1. Energy Sector Winter 2010 Eric Dewees Honglei Gong Charles Hathaway Danqing Zhou

2. Agenda Sector Analysis Sector Analysis Business & Economic Analysis Business & Economic Analysis Financial Analysis Financial Analysis Valuation Analysis Valuation Analysis Recommendations Recommendations

3. S&P 500 Components Largest S&P Members S&P Weight Market Cap (Billions) Exxon Mobil 3.24% 307 Microsoft2.28% 246 Procter & Gamble 1.89% 179 Apple Inc. 1.85% 177 Johnson & Johnson 1.82% 173 General Electric 1.77% 168 International Business Machines 1.71% 162 JP Morgan Chase 1.59%151 AT&T1.57% 149 Bank of America 1.57% 130 Total S&P Weight in Top 10 Holdings 19.29% 19.29% 1,841 1,841

4. S&P 500 vs. SIM Sector Weights Energy is overweight the S&P by 51 Basis points

5. S&P 500 Performance by Sector SectorQuarter Returns Energy-6% Materials-9% Industrials-3% Consumer Discretionary-4% Consumer Staples-2% Healthcare-2% Financials-5% Information Technology-8% Telecom Services-11% Utilities-8%

6. Energy Sector 1.08 Trillion in Market Capitalization 1.08 Trillion in Market Capitalization 5 th Largest Sector in S&P 5 th Largest Sector in S&P 39 Companies 39 Companies SIM holds 2 S&P Companies SIM holds 2 S&P Companies ConocoPhillipsConocoPhillips National Oilwell VarcoNational Oilwell Varco Non-S&P Holdings Non-S&P Holdings BP Plc.BP Plc. TransoceanTransocean

7. Largest Companies in Energy Sector Top 10 S&P Energy Components Symbol Market Cap (Billions) Industry Exxon Mobil XOM307 Oil & Gas Integrated Chevron CVX142 Schlumberger SLB75 Oil & Gas Equipment/Services ConocoPhillips COP72 Oil & Gas Integrated Occidental Petroleum OXY63 Oil & Gas Integrated Apache APA33 Oil & Gas Exploration/Production Anadarko Petroleum APC31 Oil & Gas Exploration/Production Devon Energy DVN30 Oil & Gas Exploration/Production XTO Energy XTO26 Oil & Gas Exploration/Production EOG Resources EOG24 Oil & Gas Exploration/Production

8. S&P Energy Sector Sector Industry Group IndustrySub-Industry Energy (39) Energy Equipment & Services (11) Oil & Gas Drilling (3) Oil & Gas Equipment & Services (8) National Oilwell Varco Oil, Gas & Consumable Fuels (28) Integrated Oil & Gas (7) ConocoPhillips Oil & Gas Exploration & Production (12) Oil & Gas Refining & Marketing (3) Oil & Gas Storage & Transportation (3) Coal & Consumable Fuels (3)

9. Energy Sector: Industry Returns Relative Strength to S&P Industry BaselineSymbol Since Jan 1 1 Year 10 Year Oil & Gas Refining/Marketing OGREF8%-58%120% Oil & Gas Storage OGSTO7%7%-17% Oil & Gas Equipment/Services OGEQP1%22%104% Oil & Gas Drilling OGDRL0%20%118% Oil & Gas Exploration/Production OGEXP-1%4%377% Oil & Gas Integrated OGINT-2%-34%101% Coal & Consumable Fuels COCOF-3%42%578%

10. SIM Energy Holdings EnergyHoldingsSymbolMarket Value Value% of Fund S&PWeightAnnual Return Return (Ex. Dividends) ConocoPhillipsCOP $ 590,400 $ 590,4003.11%0.75%0.95% TransoceanRIG $ 864,348 $ 864,3484.55% Not in S&P 53.77% National Oilwell Varco NOV $ 613,500 $ 613,5003.23%0.19%59.98% BP Plc. - ADR BP $ 190,808 $ 190,8081.00% Not in S&P 25.22% SIM Energy Portfolio $ 2,259,056 $ 2,259,05611.89%

11. Energy Vs. S&P Energy has been lagging the S&P over the past year. What’s to blame? Oil prices and oil demand

12. Business & Economic Analysis

13. Porter’s 5 Forces Threat of New Entrants Costly Costly Require highly specialized professionals Require highly specialized professionals Power of Suppliers Small handful of powerful companies Small handful of powerful companies Power of buyers Lack of product differentiation Lack of product differentiation Substitutes. Substitutes. Coal, gas, solar power, wind power, hydroelectricity and nuclear energy. Coal, gas, solar power, wind power, hydroelectricity and nuclear energy. Competitive Rivalry. Competitive Rivalry. Slow industry growth rates Slow industry growth rates High exit barriers High exit barriers

14. Life Cycle Low Margins Low Margins Industry Maturation Industry Maturation Growth Rates LowGrowth Rates Low ConsolidationConsolidation

15. Key Drivers to Energy Prices Consumption / Demand Consumption / Demand Production Capacity Production Capacity Distributional Bottlenecks Distributional Bottlenecks OPEC Supply Response OPEC Supply Response Geopolitics Geopolitics Weather Weather Reserves Reserves

16. Who’s Consuming?

17. Oil Futures Oil is currently in Contango, the future price is Spot Price + Carry Cost Contango has been narrowing, indicating lower prices in future Geometric Mean is 3.29% annual increase

18. Oil Price Projections We expect prices to trend along the reference line EIA Report

19. Inventories

20. Oil Demand Forecast 1Q 2010 In 2010, oil demand is expected to average 86.3 million barrels a day. In 2010, oil demand is expected to average 86.3 million barrels a day. EIA Report

21. Oil Supply Forecast 1Q 2010 In 2010, oil supply is expected to average 85.62 million barrels a day. In 2010, oil supply is expected to average 85.62 million barrels a day. EIA Report

22. Long Term Oil Demand Demand over the next 2 years is expected to rise marginally.

23. Long Term Oil Supply No dramatic growth in production between now and 2011

24. Dollar vs. Oil As the dollar strengthens Oil prices go down USD has been gaining on the Euro during the past 3 months

25. Dollar vs. Energy

26. Oil vs. Energy Sector Oil prices are highly correlated with the Energy sector performance

27. Financial / Valuation Analysis

28. Revenue Growth

29. EPS Growth

30. Sector Margins

31. Refining Industry Net Margins Sector margins have fallen below the mean - Excess Capacity in Refining - Less Production

32. Sector Valuation

33. Industry Valuation

37. Recommendations

38. Recommendations Drop 101 Basis Points to bring us to 50 basis points under weight from 51 basis points overweight. Drop 101 Basis Points to bring us to 50 basis points under weight from 51 basis points overweight. Based on Based on Oil prices aren’t going anywhereOil prices aren’t going anywhere Dollar strengtheningDollar strengthening Demand not picking up in next 3 MonthsDemand not picking up in next 3 Months Refining Margins down from excess capacityRefining Margins down from excess capacity Oil inventories have been increasing in the past couple monthsOil inventories have been increasing in the past couple months Industry Ratios show we are overvalued relative to S&PIndustry Ratios show we are overvalued relative to S&P

39. Recommendations We would like to underweight We would like to underweight Oil & Gas RefiningOil & Gas Refining Oil and Gas IntegratedOil and Gas Integrated Because of the excess capacity in refining. We would hold onto Exploration and Production as that’s our hedge to higher oil prices.

40. Questions?