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1 Permal August 31, 2007 Hedge Fund Industry

2 2 Hedge Fund Industry Timeline Inception: A.W. Jones 1 st “Wave of Popularity” - Steinhardt - Soros - Emphasis on leverage Quiet Period -Robertson launch -1982: Equity bull market begins 1 st “Wave of Tears” - Small Cap Meltdown 1949-1965 1965-1969 1969-1974 1974-1986 1986-1998 1998-2000 2000-Present 2 nd “Wave of Popularity” 1987Wall Street Crash Leon Cooperman 2 nd “Wave of Tears” -Traditional investing works -Hedge Fund growth falters -LTCM 3 rd “Wave of Popularity” -2000 stock market bubble bursts -Hedge fund growth accelerates Growth Timeline

3 3 Performance in Down Markets: January 1999 – August 2007 Outperformance: Bear Market protection and Bull Market participation Hedge Funds v. U.S. Equities Bull Market Capture Bear Market Protection Bull Market Capture HFRI Fund Weighted Composite LABI S&P 500 DRI Source: HFRI Fund Weighted Composite (Hedge Fund Research). Past performance is not indicative of future results. See disclaimer page for further explanation.

4 4 Hedge Funds In Down Markets Source: HFRI FW Composite: Hedge Fund Research ( Past performance is not indicative of future results. See disclaimer page for further explanation. Performance in Down Markets: January 2000 – December 2002 MSCI World: -41% (Std Dev = 17%) S&P 500: -38% (Std Dev = 19%) HFRI Fund Weighted Composite: +8% (Std Dev = 8%) Hedge funds outperformed traditional investments in falling equity markets.

5 5 Assets In Hedge Funds Are Growing… Hedge Funds: Dollars Under Management & Net Asset Flow( 1990- 7/31/07) 1 Includes Fund of Funds. 1 Source: Hedge Fund Research Industry Report Special Edition: July/August 2007. See last page for additional information. Assets (In billions)

6 6 How can investors choose ? The Number Of Hedge Funds Is Growing… Source: Hedge Fund Research Industry Report Special Edition: July/August 2007 Estimated Number of Global Hedge Funds (1990 – 7/31/2007)  Permal employs approximately 200 managers, only about 2% of the managers in the industry.

7 7 Hedge Funds Remain A Small Share Of Total AUM Global assets under management: $64.8 trillion Estimated as of December 31, 2006 Pensions 38% ($24.4 Trillion) Insurance 26% ($17 Trillion) 1 Mutual Funds: 34% ($21.8 Trillion) Alternative Investments: 2%* ($1.7 Trillion) *Estimate of hedge fund assets as of 5/07 1 As of December 2005 Sources: Estimates based on Watson Wyatt (pension), ICI (mutual funds), CGFS Papers of Bank for international Settlements (insurance), HFR (alternative investments)

8 8 Greater Institutional Demand Global institutional investment in hedge funds projected to increase $1 trillion by 2010 1 1 Source: Casey, Quirk & Associates and the Bank of New York, Oct. 2006  An estimated $360bn of global institutional investment is in hedge funds today. 1  Institutions’ share of hedge-fund assets is expected to rise to 40% from 30% today. 1  Institutions are expected to invest $510bn into hedge funds through 2010. 1 Years 2006 – 2010 are estimated Projected Global Institutional Hedge Fund Assets ($ billions)

9 9 Quality Of Hedge Fund Capacity The hedge fund universe is perceived as having three distinct groups of managers:  Around 15% of managers are clear stars: they provide the prime capacity that is capable of generating risk-return characteristics in line with client expectations. The majority are based in the U.S.  A further 55% are wannabes who aspire to be stars before long. Many are based in Europe and also Asia/Pacific.  The remaining 30% are has-beens. Sources: KPMG, 2005 “Hedge Funds, A Catalyst Reshaping Global Investment”

10 10 Growing Choice Of Hedge Fund Universe (By AUM) “Other” includes strategies which represent less than or equal to 3% of the hedge fund universe. Source: Hedge Fund Research. See disclaimer page for further information. As of December 31, 1990As of July 31, 2007 Estimated composition by strategy  Approximately 610 Hedge Funds  Over 9,800 Hedge Funds

11 11 The number of hedge funds that were liquidated in recent years has nearly tripled. As Number Of Hedge Funds Increase, So Do Closings Source: Hedge Fund Research Industry Report Special Edition: July/August 2007 Estimated Number of Funds Launched / Liquidated (1990 – Q2 2007) Number of Funds

12 12 Half of the Universe of Hedge Funds Is Small or Inexperienced Estimated Fund AgeEstimated Fund Size There appears to be a shortage of experienced management and an abundance of relatively small sized funds. Source: Hedge Fund Research Industry Report Special Edition: July/August 2007

13 13 Estimated Fund Age There is a shortage of experienced managers Source: Hedge Fund Research Industry Report Special Edition: July/August 2007 < 1 Yr 1 to < 2 Yrs 2 to < 3 Yrs 3 to < 5 Yrs 5 to < 7 Yrs > 7 Yrs 24% 15% 25% 14% 7% 15%  Over 85% of the assets in Permal funds are invested with managers with over 20 years of investment experience As of July 31, 2007 < 1 Yr

14 14 Risk / Reward Profile of Hedge Funds in 2006* Hedge Funds’ Wide Dispersion Of Returns - 2006  This chart consists of approximately 1,300 distinct, active single manager funds which are tracked by the Hedge Fund Research database and are included in the HFRI Fund Weighted Composite.  The graph’s range was scaled down to +70% return and 40% standard deviation and excludes funds outside these limits. -30 -10 10 30 50 70 90 0.00 10%20%30%40%50 Return % -30 -10 10 30 50 70 90 0.00 10%20%30%40%50% Return % HFRI Equity Hedge Index Constituents in 2006 Source for all 3 charts: HFR Industry Report 2006. Excluded are funds in the HFR database which had not reported 2006 performance by January 31, 2007. STD % Past performance is not a guide to future performance. See last page for disclaimer. HFRI Macro Index Constituents in 2006

15 15 Performance By Strategy Choosing a strategy can be a challenge Source: HFRI Indices from Hedge Fund Research and Permal. Past performance is not a guide to future performance. See statement on last page. Lehman Agg Bond= Lehman Aggregate Bond Index; HFRI Fund Weighted Comp = HFRI Fund Weighted Composite Index *HFRI current month and prior three month values are left as estimates and are subject to change.

16 16 EQUITY HEDGE Source: Investorforce & Hedge Fund Research. Past performance is not indicative of future results. See last page for further information. Hedge Funds’ Role In A Diversified Portfolio January 1, 1994 – January 31, 2005 Return v Risk (January 1, 1990 – August 31, 2007) Standard Deviation Annualized Return  By lowering volatility lower portfolio risk  By improving overall portfolio return

17 17 Statement SOURCES: Hedge Fund Research, Inc. (HFR) is a research firm specializing in the collection, aggregation, and analysis of alternative investment information. The estimates contained in HFR Quarterly Industry Reports are based upon the HFR Database, which tracks the hedge fund industry (including fund of hedge funds). The HFR Database currently consists of information on over 6,800 funds and fund of funds Information on their hedge fund universe of established and emerging managers is collected directly from the fund managers and/or their respective offshore administrators. HFR has monitored and tracked performance and administrative data internally on over 11,000 domestic and international funds. HFRI Indices are equally weighted performance indexes, utilized by numerous hedge fund managers as a benchmark for their own hedge funds. The HFRI are broken down into 37 different categories by strategy, including the HFRI Fund Weighted Composite, which accounts for over 2000 funds listed on the internal HFR Database. Funds included in the HFRI Monthly Indices must: report monthly returns, report net of all fees returns, report assets in USD, have at least $50 Million under management or have been actively trading for at least twelve (12) months. HFRI was launched in January 1990 and is updated three times a month. HFRX Indices currently consist of eight single strategy indices and an asset-weighted Global Hedge Fund Index. In addition to meeting HFRI criteria, fund must be open to new transparent investment and meet track record and minimum asset size. Most HFRX Indices are priced daily. The inception date of the HFRX is 04/01/2003. Index values and returns provided prior to the inception dates were calculated by means of retroactive application of the index model. Investor/Altvest Database - An extensive hedge fund on-line database of more than 2,700 hedge funds and hedge products with integrated analytical and reporting tools. The indexes listed have not been selected to represent benchmarks for the Funds, but rather allow for comparison of a Fund’s performance to that of a widely recognized index. An investor cannot invest directly in an index. Index performance does not reflect fees and expenses of investing. Past performance is not indicative of future results. Performance figures are for Class A shares, reflect the reinvestment of dividends, distributions and other earnings and are net of Fund level expenses but not sales charges which may be up to 5.5% or taxes which would reduce the return. Fees and expenses are payable at the Fund level in addition to those of third party portfolio managers or their funds. The Fund may have high fees and expenses that would reduce gross returns. Performance may be volatile and the Fund’s NAV will fluctuate. Hedge Funds are speculative and involve a number of risks including those associated with the use of leverage, options, derivative instruments, distressed securities, futures, illiquid investments and short sales. In addition, alternative investment funds with an emphasis on specific industry sector and/or public and private companies present certain risks that may not exist in a more diversified portfolio. Multi-manager funds are dependent not only on the investment performance of individual managers but also on the ability of the investment manager to effectively allocate the fund's assets. Investors may not receive the full amount invested upon redemption or withdrawal. Exchange rate fluctuations may affect Fund returns. Fund allocations and holdings are subject to change. There is no assurance that the Fund’s objective will be attained. This material is not an offer or solicitation to subscribe for shares in the Fund and is by way of information only. Sales of shares are made on the basis of the offering circular only and cannot be offered in any jurisdiction in which such offer is not authorized. The Fund is not for sale in the US or to US persons, including US citizens and residents, and its sale is restricted in certain other jurisdictions. There are restrictions on transferring Fund shares. Investment in the Fund may not be suitable for all investors and prospective investors should consult their professional advisers as to suitability, legal, tax and economic consequences of an investment in the Fund. Permal believes that the information contained herein is accurate as of the date of the materials. No entity of the Permal Group makes any warranties of accuracy of the information and they shall not be liable for any losses or damages relating to it. To UK investors: This material is approved for issue in the UK by Permal Investment Management Services Limited ("PIMS") which is authorized and regulated by the Financial Services Authority (“FSA”). The Fund is not regulated under the Financial Services and Markets Act 2000 ("the Act") and consequently no protection is provided by the UK regulatory system.. Similarly, benefits available under the UK Financial Services Compensation Scheme do not apply. This document is only intended for distribution to persons permitted to receive it by the Financial Services and Markets Act (Promotion of Collective Investment Schemes) (Exemption) Order 2001 and the rules of the FSA, any investment to which this material may relate will not be made available to private customers. If you are in any doubt as to whether or not you may receive this material, please contact PIMS at 44 (0) 20 7389 1300. To Singapore investors: This material is distributed in Singapore by PIMS, Singapore branch, which is regulated by the Monetary Authority of Singapore. To Dubai investors: This information has been distributed by Permal Investment Management Services Limited, Dubai U.A.E. Related financial products or services are only available to wholesale customers with liquid assets of over $1 million, and who have sufficient financial experience and understanding, to participate in financial markets in a wholesale jurisdiction. Permal Investment Management Services Limited is duly licensed and regulated by Dubai Financial Services Authority (DFSA). August 31, 2007 [P100-IFT.E-0807r2]

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