Equity Derivatives Specialists

RRM is an independent consultancy business focused on Equity Derivatives. Our experienced team of consultants will perform both in-depth research and analysis, or very rapid-response evaluations, to provide our clients with the critical information to make both day-to-day and strategic decisions.

Our integrated approach offers a multifaceted perspective that leads to insight, revelation, and innovative solutions that produce results. By introducing a new way of thinking about an existing situation, we assist clients to overcome seemingly insurmountable obstacles with equities and equity structured products.

We deal only with non retail clients as defined by the Corporations Code, and offer our services in concert with other professional consultancy groups. These relationships allow our business to focus on our inherent strengths and offer a depth of coverage to our clients. RRM has core competencies is the areas listed below:

The design, creation and assessment of equity derivative models

The building of Equity risk control systems for wholesale clients

Assessment of Equity Derivatives positions including restructuring and realisation

The creation of Bespoke Structured Products for Corporate financing solutions

An independent consultant and assessor for structured corporate financing

Expert witness for Equity Derivatives Cases

The creation of Hybrid and Equity Derivative pricing templates

Independent Risk and Credit margining for Equity Derivative products

Training of executives for their Derivative Accreditation (ADA1+2) and Derivatives Responsibilities under their Responsible Executive and Responsible Officer requirements

Independent Rationalisation and portfolio management for Equity Derivatives. ETOs and Hybrids being just one part of the suite of products.

Design of derivative products with a wholesale fund manager focus. Currently with approximately $250m of RRM designed funds under management

Employee share participation / option plan construction

Portfolio insurance

Option Portfolio managed closeouts for non retail investors

Some examples of our products:

Risk Return’s Employee share participation product

CESAA®

Convertible Equity Share Asset Accumulator

A flexible product to help incentivise company representatives

“Render unto Caesar the things which are Caesar’s”

CESAA is a product designed to reward company representatives without causing many of the negative aspects caused by initial share issuance and employee share option schemes (ESOP’s).

ESOP’s in all of their formats currently cause a number of problems for company issuers as well as the employees themselves.

A brief summary of these issues is attached below:

1. Shareholder resistance to the granting of free option2. ASA negative feedback3. Apparent dilution for little gain4. The requirement to underwrite these schemes5. Vesting periods 6. The perception that these “free” options don’t appropriately incentivise7. Lack of a payment for these ESOP options and the perception that they are “free”8. Lack of a yield for these ESOP options and disadvantages for holders9. A number of tax issues for both holders and the issuers10. Lack of flexibility11. Solves the issue of employee take-up of these ESOP’s.12. Fixed Term

RRM Equity Derivatives Exposure Evaluator

We design and evaluate Hybrids and Derivatives portfolios, including new issues for Wholesale clients

ANZPB $102.00 Stock Price $22.87

Security rating Company

rating

Details Bond exposure Pricing and Yields

Face value $100.00 YTM gr margin gr

Next reset/maturity 16-Jun-14 7.76% 2.13%

Exit value $100.00 OA YTM gr OA margin gr

Ann coupon $4.851 7.76% 2.13%

Payments/year 4 Acc Int ungr Mduration gr

Franking Yes $1.13 3.48

Next ex date 20-May-10

Bond value at various margins (grossed up)

Next date paid 15-Jun-10 1.75% 2.25% 2.75%

$103.35 $101.59 $99.87

Equity exposure Number Calls 0.2000 Option value at various volatilities Number Puts 20.00% 25.00% 30.00%

Call strike $0.00 $0.00 $0.00

Put strike $0.00 $0.00 $0.00

Hyb Delta at 25.0% vol 0.00

Call Delta at 25.0% vol 0.00 RRM FV $101.59

One example of our Portfolio Insurance Evaluation Techniques:

Our Structured buy and write product summary page :

The RRM option realisation template for the managed closing out of option portfolios

An abbreviated and anonymous version of one of our proprietary structured finance solutions:

MORROW RESOURCES LIMITED Royalty Equity Participation Security

Summary of Terms

A summary of the terms and conditions of the proposed Morrow Funding Security is set out below:

Issuer: Morrow Resources Limited

Issue : Approximately $150 million of new Morrow Royalty Equity Participation Bonds. These will comprise a Detachable warrant, a coupon payment and a separate XXXX component.

Application Price: AUD or USD $100 (Security Value)

We design the option or equity participation component in Employee participation plans.

Please contact Simon Gibson if you have any enquiries on:

Phone +614126100 Email rrm1@tpg.com.auFax +61395050068

We highly recommend the following organisations:

Bloomberg

Asx.com.au

Wharton

Standard and Poor’s

FNArena