Thematic Investments

Philippe ROHNER FIAP Seminar, Warsaw, May 28th 2009

2

Agenda

1. Identifying megatrends

2. Two thematic investments opportunities

- Water

- Clean Energy

3. Conclusions

3

Table of contents1.Identifying megatrends

4

Investment opportunities

8. New Technology

3. Acceleration

4. Hyper complexity

12. Globalisation

6. Commercialisation

7. Affluence

14. Democratisation

9. Polarisation

10. Dematerialisation

11. Individualisation

5. Networks

13. Health

2. Environment

15. Ageing

1. Knowledge

Sources: CIFS Copenhagen, Pictet

Biotech

WaterClean Energy

Security

TimberGenerics

Digital Communication

Premium Brands

5

How to invest in the water industry

6

Water – a basic resource

Source: K.S.B. Treatment Group

7

1. Outdated or non-existent infrastructure

Worldwide water infrastructure is completely outdated Operational issue:

– Thames Water* with 20’000 miles of water pipes: 1’100 miles to be replaced in 2005-2010 =>

equivalent of 91 years for the entire network. 50% of mains over 100 years old

30% of mains over 150 years old

Financial issue: – USD 485-896 bn of capital spending needed between

1999-2019**

Legal issue: – EU current and anticipated legislation (2006-2025) will

trigger capital expenditure up to EUR 350 bn ***

SUBSTANTIAL AND INEVITABLE INVESTMENTS

HUGE OPPORTUNITY FOR EQUIPMENT MANUFACTURERS

Sources:* Thames Water, Evidence to the House of Lords , 4th October 2006** ‘The Clean Water and Drinking Water Infrastructure Gap Analysis’ US EPA, Office of Water, Sept. 2002*** David Owen, Independent Water Sector Analyst

8

2. Outsourcing of water services

Municipal level Outsourcing of water business with Public-Private-Partnership

(PPP)– PPPs operate with up to less than 30% costs than pure public suppliers*– Better quality through performance targets

Ever stronger water quality standards Ever scarcer financing

Industry level Reduction of operating costs due to margin erosion Focus on core business Need for reliable water supply (semiconductor, tourism)

Liberalisation of service markets worldwide General Agreement on Trade in Services (GATS)

HUGE BUSINESS OPPORTUNITY FOR WATER SERVICE COMPANIES

* Source: The Hudson Institute, The NAWC Privatization Study; A Survey of the Use of Public-Private Partnerships in the Drinking Water Utility Sector; June 1999

9

Water services outsourcing - forecasts

A $260 BN MARKET GROWING AT 6% PER ANNUM

Source: David Owen, Managing Director Envisager Ltd, 2007

Market potential 2003-2015

389m

301m

1’398m

1’954m

316m

459m

NorthAmerica

Middle- &South America

Middle East & Africa

Middle & South Asia

Western Europe

South East Asia

Population (2003)

Already completedprivatisation (%)

15%

19%

44%

9%

1%

5%

12%721m

19%

27%

54%

18%

3%

9%

19%

Potential2015

World

16%

11%

6’092m

Central &Eastern Europe

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Dynamics of water prices (1989-2008)

Source: SEC filing American States Water 2008, Bloomberg Opec crude oil basket

 

AVERAGE PRICE

INCREASE

VOLATILITY

Water 6.1% 3.9%

Oil 4.8% 43.2%

HISTORICAL WATER PRICES IN CALIFORNIA

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Sector characteristics

Market still underprices strategic importance of the water industry

Strong fundamentals- under supply- rising demand- sustainable growth for contributors water value chain for water supplyand infrastructure

Still highly fragmented industry,consolidation continuing

Attractive risk – return profile

rising prices

Source: MSCI, IBES, Worldscope, Pictet Asset Management, as of 04/02/09

SECTOR CHARACTERISTICS RELATIVE TO WORLD EQUITY MARKET

4.8

1.6

5.4

2.1

2.9

8.0

2.2

3.8

7.8

0

1

2

3

4

5

6

7

8

9

Cashflow growth(FY0-FY2)

Price to CashflowFY1

Price to Book Div Yield FY1 relative average market cap

Water portfolio

MSCI World

12

Table of contentsHow to invest in clean energy

13

Historical evolution of the energy mix

ENERGY CONSUMPTION BY TYPE

Source: U.S: Department of Energy

ENERGY HAS BEEN IN A CONTINOUS TRANSITION SINCE THE INDUSTRIAL REVOLUTION

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1850

1855

1860

1865

1870

1875

1880

1885

1890

1895

1900

1905

1910

1915

1920

1925

1930

1935

1940

1945

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

Con

sum

ptio

n of

pro

duct

s as

a %

of U

S e

nerg

y co

nsum

ptio

n

Wood Coal Petroleum Natural Gas Hydroelectric Power Nuclear Electric Power

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Investment in renewable energy

$14$28

$50

$85$97 $94

$119$127

$147

$0

$50

$100

$150

$200

2004 2005 2006 2007 2008 2009E 2010E 2011E 2012E

NEW INVESTMENT IN RENEWABLE ENERGY: NEW BUILD ASSET FINANCE

Source: New Energy Finance, February 2009(Forecasts for 2009-2012 are preliminary numbers)

Billions of $

`04-12 CAGR: 34%

CLEAN ENERGY HAS FELT THE IMPACT OF THE CREDIT CRISES BUT 2010 LOOKS PROMISING

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Clean energy defined

CLEAN ENERGY INVESTMENT THEMES

Environment

Energy

Water

Natural Gas

Wind

Solar

Hydroelectric

Geothermal

Ocean

Energy Efficiency

Coal

Oil

Biomass

Nuclear

WasteManagement

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Drivers for Clean Energy

1. Environment: There is increasing consensus on climate change, the world is responding

2. Energy supply:Today’s energy resources are finite

3. Energy independence: Concerns over dependence on imported energy

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Clean energy presents opportunities

Carbon Free Energy

Low Carbon Energy

Energy Efficiency

Su

pp

lyD

em

an

d

- Solar - Wind- Hydroelectric- Geothermal- Tidal/Wave

- Natural Gas- Biomass- Waste to energy- CO2 Capture & Storage

- Lighting- Batteries - Power monitoring & control - Heating, cooling & insulation- Appliances- Flywheels - Fuel cell

TRANSITION TO CLEAN ENERGY WILL DRIVE GROWTH IN DIVERSE AREAS

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Clean Energy portfolio characteristics

Source: FactSet, as of 27/02/09

CLEAN ENERGY IS MORE EXPENSIVE THAN GLOBAL EQUITIES BUT GROWS MUCH FASTER

P/E VS EPS GROWTH

FY1

P/E

MSCI World

x

5x

10x

15x

20x

-20% -10% 0% 10% 20%

FY1 EPS Growth

Clean Energy portfolio

EV/EBITDA VS EBITDA GROWTH

Clean Energy portfolio

MSCI World

x

5x

10x

15x

20x

0% 5% 10% 15% 20% 25%

FY1 EBITDA Growth

FY

1 E

V/E

BIT

DA

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3. Conclusions

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Theme based Investing - Summary Remarks

Pricing in Externalities: Identifies new investment themes

Traditional Investment Sectors are not theme based

Indices neglect theme based investment opportunities

Theme based investing is process and not benchmark driven

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Risk/return profile

Source: Pictet Asset Management, FactSet

RISK/RETURN PROFILE OF A WATER INVESTED PORTFOLIO (JAN 2000 – MAR 2009)

-20%

-15%

-10%

-5%

0%

5%

10%

0% 5% 10% 15% 20% 25% 30% 35%

Volatility p.a.

Retu

rn p

.a.

Tech

Telco Services

Cons Discretionary

World

Utilities

Industrials

Consumer staples

Energy

Health Care

Water Portfolio

Materials

Financials

MSCI Composite

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CORRELATION MATRIX (MAR 02 – MAR09)

Source: MPI Stylus in USD

MSCI World Pharma

MSCI World Telco Svcs

MSCI World Utilities

MSCI World Cons Discr

MSCI Europe USD

MSCI World Financials

S&P 500 MSCI World USD

NASDAQ Biotech

MSCI World/Pharmaceuticals 1 0,62 0,61 0,63 0,62 0,61 0,74 0,69 0,62

MSCI World/Telecommunication Services

0,62 1 0,6 0,72 0,77 0,66 0,81 0,8 0,58

MSCI World/Utilities 0,61 0,6 1 0,66 0,75 0,64 0,71 0,76 0,43

MSCI World/Consumer Discretionary

0,63 0,72 0,66 1 0,88 0,86 0,94 0,95 0,66

MSCI Europe USD 0,62 0,77 0,75 0,88 1 0,89 0,88 0,95 0,54

MSCI World/Financials 0,61 0,66 0,64 0,86 0,89 1 0,88 0,9 0,56

S&P 500 0,74 0,81 0,71 0,94 0,88 0,88 1 0,97 0,71

MSCI World USD 0,69 0,8 0,76 0,95 0,95 0,9 0,97 1 0,65

NASDAQ Biotechnology 0,62 0,58 0,43 0,66 0,54 0,56 0,71 0,65 1

Diversification benefits

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Return benefits

Source: Pictet; in EUR; historical performance over 5 years from January 31, 2004 to January 30, 2009, monthly rebalancing

1. Equal weighting with monthly rebalancing

2. Out performance against the MSCI World after management fees

Simulation of historical performance of an equally weighted theme fund portfolio

Δ=+4.08%

Past performance is no guarantee of future performance. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares.

80

90

100

110

120

130

140

150

160

02.0

2.20

04

19.0

7.20

04

03.0

1.20

05

20.0

6.20

05

05.1

2.20

05

22.0

5.20

06

06.1

1.20

06

23.0

4.20

07

08.1

0.20

07

24.0

3.20

08

08.0

9.20

08

MSCI World Theme fund basket

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Why Pension Funds ?

Thematic investments offer a very attractive growth and return profile aligned with Pension Funds investment objectives

Global Equity Exposure regardless of MSCI traditional sectorisation

Access to a group of companies not reflected in traditional indexes and unresearched

Why Now ?

The investment framework is in constant evolution and fully supported by governments and Capital markets, creating new opportunities for long term Institutional Investors

Conclusions

THEMATIC INVESTMENT APPROACH ALLOWS PENSION FUNDS TO BENEFIT FROM MEGATRENDS, MEANING LONG TERM & SUSTAINABLE

INVESTMENT THEMES

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MANY THANKS FOR YOUR ATTENTION

Gonzalo Rengifo Abbad

Country Head - Iberia and Latin AmericaPictet & Cie (Europe) S.A., Sucursal en EspañaMadrid - Spain

Philippe Rohner

Senior Investment ManagerSector & Theme funds TeamPictet Asset Management Geneva - Switzerland