Zach RochonLogan Cotter

Adam ClaugusJoseph Hsieh

May 5th, 2009

1) Size and Composition2) Economic Analysis3) Business Analysis4) Valuation Analysis5) Financial Analysis6) Recommendation

Coal and Consumer Fuels Oil and Gas

◦Drilling◦Equipment and Services◦Exploration and Production◦Integrated◦Refining/Marketing◦Storage

Consumer Discretionary9.52%

Consumer Staples12.04%

Energy12.51%

Financials12.19%

Health Care13.83%

Industrials10.44%

Information Technology18.40%

Materials3.37%

Telecom Svc3.71%

Utilities3.98%

Cash0.00%

S&P 500 Sector Weights

Consumer Discretionary7.93%

Consumer Staples13.06%

Energy11.31%

Financials8.14%

Health Care17.74%

Industrials9.44%

Information Technology19.92%

Materials3.88%

Telecom Svc2.40% Utilities

2.50%Cash

3.69%

Sim Portfolio Weights

1. SizeA. Adjusted market cap of $1,006,613 millionB. Composes 12.51% of the S&P500C. SIM currently underweights by 120 basis points

2. Largest Companies1. Exxon Mobile($332.30B),

PetroChina($180.73B), Royal Dutch Shell($149.17B), BHP Billiton ($141.55B), BP ($139.57B), Chevron($131.86B)

3. Performance1. YTD: (2.25%)2. QTD: 11.18%

2) Economic Analysis

EUR/USD

Energy (Sp-10) prices

Correlation=-.888R² = 0.7902

0

20

40

60

80

100

120

140

160

0.6 0.65 0.7 0.75 0.8 0.85

Crud

e O

il

USD/Euro

USD/Euro vs. Crude Oil

2008-Present

The Life Cycle

The Business Cycle

Near-term future of energy markets is tied to the economy’s uncertainty.

Restoring credit flow is key to stabilizing demand.

Capital intensive nature of energy projects makes access to financing critical.

Energy is at the center of a political debate◦ Waxman-Markey Bill◦ Cap-and-trade of greenhouse gases◦ Carbon pricing◦ Clean Energy and Energy Efficiency◦ Back by Obama with majority support in the

House, Senate is the only hurdle

Increase 120 basis points to par with S&P500 at 12.51%◦ The sector is currently undervalued with strong

growth potential within our one year horizon Energy’s performance against the S&P500

◦ QTD:11.18% vs. 6.48%◦ YTD: (2.25%) vs. (2.49%)

We expect this trend to continue and improve long-term

Biggest positives◦ Short-Term: OPEC cutting production◦ Long-term: U.S. economic recover

Biggest risks◦ Appreciation of USD/Euro◦ Uncertainty in global economy◦ Political risk

Overweight◦ Drilling & Services

Underweight◦ Exploration and Production

Individual stock recommendation◦ Transocean (RIG)