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

The Round Up
17 September 2009
Issue No. 178
The Round Up is a comprehensive daily note produced by the RBS Warrants
team providing an overview of market movements along with quality ideas for
warrant traders and investors.

In today’s issue
Global Market Action Scoreboard, commentary
Aussie Market Action SPI Comment, Events & Dividends
PDN (PDNKZJ) Trading Update – Capital raising
WDC (WDCKZG) MINI Investment Buy– Bottom of cycle?
CSR (CSRKZA) MINI Trading Buy – A sweet trade
Round Up Corner Portfolio Protection using MINIs

Equities

Move Last % Move Range Volume

ASX 200 +110.1 4650.4 +2.4% +12 to +111 $7.5 bn(H)
SPI - yesterday +115.0 4662.0 +2.5% +27 to +117 65,852(VH)
Dow Jones +108.3 9791.7 +1.1% -4 to +116 Avg
S&P 500 +16.1 1068.8 +1.5% + to +16 High
Nasdaq +30.5 2133.2 +1.5% + to +31 Avg
FTSE +82.0 5124.1 +1.6% u.c to +89 Avg

Commodities

Move Last % Today % Past Month

Oil-WTI spot +1.4 72.4 +2.0% +7.1%
Gold Spot +9.6 1017.1 +0.9% +7.3%
Nickel (LME) +24.4 781.0 +3.2% -11.8%
Aluminium (LME) +3.3 85.9 +4.0% -3.2%
Copper (LME) +9.8 290.3 +3.5% +2.4%
Zinc (LME) +3.5 86.7 +4.3% +6.3%
Silver +0.4 17.4 +2.1% +18.3%
Sugar +0.7 22.5 +3.3% +2.3%
Dual Listed Companies (DLC’s)

Move %Move Last AUD Terms Diff to Aus

NWS (US) 0.35 0.02 +14.4 c 16.50 +13.8 c
RIO (UK) 75.50 0.03 +27.2 c 51.43 -875.1 c
BLT (BHP UK) 54.50 0.03 +17.6 c 33.27 -572.7 c
BXB (UK) 24.50 0.06 +4.1 c 7.78 -2.0 c

American Depository Receipts (ADR’s)

Move %Move Last AUD Terms Diff to Aus

BHP (US) 2.04 0.03 +68.9 c 39.44 +43.7 c
AWC (US) 0.42 0.07 +6.2 c 1.76 +4.0 c
TLS (US) 0.70 0.05 +14.3 c 3.28 +4.4 c
ANZ (US) 0.96 0.05 +20.2 c 23.14 +30.9 c
WBC (US) 5.31 0.05 +109.2 c 25.01 +45.5 c
NAB (US) 1.28 0.05 +25.7 c 29.42 +37.4 c
LGL (US) 1.42 0.05 +28.1 c 3.21 +6.3 c
RMD (US) 0.19 0.00 +46.0 c 5.26 -7.8 c
JHX (US) 1.05 0.03 +31.8 c 7.29 +1.1 c
PDN (CAN) 0.09 0.02 +4.3 c 4.61 +11.8 c

Overnight Commentary
United States Commentary
Déjà vu in the US, another round of consensus beating economic numbers, bolstering the bull case that the worst is behind us and the
US economy is on the improve. By the bell, the Dow just shy of highs up 108pts led by both the growth proxies and the financials, the
Nasdaq and S&P both finishing 1.5% higher.

Eco - CPI for August +0.4% vs +0.3%, Ex Food&Energy in line at +0.1%, CAD -$98.8bln vs $ 92.0bln expected but an improvement on
-$101.5bln in Q1. Of most interest and getting the most air time, better than expected Industrial Production, August coming in at +0.8%
vs consensus +0.6%.NAHB for Sept in line at 19.

Growth Proxies - Another day, another round of healthy gain from the US growth proxies. GE up over 6% and the Dow's best, Alcoa
not far behind up 3.5%, Du Pont, IBM and Caterpillar all finishing around 2% higher.

Financials - For the first time in a little while, financials and cyclical plays moved in unison. Comments from Citi's Pandit that he had
"little doubt" the bank would return to profitability and repay bailout funds once there are "concrete signs" of an economic recovery
seemed to add to confidence, BoNY up 6.6%, Amex and JP's up 3.4% and BoA finished 2.7% higher.

Homebuilders - On the back better than expected IP and the in line result from the NAHB index, US homebuilders were one of the
standouts. Lennar up 6.2%, Pulte and DR Horton up 5%.

United Kingdom & Europe Commentary

The FTSE was again boosted by increased investor optimism to hit a 12 month high. The FTSE climbed 1.6% or 82pts whilst in Europe
the FTSE Eurofirst 300 added 1.4%, the DAX was up 1.3% and the CAC rose 1.6%.

UK Banks - The sector added the most points to the index as upbeat comments from Bernanke saying the recession was over in the
US helped investor confidence. Barclays rose 3%, HSBC jumped 4.4%, Lloyds climbed 4.3% and RBS was up 0.6%.

Euro Banks - The sector was boosted by comments from SocGen saying that banks were in a better-than-expected position to meet
the ECB's new capital requirements. SocGen climbed 5.7%, BNP was up 5.1%, Deutcshe Bank rose 3.5% and Commerzbank added
4.7%.

Financials - The London Stock Exchange, up 6.5%, was up more than 10% at one stage after bid rumours. One story doing the
rounds was that a potential bidder had approached Borse Dubai and Qatar Investment Authority, which own 20% and 15% stakes
respectively of LSE.
Retail - Britain's second largest retailer Next rose 6.8% after it reported a rise in first-half profit, at the top end of expectations, although
it forecast a tougher second half and a flat full-year outcome. Defensive supermarkets Sainsbury and Tesco were off 0.4% and 0.6%
respectively.

Eco - Britain's jobless rate climbed to its highest level in almost 13 years. The amount of people who joined the unemployment queue
rose by 24.4k which was lower than the 25 k expected. Analysts however cautioned that unemployment queues could lengthen for
some time.

Resources Commentary
Miners - Stronger US data for the second night in a row again boosted metal prices. BHP climbed 3.2%, Rio was 2.85% higher, Anglo
added 2.7% and Xstrata ended 3.4% higher after also being upgraded by RBS.

Energy - Crude climbed back above $70 per barrel lifting the sector. Tullow soared 9.2% after an oil find off Sierra Leone, BP added
0.7%, Shell was up 0.5%, BG Group jumped 3.1% and in Europe Statoil was 0.45% higher, Repsol gained 1.9% as it is also in the
Sierra Leone consortium.

SPI Commentary
The SPI traded up 115pts or 2.5% to 4662. Overnight the SPI traded up another 53pts to 4715.

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 Dwelling commencements, RBA Board Minutes
US PPI, retail sales, NY Fed Empire PMI, Business inventories
Wednesday AUS
US CPI, Current account balance, Industrial production
Thursday AUS RBA Bulletin, customs imports
US NAHB survey, housing starts
Friday AUS
US Philadelphia Fed Index
*Dates are indicative only and may change

Upcoming Dividends

ExDivDate Security Description Div (c) Yield Frk(%) PayDate

21-Sep-09 BBG Billabong 18 4.3% 50 23-Oct-09
21-Sep-09 NCM Newcrest Mining 15 0.44% 0 16-Oct-09
Trading Update:

Paladin Energy (PDNKZJ) – Capital raising

Last week PDN completed an institutional placement to raise A$419m. This represents ~15% of issued capital with an
issue price of $4.60. The placement was well received by investors, however with the share price closing Friday below the
issue price, we believe a buying opportunity has been presented. RBS Research expect the stock to rerate post issue as
balance sheet concerns will be gone. RBS Research target price $5.61 with a BUY recommendation. Buy PDNKZJ

Source: IRESS

• PDN completed an institutional placement of ~15% of issued capital with a price of $4.60.
• PDN said that the funds will be used to advance M&A and other growth opportunities, progress Langer Heinrich
Stage 3, expand exploration programs, and strengthen the balance sheet
• The raising will take PDN's net debt down to US$166m from US$520mln with gearing falling to 17% (previously
46%).
• RBS Research believe the placement should be well received by investors, and expect the stock to rerate post
issue as balance sheet concerns are removed.

RBS MINIs over PDN

Security ExPrc Stop Loss CP ConvFac Delta Description

PDNKZI 135.29 156 Long 1 1 MINI Long
PDNKZJ 310.22 356 Long 1 1 MINI Long
MINI Investment Buy:

Westfield Group (WDCKZG) – Bottom of devaluation cycle?

Post result, WDC has maintained FY09 operating EPS guidance of 94-97cps, despite a cut in the FY10+ payout policy to
70-75%. With WDC arguably at the bottom of a challenging earnings and property devaluation cycle, RBS Research are
more confident of a sector re-rating and upgrade to Buy. RBS target price $14.16. WDC is trading in an uptrending
channel. Buy WDCKZG below $12.

Source: IRESS

RBS Research expect the level of cap rate expansion for WDC to ease materially and the NOI decline across the UK and
US portfolios to cease in the 2H09. RBS see ongoing rerating from here as evidence mounts of a stabilisation and slow
improvement in property markets and move to a Buy with a longterm positive disposition on quality property companies
such as WDC.

WDC reported negative revaluations of A$2.9bn across the portfolio which were not unexpected. The cut in the dividend
payout from 100% of operational earnings to 70-75% would no doubt have caught those expecting an equity raising by
surprise but we see this and the deferred development schedule positioning WDC well to respond to any upturn in the
broader property market.

RBS MINIs over WDC

Security ExPrc Stop Loss CP ConvFac Delta Description

WDCKZG 650.83 716 Long 1 1 MINI Long
WDCKZR 1847.47 1662 Short 1 1 MINI Short
MINI Trading Buy:

CSR Limited (CSRKZA) – A sweet trade

Compared to the performance of sugar and other building materials stocks, CSR has been an underperformer of late. The
sugar price has recently pulled back from multi decade highs, however RBS Research anticipate CSR has achieved
FY10 average prices in excess of A$400/t, and an increasingly attractive hedge book over FY11+. Current signals also
point to the earliest crushing season finish in 18 years. The divestment of CSR’s business is also in the pipeline which we
believe will unlock value. The stock has pulled back to its uptrend line and looks to have found support at $1.90. Buy
CSRKZA

CSR Daily Chart

Source: IRESS

CSR is trading in a strong uptrending channel since hitting lows in March. The stock has recently pulled back to the lower
end of the uptrend channel and appears to have found support at $1.90.

Sugar price returns vs CSR returns

Source: IRESS

The chart above shows the returns on CSR vs the returns on sugar. It can be seen that there is a historical correlation
with sugar and CSR, however this relationship has diverged in 2009 with sugar significantly outeprforming sugar.
CSR vs other builders and the S&P/ASX 200

Source: IRESS

The chart above compares recent returns of CSR and other building materials stocks. It can be seen that CSR has
underperformed both JHX and BLD as well as the broader market. The reason for the divergence of sugar and CSR as
shown on the previous page in 2008 was the weakness in building materials…. However this sector of the market has
rallied, and CSR has been left behind.

We believe that the underperformance of CSR in both sugar and building materials is set to converge with CSR
outperforming. CSR also has an aluminium business and has also underperformed AWC.

The sugar story is sweet

• Current sugar prices around 21.60USc/lb are just below 28-year highs, up ~45% over the past 12 months.
• With dry weather in India and excess rain in Brazil curbing production from the world’s two biggest growers, the
ISO estimates global demand may outstrip supply by 8.4Mt in 2009/10 (5% of consumption).
• CSR indicated an expectation of a minimum achieved price of A$380/t. Yet with implied raw sugar prices
subsequently averaging A$525/t, RBS research now anticipate FY10 realised prices of A$403/t.
• In addition CSR appears poised to benefit from drier weather conditions and mill upgrades to complete the sugar
cane crush in late October, the earliest in 18 years.
• RBS target price $2.15 with a buy recommendation

RBS MINIs over CSR

Security ExPrc Stop Loss CP ConvFac Delta Description

CSRKZA 100.69 Long 1 1 MINI Long
CSRKZP 299.35 Short 1 1 MINI Short
RBS Round Up Corner:

Using Index MINI Shorts

An Index MINI short is a listed derivative product issued by RBS over the SFE SPI 200 ™ futures contract (SPI). The
SPI is the benchmark equity index futures contract in Australia which is based on the XJO. The XJO consists of over
90% of the total market capitalisation of all companies, unit trusts, stapled securities listed on the ASX and is comprised
of the largest 200 ASX listed companies by market capitalisation (plus liquidity considerations). The SPI futures have a
high degree of correlation to the XJO. Buying an Index MINI short gives you upside exposure to falls in the SPI and is a
great way to hedge a stock portfolio or take a bearish trading view on the stock market

The price of an Index MINI short tracks the price of the nearest month SPI futures contract. The value of an index MINI
short is calculated by taking the strike price of the MINI short and subtracting the current SPI futures level and then
dividing by 100. The Index MINI short will move 1c for every 1 point movement in the SPI, and will increase in value as
the SPI falls and decrease in value as the SPI rises. Therefore, if you think that the Index level will go down you may
decide to buy an Index MINI Short.

Value of Index MINI Short = [Strike Price - Level of SPI Futures] / 100

The Strike Price is the amount that RBS funds on behalf of the Holder (in other words, it is the leverage incorporated
into the Index MINI) and is the amount that a holder has to pay to RBS if they want to exercise the Index MINI. The
strike price can be converted to a dollar amount by dividing by 100. Holders can choose from a range of Strike Prices,
each of which provides a different level of leverage. Index MINI shorts trade between the hours of 10am to 4pm on
trading days (although RBS will generally be quoting markets from 9:50am – 4pm)

Let’s see how an Index MINI works with an example:

Example: Trading a Index MINI Short - XJOKZX

SPI Strike Index Mini Profit / %

Action Units Stop Loss Level
Futures Price Price (Loss) Return

BUY 1,000 4,400 4895.97 $4.96 4655

Index Future falls to 4300*
SELL (same day) 1,000 4,300 4895.97 $5.95 4655 $1.00 20%
SELL (2 weeks) 1,000 4,300 4890.32 $5.90 4655 $0.94 19%
Index Future rises to 4500
SELL (same day) 1,000 4,500 4895.97 $3.96 4655 -$1.00 -20%
SELL (2 weeks) 1,000 4,500 4890.32 $3.90 4655 -$1.06 -21%
*If the index falls and the MINI position is closed out, tax will be payable on the profits from the MINI short

The first line in the table shows a position of 1,000 Index MINI Shorts purchased for a price of $3.23 where the Index was
trading at 4400. The Strike Price of the Index MINI is 4895.97, with a Stop Loss Level at 4655.

The second line shows the outcome of a decrease in the Level of the Index Futures to 4300, a 100 point drop. The Index
MINI price has increased to $5.95, with the Strike Price and Stop Loss Levels remaining unchanged. The sale of 1,000
Index MINIs has realised a 20% profit if sold on the same day. If the holder sells their Index MINI Shorts two weeks after
the date of purchase the Strike Price has decreased to 4890.32, to reflect the two weeks funding costs. The sale of 1,000
Index MINIs at $5.90 has realised a 19% profit.

The next two lines demonstrate the P&L impact if the SPI index were to rise to 4500, a 100 point rise.

If the SPI index level were to trade at or above the stop loss level of 4655, RBS will buy back the SPI futures underlying
the index MINI shorts and the holder will get back the difference between the strike price and the price which RBS buys
the SPI futures back at. A stop loss event will only occur if the SPI futures hit the stop loss level between 10am and 4pm
on a trading day. If the SPI futures were to gap through the strike price, then the holder will have no further obligation to
pay additional funds or margin… thus losses are limited to the initial capital outlay
Hedging a diversified portfolio of shares with Index MINIs

The market value of 1 SPI Futures contract = SPI Index level x 25

Example: SPI at 4,400 = 4,400 x 25

= $110,000 (value of 1 SPI contract)

The Multiplier for Index MINIs is 100. This means that the price of one Index MINI is equivalent to one hundredth of the
level of the SPI.

Now lets assume 2,500 MINIs (100 X 25) = 1 SPI Future contract
2,500 MINIs = 4,400 x 25
100 MINIs =4,400 x 1
1 MINI = 44 X $1
= $40 worth of index exposure

If you owned a diversified portfolio of shares worth $1,000,000 and want to hedge against the downside with MINI shorts.

The number of MINI shorts you must buy = $1,000,000 / $44 ($ value of 1 Index MINI)
= 22,727 MINI shorts needed to hedge portfolio

Note: The easy way to determine the index exposure of a MINI is to divide the spot index level by the MINI multiplier of
100.

Example: Index level at 4,400 = 4,400 / 100

= $44 market exposure

So… the formula for calculating the number of MINI shorts needed to hedge a $ value portfolio is:

What are the benefits and features of Index MINI shorts?

• Simpler than unlisted CFD’s - they are traded on, and supervised by the ASX.
• No maturity date thus minimising the concerns of rollovers or exercises.
• Leveraged participation in the movement of the Index on a one for one hundredth basis. (1c = 1 point)
• Funding Costs charged on a daily basis so that day-traders don’t pay intra-day.
• Limited recourse leverage and Stop Loss Levels protects Holder against losing more than initial Capital Outlay
• Most efficient way to hedge an existing portfolio by taking a short position over the overall Index.
• Do not have initial collateral requirements and do not involve margin payments
• Ability to lock in recent gains on a postfolio without realising capital gains tax

MINIs approaching stop loss

Approx. MINI Share:

Underlying MINI Code MINI Type Strike Stop Loss Share Price
Value Stop Loss

ANZ ANZKZV Short $25.43 $22.91 $ 22.83 $ 2.60 0.4%

LLC LLCKZP Short $12.31 $11.23 $ 10.99 $ 1.32 2.2%
HVN HVNKZP Short $4.98 $4.48 $ 4.33 $ 0.65 3.5%
WES WESKZT Short $29.58 $26.65 $ 25.74 $ 3.84 3.5%
XJO XJOKZW Short 5,097.62 4,843.00 4,650.40 $ 4.47 4.1%
SFI’s approaching stop loss

Approx. MINI Share:

Underlying MINI Code MINI Type Strike Stop Loss Share Price
Value Stop Loss

AGK AGKSZX Long $7.98 $9.06 $ 13.49 $ 5.51 32.8%

TTS TTSSZX Long $1.38 $1.64 $ 2.56 $ 1.18 35.9%
BSL BSLSZW Long $1.76 $1.94 $ 3.07 $ 1.31 36.8%
WDC WDCSZW Long $7.52 $8.25 $ 13.06 $ 5.54 36.8%
WBC WBCSZV Long $14.03 $15.40 $ 24.52 $ 10.49 37.2%

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

Contact
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
Robbie Taylor 02 8259 2018 robbie.taylor@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”) (ABN 84 002 768 701) (AFS Licence No
240530) (“RBS Equities”) 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, with or without RBS Equities’ assistance, 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 recommendation
without first having consulted with your adviser for a personal securities recommendation. This information contained in this report is general advice
only. RBS Equities, its officers, directors, employees and agents accept no liability for any loss or damage arising out of the use of all or any part of the
information contained in this report. This Information is not intended for distribution to, or use by any person or entity in any jurisdiction or country where
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The warrants contained in this report are issued by RBS Group (Australia) Pty Limited (ABN 78 000 862 797, AFS Licence No. 247013). The Product
Disclosure Statements relating to these warrants are available upon request from RBS Equities or on our website www.rbs.com.au/warrants

© 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