Comments from Investment Managers of the Pictet Thematic Funds

Date: 09 Feb 2010

Citywealth

Agriculture – comment from Gertjan Van Der Geer, Senior Investment Manager, PF(LUX) Agriculture Fund

The fund performed strongly during the last quarter and significantly beat the MSCI World Index. During this period, we built six new positions, which include Balrampar Chini, a sugar refiner in India, Migao a Canadian listed Chinese potassium sulphate producer and United Phosphorus, an Indian proxy on the long-term growth of generic crop protection chemicals. We closed our position in China Milk and reinvested the proceeds in one of the most efficient dairy milk farmers in the world, Almarai. We also initiated a position in Neogen, a fast growing food testing company.

After a tough year for farmers in 2009 due to the fall in crop prices, 2010 appears far more promising for the entire sector. Farm spending was reduced in 2009 owing to lower crop prices and low credit availability, but we expect both to improve in 2010, driving fertilisers, crop protection and farm equipment spending. We expect fertiliser application rates to improve in 2010 compared with a very slow 2009. With bumper crops in most important farm areas in the northern hemisphere and potash application cut by half in 2009, soil nutrient levels have been drained. Land prices have held steady in most regions during the recession, and with most soft commodities pointing towards higher prices in the future, the outlook for farmland also remains positive.

The fund strategy remains unchanged and will continue to invest in companies active across the entire agriculture industry.

Clean Energy – comment from Philippe De Weck, Senior Investment Manager, PF(LUX) Clean Energy Fund

During the fourth quarter, the fund performed in line with its reference index, the MSCI World Index and outperformed global equities by over 15% by end December 2009. Top contributors to performance included energy efficiency companies in the LED sector as well as solar inverters and solar production line manufacturers.

During the quarter, the most significant portfolio shift was our continued expansion of the holdings in energy efficiency. Within the smartgrid segment we added to our holding in EnerNOC and opened positions in Quanta and ITC. Within efficient lighting, we added to our position in Cree while reducing our position in Aixtron. In the solar sector we opened a new position in STR Holding and added to our positions in MEMC, Yingli, Suntech and Sunpower while reducing First Solar and SMA Solar. Within the wind segment, we added to our holding in Hansen Transmissions while reducing Gamesa.

The outlook for Clean Energy stocks remains attractive. Government regulation continues to be strong in the US, Europe, and especially China. The stimulus packages which were drafted throughout the world in 2009 to respond to the economic crisis contain significant funds which will be spent in 2010. Furthermore, as the global economy returns to growth, the challenge of energy supply is becoming apparent and energy prices are rising to signal the need for significant investments in energy for tomorrow.

The Fund’s strategy remains unchanged and continues to be invested in the winners of energy transition. It is focused on investing in companies which have the market positioning and the balance sheet to be able to deliver profitable growth.

Timber – comment from Gabriel Micheli, Investment Manager, PF (LUX) Timber Fund

The fund ended the year significantly outperforming the MSCI World for the third consecutive quarter, closing an impressive year in absolute (+58%) as well as relative terms (+30%).

Brazilian companies (Duratex and Fibria) contributed very positively to performance. Among the pure US Timberland companies, Plum Creek and Forestar were excellent performers. In the medium Timber segment, Meadwestvaco continued its incredible year run as the packaging markets in which the company is active were recovering, allowing for price increases.

The largest position in the fund is Fibria, a newly formed Brazilian company from the merger of Aracruz and Votorantim. We continued to take profits to keep the stock’s weight constant in the portfolio. We increased the weight of pure timberland companies like Plum Creek, Deltic, Weyerhaeuser and Rayonier as pressure on private equity timberland values alleviated because of signs of economic recovery.

The valuation of Timber stocks is compelling. Demand for timber products is growing as timber is a material which cannot be substituted and is used increasingly as emerging countries develop. At the same time, forest areas are shrinking at an alarming rate. The value of timberland implied by equity prices is often more than 40% below comparables on the private equity market. At this price, the cashflow yield from timber sales, even in recessionary years, is attractive. Also, market pulp prices are trending upwards, providing a good potential upside to our pulp makers, especially those based in South American which benefit from their low cost base and fast-growing plantations.

The fund strategy remains unchanged and will continue to invest in timber rich equities.