2009 Structured Product Forum. FX Strategies

Transcription

1 2009 Structured Product Forum FX Strategies 1

2 Structured Product Industry in 2009 Survive! Be informed Back to basics Work hard Stand out Develop new skills 2

3 and beyond Prosper! 3

4 RBS FX Credentials Best of Breed

5 Interesting Facts about the FX Market The largest - it conducts more than three times the aggregate volume of the United States Equity and Treasury markets combined Around USD 2 Trillion daily turnover The fastest - spreads are closely observed and profits and losses can be realised in a blink Low Correlation to other asset classes - investing in FX linked products will increase the diversification of your portfolio Correlation with other major classes from Jan 2000 to June 2009 EURUSD MXWO RIEHEHER JPEIGLBL EURUSD / MXWO / RIEHEHER / JPEIGLBL / Source: Bloomberg Volume of traded FX Futures & Options Unregulated and 96% Over-The-Counter, although individual countries can (and do) impose restrictions on banks / corporates / individuals situated within its borders No opening and closing bell - global, around the clock, 6 days per week Birthplace for many derivatives and structured products Source: cmegroup 5

6 Comparison With Other Asset Classes Similarities Differences 1) Prices fluctuate according to supply & demand 2) Derivatives such as options, futures and swaps exist 3) Market psychology and various factors such as state of economy, interest rates levels affect prices 4) Traded by many parties 1) Not only used for investment purposes (80% of participants are not trying to make money!) 2) Long trading hours (24 hours a day except weekend) 3) No centrally cleared market 4) Closest to ideal perfect competition (narrowest spread) 6

7 Factors Affecting FX Levels Interest Rate Money Supply Government Budgets Political Condition FX Levels Speculation & Markets Balance of Trade Economic Growth Inflation 7

8 How Do Professional Investors Trade FX? Spot - Cash settle the next Business day Swap - Largest turnover by Volume Forward - Hedging purpose & no specific formats FX Trade Forms Option - FX is the Most Liquid option market Futures - Average contract length is 3 months ETF - Usually track the performance of USD 8

9 FX Facts On the spot market, according to the BIS study, the most heavily traded currency pairs were: EUR/USD: 27% USD/JPY: 13% GBP/USD: 12% USD was involved in 86.3% of transactions, followed by the Euro (37.0%), the Yen (17.0%), and Sterling (15.0%) (see table on the right and note that volume percentages should add up to 200%: 100% for all the sellers and 100% for all the buyers) The number of transactions in the currencies of commodity-producing countries, such as AUD and CAD, have also increased Source: Triennial Central Bank Survey (December 2007), Bank for International Settlements 9

10 FX Market Outlook USD Weakening? 95 Dollar Index (Nov 2007 ~ Jun 2009) De-leverage after Financial Crisis Economy Stable Equity / Commodity Up Risk Appetite Higher 65 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 FX Market Recent Movements: US Dollar depreciated due to higher commodity prices and improving economic conditions following the Global Financial Crisis deleveraging and selloffs, when money flowed into USD as a safe harbour asset 10

11 Market Outlook Worst is Over? 3 months LIBOR vs US Treasuries After Crisis, spreads narrowed Fundamental Drivers of FX Market: Borrowing market recovered after financial crisis 11

12 Structured FX Payoffs 12

13 Dual Currency Investments Most popular FX structures in Malaysia (and the rest of Asia) with Private Banking / Wealth Management clients Offered by most banks, significant volumes Basic Structure is the same investors sell options to receive premium, which enhances their yield Simple Short-dated (typically 1 week 3 months) In Malaysia, most popular crosses are AUD/MYR, USD/MYR, EUR/MYR, GBP/MYR, NZD/MYR More exotic next generation DCI payoffs popular overseas Including Triple Currency Investments (TCI) 13

14 Dual Currency Investment (DCI) How it works Enhance the return on cash holdings short-term structure with an attractive yield pick-up compared to a traditional money market investment Guaranteed Coupon, however the bank has the right to redeem the Principal and Coupon in one of two currencies Investor sells a call option on the investment currency Example Investment USD Underlying EUR / USD Maturity 1 month Libor Rate 0.32% Spot Reference Strike Coupon 10.00% pa Trade rationale Individually tailored solution investors choose parameters Investment currency and currency pair (eg EUR / USD or any other currency pair) or precious metal (Gold, Silver) Investment amount Spot Rate at Expiry Conversion The investment (base) currency has appreciated beyond the Strike Strike / Conversion Rate Strike / Conversion Rate Tenor No Conversion Note: All the figures above are solely for illustration purpose Source: RBS 14

15 Next Generation Introducing Exotic DCIs Knock-in DCI The investor expects the currency pair not to move beyond the KI level (no major appreciation of the investment currency) Knock-out DCI The investor expects the currency pair to break through the KO level (depreciation of the investment currency) Triple Currency Investment (TCI) Higher yield possible compared to DCI, but greater risk taken Countless other variations exist 15 15

16 Knock-in (KI) DCI How it works If the Knock-in level is never reached or breached, the redemption will always be in the investment currency The enhanced coupon is paid in any case Trade rationale The investor expects the currency pair not to move beyond the KI level (no major appreciation of the investment currency) Risk of conversion is reduced through the introduction of the KI level Coupon smaller than for a standard DCI with same strike Example Investment Underlying Maturity USD EUR / USD 1 month Libor Rate 0.32% Spot Reference Strike Knock-in Coupon 105% 100% 8.00% pa Down and In 95% Note: All the figures above are solely for illustration purpose Source: RBS 16 16

17 Knock-Out (KO) DCI How it works If the Knock-out level is reached or breached, the redemption will always be in the investment currency The enhanced coupon is paid in any case Trade rationale The investor expects the currency pair to break through the KO level (depreciation of the investment currency) Risk of conversion is reduced through the introduction of the KO level Coupon smaller than for a standard DCI with same strike Example Investment Underlying Maturity USD EUR / USD 1 month Libor Rate 0.32% Spot Reference Strike Knock-Out Coupon 105% 100% 7.00% pa Up and Out 95% Note: All the figures above are solely for illustration purpose Source: RBS 17 17

18 Triple Currency Investment (TCI) How it works Very similar to DCI but option can be converted into one of three currencies Example TCI in EUR Maturity EUR / USD & EUR / JPY 1 month Trade rationale By introducing a third currency, a considerable yield pickup can be achieved compared to a DCI Coupon is highest when the correlation between the currency pairs is low and volatility is high Spot Reference & Correlation 60% Strikes & Oct-05 Dec-05 Feb-06 May-06 Jul-06 Sep-06 EUR/USD EUR/JPY Option Price = 1.40% of Notional Note: All the figures above are solely for illustration purpose Source: RBS 18 18

19 Directional Structures The following directional trades can be structured for both bullish and bearish underlying currency pairs If the forward points are positive and the investor is looking for a bullish product, the underlying structure will be more expensive - An easy way to determine if the forward points are positive or negative is to compare the interest rates of the two currencies in the pair. If the counter currency (or 2 nd currency) yields a higher return (e.g. USD in the EUR/USD pair), the forward points will be positive If the volatility is high, the underlying plain vanilla structure will be more expensive Introducing exotic barriers (knock-outs) will make the underlying structure less expensive and the participation can be increased. Here the volatility has the opposite effect generally speaking, the higher the volatility, the cheaper the underlying structure 19 19

20 Barrier Up-And-Out (Shark) Option How it works: The investor participates in the appreciation of a currency versus another currency up to the Barrier PR can be greater than 100% If Final Level falls below strike, the Option Payoff will be 0 If Barrier is reached or breached, the Option Payoff will be the Fixed Coupon Else, the Payoff will be (Final Level - Strike) / Spot Ref * PR Trade rationale: The investor has a clear view and believes the Barrier will not be reached Works best if the volatility is low Example: Underlying: AUDUSD Option Ccy: USD Expiry: 12 months Spot Ref: Strike: (ATMS) 16% 14% 12% 10% 8% 6% 4% 2% PR: 150% Barrier: Fixed Coupon: 2.00% 0% Option Price = 1.20% of Notional Note: All the figures above are solely for illustration purpose Source: RBS 20 20

21 Worst Of Digital Option Bullish on BRIC How it works: Investors participate in the appreciation of a currency versus another currency If all the underlyings are above Strike on annual observation dates, investors will receive a Coupon, else 0% Example: Option Ccy: USD Coupon: 10% Expiry: 12 months Strike: 100% Underlying: BRL, RUB, INR, CNY bullish vs. USD Trade rationale: If the investor has a clear view that the underlyings will appreciate against the USD The lower the correlation between the Underlyings, the higher the Coupons 10% 8% 6% 4% Annual Payoff 2% 0% 95% 96% 97% 98% 99% 100% 101% 102% 103% 104% 105% Performance of the Worst Underlying Option Price = 2.80% of Notional Note: All the figures above are solely for illustration purpose Source: RBS 21 21

22 Twin-Win Option How it works: The investor participates in the appreciation or depreciation of a currency versus another currency up to the Barriers PR can be greater than 100% If Barrier is reached or breached, the Option Payoff will be the Barrier Coupon Else, the Payoff will be (Final Level - Strike) / Spot Ref * PR Trade rationale: If the investor has no clear view about the direction of a currency move, but believes there will be one, but not too excessive, i.e. believes the Barriers will not be reached Works best if the volatility is low Example: Underlying: Option Ccy: USD Maturity: 18% 16% 14% 12% 10% 8% 6% 4% 2% EUR/USD 12 months Spot Ref: Strike: (ATMS) PR: 120% Barriers: 0% & Barrier Coupon:1.00% Option Price = 1.70% of Notional Note: All the figures above are solely for illustration purpose Source: RBS 2322

23 Range Option (Double No Touch = DNT) How it works: If the currency always trades inside the Range, the option payoff will be the Max Coupon If the currency breaches the Range, the option payoff will be the Min Coupon Trade rationale: If the investor has a range view, it is the easiest way to implement the view into investment The higher the volatility the wider the range Example: Underlying: Option Ccy: Maturity: EUR/USD USD 12 months Spot Ref: Max Coupon: 10.00% Min Coupon: 0% Range: (continuous observations) 10% Option Price = 6.00% of Payout = 0.60% for 10% Max Coupon Note: All the figures above are solely for illustration purpose Source: RBS 2423

24 Multi-Range Option (Wedding Cake) How it works: If the currency always trades inside the First Range, the option payoff will be Coupon 1 If the currency breaches the First Range, but then always trades inside the Second Range, the option payoff will be Coupon 2 If the currency breaches the Second Range, but then always trades inside the Third Range, the option payoff will be Coupon 3 If the currency breaches the Third Range, the option payoff will be Coupon 4 Trade rationale: It offers multiple ranges so that investors are more likely to get some option payoff compared to Single Range Option Works best if the volatility is low Example: Underlying: EUR/USD 1 st Range: Option Ccy: USD 2 nd Range: Maturity: 12 months 3 rd Range: Spot Ref: Coupon 1: 10% Coupon 2: 5% Coupon 3: 3% Coupon 4: 0% 10% % % Option Price = 1.20% of Notional Note: All the figures above are solely for illustration purpose Source: RBS 2524

25 Two Chance Option (Second Wedding) How it works: If the currency always trades inside the Initial Range, the option payoff will be the Maximum Coupon If the currency breaches the Initial Range, the investor gets a second chance and a new range is set This new range will either be on the high or low side, depending which barrier of the Initial Range was first triggered If then the currency always trades inside the Second Chance Range, the option payoff will be the Intermediate Coupon If the currency breaches the second chance range, the option payoff will be 0% Trade rationale: The Coupon is greater than for a simple range option using the same outer Barriers The Barriers are wider than for a Wedding Cake with the same Coupon Works best if the volatility is low Example: Underlying: Option Ccy: Maturity: EUR/USD USD 12 months Spot Ref: Max Coupon: 15% Intermediate Coupon: 15% 15% Initial Range: Second Range Up: % OR 15% Second Range Down: Option Price = 20.00% of Payout = 3.00% for 15% Max Coupon Note: All the figures above are solely for illustration purpose Source: RBS 2625

26 Basket Structures Why consider a basket structure compared to the individual underlying options: Consider two underlying assets A and B Let s assume the return of A is 10% and the return of B is -3% If you buy two separate options on A and B, your total return will be 10% If you buy a basket option on A and B, your total return will be 7% (+10% - 3%) Introducing correlation: If the two assets are perfectly positively correlated, the individual options and the basket option will have the same value If the two assets are perfectly negatively correlated, the basket option s value will be zero (any gain in asset A will be offset by the same loss in asset B or vice versa) The conclusion of the above points is that a basket option should always be cheaper than individual options, unless the correlation is +1, in which case the options will cost the same If the investor believes that the two assets will move in the same direction, than it makes sense to buy the basket option as it will be less expensive Calculating the performance of a basket: There are two ways to calculate the performance: n i= 1 S w i* 1 S fi ii n Sii w i* 1 = 1 S fi Where wi = the weighting for the currency pair i (e.g. USD/CAD, where investors expect CAD to appreciate) There is a perfectly good explanation for using either formula: Formula 1: a standard performance calculation Sii = Strike; Sfi = Final Spot Fixing for currency pair i Formula 2: you would use this formula, when you take the initial notional, convert it into the basket currencies and then convert it back at the end into the initial currency For a USD Put / Basket Call Option for example formula 1 would be the cheaper option. This is because if you expect USD to depreciate, you are dividing by a bigger number (Sii) i 2726

27 Basket Call Option How it works: The investor participates in the positive performance of the basket The participation level can vary The option payoff is simply an European Call Trade rationale: Basket options are generally cheaper than individual options The lower the correlation between the currencies in the basket, the higher the participation Using high yielding currencies in the basket will make an ATMS Basket Call option relatively cheap result in higher PR Example: Investment: USD Strike: ATMS Expiry: 12 month PR: 100% Basket: equally weighted BRL, RUB, INR, CNY Bullish vs USD Annual Payoff 120% 115% 110% 105% Performance Calculation: 5 i= 1 S w i* 1 S fi ii 100% -10% -5% 0% 5% 10% 15% 20% Basket Performance Option Price = 3.80% of Notional Note: All the figures above are solely for illustration purpose Source: RBS 2827

28 Basket Call Spread Option How it works: If the performance of the basket is between zero and x%, the option payoff will be the same as an European ATM Call If the performance of the basket is more than x%, the option payoff is x% Trade rationale: Same applies as to Basket Options Less expensive than a Vanilla Basket Options Example: Investment: USD x%: 10% Expiry: 12 month PR: 100% Basket: equally weighted BRL, RUB, INR, CNY Bullish vs USD Annual Payoff 115% Performance Calculation: 5 i= 1 S w i* 1 S fi ii 110% 105% 100% -5% 0% 5% 10% 15% 20% 25% 30% Basket Performance Option Price = 3.80% of Notional Note: All the figures above are solely for illustration purpose Source: RBS 2928

29 Digital Plus Option How it works: If the performance of the basket is zero or positive, the investor receives the Digital Coupon If the performance of the basket is greater than the Digital Coupon, the investor fully participates in this performance. The option can be structured with a PR greater than 100% If the performance of the basket is negative, the option payoff will be 0 Trade rationale: Same reason as for Basket options With high yielding currencies in the basket, the digital coupon will look very attractive Example: Option Ccy: USD Strike: ATMS Expiry: 12 months Digital Coupon: 5% Basket: equally weighted BRL, RUB, INR, CNY against the USD Annual Payoff 130% 125% 120% 115% 110% 105% PR: 100% Performance Calculation: 5 i= 1 S w i* 1 S fi ii 100% -5% 0% 5% 10% 15% 20% 25% 30% Basket Performance Option Price = 4.30% of Notional Note: All the figures above are solely for illustration purpose Source: RBS 3029

30 Callable and Extendable Options Why consider Callable and Extendable Options: By entering into an Callable or Extendable Option, the investor can still implement a short term view at a lower price or for a higher reward at the same price If the investor s view is correct, the Option will be AutoCalled (early redeemed) and will pay a higher coupon than an Option with a shorter maturity The risk is that if the investor s view was not correct, the Option will continue for a longer period of time and either pay no Coupon at all or or pay a minimum coupon below the risk free rate How they work? The Option will be early redeemed, if the underlying reaches a certain predefined level or specific events take place Early redemption is not at the discretion of the Option seller, but linked to a predefined event Options with Callable and Extendable Features are generally cheaper than their vanilla equivalents It is possible to add other useful and attractive features such as Switch Coupons 3130

31 AutoCallable Catch-Up Coupon with a Switch Option How it works: If, after the 1 st year, all underlying currency pairs close above the respective Strike, the Option is AutoCalled and the investor receives the Coupon, else the Option survives for a further year without paying a Coupon This process is repeated every year until the Option is AutoCalled or until expiry If the Option is AutoCalled, the Coupon will correspond to the Enhanced Coupon multiplied by Y, the year in which the early AutoCall took place e.g. for a Coupon of 8% x Y with the Option AutoCalled after the 2 nd year, the Coupon will be 16% After the Option is AutoCalled, a Switch Coupon will be paid at 1% per annum until Expiry If the Option is not AutoCalled and one or more currency pairs close below the Strike on expiry, the Option expires without any Coupon being paid Can be structured to pay a minimum Coupon regardless Note: All the figures above are solely for illustration purpose Example: Investment: USD Expiry: Underlying: Final Coupon if Redeemed in X Year 3 years 3 pairs: AUD/USD, CAD/USD, NZD/USD Bullish vs USD 30% 25% 20% 15% 10% 5% 0% 10% 17% Option Price = 7.00% of Notional Observations: annual Strike: ATMS Enhanced Coupon: 8% p.a. multiplied by Y Switch Coupon: 1% p.a. 24% Triggered at Year 1 Triggered at Year 2 Triggered at Year Source: RBS 3231

32 Extendable Option How it works: This option has a maturity of 12 months (other maturities also available). If after 6 months the performance of the underlying is positive, the Option can be redeemed by the investor, who will receive a coupon which will correspond to the performance of the underlying multiplied by PR If after 6 months the performance of the underlying is negative, the Option will be redeemed after 12 months and only the Minimum Coupon is paid at expiry Example: Option Ccy: AUD Expiry: 12 months Underlying: BRIC Basket: BRL, RUB, INR, CNY Bullish vs USD Strike: ATMS PR: 100% Minimum Coupon: 0.50% If Basket +ve Essentially a 6 Month Call Option Redeemed Trade rationale: If investors are confident that the underlyings would shoot up in 6 months, this structure can offer a higher participation rate than other 6 months structure Even if the investor s view is incorrect, they receive a 0.50% Minimum Coupon Start 6 Months If Basket -ve 1 Yr Call Option 100% PR Strike at Inception Option Price = 3.20% of Notional Note: All the figures above are solely for illustration purpose Source: RBS 3332

33 Dynamic FX Strategy RBS FX RADAR Index Regression Analysis Driven Alpha Return Index - A sophisticated Foreign Exchange Index linked to Emerging Markets 33

34 RBS FX RADAR Index Based on selection of 20 emerging market currency pairs High Performance Sophisticated source of Alpha with historically low volatility Diversification Add stability to any portfolio FX investments exhibit low correlation to equity, credit, and bond markets. This enables RADAR to offer attractive return opportunities, even when other assets are underperforming Independence Fully automated trading model where you RBS FX RADAR is Index available in several major currencies - USD, GBP, EUR, JPY and SGD 3534

35 RBS FX RADAR Index Performance & Reliability Principles underlying the RBS FX RADAR Index have been successfully used 40% 35% within RBS since 30% 25% 20% 2004 Annualized Rolling Volatilities 15% 10% Outperformance of 5% 0% Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 major indices FX Radar (SGD) MSCI World DJA IG Commodities average IRR of 6.5% p.a Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 FX Radar (SGD) TRMMI (SGD) iboxx Treasuries TR MSCI World DJAIG Commodities Annualized Rolling Volatilities 40% 30% 20% 10% 0% -10% -20% Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 MSCI World DJA IG Commodities iboxx Treasuries TR Source: RBS 3635

36 RBS FX RADAR Index Methodology Currencies with risk adjusted yields statistically different to implied yields are given Buy or Sell signals dependent on the direction of the difference To further improve the quality of the model returns, the following 3736

37 RBS FX RADAR Index Rationale & Model By investing in a currency with high implied yield relative to its risk-adjusted yield, one can profit from both the high yield and the appreciation of the currency, as other investors will also purchase that 38 37

38 RBS FX RADAR Index 5 Year ATM European Call Option Option Structure: 5 year ATM European Call option on the RBS FX RADAR Index: 1. If, from the moment of investment in the model, the model generates an aggregate loss of more than 5.0%, the option ceases to participate in the performance of the model 2. If the model doesn t hit this stop loss, then at the redemption date, the payoff will be equal to the participation in the Index s performance is paid 3. Option Premium ~ 10.8% for 100% participation Data Source: Bloomberg. Backtested Annual Returns are in SGD. Please note that: the provision of this information does not constitute investment advice to you and RBS assumes no fiduciary duty to you in regard thereto. The information provided is indicative of past performance only and it should not be relied on to provide any indication of future performance. Note Performance - Backtested (Based on daily data Jan01 Jun09): 639 full performance histories 7.8% average return p.a. Of all daily 5 year options which ended, none stopped out Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 FX Radar (SGD) TRMMI (SGD) iboxx Treasuries TR MSCI World DJAIG Commodities Source: RBS 3938

39 (There are Lies, Damn Lies, and) Backtesting 39

40 Profile of Returns BACKTESTING DEFINITION : The process of testing a trading strategy on prior time periods by using historical data to simulate what the returns would have been It is how the results of backtesting are interpreted which determines whether an investor can be comfortable with a product idea or strategy If the investor believes that the past is a Use backtesting to stress-test the structure and simulate the returns, but make good your investment guide decision to based future, on what you backtesting believe the future holds! can provide a degree of comfort and perhaps 4240

41 Interpretation Historical Annualised Rate of Return 16% 14% 12% IRR p.a. 10% 8% 6% 4% 2% 0% High Returns Average = 5.22% Backtest Results Summary Table Return p.a. Return Min 0.00% 0.00% Average 5.22% 11.11% Max 13.70% 30.13% First Test Start 3-Feb-97 Last Test End 26-Jan-07 Number of Tests 1,976 Feb.99 Aug.99 Feb.00 Aug.00 Feb.01 Aug.01 Feb.02 Aug.02 Feb.03 Aug.03 Feb.04 Aug.04 Feb.05 Time Dispersion Note Maturity Date The above chart and table represent the backtested returns of a Market Neutral Long Volatility structure we developed Time Dispersion. The average returns of 5.22% are fine, however most importantly the PROFILE of backtested returns backs up the investment hypothesis behind this structure: to profit from any increase in volatility. When the chart of the underlying (volatility of Hang Seng Index) is superimposed onto the backtested returns chart, it is obvious that the structure performed well when volatility was high. Investors expecting volatility to rise can take comfort not only from the backtested returns, but their historical profile as well. Aug.05 Feb.06 Aug.06 High Volatility 4341

42 Contacts & Global Disclaimer Managing Director Garry Frenklah Tel: Private Investor Products Paul Fong Tel: Private Investor Products Terry Tsang Tel: Private Investor Products Catherine Ho Tel: The contents of this document are indicative and are subject to change without notice. This document is intended for your sole use in order to explore, on a preliminary basis the feasibility of possible related transactions. This presentation does not purport to identify or suggest all the risks (direct or indirect) or material considerations which may be associated with any transaction or investment and before entering into any related transaction, you will ensure that you fully understand the potential risks and return of such transaction and determine it is appropriate for you given your objectives, experience, financial and operational resources, and other relevant circumstances. You should consult with such advisors as you deem necessary to assist you in making these determinations. This presentation should not be construed as an offer, invitation to offer, or solicitation to buy, subscribe for, issue or sell any financial instrument, investment or derivative thereof or as any form of commitment to enter into any transaction in relation to the subject matter hereof. The Royal Bank of Scotland plc ( RBS ) is not acting as your advisor or owe any fiduciary duties to you in connection with this presentation or any related transaction and no reliance may be placed on RBS for advice or recommendations of any sort. Nothing in this presentation shall constitute legal, accounting or tax advice, or a representation that any transaction or investment is appropriate for you taking into account your investment objectives, financial situation and particular needs, or otherwise constitutes any such advice to you. RBS makes no representations or warranties with respect to the information and disclaims all liability for any use you or your advisors make of the contents of this document. This presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by RBS. This presentation is proprietary to RBS and may not be disclosed to any third party, reproduced, copied, altered or used for any other purpose without the prior written consent of RBS. The information in this presentation reflects RBS opinions or views prevailing as of this date, which are accordingly subject to change without prior notice to you. In preparing this presentation, RBS has relied upon and assumed, without independent verification, the accuracy, completeness and timeliness of all information available from public sources which was used by RBS in the preparation of this presentation. The information in this presentation does not take into account the effects of a possible transaction or transactions or any other event, including with limitation an actual or potential change of control in the relevant entity, which may have significant valuation and/or other effects on the proposed transaction or transactions. The analyses in this presentation are not and do not purport to be appraisals or valuations of the assets, stocks or businesses of the relevant entity(ies). Even if this presentation consists of an appraisal or valuation, it should be considered preliminary, suitable only for the purpose described herein and not to be disclosed or otherwise used without the prior written consent of RBS. RBS does not accept any liability whatsoever for any direct or consequential loss arising from any use of this presentation and the information, opinions and materials contained herein. This product may not be offered or sold within the United States or to or for the benefit of US Persons. Neither this document, nor any copy thereof may be sent or taken into the United States or distributed in the United States or to a US Person. 4442