News from our advisers

Our principal specialist water and ecology advisers wrote at the end of May:

During the month President Bush unveiled a U-turn towards climate change, calling on the world’s leading economies to join the US in agreeing a long-term global goal for reducing greenhouse gases by the end of 2008. Bush’s proposals included boosting investment in research and development for energy-efficient technologies, but again rejected firm caps on carbon dioxide emissions global leaders and commentators were optimistic that this could be the start of a policy shift measures will be taken from the “20-in-10 plan” announced in the State of the Union address, which aims to cut America’s gasoline usage by 20 per cent over the next 10 years.

In the water sector, the US Senate passed the Water Resources Development Act, a USD 13.9bn bill to be implemented by the Army Corps of Engineers, which contains provisions to repair and maintain existing infrastructure, whilst authorizing projects that address environmental infrastructure, including municipal water and wastewater. In the meantime the Water Quality Financing Act of 2007 will provide USD 14bn through 2011 on waste water projects. If successful both bills are positive news for water technology and equipment suppliers. Stocks that contributed to the increase in the Company’s NAV during May include Tanfield (electric vehicles and powered access, UK), which climbed 26% following key contract wins during April, Nibe (ground source heating, Sweden) and Kurita (water treatment, Japan), which gained 15% each on the downside Energy Developments (landfill gas development, Australia) retreated 11% on project delays and cost overruns.

GTI comment: There is a saying that the best businesses to invest in are those that are not dependent on government. Government is a capricious master and its beneficence can be withdrawn just as quickly as it is granted. Yet, there is no doubt that the weight GLOBAL THEMES and dynamism of governmental support is like a following wind to this theme. Even George W Bush, the bad boy of international ecology, is towing the line now. Our Adviser estimates that the PER of its sector is about 15x. This is cheap for such a growth sector. Remember. Water isn’t like oil. It has no viable alternatives. When governments get behind a sector where the underlying commodity is in short supply and creates economic viability for previously unviable businesses, the whole sector starts to shine.