August 9th, 2011

Dear Member,

Standard & Poor’s downgraded the US sovereign credit rating to AA+ from AAA this past Friday while Moody’s and Fitch have reaffirmed their respective AAA ratings.

As a consequence we are expecting markets, equities in particular, to be volatile in the immediate aftermath. There had already been considerable uncertainty in light of the debt ceiling debate in the U.S. and the ongoing developments regarding Greece, Spain and now Italy with policy makers scrambling to find sustainable solutions.

The European Central Bank has now been purchasing Spanish and Italian government bonds in an effort to support those countries as well as to calm markets. Stock markets worldwide have been nervous and choppy however.

The Swiss National Bank has decided to become more active regarding the strong Swiss Franc. They increase the banks’ sight deposits at the SNB from currently around CHF 30 Billion to CHF 80 Billion and they narrowed the target range for the three-month Libor (interbank rates) to 0.00-0.25%. The Swiss National Bank is willing to accept a higher inflation rate than currently 0.7% (expectation 2011)

There is also data pointing towards a slowing of the global recovery and discussion about the U.S. falling back into a recession ("double dip") is intensifying again. This will be one of the main factors influencing financial markets going forward.

This set of market parameters is not an environment where one may want to sell unless the fundamental outlook changes substantially or emergency liquidity needs to be raised. However, we may want to be positioned to take advantage of exceptional opportunities that may present themselves.

Please rest assured that we continue closely monitoring the situation and your investments and will take appropriate steps if we deem it necessary.


Sincerely yours,

Lukas Ammann, Manager