Sample - Product Analysis_1_Feb 14 by Sutherland Global Services

Samples –Product Analysis Study for Natural Resource Equity Fund Prepared for XXX

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Outline

Global Summary

Regional Analysis

Asia Pacific

Europe USA Canada

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Luxembourg is the most attractive destination for fund house registration Global Mutual Fund Break-up by Domicile



The Grand-Duchy of Luxembourg offers the investment fund industry a modern legal and tax environment that has attracted many fund houses. Below are some key advantages for funds domiciled in

3% 8% 24%

Luxembourg  Exemption from Luxembourg profit and capital gains taxes and no

16%

stamp duty on share issues or transfers 2008 Total Funds 664

 Funds are created under part one of the "UCITS" law, which 9%

allows the fund houses to market their shares freely in all

10%

member states of the European Union  Well-defined regulatory framework for fund houses ensures 30%

investor protection  Availability of working professionals and service providers such as

Canada Cayman Islands France Luxembourg

custodian, fund accountants, transfer agents and tax advisors

35 75



US is the second largest destination in terms of domicile of natural resource funds

41 139

108

Ireland/Dublin

Source: Association of the Luxembourg Fund Industry; Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Sector wise energy and metal & mining and region wise North America and Europe attract a majority of investments Share of Investment by Industry Focus

Share of Investment by Geography Focus 12%

24%

26%

4% 3% 5% 49%

10% 25%

27%

Metals & Mining

North America

Energy

Europe

Gold & Precious Metals Energy - Alternate Sources Oil & Gas Service

Asia Africa

Chemicals

Latin America

Others

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Diversified natural resource and precious metal funds have given higher returns over the last five years Sector-wise Average Returns

(% Avg Returns)

36 31

25 18

17 7

I Yr return (%) Energy

3 Yr Return (%) Div. Natural Resources

5 Yr Return (%) Precious Metals

Utilities



Precious metals and diversified natural resource funds have out-performed the other two categories of funds in terms of long-term performance



Precious metal funds such as gold funds, have given 37 percent (annualized) returns over the past five years, followed by diversified natural resource funds with 36 percent returns over the same period



In terms of one-year returns, energy based funds are almost on a par with diversified resource and precious metal funds

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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In terms of different investment styles, commodity, growth and large cap focused funds have given higher returns 44.7

(% Returns) 27.9

Fund performance by Asset class

15.5

16.0

12.8

Equity

Equity funds have been the out performers vis-à-

21.9 16.8

1 Yr Return



29.9

25.3

3Yr Return C ommodity

5 Yr return Alternative

vis other asset classes in the short term to



Growth funds, followed by value based funds continue to look good within the global resource

Fund performance by Investment Style

19.6

16.9

16.4

stronger returns in the long term

23.6

22.4

(% Returns)

medium term horizon. Commodity funds display

18.1

16.6

9.9

9.6

space 

1 Yr Return

Large caps have clearly been the winners followed by the mid cap funds

3Yr Return

Blended

Growth

Value

21.3

(% Returns)

20.4

18.7

15.8

Fund performance by Investment Focus

5 Yr return

22.8

11.6 7.2

1 Yr Return

3Yr Return

4.9

5 Yr return

-4.6 Large C ap

Mid C ap

Small C ap

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Precious metals and energy funds maintain higher cash level than industry average Cash Levels by Category of Funds

5.1% 4.4%

4.2%

3.1% 2.6%

Energy

Diversified Natural Resources

Precious Metals

Utilities

Average

Diversified natural resources funds maintain the least cash levels followed by utility-based funds

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Also, percentage cash holdings vary across asset classes & investment styles 27.6

(% Cash Holdings)

Cash Holdings by Asset Class 4.4

Equity



1.6 C ommodity

Alternative

Global Resource alternative funds, due to its inherent nature of its fund management style,

(% Cash Holdings)

3.4

contain the largest proportion of cash in their portfolios 

Value based / small cap funds are operating on a risky territory by incorporating negative cash

0.7

Cash Holdings by Investment Style

Blended

Growth

Value

flows. This could primarily reflect a relative -2.4

degree of leverage exposure to achieve higher returns (% Cash Holdings) 1.9

Cash Holdings by Investment Focus

Large C ap

3.0

Mid C ap

Small cap

-11.1

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Fee structures are almost similar across different fund categories Sector-wise average fee structure 16.00% 15.10%

16.40%

14.70%

4.10%

4.00%

3.70%

4.00%

3.80%

Front Load

15.40%

1.60% 1.20% 1.40% 1.80% 1.60% 1.50% 1.70% 1.50% 0.60% 1.60%

Back Load

Energy

Management Fees

Natural Resources

1.60% 1.20% 1.60% 1.70% 1.60%

Performance Fees

Precious Metals

Utilities

Expense Ratio

Global Average

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Outline

Regional Analysis â&#x20AC;&#x201C; Asia Pacific

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Asian fund market characteristics differ from country to country

Australia China

Unit Trust or Mutual Fund

Permit Sale Offshore Funds

Need to Manufacture

3rd Party Admin.

√

MF/UT

Offshore Processing

√

Gulf

√

Hong Kong

√

India

√

Indonesia

√

Japan

UT/MF

√

Korea

UT/MF

√

√ √

Malaysia

√

Philippines

√

Taiwan

Thailand

Singapore

Vietnam

√

√ √

√

Source: HSBC 2006

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Domestic energy funds dominate the fund offerings within the Asia-Pacific Global resources funds Natural Resources Funds by Industry Focus

Natural Resources Funds by Domicile Type Total funds = 57

Total Funds = 59

3% 33% 24%

2% 98%

15% 25%

Domestic

Energy Precious Metals

Offshore

Diversified Natural Resources Utilities

Others



Within natural resources funds, domestic funds are more prominent rather than offshore funds



Energy based funds lead the total number of active funds in Asia-Pacific



However, the following countries have significant percentage of offshore funds of the total mutual funds sold:



The number of active funds focused on energy sector has increased from five in

•

Hong Kong – 94 percent

•

Singapore – 66 percent

•

Taiwan – 57 percent

•

Japan – 12 percent

•

Malaysia – 15 percent

2005 to 19 in 2008

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Value based funds have given higher performance 31.0

(% Returns)

26.0

23.7

18.9

Fund performance by Asset class

1.7 1 Yr Return

3Yr Return

5 Yr return

-11.7



Asia Pac global resource funds have reported

Equity

strong retuns over the last 5 years owing to good

C ommodity

32.0

(% Returns)

Alternative

26.0

performance of the natural resource sector in the Region 

Regulatory restrictions have so far prevented

16.8

Fund performance by Investment Style 0.3

overseas clients to invest their money into most of

1 Yr Return

the Asia Pac funds

3Yr Return

Growth

(% Returns)

Fund performance by Investment Focus

5 Yr return Value 26.0

21.9

16.1

1 Yr Return

3Yr Return

5 Yr return

Large C ap Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Outline

Regional Analysis - Europe

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Energy funds dominate the fund offerings within the European natural resource funds market Share of funds by industry focus

Share of funds by Domicile type Total funds = 327

Total Funds = 344

Utilities 15%

Domesti c 56%

Offshor e 44%

2008 Total Funds 344

Precious Metals 24%

Energy 49%

Diversified Natural Resources 12%



Availability of equal mix of domestic and offshore funds provide plenty of



2008

options to investors 

Past three years have witnessed an addition of 77 domestic and 67 offshore funds in natural resources category

Energy-based funds dominate total number of active funds in Europe in



Past three years saw a substantial addition of energy-based funds over other funds



A total of 68 energy-based funds were added in the past three years against 16 funds in diversified natural resource, 38 in precious metal and 23 funds in utilities segment

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Almost 50 percent of the investment of all the natural resources funds is in energy and metal & mining segments Share of funds by industry focus 

Rising demand for metal and energy resources from developing economies such as Eastern Europe, India, China and Brazil has supported growth in energy sector

26%

27%



Investments in precious metal sector predominantly come from goldbased funds



Oil and gas has been another attractive sector for fund managers in Europe

2% 9% 23%

4% 9%

Energy Metal and Mining Precious Metals Alternate Energy Source Oil and Gas Chemicals Others Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Global natural resources fund managers in Europe find North America and Europe the most attractive regions for investment Energy funds - Geographical break up of AUMs

Diversified natural resource funds - Geographical break up of AUMs 40.1

39.8

(% Share)

28.2

3.4

North America

Asia

3.4

Europe

Latin America

5.8

4.0

3.5

1.0 Africa

North America

Cash

Precious metals funds - Geographical break up of AUMs

Asia

Europe

Latin America

1.9

1.8

Africa

Cash

Utilities funds - Geographical break up of AUMs

51.7

(% Share)

58.2

28.8

13.9 8.1 3.9

2.7 North America

Asia

Europe

Latin America

Africa

5.1

Cash

3.4 North America

Asia

Europe

0.9

0.1

Latin America

Africa

2.5 Cash

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Utility funds have given the lowest returns, while diversified natural resources and precious metals have given high returns Sector wise average returns

(% Avg Returns)

48 35

25 16

25 18

16 6

1 Yr Return Energy

3 Yr Return Diversified Natural Resource

5 Yr Return Precious Metals

Utilities

ď&#x192;ź

Precious metals and diversified natural resource funds have outperformed the other two categories of funds in terms of long-term performance

ď&#x192;ź

Precious metal funds such as gold funds, have given 54 percent (annualized) returns over the past five years, followed by diversified natural resource funds with 48 percent returns over the same period

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

www.sutherlandglobal.com February 14, 2013

European global resource funds fee break up – A snapshot 18.18

(% Fees & Expenses)

Pricing structure by Asset class

7.03 3.47

3.59

2.66

0.2

Fr. Load

1.42 1.86 0.88 1.46

Back Load

Equity



Mgmt. Fee

0.01 2.46 1.35

2.50 Perf Fee

C ommodity

Exp Ratio

Alternative

Performance fee structure displays considerable 6.34

(% Fees & Expenses)

variances across asset classes & investment styles

4.69



Management fee charges for global resource funds

Pricing structure by Investment Style

2.66 2.88

1.52 1.54 1.21

in Europe quote higher averages vis-à-vis at the 0.57 0.24

global level Fr. Load

Back Load

Mgmt. Fee

Blended

0.17 Perf Fee

Growth

1.11

1.39 0.98

Exp Ratio Value

11.67

(% Fees & Expenses)

Pricing Structure performance by Investment Focus

3.96 5.00 2.66

3.9

0.33 Fr. Load

0.19

1.44 1.58 1.51

Back Load

Large C ap

Mgmt. Fee Mid C ap

2.86 1.25 1.50 Perf Fee

Exp Ratio Small C ap

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Outline

Regional Analysis â&#x20AC;&#x201C; USA

www.sutherlandglobal.com February 14, 2013

Only two percent of US-based natural resources funds are offshore funds and energy funds are the most predominant Natural Resources Funds by Domicile Type

Natural Resources Funds by Industry Focus

Total funds = 103

Total Funds = 108

26%

49%

98%

18% 1%

Domestic



Energy Precious Metals Others

Offshore

With only two percent natural resources funds with offshore focus, most fund sponsors have set-up their asset management teams in the same country



Diversified Natural Resources Utilities

Energy-based mutual funds are leading in the US, in terms of numbers and assets under management



Utilities based funds are also growing fast

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Returns across different categories have displayed consistent performance… US Sector-wise Average Returns

36 (% Avg Returns)

25 18

17 7

1 Y r Return

Energy



3 Y r Return

Diversified Natural Resource

5 Y r Return

Precious Metals

Utilities

Diversified natural resources funds and precious metals have displayed the strongest performance with consistent performance across all categories of natural resource funds



The natural resources sector has outperformed most other sectors consistently in the last few years

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Outline

Regional Analysis â&#x20AC;&#x201C; Canada

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Natural resources fund managers in Canada find their own continent to be the most attractive region for portfolio allocation

Energy funds - Geographical break up of AUMs

Diversified natural resource funds - Geographical break up of AUMs

70.8

(% Share)

48.8

3.5 North America

Asia

6.2

Europe

3.5 Latin America

20.6

11.4

7.7

5.7 1.6

Africa

Cash

North America

Asia

Europe

Latin America

0.0

0.1

Africa

Cash

Precious Metals funds - Geographical break up of AUMs

(% Share)

63.8

3.0 North America

Asia

5.6

Europe

3.5 Latin America

5.7

5.6

Africa

Cash

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Diversified natural resources funds have been the most consistent over the one-year, three-year and five-year periods Canada Sector-wise Average Returns

(% Avg Returns)

27 24

1 Y r Return

Energy

ď&#x192;ź

3 Y r Return

Diversified Natural Resource

5 Y r Return

Precious Metals

Natural resource funds have shown the most consistent returns across the years indicating that investors are better off investing in diversified sectors than energy or precious metals

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis

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Global resource funds within Canada look optimistic in the long run in spite of the short term performance blues (% Returns)

28.6

27.5 15.3

Fund performance by Asset class

8.1

7.4

-2.6 -3.7 1 Yr Return



Equity

Canadian global resource funds in the recent past

3Yr Return C ommodity



Alternative 25.8

(% Returns)

global & US averages Only growth funds & mid caps have been displaying respectable returns across investment styles/focus

5 Yr return

24.9

have reported disappointing results vis-à-vis the



15.9

12.0

Fund performance by Investment Style

Primary research results display an optimistic outlook

0.2

for the long term horizon owing to greater investor

0.3

1 Yr Return

3Yr Return

5 Yr return

focus in the sector Blended

Growth 32.1

(% Returns) 17.7

Fund performance by Investment Focus

Value

17.7

23.5 21.8

10.0 6.1

2.6

1 Yr Return Large C ap

3Yr Return Mid C ap

5 Yr return Small C ap

Source: Bloomberg; Lipper; Morningstar; Sutherland Analysis