March, 2016 The Crude Oil Comeback Energy Analysis and the Year Ahead 141 West Jackson Blvd. Suite 1320A Chicago IL 60604 +1 888.430.0043 2014 Price Asset Management
Disclaimer An investment in commodities or other alternative investments, is speculative, involves a high degree of risk and is suitable only for persons who are able to understand and assume such risk. Those who are not generally familiar with such risks are not suitable investors and should not consider investing in commodities or other alternative investments. This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any interest in such a product. 2
Price Asset Management Overview Price Asset Management ( PAM ) was founded in 1998 by Tom Price, Co-Chairman of Price Holdings, Inc. and original member of the Rogers International Commodity Index committee The Firm s affiliated FINRA broker dealer, Uhlmann Price, was founded by Fred Uhlmann, former Chairman of the Chicago Board of Trade Price Asset Management is an SEC Registered Investment Advisor, CFTC Registered Commodity Trading Advisor, and a NFA member Price Asset Management is a management owned company Headquartered in the Chicago Board of Trade building 3
A Broad Based Commodity Portfolio: The Rogers International Commodity Index Palladium 0.30% Nickel 1.00% Tin 1.00% Platinum 1.80% Silver 4.00% Lead 2.00% Zinc 2.00% Gold 5.00% Aluminum 4.00% Copper 4.00% Energy 40% Gas Oil 1.20% Heating Oil 1.80% RBOB Gasoline 3.00% Natural Gas 5.00% Brent Oil 13.00% Metals 25.1% Agriculture 34.9% WTI Crude Oil 16.00% www.pcscommodityfunds.com Corn 4.75% Wheat (CME) 4.75% Cotton 4.20% Soybeans 3.50% Coffee 2.00% Live Cattle 2.00% Soybean Oil 2.00% Cocoa 1.00% Lean Hogs 1.00% Lumber 1.00% Rapeseed 1.00% Rubber 1.00% Sugar 1.00% Wheat (KCBT) 1.00% Milling Wheat 1.00% White Sugar 1.00% Rice 0.75% Soybean Meal 0.75% Orange Juice 0.60% Oats 0.50% Milk 0.10% 4
Counter-Cyclicality 2,500 3,000 2,500 Inflation-Adjusted Performance of of Stocks, Bonds, and Commodity Futures July July 1959 1959-June - December 2015 2015 2,500 2,000 2,000 2,000 1,500 1,500 1,500 1,000 1,000 1,000 Commodity Futures 500 500 500 Stocks Stocks Bonds Bonds - - 1959 1959 1964 19641969 1969 1974 1974 1979 1979 1984 1989 1989 1994 1994 1999 1999 2004 2004 2009 2014 2009 2014 Sources: Yale ICF Working Paper No. 04-20, Feb. 2005 Facts & Fantasies About Commodity Futures (data from July 1959 - December 2004) and Bloomberg (RICIGLTR) Rogers International Commodity Index Total Return data (January 2005 December 2015) for Commodity Futures ; Bloomberg (SPXT) S&P 500 Total Return Index data (July 1959 June 2015) for Stocks ; Ibbotson s (SBBI) Int-Term Govt. Bond data (July 1959 December 2012) and Vanguard (VFITX) Govt. Int- Term Bond Fund (January 2013 present) for Bonds ; Federal Reserve Bank of St. Louis CPI Data (July 1959 present) used for inflation adjustment. 5
The Decline in Oil: What Happened? Increased US oil production Decline in Oil Prices Saudi price war with US energy producers Slowing growth in parts of the world (Europe and China) 6
World Wide Oil Industry Responds to Lower Prices Financial Stress Grows The world s top energy firms estimated $380 billion in spending cuts on 68 major oil and gas projects worldwide,. This is up from $200 billion estimated in August, 2015! (WSJ 11/14/16) In North America, 42 companies with $17 billion in debt filed for bankruptcy in 2015; the highest since 2008 (Reuters) Saudi Arabia issues bonds amidst decline in foreign reserves and estimated $87 billion budget deficit in 2016 (Bloomberg Business) Exxon cuts another 25% in capital expenditures and put on watch for credit downgrade! (Bloomberg Business) 7
World Wide Oil Industry Responds to Lower Prices Supply Set to Decline Baker Hughes reports US crude oil rig count drops 11 weeks in a row. At 489 now the lowest since the 488 count recorded on April 23, 1999, which was the lowest number since records began in the late 1940s. (MarketWatch March 4, 2016) US crude oil production is believed to have peaked in April, at 9.6 million bpd. (Energy Information Administration EIA ) NON-OPEC supply likely to see largest drop in over 2 decades (International Energy Agency IEA ) OPEC begins to respond with supply freeze: what s next? 8
China s Oil Consumption Continues to Rise China's oil demand will grow 4.3 percent this year to surpass 11 million barrels per day, compared to 4.8 percent growth last year (China National Petroleum Corporation research institute) 9
Demand Responds to Low Prices: US Miles Driven Sets Record 10
Current Volatility May Be Signaling the Bottom in Prices The S&P GSCI (WTI) Crude Oil posted a 3-day gain of 14.4% ending Feb. 17, 2016. This is the biggest 3-day gain in about 6 months for the index, and gains of this magnitude have only happened near oil bottoms (Jodie Gunzberg, Global Head of Commodities for S&P Dow Jones Indices) 11
Shape of Futures Curve May be Bullish 12
30 Years of Boom and Bust 13
The Crude Oil Comeback Production destruction across the globe Overall world GDP is positive Demand continues to grow Quantitative Easing worldwide Technical indicators point to recovery 14
Institutional Client Contact Information Uhlmann Price Securities, LLC Member FINRA/SIPC Chicago Board of Trade 141 West Jackson Boulevard, Suite 1340A Chicago, Illinois 60604 Uhlmann Price Institutional Group: 888.430.0043 Alan Konn Managing Director 312.264.4340 akonn@upsecurities.com Denise Poling Assistant to Managing Director 312.264.4341 dpoling@upsecurities.com Jerry McEntee Senior Director, Institutional Sales 312.264.4403 jmcentee@upsecurities.com Ruth Mignerey Director, Institutional Sales 704.969.0974 rmignerey@upsecurities.com David Fenn Consultant, Institutional Sales 1-877-261-4460 dfenn@priceasset.com Lydia Brown Vice President, Institutional Sales 312.264.4406 lbrown@priceasset.com 15
RICI Methodology Outperforms August 1998 through December 2015 Index Compound Annual Return Total Return Annualized Standard Deviation Sharpe Ratio RICI 4.15% 103.18% 19.03% 0.11 BCOM 1.21% 23.21% 16.94% -0.05 S&P 500 5.47% 152.65% 15.52% 0.23 Barclays US Agg Bond Index 5.13% 139.01% 3.45% 0.91 The RICI, S&P GSCI TM & BCOM (formerly DJ-UBS) are long only, passively managed commodity indices. It is not possible to invest in them and their returns do not reflect the fees and expenses inherent in investing a vehicle designed to replicate a particular commodity index. Detailed information on all of the indices is available upon request. Source: Barclay s Trading Group Ltd. 16
Years of Simultaneously Strong Dollar and Commodities Year DXY* Commodities** 1980 5.33% 11.10% 1982 12.10% 11.55% 1983 12.30% 16.26% 1984 14.93% 1.06% 1988 8.35% 27.93% 1989 0.68% 38.29% 1992 10.57% 4.44% 1996 3.96% 33.91% 1999 8.18% 24.34% 2000 7.55% 31.84% 2005 12.76% 21.35% 2010 1.5% 16.82% *DXY is a weighted geometric mean of the dollar's value compared only with a "basket" of 6 other major currencies which are: Euro (EUR) 57.6%, Japanese Yen (JPY) 13.6%, Pound Sterling (GBP) 11.9%, Canadian Dollar (CAD) 9.1%, Swedish Krona (SEK) 4.2%, Swiss Franc (CHF) 3.6% **Commodities are represented by the S&P GSCI TR from January 1970 to July 1998 and the Bloomberg Commodity Index TR from August 1998 through September 2014. 17
RICI : Strong Recoveries from Previous Bear Market Lows (03/1999 & 03/2009) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 1998 - - - - - - - -5.63% 9.60% -3.73% -10.07% -0.76% -11.14% 1999 0.89% -4.01% 16.77% 5.43% -5.36% 7.30% 1.98% 5.49% 5.31% -4.31% 4.65% 3.23% 41.79% 2000 6.74% 4.54% -0.89% -2.13% 7.60% 4.88% -5.48% 10.45% -1.42% 0.68% 5.13% -5.21% 26.12% 2001 2.02% -1.30% -4.46% 4.37% -2.00% -5.37% 1.48% 0.63% -8.77% -4.67% -1.11% -0.68% -18.78% 2002-1.20% 4.40% 10.95% -0.12% -0.16% 3.96% 0.49% 5.15% 2.88% -2.05% 0.45% 5.66% 34.08% 2003 7.22% 5.81% -6.92% -3.99% 8.29% 1.13% 2.66% 4.44% -1.72% 4.06% 2.57% 5.70% 31.99% 2004 2.65% 8.38% 2.13% 0.30% 2.85% -5.05% 5.01% 0.65% 7.30% 1.67% -1.00% -4.87% 20.85% 2005 3.15% 7.35% 3.32% -6.48% 0.06% 2.40% 3.68% 5.33% 1.01% -5.16% -0.97% 5.26% 19.55% 2006 7.06% -5.51% 3.18% 6.12% -0.33% -0.31% 1.39% -3.97% -6.45% 1.25% 5.45% -3.73% 3.04% 2007-2.97% 4.13% 1.77% 0.55% 0.54% 2.97% 4.80% -2.78% 9.41% 6.29% -2.41% 5.02% 29.98% 2008 2.69% 12.54% -5.39% 4.74% 3.92% 8.66% -9.32% -6.88% -13.47% -24.89% -11.07% -7.07% -41.35% 2009-5.10% -3.88% 4.98% 1.75% 16.70% -1.37% 2.33% -1.40% 0.41% 5.81% 4.36% 0.62% 26.24% 2010-7.90% 5.42% 0.67% 2.78% -10.33% 0.04% 7.94% -2.79% 8.58% 4.73% -0.29% 11.02% 19.03% 2011 3.17% 3.88% 2.38% 3.04% -5.20% -5.63% 2.34% -0.24% -13.95% 7.94% -1.20% -1.79% -6.93% 2012 3.43% 4.39% -2.58% -0.69% -11.45% 2.54% 5.77% 4.83% 0.38% -4.24% 1.83% -0.88% 2.02% 2013 3.97% -4.03% 0.41% -3.62% -1.66% -2.26% 3.34% 3.40% -2.38% -1.80% -1.13% 1.62% -4.48% 2014-1.25% 5.41% 0.80% 1.18% -1.69% 1.17% -5.05% -0.98% -6.61% -1.68% -6.53% -8.66-22.21% 2015-5.40% 3.80% -5.49% 7.60% -2.41% 1.71% -11.55% -0.60% -4.51% 0.80% -7.59% -4.64% -26.08% 2016 - - - - - - - - - - - - - *The RICI was officially released on August 1, 1998. The above performance does not include or account for commissions, regulatory charges, management fees or any other expenses inherent in investing in vehicles designed to track the RICI. The Index returns shown above are hypothetical and do not represent the results of actual trading of investible products, assets or securities 18
Risk Disclaimer An investment in commodities, managed futures or other alternative investments including any fund or separate account advised or managed by Price Asset Management, Inc. ( PAM ), is speculative, involves a high degree of risk and is suitable only for persons who are able to assume the risk of losing their entire investment. This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any interest in such a product. Prospective investors are expected to be aware of the substantial risks of investing in the highly speculative field of commodities and futures trading. Those who are not generally familiar with such risks are not suitable investors and should not consider investing in commodities, managed futures or other alternative investments. No one should consider or recommend an investment in any investment vehicle prior to a complete and thorough review of the applicable documentation required, including the sections on risk and expenses associated with such an investment. PAM cannot provide any assurance that investors will not lose all or substantially all of their investment. The past performance of any product managed by PAM is not necessarily indicative of future results. No representation is made that any returns indicated herein will actually be achieved. PAM is registered with the Commodity Futures Trading Commission (CFTC) as a commodity pool operator and commodity trading advisor and is a member of the National Futures Association ( NFA ). PAM is registered as an investment adviser with the U.S. Securities And Exchange Commission (SEC). Neither the CFTC nor the SEC have passed upon the merits of participating in any trading programs or funds promoted by PAM. Consequently, neither the CFTC nor the SEC have reviewed or approved this report. The Index returns shown in this presentation do not represent the results of actual trading of investible products, assets or securities. It is not possible to invest directly in an index. Exposure to an asset class represented by an index is available through investable instruments based on that index and there can be no assurance that investment products based on the index will accurately track index performance or provide positive investment returns. All the indices referred to in this presentation above are not investable products and their returns do not reflect the fees and charges inherent in investing in a vehicle designed to replicate a particular index. No fund nor any separate account managed by Price Asset Management, Inc. that tracks the RICI is sponsored, endorsed, sold or promoted by Beeland Interests, Inc. ( Beeland Interests ) or James Beeland Rogers, Jr. Neither Beeland Interests nor James Beeland Rogers, Jr. makes any representation or warranty, express or implied, nor accepts any responsibility, regarding the accuracy or completeness of this presentation, or the advisability of investing in securities or commodities generally, or in any private fund. or in futures particularly. BEELAND INTERESTS DOES NOT, NOR DOES ANY OF ITS AFFILIATES OR AGENTS, GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE ROGERS INTERNATIONAL COMMODITY INDEX ( RICI ), ANY SUB-INDEX THEREOF OR ANY DATA INCLUDED THEREIN. SUCH PERSON SHALL NOT HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN AND MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY OWNERS OF AN INTEREST IN ANY PRIVATE FUND OR ANY SEPARATE ACCOUNT MANAGED BY PRICE ASSET MANAGEMENT, INC., OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RICI, ANY SUB-INDEX THEREOF, ANY DATA INCLUDED THEREIN OR ANY PRIVATE FUND OR ANY SEPARATE ACCOUNT MANAGED BY PRICE ASSET MANAGEMENT, INC. BEELAND INTERESTS DOES NOT, NOR DOES ANY OF ITS AFFILIATES OR AGENTS, MAKE ANY EXPRESS OR IMPLIED WARRANTIES, AND EACH EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE RICI, ANY SUB-INDEX THEREOF, AND ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL BEELAND INTERESTS OR ANY OF ITS AFFILIATES OR AGENTS HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF. 19