Equity Structured Products and Warrants

This material has been produced by RBS sales and trading staff and should not be considered independent.

The Round Up
4 August 2010
Issue No. 380

The Round Up is a comprehensive

daily note produced by the RBS Global Market Action
Warrants team providing an overview Aussie Market Action
of market movements along with Newcrest (NCMKZG)
quality ideas for warrant traders and
Macquarie Group(MQGKZD)
investors.
Origin Energy (ORGKZC)
Australian Strategy
Scoreboard, commentary
SPI Comment, Events & Dividends
MINI Trading Buy – Quarterly production
MINI Trading Buy – When the going gets tough....
MINI Trading Buy – Offtake and set for NSW
privatisation sale
Monthly Market Review - May 2010

Equities
Move Last % Move Range Volume
ASX 200 +30.0 4571.6 +0.7% u.c to +43 $4.9 bn(A)
SPI - yesterday +32.0 4537.0 +0.7% +18 to +58 28,082(A)
Dow Jones -38.0 10636.4 -0.4% -73 to +3 Low
S&P 500 -5.4 1120.5 -0.5% -9 to -0 Low
Nasdaq -11.8 2283.5 -0.5% -23 to -0 Low
FTSE -0.6 5396.5 -0.0% -44 to + Low

Commodities
Move Last % Today % Past Month
Oil-WTI spot +1.08 82.42 +1.3% +14.2%
Gold Spot +3.90 1186.75 +0.3% -2.1%
Nickel (LME) -12.84 979.77 -1.3% +15.3%
Aluminium (LME) -0.60 99.51 -0.6% +14.8%
Copper (LME) -3.93 335.58 -1.2% +16.0%
Zinc (LME) -1.75 93.29 -1.8% +17.6%
Silver +0.04 18.41 +0.2% +3.1%
Sugar -0.81 18.59 -4.2% +11.3%
 Equity Structured Products and Warrants

Dual Listed Companies (DLC’s)

Move %Move Last AUD Terms Diff to Aus
NWS (US) -0.18 -1.2% 15.19 16.64 -21.4 c
RIO (UK) -16.5 p -0.5% £34.34 59.97 -1303.4 c
BLT (BHP UK) -15.0 p -0.7% £20.195 35.27 -570.9 c

American Depository Receipts (ADR’s)

Move %Move Last AUD Terms Diff to Aus
BHP (US) -0.44 -0.6% 74.75 40.93 -4.8 c
AWC (US) +0.06 +1.0% 5.96 1.63 -0.3 c
ANZ (US) -0.35 -1.6% 21.40 23.44 +6.7 c
WBC (US) -1.50 -1.3% 110.01 24.10 -20.4 c
NAB (US) -0.48 -2.1% 22.77 24.94 -22.3 c
LGL (US) -0.37 -1.0% 37.77 4.14 -2.4 c
RMD (US) +0.45 +0.7% 67.39 7.38 +3.0 c
JHX (US) -0.25 -0.8% 30.15 6.60 +7.4 c
PDN (CAN) +0.13 +2.8% 4.79 5.12 -8.6 c

Overnight Commentary

United States Commentary

Eco : Some weak eco data out overnight with Personal Income and Spending both flat vs 0.2% and 0.1% expected. The
PCE Deflator was a mixed bag coming in at 1.4% vs 1.3% expected whilst the PCE Core MoM was flat vs 0.1% and YoY
it was 1.4% vs 1.3%. Factory Orders was a big miss at -1.2% vs -0.5% expected and Pending Home Sales came in at -
2.6% vs 4% expected.

Market : US markets slipped on low volume after the weaker eco data and poor results from Proctor & Gamble which saw
the stock the worst on the Dow. Pfizer helped stem the selling after it reported better than expected profit and provided a
bullish long term outlook.

VIX: 22.63 last : noting 12mth high of 48 and low of 15 : Rule of thumb <25 is "calm" levels and >25 "fear" is trading.
-Note do not let the "calming" level above lead to a false sense of security! Looking back to 07 this range was more
like <12 and with the VIX at 22 this implies market volatility of 1.4% daily moves. So hardly calm markets. What VIX is
doing is trending lower off horrifically high levels. May10 it blew out to 48 so quickly retreating is a good thing.

United Kingdom & Europe Commentary

LIBOR: 22.5bps last : noting 12mth high of 75bps and low of 14

-This time last month we were looking at LIBOR costing closer to 40bps so trending towards 20bps is healthy for markets.

LMEX Index (Basket of the 6 primary Base Metals) : 3414 last (-1%) : noting 12mth high of 3767 and low of 2382
(Index Weightings are: Alum is 42%, Copper 33%, Lead is 8%, Ni 2%, Tin 1% and Zinc 13%)
-A slight pull back in base metals last night on CHINA concerns. Note not the case for SPOT Iron Ore which continues to
track higher.

Commodities Commentary

Oil +1.3%, Gold +0.3%, Nickel -1.3%, Aluminium -0.6%, Copper -1.2%, Zinc -1.8%, Silver +0.2%.
 Equity Structured Products and Warrants

SPI Commentary
The SPI traded up 32pt to 4537. Open at 4505 with a high of 4583 and a low of 4505. Volume 31,322. Overnight the SPI
traded down 4pts to 4533.

SPI Intraday SPI Daily

*SPI report taken from the 9:50am open to the 4:30pm close on the previous trading day. Charts taken from IRESS

Upcoming Economic Events for the Week

Monday AUS
US
Tuesday AUS RBA CASH TARGET, Building Approvals (MoM), Retail Sales Ex Inflation(QoQ),
US ISM Manufacturing
Wednesday AUS Trade Balance
US Pending Home Sales, MBA Mortgage Applications
Thursday AUS
US Initial Jobless Claims, Continuing Claims
Friday AUS Reserve Bank Quarterly Monetary Policy Statement
US Nonfarm Payrolls, Unemployment Rate
*Dates are indicative only and may change
 Equity Structured Products and Warrants

MINI Trading Buy:

Newcrest Mining (NCMKZG) – Quarterly production
Quarterly production and costs of 526koz at A$342/oz enabled NCM to meet its guidance. Telfer and Gosowong
did well but Hidden Valley and Ridgeway posed more questions than answers. If not for the mark to market and a
increase in our FY11 gold price forecasts, we would have been downgrading earnings.
RBS Research Target Price to A$35.23.

Source: IRESS

In the range
NCM produced 1.762Moz of gold in FY10 which was within the revised guidance range of 1.75-1.83Moz. The full year
production was 40koz less than RBS Research forecast primarily as a result of lower production out of Ridgeway and
enduring issues at Hidden Valley. Production from Ridgeway Deeps will take longer to ramp up than we had modelled.
Hidden Valley delays continue. It produced 61koz (NCM share) for the year of which only 11koz contributed to the P&L
because all revenue and costs were capitalised until the end of April. RBS Research believe that NCM will get no credit
for the operations until it can put together at least 2-3 quarters of meeting production and cost budgets.

Earnings up but more confidence in production required

Earnings for FY10 have increased 13% due to higher than expected quarterly production. RBS Research have
downgraded production from Ridgeway and Hidden Valley in FY11 but the earnings impact has been offset by an
adjustment to our gold price forecasts.

LGL and FY11 guidance over the next month or so

NCM is due to release its FY10 earnings on 16 August, at that time the CEO and CFO will provide the market with
production and cost guidance for FY11 as well as a briefing on the exploration results for the year. The PNG Court
decision on the Scheme of Arrangement should be out today and provide us with a timeline for the completion of the
scheme of arrangement with Lihir Gold.

Investment view - Hold maintained

We believe that the guidance for FY11 and the integration plans for LGL are more important than the FY10 result and
RBS Research earnings for FY11 and beyond will change significantly over the next quarter.

RBS MINIs over NWS

Security ExPrc Stop Loss CP ConvFac Delta Description

NCMKZG 24.9127 27.38 Long 1 1 MINI Long
 Equity Structured Products and Warrants

MINI Trading Buy:

Macquarie Group (MQG.AX): When the going gets tough....
MQG's 1Q10 update highlighted that key divisions have been impacted by weak market conditions. RBS
Research have lowered FY11F EPS by 4% and 1% in forward years to account for these near term impacts. We
believe that underlying market conditions will improve in 2H11 rendering MQG good value at current levels.
Maintain a Buy.

Buy Long MINI MQGKZD for short/medium term trade to $45 or hold for the long term.

Source: IRESS

First quarter ahead of pcp but outlook cautious

MQG announced that its 1Q11 earnings were slightly ahead of a subdued pcp. As expected, the key divisions, Macquarie
Securities, Macquarie Capital and FICC, were impacted by weak market conditions. MQG's revised outlook states that
these divisions are unlikely to beat FY10 results in FY11F if 1Q11 conditions do not improve over the remainder of the
year. However, we believe that conditions in 1Q11 were particularly weak with global equity indices off 10-12% and see
this as unlikely to be repeated over the remainder of FY11.

Changes to forecasts - FY11 EPS reduced by 4% and FY12/13 reduced by 1%

RBS Research have lowered FY11F EPS by 4% to account for the cautious outlook for Macquarie Capital, Macquarie
Securities and FICC business. FY12/13F EPS are lowered by 1% as we believe that the investment banking cycle has
just been pushed back six to 12 months, and with the transaction pipeline building, it is a matter of markets stabilising to
reach execution.

Investment view - retain Buy recommendation, TP trimmed to A$54

MQG's balance sheet remains strong and the firm continues to capitalise on the market downturn by acquiring
businesses and portfolios from distressed sellers. Whilst the current operating conditions are clearly subdued, the
investment banking cycle appears to have been pushed back rather than cancelled altogether, and we see near-term
earnings supported by lower impairments and recent acquisitions. With the stock still trading below 10x RBS Research’s
reduced FY11F EPS, we retain a Buy recommendation.

RBS MINIs over MQG

Security ExPrc Stop Loss CP ConvFac Delta Description

MQGKZB 22.3002 24.33 Long 1 1 MINI Long
MQGKZD 26.1646 28.59 Long 1 1 MINI Long
 Equity Structured Products and Warrants

MINI Trading Buy:

Origin Energy (ORGKZC) – Offtake and set for NSW privatisation sale
ORG's share price has come under pressure of late. In addition to general market jitters, we believe
concerns over the outlook for APLNG and the potential for an earnings downgrade have also weighed
on sentiment. In our view, the longer-term outlook hasn't changed, and we are buyers on this
weakness. Buy maintained with RBS Target Price of $18.25

Source: IRESS

Earnings should hold up in FY10...

A few things have gone against ORG since the interim result in February (eg, Contact, Cooper flooding, lower oil price,
weaker APLNG gas sales), but we still expect the company to meet its c15% NPAT guidance (RBS +15.3% vs market
+16.6%). The key positive driver over the last half has been particularly weak electricity spot prices, which should help the
retail business deliver a solid FY10 result.

... and the outlook for FY11 looks pretty robust

As shown in this note, next year seems to be loaded with a range of positive earnings drivers, so we find it hard to see
ORG being unable to deliver solid profit growth. In our view, the biggest risk revolves around how the Darling Downs
power station will interact with ORG's retail business. In isolation, the near-term outlook for the generator would be pretty
ugly, but we are hoping that any downside is offset by improved retail margins.

RSPT shouldn't have a significant impact on long-term fundamentals

We still don't expect the current proposal to get up with no changes (eg, the uplift rate) but, even if it does, we don't see it
making a material dent in our ORG valuation. RBS Research base-case valuation for APLNG would fall only 10% under
the RSPT, using RBS Research conservative forecasts for capex and an LNG sales price. At any rate, we believe the
market is underestimating ORG's fall-back plans if the LNG project is delayed materially (we have pushed back the
timeline by 12 months to mid 2015) or even shelved.

Buy maintained; we think current weakness provides a good opportunity

It may be difficult to pinpoint a precise catalyst for Origin's share price to re-rate but, in our view, there is no question the
stock is loaded up with positive optionality that can be exercised at any time. The NSW trade sale (fingers crossed) looks
promising and we believe ORG is well positioned to make an accretive acquisition.
BUY ORGKZC for 1-for-1 upside towards RBS Target Price of $18.25

RBS MINIs over ORG

Security ExPrc Stop Loss CP ConvFac Delta Description
ORGKZC 1095.88 1198 Call 1 1 MINI Long
 Equity Structured Products and Warrants

RBS Round Up Corner:

Monthly Market Review - July 2010

The focus for markets in July was on the European bank stress tests. Despite some commentators questioning
how 'stressful' the tests really were, the market reacted positively to the outcome. Strong company results in the
US and a more tame than expected outcome from Basel also helped investor sentiment.

Australia's performance vs the world

In local currency, the All Ordinaries (+4.2%) underperformed the US S&P 500 (+6.9%), the World MSCI ex Australia
Index (+7.9%) and the regional MSCI ex Japan Index (+7.1%).

The best- and worst-performing sectors

The best performers for the month were Industrials (+7.2%), Financials ex Property (+6.5%) and Materials (+4.9%). The
worst performers were Information Technology (-4.0%), Telecommunication Services (-0.5%) and Health Care (+0.9%).

The top-five and bottom-five performing S&P/ASX 200 stocks

The top-five performers from the S&P/ASX 200 (price) Index for the month were Linc Energy (+56.4%), Intoll Group
(+41.3%), Lynas Corporation (+39.4%), Downer EDI (+38.1%) and Kagara (+34.0%). The bottom-five performers were
Nufarm (-29.1%), Aquarius Platinum (-19.8%), Eldorado Gold (-14.8%), iSoft Group (-14.7%) and St Barbara (-14.3%).

Consensus earnings revisions

The top-five upgrades were Iluka Resources (+23.8%), Intoll Group (+23.4%), Newcrest Mining (+7.2%), Lihir Gold
(+6.2%) and OZ Minerals (+2.7%). The top-five downgrades were Nufarm (-31.0%), Aquarius Platinum (-24.3%), Boral (-
18.8%), AWE (-14.6%) and Paladin Energy (-10.6%).
 Equity Structured Products and Warrants

Global growth and valuation appeal to drive equities

Global pressure points manageable and global economic growth to progress further
We have reviewed the key macro pressure points for global equity markets and are confident the gradual economic
recovery will be sustained. The market appears to be excessively discounting the prevailing structural and cyclical risks,
as serious as they are. The global markets are being forced to confront many unresolved issues, creating pockets of
opportunity. In our view, this is one such opportunity. We see corporate investment as the next global growth driver and
global corporate health is now supportive of investment resumption, following a period of capex neglect. Corporate
profitability should not be underestimated and in time is likely to be the micro issue that takes centre stage, pushing
macro issues to the background.

We believe resumed confidence in earnings will drive markets forward

Analysts are often thought to be perennially bullish at the outset. However, following two years of savage declines in
expectations and given the fact we are entering the first year of synchronised positive global economic growth, Australian
equity consensus estimates appear both defensible and achievable to us, at 24% growth forecast for FY11.

S&P/ASX 200 targets – 5300 by end-2010, 5600 by mid-2011

For the market as a whole, we derive our S&P/ASX 200 targets by applying a 12-month forward PE of 12.8x (about 1
standard deviation cheap) to the RBS top-down assumptions for net income growth of 23% in FY11F and 14.6% in
FY12F. On this basis, we forecast S&P/ASX 200 returns of 22% from 4354 currently to 5300 by year-end 2010 and a
further 5% appreciation to 5600 by mid-2011.

Our view is that there will be no default in Europe but that resolution of the crisis may still be some time off. We show
below that while debt markets have deteriorated this is certainly no GFC event. With the Australian market trading on a
12.2x forward market PE, some good buying opportunities are emerging on any sort of medium-term view.
 Equity Structured Products and Warrants

For further information please do not hesitate to contact us on the details below

Equities Structured Products & Warrants

Toll free 1800 450 005 www.rbs.com.au/warrants
Trading Products Team
Ben Smoker 02 8259 2085 ben.smoker@rbs.com
Ryan Corrigan 02 8259 2425 ryan.corrigan@rbs.com
Investment Products Team
Elizabeth Tian 02 8259 2017 elizabeth.tian@rbs.com
Tania Smyth 02 8259 2023 tania.smyth@rbs.com
Robert Deutsch 02 8259 2065 robert.deutsch@rbs.com
Mark Tisdell 02 8259 6951 mark.tisdell@rbs.com

Disclaimer
The information contained in this report has been prepared by RBS Equities (Australia) Limited (“RBS Equities”) (ABN 84 002 768 701) (AFS Licence No 240530) and has
been taken from sources believed to be reliable. RBS Equities does not make representations that the information is accurate or complete and it should not be relied on as
such. Any opinions, forecasts and estimates contained in this report are the views of RBS Equities at the date of issue and are subject to change without notice. RBS
Equities and its affiliated companies may make markets in the securities discussed. RBS Equities, its affiliated companies and their employees from time to time may hold
shares, options, rights and warrants on any issue contained in this report and may, as principal or agent, sell such securities. RBS Equities may have acted as manager or
co-manager of a public offering of any such securities in the past three years. RBS Equities’ affiliates may provide, or have provided banking services or corporate finance to
the companies referred to in this report. The knowledge of affiliates concerning such services may not be reflected in this report. This report does not constitute an offer or
invitation to purchase any securities and should not be relied upon in connection with any contract or commitment. RBS Equities, in preparing this report, has not taken into
account an individual client’s investment objectives, financial situation or particular needs. Before a client makes an investment decision, a client should consider whether any
advice contained in this report is appropriate in light of their particular investment needs, objectives and financial circumstances. It is unreasonable to rely on any
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© Copyright 2009. RBS Equities. A Participant of the ASX Group.

Explanation of Warrant Tables

Security – refers to the code ascribed to the warrant, ExDate – refers to the date on which the warrant expires or is reset, ExPrc – refers to the exercise price, or second
instalment payment, CP – tells you whether the warrant is a call or a put, ConvFac – the conversion factor of the warrant which tells you how many warrants you need to
exercise in order to take possession of 1 share, Delta – tells you how much the warrant will move for a 1c move in the underlying security, Description – Tells you the type
of warrant.
All charts taken from IRESS unless indicated otherwise