27th April 2007

MARKET NOTES
FTSE 6469. GOLD $674 $/£ 1.99 C$/£ 2.23
40
DJIA 1310 Oil $67.65 €/£ 1.36 A$/£ 2.41
5.5

Overview
The sharp rebound in world equity markets has left investors more complacent than
ever and confirms the widely held view that every sell off is another buying
opportunity because ‘the market always comes back stronger’. There is no doubt
that a number of factors, including actual and rumoured bids by Private Equity
(leveraged buy-outs) and share buy-backs by the corporate sector, have been
powerful drivers against a background of loose monetary conditions. However,
central banks are actively tightening and the housing markets in the USA and Spain
have already changed the attitudes of lenders. Indeed, the Bank of England in its
Financial Stability Report draws attention to growth in global investment banks’
balance sheets which strongly suggests that the trading desks are being forced to
take bigger bets because volatility is at historic lows. This certainly constitutes a
warning from the BoE.

The good news is that Chinese growth figures continue to underline the demand for
commodities whilst major new mine openings are noticeable by their absence. We
remain cautious of companies that rely on the Anglo-Saxon speaking consumers
taking on more debt.

Special Situations
(High risk/capital growth equities)

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Indago Petroleum: (75p) Shares in issue: 53.33m

IPL.L www.indagopetroleum.com Market cap: £39.9m
Following the sale of its production assets, the company has just paid a 60p
dividend and consolidated the shares on a 1-for-5 basis. It has a 50% interest
(partner RAK Industries) in three blocks in Oman and UAE. The company is currently
drilling the Jebel Hafit prospect with mean unrisked potential of one billion boe. This
is a very deep well which spudded on 29th January and should reach target depth at

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the end of June. The company currently has US$56m of which $26m is committed to
its projects. A failure at Jebel Hafit would probably see the shares fall to around 37p
but a success could produce upside of between £10 and £15 per share. We expect
to see the shares rise prior to the results of the current drilling because the
risk/reward is so compelling.

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