investec

GSF Addicted to EnergyMark Lacey and Jonathan WaghornPortfolio ManagersCitywire 16 18 November 2011Citywire, 16 - 18 November 2011

Energy sector outlook summaryNear term & long term thoughts on oil & natural gas marketsNear term & long term thoughts on oil & natural gas markets

Oil Natural gas

erm

• Very tight markets due to Libya outages and non-OECD demand • Tight global markets as gas remains preferred energy source

• IEA SPR release reduces risk of price spikes • Concerns over nuclear is resulting in stronger global gas demand

• Non-OECD and European inventories below average • US market is slowly re-balancing as demand strengthens

Nea

r te

• OECD demand growth still at risk from further economic weakness • US gas trading at cash cost of marginal producer

• Potential for further MENA unrest is positive for price • US rigs being redirected from gas plays to oil/liquids plays

• OPEC expected to act quickly if prices fall • Demand switching from coal, being stimulated by low prices

Forecast: $110/bl Brent for 2011, $100/bl Brent for 2012 Forecast: $4.30/mcf for 2011, $4.75/mcf for 2012

• Non OECD demand growth will tighten markets further • Significant arbitrage between international gas prices will close

• OPEC spare capacity should continue to fall • Demand for natural gas likely to outstrip oil demand growth

Long

term • Oil prices to remain high in order to ration OECD demand • Natural gas is the cleaner, cheaper ‘fuel of choice’

• Limited non-OPEC supply reaction expected going forward • High decline rates imply significant development activity required

• Oil price required to deliver marginal new fields is around $100/bl • New US shales need at least $6 gas for an economic return

• Industry cost inflation gives upward bias to $100/bl forecast • US/Canada likely to export LNG by 2014 - Kitimat

Forecast: $100/bl Brent for 2013 and thereafter Forecast: $6/mcf for 2013 and thereafter

| CONFIDENTIAL07075

Fundamental costs of crude oil and natural gasGas 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 above the marginal cash cost of extraction while natural gas is trading close to it● Oil is trading above the marginal cash cost of extraction while natural gas is trading close to it● Oil prices have more downside risk while gas prices offer more upside potential

2008.0

7 5

8.0 Price at which marginal demand is destroyed

150

175

6.0

7.0

P i i d f

Price required for marginal producer to make a 10% return on

investment

7.5

6.0

y

100

125

4.0

5.0

pric

e ($

/bl)

rices

($/m

cf)

Current spot price

Price required for average cost producer to make a 10% return on

new investment

1003.75

120

50

75

2.0

3.0 Oil

p

Gas

p

Cash cost of current supply for a marginal

cost producer58

40

3.75

0

25

0.0

1.0

0 8 1 3 1 8US gas price versus US gas Oil price versus oil economics

40

| CONFIDENTIAL07075

Source: Bloomberg, October 2011

0.8 1.3 1.8US gas price versus US gas economics

Oil price versus oil economics

Energy commodity historic cost dynamicsCost of supply drives commodity pricesCost of supply drives commodity prices

● Historically, energy commodity prices have traded between the cash cost of the marginal producer d th i t hi h d d i d t dand the price at which demand is destroyed

160Incentive price for 16 Natural gas price

WTI crude oil Natural gas

120

140

Incentive price for marginal producer

Demand destruction

Cash cost of marginal producer

12

14

16

Incentive price for marginal producer

Cash cost of marginal producer

Demand destruction

60

80

100

Pric

e $/

bbl

marginal producer

Oil price

6

8

10

as p

rices

$/m

cf

Demand destruction

20

40

60

Oil

P

2

4

6

Ga

0

Jan

-90

Jan

-92

Jan

-94

Jan

-96

Jan

-98

Jan

-00

Jan

-02

Jan

-04

Jan

-06

Jan

-08

Jan

-10

0

Jan-

93

Jan-

95

Jan-

97

Jan-

99

Jan-

01

Jan-

03

Jan-

05

Jan-

07

Jan-

09

Jan-

11

| CONFIDENTIAL07075

Source: Alliance Bernstein May 2011 and IAM estimates

High oil prices could easily stifle global oil demand growthWorld oil burden as a percentage of GDPWorld oil burden as a percentage of GDP

● In the 1980s, the world ‘oil burden’ represented over 5% of global GDP and demand fell as a result

● In 2008, the ‘oil burden’ reached a 20 year peak of 5% and demand fell as a result● In 2011 the ‘oil burden’ will again break 5% and there is a risk of future demand falling● In 2011, the oil burden will again break 5% and there is a risk of future demand falling

120

8%

9%

Nominal ‘oil burden’ (global oil expenditures divided by global GDP) and oil prices

80

100

6%

7%

8%

% o

f Nom

inal

GD

P Oil Burden

WTI (real, 2008 base)

40

60

3%

4%

5% $/bbl

il E

xpen

ditu

res

as %

0

20

0%

1%

2%

Nom

inal

O

| CONFIDENTIAL07075

Source: DB

00%

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

U.S. Gasoline Demand as a percentage of incomeDemand destruction intensifies when gasoline cost is +9% of disposable incomeDemand destruction intensifies when gasoline cost is +9% of disposable income

Historical analysis● US gasoline prices are currently around $3.6/gallon

8%

10%

14%

16% Gasoline Demand - Y/Y Change (Right Axis)

Gasoline / Disposable Income (Left Axis)Period Cost at Beg of

Period Cost at Peak

1979-1982 9.0% 14.9%

Historical analysis

4%

6%

10%

12%

Cha

nge

spos

able

Inc

ome 1974 8.1% 11.2%

2008-2009 6.7% 11.2%1989-1991 5.8% 7.8%

-2%

0%

2%

8%

10%

e D

eman

d -Y

/Y C

ne /

Per C

apita

l Dis

US Gasoline % of Per Capita Disposable

Current sensitivity

-6%

-4%

-2%

4%

6%

Gas

olin

e

Cos

t of G

asol

in Cost Disposable Income

$3.00 8.0%$3.25 8.7%$3.50 9.4%$3.75 10.0%

-10%

-8%

0%

2%

74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08

$4.00 10.7%$4.25 11.4%$4.50 12.1%

| CONFIDENTIAL07075

197

197

197

197

197

197

198

198

198

198

198

198

198

198

198

198

199

199

199

199

199

199

199

199

199

199

200

200

200

200

200

200

200

200

200

Source: Simmons & Company

Near term oil supply/demand: Demand outstripping supply2010 saw demand growth ahead of non-OPEC supply growth2010 saw demand growth ahead of non-OPEC supply growth

● In 1Q 2010, oil demand grew faster than non-OPEC supply growth for the first time in six quarters● This trend was caused by non-OECD demand growth and has continued● This is a fundamental strengthening of demand which will lead to sustained tight oil markets

1000

2000

3000

y

-1000

0

1000

Bar

rels

per

da

-3000

-2000000'

B

-4000

1Q20

062Q

2006

3Q20

064Q

2006

1Q20

072Q

2007

3Q20

074Q

2007

1Q20

082Q

2008

3Q20

084Q

2008

1Q20

092Q

2009

3Q20

094Q

2009

1Q20

102Q

2010

3Q20

104Q

2010

1Q20

112Q

2011

3Q20

11E

4Q20

11E

1Q20

12E

2Q20

12E

3Q20

12E

4Q20

12E

| CONFIDENTIAL07075

Source: Goldman SachsGlobal demand growth (yoy) Global non-OPEC growth (yoy)

OPEC has limited light oil spare capacityThe oil industry is running at about 97% utilisationThe oil industry is running at about 97% utilisation

● OPEC 11 are currently producing 26.4mnb/d, well over their quota of 24.8mnb/d● The quota has been unchanged since Jan 2009 and has now become obsolete● Since then, Libya production is down by 1.5mnb/d and is unlikely to return quickly● Relative to peak volumes in 2008 we estimate OPEC has c 2 4mnb/d of spare capacity● Relative to peak volumes in 2008, we estimate OPEC has c.2.4mnb/d of spare capacity

32,000

Theoretical total capacity

Simple OPEC spare capacity estimate

Theoretical capacity 30.3mnb/dL f Lib 1 5 b/d

28,000

30,000

per

day

Loss of Libya - 1.5mnb/dNew theoretical capacity 28.8mnb/dCurrent production 26.4mnb/dEffective spare capacity 2.4mnb/d

24,000

26,000

000

barr

els

Implicit % global spare capacity 2.7%Implicit oil industry utilisation 97%20,000

22,000

un/2

000

Dec

/200

0

un/2

001

Dec

/200

1

un/2

002

Dec

/200

2

un/2

003

Dec

/200

3

un/2

004

Dec

/200

4

un/2

005

Dec

/200

5

un/2

006

Dec

/200

6

un/2

007

Dec

/200

7

un/2

008

Dec

/200

8

un/2

009

Dec

/200

9

un/2

010

Dec

/201

0

un/2

011

| CONFIDENTIAL07075

J D J D J D J D J D J D J D J D J D J D J D J

Source: Bloomberg, September 2011

Energy demand assuming conservative demand estimatesBy 2020 the world will require an additional 45mn bls/d of oil to meet predicted demandBy 2020 the world will require an additional 45mn bls/d of oil to meet predicted demand

● Assuming OECD oil demand stays flat for the next decade● Assuming non OECD (ex China) oil demand growth is half the rate of the last decade● Assuming non-OECD (ex China) oil demand growth is half the rate of the last decade● Assuming China’s oil demand grows at 7% per annum

Gl b l il d d j ti Incremental oil required based on organic demandGlobal oil demand projection

100 000

120,000

China

Non-OECD ex China

OECD

Incremental oil required – based on organic demand and expected decline rates

45,000

50,000

80,000

100,000

/d

OECD

30,000

35,000

40,000

40,000

60,000

000

bls/

15,000

20,000

25,000

000

bls

0

20,000

0

5,000

10,000

| CONFIDENTIAL07075

Source: IAM, BP statistical review and IEA

2000 2010 20202010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Incremental decline Incremental demand

Iraq has significant production potentialRecent strong production growth but volume targets are unlikely to be reachedRecent strong production growth but volume targets are unlikely to be reached

● Iraq has oil reserves of 115 billion barrels, the third largest in the world● Production was more stable in 2009/2010 and started to increase significantly in 2011● New development projects target over 2.5mnb/d of incremental Iraqi production by 2017● The massive investment and risks involved mean these targets are unlikely to be achievedg y

3,000

3,500

Iraq production Iraq production expectations

5 000

6,000

2,000

2,500

,

s pe

r da

y

3,000

4,000

5,000

uctio

n kb

/d

1,000

1,500

000

barr

el

1,000

2,000

Prod

u

0

500

Jun/

2000

Dec

/200

0

Jun/

2001

Dec

/200

1

Jun/

2002

Dec

/200

2

Jun/

2003

Dec

/200

3

Jun/

2004

Dec

/200

4

Jun/

2005

Dec

/200

5

Jun/

2006

Dec

/200

6

Jun/

2007

Dec

/200

7

Jun/

2008

Dec

/200

8

Jun/

2009

Dec

/200

9

Jun/

2010

Dec

/201

0

Jun/

2011

02009 2010 2011E 2012E 2013E 2014E 2015E 2016E 2017E

West Qurna 2 Halfaya Majnoon West Qurna expansion

Zubair Rumaila expansion Base production

| CONFIDENTIAL07075

Source: Goldman SachsSource: Bloomberg

Non-OECD is the key long term demand 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 3.8% pa (1965-2010) versus the OECD at 1.5%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

2010 per capita oil demand (bl) Global oil use by sub-sector

Ref inery fuel

Heating7%

Road construction

4%

Other6%

Per capita oil demand (bl)

2010 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%

US 6,948.1 308.7 22.5

OECD 16,615.0 1,190.6 14.0

Japan 1,589.0 127.7 12.4

Germany 895.0 82.1 10.9 p64%Petrochemicals

6%y

China 3,303.0 1330.1 2.5

India 1,211.7 1,166.0 1.0

Source: IEA, Investec Asset Management estimates 2010

| CONFIDENTIAL07075

Source: OECD and BP

, g

Car demand in emerging marketsDemand for transport continues to increaseDemand for transport continues to increase

● Vehicle ownership per 1,000 people in China is 55 – the developed world average is 582● The expected saturation level for China is over 550 cars per 1 000 people● The expected saturation level for China is over 550 cars per 1,000 people● By 2015 we expect to see the number of vehicles double from 74mn units to 150mn units, this

equates to 2mn bls/d of additional demand for fuel

900

on 60.0%

Vehicle ownership of major countries vs estimated saturation level for China

Forecast growth in light vehicle registration

500

600

700

800

0 dr

ivin

g po

pula

tio

20 0%

30.0%

40.0%

50.0%

Brazil & Argentina

India

100

200

300

400

enge

r ve

hicl

es/1

000

‐10.0%

0.0%

10.0%

20.0%China

US

Japan

W Europe

0

100

Pass

e

‐30.0%

‐20.0%

2011 2012 2013

*Expected saturation level

| CONFIDENTIAL07075

Source: Citi, Sanford Bernstein Research, NBS

p

Non-OECD demand growth expectationsWhat if China and India follow the paths of South Korea Japan or the USAWhat if China and India follow the paths of South Korea, Japan or 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%

0.02.5

| CONFIDENTIAL07075

Source: Simmons & Company; Investec Asset Management estimates,June 2011

Source: Simmons & Company; Investec Asset Management estimates, June 2011

Declines and poor exploration mean weak long term growthA lack of exploration success and increasing decline ratesA lack of exploration success and increasing decline rates

● The IEA estimate that global oil production will decline at 4.4% per annum over the next decade● Over 83% of the worlds major oil fields are past peak production● The worlds largest 580 oil fields are declining at a rate of 5.1%● A lack of new discoveries and increasing declines should limit long term production growth

Decline rates A lack of exploration successDecline rates A lack of exploration success

350

400

450

6.0

7.0

ls)

420bn

ed (b

nbls

)

12.0%

14.0%

200

250

300

350

3.0

4.0

5.0

disc

over

y si

ze (b

nb

/ res

erve

s di

scov

ere

6.0%

8.0%

10.0%

20bn

0

50

100

150

0 0

1.0

2.0

Ave

rage

d

mbe

r of d

isco

verie

s /

0.0%

2.0%

4.0%

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)

NumSuper-giants

(>5gb)Giants

(5gb><1.5gb)Large

(<1.5gb)World (top 580

f ields)

Decline phase 1 (production plateau above 85% of peak annual production)Decline phase 2 (past plateau but above 50% of peak production)Decline phase 3 (production is below 50% of peak production)Total (weighted by total production)

| CONFIDENTIAL07075

Source: IEA and Investec Asset Management estimates, 2011 Source: AAPG

g y ( , )Total (weighted by total production)

Upstream project sanctions A stable debt market is needed for long term projects to be sanctionedA stable debt market is needed for long term projects to be sanctioned

● Project sanction drives production growth in the medium term● 2007-2009 saw low levels of sanctioning activity with a production crunch in 2010-2012● 2007 2009 saw low levels of sanctioning activity, with a production crunch in 2010 2012

only averted due to the contribution of oil shale projects● Levels of sanctions need to pick up substantially in order to service growing demand

25000

30000

20000

ned in year

Exploitation

Traditional

R i

10000

15000

mn b

ls sanctio

n Russia

Heavy Oil

GTL

LNG

Deepwater

5000

| CONFIDENTIAL07075

Source: GS, IAM estimates

0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Supply is unresponsive to sanctions in the short termSupply is unresponsive to sanctions in the short term

● Project sanctions are not a short-term fix for supply● The time between sanction and first oil / gas is typically around 3 years● The time between sanction and first oil / gas is typically around 3 years ● Unconventional gas and oil provide short term supply in small increments

4.0

4.5

5.0

on

2.5

3.0

3.5

tion to first p

rodu

ctio

1.0

1.5

2.0

Years from sa

nct

0.0

0.5

GTL LNG Gas Russia Deepwater Heavy Oil Traditional Exploitation Unconventional gas

Unconventional liquids

| CONFIDENTIAL07075

Source: GS

Significant regional gas pricing differentials: US is standoutGas trading cheap relative to oilGas trading cheap relative to oil

● US gas prices are depressed versus global prices, LNG exports will close this arbitrageI t ti l i i i l li k d t il i d bi d hi h

25

Japan LNG

● International gas prices are increasingly linked to oil prices and are biased higher

International gas prices

17.7

20

Japan LNG

Henry Hub (US Natural gas)

UK Natural gas

European Natural gas

Brent crude oil

Asian gas trades closer tooil price parity. This will

ti Sh t t16.1

9.010

15

USD/Mcf

continue. Short termdelivery prices are higherthan this

European gas prices are

3.7

8.7

5

linked to oil but trademuch lower than Asia

US gas prices are at asignificant discount

0

Dec

-199

9M

ar-2

000

un-2

000

ep-2

000

Dec

-200

0M

ar-2

001

un-2

001

ep-2

001

Dec

-200

1M

ar-2

002

un-2

002

ep-2

002

Dec

-200

2M

ar-2

003

un-2

003

ep-2

003

Dec

-200

3M

ar-2

004

un-2

004

ep-2

004

Dec

-200

4M

ar-2

005

un-2

005

ep-2

005

Dec

-200

5M

ar-2

006

un-2

006

ep-2

006

Dec

-200

6M

ar-2

007

un-2

007

ep-2

007

Dec

-200

7M

ar-2

008

un-2

008

ep-2

008

Dec

-200

8M

ar-2

009

un-2

009

ep-2

009

Dec

-200

9M

ar-2

010

un-2

010

ep-2

010

Dec

-201

0M

ar-2

011

un-2

011

ep-2

011

| CONFIDENTIAL07075

D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S D M J S

Source: Bloomberg, 30.09.11

China’s gas demand – domestic gas supply insufficientDemand from China will help to tighten global marketsDemand from China will help to tighten global markets

● The Chinese gas market is currently similar in size to the markets of Canada, UK and Germany● The Chinese market is only 11% the size of the North American gas market● Domestic gas supply is not sufficient to satisfy expected demand growth

China total gas demand and domestic gas supply

Total domestic output meets <65% of total demand from 2015 onwards

China total gas demand and domestic gas supply

2015 onwards

| CONFIDENTIAL07075

Source: Wood Mackenzie, September 2010

US drilling and gas in storage summaryUS natural gas rig count is falling gas in storage at the five year average levelsUS natural gas rig count is falling, gas in storage at the five year average levels

● US gas drilling activity continues to fall as rigs are used to drill oil targets insteadW t thi it h i ti it t lt i l t l US d ti th● We expect this switch in activity to result in lower natural US gas production growth

● US natural gas in storage has come back already below five year average levels

US natural gas and oil active rig count US natural gas storage data (bcf)

1100

1300

1600Gas rig count (LHS) Oil rig count (RHS)

3500

4000US Natural gas implied storage data

US Natural gas rolling 5 year estimated storage data

g g g g ( )

700

900

1200

1400

g co

unt

rig c

ount

2500

3000

(bcf

)

300

500

800

1000

Oil

rig

Gas

1500

2000

2500

US s

tora

ge g

as

100

300

600

01/2

008

03/2

008

05/2

008

07/2

008

09/2

008

11/2

008

01/2

009

03/2

009

05/2

009

07/2

009

09/2

009

11/2

009

01/2

010

03/2

010

05/2

010

07/2

010

09/2

010

11/2

010

01/2

011

03/2

011

05/2

011

07/2

011

09/2

011

1000

1500

01/2

006

07/2

006

01/2

007

07/2

007

01/2

008

07/2

008

01/2

009

07/2

009

01/2

010

07/2

010

01/2

011

07/2

011

| CONFIDENTIAL07075

Source: Bloomberg, 30.09.11

04/0

04/0

04/0

04/0

04/0

04/

04/0

04/0

04/0

04/0

04/0

04/

04/ 0

04/0

04/0

04/0

04/0

04/

04/ 0

04/0

04/0

04/0

04/0

06/0

06/0

06/0

06/0

06/0

06/0

06/0

06/0

06/0

06/0

06/0

06/0

US gas production continues to growDespite full cycle economics of new shale plays being stretchedDespite full cycle economics of new shale plays being stretched

● US natural gas production continues to grow strongly, most recently at over 4%paThi i d it th i t d i d h l l i b i t t h d● This is despite the rig count reducing and new shale play economics being stretched

● We believe that US gas production growth will slow as a result

US natural gas production US natural gas shale play economicsUS natural gas production US natural gas shale play economics

$8.00

$9.00

$10.00

1900

2000

2100

4%+ p.a.growth

$4 00

$5.00

$6.00

$7.00

$ / m

cf

1600

1700

1800

bcf

$1.00

$2.00

$3.00

$4.00

1300

1400

1500

$0.001200

Dec

/199

9

Jun/

2000

Dec

/200

0

Jun/

2001

Dec

/200

1

Jun/

2002

Dec

/200

2

Jun/

2003

Dec

/200

3

Jun/

2004

Dec

/200

4

Jun/

2005

Dec

/200

5

Jun/

2006

Dec

/200

6

Jun/

2007

Dec

/200

7

Jun/

2008

Dec

/200

8

Jun/

2009

Dec

/200

9

Jun/

2010

Dec

/201

0

Jun/

2011

| CONFIDENTIAL07075

Source: Bloomberg, September 2011 Source: Tudor Pickering Holt, July 2011

US gas demand growing as a result of low pricesWe expect a demand reactionWe expect a demand reaction

● Low gas prices relative to oil and coal are stimulating demand growth in North America● The key areas of current and potential natural gas demand growth are:

− Power generation EPA rulings to reduce coal fired power plant capacity by 23GWh by 2020− Agricultural - North American nitrogen fertiliser manufacturers are increasing utilisationg g g− Petrochemicals margins are up sharply on weak gas prices and industry plans capacity

increases. US ethylene cash costs are now among the lowest globally− Refining natural gas increasingly used to generate hydrogen for hydrocrackersRefining natural gas increasingly used to generate hydrogen for hydrocrackers− Gas To Liquids direct conversion of natural into sulphur free diesel− Transportation increasing interest in Compressed Natural Gas (CNG) vehicles, electric vehicles

and Liquefied Natural Gas (LNG) haulageand Liquefied Natural Gas (LNG) haulage− Steel switching from coal to natural gas for blast furnaces− Gas export A number of consortia now planning to export LNG from North America into

significantly higher price international marketssignificantly higher price international markets

| CONFIDENTIAL07075

US shale playsExisting and prospective basins with oil and natural gas potentialExisting and prospective basins with oil and natural gas potential

| CONFIDENTIAL07075

Source: EIA July 2011

Long term prices: higher marginal cost of supplyThe marginal cost for oil in 2009 was around $90/bl likely to rise to $100 in 2010The marginal cost for oil in 2009 was around $90/bl, likely to rise to $100 in 2010

● Non-OPEC will need to deliver its more marginal fields, thus supporting higher crude prices● We estimate cost inflation will take the marginal cost of extraction to around $100/bl in 2010● This marginal cost of extraction is biased higher in the longer term

3324

033

358

3347

633

592

3371

433

830

3394

934

072

3419

034

309

3442

934

548

3466

734

786

3490

535

023

3514

335

262

3537

735

500

3561

935

879

3599

836

115

3623

636

355

3647

236

592

3671

036

826

3694

937

067

3718

637

307

3742

537

543

3766

337

782

3790

038

020

3813

938

258

3837

738

495

3861

438

734

3885

238

971

3908

739

204

3932

339

428

3953

739

646

3975

639

864

3997

340

091

4021

140

330

140

150

Brent oil price required for marginal cost player to return cost of capital

Industry marginal cost curve (US$/boe)

80

90

100

110

120

130

l

Brent oil price required for average cost player to return cost of capital

5yr forward Brent oil price

30

40

50

60

70

80

US

$/bl

0

10

20

30

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E

| CONFIDENTIAL07075

Source: Goldman Sachs, December 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 th l

Long term performance in USD(F D b 1994 t A t 2011)outperformed the crude oil price over the long

term● We believe energy equities are likely to

outperform the commodity long term as a result

(From December 1994 to August 2011)

1,600

1,800

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

MSCI World/Energy TR (IN)

WTI crude oiloutperform the commodity long term as a result of:− Operational leverage: if the crude price

doubles, the operating profit of a company ith 50% i ill t bl

1,000

1,200

1,400

1,600

man

ce g

row

th

with a 50% margin will treble− Growth: most energy companies can grow

while commodity investments have no ability to grow 200

400

600

800

Per

form

ability to grow− Exploration success: most energy

companies deliver value through exploration which is not available directly through the

dit

0

200

Dec

-94

Aug

-95

Apr

-96

Dec

-96

Aug

-97

Apr

-98

Dec

-98

Aug

-99

Apr

-00

Dec

-00

Aug

-01

Apr

-02

Dec

-02

Aug

-03

Apr

-04

Dec

-04

Aug

-05

Apr

-06

Dec

-06

Aug

-07

Apr

-08

Dec

-08

Aug

-09

Apr

-10

Dec

-10

Aug

-11

commodity

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 30 09 11 NAV based gross income reinvested annualised and gross of annual management fees in US

| CONFIDENTIAL07075

Source: Lipper to 30.09.11, 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 30.09.11 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 delivered b tt i t t t th th ETF

Performance in USD

225

250

Crude Oil ETF

WTI crude oil

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

● The crude oil ETF has suffered from the

(From October 2006 to September 2011)

125

150

175

200 Investec Global Energy● The crude oil ETF has suffered from the

contango oil futures curve● The Investec Global Energy Fund has

delivered strong correlation with the crude price

50

75

100

125delivered strong correlation with the crude price over this period

● A backwardated futures curve is more beneficial for direct commodity investments

0

25

Oct

-200

6D

ec-2

006

Feb-

2007

Apr

-200

7Ju

n-20

07A

ug-2

007

Oct

-200

7D

ec-2

007

Feb-

2008

Apr

-200

8Ju

n-20

08A

ug-2

008

Oct

-200

8D

ec-2

008

Feb-

2009

Apr

-200

9Ju

n-20

09A

ug-2

009

Oct

-200

9D

ec-2

009

Feb-

2010

Apr

-201

0Ju

n-20

10A

ug-2

010

Oct

-201

0D

ec-2

010

Feb-

2011

Apr

-201

1Ju

n-20

11A

ug-2

011

y

| CONFIDENTIAL07075

Source: Bloomberg, September 2011.

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 that we are in the middle of an investment cycle in the energy industry● Energy commodities are likely to maintain high prices during this period● This will be beneficial for energy equities

● We see an attractive valuation opportunity in energy equities− Many integrated oils have de-rated and do not reflect our commodity price

assumptionsp− Many E&P companies trade at big discounts to asset-backed valuations− Many service companies have de-rated as if the investment cycle is over

● We think it is cheaper to buy oil and gas on Wall Street than it is to explore for it

● The US E&P companies trade at $11 per proven barrel of reserves while it costs the US & European integrateds between $20 and $25/bl to develop organically& European integrateds between $20 and $25/bl to develop organically

| CONFIDENTIAL07075

Divergence between commodity prices and energy equitiesDivergence between commodity prices and energy equities● Recent correlation between energy equities and energy commodities has fallen sharply● Since the beginning of 1998, there is a 91% correlation between the share price performance and g g , p p

the overall energy commodity indicator (blue dots on chart below)● 2011 data (green dots below) started in line with the historical correlation but is now falling rapidly

R² = 91%

500

600

● So, either....− The equities are indicating

300

400

shar

e pr

ice

inde

x

− The equities are indicating that the Energy Commodity Indicator should fall by around 30-35%

200

300

Glo

bal in

tegr

ated

s s

− The Energy Commodity Indicator is implying that the energy equities are over 40% undervaluedcurrent 40%

divergence

0

100

divergence

| CONFIDENTIAL07075

Source: IAM September 2011

00 100 200 300 400 500 600 700 800

Global integrateds commodity indicator

$100/bl oil would imply strong sector performanceRelative performance of energy sector is driven by the energy macro environmentRelative performance of energy sector is driven by the energy macro environment

● The level and the direction of the energy macro environment is a key driver of energy sector relative performanceperformance

● The energy sector has underperformed the market since 2008 on weak energy commodity fundamentals

● Our expectations of $100/bl crude would imply that the energy sector re-rates versus markets● Our expectations of $100/bl crude would imply that the energy sector re rates versus markets

500

600Brent crude oilOutlookMSCI E MSCI W ld (R l ti )

300

400

to 1

00 in

199

9) MSCI Energy vs MSCI World (Relative)

100

200

300

Inde

x (re

base

d

0

100

c-19

99

g-20

00

r-200

1

c-20

01

g-20

02

r-200

3

c-20

03

g-20

04

r-200

5

c-20

05

g-20

06

r-200

7

c-20

07

g-20

08

r-200

9

c-20

09

g-20

10

r-201

1

c-20

11

g-20

12

I

| CONFIDENTIAL07075

Dec

Aug Ap

Dec

Aug Ap

Dec

Aug Ap

Dec

Aug Ap

Dec

Aug Ap

Dec

Aug Ap

Dec

Aug

Source: Bloomberg and IAM, September 2011

Energy equities have de-ratedEnergy equities have become dislocated from their underlying commodity mixEnergy equities have become dislocated from their underlying commodity mix

● 30 bn barrels of sub salt resources – a unique position in the industry● Greater than 10% pa volume growth for the next decade – a unique position in the industry

200

Petrobras versus 24 month forward crude oil

● Greater than 10% pa volume growth for the next decade a unique position in the industry

140

160

180 PBR US Equity

CL24 Comdty

100

120

140

x pe

rfor

man

ce

40

60

80

Inde

x

0

20

ct-2

007

c-20

07

b-20

08

pr-2

008

n-20

08

g-20

08

ct-2

008

c-20

08

b-20

09

pr-2

009

n-20

09

g-20

09

ct-2

009

c-20

09

b-20

10

pr-2

010

n-20

10

g-20

10

ct-2

010

c-20

10

b-20

11

pr-2

011

n-20

11

g-20

11

| CONFIDENTIAL07075

Source: Bloomberg, 25 October 2011

Oc

De

Feb

Ap

Ju Aug Oc

De

Feb

Ap

Ju Au g Oc

De

Feb

Ap

Ju Au g Oc

De

Feb

Ap

Ju Au g

Integrated oil company valuations are still below historic levelsDividend yields are attractive and dividends are sustainableDividend yields are attractive and dividends are sustainable

● Majors have de-rated significantly over the last ten years. ● Attractive dividend yields are covered by free cash generation

Attractive dividend yieldsSuper-majors have not priced in the rise in commodity pricescommodity prices

18x

20x

22xBP ChevronExxonMobil RDShellTOTAL

7.0%

8.0%

BP ChevronExxonMobil RDShell

12x

14x

16x

18x

sted

cas

h flo

w

4 0%

5.0%

6.0%

end

yiel

d

TOTAL

4

6x

8x

10x

EV

/ de

bt a

djus

2.0%

3.0%

4.0%

Div

ide

0x

2x

4x

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

011E

012E

013E

014E

0.0%

1.0%

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

011E

012E

013E

014E

| CONFIDENTIAL07075

Source: Investec Asset Management, September 2011

20 20 20 20 20 20 20 20

European integrateds have decoupled from US peersWe have seen negative sentiment towards companies such as TotalWe have seen negative sentiment towards companies such as Total

Chevron versus Total

200

250

CVX US Equity

TOT US Equity

150

man

ce

100

Inde

x pe

rfor

m

50

0

Sep

-200

4

Dec

-200

4

Mar

-200

5

Jun-

2005

Se p

-200

5

Dec

-200

5

Mar

-200

6

Jun-

2006

Se p

-200

6

Dec

-200

6

Mar

-200

7

Jun-

2007

Sep

-200

7

Dec

-200

7

Mar

-200

8

Jun-

2008

Se p

-200

8

Dec

-200

8

Mar

-200

9

Jun-

2009

Se p

-200

9

Dec

-200

9

Mar

-201

0

Jun-

2010

Se p

-201

0

Dec

-201

0

Mar

-201

1

Jun-

2011

Se p

-201

1

| CONFIDENTIAL07075


Canadian energy equities have de-rated from the global energy benchmarkenergy benchmark● Canadian integrateds – average 16% EPS growth p.a. over the next four years ● Global super majors – average 1% EPS growth p.a. over the next four years

Canadian energy equities vs global energy equities

● Global super majors average 1% EPS growth p.a. over the next four years

130

150MSCI Canada Energy Index

MSCI World Energy Index

110

ex p

erfo

rman

ce

70

90Ind

50

Mar

-200

6ay

-200

6Ju

l-200

6ep

-200

6ov

-200

6an

-200

7M

ar-2

007

a y-2

007

Jul-2

007

ep-2

007

ov-2

007

an-2

008

Mar

-200

8a y

-200

8Ju

l-200

8ep

-200

8ov

-200

8an

-200

9M

ar-2

009

a y-2

009

Jul-2

009

ep-2

009

ov-2

009

an-2

010

Mar

-201

0a y

-201

0Ju

l-201

0ep

-201

0ov

-201

0an

-201

1M

ar-2

011

a y-2

011

Jul-2

011

ep-2

011

| CONFIDENTIAL07075


M M J Se

No J M M J Se

No J M M J Se

No J M M J Se

No J M M J Se

No J M M J Se

E&P companies not reflecting growth potentialSome will deliver significant production and reserves growthSome will deliver significant production and reserves growth

● Companies with strong reserve growth tend to have strong organic production growth and therefore the highest returns

50

returns● The US E&P companies trade at $11 per proven barrel of reserves while it costs the US & European integrateds

between $20 and $25/bl to develop organically

35

40

45

15

20

25

30

EV p

er 1

p bl

US and European integrateds average F&D costs

0

5

10

15

Cre

scen

t Poi

ntTu

llow

Bay

tex

Cai

rn E

nerg

yD

aylig

htC

anad

ian

E&

Ps

Ene

rplu

sP

etro

bakk

enN

AL

Oil

& G

asro

gres

s E

nerg

yB

onav

ista

Arc

Res

ourc

esO

asis

Pen

grow

thP

enn

Wes

tE

nQue

stU

K E

&P

sA

nada

rko

nge

Res

ourc

esP

eyto

Val

iant

bury

Res

ourc

esS

oco

Cim

arex

Apa

che

Pla

ins

Sou

thw

este

rnN

oble

Ene

rgy

Pre

mie

r Oil

US

E&

Ps

QE

P R

esou

rces

Whi

ting

Afr

enE

OG

EX

CO

New

field

rose

Res

ourc

esFo

rest

Oil

Dev

on E

nerg

yP

ione

erS

alam

ande

rC

hesa

peak

eU

ltra

Pet

role

umQ

uick

silv

er

| CONFIDENTIAL07075

C Pr

Ran

Den

b Q

Mel

r U

Source: Investec Asset Management, September 2011

Oilfield service companies have de-ratedThey are discounting a collapse in drilling activity going forwardThey are discounting a collapse in drilling activity going forward

Weatherford versus total US rig count Nabors versus US land rig countWeatherford versus total US rig count Nabors versus US land rig count

50

602500

US land rig count (LHS)

Nabors share price (USD RHS)50

60

2100

2300

Total US rig count (LHS)

Weatherford share price (USD RHS)

40

50

1500

2000

40

50

1500

1700

1900

20

30

1000

20

30

900

1100

1300

0

10

0

500

2003

2003

2003

2004

2004

2004

2005

2005

2005

2006

2006

2006

2007

2007

2007

2008

2008

2008

2009

2009

2009

2010

2010

2010

2011

2011

2011

0

10

500

700

900

003

003

003

004

004

004

005

005

005

006

006

006

007

007

007

008

008

008

009

009

009

010

010

010

011

011

011

Jan-

2M

ay-2

Sep

-2Ja

n-2

May

-2S

ep-2

Jan-

2M

ay-2

Sep

-2Ja

n-2

May

-2S

ep-2

Jan-

2M

ay-2

Sep

-2Ja

n-2

May

-2S

ep-2

Jan-

2M

ay-2

Sep

-2Ja

n-2

May

-2S

ep-2

Jan-

2M

ay-2

Sep

-2

Jan-

20M

ay-2

0S

ep-2

Jan-

2 0M

ay-2

0S

ep-2

Jan-

20M

ay-2

0S

ep-2

Jan-

20M

ay-2

0S

ep-2

Jan-

20M

ay-2

0S

ep-2

Jan-

2 0M

ay-2

0S

ep-2

Jan-

20M

ay-2

0S

ep-2

Jan-

20M

ay-2

0S

ep-2

Jan-

20M

ay-2

0S

ep-2

| CONFIDENTIAL07075


An investment opportunity in the energy sectorWe see an average of over 60% upside to target pricesWe see an average of over 60% upside to target prices

● We believe our universe of c.175 modelled companies have an average upside of over 60%

● The Top 20 upsides average over 160%, with the bottom 20 averaging around 2%● We select what we believe are the best risk-adjusted return opportunities● We select what we believe are the best risk adjusted return opportunities

| CONFIDENTIAL07075

Source: Investec Asset Management, August 2010

GSF Fund’s structure

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

● UCITS 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 2010, 95% of the portfolio could be liquidated in five days

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

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

limited● Turnover – expected to be between 100 and 150% (rolling 12 month 96.1%*)● Indicative tracking error 6 – 10%● Maximum individual stock weighting 10%, subject to 5/10/40 concentration

| CONFIDENTIAL07075

These internal parameters are subject to change, not necessarily with prior notification to shareholders. *As at 31.12.10.

YTD 2011 performance attributionInvestec GSF Global Energy FundInvestec GSF Global Energy Fund

Top 10 relative contributors % Bottom 10 relative contributors %

Petrohawk Energy 1.5 Exxon Mobil -1.9

Xle put option 0.7 Ultra Petroleum -1.8

Schlumberger 0.6 Petrobras -1.7Schlumberger 0.6 Petrobras 1.7

Baker Hughes 0.5 PetroBakken Energy -1.4

Occidental Petroleum 0.3 Weatherford International -1.2

Rosneft 0.3 Chevron -1.1

Marathon Oil 0.3 Forest Oil -0.8

Ophir Energy 0.3 Quicksilver Resources -0.8

Woodside Petroleum 0.3 Nabors Industries -0.7

Range Resources 0.2 EnCana -0.7

| CONFIDENTIAL07075

This is not a buy or sell recommendation for any particular security. Source: Investec Asset Management as at 30.09.11. Contribution to return relative to the MSCI World Energy NR Index.

1 year performance attributionInvestec GSF Global Energy FundInvestec GSF Global Energy Fund


Petrohawk Energy 1.4 Exxon Mobil -1.9

Baker Hughes 0.9 Ultra Petroleum -1.9

Xle put option 0 7 Petrobras -1 7Xle put option 0.7 Petrobras 1.7

Woodside Petroleum 0.4 PetroBakken Energy -1.4

BP 0.3 Weatherford International -1.1

Ophir Energy 0.3 Chevron -0.9

Hess 0.3 Forest Oil -0.8

EOG Resources 0.3 Sevan Marine -0.7

Marathon Oil 0.3 Quicksilver Resources -0.6

Range Resources 0.2 Nabors Industries -0.6

| CONFIDENTIAL07075


3 year performance attributionInvestec GSF Global Energy Fund


Investec GSF Global Energy Fund

Smith International 2.2 OPTI Canada -3.6

Lukoil 1.6 Ultra Petroleum -2.2

BP 1 6 Exxon Mobil -2 2BP 1.6 Exxon Mobil 2.2

Schlumberger 1.4 Aker Solutions -1.5

Talisman Energy 1.3 Sevan Marine -1.4

Range Resources 1.3 ConocoPhillips -1.4

BG 1.2 Quicksilver Resources -1.4

OMV 1.2 PetroBakken Energy -1.3

Chesapeake Energy 1.1 Southwestern Energy -0.8

Cairn Energy 1.0 Weatherford International -0.8

| CONFIDENTIAL07075


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

Sector weightings (%) Top ten holdings %

Date 30/09/2011(1) MSCI World Energy(2)

Coal & Consumable Fuels 0.0 1.4

Total 9.2

Petrobras 7.2

ENI 6.6

Gas Utilities 0.0 0.5

Integrated Oil & Gas 37.8 60.7

Ultra Petroleum 5.4

Weatherford International 4.7

Transocean 4.6Oil & Gas Drilling 8.1 2.2

Oil & Gas Equipment & Services 11.1 10.2

Murphy Oil 4.5

Canadian Natural Resources 4.3

EnCana 4.2Oil & Gas Exploration & Production 40.9 18.2

Oil & Gas Refining & Marketing 1.7 2.4

Oil & Gas Storage & Transportation 0 0 4 5

EnCana 4.2

Devon Energy 4.0

Oil & Gas Storage & Transportation 0.0 4.5

Semiconductor Equipment 0.4 0.0

Total 100.0 100.0

The portfolio may change significantly over a short period of time.This is not a buy or sell recommendation for any particular security(1) Portfolio as at 30.09.11 (2) MSCI World Energy TR Index as at 30.09.11Source: Factset

| CONFIDENTIAL07075

Portfolio characteristicsInvestec GSF Global Energy FundInvestec GSF Global Energy Fund

● European integrateds

European integrated20.0%

Emerging market9 5%

Drilling8.2%

Ref iner1.7%

Solar0.4%

− TOTAL & ENI: Trading at 6x P/E with 7.5% yield● Pure gas

− Ultra Petroleum & Southwestern: Lowest cost US nat ral gas prod cers ith 15 20% gro th and

Diversif ied services

9.5% natural gas producers with 15-20% growth and sector leading returns

● Pure oil− Suncor Petrobakken and Canadian Natural

Pure gas19.5%

11.2%Suncor, Petrobakken and Canadian Natural Resources: All offering discount valuation versus peers and history

● Emerging markets

Pure oil15.2%

Oil & gas14.4%

− Petrobas: Significant upside to sum of the parts valuation with significant exploration exposure

● Diversified servicesW th f d Di t d t t− Weatherford: Discounted exposure to strong international oil services sector

| CONFIDENTIAL07075

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, 30.09.11

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 % Underweights %

Petrobras 7.2 Exxon Mobil -15.6

Ultra Petroleum 5 2 Chevron 8 1Ultra Petroleum 5.2 Chevron -8.1

Total 5.1 Royal Dutch Shell -7.5

ENI 4.8 ConocoPhillips -3.7

Weatherford International 4.4 Schlumberger -3.5

Murphy Oil 4.2 BG -2.9

Transocean 3.9 Occidental Petroleum -2.5

EnCana 3.6 BP -1.9

Petroleum Geo-Services 3.2 Anadarko Petroleum -1.4

D E 3 1 T C d 1 3

The portfolio may change significantly over a short period of time

Devon Energy 3.1 TransCanada -1.3

| CONFIDENTIAL07075

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 30.09.11

Investment style analysisInvestment style analysis

● Investments in the Investec Asset Management’s suite of Energy Funds are likely to be impacted b i bl i l di b t t li it d t th l b l l d d d f th ditiby many variables, including, but not 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

| CONFIDENTIAL07075

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

| CONFIDENTIAL07075

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

| CONFIDENTIAL07075

g y

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

and their specific commodity mix

the performance of the company’s share price● High correlation between a company’s commodity indicator and its share price. When these

diverge, it provides a potential investment opportunity● High correlation between a company’s commodity indicator and its financial performance. We use

this relationship to aid our financial modelling

Canadian oils have underperformed their

Statoil has underperformed its

commodity mix by 2% over the last 3 months, while the global Majors have underperformed theirs

commodity mix by 17% over the last 3 months, while Repsol has outperformed its by 9% Potentialunderperformed theirs

by 21%. Potential Long Only fund action: go overweight Majors, underweight Canadians

by 9%. Potential absolute return fund action: go long Statoil, short Repsol

| CONFIDENTIAL07075

Canadians

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 company d l t d t i i d l ti fmodels to determine earnings and valuations for

around 175 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● Cash flow● Balance sheet● Capital structure● Margins, returns and gearing● Divisional analysis● Divisional analysis● Reserves and production summary● Relative valuation (multiples)


| CONFIDENTIAL07075

● Absolute valuation (DCF and SOTP)

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


| CONFIDENTIAL07075

p p y

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

| CONFIDENTIAL07075

p p

Stage 5: Portfolio ConstructionIntegrated Risk ManagementIntegrated Risk Management

● An integral part of our investment process and portfolio construction

Fund Name VAR (%) VaR Ratio

VaR limit -Notification

VaR limit -Forced Action

Vol. or TE (%)

Beta Daily Perf (%)

MTD Perf (%)

Expected Shortfall

VaR description Status

Global Dynamic Resources -19.1% 0.9 1.5 2.0 6.2% 1.02 -0.4% 2.1% -25.6% 99% Absolute Monthly MC GREEN

Composite Benchmark GDR * -20.7% N/A N/A N/A -0.6% 1.9% N/A 99% Absolute Monthly MC N/Aprocess and portfolio construction● Internal Risk Team is led by Richard

Saldanha● Risk team reports directly to Investec

Composite Benchmark GDR 20.7% N/A N/A N/A 0.6% 1.9% N/A 99% Absolute Monthly MC N/AGSF Global Energy -19.4% 1.2 1.5 2.0 6.0% 1.08 -0.4% 2.2% -23.5% 99% Absolute Monthly MC GREEN

MSCI World Energy -16.7% N/A N/A N/A -0.4% 1.5% N/A 99% Absolute Monthly MC N/AAlternative energy and services -23.3% 1.1 1.5 2.0 12.9% 1.07 0.5% 4.3% -33.4% 99% Absolute Monthly MC GREEN

Composite Benchmark * -21.1% N/A N/A N/A 0.4% 4.1% N/A 99% Absolute Monthly MC N/A

Enhanced Natural Resources -9.5% -20.1% -26.9% 17.2% -0.2% 3.1% -11.8% 99% Absolute Monthly MC GREEN

Global Energy Long Short -5.9% -20.1% -26.9% 9.4% -7.0% 99% Absolute Monthly MC GREEN

Global Commodity & Res. (Full) -6.5% -20.1% -26.9% 11.3% 0.1% 1.1% -8.0% 99% Absolute Monthly MC GREEN

GCR (Full) - ZAR perf (est.) -0.3% 0.8%GCR SA sub-portfolio -12.0% -29.2% -39.0% 22.2% 0.8% 4.9% -14.8% 99% Absolute Monthly MC GREEN● Risk team reports directly to Investec

Asset Management CEO, Hendrik du Toit● Internal EMA Risk System

− Daily Portfolio Risk Reports (example

* Benchmark GDR: 50% MSCI AC Wld Energy, 50% MSCI AC Wld Materials.

Benchmark Alternative energy and services : 50% MSCI Wld Energy Equipment, 50% ML Renewable Energy IndexGCR, OOGENHF and Alternative energy and services pricing based on the fund's NAV from ThinkFolio. ENR, GDR and OGGENER pricing based on State Street prices.

on right), showing Value-at-Risk (VaR) and Volatility and risk tolerances for all funds

− Monthly risk report decomposesMonthly risk report decomposes country, sector, valuation and asset risk factors with VaR Matrix at 99%, 95% and 90% confidence levelAll ‘ h t if’ i l i− Allows ‘what if’ scenario analysis

| CONFIDENTIAL07075

Screenshot for illustrative purposes only

GSF Appendix

Global Commodities and ResourcesCore teamCore team

LDNGeorge Cheveley

Co-portfolio ManagerDaniel Sacks

Co-portfolio Manager Mark Lacey Jonathan WaghornBradley George

Portfolio Manager & Team Co portfolio ManagerGlobal Dynamic Resources

Base Metals & Bulks

Co portfolio ManagerGlobal Gold and Precious

Metals

Co-portfolio Manager, Global Energy

Co-portfolio Manager, Global Energy

HeadGCR, GDR, ENR, Global

Gold, Precious Metals

Graeme BakerInvestment Support

Analyst

Dawid HeylInvestment Analyst, Soft Commodities

Scott WinshipInvestment Analyst, Gold and Precious

Metals

John ThompsonInvestment Analyst, Soft Commodities

Doug BlatchTrading

Simon Gardner-BondInvestment Analyst,

Bulks, Base and Precious Metals

Ruchir PatelTrading

● Cumulative market and industry experience of over 120 years● AUM of $7.2 billion in global commodities and resources as at 31 August 2011

An e perienced team ith di erse backgro nds

| CONFIDENTIAL07075

An experienced team with diverse backgrounds

Global Commodities and ResourcesCurrent propositions including new launchesCurrent propositions, including new launches

Global Commodities and Resources Fund Range

● GSF launch date: 26 Nov 1990

GSF Global Gold Fund$509m

OEIC Global Gold Fund$327m

● Launch Date: 31 Jan 2008

GSF Global Dynamic Resources Fund $598m

● OEIC launch Date: 1 May 2008

OEIC Enhanced Natural Resources Fund $470mGSF Enhanced Natural

Resources Fund $143m

● GSF launch date: 4 Jan 2010

GSF Enhanced Global Energy Fund

$86m

● GSF launch date: 25 Jan 1985

GSF Global Energy Fund$1,362m

OEIC Global Energy Fund$352m

● 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 All Countries Materials and 50% MSCI All Countries Energy

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

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

● Long/Short absolute return. Extended UCITS powers

● Index: MSCI World Energy (50%)


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

Extended UCITS powers


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

● Index: MSCI World Energy

GSY B Global Commodities & Resources Fund

gy ( %)and MCSI World Materials (50%)

GSF Global Energy Long Short Fund SA Commodity Fund

$71 *UCITS extended investment

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

$375m

● Launch Date: 15 Dec 2008 Structure: Luxembourg SICAV Long/Short absolute return

g$27m

● Launch Date: 1 Feb 1995 Structure: South African Unit

Trust● Index: INVCM Benchmark

$71m*

Long only

UCITS extended investment powers

Long/short

Commitment to commodities and resources fund management businessThe above shows all the Fund investment strategies currently run by Investec Asset Management’s Global Commodities and Resources Team. The Funds may not have been registered, verified or approved for marketing by the relevant supervisory authorities outside of the Funds’ domicile. Please visit www investecassetmanagement com/registrations to check registrations by country Details of these Funds may only be distributed disseminated forwarded or have

| CONFIDENTIAL07075

www.investecassetmanagement.com/registrations to check registrations by country. Details of these Funds may only be distributed, disseminated, forwarded or have its contents disclosed in accordance with local marketing regulations. Responsibility for compliance with such regulations shall be your sole responsibility. Fund sizes as at 30.09.11.

Investec GSF Global Energy Fund performanceInvestec GSF Global Energy Fund performance

Percentage growth, Total return$

60

80Investec GSF Global Energy A Acc Gross USD (MF)

S&P 500 NR (IN)

MSCI World/Energy NR (IN)

$ gross

6.520

40

ge g

row

th

gy ( )

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

3.7

-8.7

-20

0

Per

cent

ag MSCI World Energy Index & S&P 500

-60

-40

Sep 06 Mar 07 Sep 07 Mar 08 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 Mar 11 Sep 11

5 years f rom 30/09/06 to 30/09/11

Past performance is not audited and should not be taken as a guide to the future.Returns to individual investors will vary in accordance with their personal tax status and tax domicile. Source: Lipper to 30 09 11 NAV based (inclusive of all annual management fees but excluding any initial charge) gross

| CONFIDENTIAL07075

Source: Lipper to 30.09.11, 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

5 years 10 years1 year 3 years

$ % Chg % Chg % Chg % Chg

Investec GSF Global Energy A Acc Gross USD -12.4 -12.0 3.7 261.6

MSCI World/Energy NR 0.6 -4.4 6.5 127.2

Relative performanceRelative performance

Fund v MSCI World Energy NR -12.9 -7.6 -2.8 134.4

Past performance is not audited and should not be taken as a guide to the future.Returns to individual investors will vary in accordance with their personal tax status and tax domicile.Source: Lipper to 30 09 11 NAV based (inclusive of all annual management fees but excluding any initial charge) gross income

| CONFIDENTIAL07075

Source: Lipper to 30.09.11, 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 performanceInvestec GSF Global Energy Fund performance

Performance

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

5 years

Annualised

10 years

Returns in USD

1 month 1 year 3 years

Investec GSF Global Energy A Acc Gross USD -19.1 3 -12.4 3 -4.2 3 0.7 2 13.7 1

MSCI World/Energy NR -12.3 0.6 -1.5 1.3 8.6

Equity Natural Resource sector average* -16.5 -10.8 -1.1 0.7 9.6

Calendar year performance

YTD 2010 2009 2008 2007 2006 2005

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

Investec GSF Global Energy A Acc Gross USD -23.0 10.7 48.4 -45.6 37.3 10.1 62.3

MSCI World/Energy NR -14.0 11.9 26.2 -38.7 29.8 17.9 28.7

Equity Natural Resource sector average* -23.1 17.9 62.2 -51.4 36.2 26.3 33.2

Past performance is not audited and should not be taken as a guide to the future.Source: Lipper to 30.09.11, 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

| CONFIDENTIAL07075

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

Biographies

Jonathan WaghornPortfolio Manager and

Mark LaceyPortfolio Manager and

Biographies

Portfolio Manager and Sector Specialist, Energy

3 years with the firm

15 years experience

Portfolio Manager and Sector Specialist, Energy3 years with the firm15 years experience

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

Mark joined Investec Asset Management in February 2008 as a portfolio manager and energy specialist in the 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

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 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

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

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 U i it

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

University.

| CONFIDENTIAL07075

investec

Business

opec supply growth

capita oil demand

oecd demand growth

natural gas

cash cost

simmons

100 bl brent

global gdp