Snap shot August 11th, 2009

The defensive values will show their potential

July was characterized by a stunning rebound of the markets and a significant newsflow in the environmental sector. After two outperforming months, our funds were not able to capture all the rebound. Two reasons for that:

• This rebound was launched by the cyclical values
• Since June we reinforced our defensive strategy regarding our positioning in the sector (investments +located on the down stream of the supply chain for the thematic funds and Champlain Sérénité) and our equity exposure (for example Performance Avenir and Champlain Opportunité).

Why do we remain prudent ?

1. We are convinced that this rebound is still fragile and even if on the very short term it can continue to increase (mechanical phenomenon of destocking , economic revival plan…), its time limit remains uncertain. The reporting, which were superior to expectations and which contributed to the rebound of cyclical stocks, rely on aggressive cost cut policies combined with social measures but without a concrete improvement of the economy. This policy limits companies’ possibilities to run their business in 2010 and will start soon to pressure the Demand…In this context, as we try to combine performance with prudence, we want to favour an active management on more defensive stocks in order to be able to anticipate the consequences of a violent reversal of the markets. But we are also working on alternative scenarios in case of a lasting rebound of the markets.

2. The bearing of the world growth perspectives for 2010 as well as the G20 summit and the stress tests seem to lead more to an “announcement effect” rather than an “economic reality”: increase of interest rates, unemployment rate near 10% (even with the recently US decrease), low consumption…According to Mr Geithner, during his speech in July, the unemployment peak would only be reached in the 2nd quarter 2010! The recent increase of the oil price shows that the economy over reacts to the signals of the markets! All this tends to show that this will be very difficult for the cyclical companies to announce good profit perspectives in 2010, which are linked to the achievement of optimist economic scenarios. They should be among the first ones to be harmed by a market decrease signal.

3. The most cyclical environmental stocks rebounded significantly during the past months, especially in the Chinese solar sector, as some stock prices doubled (China Power New Energy…). This is why, we must be very selective today in our investments. In June, we reduced our investments in the Chinese solar stocks as we have anticipated their drop of more than 20% in July. We preferred to concentrate our investments on technological leaders such as First Solar and Sunpower which stock prices increased by 20% due to the announcement of excellent results.

An increasing decorrelation of the valuation levels

Even though the companies in the Environment and the Health sectors announced increasing results and bearing forecasts for 2009, the investors neglected those sectors. If the cyclical values need an anticipated economic revival in 2010 to reach their objectives, the companies we are invested in, have already the required visibility to confirm their economic overtaking . The limited impact of these announcements on stock prices leads to attractive valorisation levels on the mid term. Some examples :

	Q1 2009 turnover	Net result Q1 2009	Comparison with the forecasts
First Solar	+ 96,3%	+ 159%	> to expectations
EDF Energies Nouvelles	+ 33,7%	+ 53,7%	> to expectations
Sanofi	+ 6,7%	+ 22,3%	Bearing of NPPS 2009 objectives
Orpéa	+ 22,5%	Non reported	Bearing of 2009 turnover objectives

Environment, Health: positive signals in a context of uncertainty

• Multiplication of significant partnerships : Though France benefits from international well-known utilities, the country has not made the required investments to develop the eco-industries especially in the solar sector. The partnership signed between EDF Energies Nouvelles and the American First Solar for the construction of “thin film” solar panels in South of France represents a significant step forward. € 90 Mio would be invested for a production of 100 MW per year to begin and creating around 350 jobs.

• Higher valorisation levels due to the last operations : As we mentioned it in our last video, the financial crisis has weakened some industrial players which leads to the multiplication of consolidation opportunities in the Environment as well as in the Health sector where rising capital operations are developing (Orpéa, Rhön Klinikum, Shanks…). The last one: the bid of Transalta for Canadian Hydro, based on attractive valorisation levels, shows the current interest for the renewable energies sector.

• An increasing mobilisation of States as the Copenhagen Summit is coming soon : After the Chinese announcements and the behaviour of the United States which finally accepted, with the “American Clean Energy Act” signed in July, to reduce their CO2 emissions by 17% in 2020 compared to 2005 and by 83% in 2050 (please download the transcript of our last video on the website: http://www.financieredechamplain.fr/index.php?lang=en&page=who-we-are&subpage=monthly-interview), India takes action too! 4th world producer of wind power energy, India could invest in the next 30 years, € 13 billion in the solar power in order to reach 20 000 MW in 2020 and 200 000 MW in 2050 against 51 MW today! 20 million households could be equipped with PV solar panels within 2020 though more than half of Indians still use candles or generators to have light! A very incentive plan (subsidies, tax credit, standard for the building sector…) should be announced in regard to the Copenhagen Summit…