The Dawn of a New Era for US Energy: Fact, Fiction and the Investment Case for MLPs in Public...

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2Todays Agenda

What is a Master Limited Partnership (MLP)?

MLP Investment Opportunity for Public Retirement Plans Summary

Crude & Natural Gas Market Review Weak Prices Now, Higher Prices Later

MLP Asset Class Overview MLPs are a Major Beneficiary of North

American Infrastructure Build-out

MLPs A Misunderstood Asset ClassFact Versus Fiction

Investment Process

Conclusion & Questions

Dawn of a New Era for US Energy

3Oil Discovery and the Need for Infrastructure

4Modernization of Midstream Energy Infrastructure

Image: Fuel Terminaling and Transportation, Source: www.transmontaignepartners.com

5What is an MLP?

A Master Limited Partnership (MLP) is an entity structure of limited partnerships andlimited liability companies, with publicly traded and therefore liquid partnership interests.

MLPs are pass-through entities and consequently are not taxed at the corporate level,eliminating double taxation of traditional corporations. This structure often enables

MLPs to return a high percentage of free cash flow to unit holders.

Source: Alerian

MLP Asset Class Overview

6MLP Asset Class Overview

What are the requirements to be an MLP?

90% of income must be derived from qualifying sources1. A qualifying source is income derived from the following activities related to any mineral

or natural resource:

Exploration

Mining

Production

Development

Processing

Refining

Transportation

Marketing

Upstream Midstream Downstream

1 Section 7704(a) of the Internal Revenue Code of 1986


Toll Collectors of the Energy Industry

Ambassador Bridge

Paying Toll to Cross

Oil Pipeline

MLP operators receive revenue (incoming fees)

to use the infrastructure

Paying Fee to Cross

Only concerned with the volume of use, not the

value of what crosses


Operating Asset

Toll Collector MLP operator earns a fee for

service

Cash Flow

Limited Partners

(Public Unit Holders)

25% Interest

NYSE: PXS

75% Interest

Example MLP Structure

$$$Oil company pays

pipeline company to

transport its oil

9Why Create an MLP?


Energy Company View

Monetization of assets at fair market value

Lower cost of capital

Sponsor retains control over assets

Tax benefits

Further monetization potential through sale of the general partner

Government View

To create a path to energy independence

Increase capital investment in energy exploration and infrastructure

10

Who are MLP Operators?


11

US oil production likely to rise ~5 mm barrels per day (bpd) from 2010 through 2015 as multi-decade effort to optimize new oilfield technology takes hold

By 2030, North America may be energy independent

An $8 trillion infrastructure expenditure required in North America through 2035

Global oil and natural gas prices likely to recover due to higher demand and slow supply growth

MLPs are among the best asset class to benefit from this long term secular trend

Recent crude oil and natural gas price collapse create great entry opportunities in MLPs

There are significant misunderstandings about MLP investing and a lack of investment expertise among investment professionals

MLP Investment Opportunity for Public Retirement Plans - Summary

12

Crude & Natural Gas Market Review

Image: The famous Lucas Gusher Spindletop, 1901

13

Global Oil Market Corrects, Price Rebound Likely

Investor misunderstanding of the MLP asset class presents an opportunity

Causes of Steep Drop in Global Oil Price

Stagnant Europe and weaker non-OECD demand

Increasing North American supply

Rising global inventories

Cure for Low Oil Prices is Low Oil Prices

US oil demand responding to low price

QE3 heads overseas to Europe and Asia

Global oil supply additions likely to slow due to low price

Global oil spare capacity remains paltry at 3-4 mm bpd

MLPs are Among the Best Beneficiaries of the Continued North American Energy Infrastructure Build-out


14

Global Oil Demand Growth Slows Due to Higher Prices, Efficiency Gains, and Weak Economic Growth in Europe

0

10

20

30

40

50

60

70

80

90

100

1994 2004 2013 2014E

Da

ily C

on

su

mp

tio

n m

m b

pd

Rest of World Europe and Eurasia China North America

2013-2014 Compound

Annual Growth Rates

North America 2.0%

Europe & Eurasia -1.5%

1994-2004 Compound

Annual Growth Rates

North America 1.6%


2004-2014 Compound

Annual Growth Rates

North America -0.5%


Source: BP Statistical Review data as of December 31, 2009, Loomis Sayles estimate 2013

China 7.9%

Rest of World 2.3%

China 4.8%

Rest of World 2.2%

China 1.7%

Rest of World 0.5%


15

Demand Growth Slow Down Coincides with Price Break

$40

$60

$80

$100

$120

0.4

0.6

0.8

1

1.2

1.4

1.6

Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14

WT

I C

rud

e P

ric

e

y/y

ch

an

ge m

m b

pd

IEA Adjusted Outlook for 2014 Global Demand Growth

Source: IEA 2014 World Energy Outlook

2014 Global demand was initially expected to grow by 1.2 mm bpd

Peak expectation rose to almost 1.4 mm bpd

Current expectations are only 0.65 mm bpd after multiple downward revisions

WTI Crude

Price

2014 Global

Demand

Growth


16

Global Oil Inventory: Builds Ahead

-1

-0.5

0

0.5

1

1.5G

lob

al In

ve

nto

ry B

uil

t (m

m b

pd

)

Q1 Q2 Q3 Q4

2013

Q1 Q2 Q3 Q4

2014

Q1 Q2 Q3 Q4

2015E

Significant Inventory Builds

Source: Evercore ISI Energy Research


17

US Oil Supply Growth is the Principal Cause of Higher Global Production over the Past 5 Years

80

82

84

86

88

90

92

94

Oil Supply

Oil Supply Growth

US Shale

20

09

US

Canada

Saud

i

Ara

bia

Oth

er

Non

-OP

EC

Oth

er

OP

EC

20

14

E

Glo

bal

Pro

du

ctio

n(m

m b

pd)

Source: IEA, EIA, Evercore ISI Energy Research


18

US Shale Production Declines with Lower Oil Prices

-1

-0.5

0

0.5

1

1.5U

S C

rud

e O

il P

rod

uctio

n G

row

th (

mm

bp

d)

2015E

2016E

Source: Rystad, Evercore ISI Energy Research

$90 $80 $70 $60 $50


19

World Oil Demand Likely to Respond to Lower Price, Aggressive Monetary Policy in Europe

0

20

40

60

80

100

2014 2019

Dem

an

d (

mm

bp

d)

OECD Developing Countries Eurasia

2014-2019 Compound

Annual Growth Rates

OECD -0.3%

Developing Countries 2.6%

Eurasia 1.0%

Total 1.1%

Non-OECD demand has been resilient at ~1 mm bpd growth; likely to continue

European economic weakness eventually responds to aggressive monetary policy: approx. 1-1.5% economic growth likely

Demand resumes 1 mm bpd growth post 2014

Lower oil prices act as a demand stimulant

Source: OPEC 2014 World Oil Outlook


20

OPEC Productive Capacity Stable; Spare Capacity Small (in mm bpd)

November 2013

Production

May 2014

Production

November2014

Production

SustainableProductionCapacity

Spare Capacityvs. November

Production

Algeria

Angola/Cabinda

Ecuador

Iran

Kuwait

Libya

Nigeria

Qatar

Saudi Arabia

UAE

Venezuela

1.13

1.59

0.54

2.71

2.78

0.22

1.89

0.72

9.75

2.66

2.48

1.15

1.62

0.56

2.85

2.80

0.22

1.90

0.70

9.71

2.79

2.50

1.13

1.69

0.55

2.76

2.76

0.69

1.92

0.68

9.61

2.71

2.44

1.17

1.80

0.57

2.90

2.85

0.85

2.00

0.73

12.40

2.90

2.60

0.04

0.11

0.02

0.14

0.10

0.16

0.08

0.05

2.79

0.19

0.16

OPEC-11 26.46 26.79 26.94 30.77 3.84

Iraq 3.10 3.42 3.38 3.40 0.02

TOTAL OPEC 29.55 30.21 30.32 34.17 3.86

NGLs

Crude + NGLs

6.28

35.83

6.36

36.57

6.49

36.80

Source: Simmons & Company International data as of November 2014


21

Rising Global Oil Demand and Flat OPEC Spare Capacity Suggests that Higher Prices are Likely

0

2

4

6

8

10

12

14

16

0

10

20

30

40

50

60

70

80

90

100

19

75

19

76

19

77

19

78

19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

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95

19

96

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97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Demand (mb/d)

Excess Capacity (mb/d)

Exce

ss C

ap

acity (

mm

bp

d)

De

ma

nd

(m

m b

pd

)

Source: Simmons & Company International


22

High Correlation of OPEC Utilization Rate to Global Crude Oil Price: OPEC Utilization vs. Quarterly Oil Price (1997-2015)

75% 80% 85% 90% 95% 100%

OPEC Utilization

Source: Bloomberg, IEA, Evercore ISI Energy Research


23

Global Oil Market Likely to Recover MLPs a Major Beneficiary

Threshold price to grow US production and sustain international production - $65-$90 per barrel

Demand responding to lower US gasoline prices

Global supply additions to slow dramatically in H2 2015

Global oil price likely recovers to $70-$75 per barrel in 2016

MLPs remain a top beneficiary of continued build out of North

American energy infrastructure

Image: Oil rigs in a booming giant oil field in the Los Angeles area (ca. 1900)


24

Natural Gas - US Supply Growth (Bcf/d)

Source: Williams, Wood Mackenzie North America Gas Service.

Note: Excludes Canadian import volumes of approximately 5 Bcf/d (at 2014 levels).


25

Natural Gas - US Demand Growth (Bcf/d)

Source: Williams, Wood Mackenzie North America Gas Service.

Note: Other includes Net Mexican Exports, Transportation, and other miscellaneous demand


26


Image: www.naptp.org

27

MLP Investments for Public Retirement Portfolios


Investment Case for MLPs

The MLP Industry Snapshot

Drivers of Industry Growth

Liquidity & Low Correlations

Image: Salt Cavern Underground Natural Gas Storage Reservoir Configuration

(Source: PB Energy Storage Services Inc.)

28

Investment Case for MLPs

Growth of US Energy Infrastructure

Stable and Growing Cash Flows

Superior Asset Class Performance

Very Attractive Yield

Growing Asset Class

Low Correlation and Beta to Other Asset Classes

Source: Alerian


29

The MLP Industry: Three Different Sectors

Source: Pointe Capital Management LLC

Note: Allocations are not targets and the allocation may vary at any time. Please see important disclosures and information at the end of this presentation.


I. CoreII. Semi-core III. Non-core

Characteristics:

Fee based business Take-or-pay long term contracts

(3-7 years)

Low/no commodity risk (less than 10% of revenue)

Participating in build out of North American infrastructure

Primary Business Activities:

Oil & Gas Pipelines Gathering Systems Processing Facilities Liquids Transportation Storage Facilities

Characteristics:

Commodity risk (20%-50% of revenue)

More complex execution risk- Exploration/production risk

- Spread risk in downstream activities

Less fee based operations than Tier I Reduced take-or-pay contracts Participating in build out of North

American infrastructure

Characteristics:

Much higher commodity risk (>50% of revenue)

Typically extends beyond energy infrastructures to include

materials, consumer, industrials,

and other sectors

High execution risks May/may not be fee based models


Same as Tier I, Plus: Exploration & Production Downstream (marketing, refining) Company business activities

include both Tier I and

Tier II


Offshore drilling rigs Materials, including soda ash,

aggregates, coal, and other

building block materials

Frac sand manufacturers An expanding list with

limited historical

track records

30

Where MLPs Operate in the Value Chain

MLP operators receive revenue for each service in the value chain


31


Performance Comparison Across Asset Classes

MLPs have generated a total return of 243% since 2006 (inception of AMZ index). In comparison, the S&P 500 Index generated a cumulative return of 100% during the same

time period.

Source: Pointe Capital Management LLC and Factset

Hypothetical Growth of $10 million2006 2014

$34.3M

$20.5M $20.0M $19.8M

$15.3M

$0M

$5M

$10M

$15M

$20M

$25M

$30M

$35M

$40M

Alerian MLPIndex

Barclays U.S.HY Index

S&P 500 TRIndex

MSCI U.S. REITIndex

Dow JonesUtilities Index

+243% +105% +100% +98% +53%

32

Asset Class Performance

Utilities

19.9%

IG Bonds

5.2%

MLPs

76.4%

MLPs

35.9%

Utilities

19.2%

Non-US Equity

17.9%

Small Cap

37.0%

Utilities

30.7%

Commodities

16.2%

Hedge Funds

-19.1%

High Yield

63.5%

REITs

28.5%

MLPs

13.9%

REITs

17.8%

S&P 500

32.4%

REITs

30.4%

MLPs

12.7%

Utilities

-27.3%

Non-US Equity

32.5%

Small Cap

25.3%

REITs

8.7%

S&P 500

16.0%

MLPs

27.6%

S&P 500

13.7%

Hedge Funds

12.6%

High Yield

-28.4%

REITs

28.6%

Commodities

16.8%

IG Bonds

7.8%

High Yield

15.4%

Non-US Equity

23.2%

IG Bonds

5.9%

Non-US Equity

11.6%

Small Cap

-34.8%

S&P 500

25.9%A

High Yield

15.1%

High Yield

6.1%

Small Cap

14.6%

Utilities

12.6%

MLPs

4.8%

IG Bonds

7.0%

Commodities

-35.6%

Small Cap

25.2%

S&P 500

15.1%

S&P 500

2.1%

Hedge Funds

7.7%

Hedge Funds

9.7%

Hedge Funds

4.1%

S&P 500

5.6%

S&P 500

-36.6%

Commodities

18.9%

Hedge Funds

10.9%

Hedge Funds

-2.5%

MLPs

4.8%

High Yield

6.6%

Small Cap

3.5%

High Yield

2.1%

MLPs

-36.9%

Hedge Funds

18.6%

Non-US Equity

8.2%

Small Cap

-5.5%

IG Bonds

4.2%

REITs

2.5%

Non-US Equity

3.2%

Small Cap

-2.8%

REITs

-38.0%

Utilities

11.9%

IG Bonds

6.5%

Non-US Equity

-11.7%

Utilities

1.6%

IG Bonds

-2.0%

High Yield

2.5%

REITs

-16.8%

Non-US Equity

-43.1%

IG Bonds

5.9%

Utilities

6.1%

Commodities

-13.3%

Commodities

-1.1%

Commodities

-9.5%

Commodities

-17.0%

2007 2008 2009 2010 2011 2012 2013 2014 Annualized

MLPs

13.3%

Utilities

8.0%

High Yield

7.9%

S&P 500

7.1%

Small Cap

5.5%

IG Bonds

5.0%

REITs

4.8%

Hedge Funds

4.6%

Non-US Equity

2.4%

Commodities

-4.9%


Source: Pointe Capital Management LLC and Factset, 2007-2014

* Returns are based on net asset class returns, represented by the following indices: MLP Alerian MLP Index, S&P500, Non-U.S. Equity MSCI EAFE Index, IG Bonds Barclays U.S. Aggregate Total Return Bond, HY Bonds Barclays High Yield Total Return Index Unhedged, Commodities Dow Jones Commodity Total Return Index, Small Cap Russell 2000 Index, REITs MSCI U.S. REIT Index, Utilities Dow Jones Utilities Average, Hedge Funds Credit Suisse Hedge Fund Index.

33

Current Yield Spread Provides Excellent Entry Point

Source: Alerian, US Department of Treasury

AMZ

AMZ- 10 Year Spread

10-Year US Treasury

Average Yield Spread: 3.18%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%1

99

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

Current spread 4.26% vs. 3.18% average

Advantageous spread provides some higher interest rate protection


34

MLPs Provide Superior Current Yields vs. Other Asset Classes

1.9% 2.2%

3.2% 3.5%

6.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

S&P 500 TRIndex

U.S. 10-YearTreasury Bond

Dow JonesUtilities Index

MSCI U.S.REIT Index

Alerian MLPIndex

Asset Class Current YieldsDecember 31, 2014

Source: Pointe Capital Management, Factset


35

Distribution Growth Averaged 7% Over 10 Years

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 AverageAnnual

Alerian MLP Index Weighted Average Annual Distribution Growth

Source: Alerian as of 31 December 2014

Distribution growth provides inflation hedge, increases total return to shareholders


36

Dramatic Increase in Infrastructure Demand

New Technologies Unlock Resources

A multi-decade oilfield technical effort created horizontal drilling and completion, reservoir description and optimization, and perfected hydraulic fracturing and drilling technologies

US crude production is at its highest level in two decades

US natural gas production is at historical highs, shale gas is expected to grow 40% by 2040

Many existing pipelines are running at or near capacity due to significant, recent production increases

Immediate Demand for Additional Infrastructure

Moving crude by rail is a short-term solution

Pipelines needed for takeaway capacity in the Bakken, Permia, Marcellus, Eagle Ford, and Canadian Oil Sands

New oil produced in Canada and the US Northwest needs to get to the refining centers on the Gulf Coast

INGAA estimates that NA will require over $614B in infrastructure investment over the next 25 years

Potential for Export

Domestic natural gas prices have dropped dramatically while international prices remain high

Four LNG export licenses have been approved by the US government with 18 applications still pending

Panama Canal opening in 2015 will allow competitive access to Asian markets from the US Gulf Coast

Oil Sands bitumen needs to be blended with NGLs (diluent) so that it moves smoothly through pipelines

America Needs More Infrastructure to Achieve Energy Independence


37

Global Energy Infrastructure Spending Requirements 2014-2035 ($ in Billions)

Average Annual Investments Cumulative

Investments

Historical New Policy Scenario New Policy Scenario

2000-2013 2014-2020 2021-2025 2026-2030 2031-2035 2014-2035

Energy Supply (billion, year-2012 US dollars)

Total 1,230 1,772 1,759 1,830 1,963 40,165

Oil 427 637 608 613 621 13,671

Upstream 320 510 509 513 520 11,284

Transport 54 50 42 39 46 986

Refining 52 77 57 61 55 1,401

Gas 252 357 388 414 453 8,771

Upstream 152 230 272 297 337 6,138

Transport 100 127 116 116 116 2,633

Source: OECD/IEA World Energy Investment Outlook


Over $20 Trillion to be spent globally, 2014-2035

38

OECD Americas, Requires ~$8 Trillion in Energy Infrastructure($ in Billions)

Average Annual Investments Cumulative

Investments

Historical New Policy Scenario New Policy Scenario

2000-2013 2014-2020 2021-2025 2026-2030 2031-2035 2014-2035

Energy Supply (billion, year-2012 US dollars)

Total 263 400 375 387 401 8,616

Oil 95 188 168 168 163 3,813

Upstream 79 168 156 156 150 3,488

Transport 7 8 3 2 4 98

Refining 9 13 9 10 9 226

Gas 64 89 92 88 100 2,019

Upstream 46 61 66 62 74 1,433

Transport 18 28 26 26 26 586

Source: OECD/IEA World Energy Investment Outlook


39

New Infrastructure Investment to Spur MLP Growth

Source: INGAA as of 28 June 2014

$614 billion would

need to be invested

in North American

infrastructure over

the next 20 years

Crude Storage Laterals,

$1.5

Crude Storage Tanks,

$1.7

Crude Gathering,

$12.7

Crude Oil

Transmission, $63.3

Crude Oil

Equipment,

$192.6

NGL Export, $5.9

NGL

Fractionation,

$21.1

NGL Transmission, $29.0

Natural Gas Transmission, $87.2

Laterals, $45.2

LNG Export,

$43.6

Gathering

Line, $35.6

Gas Lease

Equipment,

$26.9

Gas Storage

Fields, $12.0

Gas Pipeline & Storage

Compression, $11.6

Gas Gathering Line

Compression, $23.5

Natural Gas

Crude Oil

NGL


40

Growing Asset Class with Ample and Growing Liquidity

The industry has averaged seven MLP IPOs per year since 2000

The number of energy-related MLPs surpassed 120 in 2014

Industry expansion and adoption creating long term growth and opportunity

Growth in MLP asset class is on par with the REIT industry in market capitalization

$0

$100

$200

$300

$400

$500

$600

2001 2006 2011 2012 2013 2014

Billions

MLP Total Market Value2001-December 2014

Source: Pointe Capital Management LLC and Morgan Stanley, as of December 31, 2014


41

MLP Index Correlations with Other Asset Classes Very Low Over Time

Source: Pointe Capital Management LLC and Bloomberg

Note: AMX Index began in June 2006, prior data was created by Alerian through back-testing


Alerian MLP

IndexS&P 500

MSCI EAFE

Index

MSCI U.S. REIT

Index

Dow Jones

Utilities Average

Dow Jones

Commodity Index

Alerian MLP Index 1.00

S&P 500 0.53 1.00

MSCI EAFE Index 0.54 0.90 1.00

MSCI U.S. REIT Index 0.37 0.79 0.72 1.00

Dow Jones Utilities

Average0.45 0.60 0.60 0.48 1.00

Dow Jones Commodity

Index0.44 0.56 0.65 0.37 0.43 1.00

Alerian MLP

IndexS&P 500

MSCI EAFE

Index

MSCI U.S. REIT

Index

Dow Jones

Utilities Average

Dow Jones

Commodity Index

Alerian MLP Index 1.00

S&P 500 0.39 1.00

MSCI EAFE Index 0.38 0.84 1.00

MSCI U.S. REIT Index 0.37 0.78 0.71 1.00

Dow Jones Utilities

Average0.42 0.40 0.38 0.46 1.00

Dow Jones Commodity

Index0.35 0.33 0.45 0.35 0.30 1.00

Index Correlations from 1997-2013

42

Date Plan Name State $ Amount Total $ Amount to MLPs % to MLPs

Dec-2013 Texas County & District Retirement System TX $20.8 B $416 M 2%

May-2014 Ohio Police & Fire Pension Fund OH $14.2 B $1.1 B 8%

Jun-2013 Oklahoma Teachers Retirement System OK $11.8 B $826 M 7%

Oct-2014 University of Michigan Board of Regents MI $9.7 B $50 M 1%

Jan-2015 Rhode Island Employees Retirement System RI $8.0 B $160 M 2%

Jul-2013 Detroit Police & Fire Retirement System MI $3.2 B $160 M 5%

Jan-2014 Austin Employees Retirement System TX $2.1 B $105 M 5%

Mar-2013 Denver Employees Retirement Plan CO $1.9 B $133 M 7%

Feb-2013 Tacoma Employees Retirement System WA $1.3 B $38 M 3%

Jun-2014 Central Pennsylvania Teamsters Pension Fund PA $953 M $48 M 5%

Mar-2013 Norfolk Employees Retirement System VA $909 M $46 M 5%

Jun-2014 Grand Rapids Retirement Systems MI $812 M $41 M 5%

Aug-2014 El Paso City Employees Pension Fund TX $701 M $35 M 5%

Mar-2013 St. Louis Employees Retirement System MO $694 M $45 M 5%

Jan-2014 Aurora City General Employees Retirement Plan CO $383 M $19 M 5%

Aug-2014 Lincoln Firemen & Policemen's Retirement System NE $200 M $10 M 5%

Oct-2014 Sarasota General Employees Pension Board FL $143 M $7 M 5%

Oct-2014 Sarasota Firefighters Pension Board FL $136 M $7 M 5%

Aug-2014 Pueblo County Employees Retirement Plan CO $126 M $6 M 5%

Feb-2015 Longboat Key Consolidated Retirement System FL $32 M $2 M 5%

Source: Fin|Daily


Recent Public Pension Fund Allocations to MLPs

43


44

Fiction

MLPs belong in alternative traunch for institutional investors due to lack of track

record.

MLPs are commodities and belong in hard

asset class due to exposure to commodities.


45

Fact

The majority of MLPs have little exposure to commodities and show very low correlation

to commodities or other assets.

MLPs are not materially different than any other equity asset.

Investors are currently allocating MLPs in their portfolios in a variety of ways: Traditional Equity Hard Assets Dedicated Alternative Allocation


46

Fiction

The MLP asset class is too small for the institutional investor. Our investment would

be too large of a percentage of MLP AUM

to be properly diversified.


47

Fact

The MLP asset class is $600 billion in publically traded securities, roughly

equivalent in size to the REIT industry.


48

Fiction

MLPs are only suitable for taxable investors who can take advantage of the

tax beneficial reporting and tax efficient

returns.


49

Fact

The tax reporting benefits of MLP investing are a moot point for tax-exempt investors

when considering absolute performance of

the MLP industry. MLP tax exempt

investors have earned returns above most

conventional benchmarks since the birth of

the modern MLP in 1987.


50

Fiction

If MLPs were a strong performing asset class they would be more widely

understood, recommended and owned.


51

Fact

Investment professionals need to take a fresh look at the MLP investment sector.

There are outdated notions about the MLP

asset class because of substantial industry

growth over the last 5 years.


52

Investment Process:

MLP Stock Selection and Portfolio Management

Image: The Detroit City Gas Co. called their gas making/storage locations "Stations". This image shows two

stations in the construction phase in the first half of the 20th century, near the Ambassador Bridge

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Investment Process

How to invest in MLPs

Separately Managed Accounts represent the preferred investment vehicle due to lower fees, favorable tax treatment, and no counter party risk.

ETFs and mutual funds are structured as C-corps and therefore have to pay corporate level taxes on distributions before paying investors. The corporate level tax may present a significant drag on

returns.

ETNs provide similar return characteristics, however they are debt instruments and carry credit risk along with liquidity concerns.

Source: Pointe Capital Management LLC, Factset, Evestment, MLP Data

Active Strategies Passive Strategies

Separate AccountOpen-End Mutual

Fund

Closed-End Mutual

Fund

Exchange Traded

Note (ETN)

Exchange Traded

Fund (ETF)

Investment Tax

StatusPartnership

Taxable

C-corp

Taxable

C-corpTaxable Note

Taxable

C-corp

Taxable at

Corporate LevelNo Yes Yes No Yes

Counter Party

RiskNo No No Yes No

Fee Range 0.75% - 1.00% 1.00% - 2.60% 1.00% - 4.50% 0.56% - 0.95% 0.45% - 0.95%

Avg. Fee 0.90% 1.54% 2.27% 0.84% 0.72%

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Similarly to Traditional Equities, MLP Securities Require a Diligent Research and Selection Process

Investment Process

Sustainable Competitive Advantage

Identify unique, durable elements of the business model

Evaluate barriers, competitor positions, supplier/ buyer positions

Financial Durability

Stress test financial staying power in down economic environments

Measure balance sheet strength and free cash flow generation capability in a variety of economic environments

Management Assessment

Identify managements that effectively allocate capital and utilize transparent financial disclosure practices

Partner with long term management teams who have significant equity stakes

Valuation & Expectation

Analysis

Discounted cash flow analysis to measure investment expectation in current price

EV / EBITDA, relative yield, dividend discount model

Establish base, best & worst case for each security

Revenue & Distribution

Growth

Identify and evaluate sources of longer term growth in revenues and distributions

Emphasis on the identification of long term structural drivers of growth

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What are the Risks?

Limited Capital Markets Access

Broad Equity Market Decline

Sharp Interest Rate Increase

Tax Law Changes

Execution

Investment Process

Image: Natural Gas Piipeline

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Congressional Leaders View MLPs Constructively

Joint Committee on Taxation (JCT)

August 2014 study estimates foregone revenue of $6.3 billion in 2014

Decrease from February 2013 estimate of $7.5 billion

MLP Parity Act

Proposed in House (HR 1696) and Senate (S 795), bipartisan cosponsors

Would grant same tax status to certain renewable fuels

Foregone revenue estimate of $1.5 billion over 10 years

NAPTP Educational Outreach

New revenue numbers are dwarfed by the level of private capital that MLPs have invested to build US energy infrastructure ($113 billion of

infrastructure since 2007) and other contributions to our domestic energy

security.

Abolishing structure would be counterintuitive for viability of US energy independence

Source: GovTrack, Joint Committee on Taxation, NAPTP

Investment Process

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Takeaway Points

Recent collapse in global oil prices now provides an excellent entry point into MLP space

Global oil market likely recovers due to lower supply, higher demand

Rising global energy infrastructure investment is a primary driver of MLP industry growth with an $8 Trillion expenditure

likely through 2035

MLP asset class provides superior yield, returns, liquidity, and upside potential for institutional investors

Investment management in MLP asset class requires deep and broad energy expertise


58

Questions?


Image: Gas storage tank at the Marathon oil refinery. On I-75 near the River

Rouge/Detroit border

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Disclosures

Pointe Capital Management LLC (Pointe Capital Management), is a Registered Investment Advisory Firmregulated by the United States Securities and Exchange Commission (SEC) and is notice filed in the State ofMichigan and various jurisdictions. Pointe Capital Management is limited to providing investment advisory

services to residents of this state and residents of other states where the firm is notice filed or is exempt from

notice filing.

This presentation contains forward-looking statements and are based on management's current expectations

and assumptions regarding our business, the economy and other future conditions and forecasts of future

events, circumstances and results.

The information provided herein is for informational purposes only and does not constitute a complete

description of the Pointe Capital Managements services. Nothing herein is to be construed as individualfinancial, investment, tax, accounting or legal advice. The information contained in this presentation does not

constitute a distribution, recommendation, an offer to sell, or the solicitation of an offer to buy securities.

Investment advice can only be rendered after delivery of Pointe Capital Managements disclosure brochure(Form ADV Part 2) by Pointe Capital Management and after the proper execution of an advisory agreement

between a client and Pointe Capital Management. A copy of Pointe Capital Managements current ADV 2,which discusses Pointe Capital Managements business operations, services, and fees, is available fromPointe Capital Management upon request or is available through the SECs Advisor Information system.

Investment Management is long-term oriented. General investment viewpoints, financial, or other information

shown in this presentation are for illustration purposes only for review and consideration. No strategy is

without its drawbacks and limitations. Therefore, any strategies that you consider implementing or changes in

your financial situation should be brought to the attention of your professional fee only Investment Advisor.

The information in this report has been obtained from sources Pointe Capital Management believes to be

reliable. While Pointe Capital Management has exercised reasonable professional care in preparing this

report, we cannot guarantee the accuracy of all source information contained within.

Pointe Capital Management reserves the right, and at its sole discretion to change, modify, add or remove any

portion of these terms in whole or in part, at any time. Changes to the terms will be effective when notice of

such changes is posted.

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Disclosures

1. Minimum Investment - The minimum investment may be waived for any reason and at the sole discretion

of Pointe Capital Management. There is no minimum investment requirement for subsequent purchase to

an existing portfolio.

2. Concentration Risk The portfolio in general has concentrated holdings in the energy infrastructuresector. The portfolio also concentrates in a particular type of energy infrastructure security known as

Master Limited Partnerships. Portfolios that concentrate in a particular sector or particular type of security

could experience greater volatility than portfolios that invest in a broader range of investments or securities.

3. Turnover Risk Depending on market conditions and frequency of short term investments, highertransaction fees may be incurred by the portfolio.

4. Liquidity Risk MLPs trade on an exchange on those days that the exchange is open. Certain securitiesmay experience limited trading volume as a result of market capitalization size, number of shares floated

by the company, or other macro or micro circumstances. At times where limited trading volume exists, the

ability to acquire or dispose of a particular security may be limited and could result in a unfavorable impact

on the prevailing market price.

5. Industry Risk MLPs and Energy Infrastructure companies are subject to unique risk in the marketplace.1. Commodity price risk

2. Acquisition risk

3. Depletion of natural gas and/or oil reserve

4. Adverse weather conditions

5. Interest rate risk

6. Terrorist attack

7. Changes in the regulatory environment

6. Tax Risk MLPs were created under the Tax Reform Act of 1986 and the Revenue Act of 1987. If MLPswere treated as a corporation for federal income tax purposes, the amount of cash available for distribution

would be reduced. Also, the distribution may experience a change in taxable nature, such as dividend

income, return of capital, or capital gain.

7. Tax Law Risk A change in current tax law or negative legislation could adversely affect the portfolio orMLP and Energy Infrastructure investments resulting in a loss in the portfolio. A change in tax law or

negative legislation could also impact the amount or composition of distributions from MLPs and Energy

Infrastructure investments.

63 Kercheval Avenue, Suite 222, Grosse Pointe Farms, MI 48236 | 313.882.7100

250 Park Avenue, New York, NY 10017 | 212.572.6401

www.pointecapital.com

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