Manager Commentary

As of March 31, 2012

How did the Fund perform for the period?
For the three-month period ended March 31, 2012, the Individual Investor Class and Institutional Class of the Fund had total returns of 14.49% and 14.42%, respectively, vs. 11.56% for the MSCI World (Net) Index¹.

What factors contributed to the Fund’s performance?
Markets were buoyant during the first quarter, driven by renewed optimism regarding global growth, hopes of a permanent lull in the Eurozone crisis (especially following the European Central Bank's (ECB) Long-Term Refinancing Operations (LTRO Program) and signs of a positive turnaround in investor sentiment and risk appetite.                    

Factors contributing to performance over the quarter were:

• U.S. ISM data (Institute for Supply Management Purchasing Manager Index), a key metric for the health of industrial production, remained in expansionary territory.

• Stocks similarly benefitted from strengthening industrial production data in  Germany.

• Companies benefitted from better than anticipated federal budget allocations to academic and life science research.

• Continuation of merger and acquisition (M&A) activity. Portfolio holding Pentair, Inc., for example, performed strongly on news of a merger with Tyco Flow Control.

Factors detracting from performance over the quarter were:   

• Water utilities, which performed well in 2011, lagged in the first quarter ‘cyclical led’ rally of global equity markets.

• Companies with exposure to the Spanish utility regulatory risk.

• The strength of the Japanese Yen which inhibited selected Japanese exporters’ ability to compete in international markets.

Can you discuss any significant changes in the Fund’s positioning throughout the period?
Renewable Energy & Energy Efficiency – We bought Abengoa SA (bioethanol and recycling, Spain) following strong 2011 results, a favorable outlook statement for 2012 and an attractive valuation. We increased our position in Invensys PLC (automation and rail signaling, UK) as we believe the company’s leading position is under-appreciated by the market.

We sold out of Prysmian SpA (industrial energy efficiency, Italy) due to balance sheet concerns and uncertainty over the timing of a potential recovery in the company’s construction-related end markets.

Water Infrastructure and Technologies & Pollution Control – We bought Veolia Environnement SA (water utility and waste management, France) following a year of underperformance and restructuring. The quality of management and the earnings potential of the company following the restructuring indicate the stock is attractively valued at current levels. We also bought Xylem, Inc. (water infrastructure equipment, U.S.), a company that we view as an attractively valued  market leader across the water treatment and infrastructure value chain. We added to China Longyuan Power Group Corp., Ltd. (renewable IPP, China) which was reasonably valued, in our view. The company has access to the high growth infrastructure market, while government capital expenditure commitment is becoming increasingly evident.

Waste Technologies & Environmental Support Services – We took profit in China water We reduced our holding in 3M Co. (diversified environmental, U.S.) following a strong three years of executing well on their business model, as we see scope for further outperformance as being relatively limited.

Which stocks contributed positively to performance?

• China Everbright International, Ltd. (water and waste treatment, Hong Kong) – Benefitted from more accommodative lending in Chinese markets and strong order momentum, backed by government investment

• German stocks Infineon Technologies AG (power electronics), Linde AG (industrial gases) and GEA Group AG (heat exchangers) – Performed well due to improving German industrial production data

• Thermo Fisher Scientific, Inc. (analytical instruments, U.S.) - Rose as testing and monitoring stocks benefitted from better than expected academic and life science budget allocations

• Campbell Brothers, Ltd. (environmental testing, Australia)— Continued to benefit from testing activity in the metals and mining sector

Which stocks detracted from performance?

Relative underperformance came from:

• EDP Renovaveis SA (Spain, renewable IPP) – Weak on the threat of retroactive cuts to renewable energy subsidies as a result of the Spanish electricity tariff deficit

• Abengoa SA (bioethanol and recycling, Spain) – Fell following speculation on the Spanish tariff deficit and subsequent concerns on highly indebted Spanish listed companies

• Invensys PLC (automation and rail signalling, UK) – Underperformed following a profit warning in January, resulting from unforeseen costs in the company’s rail and energy efficiency businesses

What is your market outlook, particularly with respect to how it will impact your Fund?

We believe that economic figures should continue to remain satisfactory over the coming few months and that the global economy will accelerate again slightly. Moreover, the LTRO Program is likely to have further effects on markets (easing of pressure on the financial sector and the indirect narrowing of intra-European Monetary Union (EMU) spreads). Many investors have yet to take advantage of the rising markets and this observation has led us to adopt a tactical bias in favor of cheaper but slightly more cyclical companies.

We continue to favor Asia and have reduced U.S. market exposure in favor of Europe. The portfolio is composed of what we believe are high-quality companies with proven track records, successful management teams and solid balance sheets that are exposed to long-term secular growth themes. As and when governments in Europe are able to agree on credible steps to address their budget deficit and debt issues, we think it is realistic to assume that investor sentiment will continue to improve and that equity markets will remain in a positive upward trend. In this context, evidence continues to build that investments in environmental markets have compelling characteristics, and, with a long track record and a strong and stable investment team, we believe the Fund is well-positioned to withstand short-term headwinds.

Equity investments are subject to market fluctuations, the fund’s share price can fall because of weakness in the broad market, a particular industry, or specific holdings. Investing in non-diversified funds generally will be more volatile and loss of principal could be greater than investing in more diversified funds.

Portfolio holdings as of 03/31/12: Pentair, Inc. (1.2%); Abengoa SA (1.4%);  Invensys PLC (3.2%); Veolia Environnement SA (2.2%); Xylem, Inc. (2.2%) ; China Longyuan Power Group Corp., Ltd. (2.7%); 3M Co.(2.3%); China Everbright International Ltd. (3.2%); Infineon Technologies AG (2.2%); Linde AG (3.1%); GEA Group AG (2.8%); Thermo Fisher Scientific, Inc. (1.8%); Campbell Brothers,Ltd. (1.3%); EDP Renovaveis SA (1.9%). Tyco Flow Control  and Prysmian SpA were not held by the portfolio as of 03/31/12. Holdings are subject to change.

An investment in the Fund involves risk, including loss of principal. Performance data quoted represents past performance, which does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain performance for the most recent quarter- and month-end, click here.

As of 12/31/11, total annual Global Green Fund operating expenses, gross of any fee waivers or reimbursements, are 1.99% for the Individual Class shares and 1.74% for the Institutional Class shares. Total Global Green Fund operating expenses, net of fee waivers, reimbursements and acquired fund fees and expenses, are 1.40% for the Individual Class shares and 1.15% for the Institutional Class Shares. The Global Green Fund’s investment adviser has contractually agreed to reimburse expenses allocable to Individual Investor Class of the Global Green Fund to the extent such expenses exceed 1.40% of the average daily net assets of Individual Investor Class shares and 1.15% of the Institutional Class shares. This reimbursement arrangement will remain in effect until at least December 31, 2015.

¹The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI World Index consists of the following 24 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. Performance for the MSCI World Index is shown “net”, which includes dividend reinvestments after deduction of foreign withholding tax. Investors cannot invest directly in any index.. 

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