Ros Summary

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Global Macro 8 January 2013 Commodities Outlook Commodities as an Asset Class: We expect a more constructive outlook for commodity returns heading into 2013. We view energy and industrial metals as undervalued. While fundamentals are tight in the agricultural sector, from a valuation perspective this sector has moved into expensive territory in the event of an easing in supply tightness. Crude Oil: We are bullish crude oil based on an acceleration in world growth and as pipeline and railroad expansion help to tighten WTI physical fundamentals. However, rising US shale oil production remains a key event risk and OPEC will most likely need to cut production levels before mid-year. US Natural Gas: The gradual tightening of the US natural gas balance is expected to take shape starting from 2013 in response to more pronounced dry gas production declines, such as Haynesville. Consequently, we expect this will provide some level of support for natural gas prices in 2013. European Natural Gas: We believe that supply-side infrastructure risk is at a relatively low point, while demand-side dynamics are weak in both the residential/commercial and power sectors. Our gas-price forecast continues to build in a discount to oil, even relative to reduced formulas from Russia. Precious Metals: We prefer exposure to the PGMs at this juncture, particularly palladium as we expect the market to remain in a considerable deficit in 2013. From an investment perspective, our view of continued structural strength in the gold market is being tested. We expect downside risks to gold start to build from 2014. Industrial Metals: We are mildly positive for base metals in 2013. We expect that an acceleration in Chinese GDP growth and stability in economic activity in the Western World could result in modest appreciation particularly in the first half of the year. We prefer lead and copper

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