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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

8 June 2010Issue No. 346

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.

Equities

Move Last % Move Range Volume

ASX 200 -123.5 4325.9 -2.8% -150 to + $5.5 bn(A)SPI - yesterday -129.0 4338.0 -2.9% -164 to -113.u.c 39,028(H)Dow Jones -115.5 9816.5 -1.2% -122 to +50 HighS&P 500 -14.4 1050.5 -1.4% -15 to +6 AvgNasdaq -45.3 2173.9 -2.0% -47 to +14 AvgFTSE -56.9 5069.1 -1.1% -86 to u.c Avg

CommoditiesMove Last % Today % Past Month

Oil-WTI spot -0.50 71.01 -0.7% -5.5%Gold Spot +21.50 1241.40 +1.8% +2.7%Nickel (LME) +11.39 822.46 +1.4% -19.4%Aluminium (LME) -0.66 83.22 -0.8% -10.1%Copper (LME) -8.22 275.23 -2.9% -12.2%Zinc (LME) -0.61 72.42 -0.8% -22.6%Silver +0.73 18.18 +4.2% -1.0%Sugar -0.19 14.33 -1.3% +4.2%

Global Market Action Scoreboard, commentary

Aussie Market Action SPI Comment, Events & Dividends

Newcrest (NCMKZG) MINI Trading Buy Flight to GOLD

Equinox (EQNKZA) MINI Trading Buy Costs in focus

Origin Energy (ORGKZC) MINI Trading Buy Offtake and set for NSW

privatisation sale

Australian Strategy Monthly Market Review - May 2010

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Dual Listed Companies (DLCs)Move %Move Last AUD Terms Diff to Aus

NWS (US) -0.30 -2.0% 14.46 17.85 +10.0 cRIO (UK) -64.0 p -2.1% 30.52 54.49 -1105.7 cBLT (BHP UK) -36.0 p -2.0% 17.350 30.98 -556.2 c

American Depository Receipts (ADRs)Move %Move Last AUD Terms Diff to Aus

BHP (US) -1.27 -2.1% 58.44 36.07 -47.0 cAWC (US) -0.13 -2.6% 4.88 1.51 -2.4 cTLS (US) -0.17 -1.4% 12.30 3.04 -0.3 cANZ (US) -0.31 -1.7% 17.75 21.91 -10.9 cWBC (US) -2.00 -2.2% 89.20 22.02 -15.8 cNAB (US) -0.33 -1.7% 18.96 23.40 -21.5 cLGL (US) +0.21 +0.6% 33.04 4.08 +7.9 cRMD (US) -1.49 -2.3% 62.94 7.77 -5.1 cJHX (US) -1.10 -3.6% 29.40 7.26 +2.8 c

PDN (CAN) -0.11 -3.3% 3.23 3.76 -1.0 c

Overnight CommentaryUnited States Commentary

USmarketsfellagain,afterbeingupearlythankstobetterGermanFactoryorders,withinvestorsstillunwillingtostepintobuystocksaftertheweakPayrollsnumberonFridaynight.TheDowfell116pts,theS&Pdropped1.4%andtheNasdaqwasoff2%withthetechsectoroneoftheworstonthenight.Economy -JanetYellen,BarackObama'spicktobethenextFedvicechairman,saidinaspeechthatwhilethereareimprovements,"significantheadwindstostabilityremain".Financials -BoAwasoff3.4%andtheworstontheDowafterthecompany'sCountrywideFinancialCorpunitagreedtopay$108milliontosettleU.S.governmentchargesofmisleadingandoverchargingconsumers.Goldmansdropped2.6%followingnewsthatagovernmentcommissioninvestigatingthe2008financialcrisishasissuedasubpoenatothecompanyafterthebankfloodedthepanelwithbillionsofpagesofdigitizedrecords. Tech -Googledropped2.7%aftertheConnecticutAGsentalettertothefirmaskingiftheyhadunlawfullycollecteddatawithoutpermission.Applefell2%afterthecompanyunveiledanewiPhonetocompetewithnewAndroidphones. Materials -OnComex,Copperdroppedfora6thstraightsessionandtoitslowestlevelsinceOct5.Freeportsank6.1%andAlcoafell3%withtheothermetalsalsoweaker.Caterpillarfell3.3%tobesecondworstontheDowstripping15pts. United Kingdom & Europe Commentary

TheFTSEshed57pointsMondayasweakerUSjobsnumbersandEuropeandebtconcernscontinuetohauntthemarketwithinvestorsturningtheirbackonrisk.Themarketfinishedtheday-1.1%,theDAX-0.6%andtheCAC-1.2%. Banks -BankswerelowerasgeneralmarketfearswereenhancedbyworriesoveranewlevyonBritishlenders.It'sreportedthatfinanceminsterGeorgeOsborneisplanningtoslapthebankswithapunishingnewtaxdespiteattemptstoagreeonauniversallevyforfinancialfirms.Lloyds,BarclaysandRBSoff0.9%to2.7%. ThemarketwasgivenachancetorallyasGermanfactoryordershitexpectationsoutofthepark.Thenumbercameinat2.8%vs.-0.4%expasaweakerEuroincreasedexports.YetinvestorsremainedcautiousabouttheoverallstateoftheEurozoneandthemarkettradedwithlittleconviction.

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Commodities CommentaryMiners -MinerswereweakerasmetalpricescontinuedtofallonthebackofChinesedemandfears.Kazakhmys,ENRC,RIOandBHPoff2%to4%whileRandgoldchalkedupawinof0.9%asinvestorssortrefugeinthegoldplay. Energy -EnergymajorswerelowerleadbytheirUSpeersandaweakercrudeprice.RoyalDutchandBGshed1.1%and2.3%whileBP,whichhaslostabout1/3ofitsvaluesincethespillintheGulf,fell0.7%despitecappingsomeoftheleakingoil.SPI Commentary

TheSPItradeddown133ptto4338.Openat4471withahighof4491andalowof4303.Volume46,403OvernighttheSPItradeddown37ptsto4301.

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 WeekMonday AUS

US

Tuesday AUS

US

Wednesday AUS

US

Thursday AUS

US

Friday AUS

US

*Dates are indicative only and may change

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MINI Trading Buy:Newcrest Mining (NCMKZG) Flight to GOLD

NCM has secured LGL board approval for its merger proposal via an increase in bid terms. On RBS Researchsnumbers the increased terms remain EPS accretive but are dilutive on an NPV basis. We see increased sector

relevance and strong growth profile as supporting the combined entity going forward. RBS Research TargetPrice to A$40.52.

Source: IRESS

Increased NCM offer acceptedThe LGL board has recommended an increased offer of 1 NCM share and A$0.225 for every 8.43 LGL shares held, anincrease of 6.3% above the previous offer. This is in line with RBS Researchs previously stated position that a 5-10%improvement in bid terms of the bid would secure the support of the LGL board. However, the release of the Henry taxreview implies a proportionately greater impact for NCM than LGL on an NPV basis and ultimately erodes the value of anincreased script component, in our view. In light of the new tax proposals we believe NCM has achieved a soundoutcome.

NPV dilutive but its about the bigger pictureUnder the increased bid terms and including A$85m in synergies we estimate that the deal would be 1.4% EPS accretive

in year one (from 2% previously) and 8.9% NPV dilutive for NCM. However, the combined entity would be trading at aP/NPV multiple of 1.17. This compares with our historical average P/NPV multiples of 1.45 for LGL and 1.39 for NCM. Onthis basis alone we believe that the combined entity will re-rate, but flag increased index weighting, sector significanceand expanding production profile as justification for an increase P/NPV premium over time.

Investment viewPrior to the initial bid, our preference was for NCM over LGL for gold exposure due to diversification by mine andgeography, its strong growth pipeline, management strength and a relatively low P/NPV multiple. Should the merger besuccessful we are of the view that NCM's management team will be able to extract greater operational synergies overtime than the A$85m currently factored in to our numbers, and remain buyers on a long term view. We maintain our viewthat a competing bid for LGL is unlikely but would continue to hold that stock with a view to NCM exposure now that atimeline for the merger has been established.

RBS MINIs over NWS

Security ExPrc Stop Loss CP ConvFac Delta Description

NCMKZG 24.9127 27.38 Long 1 1 MINI Long

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MINI Trading Buy:Equinox (EQNKZA) Costs in focus

EQN has delivered a step change in production, with output for April and May showing a 43% increase on 1Q10 averagemonthly volume. We remain optimistic that full-year guidance of 135kt can be exceeded, particularly with five additional

trucks due online by September. We reiterate our high-conviction Buy call. Buy Long MINI EQNKZA for short term trade to $4.82 or hold for the long term.

Source: IRESS

Step change in monthly production a major positiveEQN has announced production for April/May of 29.7kt, which implies 44.6kt for the quarter if the run rate can besustained. This would be a significant increase on 1Q10 output at 30.5kt, and adding the two together indicates 75kt forthe half year is achievable. The key questions are whether the lift in head grade can be maintained, and how much of animpact the new mining methods have had in reducing dilution. We assume limited benefits were achieved from lowerdilution and that the driver of the uplift was a high-grade zone. The average Cu grade lifted from 0.93% in 1Q10 to 1.07%in April/May. We remain conservative in our forecasts, expecting grades to track back to previous-quarter averages.

Additional trucks still on the wayEQN is yet to receive all five additional trucks as agreed with Hitachi. Their delivery should support higher materialmovements in 2H10. There are currently two trucks on site that need to be built, and these should come online within thenext two months. A further three trucks are expected by EQN to be online by September. If higher grades can be

maintained for the next few months, and higher material movements in the back end of the year lift processing rates,150kt+ for 2010 is plausible, in our view. Nevertheless, the company has maintained guidance at 135kt, which continuesto look conservative compared to our 143kt estimate.

Investment view - high conviction Buy callThe production update was a very positive announcement from EQN, in our view, and should provide the market withgreater confidence in the outlook for the company. We reiterate our high-conviction Buy call on the stock. EQN offersstrong production growth, expansion opportunities, strong cash flow, no exposure to the RSPT, an FY11F PE of just 6xand a 15%-plus discount to NPV, not factoring in the expansion, which could add 40-50c to our NPV.

RBS MINIs over EQN

Security ExPrc Stop Loss CP ConvFac Delta Description

EQNKZA 2.1356 2.56 Long 1 1 MINI Long

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MINI Trading Buy:Origin Energy (ORGKZC) Offtake and set for NSW privatisation saleORG's share price has come under pressure of late. In addition to general market jitters, we believeconcerns 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 thisweakness. 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 theretail business deliver a solid FY10 result.

... and the outlook for FY11 looks pretty robustAs shown in this note, next year seems to be loaded with a range of positive earnings drivers, so we find it hard to seeORG 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 prettyugly, but we are hoping that any downside is offset by improved retail margins.

RSPT shouldn't have a significant impact on long-term fundamentalsWe 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 itmaking a material dent in our ORG valuation. RBS Research base-case valuation for APLNG would fall only 10% underthe RSPT, using RBS Research conservative forecasts for capex and an LNG sales price. At any rate, we believe themarket is underestimating ORG's fall-back plans if the LNG project is delayed materially (we have pushed back thetimeline by 12 months to mid 2015) or even shelved.

Buy maintained; we think current weakness provides a good opportunityIt may be difficult to pinpoint a precise catalyst for Origin's share price to re-rate but, in our view, there is no question thestock 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.ORG last traded $15.30, BUY ORGKZC for 1-for-1 upside towards RBS Target Price of $18.25

RBS MINIs over ORGSecurity ExPrc Stop Loss CP ConvFac Delta Description

ORGKZC 1095.88 1198 Call 1 1 MINI Long

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RBS Round Up Corner:Monthly Market Review - May 2010

May 2010 was tough, with European sovereign debt issues, escalating tensions on the Korean

peninsula, a leaking well in the Gulf of Mexico and the homegrown RSPT providing market headwinds.We don't expect a default in Europe and much has been priced in for the RSPT, hence we believe valueis emerging.

Australia's performance vs the worldIn local currency, the All Ordinaries (-7.9%) outperformed the US S&P 500 (-8.2%), the regional MSCI ex Japan Index (-11.2%) and the World MSCI ex Australia Index (-9.6%).

The best- and worst-performing sectorsAll sectors recorded negative performance during the month. Relatively good performers for the month were ConsumerStaples (-1.1%), Health Care (-4.1%) and Property (-4.2%). The worst performers were Financials ex Property (-11.5%),

Industrials (-11.3%) and Information Technology (-8.0%).

The top-five and bottom-five performing S&P/ASX 200 stocksThe top-five performers from the S&P/ASX 200 (price) Index for the month were Healthscope (+25.6%), Eldorado Gold(+22.2%), Sigma Pharmaceuticals (+18.9%), Australian Agricultural Company (+14.7%) and St. Barbara (+10.9%). Thebottom-five performers were Ausenco (-55.7%), Virgin Blue (-44.5%), Linc Energy (-26.2%), Sonic Healthcare (-25.9%)and Kagara (-23.8%).

Consensus earnings revisionsThe top-five upgrades were Intoll Group (+15.6%), Boart Longyear (+14.6%), Spark Infrastructure (+9.4%), Duet Group(+4.8%) and Orica (+2.2%). The top-five downgrades were Iluka Resources (-10.8%), Sonic Healthcare (-10.7%), PrimaryHealth Care (-8.3%), Transurban (-8.2%) and Brambles (-5.8%).

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RBS view: no sovereign default in EuropeOur view is that there will be no default in Europe but that resolution of the crisis may still be some time off. We showbelow that while debt markets have deteriorated this is certainly no GFC event. With the Australian market trading on a12.2x forward market PE, some good buying opportunities are emerging on any sort of medium-term view.

Debt markets modest reaction so far, but no GFCThe TED spread, or the spread between Libor and T-Bills, is a good indicator of bank funding stress, while RBA

exchange account balances signal the degree to which the banking system in Australia is relying on the RBA for liquiditysupport. As shown in the charts that follow, the TED spread has increased marginally, although it remains well below theelevated levels seen following the failure of Lehman in September 2008. RBA exchange account balances, or cash in thesystem, are consistently around A$15bn, indicating the absence of any significant local stress.

CDS markets: Australia flat, US weakerCredit default swap (CDS) spreads are a useful barometer of the health of the corporate creditmarket. As shown below, corporate CDS spreads have widened in most jurisdictions but remainwell below their GFC peaks.

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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 [email protected]

Ryan Corrigan 02 8259 2425 [email protected]

Investment Products Team

Elizabeth Tian 02 8259 2017 [email protected]

Tania Smyth 02 8259 2023 [email protected]

Robert Deutsch 02 8259 2065 [email protected]

Mark Tisdell 02 8259 6951 [email protected]

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 hasbeen 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 assuch. 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. RBSEquities and its affiliated companies may make markets in the securities discussed. RBS Equities, its affiliated companies and their employees from time to time may holdshares, 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 orco-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 tothe 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 orinvitation 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 intoaccount an individual clients investment objectives, financial situation or particular needs. Before a client makes an investment decision, a client should consider whether anyadvice contained in this report is appropriate in light of their particular investment needs, objectives and financial circumstances. It is unreasonable to rely on anyrecommendation without first having consulted with your advisor for a personal securities recommendation. The 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 thisreport. This Information is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to locallaw or regulation. If you are located outside Australia and use this Information, you are responsible for compliance with applicable local laws and regulation. This report maynot be taken or distributed, directly or indirectly into the United States, or to any U.S. person (as defined in Regulation S under the U.S. Securities Act of 1993, as amended).

The warrants contained in this report are issued by RBS Group (Australia) Pty Limited (RBS) (ABN 78 000 862 797, AFS Licence No. 247013). The Product DisclosureStatements relating to these warrants are available upon request from RBS Equities or on our website www.rbs.com.au/warrants

RBS Group (Australia) Pty Limited is not an Authorised Deposit-Taking Institution and these products do not form deposits or other liabilities of The Royal Bank of ScotlandN.V. or The Royal Bank of Scotland plc. The Royal Bank of Scotland plc does not guarantee the obligations of RBS Group (Australia) Pty Limited.

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 secondinstalment 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 toexercise 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 typeof warrant.

All charts taken from IRESS unless indicated otherwise

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