BNP Paribas Fortis Bank has decided not to exercise its call option on the 6.5% Redeemable Perpetual Cumulative Coupon Debt Securities 2001 issued by Fortis Bank SA/NV with first call date 26 September 2011. As a consequence Ageas will acquire the RPCC against cash at par on 26 September 2011 (first call date) after first seeking approval from the NationalBank of Belgium. The net cash position of Ageas’ (€ 2.1bn at 31 March 2011) will be reduced by € 1bn depending on the amount of securities acquired. The solvency of the insurance activities (201% under IFRS at 31 March 2011) will not be affected by the operation. Upon 100% of the RPCC being offered to Ageas, Ageas will be entitled to a quarterly coupon payment of Euribor 3M + 2.37%, which with reference to the current investment yield on the cash (Euribor 3M) would see net interest income on the cash invested rise by c € 24m. The RPCC will be accounted for as “available for sale” at fair value. This means that at the exchange date the net result and the equity of the General Account will be affected by the difference between the nominal value and the fair value of the securities at such date. Subsequent fair-value adjustments will be reflected in the shareholders’ equity. Ageas also decided to re-assess the nature of the Relative Performance Note (RPN) liability and qualify it as permanent funding. As a consequence the discretionary capital (company definition) will increase by € 0.7bn, in line with the fair value of the RPN at 31 March 2011. Our View: We consider the acquisition of the RPCC by Ageas as an investment representing equity meaning that in our SOP we will add a line for the RPCC investment for an amount equal to the reduction of the net cash up to a maximum of € 1bn (100% of RPCC tendered to Ageas). The accounting treatment of RPN (put in discretionary capital) has no impact on our SOP where we include it for € -0.8bn. Conclusion: We remain Buying with an unchanged target of € 3.25