COMMODITIES RESEARCH

28 March 2012

CHINA TRIP NOTES

Copper conditions soften

We visited China last week and met with copper fabricators, smelters and physical traders and attended the Shanghai Metals Market (SMM) Copper and Aluminium conference in Shanghai. We summarise our key conclusions from the trip below: The key takeaway from our meetings was that spot demand for copper in China is weak, the improvement in Q2 may be tepid and imports are likely to remain strong in March and possibly April before trailing off until later in the year. Sentiment amongst Chinese fabricators and manufacturers is negative. Orders have been slow to improve following the Chinese New Year and in some sectors are below year-ago levels. Inventories of cathode at consumers are low, but inventories of finished product are higher than usual for the time of year. Fabricators and some manufacturers increased production strongly in JanuaryMarch in expectation of a pick up in demand during the seasonally stronger Q2. But, so far, demand has been softer than they expected. The current state of Chinese demand is varied across industries. White goods demand is particularly weak due to an end of the stimulus and a slower occupation rate of new real estate because of slower sales. The slowing in residential construction activity has also resulted in a weakening in demand for building wire. Transport demand has improved moderately in 2012 so far. Infrastructure demand, and in particular power-related demand, remains firm. Bonded warehouse stocks of copper have continued to increase. From our discussions we understand copper bonded warehouse stocks to be around 600Kt, in line with the 2011 peak. March and April copper imports could be stronger than the market expects. We believe that metal that had been booked in October/November 2011, when the arb on six-month forward prices was open, will continue to flow into the country. We are also likely to see a pick up in exports. Chinese smelters have been delivering metal into bonded warehouses from which traders have been exporting metal onto the LME, attracted by the backwardation. Overall, we believe Chinese demand in the short term is likely to disappoint before beginning on a recovery trajectory later in Q2. Subsequently, we think that imports will weaken until bonded stocks are run down to more normal levels, possibly in Q3 12. With the market already expecting a drop in Chinese imports, we doubt this alone would have a significant negative impact on LME prices. Thats more likely to be determined by the markets evaluation of how long imports will weaken for and whether it's the result of short-term dislocation or longer lasting core weakness. The LME backwardation meanwhile is likely to continue unless Chinese exports are big enough to begin offsetting the draws in LME inventories, in our view.
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 8

Gayle Berry +44 (0)20 3134 1596 gayle.berry@barcap.com Nicholas Snowdon +1 212 526 7279 nicholas.snowdon@barcap.com www.barcap.com

Barclays | China trip notes: Copper conditions soften

CHINESE COPPER MARKET UPDATE

Chinese copper market dynamics
Chinese copper smelters, fabricators and end-use product manufacturers entered 2012 expecting another year of double-digit growth. What they have encountered is weaker, but still a level of growth most countries would be envious of.
Softer-than-expected orders are partly a function of excess capacity

The combination of industrial manufacturers operating in anticipation of strong growth on the one hand and a government targeting slower more sustainable growth on the other has resulted in a short-term dislocation between supply and demand in the Chinese copper market. It will take a little time for balance to be restored and inventory, both cathode and product, to be consumed. This looks most likely to begin later in Q2 once economic growth improves from the current trough. It is clear that the Chinese industrial sector is suffering from overcapacity and this factor should be borne in mind when digesting producer reports of weaker orders. As capacity has grown ahead of demand, market share at the company level is being lost. We believe that, over time, the Chinese market will consolidate its disjointed manufacturing industries. But such a process will take time, be painful in parts and involve periods of disequilibrium.

Chinese copper fabricator sentiment is negative

Sentiment towards the short-term outlook for copper demand amongst Chinas fabricators is negative. In our discussions with pipe and tube manufacturers, wire and cable manufacturers, sheet and plate manufacturers and upstream at smelters, the feedback was unanimous; that orders had been weaker than expected, in some cases lower y/y and the improvement in buying after the Chinese new year holiday had been slow. Sentiment amongst pipe and tube manufacturers, who primarily service the air-conditioner market, was particularly weak. White goods demand (which accounts for 24% of Chinese copper consumption) in general was described as soft due to a combination of slower construction activity, weaker export demand and an end to the stimulus package for white goods sales. That said, export demand, particularly to the US was reported to have noticeably improved in recent weeks and was expected to continue improving in Q2.

Figure 1: Chinas copper demand by end-use China's copper demand by end-use

Industrial equipment 7% Infastructure 39% Consumer goods/others 24%

Figure 2: Chinese bonded copper stocks have risen rapidly

700 600 500 400 300 200 100 Chinese copper bonded warehouse stocks (Kt)

Transport 9%

Construction 21%
Source: Brook Hunt, Barclays Research

0 Dec-10

Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Source: CRU, Barclays Research

28 March 2012

Barclays | China trip notes: Copper conditions soften

Demand for other types of products used in construction (which accounts for 21% of Fabricators also reported that Chinese copper consumption, such as wire, had underperformed expectations with the slowdown in construction activity cited as the main reason. It should be noted, however, that the feedback from the fabricators we spoke to may have been skewed by the particularly aggressive slowdown in private residential construction which was their primary market. Fabricators in central provinces, however, are believed to be benefitting more from the build out of social housing. China is, after all, a vast country. The transport market (which accounts for 9% of copper consumption) was reported by fabricators to be showing moderate signs of improvement after a weak 2011. However, there was uncertainty amongst fabricators as to the sustainability of this improvement. Demand for copper used in power cables was reported by fabricators to be firm, though feedback on demand from other infrastructure-related sectors was mixed (infrastructure accounts for almost 40% of Chinese copper consumption). Concerns over the changing structure of Chinese economic growth, from infrastructure-driven to consumption-driven, weighed on sentiment amongst market participants in this sector in particular. One interesting trend highlighted to us by the fabricators was the growing use of cathode in their raw material mix. Wire manufacturers typically use very high levels of cathode, given the metallurgical demands of their product, but pipe and tube manufacturers said that they are increasingly using more cathode in their production for two reasons. The first is because this price risk is hedgable on the SHFE. Scrap prices cannot be hedged. This is a particular problem because of the volatility in prices and supply of scrap and the impact this has on P&L. Although the pool of domestically-generated scrap in China will rise, for the time being, it remains far too small to play a significant role as a source of supply. The second reason is that a higher quality of product can be manufactured when more cathode is used in the production mix and this is more commonly being demanded by manufacturers.

Copper bonded warehouse stocks are part of the import mechanism

Bonded stocks have risen to 600-650Kt

The strength in Chinese copper imports since October 2011 has appeared at odds with the anecdotal reports of softer end-use demand and slower economic growth. From our discussion we understand that copper bonded warehouse inventories have risen to 600-650Kt (with the split being around 500-550Kt in Shanghai and 50-100Kt in Guangdong). This is a big increase in bonded inventories from the low of 200Kt in November 2011 and means that these stocks have risen to similar levels in early 2011. The perceived logic in the market is that much of this build in bonded copper inventory is simply due to copper being imported as means of raising finance. However, as we understand it, the picture is more nuanced than that. China is net short of copper and has to import copper to feed domestic demand. However, the timing of when this marginal copper is imported is very much determined by pricing signals; in particular, the arbitrage between SHFE and LME prices. When the arbitrage is positive (SHFE prices trade above LME prices), large volumes of copper will be purchased from international suppliers with futures exchanges used to hedge the physical risk. In other words, exchanges will be used to lock in the arbitrage.

Copper imports arbitraged across the forward curve

March and possibly April imports could remain strong

In September 2011, the arbitrage between SHFE and LME prices turned positive and remained positive through some of October. The arbitrage on forward prices (six months forward) was also open for periods in November. We understand that the surprise strength in February 2012 imports was partly due to metal being booked using the arbitrage in these forward prices. It is for this reason we think that copper imports could remain strong in March and possibly April.
3

28 March 2012

Barclays | China trip notes: Copper conditions soften

It might seem at odds to continue importing copper into a market which already has ample spot supply. However, there is a further price differential incentive. Chinese physical premiums are now much lower than when this metal was first purchased. In October, Chinese physical premiums were around $125/t, but have since fallen to around $50/t for bonded metal. Because SHFE prices have fallen since the metal was first purchased, we understand that buyers are keeping the copper in bonded warehouses. Here, the buyer does not have to pay VAT until they decide to release the copper into the physical Chinese market. Furthermore, whilst the copper is stored in bonded warehouses, it can be used as collateral for access to credit. Typically, these are short-term loans with expiries of 60-90 days. We discussed these types of financing activities in details in Chinese copper imports New FX rules to have limited impact, 14 April 2011.

Long physical, short futures

To hedge the physical metal exposure, we understand that there will typically be a corresponding short futures position on the LME. This short LME futures leg of the trade is only closed out when the physical metal is sold, or when rolling forward the futures position becomes too costly. The knock-on impact of this is short-covering on the LME which we believe is part of the driver behind the recent tightening in LME nearby spreads. One option in closing out the futures part of this trade could be to physically deliver metal against the short futures position. This would require the copper to be exported from China and delivered into an LME warehouse. This situation developed during the early months of 2011 when the LME backwardation flared out, metal was exported from China and the LME backwardation then narrowed (Figure 4). From our discussions we understand that the current backwardation is encouraging metal out of China again and suspect that 10-15Kt of copper could be exported each month for the next few months. There is a second type of financing deal that is transacted on copper imports. This type is based purely on an entitys desire to gain access to credit: access to credit remains difficult and the costs high for many small- and medium-sized enterprises in China. In this type of transaction, an entity will acquire a letter of credit from a bank which it will then use to purchase and import copper. This is sold into the domestic market. The cash raised from this Figure 3: Spot and forward spreads are used to trade the arbitrage
8.2 8.0 Chinese copper import arbitrage ratios

Figure 4: LME backwardations have attracted metal out of China before

50 40 Chinese copper exports (Kt) LME cash-3mnth backwardation ($/t) 60 40 20 30 0 20 -20 10 Feb-10 Jul-10 Dec-10 May-11 Oct-11

7.8 7.6 7.4 7.2 7.0 6.8 Jan-11 Spot SHFE/LME ratio Import breakeven ratio 6 month forward SHFE/LME ratio May-11 Oct-11 Mar-12
Source: LME, China Customs, Barclays Research

-40 -60 Mar-12

Source: SHFE, LME, Barclays Research

28 March 2012

Barclays | China trip notes: Copper conditions soften

Figure 5: We expect lower Chinese refined copper imports in 2012 as concentrate imports rise
Barclays refined copper China balance Change ('000t contained Cu) 2011 Y/Y Jan & Feb 12 Fcst 2012 Change Y/Y

Figure 6: Chinese copper semis output rebounded 18% y/y in January/February

Chinese copper demand indicators ('000t) Semis production Apparent consumption refined Cu

1,050

Refined demand

7794

9%

1,206

8186

5%

850

Refined production

5197

14%

872

5767

11%

650

Import requirement

-2597

1%

-334

-2419

-7%

450

Actual refined imports

2679

-7%

711

250 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10 Feb-11 Feb-12

Source: CNIA, China Customs, Barclays Research Source: CNIA, China Customs, Barclays Research

transaction is subsequently re-invested somewhere else. The impact of this kind of import is to push down domestic prices and premiums because the copper is immediately sold.

Smelter tolling also contributing to the build in bonded stocks

Another reason behind the build in bonded copper stocks is due to domestic smelters delivering copper into them. This is classified as an export which only certain smelters have the license to do. These smelters have a tolling license which allows them to export a portion of the cathode they produce from imported concentrate. When the copper is delivered into the bonded warehouse, a warrant is issued (in the same way as an LME warehouse), and our sources reported that that these warrants have been purchased by physical traders who are using the warrants as collateral for short-term financing until domestic Chinese prices and physical premiums rise to levels that make it attractive to sell the copper.

What will it all mean?

The improvement in Q2 demand could be tepid

The central message from our discussions is that China has imported more refined copper than is required and if imports remain strong in March and April, bonded stocks are likely to edge higher. Until these stocks are consumed and the SHFE/LME arbitrage opens up again, copper imports will moderate. For how long and by how much will be largely dependent on how quickly end-use demand improves. To put this into perspective, during the typical seasonal strengthening, demand in Q2 inventory can be run down quickly. In 2011 for instance, bonded stocks halved in just over three months. Current bonded inventory meanwhile equates to only 2.5 months of regular imports. However, the anecdotal feedback, combined with the weak manufacturing PMI for March, suggests to us that the improvement in Q2 may be tepid. We believe demand in the shortterm is likely to disappoint before beginning on a recovery trajectory later in Q2. Subsequently, we believe that imports will weaken. Our implied Chinese refined copper import requirement net of January/February imports suggests that net Chinese copper imports could fall to an average of 171Kt per month over the rest of the year. This compares with a monthly average net import of 223Kt throughout the whole of 2011.

28 March 2012

Barclays | China trip notes: Copper conditions soften

Whats the strong semis production so far this year telling us?
Cathode consumption has been boosted by strong semis output, but finished product inventories have built

Even when apparent consumption for the past few months is adjusted to account for the build in bonded inventory, it still shows strong y/y growth, which we believe is due to increased consumption by fabricators. Copper fabrication production rose 18% y/y during January/February for instance, according to the CNIA, and fabricators reported to us that they ramped up production in anticipation of the seasonal pick up in demand in Q2. Even with the greater buying of cathode and higher production run rates, refined copper inventories at fabricators remain low and below the usual levels for this time of year. However, we understand from our discussions that there has been a build in inventories further down the supply chain due to softer end-user demand than fabricators had anticipated. We believe that this has been exacerbated by the continued build of new fabricating capacity leading to increased competition and lower utilisation rates, particularly in lower-end semi-fabricated products. There has also been a build in some finished product inventories, such as air conditioners, for similar reasons. We have learned from our conversations that there has not been any forced selling of these products. Instead, the inventory is being used as collateral to raise short-term financing until end-demand conditions have improved. Figure 8: Chinese semis capacity has grown quicker than production
9000 8000 Chinese copper wire rod (Kt)

Figure 7: Utilisation rates at wire rod producers have rebounded in anticipation of stronger Q2 demand
90% Average utilisation rates at Chinese copper wire rod manufacturers

80%

7000 6000 5000

70%

4000 3000 Capacity Production 2011 2012

60% Mar-10

Sep-10

Mar-11

Sep-11

Mar-12

2000 2006

2007

2008

2009

2010

Source: SMM, Barclays Research

Source: Brook Hunt, Barclays Research

28 March 2012

Analyst Certification(s) We, Gayle Berry and Nicholas Snowdon, hereby certify (1) that the views expressed in this research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report. Important Disclosures Barclays Research is a part of the Corporate and Investment Banking division of Barclays Bank PLC and its affiliates (collectively and each individually, "Barclays"). For current important disclosures regarding companies that are the subject of this research report, please send a written request to: Barclays Research Compliance, 745 Seventh Avenue, 17th Floor, New York, NY 10019 or refer to http://publicresearch.barcap.com or call 212-526-1072. Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that Barclays may have a conflict of interest that could affect the objectivity of this report. Barclays Capital Inc. and/or one of its affiliates regularly trades, generally deals as principal and generally provides liquidity (as market maker or otherwise) in the debt securities that are the subject of this research report (and related derivatives thereof). Barclays trading desks may have either a long and / or short position in such securities and / or derivative instruments, which may pose a conflict with the interests of investing customers. Where permitted and subject to appropriate information barrier restrictions, Barclays fixed income research analyst(s) regularly interact with its trading desk personnel to determine current prices of fixed income securities. Barclays fixed income research analyst(s) receive compensation based on various factors including, but not limited to, the quality of their work, the overall performance of the firm (including the profitability of the investment banking department), the profitability and revenues of the Fixed Income, Currencies & Commodities Division ("FICC") and the outstanding principal amount and trading value of, the profitability of, and the potential interest of the firms investing clients in research with respect to, the asset class covered by the analyst. To the extent that any historical pricing information was obtained from Barclays trading desks, the firm makes no representation that it is accurate or complete. All levels, prices and spreads are historical and do not represent current market levels, prices or spreads, some or all of which may have changed since the publication of this document. The Corporate and Investment Banking division of Barclays produces a variety of research products including, but not limited to, fundamental analysis, equity-linked analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differ from recommendations contained in other types of research products, whether as a result of differing time horizons, methodologies, or otherwise. In order to access Barclays Statement regarding Research Dissemination Policies and Procedures, please refer to https://live.barcap.com/publiccp/RSR/nyfipubs/disclaimer/disclaimer-research-dissemination.html.

Disclaimer This publication has been prepared by the Corporate and Investment Banking division of Barclays Bank PLC and/or one or more of its affiliates (collectively and each individually, "Barclays"). It has been issued by one or more Barclays legal entities within its Corporate and Investment Banking division as provided below. It is provided to our clients for information purposes only, and Barclays makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to any data included in this publication. Barclays will not treat unauthorized recipients of this report as its clients. Prices shown are indicative and Barclays is not offering to buy or sell or soliciting offers to buy or sell any financial instrument. Without limiting any of the foregoing and to the extent permitted by law, in no event shall Barclays, nor any affiliate, nor any of their respective officers, directors, partners, or employees have any liability for (a) any special, punitive, indirect, or consequential damages; or (b) any lost profits, lost revenue, loss of anticipated savings or loss of opportunity or other financial loss, even if notified of the possibility of such damages, arising from any use of this publication or its contents. Other than disclosures relating to Barclays, the information contained in this publication has been obtained from sources that Barclays Research believes to be reliable, but Barclays does not represent or warrant that it is accurate or complete. Barclays is not responsible for, and makes no warranties whatsoever as to, the content of any third-party web site accessed via a hyperlink in this publication and such information is not incorporated by reference. The views in this publication are those of the author(s) and are subject to change, and Barclays has no obligation to update its opinions or the information in this publication. The analyst recommendations in this publication reflect solely and exclusively those of the author(s), and such opinions were prepared independently of any other interests, including those of Barclays and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all investors. Barclays recommends that investors independently evaluate each issuer, security or instrument discussed herein and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. This communication is being made available in the UK and Europe primarily to persons who are investment professionals as that term is defined in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion Order) 2005. It is directed at, and therefore should only be relied upon by, persons who have professional experience in matters relating to investments. The investments to which it relates are available only to such persons and will be entered into only with such persons. Barclays Bank PLC is authorised and regulated by the Financial Services Authority ("FSA") and a member of the London Stock Exchange. The Corporate and Investment Banking division of Barclays undertakes U.S. securities business in the name of its wholly owned subsidiary Barclays Capital Inc., a FINRA and SIPC member. Barclays Capital Inc., a U.S. registered broker/dealer, is distributing this material in the United States and, in connection therewith accepts responsibility for its contents. Any U.S. person wishing to effect a transaction in any security discussed herein should do so only by contacting a representative of Barclays Capital Inc. in the U.S. at 745 Seventh Avenue, New York, New York 10019. Non-U.S. persons should contact and execute transactions through a Barclays Bank PLC branch or affiliate in their home jurisdiction unless local regulations permit otherwise. Barclays Bank PLC, Paris Branch (registered in France under Paris RCS number 381 066 281) is regulated by the Autorit des marchs financiers and the Autorit de contrle prudentiel. Registered office 34/36 Avenue de Friedland 75008 Paris. This material is distributed in Canada by Barclays Capital Canada Inc., a registered investment dealer and member of IIROC (www.iiroc.ca). Subject to the conditions of this publication as set out above, Absa Capital, the Investment Banking Division of Absa Bank Limited, an authorised financial services provider (Registration No.: 1986/004794/06), is distributing this material in South Africa. Absa Bank Limited is regulated by the South African Reserve Bank. This publication is not, nor is it intended to be, advice as defined and/or contemplated in the (South African) Financial Advisory and Intermediary Services Act, 37 of 2002, or any other financial, investment, trading, tax, legal, accounting, retirement, actuarial or other professional advice or service whatsoever. Any South African person or entity wishing to effect a transaction in any security discussed herein should do so only by contacting a

representative of Absa Capital in South Africa, 15 Alice Lane, Sandton, Johannesburg, Gauteng 2196. Absa Capital is an affiliate of Barclays. In Japan, foreign exchange research reports are prepared and distributed by Barclays Bank PLC Tokyo Branch. Other research reports are distributed to institutional investors in Japan by Barclays Capital Japan Limited. Barclays Capital Japan Limited is a joint-stock company incorporated in Japan with registered office of 6-10-1 Roppongi, Minato-ku, Tokyo 106-6131, Japan. It is a subsidiary of Barclays Bank PLC and a registered financial instruments firm regulated by the Financial Services Agency of Japan. Registered Number: Kanto Zaimukyokucho (kinsho) No. 143. Barclays Bank PLC, Hong Kong Branch is distributing this material in Hong Kong as an authorised institution regulated by the Hong Kong Monetary Authority. Registered Office: 41/F, Cheung Kong Center, 2 Queen's Road Central, Hong Kong. This material is issued in Taiwan by Barclays Capital Securities Taiwan Limited. This material on securities not traded in Taiwan is not to be construed as 'recommendation' in Taiwan. Barclays Capital Securities Taiwan Limited does not accept orders from clients to trade in such securities. This material may not be distributed to the public media or used by the public media without prior written consent of Barclays. This material is distributed in South Korea by Barclays Capital Securities Limited, Seoul Branch. All equity research material is distributed in India by Barclays Securities (India) Private Limited (SEBI Registration No: INB/INF 231292732 (NSE), INB/INF 011292738 (BSE), Registered Office: 208 | Ceejay House | Dr. Annie Besant Road | Shivsagar Estate | Worli | Mumbai - 400 018 | India, Phone: + 91 22 67196363). Other research reports are distributed in India by Barclays Bank PLC, India Branch. Barclays Bank PLC Frankfurt Branch distributes this material in Germany under the supervision of Bundesanstalt fr Finanzdienstleistungsaufsicht (BaFin). This material is distributed in Malaysia by Barclays Capital Markets Malaysia Sdn Bhd. This material is distributed in Brazil by Banco Barclays S.A. This material is distributed in Mexico by Barclays Bank Mexico, S.A. Barclays Bank PLC in the Dubai International Financial Centre (Registered No. 0060) is regulated by the Dubai Financial Services Authority (DFSA). Principal place of business in the Dubai International Financial Centre: The Gate Village, Building 4, Level 4, PO Box 506504, Dubai, United Arab Emirates. Barclays Bank PLC-DIFC Branch, may only undertake the financial services activities that fall within the scope of its existing DFSA licence. Related financial products or services are only available to Professional Clients, as defined by the Dubai Financial Services Authority. Barclays Bank PLC in the UAE is regulated by the Central Bank of the UAE and is licensed to conduct business activities as a branch of a commercial bank incorporated outside the UAE in Dubai (Licence No.: 13/1844/2008, Registered Office: Building No. 6, Burj Dubai Business Hub, Sheikh Zayed Road, Dubai City) and Abu Dhabi (Licence No.: 13/952/2008, Registered Office: Al Jazira Towers, Hamdan Street, PO Box 2734, Abu Dhabi). Barclays Bank PLC in the Qatar Financial Centre (Registered No. 00018) is authorised by the Qatar Financial Centre Regulatory Authority (QFCRA). Barclays Bank PLC-QFC Branch may only undertake the regulated activities that fall within the scope of its existing QFCRA licence. Principal place of business in Qatar: Qatar Financial Centre, Office 1002, 10th Floor, QFC Tower, Diplomatic Area, West Bay, PO Box 15891, Doha, Qatar. Related financial products or services are only available to Business Customers as defined by the Qatar Financial Centre Regulatory Authority. This material is distributed in the UAE (including the Dubai International Financial Centre) and Qatar by Barclays Bank PLC. This material is distributed in Saudi Arabia by Barclays Saudi Arabia ('BSA'). It is not the intention of the publication to be used or deemed as recommendation, option or advice for any action (s) that may take place in future. Barclays Saudi Arabia is a Closed Joint Stock Company, (CMA License No. 09141-37). Registered office Al Faisaliah Tower, Level 18, Riyadh 11311, Kingdom of Saudi Arabia. Authorised and regulated by the Capital Market Authority, Commercial Registration Number: 1010283024. This material is distributed in Russia by OOO Barclays Capital, affiliated company of Barclays Bank PLC, registered and regulated in Russia by the FSFM. Broker License #177-11850-100000; Dealer License #177-11855-010000. Registered address in Russia: 125047 Moscow, 1st Tverskaya-Yamskaya str. 21. This material is distributed in Singapore by the Singapore branch of Barclays Bank PLC, a bank licensed in Singapore by the Monetary Authority of Singapore. For matters in connection with this report, recipients in Singapore may contact the Singapore branch of Barclays Bank PLC, whose registered address is One Raffles Quay Level 28, South Tower, Singapore 048583. Barclays Bank PLC, Australia Branch (ARBN 062 449 585, AFSL 246617) is distributing this material in Australia. It is directed at 'wholesale clients' as defined by Australian Corporations Act 2001. IRS Circular 230 Prepared Materials Disclaimer: Barclays does not provide tax advice and nothing contained herein should be construed to be tax advice. Please be advised that any discussion of U.S. tax matters contained herein (including any attachments) (i) is not intended or written to be used, and cannot be used, by you for the purpose of avoiding U.S. tax-related penalties; and (ii) was written to support the promotion or marketing of the transactions or other matters addressed herein. Accordingly, you should seek advice based on your particular circumstances from an independent tax advisor. Copyright Barclays Bank PLC (2012). All rights reserved. No part of this publication may be reproduced in any manner without the prior written permission of Barclays. Barclays Bank PLC is registered in England No. 1026167. Registered office 1 Churchill Place, London, E14 5HP. Additional information regarding this publication will be furnished upon request.

US21080/EU18427