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Roger Jones, Co-Head of Commodities Kevin Norrish, Director, Commodities Research

Roger Jones, Co-Head of Commodities Kevin Norrish, Director, Commodities Research Bharath Manium, Director, Commodities Investor Solutions Monday 10 March 2008. Roger Jones, Co-Head of Commodities Welcome. Our commodities business operates globally across a broad range of asset classes.

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Roger Jones, Co-Head of Commodities Kevin Norrish, Director, Commodities Research

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  1. Roger Jones, Co-Head of Commodities Kevin Norrish, Director, Commodities Research Bharath Manium, Director, Commodities Investor Solutions Monday 10 March 2008

  2. Roger Jones, Co-Head of Commodities • Welcome

  3. Our commodities business operates globally across a broad range of asset classes Industrial Materials • Base Metals • Precious Metals • Plastics Energy • Crude Oil • Refined Products • European Power & Gas • US Power & Gas • Coal Other Speciality Markets • Forest Products • Weather • Environmental products • Agricultural products • Softs • Freight Investor Products • Swaps • Commodity Bonds • Funds

  4. Introductions • Kevin Norrish, Director, Commodities Research - Commodity market investment outlook - Results of conference audience survey - Comparison with 2007 results • Bharath Manium, Director, Commodities Investor Solutions - Latest evolution in investor products

  5. Kevin Norrish, Director, Commodities Research • Commodity market investment outlook • Survey findings

  6. In the wake of the credit crisis, commodity investments have outperformed

  7. Demand for commodity investments continues to gather pace Commodity market investments hit $178bn in 2007 Launch of new commodity investor products has soared in early 2008

  8. Key fundamental drivers

  9. Depletion of the resource base Steep decline in mature non-OPEC oil output continues Copper reserves relative to demand are very low

  10. Costs escalation is rampant Costs of aluminium smelters are more than double the previous decade Oil project capital costs rising as fast as prices - tar sands capital costs +300% since 2001

  11. Commodity market trends are increasingly interlinked Climate change/carbon costs Rising Asian living standards & industrialisation Higher gold prices Inflation concerns & weaker dollar Inflation concerns Inflation concerns Rising energy prices Higher grain prices Higher livestock prices Higher animal feed costs Boost demand for biofuels & raise production costs Higher food prices raise labour costs Higher food prices raise labour costs Higher industrial metals prices Producer policy Resource scarcity

  12. It’s not too late! The prices of many commodities have set new records in nominal terms in recent months. But relative to inflation-adjusted benchmarks, price rises look more modest. Many commodities are still trading a long way below their 1970/80s “real” price highs.

  13. Carbon: New opportunities for Investors Analysis of the relative economics of different emissions-cutting measures is still in its infancy and cost curves like that shown below come in many different shapes and sizes. But one way or another the incorporation of carbon emission costs will be an important factor impacting future energy costs and prices.

  14. Barcelona Annual Conference Survey Results

  15. In turbulent financial conditions, investors are raising their commodities exposure…

  16. 2007 55% Today 48% 2006 8% 15% 33% 33% 4% 4% What do you think is the most attractive aspect of investing in commodities? Question 1

  17. 2007 Today 33% 50% 2006 37% 31% 11% 7% 19% 12% In 2006/2007, what percentage of your portfolio was in commodities? Question 2

  18. 2007 6% Today 7% 2006 35% 38% 37% 36% 22% 19% Over the next 3 years, what percentage of your portfolio will be in commodities? Question 3

  19. Investors view commodities as long-term exposures…

  20. 2007 9% Today 12% 2006 20% 21% 29% 28% 42% 40% How long, typically, would you expect tohold your commodity exposure? Question 4

  21. 2007 43% Today 54% 2006 21% 17% 23% 15% 13% 13% What is currently your greatest concernwith investing in commodities? Question 5

  22. 54% Today New York ConferenceResults December 2007 27% 16% 2% What do you think the average price ofoil will be over the next five years? Question 6

  23. Investor strategy…

  24. 2007 13% Today 16% 2006 18% 20% 25% 16% 45% 49% How are you currently investing in commodities? Question 7

  25. 2007 3% Today 11% 2006 21% 28% 27% 15% 50% 46% Over the next 3 years, how do you expectto be investing in commodities? Question 8

  26. Which markets do investors favour…?

  27. 18% Today New York ConferenceResults December 2007 19% 8% 45% 10% Which commodity sector do you expectwill give the highest returns in 2008? Question 9

  28. 33% Today New York ConferenceResults December 2007 16% 40% 12% What, in your opinion is the best way of getting exposure to the climate change theme? Question 10

  29. Bharath Manium, Director, Commodities Investor Solutions • Product innovations

  30. Product Innovations • New asset underlyings - Carbon - Coal and Freight • Agriculturals • New payoff structures • The quest for alpha - CORALS - Everest Alpha

  31. Questions & Answers

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