DSP BlackRock Mutual Fund World Energy Fund!

1. DSP BlackRock World Energy Fund
April 2011
FOR PROFESSIONAL INTERMEDIARIES ONLY

2. DSP BlackRock World Energy Fund
USD 6.9 billion
50-100%
Allocation
BlackRock Global Funds (BGF)
World Energy Fund
Indian Investors
USD 2.9 billion
0-30%
Allocation
BlackRock Global Funds (BGF)
New Energy Fund
Source: BlackRock; AUM of BGF funds as on March 31, 2011
2

3. Our energy expertise – we manage two different types of energy funds
(1) BGF World Energy – investing globally in traditional energy (2) BGF New Energy – investing globally in alternative energy
companies of all sizes. companies of any size.
3

4. BGF World Energy: Agenda
1. The Macro Backdrop: Oil and natural gas price outlook
2. The Opportunity: Why now is an interesting time for the energy sector
3. Our Approach: Positioning the BGF World Energy Fund
4. Fund Statistics
4

5. (1) The Macro: Witnessing a structural change in energy demand
Development of OECD/non-OECD energy demand* Change in daily oil demand by region (mb/d)**
OECD North America
OECD Pacific
OECD Europe
E.Europe
Africa
Latin America
Other Asia
Middle East
India
China
-4 -2 0 mb/d
2 4 6 8
Non-OECD countries are the drivers of long term oil demand growth
Sources: BP Statistical Review.
**International Energy Agency World Energy Outlook, November 2010. New Policies Scenario (NPS).
5

6. The Macro: The global economic recovery is increasing oil demand today
% Change in global GDP (QoQ, annualised) Robust demand growth across all regions (Δmb/d)
8% 4
OECD Non-OECD World
% change (QoQ, annualised)
6% 3
4% 2
2%
1
m b /d
0%
0
-2%
-1
-4%
-2
-6%
-3
-8% 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
2007 2008 2009 2010 2011E 2012E
Oil demand is now robust across all regions
Source: BlackRock, IMF Jan 2011. Source: IEA February 2011,
6

7. Japan: Potential demand impact
• Japan represents ~5% of global oil demand. Since 2005, total oil demand has fallen every year
• 11 reactors representing 9.7GW of capacity are offline. 8.5 GW of oil, gas and coal capacity is also shut in
• Following an earthquake in 2007, one 8.2 GW of nuclear capacity was offline for 21 months and fuel oil and direct crude burning
rose by ~250,000 b/d
• There is sufficient oil fired power capacity to make up nuclear shortfall. This could add 200,000 b/d to incremental oil demand.
• All things being equal this would increase 2011 world oil demand growth to ~1.9% from 1.6%
• However, Some of the power requirement also likely to be met by LNG & coal (although utilisation rates at gas fired power plants
are currently high)
Impact of 2007 nuclear outage on fuel oil demand Impact of 2007 nuclear outage on crude demand
Source: IEA, March 2011 & BP Statistical Review
7

8. The Macro: Oil supply growth has not kept pace – spare capacity is set to fall
World Oil Supply Growth by Region (mb/d) OPEC Spare Capacity as a % of World Oil Demand
2.5 10%
2.0 9%
8%
1.5 2011E Demand Growth
7%
1.0 6%
mb/d
0.5 5%
0.0
4%
3%
* Analyst
Range of
Forecasts
-0.5
2%
-1.0 1%
2009 2010 2011 2012 2013 2014 2015
0%
Non-OPEC crude capacity growth Global Biofuels Growth
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011E
2012E
2013E
OPEC NGLs Growth OPEC Growth (ex Biofuels)
Total Net Change Total ex-Libya growth
OPEC spare capacity has peaked
Source: IEA/Wood Mackenzie Source: Blackrock/IEA/Estimates range of ultimate spare capacity using bank analysts
8

9. Libyan Oil market analysis
Pre-crisis production profile by basin Country Sustained Current Spare
Production supply (% Capacity (%
Capacity global global
(mb/d) production) production)
1.31 0.0%
Algeria 1.4%
Iran
3.70 4.1% 0.0%
Iraq 2.75 3.0% 0.1%
Kuwait 2.55 2.7% 0.2%
Pre-crisis planned capex by company
Libya 1.80 1.6% 0.5%
Qatar 1.00 0.9% 0.2%
Saudi 12.10 10.0% 3.6%
UAE 2.70 2.8% 0.3%
Source: IEA March 2011, Wood Mackenzie
9

10. Potential for long-term supply impact: lessons from history
Iran Iraq
'000 bbl/day '000 bbl/day
7000 4000
Iranian Start of Gulf War II
6000 3500 Iran/Iraq war
Revolution
3000
5000 Gulf War I
2500
4000
2000
3000
1500
2000
1000
1000 500
0 0
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Iran oil production Iraq oil production
Russia Venezuela
'000 bbl/day '000 bbl/day Chavez
14000 Collapse of the 4000 Oil industry presidency
Soviet Union nationalised begins
12000 3500
3000
10000
2500
8000
2000
6000
1500
4000
1000
2000
500
0 0
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Russia oil production Venezuela oil production
Source: BP Statistical Review 2010
10

11. The Macro: Impact of higher oil prices on demand
• Price acts as the balancing mechanism between supply &
demand
Global energy consumption as a % of GDP
• Over the medium term, demand is highly inelastic. The majority
of oil demand is from the transportation sector. There are
limited alternatives – 98% of the world’s transportation uses
fuels derived from oil.
• Oil demand growth is largely being driven by China and the
Middle East which subsidise or control fuel prices. Demand in
these regions is less impacted by higher oil prices but it is
painful for governments.
• In the US, low natural gas prices are cushioning the impact of
rising oil prices, as is rising GDP
• Energy consumption as a proportion of World GDP reached as
high as 12% in mid-2008 yet demand remained relatively
inelastic. Currently at 7.9%.
• Some economists cite that a $10 change in oil prices impacts
global GDP by 25-50bps.
• The environment today is very different from the “energy crisis”
of the 70s:
• Gradual demand led price rises rather than sudden
supply shock?
• Low interest rates, weak USD make oil more
affordable
Sources: BlackRock, BOAML. *Price is for Brent Crude.
11

12. The Macro: US Natural Gas markets experiencing a structural change in supply
A huge unconventional gas resource US Natural gas break even by basin for a 15% return ($/Mcf)
8
7
6
5
Henry Hub gas price
4
3
2
1
0
P w e R rC M
F ye ville
re
H rn R r
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a llu W
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in d le
re
B rn tt - S liq id rich
o d rd rko a
P a ce
E g F rd - L u s rich
E
M rce s - S liq id rich
G n te W sh - L u s rich
E g F rd - d g s
l
o n a y o n l
B rn tt
ive
/B ssie
C tto V lle V rtica
o n l
C tto V lle - h rize ta
u n
G n te W sh - h rize ta
W o fo - A m
ry a
a e
M rce s - N
H yn sville - co
o d r ive B
P ea
C n W o fo
B rn tt - co
H ro
M rce s S
ice n
a tte
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W u s
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iq id
iq id
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a le o
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a
a le o
a
a e
a llu
ra a
ra a
What would make us more constructive on US natural gas? Outside the US, gas prices are more robust
1. Producers need to reduce investment US UK Japan LNG
16
2. Wall Street/JV partners have to stop funding capital expenditure programs
14
3. Hedging needs to roll off and/or futures curve flattens so that there is less
12
incentive to drill
$ M tu
10
/M B
4. Rig count needs to fall
8
5. Increased demand for natural gas due to coal to gas switching
6
6. Government policy change/LNG export 4
2
0
Source: US DOE/CS using oil credit/BlackRock. Sep-07 Sep-08 Sep-09 Sep-10
12

13. (2) The Opportunity: Oil price
Oil & Energy Equities lagged other commodities in 2010 Analysts’ Oil Price Expectations vs. the Forward Curve
120
110
160
Rebased to 100
100
90
80
120
70
60
50
80 40
Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 2004 2005 2006 2007 2008 2009 2010 2011 2012
Gold Silver Historic average BRENT Forward curve Consensus
Copper Tin
Crude Oil MSCI World Energy Index
Agricultural ETF MSCI Metals and Mining
Oil price has lagged other commodities
Source: DataStream/Internal December 2010. * Morgan Stanley/Credit Suisse/BOAML Estimates Source: DataStream 14 February 2011
13

14. The Opportunity: Valuation
Price of DataStream Oil Shares Index divided by average real earnings over previous 10 years
30x
25x
P/E ratio
20x
15x
10x
Apr-91
Apr-94
Apr-97
Apr-00
Apr-03
Apr-06
Apr-09
Market does not appreciate the sector’s earnings potential
Source: BlackRock, Bloomberg* as at 5th April 2011.
14

15. (3) Our Approach: Portfolio Positioning – focus on E&P
As the energy cycle reset in 2008 and rebounded in 2009, we changed the shape of the portfolio:
• Increased the oil price sensitivity within the integrated oil company category e.g. Suncor over Exxon
• Invested further in the Exploration & Production and the Oil Service subsectors
• Current positioning focuses on conviction plays with growth catalysts e.g. ~3% in pre-IPO companies
Evolution of sub-sector allocation within BGF World Energy Fund
60%
50%
40%
30%
20%
10%
0%
Integrated Oil Exploration & Oil Services Refining & Coal & Distribution Cash
Production Marketing Uranium
Jun-09 Mar-11 MSCI World Energy Mar 11
Source: BlackRock, as at end March 2011. subject to change.
15

16. Our Approach: Stock examples
Oil Services: US strong, international set to improve
Halliburton
• Oil service companies profit from increased spending by majors, national oil
companies and independent exploration and production companies
• Global capex expected in increase 11% in 2011 to ~$490 billion
• Currently benefiting from spending on US shales which are very service intensive.
In 2005 N. American Revenue/Rig ~$600/rig, now around $1,200/rig
• Potential for significant margin improvement in the international business driven by
expanded market position, mix and supply chain management
Value opportunities with catalysts that could lead to a re-rating
Marathon
• Integrated oil company that plans to break up to create a stand alone
upstream company and a refining & marketing company
• ConocoPhillips, Tesoro and arguably BP and Rowan have shown that oil
companies can have higher break up values than their market valuations
• Competitive US refining assets that are currently benefiting from improved
US product demand and discounted crudes
• Low growth but high ROCE upstream business compared with peers
Source: Marathon, Halliburton Corp, Barclays Capital
Reference to the company names mentioned in this communication is merely for explaining the investment strategy, and should not be construed as investment advice or investment
recommendation of that company.
* From Halliburton analyst day slides, number is 2010 Sep YTD ROCE
16

17. (4) The Stats: BGF World Energy Fund - Top 10 holdings
Company Sector Country Assets % of Fund
Anadarko Exploration & Production USA USA 4.9
Schlumberger Oil Services USA Global 4.2
National Oilwell Varco Oil Services US Global 3.6
Cairn Energy* Exploration & Production UK Global 3.2
Talisman Energy Exploration & Production Canada Global 3.2
BG Group Integrated Oil UK Global 3.0
Halliburton Oil Services USA Global 3.0
Suncor Energy Integrated Oil Canada Canada 3.0
Occidental Integrated Oil USA Global 2.8
Marathon Integrated USA USA 2.8
Total 33.7%
Total number of holdings: 77 Number of unquoted holdings: 5
Source: Holdings data as end March 2011, subject to change. * Combined Cairn Energy and Cairn India
BGF World Energy Fund is the abbreviated name of BlackRock Global Funds – World Energy Fund
17

18. The Stats: Biggest Overweight/Underweight Portfolio Positions
Overweight Fund MSCI World Active Position Underweight Fund MSCI World Active
Holding Energy Holding Energy Position
Anadarko 4.9 1.3 3.6% Exxon Mobil 2.1 14.0 -11.9%
National Oilwell 3.6 1.1 2.5% RD Shell 1.4 7.5 -6.1%
Varco
Talisman Energy 3.2 0.8 2.4% Chevron 2.0 7.1 -5.1%
Cash 2.4 0.0 2.4% Total 0.0 4.2 -4.2%
Green Dragon Gas 2.2 0.0 2.2% BP 1.9 4.5 -2.6%
Technip 2.5 0.3 2.2% ENI 0.0 2.1 -2.1%
Lukoil 2.0 0.0 2.0% Conocophilips 2.5 3.7 -1.2%
Newfield 2.3 0.3 2.0% Statoil Asia 0.0 1.0 -1.0%
Exploration
Noble Energy 2.4 0.6 1.8% Woodside Petroleum 0.0 1.0 -1.0%
Niko Resources 1.9 0.1 1.8% Transcanda Corp 0.0 0.9 -0.9%
Source: BlackRock as at end March 2011. Indicative of portfolio only. Subject to change
18

19. The Stats: BGF World Energy - Geographical exposure
Geographical Exposure by Listing Geographical Exposure by Risk Region
Latin America Australasia Africa
China 1% 4% Cash
1%
1% Australasia 2%
Asia 1%
Cash Latin America
1%
2% 2%
Europe Ex UK Europe
5% 3%
Asia
11%
Canada World
18% 45%
USA Canada
55% 15%
UK
USA
16%
17%
Source: BlackRock as at end March 2011. Indicative of portfolio only. Subject to change
19

20. The Stats: BGF World Energy: Performance
• Launched in 2001 as successor to 350
Energy International
• Fund Managers: Robin Batchelor/ 300
Poppy Allonby
• AUM of approx $ 6.9 bn 250
Percent
• Open-ended SICAV
• 50 – 80 holdings 200
• AA rated – S&P Fund Research
150
• AA rated – OBSR
• Superior rated - Morningstar 100
Sep-04
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
• Benchmark – MSCI World Energy
Index (Total Return)
BGF World Energy 7yr performance MSCI World Energy (TR)
Source: DataStream, data to 30th March 2011
US$ (net of fees) YTD* 2010 2009 2008 2007 2006 2005 2004 2003 2002
BGF World Energy Fund 12.1 16.8 36.3 -46.4 40.2 8.1 49.5 36.6 29.5 -4.8
MSCI World Energy Index
13.8 9.5 22.9 -39.4 27.5 15.8 26.2 25.3 22.9 -8.4
(total return)
Source: Datastream. *Performance shown net to 31st March 2011
20

21. Global Energy Conclusions
• Following a downturn due to the Global Financial Crisis, we are now in the upward stage of the next energy cycle
• The major headwinds facing the energy sector in 2009/2010 have gone away or are receding:
– oil demand is now robust across all regions
– OPEC spare capacity has peaked and is falling
• US Natural gas prices will remain subdued in the near term but European and Asian gas markets are attractive
• The energy sector has lagged the recovery of other commodities and equity valuations are attractive
• This is a supportive stock-picking environment
• BlackRock’s energy funds are managed by a well resourced and dedicated investment team
21

22. BGF New Energy: Agenda
1. Macro tailwinds
2. End market improvement
3. Our Approach: Positioning the BGF New Energy Fund
4. Fund Statistics
22

23. Macro tailwinds – The return of $100+ oil prices
• Unrest in the MENA region has exacerbated an already tightening oil market, helping drive oil prices above $100/bbl
• Disruption of both oil (Libya accounts for 1.7% of global supply) and gas supplies has renewed energy security concerns in many
countries
• Historical relationship between oil prices and New Energy equities has broken down. Is there potential for it to re-couple?
Energy security – a rebel guard outside a Libyan refinery Will oil prices and New Energy re-couple?
160 24
140
19
120
100
14
80
9
60
40
4
20
0 -1
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Brent Crude BGF New Energy
Source: The Guardian Source: DataStream, to 31st March 2011
A triple digit oil price moves energy security up the political agenda
23

24. Macro tailwinds – Japan and the outlook for the nuclear industry
• Nuclear accounts for 14% of world electricity generation. In North America and Western Europe it contributes 20% and 26%,
respectively. Over 25% of the world’s nuclear facilities were built before 1980.
• Life extension and expansion plans are already being reviewed:
• Germany has shut 7GW of nuclear capacity built pre 1980 for a safety review. This represents ~8% of their generation
capacity.
• China has temporarily suspended approval of new nuclear power plants. 2020 target is for 80-90GW vs. 10GW current
capacity.
• The US Nuclear Regulatory Commission is conducting a safety review of the fleet. ~20GW of capacity is currently awaiting life
extension approvals.
Global nuclear power additions Outlook for Central European reserve margins
300,000
30%
250,000
25%
200,000
20%
MW
150,000
15%
100,000
10%
50,000
5%
0
1960 - 1970 - 1980- 1990 - 2000 - 2010 - 2020 - 0%
1970 1980 1990 2000 2010 2020 2030 -5%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
At risk of At risk of
Without nuclear life ex tensions With nuclear life ex tensions
early cancelation/
retirement delay
Any delay (or reversal) of nuclear expansion will benefit renewables and energy efficiency
Source: Exxon, CLSA, IAEA, Bank of America Merril Lynch, BlackRock
24

25. Regulatory support – The start of renewed momentum?
2009/10 2011
Nuclear jitters brighten solar industry’s
Low targets, goals dropped: path
Copenhagen ends in failure
European ministers call
US energy bill stalls despite spill for bolder climate
emissions cut
Spain renewables industry
fears subsidy cuts
80% of US Energy to be made from
clean energy by 2035
Climate Bill R.I.P Oil hungry China needs energy
security rethink
25

26. Regulatory support – China is leading the way
New Energy is helping to solve China’s energy challenge
• China has accounted for 64% of incremental world energy China’s thirst for energy
consumption and 71% of energy-related carbon emissions
since 2000 Mtoe
• China’s share of world primary energy consumption has grown 2500.0 25.0%
from 10% in 1998 to over 20% today
2000.0 20.0%
• China is adding a power grid the size of France every single
year 1500.0 15.0%
1000.0 10.0%
12th Five Year Plan (2011-15)
500.0 5.0%
• 15% of primary energy from New Energy by 2020 (150GW in
wind, 20GW in solar) 0.0 0.0%
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
• Reduce energy intensity by 16% and carbon intensity by 17%
China primary energy consumption* China as a % of World
• Announced seven ‘Strategic Emerging Industries’ (SEI), of
which five relate to New Energy
• Target is for SEIs to increase their share from 3% of GDP in Source: BP Statistical Review of World Energy, 2010. * Primary energy includes electricity
generation, transportation fuel and heating
2009 to 8% in 2015 and 15% in 2020
China
• State Grid to invest $2.1 billion over next 5 years to support
EVs. $60 billion to be invested in the ‘smart grid’ by 2020
China
China will be a major growth market for renewables, energy infrastructure and energy efficiency
26

27. Developed markets continue to recover from the financial crisis
• Most of the companies in the new energy sector focus on ‘clean’ sources of electricity generation or ways to reduce electricity
consumption. Consequently, electricity demand levels and prices are important.
• The Global Financial Crisis propagated the biggest fall off in energy demand since World War II
• Whilst still below peak levels, electricity demand and prices in developed markets are trending back up
US Electricity Demand Wholesale Electricity Prices
Billion kWh/yr US$/MWh
4,000 140 Peak
3,950 Peak 120
3,900
100
3,850
80
3,800
60
3,750
40
3,700
3,650 20
3,600 0
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan 05
Jan 06
Jan 07
Jan 08
Jan 09
Jan 10
Source: EIA, rolling 12 month net electricity generation, as at December 2010 US (PJM base) Spain (base) Germany (1-yr forward)
Source: Thomson Financial DataStream, rolling 12 week average prices, as at 25th March 2011
Developed markets are recovering
27

28. Subsidy independent – The increasing cost competitiveness of New Energy
Falling cost of renewable power Today’s cost of producing electricity (with no CO2 cost)
• Continual research and development has increased the size and
efficiency of wind turbines
• Cost of wind power has fallen dramatically:
– 1980: >40 ¢ per kWh
– 2011: <8 ¢ per kWh
Clean sources of power generation are economic
Source: EIA, Vestas, Barclays Capital
28

29. Innovation and advances – Energy efficiency
• Approximately 40% of the world’s energy is consumed by buildings, making them the largest target for energy efficiency
• LEDs are now on the cusp of mass market adoption as a viable alternative to traditional lighting
Commercial building energy use LED costs ($/klm)
Other
20%
HVAC
31%
Cooking
2%
Refrigeration
4%
Water heating
6%
Electrical
components
12% Lighting
25%
Source: DOE - Buildings Energy Data Book Source: Philips Color Kinetics & DOE, Freedonia
Energy efficiency offers quick paybacks and is typically not dependent on subsidies
29

30. BGF New Energy Fund
Sector growing from an annual market of $0.74 Trillion
to $2.2 Trillion in next ten years
Energy Generation Energy Efficiency
Renewable Energy, Enabling Energy
36% Technology, 28%
Materials Technology,
Alternative Fuels, 19%
11%
Automotive &
Energy Storage, 0.2%
On-site Power, 1%
As at end March 2011 Source HSBC
30

31. Portfolio positioning
• A portfolio of high quality companies:
– predominantly earnings positive/commercial sales bias/strong balance sheet/attractively valued
• Continued exposure to government-mandated growth
• Limited exposure to loss making companies with unproven technology (>90% net income positive)
• Over 50% of companies have market caps above $5bn
Evolution of sub-sector allocation within BGF New Energy Fund
60%
50%
40%
30%
20%
10%
0%
Renewable Enabling Alternative Materials Automotive/ Energy Cash
Energy Energy Fuels Technology On Site Storage
Technology Generation
Dec-09 Mar-11
Source: BlackRock, as at end March 2011.
31

32. What we like…
Energy efficiency Automotive emission reduction
• Building efficiency • Vehicle emission standards continue to
• Demand response tighten globally creating demand for
emission reduction technologies,
• Power grid investment alternative power trains and cleaner
• Smart meters fuels
• e.g. Johnson Controls, • 2G cellulosic biofuels are expected to
Schneider Electric reduce CO2 emissions by ~90% and be
cost competitive
• e.g. Johnson Matthey, Novozymes
China Value opportunities
• Since 2000, China has accounted for • A reduction in risk appetite coupled with lower earnings visibility
almost 2/3rds of world incremental energy has led to a de-rating of renewable energy stocks.
consumption
• Selective opportunities exist to pick-up high quality assets at
• The 12th five year plan should be historically attractive valuations
supportive to the sector with focus on both
renewable energy and energy efficiency
Source: Itron, Echelon, Novozymes
32