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

The Round Up
7 September 2009
Issue No. 170
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
QBE (QBEVZM) Trading Buy – Still going strong
WDC (WDCKZG) MINI Investment Buy– Bottom of cycle?
TLS (TLSKZD) MINI Trading Buy – Buy the dips
Round Up Corner Reporting season wrap up

Equities

Move Last % Move Range Volume

ASX 200 +5.9 4435.5 +0.1% +4 to +47 $5.7 bn(A)
SPI - yesterday -5.0 4427.0 -0.1% -19 to +41 25,729(L)
Dow Jones +96.7 9441.3 +1.0% -23 to +101 Low
S&P 500 +13.2 1016.4 +1.3% -2 to +13 Low
Nasdaq +35.6 2018.8 +1.8% -1 to +36 Low
FTSE +55.0 4851.7 +1.1% u.c to +77 Avg

Commodities

Move Last % Today % Past Month

Oil-WTI spot +0.06 68.02 +0.1% -4.8%
Gold Spot +2.55 994.40 +0.3% +2.8%
Nickel (LME) -28.03 797.15 -3.4% -8.9%
Aluminium (LME) -0.14 82.38 -0.2% -7.5%
Copper (LME) +0.94 284.12 +0.3% +3.6%
Zinc (LME) +1.51 86.31 +1.8% +4.1%
Silver +0.11 16.23 +0.7% +10.9%
Sugar -1.54 21.60 -6.7% +11.6%
Dual Listed Companies (DLC’s)

Move %Move Last AUD Terms Diff to Aus

NWS (US) +0.47 +3.8% 12.91 15.17 +31.8 c
RIO (UK) +70.50 +3.0% 24.16 46.52 -873.5 c
BLT (BHP UK) +20.00 +1.3% 15.86 30.53 -608.8 c
BXB (UK) +5.50 +1.4% 3.87 7.45 -14.8 c

American Depository Receipts (ADR’s)

Move %Move Last AUD Terms Diff to Aus

BHP (US) +0.52 +0.8% 62.52 36.73 +10.7 c
AWC (US) unch unch 5.44 1.60 +2.8 c
TLS (US) +0.26 +1.9% 14.12 3.32 +3.8 c
ANZ (US) +0.01 +0.1% 18.01 21.16 -1.0 c
WBC (US) +2.10 +2.0% 104.55 24.57 +22.7 c
NAB (US) -0.17 -0.7% 23.21 27.27 +5.9 c
LGL (US) -0.05 -0.2% 25.57 3.00 +2.4 c
RMD (US) -0.15 -0.3% 45.55 5.35 -4.8 c
JHX (US) +0.56 +1.9% 29.35 6.90 +0.7 c
PDN (CAN) -0.03 -0.7% 4.18 4.52 +6.9 c

Overnight Commentary
United States Commentary
US markets were happy to put a positive spin on some mixed Payroll data as they headed into a three-day Labour Day weekend.
Gains were broad based and volumes disappointing, but the Dow managed to add 96.7 pts, and the S&P 500 added 1.3%.

Eco - Nonfarm Payrolls fell by less than expected -216k vs -230k forecast, and better than the -276k previous. Manufacturing Payrolls
were slightly worse at -63k vs -60k. The official unemployment rate increased to 9.7% in August from 9.4%. The market took the figures
as being bad for households but good for businesses as they keep their costs base low, with Ave Weekly Hours maintained at 33.1,
allowing companies leverage into any recovery.

Industrials - General Electric added 3.1%, Caterpillar put on 2.4%, Walt Disney rose 1.8%, and United Tech up 1.5% as general
industrials made up the top Dow gainers.

Gaming - MGM Mirage added % after saying it saw a "profound" improvement in the performance of its struggling casino in Macau
according to its CEO. The casino raised its market share of Macau gambling revenue to 11% in August, up from 8% in June, and
overall Macau casinos reported a 17% jump in revenues in August.

Retail - Abercrombie & Fitch was the second-worst of the S&P500, off 2.6%, after being cut to 'sell' by one broker who forecast same-
store sales will continue to fall and hurt earnings. Quiksilver fell 17% after the retailer forecast a fourth-quarter loss

United Kingdom & Europe Commentary

The FTSE rose 1.2% or 55pts as positive US jobs data helped the banks and miners were stronger again. The FTSE Eurofirst 300
climbed 1.3%, the CAC also added 1.3% and the DAX jumped 1.6%.

UK Banks - The sector was stronger as investors looked for growth. Barclays, HSBC, Lloyds, RBS and Standard Chartered were up
between 0.1% and 2.2%.

Eco - British construction volumes fell by a smaller than expected 0.5% in the second quarter this year, prompting speculation about a
possible upward revision to GDP in the quarter.

Telco - Vodafone advanced 2.3% after the Financial Times reported Deutsche Telekom had held preliminary talks with Vodafone,
France Telecom and Spain's Telefonica over the sale of its T-Mobile UK unit.
Resources Commentary
Miners - Gold nearly hit $1000 again helping Randgold which was up 3%. BHP climbed 1.3%, Rio added 3%, Vedanta rose 2.8%
whilst Lonmin surged 9.4% after renewed takeover speculation from Xstrata which was up 1.9%. Anglo American, up 2.9%, is unlikely
to make a decision for several weeks on whether to force Xstrata to make a formal bid or walk away, a source close to the situation
said.

Energy - A quiet night for crude saw muted moves in the sector. BP added 0.1%, Shell was flat, BG Group rose 0.6% and Tullow
jumped 2.9%. In Europe Total added 1.9%, Repsol added 0.7% and Statoil ended flat.

SPI Commentary
The SPI traded down 5pts or 0.11% to 4427. Open at 4448 with a high of 4473 and a low of 4413. Volume 17,892. Overnight the SPI
traded up 38pts to 4465.

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 AIG/HIA construction PCI, ANZ job ads

US
Tuesday AUS NAB business confidence, NAB business conditions
US
Wednesday AUS WMI consumer confidence, nominal retail trade, owner occupied housing finance, investor housing finance
US Consumer credit
Thursday AUS Employment, unemployment rate
US Fed Beige Book
Friday AUS
US Import prices, wholesale inventories, Michigan consumer sentiment
*Dates are indicative only and may change

Upcoming Dividends

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

7-Sep-09 AMP AMP Limited 14 4.72% 50 16-Oct-09
7-Sep-09 LEI Leighton Holdings 55 3.12% 100 30-Sep-09
7-Sep-09 LLC Lend Lease 16 4.55% 100 25-Sep-09
7-Sep-09 OST One Steel 4 2.96% 0 15-Oct-09
7-Sep-09 WOW Woolworths 56 3.62% 100 9-Oct-09
8-Sep-09 SHL Sonic Healthcare 35 4% 35 28-Sep-09
Trading Buy:

QBE Insurance Group (QBEVZM) – Still going strong

RBS Research believe QBE’s result was strong in difficult circumstances. This should reduce the ongoing balance sheet
concerns that the market has had. Management upgraded guidance for FY09 insurance margin to be "towards the high
end" of the previous 16-18% range and indicated it could even exceed this if catastrophe claims remain relatively benign.
RBS has a target price of $26.11 on QBE and a buy recommendation.

Source: IRESS

1H09 result was solid

• The insurance margin of 17.5% was towards the top end of full-year guidance of 16-18% and the probability of adequacy rose
from 86% to 89%, which should allay a few balance sheet concerns.
• QBE delivered a gross investment yield of 3.3%, above its full-year target of 3%
• The key highlight of the result was management’s upgrade to the full-year insurance margin guidance from 16-18% to be
“towards the high end” of this range.
• Management also indicated that if catastrophe claims came in below their ‘target’ of 10% then the insurance margin could
potentially be higher.
• Further out, management pointed to the beneficial impact of rising interest rates on QBE’s balance sheet and profitability.
• RBS Research believe QBE’s track record in underwriting and acquisition execution remains excellent. We believe the current
environment should provide plenty of growth opportunities and QBE should benefit from the impending hardening in global
insurance rates.
• At 11x FY10F EPS, the stock is trading below its historical average of 13x. RBS retain Buy recommendation, with a target price
of A$26.11 due to the potential we see for an upside surprise to our numbers

RBS Warrants over QBE

Security ExDate ExPrice CP ConvFac Delta Description

QBEVZM 29-Oct-09 2200 Call 4 0.15 Trading Call Warrant
QBEVZN 26-Nov-09 2000 Call 4 0.20 Trading Call Warrant
QBEVZX 29-Oct-09 2000 Put 4 -0.04 Trading Put Warrant

RBS MINIs over QBE

Security ExPrc Stop Loss CP ConvFac Delta Description

QBEKZF 1203.42 Long 1 1 MINI Long
QBEKZK 1110.32 Long 1 1 MINI Long
QBEKZR 3160.94 Short 1 1 MINI Short
QBEKZS 2826.11 Short 1 1 MINI Short
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:

Telstra Corporation (TLSKZC) – Buy the dip

TLS traded back down to its medium term uptrend line having gone ex dividend 14c last week and post the Future Fund
offering 498mln TLS shares at $3.47 (cum dividend). RBS Research consider the Future Fund selldown a good thing for
shareholders despite the ongoing overhang. Use the pullback as a buying opportunity. RBS has a BUY on TLS with $4.50
target price. Buy TLSKZC

Source: IRESS

Telstra Result points and fundamentals

• Broadband ARPU up 6.5% to A$57.70. MBB SIOs doubled to 1.05m, helping lift mobile ARPU 4.8% to A$51.84
• Sales of IP-based products increased at double-digit rates. With the rate of PSTN erosion reducing in 2H09 (cf
1H09) the speed-driven revenue lines helped keep total revenue growth at 2.7%.
• Maintaining comparable revenue growth in FY10 may be harder as unemployment rises, the A$ strengthens and
Sensis sales face a tougher business environment.
• The company says achieving its FY10 targets ‘would give us significant excess free cashflow, and all the
flexibility that brings’. We think there is enough flexibility to contribute to NBN Co, on the right terms, and still pay
an extra 2cps in dividends fully franked.
• Key downside risks include further margin contraction, tougher regulation and lower access prices.
• Upside risks include faster sales recovery, better cost control and higher access prices. Regulatory issues may
be clearer when proposed legislation is tabled, we think by September.

RBS MINIs over TLS

Security ExPrc Stop Loss CP ConvFac Delta Description

TLSKZC 260.58 274 Long 1 1 MINI Long
TLSKZD 289.16 306 Long 1 1 MINI Long
TLSKZP 449.9 405 Short 1 1 MINI Short

RBS Warrants over TLS

Security ExDate ExPrice CP ConvFac Delta Description

TLSJZB 29-Oct-09 250 Call 1 0.88 HOT Instalment
TLSIZA 28-Jan-10 250 Call 1 0.95 HOT Instalment
TLSIZQ 14-Jun-10 250 Call 1 1 Rolling Instalment
TLSIZR 14-Jun-10 225 Call 1 1 Rolling Instalment
TLSSZX 4-Feb-19 193.88 Call 1 1 Self Funding Instalment
TLSSZZ 30-Jun-17 255.18 Call 1 1 Self Funding Instalment
RBS Round Up Corner:

Reporting Season Wrap Up

Reporting season has generally been seen as successful due to the high degree of earnings surprise. However, this
outcome masks a 19% decline on June 2008. Importantly the outlook commentary was generally positive which is a more
important takeaway.

Reporting season saw a substantial degree of earnings surprise following a long broker downgrade cycle leading into
reporting. The more sobering assessment was that actual NPAT results were down 19% on June 2008.

RBS Research aggregate analysis of ASX 200 non-financial stocks demonstrates the earnings surprise evident was
driven largely by better-than-expected results at the net interest and tax lines. Clearly, corporate Australia still has room to
move on the expense front.

In aggregate management outlook comments were very positive this season, reflecting the improvement in the macro
environment over the past six months. However, they should also be judged in the context of the last reporting season,
which reflected the very worst of the global financial crisis. Management has expressed a collective ‘sigh of relief’.

The macroeconomic outlook has improved and we see the positive management outlook commentary as evidence of
improving conditions at the coal face. Market valuations remain fair to full, but the upgrade cycle post reporting still has a
little way to run.

MINIs approaching stop loss

Approx. MINI Share:

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

COH COHKZQ Short $68.40 $61.57 $ 60.46 $ 7.94 1.8%

BXB BXBKZR Short $8.73 $7.85 $ 7.61 $ 1.12 3.2%
CCL CCLKZP Short $11.80 $10.62 $ 10.23 $ 1.57 3.8%
CPU CPUKZP Short $11.78 $10.60 $ 10.20 $ 1.58 3.9%
CBA CBAKZT Short $50.33 $47.53 $ 45.44 $ 4.89 4.6%
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:
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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
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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