Commodity Equities
“Les Patrimoniales”
Pau, June 16th, 2011
Arnaud du Plessis
Global Commodity Team
Senior Portfolio Manager
This material is solely for the attention of “professional” investors (see
more details and definitions at the end of the presentation).
Table of Contents
01 Supporting drivers for commodities
02 Commodity Outlook
–
–
–
–
03
04
05
06
Energy
Mining
Gold
Agriculture
Commodity Equities in Asset Allocation : Exemple of gold equities
Commodity Expertise
Appendix
Q&A
Page2
01
Supporting Drivers For
Commodities
Page3
Big picture supportive for commodity equities
Developed
Emerging
Growth
Low, improving
High, stable / decelerating?
Interest rates
Low, to edge up
Rising
Low, rising
(energy)
High, rising
(soft commodities)
Inflation
 Growth: More homogenous
Improving macroeconomic data in the West; reconstruction in MENA and Japan: => commodity demand
likely to be less dependant on Asian and Latam emerging countries
 Rates: expected to edge up
Developed countries about to start a cycle of rising rates, but no sharp upturn anticipated
Interest rate hikes to continue in emerging markets in an attempt to curb inflation, but close to the end
 Inflation: commodity-driven. A rising pressure for all countries
As commodity inflation will result more and more from supply issues than from growth, monetary policies
could be less efficient to stop rising prices.
Commodity inflation: should drive more investments into hard assets
A favourable environment for commodities
Page4
Our view on the super cycle
Demand from developed countries
matched with full supply availability
10 years of booming commodity
demand from Emerging countries;
Supply constraints on a rising trend
 The next decade:
– Global demand will continue to be strong for commodities, still supported mainly by
urbanization and industrialization in Emerging countries
– Demand response to higher prices will be slow: a long, difficult and costly process
– Main drivers for commodity prices will come increasingly from supply constraints
Supply constraints + Inflation: another leg of the Super Cycle ahead
Source: Reuters
Page5
Our general view on Commodities markets
4%
 Global demand for commodities
4.1
 Global demand from China
3%
3.9
2%
3.7
1%
3.5
0%
-1%
3.3
-2%
3.1
-3%
Global Demand Proxy - Deviation from Trend
GS Commodity Index
200
9
200
8
200
7
200
6
200
5
200
4
201
0
Q2
Q2
Q2
Q2
Q2
Q2
200
3
200
2
200
1
200
0
199
9
199
8
199
7
199
6
199
5
199
4
199
3
199
2
199
1
 Supply constraints over time
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q2
Q2
199
0
2.9
Q2
Q2
198
9
-4%
 Commodity prices are expected to remain very
firm as supply constraints increase market
imbalance for most commodities. The last
series of companies reports have shown very poor
figures on production volumes.
 High prices driven by supply constraints, likely
to limit the impact of rising interest rates
 Consensus is revising upwards estimates for
2011
Supply constraints becoming the supporting factor for prices
Page6
Gold Environment
Source: US Global Investors
Page7
02
Commodity Outlook
Page8
Energy: Short term supply risks
 Unrest in several countries puts short term supply at risk
 For the moment, only part of the Libyan production is disrupted
 OPEC spare capacity represents 6% of world production (5.2mmbbls/day), of
which 70% is in Saudi Arabia
 Countries most at risk represent 74% of the spare capacity which explains the
nervousness on the oil price
Oil price spikes how much should be political premiums?
Production
most at risk MMbbl/day
Egypt
Libya
Algeria
Yemen
Total
0.7
1.6
1.3
0.3
3.9
% OPEC
spare
capacity
14%
30%
24%
5%
74%
Source: Financial Times
Oil prices will factor in a higher political risk premium in the future
Page9
Energy: Long term supply constraints
 Depletion of existing fields:
5% per year = 4mmbbls/day = 1 Iran per year
 Geopolitical risk:
New fields in more challenging areas = higher finding & development costs
OPEC market power to increase: 40% of oil production and 77% of reserves
 Operating risk:
Impact of Macondo oil spill on resource access and costs
 Easing of Supply constraints to come from the rapid development in Iraq and Brazil
Reserve replacement
Production costs ($/b)
Production increasing more rapidly than discoveries
Supply constraints will put a floor on price levels
Source: UN, McKinsey
Page10
Copper: Constraints deriving from risk exposure of new mines
■ A continued deficit in copper concentrates markets
2.7% expected deficit in 2011.
Inventories below 4 weeks;
ETF impact
■ New supply: little to come …………………………………..and more risky
25-35 year reserves, but associated risk going higher
Source: Macquarie, SG Cross Asset Research, Brook Hunt
1: country risk derived from Global Insight’s country risk rankings
Page11
Copper: Constraints through the supply chain
■ Deteriorating accessibility: geology, technology, costs, environment….
*
■ Deteriorating infrastructure: harbours, railways, roads, power, water, …
Source: Brook Hunt
*: all new discoveries over 4 millions tons of contained copper
Page12
Manager’s views on Gold market
Gold demand by sector 2010
Official
Holdings
16%
Other
Fabrication
11%
Jew ellery
52%
Lost and
unaccounted
2%
Source: GFMS
Gold year-on-year returns since 1970
60
YoY returns (%)
Private
Investment
19%
40
20
0
Today
-20
-40
-5 -4 -3 -2 -1
0
1
2
3
4
5
6
7
8
9
Real short-term Fed funds rate (%)
Historical price evolution of the physical Gold and Gold equities
Relative valuation
Attractive macro and fundamental outlook
Page13
Gold: two main factors strongly in place
Currency alternative
Search for safe haven
 Rising currencies volatility
 Sovereign risk remains high in Europe
 Dollar leading position much debated
 Japan and US could be the next
Gold: reinforced save haven appeal
Source: Bloomberg
Page14
What could happen with US Debt…
Page15
Central Bank: reserves diversification – In a new Era
Central banks are once again net buyers after
being net sellers for 21 years
Gold accounts for only 5% of reserves of BRIC
Central Banks compared to >50% in developed
countries
Market imbalance as Central Banks sales have dried up
Reserve diversification still strongly needed
Source : WGC, BofA Merril Lynch Global Commodities Research
Page16
Soft commodity : strong demand growth
45
9,5
Change in global population
9
Global meat consumption
(bn inhbts)
(kg/capita/yr)
40
8,5
8
35
7,5
7
30
6,5
6
25
5,5
20
5
2000
2010
2020
2030
2040
1980
2050
1985
1990
1995
2000
2005
2010 E
140
Demography
US biofuel production quotas
120
(bn l)
100
Economy
80
60
40
Energy
20
0
2007
Source : United Nations, USDA, Bloomberg
2009
2011
2013
2015
2017
2019
2021
Page17
Soft commodity : supply constraints
0,6
Severity of Human induced soil degradation
Global arable land
0,5
(ha/inhbt)
0,4
None
Slight
0,3
Moderate
Severe
0,2
Very severe
Not listed
0,1
0
1950
1960
1970
1980
1990
2000
2010
2020
Impact of global warming on farmland productivity
Urbanisation
Soil degradation
Climate change
Source : USDA, FAO, IPCC
Page18
03
Commodity Equities in asset allocation:
Example of Gold Equities
Page19
Gold Equities : diversification within a Global Equity portfolio
Asymmetry of returns
Higher returns with higher volatility
500
450
400
350
300
250
200
150
100
50
Equity
Jun-10
Jun-08
Jun-06
Jun-04
Jun-02
Jun-00
Jun-98
Jun-96
Jun-94
0
Low correlation with Global equities
Gold Mines
Data : MSCI AC World Investable Market U$, DJTM World Gold Mining U$,
June 1994- December 2010
Data : MSCI AC World Investable Market U$, DJTM World Gold Mining U$,
Monthly returns matrix, June 1994- December 2010
Strong diversification benefits with Gold Equities
Amundi Rendez-Vous March 2011page 20
Page20
Gold equities in a global portfolio: 2 examples
Data: MSCI AC World Investable Market U$, DJTM WORLD GOLD MINING U$; June 1994- December 2010
 Gold Equities allocations generate more performance without added risk
 Gold Equities performance asymmetry enables to control volatility
Gold Equities Allocation improve Risk/Return Profile
Source : Datastream, Amundi Research
Amundi Rendez-Vous March 2011page 21
Page21
04
Commodity Expertise
Page22
Commodity equities: the obvious winners of higher prices
Cash Flows
 High cash flows to continue
 Producers to reduce further debt levels and turn net cash positive
 Cash flow generation quicker than capital expenditure
High returns
 Cash surplus to be returned to shareholders through dividends
and share buybacks
 More return than with physical commodities
M&A
 2010 a record year for M&A. For example in mining with over $134bn
 M&A strong start in 2011
Favorable factors for equity shareholders
Page23
Return of M&A activities – most recent deals
Sector
Subsector
Acquirer
Target
Premium
Size
Deal Structure
Energy
Coal
Alpha Natural
Massey
31%
$8.5 bn
Cash + Equity
Energy
Oil Drilling
Ensco
Pride
24%
$8.5 bn
Cash + Equity
Material
Copper
MinMetals
Equinox
23%
$6.5 bn
Cash
Material
Copper
Barrick Gold
Equinox
30%
$7.8 bn
Cash
Precious
Gold
Newmont
Fronteer
37%
$2.3 bn
Cash
Precious
Gold
Newgold
Richfield
31%
$513 m
Equity
Agriculture
Food
DuPont
Danisco
38%
$6.3b
Cash
In the portfolio
M&A the only option for quick production growth
Page24
Equities outperform physical commodities in the long run
GSCI Commodity Tot Return Ind
MSCI Wrld Energy
MSCI Wrld Metals & Mining
FT Gold Mines
Dax Agribusiness
900
800
700
600
500
400
300
200
100
0
2001
2002
Source : Datastream
2003
2004
2005
2006
2007
2008
2009
2010
Page25
Investment Philosophy
 The fund does not invest directly in commodities, but through equities only. Rather
than adding to price pressure and speculation
 We hold a long term-approach, as our goal is to identify throughout the entire value chain
the sectors and companies that will most benefit from supply/demand imbalance and best
deliver on their growth potential through a strong and sustainable development. The
minimum recommended investment horizon is 5 years.
Page26
Global Commodity Equity team
Global Resources
Anne Ruffin (Head of the team since 98)
USD 1 250m
Henrietta Lance
 Annualised excess return of 2.0% - IR of 0.321
Energy & Renewables
Stéphane Soussan
USD 320 m
 Annualised excess return of 5.0% - IR of 0.531
Global Mining
Anne Ruffin
USD 517 m
 Annualised excess return of 3.8% - IR of 0.922
 USD 3.3 bn AuM
Gold
(04/30/2011)
USD 728 m
 Annualised excess return of 4.5% - IR of 0.431
 19 years average
experience
Arnaud du Plessis
Agriculture & Water
Nicolas Fragneau
USD 496 m
 Annualised excess return of 4.2% - IR of 0.433
1since
Dec 31, 98
2
since Apr 26, 10
3since
Dec 12, 07
Page27
Amundi capabilities in commodity expertise: Global Resources
Calendar yr returns (gross)
 Consistent outperformance over the past 12 years
Composite Global Resources
Benchmark
Composite
Bench
Outperf
1999
40.3%
18.9%
21.2%
2000
-13.2%
-9.3%
-3.9%
2001
-0.5%
0.3%
-0.8%
2002
11.0%
10.6%
0.4%
2003
42.0%
36.2%
5.8%
2004
12.2%
11.6%
0.6%
2005
29%
25.4%
3.6%
2006
22.4%
20.3%
2.4%
2007
35.6%
29.0%
6.6%
2008
-39.3%
-34.6%
-4.7%
2009
44.0%
38.6%
5.6%
2010
21.2%
21.1%
0.1%
2011 YTD
7.0%
8.0%
-1.0%
 Performance in USD since inception (31 December 1998)
Since inception
Annualised return as of 30th April 2011
1Y
3Y
5Y
7Y
10Y
Composite Global Resources
25.0%
3.6%
8.6%
17.3%
15.3%
14.4%
Benchmark*
27.0%
5.4%
9.2%
15.9%
14.1%
12.6%
*Benchmark : 1/3 MSCI World Materials – 1/3 MSCI World Energy – 1/3 FTSE Gold Mines
Source: Amundi Gross performance in USD as at the end of April 2011.
Past performance does not prejudge future results, nor is it a guarantee of future returns
Page28
Amundi capabilities in commodity expertise: Global Gold
 Consistent outperformance over the past 12 years
Calendar yr returns (gross)
800
700
Composite Global Equities - Gold
600
Annualised excess return since Dec 31 1998: 4.6%
Information ratio since Dec 31 1998: 0.50
500
400
300
Benchmark
200
100
0
janv-99 janv-00 janv-01 janv-02 janv-03 janv-04 janv-05 janv-06 janv-07 janv-08 janv-09 janv-10 janv-11
Composite
Bench
Outperf
1999
111.16
57.60
53.56
2000
-30.86
-31.25
0.39
2001
12.58
23.67
-11.09
2002
58.48
55.48
3.00
2003
52.28
41.90
10.38
2004
-3.23
-7.72
4.49
2005
32.77
28.75
4.02
2006
24.71
13.29
11.43
2007
18.5
21.94
-3.43
2008
-31.00
-19.24
-11.75
2009
42.41
30.50
11.91
2010
31.85
29.59
2.26
2011 YTD
2.10
0.91
1.19
 Performance of Gold Equities composite in USD since inception (31 December 1998)
Annualised return as of 30th April 2011
1Y
3Y
5Y
7Y
10Y
Since inception
Composite Global Equities – Gold
24.3%
11.8%
8.3%
18.3%
21.2%
18.2%
FT Gold Mines
20.4%
14.0%
9.3%
16.8%
19.0%
13.6%
Source: Amundi. Gross performance in USD
Past performance does not prejudge future results, nor is it a guarantee of future returns.
Page29
Consistent outperformance over the past 7 years
Performance in EUR since inception (01 January 2004)
Composite: 150M EUR
300
Calendar yr returns (gross)
Global Energy
Composite
Bench
Outperf
2004
18.4%
18.9%
-0.5%
2005
61.7%
48.4%
13.3%
2006
2.9%
5.4%
-2.5%
2007
23.1%
17.1%
6.0%
2008
-39.9%
-34.9%
-5.0%
2009
29.9%
22.3%
7.6%
2010
20.2%
19.7%
0.6%
2011 YTD
5.3%
5.4%
-0.1%
250
200
150
Benchmark
100
50
janv-04
janv-05
janv-06
janv-07
Composite
janv-08
janv-09
janv-10
janv-11
Bench
1Y
3Y
5Y
7Y
Since
inception
Composite Global Energy
18.0%
0.2%
2.1%
11.9%
12.6%
Benchmark*
15.6%
1.1%
2.9%
10.4%
11.3%
Annualised return as of 30th April 2011
*Benchmark : MSCI WORLD ENERGY (DS)
Source: Amundi Gross performance in EUR as at the end of April 2011.
Past performance does not prejudge future results, nor is it a guarantee of future returns
Page30
Amundi capabilities in commodity expertise: Global Agriculture
120
110
100
90
80
70
60
50
40
30
20
m ars08
juin08
sept.08
déc.08
m ars09
juin09
sept.09
Com posite Global Agriculture
déc.09
m ars10
juin10
sept.10
déc.10
m ars11
Benchm ark S&P com posite
30/04/2011 (USD)
2011 (Ytd)
2010
2009
2008
Inception
(31/03/08) ann
Composite Global Agriculture
8.0%
22.06%
64.5%
- 47.9%
4.0%
S&P Composite
7.9%
19.0%
41.6%
- 44.1%
- 0.1%
Source : Amundi
From inception to 31 August 2010: S&P Global Natural Resources Agriculture
From 31 August 2010: S&P Global Agribusiness
Page31
05
Appendix
Page32
Global Commodity Equity Team
Anne Ruffin
Arnaud du Plessis
Head of Commodity Equities
Senior Portfolio Manager
Global Resources; Global Mining
Senior Portfolio Manager
Global Gold
Anne is Head of the Global Commodity Equity team and
has been managing Commodity Equity portfolios since
1998, including LCL Actions Or Monde.
Arnaud du Plessis joined Amundi in November and
has taken responsibility of the Gold expertise, in
close cooperation with Anne.
Prior to that, she worked as an Auditor with Ernst &
Young 1988-1991 within the oil department. Anne Ruffin
joined Amundi in 1991 where she worked as a Financial
Engineer until 1994, a Financial Analyst on commodities
1995-1998, and then a Global commodity Portfolio
Manager 1998 - 2010.
Arnaud was previously head of cyclicals at Natixis
Asset Management (2002-2010). He co-managed
gold equities and cyclical funds. More particularly, he
was in charge of precious metals and basic
materials , as well as energy.
Anne holds a Masters in Banking & Finance and in
Financial Engineering (1988) from Ecole Supérieure de
Commerce de Paris, one of France’s top Business
schools. She is also a Graduate of the French Society of
Security Analysts (SFAF).
Prior to that, he worked as a European equities
portfolio manager with Credit Lyonnais Asset
Management (1998-2002) after being Head of
derivative trading (1989-1998).Arnaud started his
career with Patrice Wargny SA in 1988 as an option
broker.
Arnaud is a Graduate of Institut Supérieur de Gestion
and also of the French Society of Security Analysts
(SFAF).
Page33
Global Commodity Equity team
Stéphane Soussan
Portfolio Manager
Global Energy , Renewable Energy
Stéphane started out as a Fund Manager Assistant at
Sinopia Asset Management in 1996. He joined Oddo
in 1998 as a sell-side Analyst for oil and metal
sectors and went on to Exane BNP Paribas in 2001
where he was a sell-side Analyst for the oil sector.
Research team
Nicolas Fragneau
Portfolio Manager
Global Agriculture, Fishery, Water
Nicolas joined Amundi in 2006 as a Commodity Equity
portfolio manager within the Global Commodity Equity
team.
In 2008 he joined the Global Resources team as a
portfolio manager focusing on energy and renewable
energy sectors.
Prior to joining the company he worked as a North
American & Energy equity portfolio manager at
Raymond James Asset Management after joining in
2000. He began his career at Cap Gemini in 1999 as
an IT developer.
Stéphane is a graduate from ESSEC, he has a
Master of finance from IEP and is a SFAF member
(Société Française des Analystes Financiers). He
has more than 14 years experience in asset
management.
Nicolas holds a Masters degree in Management
Science (Specialization in Finance) from the University
of Paris IX Dauphine (2000). He is a graduated of the
French Society of Security Analysts (SFAF) and the
CEFA (2003).
Page34
Global Commodity Equity team
Henrietta Lance
Senior Portfolio Manager
Global Chemicals and other
Materials
Henrietta Lance started her career in London in 1985
with Prudential Bache. In 1989 she moved to Paris to
specialise in European equities first working for François
Dufour Kervern. In 1992 she joined Société Générale
and then in 1999 she moved to Exane before returning to
Société Générale Asset Management in early 2007. She
joined the Global Resources team in October 2008.
Henrietta graduated from Edinburgh University, she holds
the CIIA and is a SFAF member (Société Française des
Analystes Financiers). She has more than 25 years
experience in asset management.
Page35