of the government stake. We therefore keep our global economy and with leading indicators signaling less
underweight recommendation. 5Y CDS trade at 155/165bp, favorable conditions. However, Anglo repeated its confidence
slightly below those of Portugal (around 180bp). Conference in the outlook for the industry in the medium to long term. We
call at 10am (UK time), +44 207 162 002 keep our marketweight recommendation on the name.
EDF EDF (Aa3s/A+s/A+s) released improved figures for 1H10 SANFP Yesterday, Mr. Chris Viehbacher, CEO, stated that Sanofi's
(CK) above expectations. Sales increased by 7.7% yoy to EUR (RS) (A1s/AA-s/AA-s) board would support a bid for US-based
37.5bn, whereas EBTIDA was up 4.4% to EUR 10.4bn (market biotech company Genzyme (Baa2s/A-s/---) up to a share price
consensus of EUR 10.0bn). Around half of the revenue growth of USD 70. As the share price of Genzyme already rocketed
was related to consolidation effects, in particular the from 52 to USD 71 during the last two weeks, a bid would cost
acquisition of SPE in Belgium and of the 49.99% stake in ca. USD 18.6bn at least. As there are a couple of "active"
Constellation Energy in the US. Excluding consolidation and shareholders like Mr. Carl Icahn invested in Genzyme, it
currency effects, organic sales growth was positive at + 2.1% should be very difficult for Sanofi to gain the majority in the
yoy (had been negative in 1Q10). Net debt/EBITDA is 2.5x, company assuming an offer of USD 70 per share. A premium
which is at the lower end of the company's guidance. The of 20% would result in a transaction value for Genzyme's
group confirmed its FY10 guidance: 1. Organic EBITDA growth equity of USD 22.4bn. Assuming a fully debt-financed
between 3% and 5%, and 2. Net debt between 2.5x and 3.0x. acquisition, adj. total debt to EBITDA would increase to 2.5x
3. Stable dividend. We keep our marketweight (FYE09: 1.1x) which would be in-line with that of Roche
recommendation for the name. (A2s/AA-s/AA-s) immediately after the Genentech acquisition.
VALEBZ Vale released strong 2Q10 results, primarily reflecting higher However, as we regard Sanofi's business model as more risky
sales prices for iron ore and pellets and higher shipment than that of Roche, (multi-notch) rating actions are very likely
(JA) in our view. We keep our underweight recommendation on the
volumes in almost all of the company's products. 2Q EBITDA
name and remain protection buyer in the name.
surged by 95% qoq to USD 5.58bn on a revenue increase by
45% qoq to USD 9.93bn. Despite the robust internal cash Belgacom Belgacom just released solid 2Q and 1H10 results. In 1H10,
generation (FOCF of about USD 1.4bn), net debt increased (BELGBB) revenues increased by 10.3% (2Q10: 10.7%) to EUR 3,305mn,
from USD 12.4bn at the end of 1Q to USD 17.7bn, due to (SH) excluding non-recurring revenue. The growth was driven by
acquisition-related cash outflows of USD 5.2bn, mainly relating the full-consolidation of BICS, including MTN ICS, and a solid
to the acquired fertilizer assets. Thanks to the strong operating underlying business trend (organic revenue growth 0.3%).
performance, debt leverage nevertheless declined from 2.4x in Group EBITDA in 1H10 rose by 0.5% yoy (organic growth: -
1Q to 1.8x. Vale yesterday also announced that it intends to 2.1%) to EUR 999mn, with the EBITDA margin remaining
buy the Brazilian copper producer Paranapanema for USD stable at 30.2% as a result of a strong focus on overall cost
1.1bn. Overall, the announcements underpin that the efficiencies, including initiatives enhancing product profitability
company's operating performance remains robust, while while maintaining strict control of expenses. FCF in 1H10
generated cash will continuously be used for M&A activities. increased to EUR 598mn compared to EUR 362mn for 1H09,
We keep our marketweight recommendation on the name. positively influenced by timing differences related to working
MNDILN Ahead of its 1H figures release on August 10, Mondi just capital and one-off items. The reported net debt to EBITDA
issued a trading statement confirming that the group's ratio was up to approximately 0.8x from 0.7x last quarter,
(JA) mainly driven by dividend payments. Based on Belgacom's
underlying operating profit is expected to be considerably
higher yoy. We keep our buy recommendation on the name. solid results so far, the company upgraded its revenue outlook
for 2010: Group revenues are expected to increase now by 9-
RENTKL Rentokil released 2Q10 results that revealed further operating 10% versus the previously announced 8%-9% due to the
(JA) improvements. Sales growth (for continuing operations) consolidation of BICS as of 1 January 2010. EBITDA should
remained muted in the quarter, down at 0.8% (at constant be approximately 30% versus the previous 30-31% and the
exchange rates, CER) to GBP 627mn. Operating profit from capex-to-revenue ratio should be stable at 10% yoy. We keep
continuing operations (before impairments, amortization and our underweight recommendation for the name, despite the
one-offs) improved by 18.3% at CER to GBP 61mn, positively fact that the company is more than 50% owned by the Belgian
influenced by cost savings that are materializing ahead of plan. government. Belgacom bond spreads continue to trade
Despite continuing challenging market conditions, as also relatively tight compared to peers and we regard the downside
reflected in strong price pressure, the company stuck to its full risk, e.g. from M&A activities and shareholder remuneration, as
year expectations, expecting continued profit enhancement, higher than upside potential.
supported by its internal measures. Rentokil also repeated its
commitment to reduce net debt to below GBP 1bn by YE (GBP
1bn at 1H) and to restore its credit metrics to a BBB flat rating.
We keep our marketweight recommendation on the name.

Company Comment Company Comment

(Analyst) (Analyst)
RENAUL Renault (Ba1s/BBs/BBs) reported 1H10 results with a net MICH Michelin (Baa2s/BBBn/BBB-s) reported 1H10 net income of
(SK) income of EUR 823mn, above the consensus expectation of (SK) EUR 504mn, which was above the expected EUR 369mn. The
EUR 377mn. Renault expects the global automotive market to operating margin improved to 9.8% vs. 4.0% yoy. FCF after
grow by approximately 8% in 2010 compared to 2009, despite dividends weakened to EUR -90mn vs. EUR 478 mn yoy on a
an estimated 7%-9% decline in the European market (previous significant working capital build-up of EUR 651mn yoy.
expectation for Europe was -10%). 1H10 performance and FFO/net debt in LTM1H10 improved to 29%, which is now
results are ahead of plan according to the company. In an close to S&P's rating hurdle ratio of 30% and rating pressure
unusually uncertain environment in 2H10, Renault continues to therefore eased. For FY10, the company said that the clear
focus on its action plans, while closely monitoring changes in rebound in the tire markets is expected to continue in 2H10,
the overall economic environment. 3Q10 will be important in although the pace of economic recovery will vary from one
determining visibility for FY10 and the start of 2011 in the region to another. While rising raw material costs will have a
automotive market. Renault’s objective for 2010 remains to negative impact on 2H10 consolidated results (and reduce full-
generate positive FCF and increase market share in the year income by EUR 600-650mn), Michelin will benefit from
Group’s main markets. Just like Peugeot, the company pointed the price increases introduced in 1H10. In addition, the Group
to a more difficult 2H10. We continue to have a marketweight is announcing an increase of around 3% in its passenger car
recommendation on RCI Banque (Baa2s/BBB-s) and a hold and light truck replacement tire prices in Europe starting in
recommendation on Renault. September, thereby confirming its commitment to a responsive
pricing policy. In this environment, Michelin reaffirms its FY10
targets of a sales volume increase of at least 10%, positive
FCF and an operating margin before non-recurring items of
close to 9%. We continue to have a marketweight
recommendation on the name.
Analysts: CK=Christian Kleindienst, JA=Jana Arndt, RS=Rocco Schilling, SH=Stephan Haber, SK=Sven Kreitmair Source: UniCredit Research
iTraxx Page
ITRAXX INDEX LEVELS (YESTERDAY'S CLOSING)
Series 13
Europe Indices 5Y Mid Price Daily Change Europe Indices 10Y Mid Price Daily Change
Europe 104.7 -1.3 Europe 111.5 -1.3
HiVol 150.4 -2.9 HiVol 157.3 -3.5
X-Over 479.0 -6.6 X-Over 470.3 -7.3
Europe Subsectors 5Y Mid Price Daily Change Europe Subsectors 10Y Mid Price Daily Change
FIN sen 5Y 114.9 -0.6 FIN sen 10Y 121.1 -1.4
FIN sub 5Y 182.1 0.2 FIN sub 10Y 187.6 -0.2
Europe Indices 3Y Mid Price Daily Change Europe Indices 7Y Mid Price Daily Change
Europe 3Y 85.1 -1.6 Europe 7Y 108.0 -1.0
HiVol 3Y 133.7 -2.2 HiVol 7Y 153.8 -3.3
Source: Bloomberg, UniCredit Research
ITRAXX INTRADAY AS OF JULY 29, 2010
iTraxx Europe Series 13 Version 1 5Y Bund Future (RS) iTraxx Europe Crossover Series 13 Version 1 5Y Dax Future (RS)
107 128.25 490 6080
128.2 6100
106 485
128.15 6120
128.1
105 480 6140
128.05
6160
104 128 475
6180
127.95
103 470 6200
127.9
127.85 6220
102 465
127.8 6240
101 127.75 460 6260

7:30 AM 9:30 AM 11:30 AM 1:30 PM 3:30 PM 5:30 PM 7:30 PM 7:30 AM 9:30 AM 11:30 AM 1:30 PM 3:30 PM 5:30 PM 7:30 PM

Trader’s Comment
Utilities/Energy
Another good start with tighter CDS and cash spreads. While cash remained in positive
territory, CDS closed the day more or less unchanged. Flows were balanced in the end, as
credit came under pressure on the back of weaker stock markets.
Primary Market<BOOKMARK>
Pipeline Comunidad De Madrid (Aa2/AA/AA) Guidance is MS+160/170bp for planned EUR 3Y issue, due 5 August 2013. Settle 5 August 2010.
Denoms 1k+1k, Spanish docs. Bookrunner: CS, GS.
Priced Bank of America (A2/A/A+) EUR 2bn, due 7 August 2017, coupon 4.625%. Reoffer 99.496. Spread MS+212.5bp / DBR 4.00% 7/17
+241.9bp. Settle 05 August 2010. List London, denoms 50k+50k. EMTN. RegS only. Final book EUR 4.5bn. Bookrunner: BAML.
Santander (Aa2/AA/AA) EUR 1.5bn senior unsecured, unsubordinated, due 12 August 2014, coupon 3.5%. Price 99.802. Spread MS+160bp /
OBL+228.8bp. List Lux, denoms 50kx50k. Off EMTN. Bookrunner: HSBC, Natixis, Santander.
SAP (-/-/-)
Tranche A: EUR 600mn, due 6 August 2013, coupon 2.25%. Reoffer 99.857. Spread MS+60bp / OBL 152 +132.1bp, yield 2.30%.
Tranche B: EUR 500mn, due 6 February 2012, coupon 1.75%. Reoffer 99.853. Spread MS+50bp /DBR 5.00% 01/12 +115.2bp, yield 1.853%.
Settle 06 August 2010. List Lux, denoms 1k. Standalone docs. CoC included. Bookrunner: BarCap, DB.
Source: Bond Radar, Bloomberg
Rating Actions
SUMMARY OF RECENT RATING ACTIONS
Issuer Agency Action From To

Lukoil S&P Outlook change BBB- BBB- watch negative
Rockwood S&P Upgrade B+ BB-
Ukraine (Foreign Currency Debt) S&P Upgrade B watch positive B+
Valeo Moody's Upgrade Ba2 Ba1
Recent Credit Research Publications

Date Title Sector/Region Analyst
29/07/10 » Daily Credit Briefing Aerospace & Defense, Arndt, Ernst, Gisdakis, Haber, Hummel,
Automobiles & Parts, Banks, Kleindienst, Kolek, Kreitmair, Schilling,
Chemicals, Industrial Goods & Schlachter, Tzschentke, Weber
Services, Media, Non-cyclical
Goods & Services, Oil & Gas,
Telecommunications, Utilities
» Strategy View - An update on CDS central clearing Brunne
» Covered Bond & Agency Monitor - English Version Agencies & Subsovereigns, Dyckmans, Hillenbrand, Rudolf
Covered Bonds
» Sector Flash - Moody's updates its methodology for rating Agencies & Subsovereigns, Dyckmans
government-related issuers Governments
» Credit Flash (HG) - MAN's 1H10 results (Marketweight) Automobiles & Parts Kreitmair
» Sector Report RAS - Update on Basel III Banks, Financials Maglanoc
» Sector Flash RAS - Update on EU Banks Stress Test Banks, Financials Maglanoc
Results (III)
» Sector Report RAS - BIS CGFS on Long Term Issues in Banks, Financials Maglanoc
International Banking
» Credit Flash (HG) - ArcelorMittal: 2Q10 results (Overweight) Basic Resources Arndt
» Credit Flash (HG) - BASF: 2Q10 earnings review (Upgrade Chemicals Schlachter
to OW)

» Credit Flash (HG) - Merck KGaA's 1H10 results Health Care Schilling
(overweight)
» Credit Flash (HG) - Siemens: 3Q09/10 results Industrial Goods & Services Arndt
(Marketweight)
» Sector View - Spanish Securitization vs Stress Test Results Securitization Ernst
» Credit Flash (HG) - Vattenfall (Upgrade to Overweight) Utilities Kleindienst
28/07/10 » Daily Credit Briefing Automobiles & Parts, Banks, Basic Arndt, Brunne, Ernst, Gisdakis, Haber,
Resources, Energy, Industrial Hummel, Kleindienst, Kolek, Kreitmair,
Goods & Services, Non-cyclical Schilling, Schlachter, Tzschentke
Goods & Services, Technology,
Telecommunications
» Evening Credit Roundup - Time for a new haircut Brunne, Ernst, Gisdakis, Kolek, Weber
» Credit Flash - Peugeot's 1H10 results: Easing rating Automobiles & Parts Kreitmair
pressure
» Credit Flash (HY) - Valeo's 1H10 results: Ready for the Ba1 Automobiles & Parts Kreitmair
rating (HOLD)
» Sector Report RAS - CEBS Guidelines on Large Exposure Banks, Financials Maglanoc
Exemptions
» Sector Report RAS - CESR Guidelines on Calculation of Banks, Financials Maglanoc
UCITS Exposure
» Sector Report RAS - ECB Reviews Risk Control Measures Banks, Financials Maglanoc
in Collateral Framework
» Credit Flash (HG) - Rexam: 1H10 results (Marketweight) Industrial Goods & Services Arndt
» Credit Flash (HG) - ENI (A strong quarter – rating pressure Oil & Gas Kleindienst
reduced )
Source: UniCredit Research

Disclaimer
Our recommendations are based on information obtained from, or are based upon public information sources that we consider to be reliable but for the completeness and accuracy of
which we assume no liability. All estimates and opinions included in the report represent the independent judgment of the analysts as of the date of the issue. We reserve the
right to modify the views expressed herein at any time without notice. Moreover, we reserve the right not to update this information or to discontinue it altogether without notice.
This analysis is for information purposes only and (i) does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to buy or subscribe for any
financial, money market or investment instrument or any security, (ii) is neither intended as such an offer for sale or subscription of or solicitation of an offer to buy or subscribe
for any financial, money market or investment instrument or any security nor (iii) as an advertisement thereof. The investment possibilities discussed in this report may not be
suitable for certain investors depending on their specific investment objectives and time horizon or in the context of their overall financial situation. The investments discussed
may fluctuate in price or value. Investors may get back less than they invested. Changes in rates of exchange may have an adverse effect on the value of investments.
Furthermore, past performance is not necessarily indicative of future results. In particular, the risks associated with an investment in the financial, money market or investment
instrument or security under discussion are not explained in their entirety.
This information is given without any warranty on an "as is" basis and should not be regarded as a substitute for obtaining individual advice. Investors must make their own
determination of the appropriateness of an investment in any instruments referred to herein based on the merits and risks involved, their own investment strategy and their legal,
fiscal and financial position. As this document does not qualify as an investment recommendation or as a direct investment recommendation, neither this document nor any part
of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever. Investors are urged to contact their
bank's investment advisor for individual explanations and advice.
Neither UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul
Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank nor any of their respective directors, officers or employees nor any other person accepts any liability whatsoever (in
negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection therewith.
This analysis is being distributed by electronic and ordinary mail to professional investors, who are expected to make their own investment decisions without undue reliance on
this publication, and may not be redistributed, reproduced or published in whole or in part for any purpose.
Responsibility for the content of this publication lies with:
a) UniCredit Bank AG, Am Tucherpark 16, 80538 Munich, Germany, (also responsible for the distribution pursuant to §34b WpHG). The company belongs to UCI Group.
Regulatory authority: “BaFin“ – Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 60439 Frankfurt, Germany.
b) UniCredit Bank AG London Branch, Moor House, 120 London Wall, London EC2Y 5ET, United Kingdom.
Regulatory authority: “BaFin“ – Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 60439 Frankfurt, Germany and subject to limited regulation by the Financial
Services Authority (FSA), 25 The North Colonnade, Canary Wharf, London E14 5HS, United Kingdom. Details about the extent of our regulation by the Financial Services
Authority are available from us on request.
c) UniCredit Bank AG Milan Branch, Via Tommaso Grossi 10, 20121 Milan, Italy, duly authorized by the Bank of Italy to provide investment services.
Regulatory authority: “Bank of Italy”, Via Nazionale 91, 00184 Roma, Italy and Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 60439 Frankfurt, Germany.
d) UniCredit Bank AG Vienna Branch, Julius-Tandler-Platz 3, 1090 Vienna, Austria
Regulatory authority: Finanzmarktaufsichtsbehörde (FMA), Praterstrasse 23, 1020 Vienna, Austria and subject to limited regulation by the “BaFin“ – Bundesanstalt für Finanz-
dienstleistungsaufsicht, Lurgiallee 12, 60439 Frankfurt, Germany. Details about the extent of our regulation by the Bundesanstalt für Finanzdienstleistungsaufsicht are available
from us on request.
e) UniCredit Securities, Boulevard Ring Office Building, 17/1 Chistoprudni Boulevard, Moscow 101000, Russia
Regulatory authority: Federal Service on Financial Markets, 9 Leninsky prospekt, Moscow 119991, Russia
f) UniCredit Menkul Değerler A.Ş., Büyükdere Cad. No. 195, Büyükdere Plaza Kat. 5, 34394 Levent, Istanbul, Turkey
Regulatory authority: Sermaye Piyasası Kurulu – Capital Markets Board of Turkey, Eskişehir Yolu 8.Km No:156, 06530 Ankara, Turkey
g) Zagrebačka banka, Paromlinska 2, HR-10000 Zagreb, Croatia
Regulatory authority: Croatian Agency for Supervision of Financial Services, Miramarska 24B, 10000 Zagreb, Croatia
h) UniCredit Bulbank, Sveta Nedelya Sq. 7, BG-1000 Sofia, Bulgaria
Regulatory authority: Financial Supervision Commission (FSC), 33 Shar Planina str.,1303 Sofia, Bulgaria
This report may contain excerpts sourced from UniCredit Bank Russia, UniCredit Tiriac Bank, Bank Pekao or Yapi Kredi all members of the UniCredit group. If so, the pieces and
the contents have not been materially altered.
POTENTIAL CONFLICTS OF INTERESTS
Bayer AG 1a; Caja Madrid 2, 3; EADS NV 3; EDF 3; EDP 3; Enel 2, 3, 6a, 7; Erste Bank 3; HeidelbergCement 2, 4; Michelin 3; PPR 3; Renault 3; Sanofi-Aventis 3; Volkswagen
2, 3, 4;
Key 1a: UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler
A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated with it (pursuant to relevant domestic law) owns at least 2% of the capital stock of the company.
Key 1b: The analyzed company owns at least 2% of the capital stock of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit
Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated with it (pursuant to relevant
domestic law).
Key 2: UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul
Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated with it (pursuant to relevant domestic law) belonged to a syndicate that has acquired
securities or any related derivatives of the analyzed company within the twelve months preceding publication, in connection with any publicly disclosed offer of securities of the
analyzed company, or in any related derivatives.
Key 3: UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul
Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated (pursuant to relevant domestic law) administers the securities issued by the analyzed company
on the stock exchange or on the market by quoting bid and ask prices (i.e. acts as a market maker or liquidity provider in the securities of the analyzed company or in any related
derivatives).
Key 4: The analyzed company and UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, UniCredit
Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated (pursuant to relevant domestic law) concluded an agreement
on services in connection with investment banking transactions in the last 12 months, in return for which the Bank received a consideration or promise of consideration.
Key 5: The analyzed company and UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, UniCredit
Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated (pursuant to relevant domestic law) have concluded an
agreement on the preparation of analyses.
Key 6a: Employees of UniCredit Bank AG Milan Branch and/or members of the Board of Directors of UniCredit (pursuant to relevant domestic law) are members of the Board of
Directors of the Issuer. Members of the Board of Directors of the Issuer hold office in the Board of Directors of UniCredit (pursuant to relevant domestic law).
Key 6b: The analyst is on the supervisory/management board of the company they cover.
Key 7: UniCredit Bank AG Milan Branch and/or other Italian banks belonging to the UniCredit Group (pursuant to relevant domestic law) extended significant amounts of credit
facilities to the Issuer.
RECOMMENDATIONS, RATINGS AND EVALUATION METHODOLOGY
UniCredit Research page 24

Company Date Rec. Company Date Rec. Company Date Rec.

AALLN 01/02/2010 Marketweight ELEPOR 05/05/2010 Underweight MRKGR 18/03/2010 Overweight
AZN 29/01/2010 Underweight ENEL 05/05/2010 Marketweight MRKGR 01/03/2010 Underweight
AZN 23/10/2009 Marketweight ENEL 14/09/2009 Overweight PASTOR 30/10/2009 Marketweight
BAYNGR 03/09/2009 Underweight ENEL 04/08/2009 Marketweight RENAUL 01/06/2010 Marketweight
BRITEL 30/07/2010 Marketweight HEIGR 16/10/2009 Buy RENAUL 05/05/2010 Overweight
CONGR 12/01/2010 Hold HEIGR 14/09/2009 Hold RENAUL 06/04/2010 Underweight
CONGR 12/08/2009 Buy MANAG 30/03/2010 Overweight RENTKL 07/10/2009 Marketweight
EADFP 01/06/2010 Marketweight MANAG 02/02/2010 Marketweight VALEBZ 30/03/2010 Marketweight
EADFP 14/05/2010 Marketweight MANAG 30/11/2009 Overweight VATFAL 29/07/2010 Overweight
EADFP 20/11/2009 Underweight MICH 31/07/2009 Marketweight VW 30/03/2010 Overweight
EDF 25/01/2010 Marketweight MNDILN 20/04/2010 Buy VW 30/09/2009 Marketweight
Overview of our ratings

You will find the history of rating regarding recommendation changes as well as an overview of the breakdown in absolute and relative terms of our investment ratings on our
websites www.research.unicreditgroup.eu and www.cib-unicredit.com/research-disclaimer under the heading “Disclaimer.”
Note on what the evaluation of equities is based:
We currently use a three-tier recommendation system for the stocks in our formal coverage: Buy, Hold, or Sell (see definitions below):
A Buy is applied when the expected total return over the next twelve months is higher than the stock's cost of equity.
A Hold is applied when the expected total return over the next twelve months is lower than its cost of equity but higher than zero.
A Sell is applied when the stock's expected total return over the next twelve months is negative.
We employ three further categorizations for stocks in our coverage:
Restricted: A rating and/or financial forecasts and/or target price is not disclosed owing to compliance or other regulatory considerations such as blackout period or conflict of interest.
Coverage in transition: Due to changes in the research team, the disclosure of a stock's rating and/or target price and/or financial information are temporarily suspended. The
stock remains in the research universe and disclosures of relevant information will be resumed in due course.
Not rated: Suspension of coverage.
Company valuations are based on the following valuation methods: Multiple-based models (P/E, P/cash flow, EV/sales, EV/EBIT, EV/EBITA, EV/EBITDA), peer-group
comparisons, historical valuation approaches, discount models (DCF, DVMA, DDM), break-up value approaches or asset-based evaluation methods. Furthermore,
recommendations are also based on the Economic profit approach. Valuation models are dependent on macroeconomic factors, such as interest rates, exchange rates, raw
materials, and on assumptions about the economy. Furthermore, market sentiment affects the valuation of companies. The valuation is also based on expectations that might
change rapidly and without notice, depending on developments specific to individual industries. Our recommendations and target prices derived from the models might therefore
change accordingly. The investment ratings generally relate to a 12-month horizon. They are, however, also subject to market conditions and can only represent a snapshot. The
ratings may in fact be achieved more quickly or slowly than expected, or need to be revised upward or downward.
Note on the bases of evaluation for interest-bearing securities:
Our investment ratings are in principle judgments relative to an index as a benchmark.
Issuer level:
Marketweight: We recommend having the same portfolio exposure in the name as the respective reference index (the iBoxx index universe for high-grade names and the ML
EUR HY index for sub-investment grade names).
Overweight: We recommend having a higher portfolio exposure in the name as the respective reference index (the iBoxx index universe for high-grade names and the ML EUR
HY index for sub-investment grade names).
Underweight: We recommend having a lower portfolio exposure in the name as the respective reference index (the iBoxx index universe for high-grade names and the ML EUR
HY index for sub-investment grade names).
Instrument level:
Core hold: We recommend holding the respective instrument for investors who already have exposure.
Sell: We recommend selling the respective instrument for investors who already have exposure.
Buy: We recommend buying the respective instrument for investors who already have exposure.
Trading recommendations for fixed-interest securities mostly focus on the credit spread (yield difference between the fixed-interest security and the relevant government bond or
swap rate) and on the rating views and methodologies of recognized agencies (S&P, Moody’s, Fitch). Depending on the type of investor, investment ratings may refer to a short
period or to a 6 to 9-month horizon. Please note that the provision of securities services may be subject to restrictions in certain jurisdictions. You are required to acquaint
yourself with local laws and restrictions on the usage and the availability of any services described herein. The information is not intended for distribution to or use by any person
or entity in any jurisdiction where such distribution would be contrary to the applicable law or provisions.
The prices used in the analysis are the closing prices of the appropriate local trading system or the closing prices on the relevant local stock exchanges. In the case of unlisted
stocks, the average market prices based on various major broker sources (OTC market) are used.
The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior written permission of MSCI, this information and any
other MSCI intellectual property may not be reproduced, redisseminated or used to create any financial products, including any indices. This information is provided on an “as is”
basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the
information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this
information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information
have any liability for any damages of any kind. MSCI, Morgan Stanley Capital International and the MSCI indexes are services marks of MSCI and its affiliates.
The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor’s. GICS is a
service mark of MSCI and S&P and has been licensed for use by UniCredit Bank AG.
Coverage Policy
A list of the companies covered by UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, UniCredit
Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank is available upon request.
Frequency of reports and updates
It is intended that each of these companies be covered at least once a year, in the event of key operations and/or changes in the recommendation. Companies for which
UniCredit Bank AG Milan Branch acts as Sponsor or Specialist must be covered in accordance with the regulations of the competent market authority.
SIGNIFICANT FINANCIAL INTEREST:
UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler
A.Ş., Zagrebačka banka and UniCredit Bulbank and/or a company affiliated (pursuant to relevant national German, Italian, Austrian, UK, Russian and Turkish law) with them
regularly trade shares of the analyzed company. UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch,
UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank may hold significant open derivative positions on the stocks of the company
which are not delta-neutral.
Analyses may refer to one or several companies and to the securities issued by them. In some cases, the analyzed issuers have actively supplied information for this analysis.
ANALYST DECLARATION
The author’s remuneration has not been, and will not be, geared to the recommendations or views expressed in this study, neither directly nor indirectly.
ORGANIZATIONAL AND ADMINISTRATIVE ARRANGEMENTS TO AVOID AND PREVENT CONFLICTS OF INTEREST

To prevent or remedy conflicts of interest, UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch,
UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank have established the organizational arrangements required from a legal and
supervisory aspect, adherence to which is monitored by its compliance department. Conflicts of interest arising are managed by legal and physical and non-physical barriers
(collectively referred to as “Chinese Walls”) designed to restrict the flow of information between one area/department of UniCredit Bank AG, UniCredit Bank AG London Branch,
UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank and
another. In particular, Investment Banking units, including corporate finance, capital market activities, financial advisory and other capital raising activities, are segregated by
physical and non-physical boundaries from Markets Units, as well as the research department. In the case of equities execution by UniCredit Bank AG Milan Branch, other than
as a matter of client facilitation or delta hedging of OTC and listed derivative positions, there is no proprietary trading. Disclosure of publicly available conflicts of interest and
other material interests is made in the research. Analysts are supervised and managed on a day-to-day basis by line managers who do not have responsibility for Investment
Banking activities, including corporate finance activities, or other activities other than the sale of securities to clients.
ADDITIONAL REQUIRED DISCLOSURES UNDER THE LAWS AND REGULATIONS OF JURISDICTIONS INDICATED
Notice to Austrian investors
This document does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to buy or subscribe for any securities and neither this document
nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever.
This document is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on to any other person or published, in
whole or part, for any purpose.
Notice to Czech investors
This report is intended for clients of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, UniCredit
Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka and UniCredit Bulbank in the Czech Republic and may not be used or relied upon by any other person for any purpose.
Notice to Italian investors
This document is not for distribution to retail clients as defined in article 26, paragraph 1(e) of Regulation n. 16190 approved by CONSOB on 29 October 2007.
In the case of a short note, we invite the investors to read the related company report that can be found on UniCredit Research website www.research.unicreditgroup.eu.
Notice to Russian investors
As far as we are aware, not all of the financial instruments referred to in this analysis have been registered under the federal law of the Russian Federation “On the Securities
Market” dated April 22, 1996, as amended, and are not being offered, sold, delivered or advertised in the Russian Federation.
Notice to Turkish investors
Investment information, comments and recommendations stated herein are not within the scope of investment advisory activities. Investment advisory services are provided in
accordance with a contract of engagement on investment advisory services concluded with brokerage houses, portfolio management companies, non-deposit banks and the
clients. Comments and recommendations stated herein rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not suit
your financial status, risk and return preferences. For this reason, to make an investment decision by relying solely on the information stated here may not result in consequences
that meet your expectations.
Notice to Investors in Japan
This document does not constitute or form part of any offer for sale or subscription for or solicitation of any offer to buy or subscribe for any securities and neither this document
nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever.
Notice to UK investors
This communication is directed only at clients of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch,
UniCredit Securities, UniCredit Menkul Değerler A.Ş., Zagrebačka banka or UniCredit Bulbank who (i) have professional experience in matters relating to investments or (ii) are
persons falling within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations, etc.”) of the United Kingdom Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 or (iii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This communication must
not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant
persons and will be engaged in only with relevant persons.
Notice to U.S. investors
This report is being furnished to U.S. recipients in reliance on Rule 15a-6 ("Rule 15a-6") under the U.S. Securities Exchange Act of 1934, as amended. Each U.S. recipient of this
report represents and agrees, by virtue of its acceptance thereof, that it is such a "major U.S. institutional investor" (as such term is defined in Rule 15a-6) and that it understands
the risks involved in executing transactions in such securities. Any U.S. recipient of this report that wishes to discuss or receive additional information regarding any security or
issuer mentioned herein, or engage in any transaction to purchase or sell or solicit or offer the purchase or sale of such securities, should contact a registered representative of
UniCredit Capital Markets, Inc. (“UCI Capital Markets”).
Any transaction by U.S. persons (other than a registered U.S. broker-dealer or bank acting in a broker-dealer capacity) must be effected with or through UCI Capital Markets.
The securities referred to in this report may not be registered under the U.S. Securities Act of 1933, as amended, and the issuer of such securities may not be subject to U.S.
reporting and/or other requirements. Available information regarding the issuers of such securities may be limited, and such issuers may not be subject to the same auditing and
reporting standards as U.S. issuers.
The information contained in this report is intended solely for certain "major U.S. institutional investors" and may not be used or relied upon by any other person for any purpose.
Such information is provided for informational purposes only and does not constitute a solicitation to buy or an offer to sell any securities under the Securities Act of 1933, as
amended, or under any other U.S. federal or state securities laws, rules or regulations. The investment opportunities discussed in this report may be unsuitable for certain
investors depending on their specific investment objectives, risk tolerance and financial position. In jurisdictions where UCI Capital Markets is not registered or licensed to trade in
securities, commodities or other financial products, transactions may be executed only in accordance with applicable law and legislation, which may vary from jurisdiction to
jurisdiction and which may require that a transaction be made in accordance with applicable exemptions from registration or licensing requirements.
The information in this publication is based on carefully selected sources believed to be reliable, but UCI Capital Markets does not make any representation with respect to its
completeness or accuracy. All opinions expressed herein reflect the author’s judgment at the original time of publication, without regard to the date on which you may receive
such information, and are subject to change without notice.
UCI Capital Markets may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. These publications
reflect the different assumptions, views and analytical methods of the analysts who prepared them. Past performance should not be taken as an indication or guarantee of future
performance, and no representation or warranty, express or implied, is provided in relation to future performance.
UCI Capital Markets and any company affiliated with it may, with respect to any securities discussed herein: (a) take a long or short position and buy or sell such securities; (b)
act as investment and/or commercial bankers for issuers of such securities; (c) act as market makers for such securities; (d) serve on the board of any issuer of such securities;
and (e) act as paid consultant or advisor to any issuer.
The information contained herein may include forward-looking statements within the meaning of U.S. federal securities laws that are subject to risks and uncertainties. Factors
that could cause a company’s actual results and financial condition to differ from expectations include, without limitation: political uncertainty, changes in general economic
conditions that adversely affect the level of demand for the company’s products or services, changes in foreign exchange markets, changes in international and domestic
financial markets and in the competitive environment, and other factors relating to the foregoing. All forward-looking statements contained in this report are qualified in their
entirety by this cautionary statement.
This document may not be distributed in Canada or Australia.

UniCredit Research*
Dr. Ingo Heimig
Thorsten Weinelt, CFA Head of Research Operations
Global Head of Research & Chief Strategist +49 89 378-13952
+49 89 378-15110 ingo.heimig@unicreditgroup.de
thorsten.weinelt@unicreditgroup.de
Credit Research
Luis Maglanoc, CFA, Head

+49 89 378-12708
luis.maglanoc@unicreditgroup.de
Credit Strategy & Structured Credit Research Financials Credit Research

Dr. Philip Gisdakis, Head Franz Rudolf, CEFA, Head
Credit Strategy Covered Bonds
+49 89 378-13228 +49 89 378-12449
philip.gisdakis@unicreditgroup.de franz.rudolf@unicreditgroup.de
Dr. Tim Brunne, Quantitative Credit Strategy Alexander Plenk, CFA, Deputy Head
+49 89 378-13521 Banks
tim.brunne@unicreditgroup.de +49 89 378-12429
alexander.plenk@unicreditgroup.de
Markus Ernst, Credit Strategy & Structured Credit
+49 89 378-14213 Amey Dyckmans
markus.ernst1@unicreditgroup.de Sub-Sovereigns & Agencies
+49 89 378-12004
Dr. Stefan Kolek, EEMEA Corporate Credits & Strategy anna-maria.dyckmans@unicreditgroup.de
+49 89 378-12495
stefan.kolek@unicreditgroup.de Florian Hillenbrand, CFA
Covered Bonds
Dr. Christian Weber, CFA, Credit Strategy +49 89 378-12961
+49 89 378-12250 florian.hillenbrand@unicreditgroup.de
christian.weber@unicreditgroup.de
Luis Maglanoc, CFA
Insurance, Banks, RAS
+49 89 378-12708
Corporate Credit Research luis.maglanoc@unicreditgroup.de
Stephan Haber, CFA, Co-Head
Telecoms, Cable, Technology Natalie Tehrani Monfared
+49 89 378-15192 Regulatory & Accounting Service
stephan.haber@unicreditgroup.de +49 89 378-12242
natalie.tehrani@unicreditgroup.de
Dr. Sven Kreitmair, CFA, Co-Head
Automotive, Media Dr. Dietmar Tzschentke
+49 89 378-13246 Banks
sven.kreitmair@unicreditgroup.de +49 89 378-12960
Jana Arndt, CFA
Basic Resources, Industrial G&S
+49 89 378-13211
Carmen Hummel
Consumers, Retail
+49 89 378-12252
carmen.hummel@unicreditgroup.de
Christian Kleindienst
Utilities, Oil & Gas
+49 89 378-12650
Rocco Schilling
Healthcare, Tobacco, Tollroads, Utilities
+49 89 378-15449
Jochen Schlachter
Chemicals, Construction & Materials
+49 89 378-13212
Publication Address
UniCredit Research
Corporate & Investment Banking Bloomberg
UniCredit Bank AG UCCR
Arabellastrasse 12
D-81925 Munich Internet
Tel. +49 89 378-18927 www.research.unicreditgroup.eu
Fax +49 89 378-18352
*UniCredit Research is the joint research department of UniCredit Bank AG (UniCredit Bank), UniCredit CAIB Group (UniCredit CAIB), UniCredit Securities (UniCredit Securities),
UniCredit Menkul Değerler A.Ş. (UniCredit Menkul), Zagrebačka banka and UniCredit Bulbank.

JUL 30 UniCredit Credit Research

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JUL 30 UniCredit Credit Research

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30 July 2010 Credit Research

Daily Credit Briefing

Credit Strategy Highlights Credit drivers

Rating Actions / Recent Credit Research Publications _______________ 22

UniCredit Research page 1 See last pages for disclaimer.

Credit Strategy Highlights<BOOKMARK>

Dr. Stefan Kolek (UniCredit Bank)

Relative Value Trading Idea <BOOKMARK>

UniCredit Research page 2 See last pages for disclaimer.

Rocco Schilling (UniCredit Bank) Jochen Schlachter (UniCredit Bank)

UniCredit Research page 3 See last pages for disclaimer.

Stephan Haber, CFA (HVB)

UniCredit Research page 4 See last pages for disclaimer.

Christian Kleindienst (UniCredit Bank)

Christian Kleindienst (UniCredit Bank)

UniCredit Research page 5 See last pages for disclaimer.

Christian Kleindienst (UniCredit Bank)

UniCredit Research page 6 See last pages for disclaimer.

Recommendation We maintain our marketweight recommendation on Saint Gobain's bonds. However, we

Jochen Schlachter (UniCredit Bank)

UniCredit Research page 7 See last pages for disclaimer.

Name recommendation We keep our marketweight recommendation on the name.

Jana Arndt, CFA (UniCredit Bank)

Jana Arndt, CFA (UniCredit Bank)

UniCredit Research page 8 See last pages for disclaimer.

Dr. Sven Kreitmair, CFA (UniCredit Bank)

UniCredit Research page 9 See last pages for disclaimer.

FY11 for its FY10.

Dr. Sven Kreitmair, CFA (UniCredit Bank)

Dr. Sven Kreitmair, CFA (UniCredit Bank)

UniCredit Research page 10 See last pages for disclaimer.

Rocco Schilling (UniCredit Bank)

UniCredit Research page 11 See last pages for disclaimer.

Rocco Schilling (UniCredit Bank)

Rocco Schilling (UniCredit Bank) Carmen Hummel (UniCredit Bank)

High Yield <BOOKMARK>

UniCredit Research page 12 See last pages for disclaimer.

883mn (down from EUR 949mn).

Jochen Schlachter (UniCredit Bank)

Jochen Schlachter (UniCredit Bank)

UniCredit Research page 13 See last pages for disclaimer.

WIND TELECOMUNICAZIONI: FY10 GUIDANCE DEVELOPMENT

Source: Company info, UniCredit Research

UniCredit Research page 14 See last pages for disclaimer.

Stephan Haber, CFA (UniCredit Bank)

UniCredit Research page 15 See last pages for disclaimer.

CAJA MADRID: KEY FINANCIAL HIGHLIGHTS

Source: Caja Madrid, UniCredit Research

Dr. Dietmar Tzschentke (UniCredit Bank)

UniCredit Research page 16 See last pages for disclaimer.

BANCO PASTOR: KEY FINANCIAL HIGHLIGHTS

Source: Banco Pastor, UniCredit Research

Dr. Dietmar Tzschentke (UniCredit Bank)

UniCredit Research page 17 See last pages for disclaimer.

ERSTE BANK: FINANCIAL HIGHLIGHTS

Figures in EUR million 2Q09 1Q10 2Q10 yoy qoq

Source: Erste Bank, UniCredit Research

Dr. Dietmar Tzschentke (UniCredit Bank)

UniCredit Research page 18 See last pages for disclaimer.

SCOR: FINANCIAL HIGHLIGHTS

Figures in EUR millions 1H10 1H09 % change 2Q10 1Q09 % change

Source: Company data; UniCredit Research

Luis Maglanoc, CFA (UniCredit Bank)