Professional Documents
Culture Documents
RBS Chief UK Economist, Ross Walker discusses the true implications of the UK election. Page 16
The magazine for the self-directed investor 01/2010
MARKETS Direct
Politics & Opportunity:
A new dawn in Westminster?
Page 10
Indices
Emerging Markets on the
fast-track to recovery
Emerging market shares
have risen sharply since 2009
Page 18
Currencies
Currencies - potential
trends for 2010
Will the pound become
the target of speculation?
Page 30
Commodities
After the
gold peak
Whats really driving
the gold price higher?
Page 25
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D2506 RBS Master Invester Press (200x268) FA.indd 1 16/06/2010 13:18
Welcome to Markets, a division of The Ro-
yal Bank of Scotland, which focuses spe-
cifcally on the needs of the self directed
private investor. Our aim is to open up in-
vestment markets to give private inves-
tors access to the same opportunities that
our institutional clients enjoy. Our extensi-
ve range of investment products covers
varying risk levels, complexities, regions
and asset classes. RBS listed products
have been created to allow investors to
meet needs which may not necessarily
be met through the standard fnancial in-
struments available in the wider markets.
They are often used as an alternative to
direct investment and as part of an asset
allocation process to help reduce risk and
exposure within a portfolio. They are lis-
ted on the London Stock Exchange and
can be bought through a UK stockbro-
ker. Our whole range can be found on our
website www.rbs.co.uk/markets along
with regular market news, views and pro-
duct guides.
This exciting new business was only laun-
ched in the UK in November 2008, but it is
founded on a proven model that is well es-
Welcome to Markets from
The Royal Bank of Scotland
tablished in Germany, Italy, Switzerland,
Netherlands, the Nordics and Asia. RBS
Markets has over 30,000 products glo-
bally and has recently won the prestigious
2009 Euromoney award for Best Structu-
red Products House. In the UK we have
already followed in this vain, accumula-
ting three awards and being shortlisted
for a fourth in our frst year of business:
2009 FT Investors Chronicle Investment
Awards Winner - Innovation of the year
award.
2009 Shares Awards Winner - Best Lis-
ted Structured Products provider.
Short-listed for The 2010 FT and IC
Wealth Management Awards 2010 Best
investment / banking website.
MARKETS Direct is designed to help you
construct your own view on the markets.
However, you should bear in mind that the
content of this magazine does not con-
stitute inedependent research or analy-
sis. Every edition will focus on the hot-
test topics from the markets, new product
ideas and a run down of the events and
seminars that you can attend for free. This
quarter we look at the likely impact of the
election, todays burning investment the-
mes and Covered Warrants as a means
to gain amplifed exposure to both rising
and falling markets.
Enjoy the frst issue of our RBS MARKETS
Direct magazine.
Sincerely,
Ben Board
Director, UK Listed Products
Next issue of MARKETS Direct will be published in September 2010.
MARKETS Direct is a form of marketing communication issued by the Royal Bank of Scotland plc
and, among other things, it refers to products and services offered by the RBS group. We would draw
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does not constitute independent investment research or analysis.
The products referred to and/or featured in MARKETS Direct are restricted to those issued by RBS and
listed on the London Stock Exchange. There may be other products available in the wider market that meet
your investment objectives and requirements. If you are unsure of any details relating to the product that
you are considering, consult a fnancial adviser prior to undertaking any investment activity.
Editorial
MARKETS Direct | 01/2010
3
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
South Africa
Will the beautiful game bring a beautiful
gain to South Africa? 6
Listed Products
The dawn of a better
structured product? 8
News 6
MARKETS Direct
Indices 18
Commodities 25
Global 30
Emerging Markets on the
fast-track to recovery 18
Index focus 23
After the gold peak 25
Commodities focus 29
Currencies
Potential trends for 2010 30
Are interest rates set to rise
globally? 33
Content
MARKETS Direct | 01/2010
at a Glance | 01/2010
Covered Warrants 44
Trackers 56
Accelerated Trackers 56
Auto calls and Bonds 56/57
Legal information 59
Products Service
Ross Walker
What a coalition government
could mean for the UK 16
Interview 16
Building a diversifed Portfolio 37
By David Stevenson
Special
A Beginners Guide to
Covered Warrants
By Andrew McHattie 40
Internet
Introducing the website 58
Education
Cover Story
Politics & Opportunity
A new dawn for Westminster? 10
Outlook 10
Content
MARKETS Direct | 01/2010
Past performance is no indication or guarantee of future performance.
News Focus: South Africa
Will the beautiful game bring a beautiful gain to South Africa?
The World Cup comes to South Africa in 2010.
With the World Cup football
tournament taking place in Sou-
th Africa, its not just the Eng-
land team that stands to gain
from the big event. During and
following the previous 4 events,
the host nations main share in-
dex performed better than both
the MSCI World Index (which
represents shares from com-
panies across the globe) and
the FTSE 100 Index (represen-
ting UK shares) in the year fol-
lowing the World Cup.
The economic halo of the
World Cup
The last World Cup hosted
in Germany for example saw
the domestic DAX Index rise
by 15.58% from the 1st June
2006 - 29th December 2006
*
.
It also performed 53.09%
better in the year of the World
Cup and the following year of
the event than the MSCI World
Index, a fair indicator of global
economic growth. As a com-
parison to the historical per-
formance of the DAX Index
against the MSCI Index, if we
take the 10 year period of Dec
1995 to Dec 2005, the DAX
Index performed better than
the MSCI Index by 36.81%*,
considerably less than the
period immediately following
the event. With the infux of an
estimated 300-400k tourists
1
,
mass global media exposu-
re and the investment of big
name sponsors, comes the
potential for a real boost to the
South African economy and
its domestic index, the FTSE/
JSE Top40 Index of stocks
listed on the Johannesburg
Stock Exchange.
The longer-term story for
South Africa
As the main constituents table
shows, big global mining com-
panies such as Anglo Ameri-
can (AAL, AGL:SJ) and BHP
Billiton (BLT, BIL:SJ) are part
of the FTSE/JSE Top40 Index.
This illustrates South Africas
position as one of the globes
core producers of commodi-
ties for manufacturing - the
nation is the worlds largest
producer of platinum, gold
and chromium
2
. As econo-
mies such as China continue
to rebound from the global re-
cession the demand for raw
materials has the potential to
rise, providing opportunities
for South African companies
to further establish themsel-
ves on the world stage.
Moreover, while the FTSE/JSE
Top40 Index has seen returns
of 32% since March 2009*, it
still remains 18%* below its
peak in May 2008. So, with the
potential boost which could re-
sult from being the next World
Cup host nation, there is still a
lot of scope for growth in South
African shares to rise in value.
*Bloomberg, April 2010
1) Grant Thornton, http://www.gt.co.za/
News/Press-releases/Strategicsolutions/
2010/domestic10.asp, 18 March 2010
2) CIA World Factbook, 1 April 2010
News
MARKETS Direct | 01/2010
6
News Focus: South Africa
About the FTSE/JSE Top40 Index
The FTSE/JSE Top40 Index
includes the 40 largest com-
panies by market capitalisati-
on of the FTSE/JSE All Shares
Index. Market capitalisation is
calculated by multiplying the
number of shares in a compa-
FTSE/JSE Top 40 Index Performance
35000
30000
25000
20000
15000
10000
06/05 06/06 06/07 06/08 06/09 06/10
ZAR
FTSE/JSE Africa Top 40 Index
Source: Bloomberg; 8 June 2010
Top 10 FTSE/JSE Top40 Index constituents by index weighting
Constituent Bloomberg code Weight
BHP Billiton BIL SJ 16.52%
Anglo American AGL SJ 12.44%
SABMiller SAB SJ 7.91%
MTN Group MTN SJ 6.14%
SASOL SOL SJ 5.67%
Standard Bank SBK SJ 5.23%
Financiere Richemont CFR SJ 4.39%
Impala Platinium Holdings IMP SJ 3.91%
Naspers NPN SJ 3.75%
Anglogold Ashanti ANG SJ 3.01%
Source: Bloomberg, 8 June 2010
The table above shows a list of some of the companies included in the FTSE/JSE Top40
Index which is ranked according to the weighting they are given in the Index. Companies
with the highest rating will contribute most to the performance of the Index.
Companies may beneft from additional business and media focus during the World Cup.
ny by its share price.
A word of warning
As with any foreign invest-
ment, we need to consider the
impact of exchange rate fuc-
tuations. Investments linked to
The world cup encourages the development of new infrastructure.
the performance of the FTSE/
JSE Top40 Index will bene-
fit if the South African Rand
strengthens in value when
measured against Sterling,
and lose value if the South Af-
rican Rand weakens in value
when measured against Ster-
ling. You also need to consider
the fact that South Africa is an
emerging market and therefo-
re carries more economic, po-
litical and fnancial risks than
developed markets.
News
MARKETS Direct | 01/2010
7
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
News Focus: Listed Products
Listed Products, the dawn of a better structured product?
Structured Products in the
UK are like the marmite of
the investment communi-
ty; you either love them, or
you hate them. They clear-
ly have their advocates as
according to www.structu-
redretailproducts.com, the
UK Structured Product mar-
ket grew 50% between 2008
and 2009 to reach an eye-wa-
tering 13.6bn in sales. The
growth of the industry could
be attributed to the ability of
structured products to provi-
de exposure to a given mar-
ket or underlying whilst also
offering some degree of ca-
pital protection something
particularly attractive when
the markets are unsettled.
When Lehman Brothers col-
lapsed in 2008, Structured
Products came under close
scrutiny from the Financial
Services Authority and the
industry as a whole. Issues
such as credit worthiness
and the risk of the issuer go-
ing bust came to the fore. Cri-
ticisms of overly-complica-
ted structures, opaque fees
and even an over reliance
on UK underlyings had to be
addressed by the industry. A
big concern surrounded the
lack of flexibility. Once you
were invested it was hard to
sell back your investment wit-
hout penalty.
Introducing Listed Pro-
ducts, a more fexible struc-
tured product
So how much of a difference
can the word listed really
make. Well more than you
might think. The term Listed
Product in the context of RBS
Listed Products refers to any
fnancial instrument issued by
RBS which is in the nature of a
structured product and is lis-
ted and traded on a stock ex-
change, typically the London
Stock Exchange and thats
where the big difference is.
Typically when we think of tra-
ding on exchange, we think of
buying and selling shares but
the same rules apply to Listed
Products. With the same ease
of buying a share, investors
can gain exposure to exciting
new markets, asset classes
and investment strategies. Its
as simple as that to buy, and
if you ever want to get out of
your investment, you can sell
it back at the price quoted on
the LSE between 8.15am and
4.30pm under normal trading
conditions and on a regular
trading day. This makes the
listed products market extre-
mely transparent; you know
from the start what youre in-
vesting in, what it costs and
how to get in, or out if you
want to. You do need to be
aware that prices will fluc-
tuate throughout the invest-
ment term and if you sell your
investment before the full in-
vestment term, you may get
back less than your original
investment. Also, whilst RBS
will assist in the stimulation of
a secondary market in these
products you must be awa-
re that market liquidity cannot
be guaranteed and in certain
trading conditions it may be
diffcult or impossible to liqui-
date your investment (this is
called liquidity risk).
With ready access to this new
world of investment opportu-
nity, it is now easier than ever
to build and manage your
own portfolio. You no longer
need to rely on products that
charge commissions, exten-
sive management fees or in-
fict early redemption penal-
ties. With Listed Products you
will pay an execution fee with
your stockbroker which is ty-
pically around 10 - 18 per
trade. Trackers may also in-
clude an Annual Manage-
ment fee of 0%-1.5%.
So now, you can decide for
yourself where and how you
want to invest, and for how
long you want to do it. Plus,
you can do it yourself through
your share dealing account
for the same dealing costs as
buying or selling a share. Just
some of the reasons to try Lis-
ted Products include:
Control you decide whe-
re, how and when you want
to invest and you can decide
exactly when you want to end
your investment, subject to li-
quidity risk.
Simplicity can be bought
and sold through your stock
broker in exactly the same
way that you would buy and
sell shares.
Accessibility just like
shares, they can be bought
or sold at any time during a
regular trading day (08:15
16:30) and do not have to be
held for any minimum period
of time.
Transparent two-way pri-
ces must be quoted throug-
hout the day so you can al-
ways access the current va-
lue of your product.
Low cost just as with sha-
res, the only costs involved in
buying a Listed Product will
be the bid/ask spread (the
difference between the price
at which you can buy the pro-
duct and the price at which
you can sell the product) and
your standard broker fees.
Trackers may also have an
annual management charge.
Regulated all products lis-
ted on the London Stock Ex-
change must adhere to the ru-
les of the UK Listing Authority.
Risks to be aware of
Listed products are subject
to price fuctuations and in-
vestors may not get back any
of their initial investment;
In the event that RBS fails or be-
comes insolvent you may lose
some or all of your investment.
The RBS Markets team is dedicated to
helping you shape your market view.
News
MARKETS Direct | 01/2010
8
These products may not be
suitable for all investors, you
should therefore ensure you
fully understand the risks in-
volved, and seek independent
advice where necessary.
Product costs are built into
the structure of the product.
In the case of a Tracker in-
vestment, this may include an
annual management charge
of 0%-1.5%.
Subject to any technical pro-
blems, RBS will endeavour to
offer a secondary market in
line with LSE rules and mar-
ket making obligations. RBS
may be the only market maker
in the Listed Products which
may affect liquidity.
What can you invest in?
A real feature of Listed Pro-
ducts is their inherent flexi-
bility and diversity. Through
Listed Products you can gain
exposure to shares, indices,
currencies or commodities
so the question may not be
what you can invest in, but
how you can do it. The range
is growing continuously but
the main types of product in-
clude:
Listed bonds which provide
a fxed annual income but wit-
hout redemption penalties.
Trackers for uncapped ex-
posure to global indices and
commodities.
Accelerated Trackers for
amplifed, capped exposure
and the possibility of capital
protection.
Autocalls for the potential to
receive a coupon depending
on the performance of global
markets or commodities.
Covered Warrants: for gea-
red performance from global
indices, shares, commodities
or currencies.
Choosing the right product
for you largely depends on
your own market view and the
level of risk that you are pre-
pared to take. More informa-
tion on all our products can
be found on page 44 in the
product lists or online at www.
rbs.co.uk/markets.
Trading Listed Products
One of the great things about
Listed Products is how easily
they can be bought and sold
during normal market condi-
tions, subject to liquidity risk.
As they are listed on the stock
exchange, they can be tra-
ded in exactly the same way
as you would trade a share
through your stockbroker.
As Listed Products are ge-
nerally considered complex,
the frst time you want to buy a
Listed Product your stockbro-
ker will need to assess whe-
ther the product is appropria-
te for you and make sure you
understand the relevant risks.
This will involve the issue of
a risk warning which you will
need to read carefully before
investing. You must consider
whether the investment is ap-
propriate for you and meets
your investment needs and
obtain advice if necessary.
Once you have returned this
form to your broker and if the
product is deemed suitab-
le for you based on the Risk
Warning form, you are ready
to invest.
You can trade online or by
calling your broker, quoting
the product code of the pro-
duct you want to purchase
e.g. RB01.
The whole trading process
is roughly as follows:
1. Open a share dealing ac-
count with a stockbroker (only
needs to be done once!).
2. Complete the Risk War-
ning form to enable the stock-
broker to asses whether the-
se products are appropriate
for you and read the risk war-
nings carefully. Seek inde-
pendent advice if necessary.
3. Decide which product you
want to purchase by visiting
www.rbs.co.uk/markets.
4. Go online or call your bro-
ker.
5. Quote the product code
(TIDM code) you want to
purchase which will be listed
on the relevant product page
of the RBS Markets website.
6. Inform your broker how
much you want to buy and
they will process your new in-
vestment.
These products may not be
suitable for all investors, you
should therefore ensure you
fully understand the risks in-
volved, and seek indepen-
dent advice where necessa-
ry.
The cost of investment
With a Listed Product there
are 3 potential costs to be
aware of:
1. Brokerage fees as with
buying shares, each time you
trade a Listed Product your
stockbroker will charge a fee.
This will usually be approxi-
mately 10 - 18 per trade.
2. Bid/ask spread There is
a bid/ask spread which is the
difference between the price
at which you can buy and the
price at which you can sell the
product.
3. Annual Management Char-
ge Trackers may have an
annual management charge,
payable each year out of your
initial investment. This will ty-
pically be 0.2%-1.25%.
News
MARKETS Direct | 01/2010
9
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
Britain has cast its vote
Politics & Opportunity
A new dawn for Westminster?
Following the most exciting election night in decades, the UK has a new coalition government in place. So, how did this
situation arise, and what effect will it have on the markets?
Cover Story
MARKETS Direct | 01/2010
10
How is this election going to affect my
portfolio? The recent election has pro-
ved to be one of the most exciting and
unpredictable this country has seen for
decades. From the frst ever live televised
leader debates, the rise, fall and subse-
quent rise again of Nick Clegg, to the f-
nal farewell of Gordon Brown the elec-
tion was hugely absorbing for anyone with
even a remote interest in politics.
The fnal hours of 6 May raised a sen-
se of surprise from political commenta-
tors as the initial euphoria around Nick
Cleggs TV performance and groundswell
of Liberal Democrat support had come to
little more. All the exit polls predictions of
a hung parliament proved to be accurate
by the morning news on the 7th May.
With no single party clinching an out-
right majority, the hours of deal making
dragged into days before fnally the Ca-
meron-Clegg partnership began and our
political landscape changed signifcant-
ly with a Conservative-Liberal Democrat
coalition agreed. Labour, after 13 years
in power, returned to the opposition ben-
ches and started the search for a new lea-
der. The reason for this hung parliament
is simple. The British frst-past-the-post
system means that for a single party to
achieve a majority government they must
secure 326 seats in the Houses of Parlia-
ment. As you can see by the election re-
sults shown below, despite a swing of 5%
from Labour to Conservati-
ve, the Tories could not reach
this target, falling short at 306
seats. So they were faced
with two choices: to either try
to push ahead and rule with a
minority government, or to seek to form a
coalition with the Liberal Democrats. With
the Lib Dems winning 57 seats (fve less
than they held in the previous parliament)
the coalition would have a comfortable
majority with 363 seats in total.
While this political coalition is not one that
had been easily envisaged by most vo-
ters or analysts, the more likely on pa-
per at least centre-left coalition of La-
bour and the Lib Dems fell down on the
maths. Even with Labours 258 seats and
the Lib Dems 57 this gave it only 315 in
total which meant it would also have to
rely on the support of smaller parties. A
rainbow coalition as it was dubbed was
not an impossibility, but there was a clear
feeling across all parties that with Labour
only getting a 29% share of the vote, this
was not the mandate of the electorate.
Because of the parlous state of our
economy, trying to govern with a mino-
rity was far from ideal for the Conserva-
tives. Achieving a stable government
was the phrase constantly trotted out du-
ring, and after, the election with everyone
from the City to the politicians
demanding this was the pri-
ority above all else. The ne-
cessity for this in tumultuous
times was starkly illustrated
by the riots, and subsequent
deaths, on the streets of Greece as its
government, bailed out by the EU and
International Monetary Fund (IMF) to the
tune of 110 billion, had to slash its public
spending and boost tax revenue to meet
the conditions of the loan.
So, while the political shenanigans
kept the electorate at large enthralled,
how did the markets, which do not nor-
mally like indecision or a political vacu-
um, perform?
Despite fears, the markets proved re-
markably tolerant during the few days de-
lay required to hammer out the coalition. If
anything, it was the bigger picture factors
such as the Eurozone debt crisis that had
a greater impact than the domestic situ-
ation. Greeces fnancial straits also high-
lighted how intolerant the markets were to
countries that did not introduce credible
policies to cut budget defcits.
But in the UK there was a sense of cau-
tious optimism surrounding this coalition
and the FTSE 100 remained broadly un-
changed since the election with UK bond
prices rising although sterling weakened
slightly. Some commentators pointed to
the gap narrowing between the yield on
equivalent German and UK government
bonds, suggesting that investors saw
lending to the British government as less
risky than previously.
Short-term gains in sterling imme-
diately after the coalition was agreed
abated as the bigger issues of econo-
mic recovery took hold and the Bank of
England continued to predict that infa-
tion would remain low despite Aprils f-
gure of 3.7% (the highest rate for almost
a year and a half and above the target
of 2%).
The key issue has been how this
government would tackle reducing
Britains budget defcit of 163bn.
There was a
sense of cautious
optimism surround-
ing this coalition.
UK - National results at a glance
36,10% Conservative
29,00% Labour
23,00% Liberal Democrat
11,90% Others
Share
Party Seats Gain Loss Net Votes % +/-%
Conservative 306 100 3 97 10.706.647 36,1 3,8
Labour 258 3 94 -91 8.604.358 29 -6,2
Liberal Democrat 57 8 13 -5 6.827.938 23 1
Source: news.bbc.co.uk/1/shared/election2010/results/
Cover Story
MARKETS Direct | 01/2010
11
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
Cameron and Clegg
Performance of the FTSE 100 Index
7000
6500
6000
5500
5000
4500
4000
3500
3000
05/05 11/05 05/06 11/06 05/07 11/07 05/08 11/08 05/09 11/09 05/10
Points
FTSE 100 Index
Source: Bloomberg, 26 May 2010
Performance of GBP/EUR
1,6
1,5
1,4
1,3
1,2
1,1
1
05/05 11/05 05/06 11/06 05/07 11/07 05/08 11/08 05/09 11/09 05/10
GBP/EUR
Pound Sterling - Euro
Source: Bloomberg, 26 May 2010
While Labours approach had been to de-
lay drastic cuts arguing this would tip the
country back into recession just as it was
falteringly coming out of it, the Conserva-
tives wanted more immediate action. How
the Lib Dems would fall into line was still
unknown but as the details of the coaliti-
on came to light it was clear that this was
one area where Tory policy was the victor.
Many the Conservatives among them
felt that the markets would not stand
a delay. As a result, the government an-
nounced that spending cuts worth 6bn
would be implemented in 2010, which was
welcomed by the governor of the Bank of
England, Mervyn King. Full details of how
these cuts will be achieved will be presen-
ted in the emergency budget announced
by Chancellor of the Exchequer, George
Osborne, on 22 June.
But this government will still have to
hope that the markets work to its favour as
there are trends in the underlying econo-
my that can have a signifcant impact. A
sterling crisis for instance where inves-
tors sell the pound to buy dollars or euros
would almost certainly be bad news for
the coalition government.
Perhaps the most sensitive indicator
of confdence will be the long-term gilt pri-
ces these show how much the market is
willing to pay for government securities or
gilts dated at more than 10 years. So far
they have held relatively steadily.
The election aside, much of the in-
creased confidence is also a result of
positive economic indicators. In parti-
cular, recent macro-economic data and
GDP trends have been surprisingly po-
sitive of late at the very end of March,
for instance, fourth quarter GDP growth
was revised up 0.4% quarter-on-quar-
ter, ahead of City economists forecasts.
The main upward impetus seems to have
come from companies inventory stocks
which were running down at a signifcant-
ly slower rate in the last quarter of 2010
according to RBS analysis this contribu-
ted 0.7 percentage points to last quarter
GDP, almost fully accounting for the rise
in domestic demand.
The data based on the purchasing
decisions and the expectations of ma-
nufacturers and service companies (the-
Cover Story
MARKETS Direct | 01/2010
12
12
11
10
9
8
7
6
5
4
3
2
1
0
-1
-2
2006 2007 2008 2009
Government defcit as a percentage of GDP, calendar years
70
60
50
40
30
20
10
0
2006 2007 2008 2009
Source: National Statistics www.statistics.gov.uk/cci/nugget.asp?id=277
Government debt as a percentage of GDP, calendar years
Concerns in the city?
Source: National Statistics www.statistics.gov.uk/cci/nugget.asp?id=277
se widely used indicators are something
called the PMI or purchasing manager
indices) also contained some positive
news. Even though the new business
part of the index fell to a level of 52.8 from
54.6 in April, the purchasing managers
index (PMI) for services rose to a level
of 55.4 from 55.3 in April. A level of more
than 50 is generally considered to be a
rise in activity.
Headline manufacturing PMI stayed
at 58 and the construction PMI even rose.
However, infation made a comeback with
3.7% which is well above the 2% target.
But this new found optimism after one
of the toughest 18 to 24 months in living
memory, welcome though it may be, still
needs to be tempered with caveats.
The broad economic data still suggests a
number of worrying issues, not least:
The savings ratio has declined again
this is good news for shops and factories
looking to sell more to free spending con-
sumers, but is less positive if rebuilding
household fnances and cutting down on
high debt levels is seen as an imperative
A defcit is created when a government spends more than it takes in. Government debt is the accumulated borrowing.
Cover Story
MARKETS Direct | 01/2010
13
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
What is a hung
parliament?
A hung parliament is where no single
party holds a majority of seats (326, or
more, seats are required for an outright
majority). This has not been a common
feature of the UK political landscape
the First Past The Post (FPTP) system
is designed to prevent this by rewar-
ding the party with the most votes with
a disproportionately large number of
seats.
There is still little evidence of the es-
sential rebalancing of the UK economy
net exports and new capital investment
in capacity were both down in the last
quarter. If the UK is to export its way out
a recession, these numbers need to in-
crease sharply
Overall, some of the PMI data was still
down in the previous month, which indi-
cates that the return in confdence is still
fragile.
So, now we have a slightly better idea of
what the political landscape will look like
and some understanding of the macro-
economic (GDP/PMI) data, what could
an investor sensibly conclude in this post-
election period? The coalition looks, for
the time being at least, to be reasonably
strong and the Conservatives have most-
ly got their way on the bigger economic
areas so a continued recovery in the UK
economy seems possible built around
improving business sentiment. But the
trends underlying these outcomes are
still fragile and could be over-turned at
any stage with sterling/euro rates looking
perhaps the weak link. A strengthening
pound may lead to declining exports.
Cover Story
MARKETS Direct | 01/2010
14
*This document is an advertisement and is not a prospectus for the purposes of EU Directive 2003/71/EU (the Directive) and/or Part VI of the Financial Services and Markets Act 2000. A prospectus has
been prepared and made available to the public in accordance with the Directive. Investors should not subscribe for the securities referred to in this document except on the basis of the information contained
in the prospectus. Investors may obtain copies of the prospectus from the oces of the issuer or paying agent. The Royal Bank of Scotland plc is authorised and regulated in the UK by the Financial Services
Authority. The Royal Bank of Scotland plc, registered in Scotland No 90312. Registered Oce: 36 St Andrew Square, Edinburgh EH2 2YB. RBS is authorised and regulated in the UK by the Financial Services
Authority. RBS is an authorised agent of The Royal Bank of Scotland N.V. in certain jurisdictions.
Accelerated Trackers
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Accelerated Trackers are certicates issued by the
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you fully understand the risks involved, and seek
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Past performance is no indication or guarantee of future performance.
An interview with Ross Walker
Chief UK Economist for The Royal Bank of Scotland plc.
MARKETS Direct: Weve finally got
through this election and now face a
hung parliament with a Con-Lib coa-
lition. Were you surprised by this out-
come?
Ross Walker: Its what the opinion polls
had been signalling so in that sense it pro-
bably shouldnt have been a huge surpri-
se. Because all the projections that come
from the national opinion polls assume a
uniform national swing, there was an as-
sumption that the Conservatives would do
better in some marginal seats. The big pic-
ture in the end was that the Conservatives
tended to win target marginal seats against
Labour, and they won some seats that were
beyond what they needed, but they didnt
quite make the inroads against the Libe-
ral Democrats in some of those marginals.
So, overall the result wasnt really a sur-
prise, we had been quite early in fagging
the risks of a hung parliament. The HIPPO
(Hung Parliament Probability Observer) in-
dicator we developed, which took the opi-
nion poll data and expressed it as a proba-
bility of a hung parliament, showed it was
a higher probability than the markets and
bookmakers were factoring in.
MARKETS Direct: The city has traditi-
onally been more sceptical of the Li-
beral Democrats economic position
and more comfortable with the Con-
servative, where does this coalition
leave it?
Ross Walker: Its an evolving picture.
Weve had a major announcement on
fscal policy [the establishment of the Of-
fce of Budget Responsibility] and this is
one thats been put together by the coali-
tion; in our view its the most radical fscal
policy development since the IMF rolled
into town back in 1976. There are some
early signs that maybe this will be a new
politics, at least in some areas. The city
will continue to judge as events unfold.
But there are signs that things have mo-
ved more quickly and more decisively
in some areas than people might have
thought.
MARKETS Direct: Can such opposing
ideas be easily married?
Ross Walker: As Cameron and Clegg
have made clear their parties do not ag-
ree on everything and there are a sizeab-
le number of areas where there are diffe-
rences. What they are focusing on is the
areas of agreement. I think the surprise
so far has been in terms of the big pic-
ture economic and fscal situation the
Conservatives have largely got their way.
Theyve given ground on some of the in-
dividual policies such as the inheritance
tax threshold rise whereas the Liberal po-
licy of lifting some of the lowest earners
out of tax altogether, looks like it will be a
higher priority. So some of the micro eco-
nomics have gone the Lib Dems way but
the big picture, macro economics that our
business cares about currency markets
and fxed income, the fscal tightening this
year not next year its Conservative poli-
cy thats getting implemented.
MARKETS Direct: How have the city
and markets responded so far to this
new government?
Ross Walker: Its been reasonably po-
sitive there have been other big issu-
es happening and Greece is the ob-
vious one. What Greece has done is
bring into focus concerns about fis-
cal deficit and downgrades and that
focus could have been detrimental to
the UK. In fact, UK government bonds
have benefted, weve seen some sort
of fight to safety moves so gilt yields
have been drifting down a little. Weve
also seen our UK sovereign CDS (credit
default swap) prices come down relati-
ve to other similar economies. So there
are signs that are cautiously positive,
but its early days.
MARKETS Direct: The great concern
is that this coalition will fall apart in
a way similar to 1974, how would the
markets react if the country was faced
with another election in a year or 18
months?
Ross Walker: Its very diffcult at this sta-
ge to say how durable this is going to be.
Before the election the feeling was that a
hung parliament would bring an election
within a year. I think the fact that one of
the agreements between the two parties
was fxed parliamentary terms indicates
they would like this coalition to run for se-
veral years, if not for a full fve. Against
that you have the fringes of both parties
saying that its not going to last. The real
test will be a year from now when we ex-
About Ross Walker
Ross Walker, Chief UK Economist for
The Royal Bank of Scotland plc, pro-
vides an inside view on what a coaliti-
on government could mean to the UK
recovery prospects
Ross Walker
Interview
MARKETS Direct | 01/2010
16
pect therell be further tax rises taking ef-
fect and when spending cuts are starting
to bite, and then well get a better idea of
just how robust this coalition is.
MARKETS Direct: Do you think peop-
le are ready for a more austere Bri-
tain and what do you think of propo-
sals so far?
Ross Walker: I think with the public fnan-
ces featuring so prominently during the
election there is clearly some public awa-
reness of this issue and the implications
to their own fnancial positions. Personally
Im still sceptical that people have rea-
lised just how diffcult this is going to be to
correct in terms of the scale of the spen-
ding cuts and tax rises required and the
prolonged period of time over that those
austerity measures will be in place.
MARKETS Direct: How will the short-
term impact of a coalition government
compare to the longer-term impact?
Ross Walker: Its very diffcult to say. The
early announcements on the fscal side
have been quite positive. The real test
will be when the unpopular decisions like
spending cuts and tax rises take effect.
So far the tax increases have been large-
ly about hitting higher earners so at this
stage its not the average person in the
street having to fork out a lot more tax.
MARKETS Direct: While some indica-
tors point to Britain coming out of re-
cession many commentators continue
to highlight the risk of a double dip re-
cession. How do you see the economy
developing over the next year?
Ross Walker: I think although the fscal
tightening measures that have been an-
nounced will have some short-term net
dampening effect, overall they should
support growth. Because there are a
number of risks of not taking this action:
one would be that the markets would
demand a much higher rate of interest
on government debt so governments
own fnancing cost would rise more ra-
pidly. Secondly that some of that extra
cost of those higher gilt yields would get
passed onto companies so higher borro-
wing would deter some investment and
future growth. The big risk then is market
panic and an aggressive sell off of ster-
ling. All of those things would really un-
dermine growth, certainly over the me-
dium term. Short term there are risks of
dampening growth but I dont think its
going to be enough to tip us into reces-
sion, certainly thats the Bank of England
view, and seemingly the advice of tre-
asury offcials to the new government is
the same. For me the bigger risk was not
tightening enough.
MARKETS Direct: This government
has said it will introduce fixed-term
parliaments, is this something that the
market will react well to?
Ross Walker: Im not sure it makes a
huge amount of difference. If, as a politi-
cian, you know when an election is going
to be then you have less fexibility, but in
reality it was always a relatively constrai-
ned choice. Did you go to the country af-
ter four years or did you wait for the full
fve? So there was never that much free-
dom. It was almost impossible to micro
manage the economy in a way that would
ensure you had buoyant growth and low
unemployment during an election. From
a fscal credibility point of view the inde-
pendent Offce for Budget Responsibility,
which will produce the growth and fscal
forecasts, is the biggest bulwark against
political interference in terms of trying to
align the political and economic cycles.
So for me the fxed parliament issue is
very much a secondary one.
MARKETS Direct: In light of the out-
come to the election, do you have any
tips for investors as to where they
should be looking now?
Ross Walker: Economists are the worst
people in the world to listen to in terms
of investment advice. But the big ques-
tion is still the basic one of how sturdy is
risk appetite? And youd never look at just
one indicator, when you do that things
start to go badly wrong either for eco-
nomic policy or investing. I think the key
gauge is do you think the economic reco-
very is sustainable? Look at the risk indi-
cators stock markets, CDS levels, cor-
porate bond yields are we on track for
what the markets think will be a relatively
healthy recovery or are things going to
falter? Im somewhere between the two
in terms of our own forecasts, theres al-
ways a risk the markets have got ahead
of themselves and the gains weve seen
in stock markets, in particular for the past
six or nine months, may indicate that.
But were not in the double dip recession
camp, we think that can be avoided and
theres enough momentum in the econo-
my, but its going to be a slow and drawn
out recovery and from an investors point
of view guess what? There arent any
quick easy bucks to be made!
Big Ben
Interview
MARKETS Direct | 01/2010
17
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
Despite the global crisis optimism prevails in the emerging markets.
Emerging Markets
on the fast-track to recovery
The higher growth rates in many emerging markets are fuelling share price rises. However, some independent
commentators are warning that a speculative bubble is now forming in Asia and Brazil. We look at the case for
and against investing in Emerging countries.
.
Indices
MARKETS Direct | 01/2010
18
Those who have been watching on the
stock markets of some of the worlds de-
veloped countries could be forgiven for
feeling somewhat baffed. Since 2003,
shares listed on the stock markets of
emerging countries have risen sharply,
while the more developed countries
stocks have climbed only moderately in
comparison
1
. The fnancial and economic
crisis has done nothing to change this si-
tuation. After dropping sharply, emerging
market stocks again outperformed their
counterparts in developed nations
1
.
However, the equity markets are
only refecting the global economic situ-
ation: The bulk of the worlds economic
growth is concentrated in emerging mar-
kets, since developed nations are having
to deal with high unemployment, enor-
mous government debt and a weakened
banking system. The recent fnancial cri-
sis has scarred developed nations more
deeply than the emerging markets. While
the largest economic regions, the USA,
the Eurozone and Japan, have registered
negative growth over the last three ye-
ars, the major emerging market countries
have proved robust, maintaining impres-
sive levels of economic expansion
1
.
Emerging market growth remained
unabated
The economic recovery over the last few
months means the 2010 economic out-
look for developed nations is now brigh-
ter. Nevertheless, emerging market
growth will remain stronger. The beating
heart of this growth will be Asia. Central
and Eastern Europe has greater structu-
ral problems than Asia, so we forecast
lower growth there, says Emerging Mar-
kets economist from the German Deka-
Bank, Janis Hbner.
A key factor in the growth potential of
emerging markets is the rising domestic
consumer spending that comes hand in
hand with the increasing wealth of many
people. Booming China alone, with its
population of 1.3 billion, is signifcantly
bolstering demand for many industrial
goods. And auto sales in emerging mar-
kets are higher than in the USA, Euro-
pe and Japan
2
. Experts believe that by
2020 the Chinese will have replaced the
Americans as the worlds largest consu-
mers. And, while consumers in develo-
ped countries are saving, some experts
expect the BRIC countries to lead the glo-
bal recovery in consumer spending.
Consumer-based industries set to
thrive
The sectors likely to fourish in emerging
Asian countries over the coming years
are therefore those that are largely con-
sumer-driven. According to Union Invest-
ment fund manager Hans Hlzl, the con-
sumer and infrastructure sectors will ex-
perience the strongest growth in Asia,
followed by the energy sector, including
alternative energy and energy supply. Mr
Hlzl, who has managed Unions South
East Asia fund since 2002, believes that
the pensions and healthcare, and tourism
segments will be a central theme. From
experience, these consumer-focused
All Markets vs. Emerging Markets
250
225
200
175
150
125
100
75
50
Points
06/05 06/06 06/07 06/08 06/09 06/10
MSCI Emerging Markets Index
MSCI World Index
Rebased: June 2005 = 100 points
Sharp price gains
New capital markets arose in these countries (the emerging markets), which performed extremely well. The MSCI
Emerging Markets Index, a barometer of Emerging Markets stock markets, has signifcantly outperformed the MSCI
World Index from 1988 to the present day. However, these emerging markets also experience higher levels of volati-
lity.
Jakarta The centre of growth for Indonesia.
1) Bloomberg, 21 April 2010
2) http://globaleconstats.com/wp/2010/01/01/scotia-economics-emerging-market-
auto-sales-to-climb-higher-in-2010/, 1 January 2010
Source: Bloomberg; 8 June 2010
Indices
MARKETS Direct | 01/2010
19
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
market segments trend upwards when
the per capita annual income reaches
around USD 3,000. Below this, it makes
little difference to consumption whether
per capita GDP rises from USD 1,000 to
2,000 or stagnates.
Equities set to keep rising
The healthy growth outlook is heightening
equity market expectations in the emer-
ging markets. While industrial countries
are likely to continue suffering the con-
sequences of the crisis, experts belie-
ve that the emerging markets prospects
are better.
Carry trades benefting the emerging
markets
The emerging market boom is viewed cri-
tically by some. Some market commenta-
tors warn that a speculative bubble could
emerge owing to the hot money on the
markets. The background to this is the
interest rate differential between deve-
loped and emerging market countries:
Risk tolerant investors (carry traders) take
on debt in low-interest currencies such
as the US Dollar and invest their capi-
tal in other, higher-interest currencies or
in the equity, real estate or commodities
markets of the booming emerging mar-
kets. This increases the risk of a bubb-
le forming.
This is the case today. Capital infows
from developed countries have contribut-
ed to the stock markets of emerging mar-
kets outperforming those of developed
countries. In the past, when interest rates
rose in the USA and Europe, funds fowed
back out of the emerging markets. Such
return fows of money, also referred to as
repatriation, led to the appreciation of de-
veloped nations currencies, particularly
the US Dollar. It also gave rise to foreign
currency shortages in emerging markets.
The high level of foreign debt could then
not be repaid. A credit squeeze and the
fight of foreign capital has in many cases
then caused share prices to crash in the
respective emerging markets.
Increased economic stability
The US Dollar has regained a certain de-
gree of stability recently, but it is probably
Price/Earnings (P/E) ratio of the MSCI World and MSCI Emerging Markets
90
80
70
60
50
40
30
20
10
0
P/E Ratio
06/95 06/97 06/99 06/01 06/03 06/05 06/07 06/09 06/10
MSCI Emerging Markets Index MSCI World Index
No over valuation based on P/E ratios
When comparing the P/E ratio of the MSCI Emerging Markets Index to the P/E ratio of the MSCI World Index, we can
see that emerging markets seem cheaper when valued with their P/E ratio.
Source: Bloomberg, 8 June 2010
Emerging Markets are booming
Indices
MARKETS Direct | 01/2010
20
Comparison of economic growth
20
15
10
5
0
-5
-10
Change in real Gross Domestic Product (GDP) compared to
the previous year in %
1990 1994 1998 2002 2006 2010 1992 1996 2000 2004 2008
China Germany India Japan USA
Source: International Monetary Fund; 28 January, 2010
Long-term stronger growth
Major emerging markets such as China and India showed stronger GDP growth
than established markets such as the US, Japan and Germany.
Comparison of per capita annual income
9.000
8.000
7.000
6.000
5.000
4.000
3.000
2.000
1.000
0
USD
India Vietnam Philippines Indonesia China Malaysia
2009
Source: IMF; February 2010
Consumer spending threshold reached
According to Jim ONeill, Goldman Sachs Economist and inventor of the term
BRICs, emerging markets economies start to grow once per capita GDP rises above
USD 3,000 per year. With its population of 1.3 billion, China has already crossed
this threshold. Indonesia is set to follow in the next few years. The average per ca-
pita GDP of all emerging countries is already more than USD 9,400.
Major infrastructure projects are driving emerging market growth.
Indices
MARKETS Direct | 01/2010
21
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
RBS Listed products linked to the performance of the Emerging Markets
Covered Warrants offer leveraged exposure and Tracker Certifcates track the underlying index.
Name Underlying ISIN TIDM (Product code) Expiry Strike Currency
Emerging Market Tracker (certifcate) MSCI Emerging Market EUR Price Index GB00B436SJ76 RB08 20/11/19 EUR
Emerging Market Tracker GBP (certifcate) MSCI Emerging Market Index GB00B4XTW837 RB15 16/12/19 975,01 GBP
Frontier Markets Tracker (certifcate) MSCI Frontier Markets Net TR USD Index GB00B5VDGW64 RB18 20/01/20 548,441 GBP
South Africa Accelerated Tracker (certifcate) FTSE/JSE TOP 40 GB00B59SRD16 RB42 08/04/13 26.045,83 GBP
China Accelerated Tracker (certifcate) HSCEI GB00B54W1D61 RB03 17/06/13 10.700,15 GBP
China Bear Super Tracker (certifcate) iShares FTSE/Xinhua China 25 Index Fund GB00B61FBF70 RB94 05/02/16 GBP
Covered Warrants (certifcate) Bovespa Index Various n/a Various Various GBP
Covered Warrants (certifcate) Nikkei 225 Index Various n/a Various Various GBP
Covered Warrants (certifcate) HSCEI Index Various n/a Various Various GBP
Covered Warrants (certifcate) FTSE/JSE TOP 40 Index Various n/a Various Various GBP
Investing in Emerging markets involves certain risks and special considerations not typically associated with investing in more established economies.
Please see www.rbs.co.uk/markets for more information. Source: RBS; 3 June 2010
still too early to say whether the trend has
reversed, and developed nations central
banks are still holding off raising inte-
rest rates. The upturn following the se-
vere fnancial and economic crisis of
the two preceding years is, quite sim-
ply, still too fragile.
In addition, the overall economic
stability in many emerging markets has
improved considerably in recent years.
The export success of these countries
has been used to build currency re-
serves and, at the same time, foreign
debt has been reduced. Consequently
the sensitivity of servicing
debt against exchange
rate fuctuations has been
reduced. Scenarios like
the 1997/98 fnancial cri-
sis in Asia, when the high level of for-
eign currency-denominated debt and
low currency reserves triggered a fa-
tal chain reaction, are much less likely
to happen now. Moreover, the growth
in domestic demand in these countries
has also had the effect
of stabilising the over-
all economy. This means
that the economy can be
less reliant on exports
to industrial countries. There is a very
good chance that the economic ascent
of the emerging markets will continue.
Emerging markets
have become more
economically stable.
The agricultural sector is losing economic signifcance, even in Asia.
Indices
For more information, educational material and expert views, please visit rbs.co.uk/markets
References to particular share indices do not indicate any association between RBS and the third party Index provider, or endorsement of any products by the Index provider. The products
are not in any way sponsored, sold or promoted by any relevant stock market, relevant Index, related exchange, index sponsor or investment fund provider, and they make no warranty or
representation whatsoever, express or implied, either as to the results to be obtained from the use of the relevant stock market and/or the fgure at which the relevant stock market, relevant In-
dex, related exchange or investment fund level stands at any particular time on any particular day or otherwise. They shall not be liable (whether in negligence or otherwise) to any person for
any error in the relevant stock market, relevant index, related exchange, or relevant investment fund and shall not be under any obligation to advise any person of any error therein.
MARKETS Direct | 01/2010
22
Indices
Europe
Index Country Price Index Performance YTD % Performance 1 year % Performance 5 years %
FTSE Index UK 5232,64 -3,33 19,37 4,67
DAX Index Germany 6075,69 1,99 20,20 34,70
TECDAX 30 Index Germany 757,27 -7,38 17,42 41,85
EURO STOXX 50 Index EU 2650,96 -10,59 6,75 -14,88
ATX Index Austria 2364,80 -5,24 10,58 -16,22
SMI Index Switzerland 6447,23 -1,51 19,73 3,82
CECE Index Eastern Europe 1905,14 4,21 42,39 14,71
WIG20 Index Poland 2405,25 0,69 24,12 23,97
BUX Index Hungary 22674,12 6,82 49,25 28,60
PXD Index Czech 1178,70 5,50 27,61 1,43
RDX Index Russia 1449,49 11,07 30,92 81,76
ROTX Index Romania 6978,53 6,85 49,91 -6,86
America
Index Country Price Index Performance YTD % Performance 1 year % Performance 5 years %
Dow Jones Industrial Average Index USA 10249,54 -1,71 18,15 -2,02
S&P 500 Index USA 1098,38 -1,50 17,88 -8,16
Nasdaq 100 Index USA 1879,59 1,04 27,39 21,70
Latibex Top Index Latin America 5176,90 3,28 37,59 131,74
Bovespa Index Brazil 62942,91 -8,23 20,84 138,73
Mexbol Index Mexico 31411,91 -2,21 27,42 137,89
Merval Index Argentina 2212,39 -4,67 38,19 46,89
Asia
Index Country Price Index Performance YTD % Performance 1 year % Performance 5 years %
Nikkei 225 Index Japan 9914,19 -5,99 1,77 -12,26
Hang Seng Index Hong Kong 19786,71 -9,54 6,51 43,19
Hang Seng China Enterprises Index China 11397,41 -10,92 5,29 150,46
MSCI Taiwan Index Taiwan 262,42 -11,33 3,73 2,60
Kospi 200 Index South Korea 217,58 -1,93 20,56 74,01
Nifty 50 Index India 5110,50 -1,74 12,80 144,03
SET 50 Index Thailand 533,95 2,55 28,20 13,70
LQ45 Index Indonesia 545,61 9,50 38,49 128,19
Kuala Lumpur Comp. Index Malaysia 1294,44 1,70 22,65 49,49
Africa
Index Country Price Index Performance YTD % Performance 1 year % Performance 5 years %
S&P Africa 40 Index Africa 293,04 20,76 48,77
CASE 30 Index Egypt 6517,94 4,98 5,57 56,57
FTSE/JSE Top 40 Index South Africa 24452,18 -2,18 17,15 91,74
CFG 25 Index Morocco 25090,71 15,62 9,16 129,53
Nigeria SE Index Nigeria 26150,78 25,56 -13,39 21,91
Sectors
Index Country Price Index Performance YTD % Performance 1 year % Performance 5 years %
AMEX Gold Bugs Gold mining 462,34 7,54 23,39 142,74
AMEX Biotech Index Biotechnology 1073,93 13,99 56,85 98,97
AMEX Oil Index Oil producers 943,53 -11,67 -2,65 11,82
DJ Internet Commerce Index E-commerce 162,52 -2,42 41,20 41,32
DJ Internet Service Index E-commerce 71,26 11,54 33,12 62,95
Index Focus
The index tables below show the performance of world indices.
Past performance is no indication or guarantee of future performance. Source: Bloomberg; 03 June, 2010
MARKETS Direct | 01/2010
23
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and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
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is an authorised agent of The Royal Bank of Scotland N.V in certain jurisdictions.
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D2564 RBS Gold Bullion Tracker (200x268) FA.indd 1 21/04/2010 12:52
After the gold peak
Experts believe that gold production hit its peak in 2001. Resources that can be mined
inexpensively are now depleted, which is likely to push up gold prices in the long term.
The gold price has increased fve-fold
since 2002. One ounce of fne gold (1
troy ounce = 31.103481 grams) now
costs more than USD 1,200. The recent
surge in the price of gold can be largely
attributed to the widespread volatility that
weve seen across asset classes and the
enormous infows of investment into gold
Exchange Traded Funds. However, dig
below the surface and you could also
fnd that the gold price is being driven
higher by the gradual depletion of our
global reserves.
Until 2008, global gold production
had fallen for eight consecutive years.
According to the World Gold Council
(WGC), annual production in 2008 was
2,400 tonnes. In 2009, production rose
by 150 tonnes, which the WGC attribu-
tes to an increase in gold recycling. De-
spite the brief uptick last year, market
commentators believe that production
is set to sink over the long term. This is
because existing gold reserves are de-
pleted and new reserves are not being
discovered quickly enough to offset the
decline. Owing to the long lead time of
Gold in its purest form.
Commodities
MARKETS Direct | 01/2010
25
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
up to eight years, a rapid increase in pro-
duction is not possible. In addition, gold
mining is becoming increasingly labour
intensive and, therefore, cost-intensive.
South African dominance eroded
This is well illustrated by the situation
in South Africa, which was the worlds
largest gold producer until 2007. Three
years ago, the country was responsible
for around 14% of global production. In
the 1980s, it accounted for as much as
60%, while today it represents just 10%.
In 2009, South Africa produced 205
tonnes of gold, while China produced
314 tonnes. The country has therefore
lost its status as the leading gold pro-
ducer and is now in fourth place behind
China, Australia and the US. One of the
significant problems faced by South
African companies is the sharp rise in
electricity prices. Electricity costs com-
prise 13% of gold producers total ex-
penses. And the state energy supplier,
Eksom, has announced annual price
hikes of 45% to cover the cost of mo-
dernising the dilapidated electricity net-
work.
Four grams of gold per tonne of ore
During the nineteenth century gold rush,
gold was found concentrated in the form
of nuggets. Now, however, gold mines
have to break through tonnes of ore to
extract just a couple of grams of gold.
According to the WGC, the yield from
an underground gold mine in South Af-
rica, for example, is between four and
ten grams per tonne of ore. Even with a
gold yield of ten grams per tonne, more
than three tons of ore is needed in order
to produce the industry measure of one
troy ounce of gold. In many
cases the situation is wor-
se as the mines are open-
pit, and the gold yield is
just one to four grams per
ton of ore.
South Africas second-largest gold
company, Gold Fields, has felt frst-hand
how problematic gold exploration can
be. The company acquired the mine
South Deep three years ago for USD 2.5
billion. Experts believe that the under-
ground mine 40 kilometres south-west of
Johannesburg contains the worlds lar-
gest gold reserves, with 30 million oun-
ces. Immediately after the takeover, seri-
ous accidents, fre and foods occurred.
Owing to the extensive repairs required,
the mine was closed down for several
months. Although 230,000 ounces were
again produced in South Deep in 2008,
this was just half the production of 2005.
Gold Fields has announced that it is in-
vesting EUR 90 million this year to im-
prove the mining infrastructure at Sou-
th Deep. The current mine
is more than 2,000 metres
deep. However, the mine
needs to be well over
3,000 metres deep and
that costs money. In addition, the under-
ground temperature is 60 degrees. Coo-
ling the facilities is expensive and is only
economically viable at a price per ounce
of more than USD 1,000.
Global gold production
3.000
2.500
2.000
1.500
1.000
500
0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2008
tons
Maximum gold production
Is the current downswing in gold production just a blip, of which there have been
several since 1900, or has maximum gold extraction really been reached? The
second hypothesis is supported by todays high gold prices, and the sharp rise in
development costs for new gold mines.
Source: Goldsheetlinks.com; March 2010 Source: U.S. Geological Survey; March 2010
Gold production worldwide per country
100
90
80
70
60
50
40
30
20
10
0
Percentage of total global gold production
USA Canada
Russia (until 1990 former USSR countries)
South Africa
1970 1975 1980 1985 1990 1995 2000 2005 2008
China Australia Others
Traditional producers becoming less signifcant
Traditional gold producing countries have become considerably less signifcant with
regard to gold extraction over the last decade. This applies frst and foremost to South
Africa, but is also true of the Soviet Union and its successor states. The other category
includes a large number of developing and smaller producing countries. The chart indi-
cates that the major gold deposits have already been tapped and are partly exhausted. In
order to maintain production, smaller deposits will increasingly have to be exploited.
Gold mining could
become more and
more expensive.
Commodities
MARKETS Direct | 01/2010
26
High production costs
The WGC estimate that the average
global production cost is approximate-
ly USD 400 per ounce. The signifcant
exploration costs also push down gold
companies margins. When the gold pri-
ce experienced a 20-year downward
trend, between 1980 and 1999, many
small gold mines closed.
A few years ago, between USD 300
and 500 million was needed to open up
a mine, said Jamie Sokalsky, Chief Fi-
nancial Officer of Canadas Barrick
Gold, at an investor conference in Ge-
neva. Now, you need between USD 3
and 5 billion, he continued. At the same
conference, Barrick CEO Aron Regent
revealed that Barrick, together with its
competitors Goldcorp Newmont Mi-
ning and Kinross Gold, invested a to-
tal of USD 4 billion in gold exploration in
2009. However, hardly any new deposits
were found.
As in the oil sector, resources that
are easy and inexpensive to mine are
largely depleted. Extracting poor or very
deep ore often comes up against tech-
nical and economic hurdles. In open-pit
mining, an average of one tonne of stone
has to be processed for four grams of
gold, says gold expert and Erste Bank
analyst Ronald-Peter Stferle in an in-
terview with Rohstoff-Spiegel earlier this
year. Mr Stferle points out that gold pro-
duction is stagnating or sinking in eight
of the twelve most signifcant gold pro-
ducing nations, which together account
for more than 50% of the primary supply.
This includes the big four gold mining
regions, Canada, Australia, the US and
South Africa.
The gold peak
The comparison with depleting oil re-
sources has been increasingly drawn
over the last few years. However, the si-
tuation is not exactly the same, as gold
is not consumed after it is produced. But
there is talk of a gold peak, as experts
believe that production peaked in 2001
with annual production of 2,600 tonnes.
The worlds largest producer, Barrick
Gold, also holds this view. The Canadi-
an group anticipates a long-term decline
Gold demand per annum
Global gold mining costs
4.500
4.000
3.500
3.000
2.500
2.000
1.500
1.000
500
0
-500
Others Bar & coin retail investment
Jewellery
ETF (Exchange Traded Funds)
tons
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Industrial & dental
500
400
300
200
100
0
2003 2004 2005 2006 2007 2008
USD/ounce
Global gold supply per annum
4.500
4.000
3.500
3.000
2.500
2.000
1.500
1.000
500
0
-500
Net producer hedging (This means that producers store gold to hedge themselves against ination.)
Ofcial sector sales Total mine supply
tons
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Old gold scrap
Gold supply and demand
The bulk of the worlds gold demand of around 3,500 tonnes per year is attributable to the jewellery industry. Demand for gold
in major emerging markets, such as China and India is increasing in line with the growth in the populations wealth. Gold is
also used in the electronics industry and dentistry. Added to this, investors interest in gold has spiked in recent years and
contributed signifcantly to the price rises. According to Barclays Capital, investment demand amounted to 1,400 tonnes of
gold last year, which corresponds to a 40% share of global gold production. Today, annual gold production is roughly 2,500
tonnes. Demand is therefore outstripping mine production by more than one third. Additional supply is generated through
recycling and the gold reserves of central banks, which have been consistently reduced since the end of the 1990s. However,
there seems to be a change of thinking in this regard, demonstrated in particular by the gold purchases of Asian central banks.
Surging costs
Over the last 7 years, gold production costs have more than doubled. This upward trend refects the fact that gold de-
posits that can be easily exploited are already largely exhausted.
Source: GFMS, June 2010
Source: U.S. Geological Survey; March 2010
Source: GFMS, June 2010
Commodities
MARKETS Direct | 01/2010
27
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
RBS Listed products linked to the performance of Gold.
Covered Warrants provide leveraged exposure to the underlying and Tracker Certifcates track the performance of the Underlying.
Name Underlying ISIN TIDM (Product code) Expiry Strike Currency
Gold Bullion Tracker Certifcate, GBP Hedged Gold GB00B59N1890 RB81 17/06/19 937,25 GBP
Gold Bugs Tracker (Certifcate) Gold Bugs Index GB00B4LZCF09 RB11 02/12/19 500,55 GBP
Gold Super Tracker (Certifcate) Gold GB00B67JNK20 RB92 25/11/14 GBP
Covered Warrants Gold Various n/a Various Various GBP
Source: RBS; 3 June 2010
From gold rush to industrial production
When James Marshall checked
his water mill on Californias Ame-
rican River on 24 January 1848,
something was glinting in the wa-
ter. Marshall bent down, grabbed
a handful of grit and mud and
held it up to the light. Then he re-
alised what was shining: Gold!
Thousands of gold prospectors
were subsequently attracted by
the dream of getting rich quick.
Between January 1848 and De-
cember 1949, San Franciscos population grew from 1,000 to 25,000. The Californi-
an gold rush also marked the start of industrial gold production.
In Australia, gold fever took hold in the 1850s, when immigration swelled. The dis-
covery of gold also had signifcant ramifcations on South Africas industry. The dis-
covery of the worlds largest gold deposit in 1886 in Witwatersrand transformed the
economic and social structure of the previously remote and agriculturally-dominated
Boer Republic. The American gold rush in 1896 also brought signifcant change.
Hundreds of thousands of gold prospectors came to the Klondike River near Daw-
son City. This led to the establishment of the Canadian Yukon Territory and the dra-
wing of the border between Alaska and Canada. Most of the gold produced through
mining today comes from China, Australia, the USA, South Africa, Canada and Rus-
sia. Annual production is now roughly 2,500 tonnes, some one hundred times the
production in the nineteenth century. We now produce more gold in two years than
documented in the thousand years of the middle ages.
Westward Ho! Gold prospectors on the way to California.
Only a few were able to realise their dreams.
P
h
o
t
o
:
w
i
k
i
.
h
i
s
t
n
e
t
.
c
h
Diffcult mining conditions.
in production of one million ounces per
year. 2009 was a statistical anomaly in
terms of gold production, according to
the second largest gold mining compa-
ny, Newmont Mining (USA).
Since gold production began, an
estimated 160,000 tonnes of gold has
been extracted from the earth. It is be-
lieved that there are reserves of a further
100,000 tonnes. The expected decli-
ne in gold production is an indicator of
long-term gold price rises. While supply
shrinks, many experts consider that de-
mand will rise in the future, particular-
ly from burgeoning emerging markets
and investors who are banking on ano-
ther gold rally.
Gold fever.
Commodities
MARKETS Direct | 01/2010
28
Commodities
Commodities Focus
The commodity tables below show the performance of various commodity indices and other single commodity futures.
Main indices
Index Maturity Current price Performance YTD % Performance 1 year % Performance 5 years %
Rogers Int. Commodity Index 3274,55 0,02 26,14 7,57
Energy
Index Maturity Current price Performance YTD % Performance 1 year % Performance 5 years %
Rogers Int. Energy 774,68 3,45 30,46 -26,32
IPE Brent Crude Oil TR Index 86,11 9,49 56,55 62,38
NYMEX Crude Oil Aug 10 85,73 7,14 56,65 60,15
NYMEX Heating Oil Jul 10 225,26 6,48 54,75 53,20
NYMEX Natural Gas Jul 10 4,08 -26,17 9,03 -43,33
NYMEX Unleaded Gasoline Jul 10 232,24 13,13 54,58 41,00
Metals
Index Maturity Current price Performance YTD % Performance 1 year % Performance 5 years %
Rogers Int. Metalller 2492,65 7,08 59,70 142,02
Aluminium TR Index 2410,00 7,72 56,75 23,96
Lead Sep 10 2334,75 -4,20 66,35 141,69
Copper Sep 10 7930,50 7,44 73,86 142,23
Nickel Sep 10 25211,00 35,96 128,20 56,76
Zinc Sep 10 2419,00 -5,75 73,13 76,73
Tin Sep 10 18751,00 10,53 70,54 129,48
Precious Metals
Index Maturity Current price Performance YTD % Performance 1 year % Performance 5 years %
Rogers Int. delmetaller 1865,44 10,85 42,92 150,91
Gold TR Index 1163,65 5,92 30,10 172,19
Silver Spot 18,42 8,74 44,36 157,01
Platin Kasse 1737,00 18,34 39,42 101,63
Palladium Kasse 523,00 28,66 117,05 165,48
Agriculture
Index Maturity Current price Performance YTD % Performance 1 year % Performance 5 years %
Rogers Int. Jordbruk 911,02 -8,37 1,90 -12,48
Cotton TR Index 80,06 4,53 64,17 46,31
Oat Oct 10 222,75 -21,84 8,78 56,34
Coffe Sep 10 135,35 -1,64 11,66 14,85
Cocoa Jul 10 2171,00 -4,40 19,68 148,40
Live Cattle Sep 10 94,43 9,57 11,32 11,51
Lean Hog Aug 10 83,48 19,46 13,41 9,73
Corn Jul 10 359,00 -15,38 -10,07 66,78
Feeder Cattle Sep 10 115,10 19,58 16,15 8,43
Orange juice Aug 10 131,80 2,13 54,22 40,51
Rapeseed Sep 10 297,25 1,80 4,85 43,25
Canola Nov 10 387,50 -6,04 -10,53 104,02
Rice Nov 10 13,35 -10,34 -1,29 76,47
Soy bean Sep 10 970,25 -7,46 -3,19 55,36
Soy bean meal Aug 10 269,10 -12,09 -12,27 43,21
Soy bean oil Aug 10 40,36 -1,03 12,94 77,48
Wheat Aug 10 483,00 -12,97 -9,51 50,35
Sugar Sep 10 17,07 -32,34 27,50 98,72
Past performance is no indication or guarantee of future performance. Source: Bloomberg, 3 June, 2010
MARKETS Direct | 01/2010
29
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
Currencies
Potential trends for 2010
2010 promises to be an interesting year for the currency markets. Will the Pound
become the target of speculation?
The capital markets were marked by three
major developments in 2009: The unex-
pectedly rapid exit from the global reces-
sion, the increased risk appetite of priva-
te investors and the break away of emer-
ging markets from developed nations. In
the currency markets, the most signifcant
of these was investors return to riskier as-
sets. Given the extremely low interest ra-
tes in most developed nations, investors
sought out currencies offering interest
rate advantages. A resurgence of carry
trades, where investors take out credit in
low-interest currencies and invest the mo-
ney in higher-interest currencies, began
as early as the start of 2009.
Structural problems
Overall, the structural problems in many
countries were tackled in 2009 by massi-
vely expanding government debt and IMF
lending, in order to stop the fnancial cri-
sis spreading like an international wildf-
re. However, this year will likely see some
severe adjustments. Countries in fnanci-
al diffculties may be able to help them-
selves but if not, more bailouts may be on
the cards. This will require painful, even
excruciating, cost cutting measures and
structural reforms that not all countries are
prepared for. We have already seen ex-
amples of this in Greece, Iceland, Portu-
gal, Mexico and Dubai. A similar situation
is brewing in the Baltic States and other
Eastern European countries. It is therefore
highly likely that, despite the general cal-
ming of the global credit market, there will
be further local fnancial crises and the po-
tential for signifcant turbulence for some
currencies. A lot depends on whether the
economic recovery gathers pace, as this
would allow many of the structural prob-
lems to be eradicated. However, many are
sceptical as to whether this type of blan-
A new world of opportunity.
Currencies
MARKETS Direct | 01/2010
30
ket recovery is possible in the timescale
that it is needed. This puts particular pres-
sure on the currencies of countries which
have high defcits and debt ratios.
Despite the scepticism surrounding
the Euro in recent months, a free-falling
US Dollar is the biggest threat to the glo-
bal economy that could emerge from the
currency market in the long term. Cer-
tainly China and many other countries in
Asia, which own billions of US Dollars,
could face signifcant economic fallout
if this was to occur. This uncontrolled de-
valuation of the currency would occur if
the market lost confdence in Americas
ability to service its huge debt position.
Such a scenario is too grim to contemp-
late and, in actual fact, an entirely diffe-
rent story has played out over the past few
months: The US Dollar has been in de-
mand again, as many investors are spe-
culating that the US economy will recover
more quickly than the European or Japa-
nese economies, for example. In addition,
the events in Greece cast doubts over the
stability of the European Monetary Union
which cast downward pressure on the va-
lue of the Euro.
Nevertheless, speculation about an
early interest rate hike by the US central
bank is exaggerated. The Fed is not like-
ly to raise its key rate befo-
re the ECB, so interest in
the Eurozone will remain
higher than in the USA for
an extended period. This
should boost the EUR/USD rate in the me-
dium term. The Yen, on the other hand,
could again come under selling pressu-
re, as it has already done in recent weeks.
Chronic defation in Japan means that the
Bank of Japan will likely keep its key rate
at zero throughout 2010 and beyond. It is
possible that over the long term, the Yen
could replace the Dollar as the borrowing
currency for carry trades once more and
start losing ground again. From the se-
cond half of the year, the issue of a rever-
sal of interest rates will become increasin-
gly important in the USA and Eurozone. In
particular, the downward pressure on the
Dollar will increase again if the US econo-
my starts to lose pace.
Like the Euro, the Pound could be-
come the target of speculative attacks
in the coming months, as Britains bud-
get defcit is running at more than 12% of
GDP, a similar level to that of
Greece. Furthermore, the
new coalition government
in Westminster has yet to
explain how it intends to
put its budget in order. It faces an unple-
asant task of consolidating the UK bud-
get, which will be likely to require dras-
tic government spending cuts and, in all
likelihood, tax increases. Should an an-
nouncement on the new budget conso-
lidation measures be further delayed, ra-
ting agencies could strip UK government
bonds of their top-level credit rating. This
could put signifcant downward pressure
on the British currency.
Summary
The stability of the US economy may be
overstated. The present strength of the
Dollar is unlikely to be long-lasting. The Yen
The strength of
the US economy
is unknown.
The greatest threat is for USD depreciation.
Currencies
MARKETS Direct | 01/2010
31
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
Performance GBP/USD exchange rate
2,20
2,00
1,80
1,60
1,40
1,20
Exchange rate
06/05 06/06 06/07 06/08 06/09 06/10
GBP/USD exchange rate
Source: Bloomberg, 8 June 2010
British Pound under pressure
Following the collapse of Lehman Brothers in 2008, the GBP/USD exchange rate
nosedived, falling back to 2001 levels. The currency then recovered, but the new-
found strength of the US Dollar from December 2009 also caused the GBP/USD
exchange rate to slump. At times, the Pound fell below the USD 1.50 mark. Howe-
ver, with regard to the Euro exchange rate, the Pound benefted from the weakness
of the single European currency and EUR/GBP is now signifcantly below the level
of December 2009.
Performance GBP/BRL (Brazilian Real) exchange rate
5,00
4,50
4,00
3,50
3,00
2,50
2,00
06/05 06/06 06/07 06/08 06/09 06/10
Exchange rate
GBP/BRL exchange rate
Source: Bloomberg, 8 June 2010
Emerging market currencies in demand
The appreciation of the emerging market currencies refects the success of the
recovery in these countries compared to industrialised nations. For example, the
British Pound/Brazilian Real exchange rate has fallen by more than 40% over the
last fve years. In countries such as Brazil, China and India, the fnancial crisis
even accelerated the recovery process; while developed countries were paralysed
by their high level of debt, the emerging markets pulled the global economy out of
recession.
will likely remain the lowest-yielding curren-
cy and may therefore start losing ground
again during the year. The Pound is under
threat from becoming the target of specu-
lative attacks if the government does not
indicate the way out of its budget defcit
soon. Overall, 2010 should see further sig-
nifcant turbulence in the currency market,
as the global economy remains unstable.
Currencies
Currencies Focus
The Currency tables below show the performance of various currencies.
Leading currencies
Currency Currency pair Exchange rate Performance YTD % Performance 1 year % Perf. 5 years % Current interest rate
British Pound 0,55
Euro GBP/EUR 1,20 -5,87 -3,72 23,82 0,33
US Dollar GBP/USD 1,47 -9,16 -9,93 -19,00 0,30
Swiss Francs GBP/CHF 1,69 -1,32 3,32 34,24 0,02
Norwegian Krone GBP/NOK 9,42 -0,65 10,03 24,36 2,11
Japanese Yen GBP/JPY 135,94 10,63 14,99 43,81 0,13
Australian Dollar GBP/AUD 1,73 3,92 17,38 38,65 4,57
Emerging markets currencies
Currency Currency pair Exchange rate Performance YTD % Performance 1 year % Perf. 5 years % Current interest rate
Polish Zloty GBP/PLN 4,88 -5,19 6,78 24,77 3,06
Czech Krone GBP/CZK 30,84 -3,73 0,43 44,87 0,81
Hungarian Forint GBP/HUF 330,31 -7,95 0,68 12,10 4,52
Russian Ruble GBP/RUB 45,45 6,79 10,80 13,05 2,66
Bulgarian Ruble GBP/BGN 2,34 -5,89 -3,84 23,21 0,35
Turkish Lira GBP/TRY 2,31 4,40 9,06 7,14 6,70
South African Rand GBP/ZAR 11,17 6,79 18,32 11,49 6,49
Brazil Real GBP/BRL 2,67 5,50 20,13 63,77 11,13
Past performance is no indication or guarantee for futures performance. Source: Bloomberg, 3 June, 2010
MARKETS Direct | 01/2010
32
Are interest rates
set to rise globally?
Australia was the frst major developed country to raise its interest rates. If this is the frst sign of a global
interest rate snap back, investors will have to get used to the idea of falling bond prices.
Are interest rates set to soar?
Government bonds at a glance
This table shows a list of leading government bonds and their performance over different time periods.
Name Future contract Future price Performance YTD % Performance 1 year % Perf. 5 years % Yield %
German government bond BUND future 128,28 5,85 7,05 4,57 2,72
UK government bond Gilt future 119,66 4,55 32,28 5,22 3,62
Swiss government bond Swiss federal bond 142,15 3,99 15,27 5,44 1,50
US government bond T-note future 119,83 3,79 1,70 6,06 3,41
US government bond T-bond future 122,09 5,82 3,76 3,63 4,30
Japan government bond JGB future 140,37 0,48 2,50 -0,46 1,29
Source: Bloomberg, 3 June, 2010
Bonds
MARKETS Direct | 01/2010
33
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
Israel, Australia and Norway have all
raised their key interest rates over the
last year. These countries are not usu-
ally the central focus of international mo-
netary policy, but this time the fnancial
world is tracking their interest rate deci-
sions very closely, as Australia was the
first major developed country to raise
its interest rates after the economic and
fnancial crisis. Almost all of the worlds
central banks reacted to the crisis with
swingeing interest rate cuts. Investors
are now concerned that the rate hikes
in these countries could trigger a global
turnaround in interest rates. However, ta-
king a closer look, it is clear that the inte-
rest rate rise in Australia is largely attribu-
table to the brightening economic envi-
ronment in the Asia-Pacifc
region. With its commodity-
driven economy, the count-
ry is reaping the rewards of
the still high growth rates of
China and its neighbours.
No whisper of rate hikes in the US
At the heart of the world economy
which is still the US the situation is com-
pletely different, however. During the f-
nancial crisis, the Federal Reserve cut
its key rate to a historic low of 0 to 0.25%.
At the same time, it pumped enormous
amounts of cash into the economy, infa-
ting its balance sheet by USD 2 trillion,
Household consumption and GDP (nominal) in the US
16
14
12
10
8
6
4
2
0
-2
-4
Change compared to previous year in %
01/55 01/61 01/67 01/73 01/79 01/85 01/91 01/97 01/03 01/09
Household consumption
Gross domestic product
Source: Bloomberg, February 2010
Massive decline
Both gross domestic product and household consumption have declined consi-
derably in US Dollar terms (nominal). A crisis of this scale was last seen in 1958.
This means that company revenues are trending downward.
as a reaction to the contracting GDP a
situation last seen in early 1958. Com-
panies saw their potential revenues shri-
vel and reacted by making redundan-
cies, which in turn put a brake on con-
sumer spending, exacerbating the US
economic slowdown over the following
quarters. As well as the central bank, the
US government also mounted a charge
against the declining nominal GDP. Ba-
rack Obamas government decided to
tackle the economic crisis
with substantial economic
stimulus packages, which
also caused the budget
defcit during the last fscal
year (to 30 September 2009) to climb to
an immense USD 1.417 trillion its high-
est level since the Second World War.
However, US exports were favoured by
the weaker US Dollar. These efforts paid
off: according to the Department of Com-
merce, during the fourth quarter, the US
economy registered 5.7% growth on an
annualised basis. The Fed is nonethe-
less sticking to its zero interest rate po-
licy. The deteriorating situation in the la-
The Fed is still
holding its key rates
extremely low.
Australia is leading the way.
Its hard to calculate where interest rates go next
Bonds
MARKETS Direct | 01/2010
34
bour market is causing the central bank
concern. Fed Chairman Ben Bernanke
has stated that the low interest rate will
likely be maintained for an extended pe-
riod, but that the US central bank is pre-
pared to rein in monetary policy when the
situation has improved suffciently.
ECB and Bank of England maintain
low interest rates
A similar approach has been adopted
in Europe. During the fnancial crisis, in-
terest rates were cut to unprecedented
lows the ECB headline rate is now at
a historic low of 1.0%, while the Bank of
England rate is 0.50%. Banks can now
borrow unlimited funds from the ECB for
a period of up to one year, which has
pumped more liquidity into the market
than ever before. The respective heads
of the ECB and BoE believe the current
monetary policy to be appropriate. Des-
pite signs of the economy stabilising, the
outlook is still uncertain and a bumpy
landing is expected. Many experts be-
lieve that it is still too early to tighten mo-
netary policy in the Eurozone and that
Savings rate and national fnances in the US
12
10
8
6
4
2
100
90
80
70
60
50
% %
01/55 01/65 01/75 01/85 01/95 01/05
Unemployment as a % of the labour force (left-hand scale)
Capacity utilisation in US industry (right-hand scale)
(Capacity utilisation is the extent to which the productive capacity of an
industry is being used for production)
20
10
0
-10
-20
%
01/59 01/69 01/79 01/89 01/99 01/09
Savings rate (savings as a percentage of disposable income)
Budget balance (as % of GDP)
Source: Bloomberg, January 2010 Source: Bloomberg, January 2010
Job losses
As a result of the economic and fnancial crisis, capacity utilisation in US industry
slumped. Companies reacted to declining demand with massive job cuts. The un-
employment rate in the US is now just under 10%.
Defcit spending
Borrowing is bad, saving is good this is the new mantra of private consumers in
the US. This has led to a decline in private demand. The government is trying to
counter this through defcit spending. However, the high budget defcits are not sus-
tainable over the long term.
Interest rates in the US and Europe remain low for the time being.
Labour market and industrial capacity utilisation in the US
Bonds
MARKETS Direct | 01/2010
35
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
Yields on ten-year US bonds Price developments in the US
8
7
6
5
4
3
2
1
0
Percent
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Ination expectation
Yield on ten-year US Treasury Ination Protected Securities (TIPS)
Yield on ten-year US Treasury Bonds
6
5
4
3
2
1
0
-1
-2
-3
Change on previous year in %
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Ination rate Core ination (excluding food and energy)
Source: Bloomberg, 10 June 2010
Source: Bloomberg, 10 June 2010
Low infation expected
The yield on traditional bonds reflects investors expectations for nominal growth.
The yield on inflation-protected bonds incorporates the expectations regarding real
economic growth in the US. Based on the yields of traditional and inflation-protec-
ted bonds, investors expect moderate inflation in the coming years and above-
average growth in the US economy. Investors anticipate real economic growth of
1.3% and an inflation rate of 2.2% over the next few years. In addition, they expect
debt reduction in the private sector will continue to hold back the US economy in
the longer term.
Price declines in the US
Negative infation rates (defation) have recently been reported in the US. However, ex-
cluding food and energy, prices are up more than 2.5% on the previous year (January
2009 to January 2010). The US government and the Federal Reserve were able to prevent
industrially produced consumer goods and services from slumping into defation through
spending programmes and an expansionary monetary policy.
the current interest rate levels and ad-
ditional money supply should be main-
tained for the time being. Although gra-
dual recovery in the Eurozone and mar-
ginal growth are forecast for this year,
the recovery is still reliant on econo-
mic stimulus packages in the individual
countries. The objective of maintaining
low interest rates is therefore to avoid
stresses within the monetary structure.
Countries, such as the UK
for example, are depen-
dent on an even tighter
monetary policy in order to
recover from their currently
weak economic growth. A
side-effect of the low inte-
rest rate is the weak Pound, which is be-
nefting the UKs exporters. Only when
the economic recovery
frms up and, therefore, the
risk of infation rises, is the
pressure on central banks
to raise interest rates likely
to increase. However, the
bond market is not yet an-
ticipating such a development.
The BoE is
strengthening
exports through low
interest rates and a
weak currency.
A jigsaw of interest rates.
RBS Listed Bonds
RBS Listed bonds offer competitive interest rates without any lock-in periods.
Underlying Product type ISIN TIDM Expiry Cur.
Royal Bond Listed Bond GB00B3YVV405 RB53 26/08/15 GBP
Royal Bond Listed Bond GB00B3N3WC23 RB51 03/02/20 GBP
Source: RBS; 3 June, 2010
Bonds
MARKETS Direct | 01/2010
36
Building a diversifed
Portfolio
Tis the part of a wise man to keep himself today for tomorrow, and
not venture all his eggs in one basket. Miguel de Cervantes, Don
Quixote de la Mancha, 1605. By David Stevenson
Portfolios like stock markets are very
strange creatures indeed. I constantly
fret over the health of mine its my other
child that constantly causes me limitless
grief and anxiety, interspersed by the
odd moment of euphoria. What makes
my behaviour towards my portfolio even
more inexcusable is that I also constant-
ly break all the rules advanced by be-
havioural investment gurus
like James Montier, stock-
market strategist and au-
thor of the US fnance best
seller the Little Book of Be-
havioural Investing. Mon-
tier claims this constant fussing over my
pension pot is perhaps the greatest sin of
modern portfolio management (and trust
me when I say there are many, many
other sins which he identifes). He cont-
ends that a smart investor structures his
or her portfolio intelligently and then lea-
ves it alone for weeks or even months on
end, without constantly checking to see
if its going up, down or sideways. If this
all sounds a bit too good to be true, its
because it is. Montier is by background
a value investor with a strong contrari-
an streak and like many of this creed
hes used to taking a stand based on
many well thought through principles it
must be said and then steadfastly sti-
cking to this analysis through thick and
thin. Hes also benefting from the moun-
tain of research (courtesy of his leading
position in the City) that suggests that
certain approaches work over the long
term and that most of the
time markets revert to the
mean or mean reversion
as its called. For the rest
of us life is considerably
tougher, especially if we
dont have access to Montiers cons-
tant stream of institutional information.
Truth be told, weve probably not thought
through the principles underlying our
portfolios theyre largely opportunistic,
built through bolt on acquisitions and de-
sperate forced sales.
There is an alternative way based
on a thorough understanding of what
works and what doesnt. That analysis
of what works has, luckily, already been
done by a legion of researchers, acade-
mics, and investors. And one lesson shi-
nes through above all else that diver-
sifcation matters. You may well be able
to put together a fantastic portfolio of just
three or even four stocks that shoot out
the lights in one year or even a few years,
but you will pay the price eventually. Your
lack of diversification will come back
and destroy your returns. Great growth
stocks inevitably tumble to earth, dest-
roying the share price and your portfo-
lio along the way never under-estimate
the power of what economists call mean
reversion (you and I would probably call
it the fnal price of hubris!).
The only protection against that fo-
cussed short term speculation on just a
few stocks the polar opposite of long
term INVESTING - is that mysterious
creature called diversifcation. It seems
daft to say it, but diversifcation really,
really matters and it does produce the
goods: namely better long term returns,
hopefully at a lower cost in terms of los-
ses and volatility. But merely stating this
obvious truth doesnt necessarily make it
easy to apply for ordinary investors vex-
ed by their behavioural vices! In this ar-
ticle Ill try and fesh out some ideas for
building a sensibly diversifed portfolio.
Where do these profts of diversifca-
tion come from?
Whats behind this almost magical pro-
cess that delivers in some cases less
risk but greater returns? Academic eco-
nomists have obviously taken the blee-
ding obvious and turned it into a much
more noble form modern portfolio the-
ory. Im not going to bore you with a
lengthy exposition of the ins and outs of
this feld but suffce to say that most in-
vestors have three building blocks that
comprise their total return:
A smart structure
of investments
is crucial.
Juggle different
Betas in an
accessible manner
Special
MARKETS Direct | 01/2010
38
They looked at three potential portfo-
lios:
S&P 500 Index
Another variant invested 60% in the
S&P 500 Index and 40% in fve-year US
government Treasury Notes (similar to
long-term gilts in the UK). This is very
easy for any investor to replicate.
Another 60/40 split made up of 40%
US government Treasury Bill (similar
to short-term gilts in the UK) and 60%
equity but this time the equity was split
four ways between US based large-cap
stocks, large-cap value stocks, small-
cap stocks and small-cap value stocks
According to Merriman and Bucks
analysis the all-equity S&P 500 Index
portfolio had an annualised return of
10.9% over that 50-year period while the
60/40 versions annualised return was
9.6%. Surely the average private inves-
tor would have always plumped for this
all equity version? Merriman and Buck
arent so sure though the mixed 60/40
equities/bond mix returned less than the
pure equities approach it does so with a
much lower level of risk. Statistically, you
could say the 60/40 portfolio reduced re-
turn by 12% while reducing risk by 42%
say Merriman and Buck. Or you could
say the 60/40 portfolio provided 88% of
the return with only 58% of the risk.
The best performer by far though
came in the shape of the third mixture
the 60/40 portfolio with greater equity
diversifcation. Over the 50 years in our
study Merriman and Buck report, this
diversifed 60/40 portfolio produced a
return of 11.4%, with a maximum peak
to trough fall in value of 25%. Compared
with the all-equity portfolio,
this diversifed mix raised
the return by an extra 0.5%
age point while it reduced
the risk by 44%. That 0.5%
per annum difference may
not seem that great but the authors re-
mind us that over 50 years $100 inves-
ted at 10.9% would grow to $17,643.
The same $100 invested at 11.4% would
grow to $22,093, a difference of $4,450,
or an increase of 25%! They add that
difference alone is equal to more than
44 times the entire original investment
of $100.
But what about going global? Mer-
riman and Bucks original analysis only
looked at US investments but surely the-
re must be some beneft from investing
internationally as well? The authors ag-
reed and subsequently looked at year-
by-year returns from 1970 through 2004
if an investor had stuck with the diversi-
fed option number three from earlier
(no international stocks) or invested in
an alternative strategy which consisted
of a 60%/40% equity split but with that
equity portion split 50% into US based
stocks of varying sizes
(large-cap stocks, large-
cap value stocks, small-
cap stocks and small-cap
value stocks) and 50% in-
ternational (split fve ways
this time to include large-cap stocks, lar-
ge-cap value stocks, small-cap stocks,
small-cap value stocks and stocks in
emerging markets). The returns incre-
ased by more than 40 fold! The bottom
line the more you diversify internatio-
nally, the greater your potential returns!
Transparency is a
key advantage of
Covered Warrants.
Enhanced
SM
ER Call Warrants RD14 17.06.2011 4000,00 2,86 1000,00 2970,80 GBP 0,10 0,11 0,00%
GB00B5YCP014 RICI
Enhanced
SM
ER Call Warrants RD15 17.12.2010 3750,00 3,51 1000,00 2971,40 GBP 0,06 0,07 0,00%
GB00B5MJP824 RICI
Enhanced
SM
ER Call Warrants RD13 17.12.2010 3500,00 3,96 1000,00 2971,20 GBP 0,10 0,11 0,00%
GB00B59N2D19 RICI
Enhanced
SM
ER Call Warrants R584 18.06.2010 3500,00 0,05 1000,00 2970,80 GBP 0,001 0,021 0,00%
GB00B59G3Q09 RICI
Enhanced
SM
ER Call Warrants R587 17.12.2010 4500,00 1,72 1000,00 2970,80 GBP 0,01 0,02 0,00%
GB00B59G3N77 RICI
Enhanced
SM
ER Call Warrants R585 18.06.2010 4000,00 0,01 1000,00 2971,10 GBP 0,001 0,011 0,00%
GB00B59N2G40 RICI
Enhanced
SM
ER Call Warrants R586 17.12.2010 4000,00 2,64 1000,00 2971,20 GBP 0,04 0,05 0,00%
GB00B59G2K71 Rio Tinto Call Warrants R579 18.06.2010 33,04 12,92 8,26 32,46 GBP 0,125 0,13 64,52%
GB00B59N1V26 Rio Tinto Call Warrants R578 18.06.2010 28,91 7,37 8,26 32,46 GBP 0,464 0,469 31,59%
GB00B59G2V86 Rio Tinto Put Warrants R582 18.06.2010 24,78 -5,93 8,26 32,46 GBP 0,006 0,011 -45,16%
GB00B59G2X01 Rio Tinto Put Warrants R583 18.06.2010 20,65 -0,25 8,26 32,46 GBP 0,001 0,006 0,00%
GB00B3L6LK43 Rio Tinto Put Warrants RD81 17.06.2011 30,00 -2,06 10,00 32,49 GBP 0,554 0,559 -8,40%
GB00B3MBJH16 Rio Tinto Call Warrants RD84 17.06.2011 50,00 3,02 10,00 32,49 GBP 0,157 0,162 12,72%
GB00B3LLXD60 Rio Tinto Call Warrants RD85 17.06.2011 60,00 2,71 10,00 32,49 GBP 0,068 0,073 12,80%
GB00B3MXFK27 Rio Tinto Call Warrants RD83 17.09.2010 50,00 3,17 10,00 32,46 GBP 0,011 0,016 17,39%
GB00B618F102 Rio Tinto Put Warrants RD80 17.12.2010 25,00 -2,90 10,00 32,49 GBP 0,204 0,209 -13,78%
GB00B3NZQM60 Rio Tinto Put Warrants RD79 17.09.2010 30,00 -4,13 10,00 32,46 GBP 0,263 0,268 -16,90%
GB00B3M2F328 Rio Tinto Put Warrants RD82 17.06.2011 25,00 -2,09 10,00 32,49 GBP 0,339 0,344 -9,54%
GB00B5M55G88 Rio Tinto Put Warrants RC58 17.09.2010 25,00 -3,98 10,00 32,49 GBP 0,112 0,117 -19,08%
GB00B5W58D60 Rio Tinto Put Warrants RC60 17.12.2010 40,00 -2,42 10,00 32,49 GBP 0,98 0,985 -8,90%
GB00B56VG144 Rio Tinto Call Warrants RC62 17.09.2010 35,00 5,28 10,00 32,49 GBP 0,232 0,237 21,82%
GB00B5WCV727 Rio Tinto Put Warrants RC59 17.12.2010 30,00 -2,91 10,00 32,49 GBP 0,386 0,391 -12,60%
GB00B5T1FM59 Rio Tinto Call Warrants RC66 17.12.2010 40,00 4,08 10,00 32,46 GBP 0,204 0,209 15,69%
GB00B5T03G27 Rio Tinto Call Warrants RC68 17.12.2010 60,00 2,65 10,00 32,45 GBP 0,015 0,02 12,90%
GB00B5MW3765 Rio Tinto Call Warrants RC63 17.09.2010 40,00 5,33 10,00 32,49 GBP 0,091 0,096 23,84%
GB00B5SY5F86 Rio Tinto Call Warrants RC67 17.12.2010 50,00 3,60 10,00 32,45 GBP 0,056 0,061 11,43%
GB00B5W75190 Rio Tinto Call Warrants RC65 18.06.2010 45,00 0,01 10,00 32,46 GBP 0,001 0,006 0,00%
GB00B52GPX80 Royal Dutch Shell - B shares Put Warrants RA98 17.06.2011 16,00 -3,11 10,00 17,70 GBP 0,208 0,213 -4,97%
GB00B53JJ678 Royal Dutch Shell - B shares Call Warrants RC06 17.09.2010 17,00 6,49 10,00 17,70 GBP 0,163 0,168 9,97%
GB00B53DDV21 Royal Dutch Shell - B shares Call Warrants RC08 17.06.2011 21,00 3,86 10,00 17,80 GBP 0,093 0,098 6,70%
GB00B52C4399 Royal Dutch Shell - B shares Call Warrants RC09 17.06.2011 18,00 3,97 10,00 17,70 GBP 0,198 0,203 6,37%
GB00B5283B83 Royal Dutch Shell - B shares Put Warrants RA97 17.09.2010 17,00 -6,02 10,00 17,80 GBP 0,109 0,114 -7,47%
GB00B53GLC88 Royal Dutch Shell - B shares Call Warrants RC07 17.09.2010 20,00 6,36 10,00 17,80 GBP 0,039 0,044 16,90%
GB00B548Y243 Royal Dutch Shell - B shares Put Warrants R909 18.06.2010 18,00 -15,36 10,00 17,80 GBP 0,063 0,068 -18,63%
GB00B544BY34 Royal Dutch Shell - B shares Put Warrants R910 17.12.2010 17,00 -4,41 10,00 17,80 GBP 0,166 0,171 -5,60%
GB00B51QNW41 Royal Dutch Shell - B shares Call Warrants R900 17.12.2010 18,00 5,30 10,00 17,70 GBP 0,147 0,152 8,73%
GB00B51QN133 Royal Dutch Shell - B shares Call Warrants R901 17.12.2010 20,00 4,21 10,00 17,70 GBP 0,028 0,033 15,09%
GB00B3Z79430 Royal Dutch Shell - B shares Put Warrants R719 18.06.2010 13,00 -0,51 10,00 17,80 GBP 0,001 0,006 0,00%
GB00B40B3X43 Royal Dutch Shell - B shares Put Warrants R718 18.06.2010 15,00 -4,20 10,00 17,70 GBP 0,002 0,007 -30,77%
GB00B3Z78K25 Royal Dutch Shell - B shares Call Warrants R708 18.06.2010 16,00 8,88 10,00 17,80 GBP 0,184 0,189 13,37%
GB00B4403606 Royal Dutch Shell - B shares Call Warrants R709 18.06.2010 20,00 3,10 10,00 17,80 GBP 0,001 0,006 0,00%
GB00B5106T47 S&P 500 Call Warrants R923 16.12.2010 1100,00 5,31 100,00 1102,00 GBP 0,74 0,745 6,00%
GB00B55JDK75 S&P 500 Put Warrants R932 17.06.2010 900,00 -6,85 100,00 1102,80 GBP 0,006 0,011 -56,41%
GB00B54J7N94 S&P 500 Call Warrants R920 17.06.2010 1100,00 19,03 100,00 1102,50 GBP 0,202 0,207 15,21%
GB00B54PTR57 S&P 500 Put Warrants R933 16.12.2010 1000,00 -4,27 100,00 1102,30 GBP 0,529 0,534 -9,53%
GB00B55BBF49 S&P 500 Call Warrants R924 16.12.2010 1300,00 5,49 100,00 1102,30 GBP 0,167 0,172 9,71%
GB00B55B6R12 S&P 500 Call Warrants R925 16.12.2010 1500,00 2,58 100,00 1102,80 GBP 0,01 0,015 0,00%
GB00B53Y3C68 S&P 500 Call Warrants R922 17.06.2010 1300,00 0,03 100,00 1102,00 GBP 0,001 0,006 0,00%
GB00B556DF30 S&P 500 Call Warrants R921 17.06.2010 1200,00 6,76 100,00 1102,50 GBP 0,003 0,008 -26,67%
GB00B54PWJ86 S&P 500 Put Warrants R934 16.12.2010 900,00 -3,96 100,00 1102,00 GBP 0,345 0,35 -11,01%
GB00B55B9503 S&P 500 Put Warrants R931 17.06.2010 1000,00 -13,67 100,00 1102,50 GBP 0,036 0,041 -49,01%
GB00B3P20G71 S&P 500 Put Warrants RD99 16.09.2010 1100,00 -6,37 100,00 1102,50 GBP 0,56 0,565 -11,90%
GB00B3MMK592 S&P 500 Put Warrants RD96 16.06.2011 1100,00 -3,16 100,00 1102,30 GBP 1,101 1,106 -6,28%
GB00B5NXR324 S&P 500 Call Warrants RD12 16.09.2010 1600,00 0,01 100,00 1102,30 GBP 0,01 0,015 0,00%
GB00B5NQKF49 S&P 500 Call Warrants RD09 17.06.2010 1400,00 0,01 100,00 1102,50 GBP 0,001 0,006 0,00%
GB00B5M9D771 S&P 500 Call Warrants RD10 16.09.2010 1200,00 7,84 100,00 1102,50 GBP 0,21 0,215 9,25%
as at 03.06.2010
Covered Warrants Covered Warrants offer leveraged exposure to the Underlying.
MARKETS Direct | 01/2010
52
Products
ISIN Linked to Product type TIDM
(Product Code)
Expiry Strike Eff. Gear. Parity Ref. Currency Bid Ask % Chg
(daily)
GB00B5VM9136 S&P 500 Call Warrants RD11 16.09.2010 1400,00 1,54 100,00 1102,50 GBP 0,003 0,008 -15,38%
GB00B5T3MF32 S&P 500 Put Warrants RD22 17.06.2010 1100,00 -19,03 100,00 1102,50 GBP 0,184 0,189 -32,30%
GB00B5NQH758 S&P 500 Put Warrants RD23 16.09.2010 1000,00 -5,81 100,00 1102,30 GBP 0,333 0,338 -13,86%
GB00B5TMYR62 S&P 500 Put Warrants RD24 16.09.2010 900,00 -5,21 100,00 1102,00 GBP 0,192 0,197 -15,25%
GB00B3NDCL14 S&P 500 Call Warrants RD86 16.06.2011 1200,00 4,25 100,00 1102,50 GBP 0,677 0,682 4,62%
GB00B3MMQ409 S&P 500 Put Warrants RD97 16.06.2011 1000,00 -3,04 100,00 1102,00 GBP 0,823 0,828 -6,99%
GB00B3KXBY01 S&P 500 Call Warrants RD88 16.06.2011 1600,00 2,73 100,00 1102,80 GBP 0,033 0,038 9,23%
GB00B3MLX688 S&P 500 Put Warrants RD98 16.06.2011 900,00 -2,90 100,00 1102,50 GBP 0,594 0,599 -8,16%
GB00B3N6N280 S&P 500 Call Warrants RD89 16.12.2010 1400,00 4,33 100,00 1102,00 GBP 0,049 0,054 10,75%
GB00B3P3TP28 S&P 500 Put Warrants RE00 16.12.2010 1100,00 -4,52 100,00 1102,50 GBP 0,783 0,788 -8,50%
GB00B3N19143 S&P 500 Call Warrants RD90 16.09.2010 1300,00 5,86 100,00 1102,50 GBP 0,039 0,044 2,47%
GB00B3P66M78 S&P 500 Call Warrants RD87 16.06.2011 1400,00 4,02 100,00 1102,80 GBP 0,205 0,21 6,68%
GB00B5N7W394 Silver Put Warrants RD05 18.06.2010 15,00 -7,68 1,00 18,35 GBP 0,01 0,02 0,00%
GB00B42Y7951 Silver Put Warrants R679 17.12.2010 14,00 -4,31 1,00 18,35 GBP 0,342 0,357 -1,69%
GB00B4B0Q313 Silver Put Warrants R680 17.12.2010 12,00 -4,33 1,00 18,35 GBP 0,12 0,13 -7,41%
GB00B4RGV838 Silver Put Warrants R744 17.12.2010 17,00 -4,09 1,00 18,35 GBP 1,00 1,01 -0,99%
GB00B4S5GC85 Silver Call Warrants R742 17.12.2010 23,00 4,94 1,00 18,35 GBP 0,62 0,63 1,63%
GB00B4RLMR45 Silver Call Warrants R739 18.06.2010 21,00 14,41 1,00 18,35 GBP 0,02 0,03 -28,57%
GB00B4PNFX95 Silver Call Warrants R741 17.12.2010 20,00 4,82 1,00 18,38 GBP 1,10 1,11 1,84%
GB00B4QRGY80 Silver Call Warrants R740 17.12.2010 18,00 4,57 1,00 18,35 GBP 1,60 1,61 1,26%
GB00B4S3K642 Silver Call Warrants R738 18.06.2010 18,00 14,30 1,00 18,36 GBP 0,54 0,55 3,81%
GB00B4QRHJ05 Silver Put Warrants R743 18.06.2010 17,00 -15,75 1,00 18,35 GBP 0,10 0,11 -8,70%
GB00B3XWST88 Standard Chartered Call Warrants R506 18.06.2010 12,00 3,36 10,00 16,90 GBP 0,493 0,498 7,14%
GB00B3XWT177 Standard Chartered Call Warrants R507 18.06.2010 16,00 9,00 10,00 16,90 GBP 0,132 0,137 14,47%
GB00B54LHX57 Standard Chartered Call Warrants R885 17.12.2010 20,00 4,06 10,00 16,90 GBP 0,114 0,119 7,37%
GB00B551R340 Standard Chartered Call Warrants R882 18.06.2010 18,00 11,52 10,00 16,90 GBP 0,027 0,032 25,53%
GB00B5570Q62 Standard Chartered Put Warrants R887 17.12.2010 15,00 -3,04 10,00 16,90 GBP 0,16 0,165 -7,41%
GB00B551MW82 Standard Chartered Put Warrants R886 18.06.2010 16,00 -9,91 10,00 16,90 GBP 0,041 0,046 -23,01%
GB00B54LK928 Standard Chartered Call Warrants R883 18.06.2010 20,00 0,89 10,00 16,90 GBP 0,001 0,006 0,00%
GB00B54LJ409 Standard Chartered Call Warrants R884 17.12.2010 16,00 3,65 10,00 16,90 GBP 0,285 0,29 5,50%
GB00B59N5T83 Tullow Oil Put Warrants RD48 18.06.2010 12,00 -9,50 10,00 11,51 GBP 0,078 0,083 -16,58%
GB00B5LG3P70 Tullow Oil Put Warrants RD47 18.06.2010 13,00 -6,57 10,00 11,51 GBP 0,157 0,162 -11,14%
GB00B5MHVH79 Tullow Oil Call Warrants RD40 18.06.2010 15,00 0,19 10,00 11,50 GBP 0,001 0,006 0,00%
GB00B5MMVJ47 Tullow Oil Call Warrants RD39 18.06.2010 14,00 2,20 10,00 11,51 GBP 0,001 0,006 0,00%
GB00B5NW1370 Tullow Oil Call Warrants RD38 18.06.2010 13,00 7,67 10,00 11,50 GBP 0,007 0,012 26,67%
GB00B3PMG700 USD/JPY Put Warrants RE25 17.06.2011 80,00 -5,03 0,10 92,50 GBP 0,157 0,162 -5,90%
GB00B3LNBL64 USD/JPY Call Warrants RE18 17.06.2011 100,00 12,23 0,10 92,50 GBP 0,168 0,173 -2,29%
GB00B3LN6226 USD/JPY Put Warrants RE22 17.12.2010 100,00 -7,88 0,10 92,50 GBP 0,662 0,667 -3,35%
GB00B3PKWL01 USD/JPY Call Warrants RE20 17.12.2010 110,00 10,89 0,10 92,50 GBP 0,016 0,021 12,12%
GB00B3LKB514 USD/JPY Put Warrants RE24 17.06.2011 90,00 -6,04 0,10 92,50 GBP 0,368 0,373 -3,89%
GB00B3LJMR79 USD/JPY Call Warrants RE16 17.12.2010 90,00 12,05 0,10 92,50 GBP 0,387 0,392 0,00%
GB00B549DZ36 USD/JPY Call Warrants R540 18.06.2010 110,00 0,06 0,10 92,50 GBP 0,001 0,006 0,00%
GB00B54CPP66 USD/JPY Put Warrants R534 18.06.2010 90,00 -27,11 0,10 92,50 GBP 0,023 0,028 -21,54%
GB00B3Q4GM07 USD/JPY Call Warrants RE15 18.06.2010 100,00 8,56 0,10 92,50 GBP 0,001 0,006 0,00%
GB00B3LM0V60 USD/JPY Put Warrants RE21 18.06.2010 100,00 -12,07 0,10 92,50 GBP 0,553 0,558 -4,31%
GB00B3PLGC27 USD/JPY Call Warrants RE17 17.12.2010 100,00 17,76 0,10 92,50 GBP 0,078 0,088 0,00%
GB00B3L67K65 USD/JPY Put Warrants RE23 17.12.2010 90,00 -8,74 0,10 92,50 GBP 0,231 0,236 -4,89%
GB00B3MGLV43 USD/JPY Call Warrants RE19 17.06.2011 120,00 7,07 0,10 92,50 GBP 0,018 0,023 5,13%
GB00B63CPB04 Vodafone Put Warrants RF19 17.12.2010 1,40 -4,04 1,00 1,38 GBP 0,174 0,178 -8,81%
GB00B63CG280 Vodafone Call Warrants RF15 17.12.2010 1,30 4,59 1,00 1,38 GBP 0,18 0,184 10,98%
GB00B65C5R44 Vodafone Call Warrants RF16 17.12.2010 1,50 5,06 1,00 1,38 GBP 0,087 0,091 14,10%
GB00B63Q2D30 Vodafone Call Warrants RF12 18.06.2010 1,55 3,84 1,00 1,38 GBP 0,001 0,005 0,00%
GB00B63H9F71 Vodafone Call Warrants RF13 17.06.2011 1,60 3,85 1,00 1,38 GBP 0,086 0,09 11,39%
GB00B63PZQ42 Vodafone Call Warrants RF17 17.12.2010 1,60 4,95 1,00 1,38 GBP 0,056 0,06 18,37%
GB00B65FFF15 Vodafone Call Warrants RF14 17.06.2011 1,30 3,71 1,00 1,38 GBP 0,202 0,206 9,09%
GB00B63QBR06 Vodafone Call Warrants RF11 18.06.2010 1,50 9,88 1,00 1,38 GBP 0,006 0,01 33,33%
GB00B63CJ417 Vodafone Put Warrants RF18 18.06.2010 1,40 -13,54 1,00 1,38 GBP 0,056 0,06 -28,40%
GB00B445D659 Vodafone Put Warrants R685 18.06.2010 1,20 -7,53 1,00 1,38 GBP 0,005 0,009 -46,15%
GB00B46KWR25 Vodafone Put Warrants R686 18.06.2010 1,00 -0,48 1,00 1,38 GBP 0,001 0,005 0,00%
GB00B51QN356 Vodafone Call Warrants R904 17.12.2010 1,40 4,93 1,00 1,38 GBP 0,129 0,133 12,93%
GB00B53ZD297 Vodafone Call Warrants R905 17.12.2010 1,70 4,53 1,00 1,38 GBP 0,032 0,036 17,24%
GB00B54TXP34 Vodafone Put Warrants R913 17.12.2010 1,10 -3,76 1,00 1,38 GBP 0,059 0,063 -10,29%
GB00B549G545 Vodafone Put Warrants R912 17.12.2010 1,30 -4,06 1,00 1,38 GBP 0,126 0,13 -9,22%
GB00B446BJ73 Vodafone Call Warrants R697 18.06.2010 1,60 0,55 1,00 1,38 GBP 0,001 0,005 0,00%
GB00B45M7X03 Vodafone Call Warrants R696 18.06.2010 1,40 14,87 1,00 1,38 GBP 0,034 0,038 33,33%
GB00B51YTK80 Vodafone Put Warrants RA94 17.06.2011 1,40 -2,91 1,00 1,38 GBP 0,255 0,259 -6,55%
GB00B52Q5L63 Vodafone Call Warrants RC01 17.06.2011 1,70 3,74 1,00 1,38 GBP 0,061 0,065 12,50%
GB00B586YY69 Vodafone Put Warrants RA92 17.06.2011 1,10 -2,89 1,00 1,38 GBP 0,117 0,121 -7,03%
GB00B5314F74 Vodafone Call Warrants RC00 17.09.2010 1,60 6,19 1,00 1,38 GBP 0,029 0,033 24,00%
GB00B52YDZ07 Vodafone Call Warrants RC10 17.09.2010 1,40 6,45 1,00 1,38 GBP 0,101 0,105 17,05%
GB00B5285X44 Vodafone Call Warrants RA99 17.06.2011 1,40 3,86 1,00 1,38 GBP 0,156 0,16 9,72%
GB00B590PS88 Vodafone Put Warrants RA91 17.09.2010 1,40 -5,60 1,00 1,38 GBP 0,121 0,125 -12,14%
GB00B56XNT75 Vodafone Put Warrants RA93 17.09.2010 1,20 -5,17 1,00 1,38 GBP 0,046 0,05 -15,79%
GB00B53LC422 Xstrata Call Warrants RC03 10.09.2010 14,00 5,09 1,00 10,20 GBP 0,20 0,21 10,81%
GB00B50J1L90 Xstrata Put Warrants RA96 18.06.2010 11,00 -7,88 1,00 10,20 GBP 0,97 0,98 -21,05%
GB00B52T6569 Xstrata Call Warrants RC05 18.06.2010 14,00 0,44 1,00 10,20 GBP 0,01 0,02 0,00%
GB00B51YT191 Xstrata Put Warrants RA95 10.09.2010 10,00 -3,99 1,00 10,20 GBP 1,05 1,06 -14,57%
GB00B52LZY49 Xstrata Call Warrants RC02 10.09.2010 11,00 5,08 1,00 10,20 GBP 0,84 0,85 10,46%
GB00B530JZ98 Xstrata Call Warrants RC04 18.06.2010 13,00 4,21 1,00 10,20 GBP 0,01 0,02 0,00%
GB00B3P3BZ67 Xstrata Put Warrants RD92 17.06.2011 8,00 -1,97 1,00 10,20 GBP 1,17 1,18 -8,56%
GB00B3P4RL72 Xstrata Put Warrants RD91 17.06.2011 11,00 -1,75 1,00 10,20 GBP 2,73 2,75 -6,16%
GB00B3N1CP99 Xstrata Call Warrants RE05 17.06.2011 16,00 2,88 1,00 10,20 GBP 0,75 0,76 5,59%
GB00B3PVH527 Xstrata Call Warrants RE01 17.06.2011 13,00 2,86 1,00 10,20 GBP 1,35 1,36 8,84%
as at 03.06.2010
Covered Warrants Covered Warrants offer leveraged exposure to the Underlying.
MARKETS Direct | 01/2010
53
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
Products
ISIN Linked to Product type TIDM
(Product Code)
Expiry Strike Eff. Gear. Parity Ref. Currency Bid Ask % Chg
(daily)
GB00B5N9PL46 Aluminium Call Warrants RC90 30.11.10 2.300, 5,09 100, 2018,80 GBP 0,90 0,91 -2,16%
GB00B5T8P481 Aluminium Call Warrants RC91 30.11.10 2.600, 4,95 100, 2021,00 GBP 0,55 0,56 -1,77%
GB00B5LFP147 Aluminium Put Warrants RD01 30.11.10 1.900, -4,65 100, 2018,10 GBP 1,03 1,04 0,98%
GB00B5TGG279 Aluminium Put Warrants RD02 30.11.10 2.200, -3,57 100, 2019,50 GBP 2,30 2,31 0,44%
GB00B4YBDZ23 Anglo American Call Warrants RA40 18.06.10 30, 10,55 10, 26,50 GBP 0,016 0,021 5,71%
GB00B4ZZ3867 Anglo American Put Warrants RA45 18.06.10 25, -10,70 10, 26,50 GBP 0,058 0,063 -30,86%
GB00B4XTLK88 Anglo American Call Warrants RA41 17.12.10 27, 3,85 10, 26,60 GBP 0,368 0,373 9,13%
GB00B4Y06947 Anglo American Call Warrants RA42 17.12.10 31, 4,25 10, 26,50 GBP 0,208 0,213 10,50%
GB00B3ZDZX27 Anglo American Call Warrants R704 18.06.10 20, 3,89 10, 26,50 GBP 0,669 0,674 10,53%
GB00B4T6S027 Anglo American Call Warrants R751 18.06.10 22, 5,22 10, 26,60 GBP 0,476 0,481 13,25%
GB00B4S6QS76 Anglo American Put Warrants R747 18.06.10 18, -1,77 10, 26,50 GBP 0,001 0,006 -36,36%
GB00B4T4DR80 Anglo American Call Warrants R750 18.06.10 27, 12,02 10, 26,60 GBP 0,095 0,10 22,64%
GB00B3ZWMJ43 Anglo American Call Warrants R705 18.06.10 25, 8,91 10, 26,60 GBP 0,219 0,224 20,05%
GB00B4024451 Anglo American Put Warrants R715 18.06.10 15, -0,03 10, 26,50 GBP 0,001 0,006 0,00%
GB00B598MC57 Anglo American Put Warrants RG42 17.09.10 27, -4,21 10, 26,60 GBP 0,302 0,307 -10,83%
GB00B53H2K64 Anglo American Put Warrants RG46 17.12.10 20, -2,99 10, 26,50 GBP 0,139 0,144 -9,00%
GB00B52VXP16 Anglo American Call Warrants RG36 17.09.10 28, 5,37 10, 26,50 GBP 0,216 0,221 12,92%
GB00B57L0G65 Anglo American Call Warrants RG38 17.09.10 34, 5,40 10, 26,50 GBP 0,055 0,06 7,48%
GB00B57CD040 Anglo American Put Warrants RG45 17.12.10 24, -3,05 10, 26,50 GBP 0,268 0,273 -8,46%
GB00B58PRS88 Anglo American Call Warrants RG41 17.12.10 36, 4,19 10, 26,50 GBP 0,096 0,101 7,65%
GB00B56TB248 Anglo American Put Warrants RG43 17.09.10 23, -4,28 10, 26,50 GBP 0,141 0,146 -13,81%
GB00B58J0X66 Anglo American Call Warrants RG37 17.09.10 31, 5,66 10, 26,50 GBP 0,112 0,117 12,81%
GB00B56RWV45 Anglo American Call Warrants RG39 17.12.10 28, 3,98 10, 26,50 GBP 0,323 0,328 9,78%
GB00B584GM26 Anglo American Call Warrants RG40 17.12.10 32, 4,28 10, 26,60 GBP 0,177 0,182 9,79%
GB00B51WNL12 Anglo American Put Warrants RG44 17.12.10 27, -2,98 10, 26,60 GBP 0,405 0,41 -7,49%
GB00B58SVV84 AstraZeneca Put Warrants R953 17.12.10 28, -4,18 10, 29,78 GBP 0,255 0,26 -5,85%
GB00B58SV962 AstraZeneca Call Warrants R944 17.12.10 29, 4,85 10, 29,76 GBP 0,344 0,349 5,16%
GB00B58SVX09 AstraZeneca Put Warrants R951 18.06.10 26, -9,30 10, 29,78 GBP 0,014 0,019 -23,26%
GB00B58ST818 AstraZeneca Call Warrants R943 18.06.10 30, 15,76 10, 29,76 GBP 0,082 0,087 13,42%
GB00B58T0H08 AstraZeneca Put Warrants R954 17.12.10 25, -3,94 10, 29,76 GBP 0,149 0,154 -7,34%
GB00B58SZJ45 AstraZeneca Put Warrants R952 18.06.10 24, -5,79 10, 29,76 GBP 0,006 0,011 -19,05%
GB00B58ST032 AstraZeneca Call Warrants R945 17.12.10 32, 5,13 10, 29,76 GBP 0,206 0,211 6,11%
GB00B57YZ716 AstraZeneca Call Warrants R942 18.06.10 28, 11,10 10, 29,78 GBP 0,214 0,219 11,31%
GB00B5MR8P47 AstraZeneca Call Warrants RD17 18.06.10 34, 3,41 10, 29,76 GBP 0,002 0,007 -18,18%
GB00B5T4H065 AstraZeneca Put Warrants RD27 17.09.10 27, -5,37 10, 29,76 GBP 0,15 0,155 -7,85%
GB00B5MGRY34 AstraZeneca Call Warrants RD19 17.09.10 33, 6,42 10, 29,76 GBP 0,10 0,105 8,47%
GB00B5KTWW77 AstraZeneca Call Warrants RD20 17.09.10 36, 5,42 10, 29,76 GBP 0,037 0,042 8,22%
GB00B5WBLZ73 AstraZeneca Call Warrants RD16 18.06.10 32, 12,42 10, 29,76 GBP 0,017 0,022 0,00%
GB00B5TPVL84 AstraZeneca Call Warrants RD21 17.12.10 35, 5,14 10, 29,76 GBP 0,103 0,108 3,94%
GB00B5N4M962 AstraZeneca Put Warrants RD28 17.12.10 31, -4,15 10, 29,76 GBP 0,402 0,407 -5,38%
GB00B5NQFZ91 AstraZeneca Put Warrants RD26 17.09.10 30, -5,52 10, 29,78 GBP 0,276 0,281 -6,70%
GB00B5NXWD71 AstraZeneca Call Warrants RD18 17.09.10 30, 6,41 10, 29,78 GBP 0,217 0,222 7,33%
GB00B5V1PW36 AstraZeneca Put Warrants RD25 18.06.10 28, -12,72 10, 29,76 GBP 0,037 0,042 -26,17%
GB00B54GQK09 Barclays Put Warrants RA58 17.09.10 3, -3,18 1, 3,10 GBP 0,40 0,405 -12,40%
GB00B4ZG4G40 Barclays Call Warrants RA65 17.09.10 3,5 4,82 1, 3,00 GBP 0,204 0,209 7,83%
GB00B4ZVHC62 Barclays Put Warrants RA59 17.09.10 2, -2,72 1, 3,00 GBP 0,13 0,135 -18,96%
GB00B4ZW7B80 Barclays Call Warrants RA66 17.09.10 4, 5,00 1, 3,00 GBP 0,069 0,074 5,93%
GB00B4ZHG277 Barclays Call Warrants RA68 17.09.10 4,5 3,76 1, 3,10 GBP 0,015 0,02 0,00%
GB00B4W5LB81 Barclays Call Warrants R777 17.12.10 4, 3,95 1, 3,10 GBP 0,16 0,165 13,24%
GB00B4T0WP75 Barclays Call Warrants R775 18.06.10 5, 0,01 1, 3,00 GBP 0,001 0,011 0,00%
GB00B4WGX156 Barclays Call Warrants R776 18.06.10 5,5 0,01 1, 3,10 GBP 0,001 0,011 0,00%
GB00B4T07523 Barclays Call Warrants R779 17.12.10 6, 0,05 1, 3,00 GBP 0,001 0,006 0,00%
GB00B4R7PQ21 Barclays Call Warrants R778 17.12.10 6, 3,64 1, 3,10 GBP 0,008 0,013 23,53%
GB00B4VR9V18 Barclays Call Warrants R774 18.06.10 4, 0,82 1, 3,00 GBP 0,001 0,011 0,00%
GB00B4W43R55 Barclays Put Warrants R785 18.06.10 3,5 -5,83 1, 3,10 GBP 0,47 0,48 -17,39%
GB00B4VRLN71 Barclays Put Warrants R788 17.12.10 4, -2,13 1, 3,00 GBP 1,119 1,124 -6,15%
GB00B4VGZ096 Barclays Put Warrants R786 18.06.10 4, -3,17 1, 3,00 GBP 0,95 0,96 -8,61%
GB00B4WGW745 Barclays Put Warrants R787 17.12.10 3, -2,32 1, 3,10 GBP 0,536 0,541 -8,96%
GB00B53WN863 Barclays Call Warrants R561 18.06.10 3,5 8,47 1, 3,00 GBP 0,021 0,031 -7,14%
GB00B53WMJ07 Barclays Call Warrants R560 18.06.10 2,5 4,38 1, 3,10 GBP 0,601 0,611 15,21%
GB00B3NMYN49 Barclays Call Warrants R619 18.06.10 4,5 0,01 1, 3,10 GBP 0,001 0,011 0,00%
GB00B3NQ6T65 Barclays Put Warrants R629 18.06.10 2, -3,55 1, 3,00 GBP 0,011 0,021 -15,79%
GB00B3KC9G55 Barclays Put Warrants R628 18.06.10 2,5 -6,21 1, 3,10 GBP 0,05 0,06 -23,61%
GB00B3NNNC93 Barclays Put Warrants R627 18.06.10 3, -8,76 1, 3,10 GBP 0,136 0,146 -31,55%
GB00B55XT905 Barclays Call Warrants RG76 17.09.10 2,75 3,44 1, 3,00 GBP 0,60 0,605
GB00B56PPT73 Barclays Put Warrants RG86 17.12.10 2,75 -2,29 1, 3,10 GBP 0,432 0,437
GB00B56TKJ43 Barclays Put Warrants RG85 17.12.10 2,5 -2,25 1, 3,10 GBP 0,342 0,347
GB00B5848S25 Barclays Call Warrants RG77 17.09.10 3, 3,94 1, 3,10 GBP 0,442 0,447
GB00B5V4CS75 Barclays Put Warrants RG83 17.09.10 2,5 -3,01 1, 3,10 GBP 0,233 0,238
GB00B58G9J61 Barclays Call Warrants RG75 17.09.10 2,5 2,99 1, 3,10 GBP 0,775 0,78
GB00B521QY18 Barclays Call Warrants RG79 17.12.10 2,75 2,84 1, 3,10 GBP 0,716 0,721
GB00B57FWR36 Barclays Call Warrants RG82 17.06.11 3,5 2,89 1, 3,10 GBP 0,47 0,475
GB00B582NT22 Barclays Put Warrants RG84 17.09.10 2,75 -3,11 1, 3,10 GBP 0,307 0,312
GB00B5964V28 Barclays Call Warrants RG81 17.06.11 2,75 2,39 1, 3,00 GBP 0,849 0,854
GB00B5LQJ261 Barclays Call Warrants RG78 17.12.10 2,5 2,57 1, 3,10 GBP 0,876 0,881
GB00B5899950 Barclays Call Warrants RG80 17.06.11 2,5 2,22 1, 3,00 GBP 0,999 1,004
GB00B3PVW245 Barclays Call Warrants RF30 17.06.11 4,5 3,11 1, 3,00 GBP 0,147 0,152 7,17%
GB00B3K69B24 Barclays Call Warrants RF32 17.06.11 6, 0,51 1, 3,00 GBP 0,004 0,014 28,57%
GB00B3NFR672 Barclays Call Warrants RF27 17.12.10 3, 3,11 1, 3,10 GBP 0,571 0,576 7,90%
GB00B3KYDY73 Barclays Call Warrants RF29 17.12.10 4,5 3,77 1, 3,10 GBP 0,058 0,063 19,80%
GB00B3N78263 Barclays Put Warrants RF42 17.06.11 2,1 -1,62 1, 3,00 GBP 0,346 0,351 -12,11%
GB00B3N5QS21 Barclays Put Warrants RF41 17.06.11 4, -1,71 1, 3,10 GBP 1,249 1,254 -5,55%
as at 18.04.2010
Covered Warrants Covered Warrants offer leveraged exposure to the Underlying.
MARKETS Direct | 01/2010
54
Products
ISIN Linked to Product type TIDM
(Product Code)
Expiry Strike Eff. Gear. Parity Ref. Currency Bid Ask % Chg
(daily)
GB00B3PT9949 Barclays Put Warrants RF40 17.12.10 4,5 -1,83 1, 3,00 GBP 1,51 1,52 -5,16%
GB00B3N6YZ88 Barclays Call Warrants RF28 17.12.10 3,5 3,63 1, 3,00 GBP 0,331 0,336 10,61%
GB00B3M4JK39 Barclays Call Warrants RF31 17.06.11 3, 2,56 1, 3,10 GBP 0,71 0,715 4,55%
GB00B3N1VM99 Barclays Put Warrants RF39 17.12.10 3,5 -2,29 1, 3,10 GBP 0,793 0,798 -7,23%
GB00B46GPY88 BHP Billiton Put Warrants R689 18.06.10 12, -0,15 10, 18,90 GBP 0,001 0,006 0,00%
GB00B46MHX99 BHP Billiton Put Warrants R688 18.06.10 15, -4,79 10, 18,90 GBP 0,005 0,01 -28,57%
GB00B45D4T84 BHP Billiton Call Warrants R700 18.06.10 16, 5,81 10, 18,91 GBP 0,301 0,306 10,97%
GB00B446BL95 BHP Billiton Call Warrants R699 18.06.10 14, 3,76 10, 18,91 GBP 0,492 0,497 6,92%
GB00B46JF811 BHP Billiton Call Warrants R701 18.06.10 20, 12,69 10, 18,90 GBP 0,03 0,035 3,17%
GB00B4ZG2S22 BHP Billiton Call Warrants R867 17.12.10 21, 4,41 10, 18,91 GBP 0,152 0,157 6,19%
GB00B4Z6ZG17 BHP Billiton Call Warrants R866 17.12.10 19, 4,12 10, 18,91 GBP 0,238 0,243 7,13%
GB00B4ZLWD23 BHP Billiton Call Warrants R863 18.06.10 22, 4,81 10, 18,90 GBP 0,003 0,008 0,00%
GB00B4ZHK709 BHP Billiton Call Warrants R865 17.12.10 17, 3,66 10, 18,91 GBP 0,347 0,352 5,75%
GB00B4YYJB93 BHP Billiton Call Warrants R868 17.12.10 24, 4,30 10, 18,90 GBP 0,07 0,075 5,84%
GB00B4ZFX425 BHP Billiton Call Warrants R864 18.06.10 24, 0,19 10, 18,90 GBP 0,001 0,006 0,00%
GB00B501PT10 BHP Billiton Call Warrants R862 18.06.10 18, 9,91 10, 18,91 GBP 0,133 0,138 15,32%
GB00B4Z71L12 BHP Billiton Put Warrants R872 18.06.10 17, -9,58 10, 18,90 GBP 0,021 0,026 -29,85%
GB00B4ZMFY77 BHP Billiton Put Warrants R874 17.12.10 16, -3,25 10, 18,90 GBP 0,141 0,146 -8,31%
GB00B5006J57 BHP Billiton Put Warrants R875 17.12.10 14, -3,09 10, 18,90 GBP 0,085 0,09 -10,26%
GB00B4YSXL91 BHP Billiton Put Warrants R873 17.12.10 18, -3,29 10, 18,90 GBP 0,219 0,224 -7,52%
GB00B4ZW5Q93 BHP Billiton Call Warrants RA69 17.09.10 22, 5,67 10, 18,91 GBP 0,06 0,065 8,70%
GB00B4YXQQ07 BHP Billiton Put Warrants RA60 17.09.10 18, -4,57 10, 18,90 GBP 0,156 0,161 -10,20%
GB00B4Z9P821 BHP Billiton Put Warrants RA61 17.09.10 16, -4,42 10, 18,90 GBP 0,087 0,092 -10,95%
GB00B53XDZ64 BHP Billiton Call Warrants RA67 17.09.10 20, 5,70 10, 18,90 GBP 0,125 0,13 9,44%
GB00B5MVRJ34 BHP Billiton Call Warrants RC79 17.09.10 24, 5,04 10, 18,90 GBP 0,026 0,031 0,00%
GB00B5LDMJ57 BHP Billiton Call Warrants RC76 17.06.11 20, 3,26 10, 18,90 GBP 0,276 0,281 5,29%
GB00B5730627 BHP Billiton Call Warrants RC78 17.06.11 30, 2,96 10, 18,90 GBP 0,046 0,051 0,00%
GB00B56V5M89 BHP Billiton Call Warrants RC77 17.06.11 25, 3,35 10, 18,90 GBP 0,119 0,124 3,40%
GB00B5LD8420 BHP Billiton Put Warrants RC85 17.06.11 15, -2,32 10, 18,90 GBP 0,188 0,193 -6,39%
GB00B5L39J46 BHP Billiton Put Warrants RC84 17.06.11 20, -2,29 10, 18,90 GBP 0,419 0,424 -5,17%
GB00B59N0T39 Bovespa Index Quanto Call Warrants R570 14.12.10 60.000, 3,79 10.000, 63133,40 GBP 1,12 1,20 1,75%
GB00B59N0B54 Bovespa Index Quanto Call Warrants R568 15.06.10 55.000, 6,64 10.000, 63133,40 GBP 0,85 0,89 3,57%
GB00B59G0Q93 Bovespa Index Quanto Call Warrants R569 15.06.10 65.000, 16,98 10.000, 63133,40 GBP 0,10 0,12 10,00%
GB00B59G1G60 Bovespa Index Quanto Call Warrants R571 14.12.10 70.000, 4,83 10.000, 63133,40 GBP 0,57 0,60 1,74%
GB00B3T4JP13 Bovespa Index Quanto Call Warrants R462 15.06.10 50.000, 4,50 10.000, 63133,40 GBP 1,33 1,39 3,03%
GB00B3T4J402 Bovespa Index Quanto Call Warrants R461 15.06.10 47.000, 3,68 10.000, 63133,40 GBP 1,62 1,72 2,45%
GB00B46MHF18 BP Put Warrants R682 18.06.10 4,5 -7,27 1, 4,40 GBP 0,303 0,313 -27,01%
GB00B445B943 BP Put Warrants R681 18.06.10 5,5 -3,82 1, 4,40 GBP 1,09 1,11 -12,21%
GB00B584Y735 BP Put Warrants R946 17.12.10 5, -2,52 1, 4,40 GBP 1,086 1,096 -9,69%
GB00B5700638 BP Call Warrants R936 17.12.10 6, 3,89 1, 4,40 GBP 0,169 0,179 20,00%
GB00B58SVB88 BP Put Warrants R947 17.12.10 6, -2,02 1, 4,40 GBP 1,84 1,86 -6,57%
GB00B55TCV14 BP Call Warrants R937 17.12.10 8, 2,22 1, 4,40 GBP 0,017 0,027 15,79%
GB00B56ZWP27 BP Call Warrants R935 18.06.10 7, 0,09 1, 4,40 GBP 0,001 0,011 0,00%
GB00B45M7C99 BP Call Warrants R690 18.06.10 5, 9,34 1, 4,40 GBP 0,08 0,09 13,33%
GB00B446B750 BP Call Warrants R691 18.06.10 6, 3,13 1, 4,40 GBP 0,005 0,015 0,00%
GB00B3N4X888 BP Put Warrants RD95 18.06.10 6, -2,76 1, 4,40 GBP 1,56 1,58 -9,77%
GB00B3MJ7484 BP Put Warrants RD94 17.12.10 5,5 -2,27 1, 4,40 GBP 1,44 1,46 -7,64%
GB00B3MLB866 BP Call Warrants RE03 18.06.10 6,5 0,68 1, 4,40 GBP 0,001 0,011 0,00%
GB00B3MKBZ03 BP Call Warrants RE02 17.06.11 8, 2,31 1, 4,40 GBP 0,04 0,05 50,00%
GB00B3PT8L94 BP Call Warrants RE04 17.12.10 7, 3,32 1, 4,40 GBP 0,056 0,066 22,00%
GB00B3N18B72 BP Put Warrants RD93 17.06.11 4, -2,30 1, 4,40 GBP 0,705 0,715 -8,15%
GB00B5LHPD23 BP Put Warrants RC48 17.06.11 4,5 -2,23 1, 4,40 GBP 0,969 0,979 -7,33%
GB00B5KWCY82 BP Call Warrants RC43 17.06.11 7, 2,92 1, 4,40 GBP 0,105 0,115 35,80%
GB00B5VMXG62 BP Call Warrants RC44 17.09.10 8, 1,41 1, 4,40 GBP 0,005 0,015 0,00%
GB00B5KRX171 BP Call Warrants RC42 17.06.11 6, 3,86 1, 4,40 GBP 0,207 0,217 18,44%
GB00B5MTN331 BP Put Warrants RC47 17.09.10 5, -3,19 1, 4,40 GBP 0,911 0,921 -12,93%
GB00B5VDNW57 BP Put Warrants RC46 17.06.11 5, -2,11 1, 4,40 GBP 1,277 1,287 -6,42%
GB00B5MQJN68 BP Call Warrants RC41 17.09.10 7, 3,21 1, 4,40 GBP 0,021 0,031 8,33%
GB00B5W6Y425 BP Put Warrants RC45 17.09.10 5,5 -2,75 1, 4,40 GBP 1,28 1,30 -9,79%
GB00B4ZRF757 BP Put Warrants RA62 17.09.10 4,5 -3,47 1, 4,40 GBP 0,614 0,624 -15,09%
GB00B54FWR62 BP Call Warrants RA71 17.09.10 6, 4,64 1, 4,40 GBP 0,086 0,096 12,35%
GB00B4XLK748 Brent Crude Oil Future Call Warrants RA01 10.11.10 130, 2,84 10, 77,90 GBP 0,03 0,05 -20,00%
GB00B4Z1SC31 Brent Crude Oil Future Put Warrants RA19 10.11.10 70, -3,90 10, 78,00 GBP 0,38 0,40 -2,50%
GB00B4Z0QF98 Brent Crude Oil Future Put Warrants RA18 10.11.10 90, -3,29 10, 78,00 GBP 1,11 1,13 -0,88%
GB00B4WGQT49 Brent Crude Oil Future Call Warrants RA00 10.11.10 110, 4,35 10, 78,00 GBP 0,08 0,10 -10,00%
GB00B4ZB4582 Brent Crude Oil Future Call Warrants RA02 10.11.10 150, 1,87 10, 77,90 GBP 0,02 0,04 0,00%
GB00B60TXG52 Brent Crude Oil Future Call Warrants R596 10.11.10 100, 4,97 10, 78,00 GBP 0,15 0,17 -11,11%
GB00B60TXW11 Brent Crude Oil Future Put Warrants R603 10.11.10 60, -3,70 10, 78,00 GBP 0,19 0,21 -4,76%
GB00B613F608 Brent Crude Oil Future Call Warrants R597 10.11.10 120, 3,34 10, 78,00 GBP 0,05 0,07 -14,29%
GB00B60YZ538 Brent Crude Oil Future Put Warrants R602 10.11.10 80, -3,78 10, 78,00 GBP 0,69 0,71 0,00%
GB00B3V6FF70 Brent Crude Oil Future Call Warrants R491 10.11.10 85, 5,02 10, 78,00 GBP 0,40 0,42 -4,65%
GB00B3V6FC40 Brent Crude Oil Future Call Warrants R490 10.11.10 75, 4,43 10, 78,00 GBP 0,71 0,73 -2,70%
GB00B55TJ763 British Airways Call Warrants R939 18.06.10 2,75 0,04 1, 2,10 GBP 0,001 0,011 0,00%
GB00B57Z0130 British Airways Put Warrants R950 17.12.10 2, -2,78 1, 2,10 GBP 0,309 0,319 -5,99%
GB00B55THY99 British Airways Call Warrants R938 18.06.10 2,25 9,42 1, 2,10 GBP 0,021 0,031 4,00%
GB00B58SXH80 British Airways Put Warrants R949 18.06.10 2,25 -7,93 1, 2,10 GBP 0,21 0,22 -16,02%
GB00B56S8V99 British Airways Call Warrants R940 17.12.10 2,5 3,75 1, 2,10 GBP 0,127 0,137 20,00%
GB00B56S9495 British Airways Call Warrants R941 17.12.10 3, 3,30 1, 2,10 GBP 0,053 0,063 41,46%
GB00B58SXF66 British Airways Put Warrants R948 18.06.10 2, -10,49 1, 2,10 GBP 0,058 0,068 -25,88%
GB00B4R5TB91 British Airways Call Warrants RF77 17.06.11 3,5 2,55 1, 2,10 GBP 0,075 0,085 50,94%
GB00B4JPT731 British Airways Call Warrants RF67 17.12.10 2,75 3,58 1, 2,10 GBP 0,082 0,092 27,94%
GB00B4N6W512 British Airways Call Warrants RF69 17.06.11 2,75 2,85 1, 2,10 GBP 0,171 0,181 22,22%
as at 18.04.2010
Covered Warrants Covered Warrants offer leveraged exposure to the Underlying.
MARKETS Direct | 01/2010
55
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Past performance is no indication or guarantee of future performance.
Products
ISIN Linked to Product type TIDM
(Product Code)
Expiry Strike Eff. Gear. Parity Ref. Currency Bid Ask % Chg
(daily)
GB00B45D4J86 Xstrata Call Warrants R694 18.06.2010 10,00 10,76 1,00 10,20 GBP 0,57 0,58 32,18%
GB00B4467775 Xstrata Call Warrants R693 18.06.2010 12,00 9,66 1,00 10,20 GBP 0,05 0,06 57,14%
GB00B4T2SF55 Xstrata Call Warrants R843 17.12.2010 12,00 3,81 1,00 10,20 GBP 0,99 1,00 8,74%
GB00B4T3DJ73 Xstrata Call Warrants R842 17.12.2010 10,00 3,42 1,00 10,20 GBP 1,76 1,77 9,97%
GB00B4VJ4455 Xstrata Call Warrants R844 17.12.2010 14,00 3,86 1,00 10,20 GBP 0,54 0,55 10,10%
GB00B4T2VQ73 Xstrata Put Warrants R850 17.12.2010 9,00 -2,83 1,00 10,20 GBP 1,05 1,06 -10,21%
GB00B4T3S362 Xstrata Put Warrants R851 17.12.2010 7,00 -2,89 1,00 10,20 GBP 0,40 0,41 -12,90%
GB00B4T2TP29 Xstrata Put Warrants R848 18.06.2010 9,00 -10,31 1,00 10,20 GBP 0,11 0,12 -41,03%
GB00B4VBTH95 Xstrata Put Warrants R849 18.06.2010 8,00 -7,46 1,00 10,20 GBP 0,03 0,04 -46,15%
GB00B467P418 Xstrata Put Warrants R683 18.06.2010 6,00 -0,03 1,00 10,20 GBP 0,01 0,02 0,00%
GB00B53WNM01 Xstrata Call Warrants R564 18.06.2010 8,00 4,36 1,00 10,20 GBP 2,25 2,27 13,85%
GB00B53WPL34 Xstrata Put Warrants R567 18.06.2010 7,00 -1,60 1,00 10,20 GBP 0,01 0,02 0,00%
GB00B65BQV24 Xstrata Call Warrants RF07 17.12.2010 13,00 3,88 1,00 10,20 GBP 0,73 0,74 7,30%
GB00B65BRJ78 Xstrata Call Warrants RF08 18.03.2011 14,00 3,29 1,00 10,20 GBP 0,84 0,85 9,03%
GB00B63PCK78 Xstrata Put Warrants RF20 18.06.2010 12,00 -5,24 1,00 10,20 GBP 1,82 1,84 -14,49%
GB00B63PQ059 Xstrata Put Warrants RF25 17.06.2011 11,50 -1,70 10,20 GBP 3,05 3,07 -5,26%
GB00B65BQC35 Xstrata Call Warrants RF10 17.06.2011 14,00 2,89 1,00 10,20 GBP 1,11 1,12 6,70%
GB00B63P5T72 Xstrata Put Warrants RF22 18.03.2011 10,00 -2,17 1,00 10,20 GBP 1,85 1,86 -7,71%
GB00B63D4K52 Xstrata Call Warrants RF09 18.03.2011 12,50 3,23 1,00 10,20 GBP 1,20 1,21 8,07%
GB00B63FMW90 Xstrata Put Warrants RF24 17.06.2011 10,00 -1,84 1,00 10,20 GBP 2,14 2,15 -6,13%
GB00B667NQ31 Xstrata Put Warrants RF23 18.03.2011 12,00 -1,91 1,00 10,20 GBP 3,07 3,09 -6,10%
GB00B65C7124 Xstrata Put Warrants RF21 17.12.2010 11,00 -2,52 1,00 10,20 GBP 2,09 2,11 -9,09%
GB00B65ZGS15 Xstrata Call Warrants RF06 18.03.2011 11,50 3,14 1,00 10,20 GBP 1,51 1,52 9,39%
ISIN Underlying Product type TIDM Expiry Par. Ref. Cur. Bid Ask % Chg
(daily)
GB00B4NQ5Z25 DJES 50 Europe Autocall RB62 11.05.2015 1, 2652,90 GBP 98,70 99,70 0,61%
GB00B50PH089 FTSE 100 UK Autocall 2 RB72 26.05.2015 1, 5239,20 GBP 102,70 103,70 0,68%
GB00B3Y4W804 FTSE 100 UK Autocallable RB04 23.07.2012 1, 5237,40 GBP 111,19 112,19 0,35%
GB00B4M79H64 FTSE 100 UK Autocallable Accelerator RB06 10.09.2011 1, 5237,40 GBP 106,73 107,73 0,54%
Auto Call
ISIN Name Underlying TIDM Expiry Strike Ref. Cur. Bid Ask % Chg
(daily)
GB00B59N0X74 Gold Bullion Tracker Certifcate, USD Gold RB80 17.06.2019 937,25 1218,30 USD 129,31 129,56 -0,30%
GB00B59N1890 Gold Bullion Tracker Certifcate, GBP Hedged Gold RB81 17.06.2019 937,25 129,00 GBP 129,40 129,66 0,25%
GB00B59N1H81 Gold Bullion Tracker Certifcate, EUR Hedged Gold RB82 17.06.2019 937,25 129,00 EUR 129,25 129,51 0,24%
GB00B46DN453 Gold Bullion Tracker Certifcate, EUR Hedged Gold RB09 15.11.2019 1.140, 1091,90 EUR 106,91 107,55 0,20%
GB00B4LZCF09 Gold Bugs Tracker Gold Bugs Index RB11 02.12.2019 500,55 459,33 GBP 103,96 105,51 -0,09%
GB00B436SJ76 Emerging Market Tracker MSCI Emerging Market EUR Price Index RB08 20.11.2019 313,00 EUR 123,34 124,34 2,44%
GB00B4XTW837 Emerging Market Tracker GBP MSCI Emerging Market Index RB15 16.12.2019 975,01 926,00 GBP 106,06 107,06 1,51%
GB00B5VDGW64 Frontier Markets Tracker MSCI Frontier Markets Net TR USD Index RB18 20.01.2020 548,441 554,00 GBP 111,572 112,574 0,14%
GB00B59N1Q72 RICI
Enhanced
SM
- Agri.ER Index T.Certi, USD RICI Enhanced Agric. Excess Return Index RB83 17.06.2019 905,88 837,00 USD 91,77 92,33 0,05%
GB00B59N2971 RICI
Enhanced
SM
- Agric. ER Index T. Certi EUR Hedged RICI Enhanced Agric. Excess Return Index RB85 17.06.2019 905,88 91,00 EUR 90,95 91,49 0,07%
Trackers
ISIN Name Underlying TIDM Expiry Strike Ref. Cur. Bid Ask % Chg
(daily)
GB00B54X1L77 US Accelerated Tracker DJ Industrial Average RB02 17.06.2014 8.497,18 10278,20 GBP 124,70 125,20 0,64%
GB00B4XJML62 Europe Accelerated Tracker DJES 50 RB12 06.12.2013 2.871,22 2657,40 EUR 93,14 94,14 0,79%
GB00B41DLC45 UK Accelerated Tracker 2 FTSE 100 RB05 11.09.2014 4.987,68 5241,70 GBP 102,90 103,40 2,18%
GB00B40PNB41 UK Accelerated Tracker FTSE 100 RB01 28.04.2014 4.096,4 5244,70 GBP 134,90 135,40 2,27%
GB00B5MHYJ09 UK Accelerated Tracker 3 FTSE 100 RB19 12.01.2015 5.538,07 5245,20 GBP 93,60 94,10 2,40%
GB00B59SRD16 South Africa Accelerated Tracker FTSE/JSE TOP 40 RB42 08.04.2013 26.045,83 24422,90 GBP 93,18 94,18 1,01%
GB00B67JNK20 Gold Super Tracker Gold RB92 25.11.2014 1217,50 GBP 155,67 156,67 0,26%
GB00B54W1D61 China Accelerated Tracker HSCEI RB03 17.06.2013 10.700,15 11383,10 GBP 105,70 106,70 0,47%
GB00B4WZ6467 Ireland Accelerated Tracker ISEQ 20 RB14 08.12.2011 462,78 482,20 EUR 98,51 99,51 1,94%
GB00B61FBF70 China Bear Super Tracker iShares FTSE/Xinhua China 25 Index Fund RB94 05.02.2016 37,57 39,60 GBP 99,00 100,00 -0,53%
Accelerated Trackers
as at 03.06.2010
Covered Warrants Covered Warrants offer leveraged exposure to the Underlying.
as at 03.06.2010
as at 03.06.2010
as at 03.06.2010
MARKETS Direct | 01/2010
56
Products
Underlying Product type TIDM Expiry Strike Eff. Gear. Par. Ref. Cur. Bid Ask % Chg
(daily)
Royal Bond Listed Bond RB53 26.08.2015 1 1 GBP 103,4 104,15 0,00%
Royal Bond Listed Bond RB51 03.02.2020 GBP 100,55 101,3 0,00%
Bonds
Emerging Markets
Gold
as at 03.06.2010
Name Underlying TIDM Expiry Strike Cur.
Gold Bullion Tracker Certifcate, USD Gold RB80 17.06.2019 937,25 USD
Gold Bullion Tracker Certifcate, GBP Hedged Gold RB81 17.06.2019 937,25 GBP
Gold Bullion Tracker Certifcate, EUR Hedged Gold RB82 17.06.2019 937,25 EUR
Gold Bullion Tracker Certifcate, EUR Hedged Gold RB09 15.11.2019 1140,00 EUR
Gold Super Tracker Gold RB92 25.11.2014 GBP
Covered Warrants Gold n/a Various Various GBP Gold N/A Various Various GBP
Name Underlying TIDM Expiry Strike Cur.
Emerging Market Tracker MSCI Emerging Market EUR Price Index RB08 20.11.2019 EUR
Emerging Market Tracker GBP MSCI Emerging Market Index RB15 16.12.2019 975,01 GBP
Frontier Markets Tracker MSCI Frontier Markets Net TR USD Index RB18 20.01.2020 548,441 GBP
South Africa Accelerated Tracker FTSE/JSE TOP 40 RB42 08.04.2013 26.045,83 GBP
China Accelerated Tracker HSCEI RB03 17.06.2013 10.700,15 GBP
China Bear Super Tracker iShares FTSE/Xinhua China 25 Index Fund RB94 05.02.2016 GBP
Russia Accelerated Tracker RDX (EU) RB07 02.10.2013 1.118,02 GBP
Bovespa Index Various n/a Various GBP GBP
Nikkei 225 Index Various n/a Various GBP GBP
HSCEI Index Various n/a Various GBP GBP
FTSE/JSE TOP 40 Index Various n/a Various GBP GBP
as at 03.06.2010
as at 03.06.2010
MARKETS Direct | 01/2010
57
Further information on the risks associated with any of the products mentioned in this magazine can be found online at www.rbs.co.uk/markets
and in the prospectus relating to the relevant product which is available to the public in accordance with applicable legal requirements.
Fine Gold
Past performance is no indication or guarantee of future performance.
RBS Markets UK
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MARKETS Direct | 01/2010
58
Disclaimer
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This magazine contains articles and information that may refer to products and services that are issued and promoted by The Royal Bank of Scotland plc (RBS). RBS is an authorised agent of
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RBS Chief UK Economist, Ross Walker discusses the true implications of the UK election. Page 16
The magazine for the self-directed investor
01/2010
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Page 10
Indices
Emerging Markets on the
fast-track to recovery Emerging market shares have risen sharply since 2009
Page 18
Currencies
Currencies - potential trends for 2010
Will the pound become the target of speculation? Page 30
Commodities
After the
gold peak
Whats really driving the gold price higher? Page 25
Product information