investec gsf global energy fund presentation aug10 (hk)

GSF Investec Global Energy FundM k L d J th W hMark Lacey and Jonathan WaghornPortfolio ManagersAugust 2010August 2010

Important InformationImportant Information

● Investec Global Energy Fund (the "Fund") is an equity sector mutual fund. The Fund aims to achieve it l th b i ti i th it i t t f i t ti ll t d i th h t thcapital growth by investing in the equity instruments of internationally quoted companies throughout the

world involved in the exploration, production or distribution of oil, gas and other energy sources.

● Key risks of the product: Sector risk - The Fund invests in single sector and subjects to greater volatility than a broadly diversified portfolio. The sector may decline even while broader based equity market indices are rising. Smaller company risk – The Fund may invest in smaller companies and their shares may be less liquid and more volatile than the shares of larger companies due to the smaller number of shares in issue andand more volatile than the shares of larger companies, due to the smaller number of shares in issue and the frequently less diversified and less established nature of the business. These factors can create a greater potential for significant capital losses.

● In the worst case scenario, the value of the Fund may be worth substantially less than the original amount● In the worst case scenario, the value of the Fund may be worth substantially less than the original amount you invested and in an extreme case could be worth nothing.

● The investment decision is yours but you should not invest in the Fund unless the intermediary who sells it to you has explained to you that the Fund is suitable for you having regard to your financial situation, y p y y g g y ,investment experience and investment objectives.

● Investors should not only base on this material alone to make investment decisions. Please refer to the Fund Prospectus for the details of all risk factors.

| Investec GSF Global Energy Fund | FOR PROFESSIONAL ADVISORS USE ONLY04853

Target audienceTarget audience

This document is meant to be read only by professional investors, professional financial advisors and, at their exclusive discretion, their clients. No other person should rely on the information contained in this document.If you plan to show this to your clients, please ensure that you comply with any applicable y p y p y p y y pplocal marketing regulations.This document is not to be generally distributed to the public.


Table of contentsTable of contents

● Introduction● Team and products ● Investment process● Fund’s structure● Fund’s structure● Investment case for energy equities● The macro outlook for energygy

− Key themes for 2010− Near term supply and demand

L t l d d d− Long term supply and demand− Gas markets

● Appendixpp− Performance


The co-portfolio managersBackgroundBackground

Mark Lacey – 14 Years experience Jonathan Waghorn – 14 Years experience ● Co-Portfolio Manager Investec GSF

Global Energy Fund● Goldman Sachs Executive Director and

● Co-Portfolio Manager Investec GSF Global Energy Fund

● Goldman Sachs Executive Director and● Goldman Sachs, Executive Director and joint head of the Energy Research team

● Ranked number 1 analyst in oil and gas industry in 2007 Thompson Extel survey

● Goldman Sachs, Executive Director and joint head of the Energy Research team

● Rated 5 star analyst by Starmine for stock picking and earnings estimates (2007)industry in 2007 Thompson Extel survey

● Credit Suisse Asset Management, Energy and Resources Portfolio Manager

picking and earnings estimates (2007)● Previous energy research and industry

experience (Wood Mackenzie & Shell International)International)

Top rankings independently recognised by both oil companies and investors with a proven track record of alpha generation in both Long Only and Long/Short strategies


t ac eco d o a p a ge e at o bot o g O y a d o g/S o t st ateg es

Global Commodities and ResourcesCore team

LDNBradley George

Portfolio Manager and Team Co ordinator

Core team

Portfolio Manager and Team Co-ordinatorGlobal Dynamic Resources. Global Gold

George CheveleyCo portfolio Manager Daniel SacksMark Lacey Jonathan WaghornLDN CPTLDN LDNCo-portfolio Manager

Global Dynamic Resources Base Metals & Bulks

Co-portfolio ManagerGlobal Gold

Co-portfolio Manager, Global Energy

Co-portfolio Manager, Global Energy

John ThompsonInvestment

Analyst, Soft Commodities

CPTKevin de Villiers

Trading

CPTDawid HeylInvestment

Analyst, Soft Commodities

LDNRuchir Patel

Trading

Scott WinshipInvestment Analyst,

Gold and Precious Metals

CPT LDN

● Cumulative market and industry experience of over 100 years● AUM of $4.5 billion in global commodities and resources as at 30 June 2010

An experienced team with diverse backgrounds


p g

Global Commodities and ResourcesCurrent propositionsCurrent propositions

Global Commodities and Resources Fund Range

GSF Global Gold Fund$354m

OEIC Global Gold Fund*$162m

GSF Global Dynamic Resources Fund $114m

OEIC Enhanced Natural Resources Fund* $294mGSF Enhanced Natural Resources Fund* $58m

GSF Enhanced Global Energy Fund *$55m

GSF Global Energy Fund$1,236m

OEIC Global Energy Fund*$359m

● GSF launch date: 26 Nov 1990− Structure: Luxembourg SICAV

● OEIC launch date: 10 April 2006− Structure: UK OEIC

● Index: HSBC Global Gold

● Launch Date: 31 Jan 2008− Structure: Luxembourg SICAV

● Index: 50% MSCI World Materials and 50% MSCI World Energy

● OEIC launch Date: 1 May 2008− Structure: UK OEIC

● GSF launch date: 4 Jan 2010− Structure: Luxembourg SICAV

● Long/Short absolute return. Full UCITS III powersIndex: MSCI World Energy (50%)


● Index: MSCI World Energy● Long/Short absolute return. Full

UCITS III powers


● OEIC launch date: 29 Nov 2004− Structure: UK OEIC

● Index: MSCI World Energy

GSY B Global Commodities & Resources Fund*

● Index: MSCI World Energy (50%) and MCSI World Materials (50%)

GSY B Global Energy Long Short Fund* SA Commodity Fund *

● Launch Date: 31 Jan 2007− Structure: Guernsey B− Long/Short absolute return

Resources Fund$287m

● Launch Date: 15 Dec 2008− Structure: Guernsey B− Long/Short absolute return

Long Short Fund$56m

● Launch Date: 1 Feb 1995− Structure: South Africa

● Index: INVCM Benchmark

$78.5m#

Commitment to commodities and resources fund management business


*The funds have not been authorised by the SFC and therefore are not available to Hong Kong investors. Fund sizes as at 31.07.10. #As at 30.06.10

Executive summaryThe Investec GSF Global Energy FundThe Investec GSF Global Energy Fund

● We seek to deliver returns that exceed those of the MSCI World Energy Index by:− Using the fundamental and rigorous investment process that is being used across all

Investec Asset Management’s energy products− Using our proprietary Energy Commodity Indicator to optimise the selection andUsing our proprietary Energy Commodity Indicator to optimise the selection and

timing of investments− Leveraging our numerous high quality industry contacts to get access to the best

industry and company informationindustry and company information● The Global Energy Fund has a high quality long term track record

− The Fund has returned 330% over ten years versus the MSCI World Energy Index (up 116%) in USD

Past performance should not be taken as a guide to the future and there is no guarantee that this investment will make profits; losses can be made.Source: Investec Asset Management Lipper to 31 07 10 NAV based (inclusive of all annual management fees but excluding any


Source: Investec Asset Management, Lipper to 31.07.10, NAV based (inclusive of all annual management fees but excluding any initial charge), gross income reinvested, in US dollars. Performance is of the A Income share class. Performance would be lower had initial charges been included.

GSF Investment process

Investment processA structured and disciplined investment processA structured and disciplined investment process

Commodity Resource equity

Commodity analysisSupply/demand and break-even price analysis indicates likely commodity price trends

Commodity IndicatorScreening process that measures the daily interplay between major resource equities and their specific commodity mix

1 2

price trends specific commodity mix

Equity analysisP i t i d l ti d l

3Proprietary earnings and valuation models for companies

Q lit ti i4 Market consideration forward curve volatility liquidity Sell–side sentimentQualitative issues4 Market consideration, forward curve, volatility, liquidity. Sell side sentiment.Management meetings

High quality idea generation translated into various portfolios

Portfolio construction5 Selection and weighting of best commodity and equity ideas


g q y g p

These internal parameters are subject to change, not necessarily with prior notification to shareholders.

Stage 1: Commodity analysisUnderstanding of major new supply sources

Stage 1. Commodity analysisSupply/demand and break-even price analysis indicates likely commodity

price trendsUnderstanding of major new supply sources

● Strong track record of fundamental oil and gas

price trends

commodity research from Goldman Sachs● Top 170 Oil and Gas Projects research was

highly regarded and extensively used within the g y g yindustry

Presented work to:● OPEC● OPEC● Saudi Aramco● Major Oils● Service companies● Global energy portfolio managers

Backgrounds in fundamental commodity research


ac g ou ds u da e a co od y esea c

Stage 2: Commodity indicatorEach company has its own mix of commodities

Stage 2. The Commodity IndicatorScreening process that measures the daily interplay between major resource equities

and their specific commodity mixEach company has its own mix of commodities

● Commodity Indicator: Built bespoke commodity indicators to determine the relationship

and their specific commodity mix

between the performance of the mix of commodities that the company is exposed to (commodity indicator) vs. the performance of the company’s share price

● High correlation between a company’s commodity indicator and its share price. When g p y y pthese diverge, it provides a potential investment opportunity

Canadian oils have underperformed their commodity mix by 2%

Statoil has underperformed its commodity mix by

over the last 3 months, while the global Majors have underperformed theirs by 21%. Potential

17% over the last 3 months, while Repsol has outperformed its by 9%. Potential absolute return fundby % o e a

Long Only fund action: go overweight Majors, underweight Canadians

absolute return fund action: go long Statoil, short Repsol


This is not a buy or sell recommendation for any particular security.Data as of mid 2009 and is meant for illustrative purposes only

Stage 3: Resource equity analysis Full financial and valuation models for companies

Stage 3. Resource Equity analysisProprietary earnings and valuation

models for companiesFull financial and valuation models for companies

● Company models: We have built individual d l t d t i i dcompany models to determine earnings and

valuations for around 150 companies● Our models are maintained by the Fund Managers

and contain our own forecastsand contain our own forecastsThe models have the following sections:● Commodity assumptions● Income statement● Income statement● Cash flow● Balance sheet

C it l t t● Capital structure● Margins, returns and gearing● Divisional analysis● Reserves and production summary● Relative valuation (multiples)● Absolute valuation (DCF and SOTP) Data as of mid 2009 and is meant for illustrative purposes only


This is not a buy or sell recommendation for any particular security.

Stage 3: Resource equity analysisSummary valuation comparisons for companies

Stage 3. Resource Equity analysisProprietary earnings and valuation

models for companiesSummary valuation comparisons for companies

Valuation comparisons include:● Target prices and expected upside● Valuation multiples● IAM earnings estimates and consensus● IAM earnings estimates and consensus● Margins, returns, gearing and growth● Valuation assumptionsp● Share price performance● Benchmarking

The upside /downside to each target price is a key factor in both our Buy and Sell decisions

Data as of mid 2009 and is meant for illustrative purposes only


p p y

This is not a buy or sell recommendation for any particular security.

Stage 4: Qualitative issuesMarket considerations and management meetings

Stage 4. Qualitative factorsMarket considerations and management

meetingsMarket considerations and management meetings

● We consider all of the following factors before making an investment● Meeting management. We will meet company management teams wherever possible

prior to investing to discuss current operational performance and costs● Trading patterns We have dedicated traders for all our equity and commodity trades● Trading patterns. We have dedicated traders for all our equity and commodity trades● Market liquidity. We monitor equity and commodity volumes, trading patterns and risk

appetitesS ll id ti t W i t i t l ti hi ith ll id t ti● Sell-side sentiment. We maintain strong relationships with sell-side counterparties

These qualitative issues complement the quantitative analysis andcomplete our stock selection process


co p e e ou s oc se ec o p ocess

Stage 5: Portfolio ConstructionIntegrated Risk ManagementIntegrated Risk Management

● An integral part of our investment process d tf li t tiand portfolio construction

● Internal Risk Team is led by Richard Saldanha

● Risk team reports directly to Investec Asset Management CEO, Hendrik du Toit

● Internal EMA Risk System− Daily Portfolio Risk Reports (example on

right), showing Value-at-Risk (VaR) and Volatility and risk tolerances for all fundsM thl i k t d− Monthly risk report decomposes country, sector, valuation and asset risk factors with VaR Matrix at 99%, 95% and 90% confidence level90% confidence level

− Allows ‘what if’ scenario analysis


#The funds have not been authorised by the SFC and therefore are not available to Hong Kong investors.

GSF Fund’s structure

Portfolio structure and construction limitationsInvestec GSF Global Energy FundInvestec GSF Global Energy Fund

● UCITS III Long Only Fund● Concentrated core portfolio, approximately 30-40 best ideas● Weighting dependent on level of conviction, mindful but not driven by the benchmark● Primarily a liquid portfolio

Mi i k t it li ti f US$500 illi lth h li idit i i t t f t− Minimum market capitalisation of c.US$500 million although liquidity is a more important factor− As of 31 December 2009, 95% of the portfolio could be liquidated in one day

● Sector universe− Integrated oils exploration & production equipment & services and downstream (refining and− Integrated oils, exploration & production, equipment & services and downstream (refining and

marketing)− Able to invest in coal and alternative energy although exposure is expected to be very limited

● Turnover – expected to be between 100 and 150%p

Risk Profile Investec GSF Global Energy Fund

Indicative Tracking Error 6 - 10%

Sub-sector weighting Up to 3.0x vs. index

Individual stock weighting 2% – 10% (for both index and non-index)


These internal parameters are subject to change, not necessarily with prior notification to shareholders.

Performance attributionInvestec GSF Global Energy Fund 1H 2010 and 2009Investec GSF Global Energy Fund 1H 2010 and 2009

● Key +ve contributors vs the benchmark in 1H 2010 were:benchmark in 1H 2010 were:− Underweight BP. Overweight

Smith International, Baker Hughes and Marathon

● Key ve contributors vs the● Key –ve contributors vs the benchmark in 1H 2010 were:− Underweight ConocoPhillips and

Occidental. Overweight SevanMarine and WeatherfordMarine and Weatherford

● Key +ve contributors vs the benchmark in 2009 were:− Underweight ExxonMobil and

Chevron Overweight PetrobrasChevron. Overweight Petrobras, Afren, Quicksilver, Venture and Weatherford

● Key –ve contributors vs the benchmark in 2009 were:benchmark in 2009 were:− Underweight BG, Woodside,

NOV, Tullow, Schlumberger. Overweight ConocoPhillips and Frontier


FrontierThis is not a buy or sell recommendation for any particular security. Source: Investec Asset Management

Portfolio attributes – Top ten holdings and benchmark positioningInvestec GSF Global Energy FundInvestec GSF Global Energy Fund

Sector weightings (%) Top ten holdings %

Date Fund MSCI World Energy

Integrated 49.1 57.3

E&P Oil Sands 3 5 3 4

Total S.A. 9.56

Exxon Mobil Corp. 9.15

Ultra Petroleum Corp. 6.38E&P Oil Sands 3.5 3.4

E&P 30.9 18.9

E&P subtotal 34.4 22.3

ENI S.p.A. 5.92

Noble Corp. 4.69

Marathon Oil Corp. 4.12Equipment and Services 15.1 12.9

Refining 0.4 1.7

p

BG Group PLC 3.94

Baker Hughes Inc. 3.91

Petrohawk Energy Corp. 3.65Other 1.0 5.8

Total 100.0 100.0

gy p

Chevron Corp. 3.57

The portfolio may change significantly over a short period of time


The portfolio may change significantly over a short period of time.This is not a buy or sell recommendation for any particular security.Source: Investec Asset Management, as at 31.07.10.

Portfolio attributes – Current portfolio over/under-weightsInvestec GSF Global Energy Fund

Top Fund over-weights and under-weights versus MSCI World Energy Index

Investec GSF Global Energy Fund

Overweights %

Ultra Petroleum Corp. 6.08

Total S A 4 60

Underweights %

Halliburton Co. -1.26

Apache Corp 1 61Total S.A. 4.60

Noble Corp. 4.30

ENI S.p.A. 3.44

Apache Corp. -1.61

Canadian Natural Resources Ltd. -1.74

Occidental Petroleum Corp. -2.95

Petrohawk Energy Corp. 3.43

Marathon Oil Corp. 3.02

Quicksilver Resources Inc. 3.02

Schlumberger Ltd. -3.32

Chevron Corp. -3.56

ConocoPhillips -3.63Q

Baker Hughes Inc. 2.95

Range Resources Corp. 2.79

p

Royal Dutch Shell PLC (CL B) -4.89

Exxon Mobil Corp. -5.02

The portfolio may change significantly over a short period of time

Southwestern Energy Co. 2.61 BP PLC -5.56


The portfolio may change significantly over a short period of time.This is not a buy or sell recommendation for any particular security.Source: Investec Asset Management, as at 31.07.10

Investment style analysisInvestment style analysis

● Investments in the Global Energy Fund are likely to be impacted by many variables, including, but t li it d t th l b l l d d d f th ditinot limited to, the global supply and demand for the commodities

● Factors influencing supply include: − the actions of Organization of The Petroleum Exporting Countries (“OPEC”)

war and terrorismweathertax regimesthe price of oil itself which influences the marginal return of producing oil and natural gasthe price of oil itself, which influences the marginal return of producing oil and natural gas

● Factors influencing demand include: − economic growth around the world, and the relative growth of less developed countries versus

developed economiesdeveloped economiesweatherthe price of the commodity itself

● The Funds rely on a disciplined investment and portfolio construction process which may also not● The Funds rely on a disciplined investment and portfolio construction process which may also not work at times. Factors affecting this could include commodity price movements and broader equity market movements


GSF The macro outlook for energy

Key energy sector themes for 2010 and beyondKey energy sector themes for 2010 and beyond

● OPEC actions: We expect compliance to slip further as Saudi bank rolls production increases l h i th ld i ll R ielsewhere in the world, especially Russia

● Range bound oil prices: We expect an average $70/bl Brent in 2010 (within a range of $60-85/bl) as OPEC supply the market in the short-term

● Destocking: We need to see inventories decline before prices can move significantly higher● Destocking: We need to see inventories decline before prices can move significantly higher● Iraqi production: It is too early to tell how much production can really increase over the next

10 years● Investment: We expect capital expenditure to increase slightly in 2010 and then accelerate further● Investment: We expect capital expenditure to increase slightly in 2010 and then accelerate further

in 2011 and beyond● Non-OPEC production: Lack of investment should see non-OPEC production slipping● US gas market recovery: g y

− We expect supply to fall and for inventories to decline, which is supportive to prices− We expect demand to show signs of a recovery, which is supportive to prices

● M&A activity: y− We expect the IOC’s and NOC’s to continue to be active in acquiring strategic assets− With the discovery of new low cost gas shales, we believe that this is a key focus area

● Share prices: Management quality, delivery and exploration success will be rewarded


p g q y y p

Gas markets: more potential upside in gas than in oilGas prices appear more positively skewed than oil prices presentlyGas prices appear more positively skewed than oil prices, presently

● There is better fundamental economic support for natural gas prices than for oil prices● Oil is trading well above the marginal cash cost of extraction while natural gas is trading

close to it● Oil prices have more downside risk while gas price offer more upside potential● Oil prices have more downside risk while gas price offer more upside potential

7.5160.08.0

Price required for marginal producer to

make a 10% return on investment

6.0

80 85

120.06.0

$ / 6

1)

$ / m

cf)

Price required for average cost producer to

make a 10% return on new investment

3.880 - 85

55

40 0

80.0

2 0

4.0

Oil

pric

e (

Gas

pric

e ( $ Current spot price

Cash cost of current supply for a marginal

cost producer

35

0.0

40.0

0.0

2.0

G i i Oil i il i


Source: Bloomberg, March 2010

Gas price versus gas economics Oil price versus oil economics

Gas markets: US gas prices are very depressedUS gas prices have not recovered with oilUS gas prices have not recovered with oil

● US gas prices are at depressed levels, despite the recent strength in crude prices● Weak industrial demand and fears of over-supply have caused this price reaction● We expect the US market to correct dramatically and for gas prices to rise from hereS US i (US$/ f)Spot US gas price (US$/mmcf)


Source: Bloomberg, July 2010

Global Gas Demand: Gas demand growth outpaces oil demand growthdemand growth

● Global gas demand grew 2.4% CAGR over the last 15 years

● Growth in LNG demand of ~7% CAGR over the last decade outpaced that of overall gas demand

● During 2009 growth in China India UK and US offset material year on year declines in Japan South Korea and Taiwan● During 2009, growth in China, India, UK and US offset material year-on-year declines in Japan, South Korea and Taiwan

● LNG represents ~10% of total gas consumption, up from 6% in 2000

● LNG will continue to gain its share of global energy demand as countries move away from coal and oil (on a relative basis)

● In contrast, non-OPEC crude oil supply has grown by only 5 mmbpd (1% annually) during the last 10 years


pp y g y y p ( y) g y

Sources: Tudor Pickering Holt & Co, April 2010

Gas demand: industrial demand recovery is criticalIndustrial demand represents 35-40% of total gas demandIndustrial demand represents 35-40% of total gas demand

● Between 35 and 40% of total gas demand is for industrial use− Industrial demand accounts directly for c.30%− 30% of power generation demand for natural gas is also for industrial use

● US industrial demand is still well below the December 2007 peak● US industrial demand is still well below the December 2007 peak● Recovery is underway, although we believe there is further to go● Gas is more leveraged to an industrial demand recovery than oilg y

U.S. natural gas demand, 2008Pipeline

3%

Commercial 14%

Industrial 30%

Power Generation

26%

Residential22%

14%


Source: Simmons, March 2010

Other 5%

Gas markets: the cheapest energy sourceGas is cheaper than both oil and coal currentlyGas is cheaper than both oil and coal currently

● Depressed prices leave gas as the cheapest ‘energy molecule’ available● Power producers will switch from ‘dirtier’ coal into ‘cleaner’ natural gas at $4.50/mcf● The US gas market is likely to correct sharply as demand returns and supply falls

WTI oil vs natural gas price ratio



Gas demand: Gas should benefit from coal displacementGas is cheaper and cleaner than thermal coalGas is cheaper and cleaner than thermal coal

Natural gas futures vs MMBtu equivalent coal futures prices


Source: Credit Suisse, April 2010

Gas demand: future demand from power generationAn easy option for governments to reduce carbon intensityAn easy option for governments to reduce carbon intensity

● Gas demand from power has grown significantly since 1997● Recent shale gas discoveries give confidence in future gas production● We expect further gas-powered electricity generation growth● Renewable energy economics are stretched while subsidies are likely to be delayed or● Renewable energy economics are stretched while subsidies are likely to be delayed or

restrained in the weak economic environment● Gas offers the cheapest, easiest route towards reducing carbon intensity

16

18

Gas consumption from power generation sector Capacity added by fuel type

6

8

10

12

14

bcfd

0

2

4

1949

1951

1953

1955

1957

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007


Source: EIA, Simmons Source: Platts, Simmons

Gas supply: capex and drilling have reacted quicklyCuts likely to be too drastic and should lead to higher pricesCuts likely to be too drastic, and should lead to higher prices

● Given the cut in US drilling activity in 2009, we expect a supply response in 2010● US E&P capital expenditure fell sharply in 2009 but should rebound in 2010● The gas-directed rig count is rebounding with a larger share in horizontal rigs● The US market is back into balance There is a strong possibility that it goes into deficit

100%E&P Year-over-Year Change in Organic Capex (%)

● The US market is back into balance. There is a strong possibility that it goes into deficitBaker Hughes US gas rig count E&P year-over-year change in organic capex (%)

40%

60%

80%

0%

20%

40%

-40%

-20%



US shale gas production is an increasing source of supplyUS shale gas production is an increasing source of supply

● US shale gas production now represents around 17% of total US production. This compares to just 4% in 2004

● We expect US shale gas production to double over the next six years● Assuming well service costs remain stable gas producers will still need $6 50/MMBtu in● Assuming well service costs remain stable, gas producers will still need $6.50/MMBtu in

order to generate a cost of capital return

US Shale ProductionUS Shale Production


Source: Credit Suisse, June 2010

Basic cost analysis provides an indication of fundamental supportsupport

● We estimate that total costs for the listed exploration and production companies is around $5 75/M bt$5.75/Mmbtu

● We estimate that total cash costs for the listed exploration and production companies is around $3.50/Mmbtu

E&P company total cost per Mmbtu E&P company total cash cost per Mmbtu

● We continue to invest in the low cost, high organic growth and high return companies

$

$8.00

$10.00

$5 00

$6.00

$7.00

$8.00

$2.00

$4.00

$6.00

$2.00

$3.00

$4.00

$5.00

$0.00 SD

PX

PW

TIS

MP

XD

AP

CK

WK

EQ

TR

OS

EB

BG

CR

KC

OG

MU

RO

XY

AP

AN

FXH

K RR

CE

OG

NB

LFS

TU

NT

CR

ZOD

VN

XE

CC

HK

UP

LS

WN

$0.00

$1.00

DP

TRS

D EQ

TP

ETD

PV

AK

WK

GM

XR

AP

CR

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EH

KFS

TB

BG

NFX

UN

TC

OG

DV

NR

RC

EO

GC

RK

XE

CC

RZO

CH

KU

PL

SW

N


This is not a buy or sell recommendation for any particular security.Source: Credit Suisse, June 2010

Gas supply: prolific shale plays but high decline ratesShale play decline rates are prohibitiveShale play decline rates are prohibitive

● Average first year decline rates on the shale plays are around 70%● Over the first three years, declines average around 85%● At the same time, Gulf of Mexico gas production is down over 40% in the last 10 years● The shale plays are needed and the resource holders will be winners● The shale plays are needed and the resource holders will be winners...

... but so will the service companiesDecline rates on US gas shale plays


Source: Simmons, March 2010

Gas supply: LNG volumes need at least $6 mmcfIt is unlikely that significant volumes will go to the US marketsIt is unlikely that significant volumes will go to the US markets

● We expect around 10bcf/d of new global LNG supply by end 2011 vs end 2008

Return Sensitivity Analysis (IRR%)by end 2011 vs end 2008

● Whilst new LNG projects have started, the majority of these volumes have been contracted

● Current prices indicate that any excess (spot) LNG

Gas Price $/mmcf

$4 $5 $6 $8 $10 $12

Without NGLs 0% 4% 7% 11% 15% 19%● Current prices indicate that any excess (spot) LNG cargoes will go to Asian markets, not to the US

● US gas prices need to be higher to incentivise LNG supply

With NGLs 8% 10% 12% 16% 19% 21%

Regasification Capacity (Bcf/d) 2006 2007 2008 2009North America 5 1 5 1 10 7 15 2

Global LNG netback prices ($/mmcf)New LNG supply coming into the market

F b N tb k T bl ($/ bt )North America 5.1 5.1 10.7 15.2Europe 8.2 10.2 13.4 14.7Total 13.3 15.3 24.1 29.9Percentage Increase 15% 58% 24%

Liquefaction Additions (Bcf/d) 2H08 1H09 2H09 1H10Nigeria (Train 6) 0.5Qatar (Qatargas 4, Rasgas 6) 2.0A t li (NWS 5) 0 6

February Netback Table ($/mmbtu)Destination Ports

Cove LakePoint Altamira Charles Spain Belgium UK India Japan Korea

$5.60 $5.80 $5.04 $4.80 $5.35 $5.45 $7.20 $7.80 $7.80Algeria 4.90 4.87 4.12 4.62 4.98 5.09 6.07 5.84 5.91Egypt 4.63 4.58 3.86 4.43 4.71 4.83 6.35 6.12 6.19Nigeria 4.35 4.68 3.94 4.08 4.55 4.65 5.94 5.91 5.97e

Port

s

Australia (NWS 5) 0.6Indonesia (Tangguh) 1.0Yemen (Yemen LNG) 0.9Russia (Sakhalin II) 1.3Qatar (Qatargas 5, Qatargas 6, Rasgas 7) 3.0Total 0.5 2.6 3.2 3.0

Nigeria 4.35 4.68 3.94 4.08 4.55 4.65 5.94 5.91 5.97Qatar 4.01 3.97 3.24 3.78 4.08 4.18 6.90 6.73 6.78Trinidad 5.20 5.32 4.58 4.05 4.60 4.70 5.45 5.39 5.44Source: Waterborne LNG

Sour

ce


Source: Tudor Pickering, Investec Asset Management estimates, April 2010

Gas equities: M&A activity in the North American gas marketExxon has made the boldest move We expect others to followExxon has made the boldest move. We expect others to follow

● Exxon’s $43 billion takeover of XTO is based on expanding their US shale gas expertise globally

E&P acquisitionsexpanding their US shale gas expertise globally.

● In addition, there have been a number of other acquisitions in the North American gas sector over the last two years

● We cross reference our company valuations against these deal metrics

● On our estimates, we value companies based on the following approximate valuations:following approximate valuations:− Marcellus $9k/acre− Haynesville $20-25k/acre

H Ri $7k/− Horn River $7k/acre− Fayetteville $8-10k/acre

● Based on these valuations, at $7/mmbtu, we still see significant upsides to a number of the US E&Psignificant upsides to a number of the US E&P companies


This is not a buy or sell recommendation for any particular security.Source: Company data, Investec Asset Management estimates, April 2010

Gas equities: Exxon acquisition of XTOValuation and RoACE of XTO at different gas pricesValuation and RoACE of XTO at different gas prices

● Exxon acquired XTO at the end of 2009 for $43bn, with a takeout price of c.US$48/sh● We believe Exxon paid for a long term gas price of around $5/mcf● At $7/mcf gas, the RoACE on the acquisition for Exxon is around 7%● Exxon acquires XTO’s knowledge as well as its US acreage● Exxon acquires XTO’s knowledge as well as its US acreage

XTO valuation at various gas prices RoACE for Exxon’s purchase of XTO at various gas prices


This is not a buy or sell recommendation for any particular securitySource: Investec Asset Management, March 2010

Gas equities: gas equities offer potential upside even at $5/mcfUpsides at different gas prices for US gas E&PsUpsides at different gas prices for US gas E&Ps

● We see 60-80% upside in gas E&Ps at a $6/mcf long term gas price● Even at $5/mcf, we see upside averaging over 40%● We believe these names offer attractive upside and downside support● All five names have some production hedged through 2010/2011● All five names have some production hedged through 2010/2011

E&P sum of the parts valuation at various gas prices


This is not a buy or sell recommendation for any particular securitySource: Bloomberg, March 2010

Oil markets: near-term oil supply/demand balanceDe-stocking is required in the short-termDe-stocking is required in the short-term

● We expect 2010 to be a year of de-stocking with OPEC crude production gradually increasing

Mmb/d 2008 2009 2010F

Flat year on year demand growth is in line with current IEA andOECD demand 47.6 45.5 45.5 Flat year-on-year demand growth is in line with current IEA and OPEC forecasts for 2010

Non-OECD demand 38.7 39.2 39.7 Our 2010 forecast is below current IEA forecasts (40.6mb/d) and above the current OPEC forecasts

Total demand 86.3 84.7 85.2

Non-OPEC supply 50.6 50.5 50.5 Flat non-OPEC production could prove optimistic in 2010 given the slow down in investment in 2008 and 2009

OPEC NGLs 4 7 5 4 5 8OPEC NGLs 4.7 5.4 5.8

OPEC 12 supply 31.0 28.6 28.6 Based on current OPEC production rates

(Deficit)/surplus (0.2mb/d) (0.3mb/d) Over the next 12 months we believe we need OPEC production to increase only marginally n order to keep the market balanced


Source: Investec Asset Management, IEA, December 2009

Near-term supply/demandDe-stocking is required to overcome the current inventory overhangDe-stocking is required to overcome the current inventory overhang

● There is still around 61 days of forward cover in OECD stocks● We need this forward cover to return to more normal levels of 52-56 days● A return to these levels will allow crude prices to move sustainably higher

OECD total (crude + products) inventories, bn bbl OECD total inventories, days’ demand


Source: Collins Stewart Europe Limited, May 2010

Long term demand: Non-OECD is the key driverPer capita oil demand and car density remain very lowPer capita oil demand and car density remain very low

● Non-OECD oil demand has grown at 2.6% pa (1973-2008) versus the OECD at 0.5%pa● China and India per capita oil demand is a fraction of OECD levels● Car density is rapidly increasing in China and India, and still a fraction of the OECD● In contrast US and western European per capita demand will likely moderate● In contrast, US and western European per capita demand will likely moderate

2009 per capita oil demand (bl)Per capita oil demand (bl)

Global oil use by sub-sector

Ref inery fuel

Heating7%

Road construction

4%

Other6%

p ( )

2009 Oil Demand (mb)

Population (in mil)

Oil Consumption per capita (bls)

US 6,948.1 308.7 22.5

TransportPetrochemicals

Industrial fuel8%

Ref inery fuel5%OECD 16,615.0 1,190.6 14.0

Japan 1,589.0 127.7 12.4

Germany 895.0 82.1 10.9

Cp

64%Petrochemicals6%

China 3,303.0 1330.1 2.5

India 1,211.7 1,166.0 1.0

Source: IEA, Investec Asset Management estimates 2008


Source: OECD and BP

, g

Long term demand: Car density and ownership growthWhilst the growth has been strong we do not expect it to slow significantlyWhilst the growth has been strong, we do not expect it to slow significantly

● We expect China to consume more units on an annual basis than the US by 2011● We estimate that car density in China and India will double within five yearsInternational car sales – key markets (millions of units) Car density (cars per 1000 of population)

1990-99 2000 2001-2007 2008 2009 2010F

Global Sales 39.2 46.6 49.5 52.2 50.9 52.7

North America 16.4 19.8 19.4 15.9 12.7 13.9

Canada 1.3 1.6 1.6 1.6 1.5 1.5

United States 14.6 17.4 16.7 13.2 10.4 11.5

2000 2004 2007 2009E 2010E 2014E

Total W. Europe 467 492 495 499 500 508Russia 140 169 206 231 234 265Total Eastern Europe 147 171 199 221 225 252Total N. America 359 374 380 372 367 357China 4 9 16 24 29 47

Mexico 0.5 0.9 1.0 1.0 0.8 0.9

Western Europe 13.1 14.8 14.6 13.5 13.6 12.5

Germany 3.6 3.4 3.3 3.1 3.8 3.2

Eastern Europe 1.18 2.4 2.5 4 3 3.2

Russia 0 8 1 1 4 2 7 1 5 1 6

China 4 9 16 24 29 47India 5 6 6 8 9 13Japan 413 438 451 452 450 452Korea 171 220 247 268 280 329Total Asia 31 35 40 43 46 54Argentina 140 128 145 165 172 196Russia 0.8 1 1.4 2.7 1.5 1.6

Asia 6.9 7.9 10.8 15.1 17.7 18.8

China 0.3 0.6 2.6 5 7.3 8.8

India 0.3 0.6 0.8 1.2 1.5 1.6

South America 1.6 1.9 2.2 3.7 3.9 4.3

B il 0 9 1 2 1 4 2 2 2 5 2 7

gBrazil 90 96 107 119 124 147Total S. America 76 79 89 99 102 119S.Africa 87 92 107 105 104 112Grand Total 109 116 122 126 127 135

Brazil 0.9 1.2 1.4 2.2 2.5 2.7


Source: Scotia Capital/Investec Asset Management, February 2010 Source: Global Insight, February 2010

Long term demand: Non-OECD demand growth What if China and India follow the paths of South Korea and the USAWhat if China and India follow the paths of South Korea and the USA

● Industrial production growth in non-OECD countries should have a bigger impact on overall oil d d i f ddemand going forward

● Whilst we expect OECD oil consumption per capita to reduce over time, this will be more than offset by the industrialisation of China and India alone

90%

100%OECD Demand Non‐OECD Demand

Non-OECD as a % of global demand Per capita oil consumption (barrels per year)

27 530.032.5 Japan USA South Korea China India

50%

60%

70%

80%

17.520.022.525.027.5

)20%

30%

40%

5.07.5

10.012.515.0

0%

10%

Source: Simmons & Company; Investec Asset Management estimates

0.02.5

Source: Simmons & Company; Investec Asset Management estimates February


Source: Simmons & Company; Investec Asset Management estimates,February 2010

Source: Simmons & Company; Investec Asset Management estimates, February 2010

Long term supply: declines and poor explorationA lack of exploration success and increasing decline ratesA lack of exploration success and increasing decline rates

● A lack of new discoveries and increasing declines should limit long term production growth● Oil resources are still abundant, they are just not as low cost and accessible as those discovered

between 1920 and 1970

Average oilfield decline rate (% p.a.) A lack of exploration success

>20%20%

25%

g ( p ) p

350

400

450

6.0

7.0

bls)

420bn

red

(bnb

ls)

10%11%

16%

15%

200

250

300

350

3.0

4.0

5.0

disc

over

y si

ze (b

nb

/ res

erve

s di

scov

er

4%5%

10%

5%

10%

20bn

0

50

100

150

0 0

1.0

2.0

Ave

rage

mbe

r of d

isco

verie

s

0%Before1960s

1960s 1970s 1980s 1990s 2000s

01850-1899

1900-1909

1910-1919

1920-1929

1930-1939

1940-1949

1950-1959

1960-1969

1970-1979

1980-1989

1990-1999

2000-2006

0.0

Volume discovered (bnbls, LH axis)Number of discoveries (LH axis)Average discovery size (bnbls, RH axis)

Num


Source: Goldman Sachs and Investec Asset Management estimates, 2010 Source: AAPG

g y ( , )

Long term supply: Reserve additions and value creation through explorationthrough exploration

● Aside from a few companies, exploration success has been limited

250%

Reserves added to exploration since 2000 as a % of SEC reservesNet present value of discoveries as a % of EV

70%

80%

150%

200%

50%

60%

100%

150%

30%

40%

50%

0%

10%

20%

0%

Gal

pTu

llow

INPE

XBG

Mur

phy

Rel

ianc

eC

airn

Indi

aPe

trobr

asW

oods

ide

Re p

sol

Soco

Mar

atho

nN

oble

Ene

r gy

ENI

Sino

pec

Cor

pAn

adar

koH

usk y

Ene

rgy

TOTA

LC

hevr

onSt

atoi

lR

DSh

ell

A pac

heC

NO

OC

Hes

sBP

BHP

Billi

ton

Con

ocoP

hilli p

sEx

xonM

obil

Petro

chin

aN

exen

Enca

naD

evon

Ene

r gy

Luko

il

0%

Soco

INPE

XC

airn

Indi

aTu

llow

Gal

pPe

trobr

as BGM

urph

yAn

adar

koM

arat

hon

Woo

dsid

eC

hevr

onN

oble

Ene

rgy

Rep

sol

Hes

sR

elia

nce

BPTO

TAL

Enca

naC

NO

OC

Stat

oil

Nex

enC

onoc

oPhi

llips

RD

Shel

lPe

troch

ina

Dev

on E

nerg

yEN

IEx

xonM

obil

Apac

heH

usky

Ene

rgy

Sino

pec

Cor

pBH

P Bi

llito

n


This is not a buy or sell recommendation for any particular security.Source: Goldman Sachs, February 2010

Non-OPEC production: key regions are decliningNorth Sea Mexico and US falling fast despite capex spend Is Russia next?North Sea, Mexico and US falling fast despite capex spend. Is Russia next?

● Mexico, North Sea and US oil production has been falling at c. 8% p.a. over the last few years. Assuming this decline rate slows to c 4% p a non OPEC production remains under pressuredecline rate slows to c. 4% p.a., non-OPEC production remains under pressure

● Given the maturity of the Russian oil fields, we believe that oil production from this region has peaked● These decline rates should accelerate if oil prices were to weaken as a result of reduced capital expenditureNorth Sea Mexico

4,000

5,000

6,000

7,000( )

1500

2000

2500

3000

3500

4000

1,000

2,000

3,000

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

E

2012

E

2015

E

0

500

1000

1500

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

E

2012

E

2015

E

7,000

8,000

9,000

10,000

7 000

9,000

11,000

13,000

United StatesRussia Oil Production (mbl/d)

3,000

4,000

5,000

6,000

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

E

2012

E

2015

E

1,000

3,000

5,000

7,000

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

E

2012

E

2015

E


2 2 22 2 2

Source: Investec Asset Management / Tudor Pickering, February 2010

Long term supply: lack of project sanctions recentlyThe industry faces technical and resource-based challengesThe industry faces technical and resource-based challenges

Water depth is getting deeper. This will impact both extraction costs per barrel and production delays

Lack of project sanctions since 2006 is likely to make post 2010 volume growth difficult extraction costs per barrel and production delayspost 2010 volume growth difficult


Source: Goldman Sachs, September 2009

Non-OPEC production change year-on-yearProduction from Brazil is unlikely to offset declinesProduction from Brazil is unlikely to offset declines

● Early indications are that Brazil’s sub-salt discoveries could contain as much as 60 billion barrels of il i loil in place

● Significant first production is not expected until 2014, but significant investment is needed to achieve this target3,000

2,000

2,500

,

eclin

e) k

bls/

d

500

1,000

1,500

uctio

n gr

owth

/ (d

e

1 000

-500

0

n-O

PE

C y

oy p

rod

-1,500

-1,000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

No

Perfect delivery Delivery in line with history


Source: Goldman Sachs, February 2010One percent more decline in the base One percent decline and historical delivery

OPEC: We need OPEC’s spare capacityBased on a conservative demand outlook we see a need for investment in the industryBased on a conservative demand outlook, we see a need for investment in the industry

● If demand grows from current levels, then OPEC spare capacity will be needed and could be fully tili d b 2012utilised by 2012

● In addition to non-OPEC producers, the OPEC member countries also need to invest heavily

Call on OPEC crude (mmb/d) OPEC spare capacity (% utilised)

$100

$120

$140

32

33

34

35

110 0%

115.0%

120.0%

$60

$80

$100

29

30

31

32

$/bb

l

mm

bpd

100.0%

105.0%

110.0%

C c

apac

ity u

tilis

atio

n

Physical limit to demand

$0

$20

$40

25

26

27

28

85.0%

90.0%

95.0%

OP

EC

$0 25

Call on OPEC Crude WTI

85.0%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

E

2010

E

2011

E

2012

E

2013

E

2014

E

2015

E

Base case Historical delivery 1% increase in decline rates Historical delivery and decline increase

Source: Goldman Sachs, February 2010Source: Simmons & Company, February 2010


, yp y, y

OPEC: Iraq is the real wild cardA significant amount of investment is neededA significant amount of investment is needed

● Oil reserves of 115 billion barrelsOPEC – available spare capacity (50% of Iraq plans)

● Projects announced so far are targeted to add 6.1mmb/d of additional capacity by 2017!

● Over $12 billion p.a. of capital expenditure is 6 %

8 %

1 0 %

needed over this period

0 %

2 %

4 %

0 6 0 7 0 8 0 9 E 1 0 E 1 1 E 1 2 E 1 3 E 1 4 E 1 5 E 1 6 E 1 7 E 1 8 E

10 %

12 %

OPEC – available spare capacity (Iraq plans fulfilled)

4 %

6 %

8 %

0 %

2 %

06 07 0 8 0 9E 1 0E 1 1E 1 2E 1 3E 1 4E 15E 16E 17E 18E


Source: Collins Stewart, Investec Asset Management estimates, February 2010

Long term supply: marginal cost likely to remain highCanadian tar sands projects are the marginal future producersCanadian tar sands projects are the marginal future producers

● The industry will have to develop Canadian tar sands projects to satisfy global demand● These projects require, on average, around $80/bl to make a cost of capital return● These projects will set long term crude prices

Oil price required to make a Cost-of-Capital break even ($/bl) for potential new projects

Canadian tarCanadian tarsands projects


Source: Goldman Sachs, January 2010

Long term supply: higher marginal cost of supplyWe estimate that the marginal cost for oil in 2009 is around $80/blWe estimate that the marginal cost for oil in 2009 is around $80/bl

● The development of marginal projects is currently in question, whilst spare capacity exists

● Once the spare capacity is exhausted, more marginal fields will be needed, thus supporting higher crude prices

Industry marginal cost curve (US$/boe)


Source: Goldman Sachs

Refining – not as bad as the 1980s Spare capacity is still quite high thoughSpare capacity is still quite high though

Global refining capacity versus demand (kb/d) Global refining excess capacity by product

40% 50%

ty MS Estimates

60,000

80,000

100,000

b/d

20%

25%

30%

35%

30%

40%

s %

of P

rodu

ct C

apac

i

20,000

40,000

kb

5%

10%

15%

20%

0%

10%

20%

rld E

xces

s C

apac

ity a

s

-

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

e20

12e

2014

e

0%

Global MD capacity Global LD capacityGlobal FO capacity Global 'others' capacityWorld Tot Pdts Consumption (kb/d) Global excess cap as % total capacity

-10%19

8419

8619

8819

9019

9219

9419

9619

9820

0020

0220

0420

0620

0820

10e

2012

e20

14e

Wor

Light Distillates Middle Distillates Fuel Oil

World Tot Pdts Consumption (kb/d) Global excess cap as % total capacity


Source: Morgan Stanley, June 2010

Refining – Product margins and capacity differ by regionRefining Product margins and capacity differ by region

Europe Excess Capacity – less diesel, more fuel oil60% MS Estimates 60%ci

ty MS Estimates

N.America Excess Capacity – lots more fuel oil, still short gasoline

20%

30%

40%

50%

y as

% o

f Pro

duct

Cap

acity

-20%

0%

20%

40%

acity

as

% o

f Pro

duct

Cap

ac

-30%

-20%

-10%

0%

10%

Euro

pe E

xces

s C

apac

ity

-100%

-80%

-60%

-40%

Nor

th A

mer

ica

Exce

ss C

apa

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

e20

12e

2014

e


1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

e20

12e

2014

e

N


60%

y

MS Estimates

APAC Excess Capacity – longer fuel oil, balanced light and middle distillate capacity

70%ty

Middle East Excess Capacity – not the export threat that is widely perceived

0%

20%

40%

ty a

s %

of P

rodu

ct C

apac

ity

30%

40%

50%

60%

70%

city

as

% o

f Pro

duct

Cap

acit

MS Estimates

-80%

-60%

-40%

-20%

84 86 88 90 92 94 96 98 00 02 04 06 08 0e 2e 4e

APA

C E

xces

s C

apac

i

-10%

0%

10%

20%

4 6 8 0 2 4 6 8 0 2 4 6 8 e e e

Mid

dle

East

Exc

ess

Cap

ac


1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

e20

12e

2014

e


1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

e20

12e

2014

e

Light Distillates Middle Distillates Fuel OilSource: Morgan Stanley, June 2010

GSF Investment case for energy equities

Investment: Energy equities relative to energy commoditiesEnergy equities provide more leverage than the crude priceEnergy equities provide more leverage than the crude price

● The GSF Global Energy Fund has t f d th d il i i 1994

Long term performance in USD(F D b 1994 t J l 2010)outperformed the crude oil price since 1994

● We believe energy equities are likely to outperform the commodity long term as a result of:

(From December 1994 to July 2010)

1 600

1,800

2,000Investec GSF Global Energy A Inc (MF)

MSCI World/Energy TR (IN)

WTI crude oilresult of:− Operational leverage: if the crude price

doubles, the operating profit of a company with a 50% margin will trebleG th t i

1,000

1,200

1,400

1,600

ance

gro

wth

− Growth: most energy companies can grow while commodity investments have no ability to grow

− Exploration success: most energy400

600

800

Per

form

a

Exploration success: most energy companies deliver value through exploration which is not available directly through the commodity

0

200

Dec

-94

Jun-

95D

ec-9

5Ju

n-96

Dec

-96

Jun-

97D

ec-9

7Ju

n-98

Dec

-98

Jun-

99D

ec-9

9Ju

n-00

Dec

-00

Jun-

01D

ec-0

1Ju

n-02

Dec

-02

Jun-

03D

ec-0

3Ju

n-04

Dec

-04

Jun-

05D

ec-0

5Ju

n-06

Dec

-06

Jun-

07D

ec-0

7Ju

n-08

Dec

-08

Jun-

09D

ec-0

9Ju

n-10

Past performance should not be taken as a guide to the future and there is no guarantee that this investment will make profits; losses can be made.Source: Lipper to 31 07 10 NAV based gross income reinvested annualised and gross of annual management


Source: Lipper to 31.07.10, NAV based, gross income reinvested, annualised and gross of annual management fees in US dollars. The performance is shown since inception of MSCI World Energy index at 30.12.94. Source: Bloomberg to 31.07.10 for WTI crude oil

Investment: Energy equities versus a crude ETFEnergy equities have strongly outperformed crude oil ETFsEnergy equities have strongly outperformed crude oil ETFs

● The Investec Global Energy fund has d li d b tt i t t t th th

Performance in USDdelivered a better investment return than the ETF Securities crude oil ETF (CRUD LN), since its inception (October 2006)

● The Investec Global Energy Fund has

(From October 2006 to July 2010)

● The Investec Global Energy Fund has delivered strong correlation with the crude price over this period

Past performance should not be taken as a guide to the future and there is no guarantee that this investment will make


Past performance should not be taken as a guide to the future and there is no guarantee that this investment will make profits; losses can be made. Source: Bloomberg, July 2010, based on ‘A’ Income Share.

Investment: A valuation opportunity in energy equitiesEnergy equities are not pricing in our long term commodity assumptionsEnergy equities are not pricing in our long term commodity assumptions

● We believe we are in the middle of an investment cycle in the energy industry− Energy equities generally outperform markets during investment phases

● Energy equities have historically outperformed the crude price● While the near term commodity may be uncertain● While the near term commodity may be uncertain …

… energy equities seem to be discounting a more bearish long term outlook than we expect

Th M j d E&P h d t d d t i i i f d il i● The Majors and E&Ps have de-rated and are not pricing in forward oil prices− The E&P companies are trading at asset-backed valuation discounts− We believe it is still cheaper to buy oil and gas on Wall Street than to explore for ite be e e s s c eape o buy o a d gas o a S ee a o e p o e o

● The Service companies have de-rated as if the investment cycle is over


Energy equities: a long investment phase aheadThe investment phase is continuingThe investment phase is continuing

● We still need to build more oil and gas production capacity to satisfy long term demand growth

● We expect the current investment phase to last for another 10+ yearsEnergy stocks and net investment, long term

13.4

11 0

11.5

Net Energy

gy , gExploitation

phaseExploitation

phaseExploitation

phaseExploitation

phaseInvestment

phaseInvestment

phaseInvestment

phase

12.8

13.1

10.0

10.5

11.0Net Energy investment(right axis)

11 9

12.2

12.5

8.5

9.0

9.5Net Energy

Capital Stock(left axis)

11.3

11.6

11.9

8 5 9 6 3 0 7 4 8 5 9 6

7.0

7.5

8.0


1901

1908

1915

1922

192 9

1936

1943

1950

1957

1964

1971

1978

1985

1992

1999

2006

Source: Goldman Sachs

Investment: Energy equities sector relative performanceThe energy sector historically outperforms during investment phasesThe energy sector historically outperforms during investment phases

● Energy equities generally outperform during investment phases

2.5Energy stocks

outperformEnergy stocks underperform

Energy stocks outperform

Energy stocks vs S&P 500, recent

1.5

2.0

embe

r 197

3

18 years

12 years 18 years +20 years

1.0

base

d to

100

, Nov

e

0 0

0.5

Reb

Investment phase

Investment phase

Consolidation phase

Consolidation Phase

0.0

Nov

-73

Nov

-75

Nov

-77

Nov

-79

Nov

-81

Nov

-83

Nov

-85

Nov

-87

Nov

-89

Nov

-91

Nov

-93

Nov

-95

Nov

-97

Nov

-99

Nov

-01

Nov

-03

Nov

-05

Nov

-07

Nov

-09

US oils relative to US markets

We expect this investment phase to be significantly longer than the 1970’s

2030


e e pec s es e p ase o be s g ca y o ge a e 9 0 sSource: Datastream, January 2010

Oil company valuations are still below historic levelsDespite crude prices being significantly higher than historic levelsDespite crude prices being significantly higher than historic levels

● The super-majors have de-rated significantly over the last ten years. The emergence of new titi h d i thicompetition has driven this

22x BP Ch E M bil RDSh ll TOTAL

Independent E&P companies are trading below the long term marginal cost of extraction

Super-majors have not priced in the rise in commodity prices

16x

18x

20x

22x

low

BP Chevron ExxonMobil RDShell TOTAL

10x

12x

14x

adju

sted

cas

h fl

4x

6x

8x

EV

/ de

bt a

0x

2x

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

E

2010

E

2011

E


2 2 2

This is not a buy or sell recommendation for any particular security.Source: Investec Asset Management, March 2010

Company Exposure: It is more difficult to differentiate between integrated oil companiesintegrated oil companies

● All the companies below have strong free cash generation, but the European companies tend to hi h di id dpay a higher dividend

The European Majors offer around 6% dividend yields

The global Majors offer around 6% free cash flow yieldsyields yields

7.0%

8.0%BP Chevron ExxonMobil

RDShell TOTAL8.0%

10.0%

BP

Chevron

ExxonMobil

RDShell

4.0%

5.0%

6.0%

end

yiel

d

2.0%

4.0%

6.0%

h flo

w y

ield

TOTAL

2.0%

3.0%Div

ide

-2.0-%

0%

Free

csh

0%

1.0%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

-6.0-%

-4.0-%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

E20

10

E20

11


E E


Company Exposure: Differentiating between E&P companies globallyglobally

● Companies with strong reserve growth tend to have strong organic production growth and therefore th hi h t tthe highest returns

A number of E&P companies offer very high production growth outlooks

These production growth outlooks are backed by solid reserve growth and reserve backing

600

700

0, 2

003) Ultra Petroleum

Anadarko900

1000

1100

Ultra Petroleum

Anadarko

production growth outlooks solid reserve growth and reserve backing

400

500

(reba

sed

to 1

00 Apache

Chesapeake

Quicksilver

Range Resources600

700

800

d to

100

, 200

3) Apache

Chesapeake

Quicksilver

Range Resources

200

300

nd g

as re

serv

es

200

300

400

500

duct

ion

(reba

sed

0

100

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Oil

a n

0

100

200

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Pro

d


2 2 2 2 2 2 2 2 2 22 2 2 2 2 2 2 2 2 2


Oilfield Service companies have de-ratedThey are discounting a slowdown in investment going forwardThey are discounting a slowdown in investment going forward

● Strong investment from OPEC and non-OPEC producers should lead to increasing revenues for th t h l l d i th ilfi ld i tthe technology leaders in the oilfield services sector

US Oilfield Services EV/DACF US Oilfield Services Price/Book26 7.5

22

5.5

6.5

14

18

3.5

4.5

6

10

0 5

1.5

2.5

6

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

E

2011

E

Baker Hughes Halliburton Schlumberger

Smith International Weatherford Average

0.5

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

E

2011

E

Baker Hughes Halliburton Schlumberger

Smith International Weatherford Average



An investment opportunity in the energy sectorWe see an average of nearly 40% upside to target pricesWe see an average of nearly 40% upside to target prices

● We believe our universe of c.150 modelled companies have an average upside potential of nearly 40%

● The Top 20 upsides may average around 140%, with the bottom 20 may average around -40%


Source: Investec Asset Management, June 2010

GSF Appendix

Investec GSF Global Energy Fund performanceInvestec GSF Global Energy Fund performance

Percentage growth, Total return$$ gross

100

120 Investec GSF Global Energy A Inc (MF)MSCI World/Energy TR (IN:IN)S&P 500 TR (IN)

5 year cumulative performance of Investec GSF Global Energy Fund versus MSCI World Energy Index &

60

80

owth

MSCI World Energy Index & S&P 500

20

40

Per

cent

age

gro

31.6%

16.8%

-40

-20

0 -0.9%

Past performance figures shown are not indicative of future performance. Source: Lipper to 31 07 10 NAV based (inclusive of all annual management fees but excluding any initial charge) gross

5 years from 31/07/05 to 31/07/10

-40Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10


Source: Lipper to 31.07.10, NAV based (inclusive of all annual management fees but excluding any initial charge), gross income reinvested, in US dollars. Performance would be lower had any initial charge been included and will vary between different share classes dependant upon their applicable charges.

Investec GSF Global Energy Fund Cumulative performance vs IndicesCumulative performance vs. Indices

YTD 1 year 3 years 5 years 10 years

$ % % % % %

Investec GSF Global EnergyInvestec GSF Global Energy Fund A Inc -6.5 7.4 -11.4 31.6 330.0

MSCI World/Energy TR -9.1 3.7 -19.8 16.8 115.6

R l ti fRelative performance

Fund v MSCI World Energy 2.6 3.7 8.3 14.9 214.4

Past performance figures shown are not indicative of future performance.Source: Lipper to 31 07 10 NAV based (inclusive of all annual management fees but excluding any initial charge) gross income


Source: Lipper to 31.07.10, NAV based (inclusive of all annual management fees but excluding any initial charge), gross income reinvested, in US dollars. Performance would be lower had any initial charge been included and will vary between different shareclasses dependant upon their applicable charges.

Investec GSF Global Energy Fund performance

Returns in USD Annualised

Investec GSF Global Energy Fund performance

Performance

1 month 1 year 3 years 5 years 10 years

$ % Chg Q % Chg Q % Chg Q % Chg Q % Chg Q

Investec GSF Global Energy A Inc -6.9 4 7.4 2 -4.0 1 5.6 1 15.7 1

MSCI World/Energy TR 9.5 3.7 -7.1 3.1 8.0

Equity Natural Resource sector average* 8.3 6.7 -8.5 4.8 11.2

YTD 2009 2008 2007 2006 2005

$ % Chg % Chg % Chg % Chg % Chg % Chg

Investec GSF Global Energy A Inc -6.5 48.4 -45.0 37.6 10.1 62.3

Calendar year performance

MSCI World/Energy TR -9.1 27.0 -37.7 30.4 18.4 29.4

Equity Natural Resource sector average* -8.8 51.0 -50.0 41.0 22.6 42.5

Past performance figures shown are not indicative of future performance. Source: Lipper to 31.07.10, NAV based (inclusive of all annual management fees but excluding any initial charge), gross income reinvested in US dollars Performance would have been lower had any initial charge been included and will vary between different


reinvested, in US dollars. Performance would have been lower had any initial charge been included and will vary between different share classes dependant upon their applicable charges. * Unweighted average of the offshore funds in Lipper Global Equity Sector Natural Resource.

BiographiesBiographies

Mark Lacey Jonathan WaghornPortfolio Manager and Sector Specialist Energy Portfolio Manager and Sector Specialist EnergyPortfolio Manager and Sector Specialist, Energy2 years with the firm14 years experience

Portfolio Manager and Sector Specialist, Energy2 years with the firm14 years experience

Mark joined Investec Asset Management in February 2008 as a portfolio manager and energy specialist in the global commodities and resources team.

Mark was previously employed at Goldman Sachs where he was an Executive Director and joint head of the highly ranked energy research team. In 2007, Mark was the number one rated oil and gas analyst in the leading investment survey “Thompson Extel” Prior to Goldman Sachs Mark spent three years at JP Morgan as a European

Jonathan joined Investec Asset Management in February 2008 as a portfolio manager and energy specialist in the global commodities and resources team.

Previously, Jonathan spent eight years at Goldman Sachs where he was an Executive Director and joint head of the highly ranked energy research team. Jonathan was rated a 5 star analyst by “Starmine” for his stock-picking and earnings estimates in the oil and gas sector Prior to working at Goldman Sachs Jonathan spent two yearsExtel . Prior to Goldman Sachs, Mark spent three years at JP Morgan as a European

oil and gas analyst. Mark was also a commodities portfolio manager at Credit Suisse Asset Management for six years.

Mark graduated from Nottingham Trent University with a BA Honours degree in Business Studies.

oil and gas sector. Prior to working at Goldman Sachs Jonathan spent two years working for Wood Mackenzie as a UK oil and gas analyst, which involved detailed economic modelling of oil and gas facilities and companies. Jonathan began his career as a drilling engineer for Shell International in the Netherlands, where he spent three years.

Jonathan graduated from Bristol University in 1994 with an Honours degree in Physics and in 1995 was awarded an MSc in Semiconductor Physics from Bristol University.


Important informationImportant informationThis document is not for general public distribution. If you are a private investor and receive it as part of a general circulation, please contact us at + 852 2861 6888.The value of this investment and any income generated from it will be affected by changes in interest rates general market conditionsThe value of this investment, and any income generated from it, will be affected by changes in interest rates, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which it invests. Investors are not certain to make profits; losses may be made.

All the information contained in this document is believed to be reliable but may be inaccurate or incomplete. A full explanation of the characteristics of the investment is given in the prospectus Any opinions stated are honestly held but are not guaranteed and should notcharacteristics of the investment is given in the prospectus. Any opinions stated are honestly held but are not guaranteed and should not be relied upon.

Past performance figures shown are not indicative of future performance. Investment involves risks. Investors should read theProspectus for details, including the risk factors.

This is not a buy or sell recommendation for any particular stock The portfolio may change significantly over a short period of timeThis is not a buy or sell recommendation for any particular stock. The portfolio may change significantly over a short period of time.

THIS DOCUMENT IS PROVIDED FOR GENERAL INFORMATION ONLY. IT IS NOT AN INVITATION TO MAKE AN INVESTMENT NOR DOES IT CONSTITUTE AN OFFER FOR SALE. THE FULL DOCUMENTATION THAT SHOULD BE CONSIDERED BEFORE MAKING AN INVESTMENT, INCLUDING THE PROSPECTUS AND SIMPLIFIED PROSPECTUS OR OFFERING MEMORANDUM, WHICH SET OUT FUND SPECIFIC RISKS, IS AVAILABLE FROM INVESTEC ASSET MANAGEMENT.OU U S C C S S, S O S C SS G

This document should not be distributed to private customers who are resident in countries where the Fund is not registered for sale or in any other circumstances where its distribution is not authorised or is unlawful. Please visit www.investecassetmanagement.com/registrations to check registrations by country.

THIS INVESTMENT IS NOT FOR SALE TO US PERSONSTHIS INVESTMENT IS NOT FOR SALE TO US PERSONS.

Telephone calls may be recorded to confirm your instructions

This document has not been reviewed by the SFC. Issuer: Investec Asset Management Asia Limited.


Contact detailsContact detailsKK CheungDirector, Regional Business Development

Sandy ChanSenior Manager, Business Development

Tel: +852 2861 6881Email: [email protected]

Tel: + 852 2861 6885Email: [email protected]

Noel MakNoel MakManager, Business DevelopmentTel: +852 2861 6887Email: [email protected]

Investec Asset Management Asia LimitedSSuites 2604-06, Tower 2The Gateway, Harbour CityTsimshatsui, KowloonHong Kong

www.investecfunds.com.hk


Telephone calls may be recorded for training and quality assurance purposes. Issued by Investec Asset Management, August 2010

investec gsf global energy fund presentation aug10 (hk)

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