But even as investor interest and support strengthens, companies involved in alternative energy face significant hurdles, particularly in this country. Congress has been debating for well over a year about whether to renew the investment tax credit to stimulate investment in solar energy and the production tax credit for investments in wind energy, both of which are set to expire at the end of 2008. Such credits are critical to the expansion of the clean power industry. In a recent interview in The New York Times, Rhone Resch, president of the Solar Energy Industries Association, said that if the credits expire in 2009, the industry would lose $20 billion worth of investments.

Although the failure to reach an agreement on tax credits clouds the outlook for those industries, Jankowska says that a separate bill later this year could extend the credits, and there is strong support for incentives at the state level. "I don't think the U.S. is as slow in adapting to alternative energy as some people think," she says. "There is a huge build-out in the U.S. and China, particularly in wind power generation. Eco-trends is one of the few sectors where public and political support is lined up with the notion that action needs to be taken sooner rather than later, and that lays the groundwork for great investment opportunities."

Wind Is In, Ethanol Is Out
    Jankowska cautions that the green tide will not lift all environmental technology boats. "I am negative on the ethanol space and am not a believer in the sustainability of these companies," she says. "It is not a green manufacturing process because of the environmental impact of growing corn. And demand for biofuels is raising corn prices, which squeezes the profit margins of ethanol manufacturers." The political climate in Europe is also lukewarm toward biodiesel fuels that rely on plant oils derived from rain forest trees.

She is much more optimistic about wind power, both from an ecological and business perspective. The federal tax credit issue casts a longer shadow over solar power than wind power, she says, because the latter form of energy has more support from state level mandates. Although she sees favorable long-term prospects for solar energy, she is "far more positive about wind. It's a cheap and fast form of energy." Utilities are also more rapidly committing to investing in wind energy development than to solar.

Denmark-based Vestas Wind Systems, the fund's top holding at nearly 10% of assets, has played an active role in wind power generation since 1979 and employs more than 15,000 people. The company's 23% market share makes it the biggest player in the growing global wind power market. Vestas expects that the present wind power share of about 1% of global power consumption will grow to at least 10% by 2020.

Spain's Gamesa, another major name in the wind power industry, recently opened its first plant outside of Spain, in the U.S., and will soon launch other factories in China and Portugal. The company is also involved in developing photovoltaic solar energy and biofuels. Fund holding First Solar, the largest solar company in the U.S., recently opened its newest factory in Germany to take advantage of the country's booming solar market.

In addition to alternative energy, the fund also invests in companies involved in pollution control, recycling and waste management.
Another fund holding, the U.S.-based company Stericycle, offers services such as medical waste disposal management; product recalls and retrievals; OSHA compliance training; pharmaceutical and medical device returns; and pharmaceutical waste disposal. Denmark's Novozymes makes enzymes and micro-organisms for a wide range of uses, including biofuel production. Its latest innovation is Celluclean, a new technology for the detergent industry that offers an environmentally friendly alternative to bleach that is less damaging to clothes. Another top ten holding, LKQ Corporation, is the largest U.S. provider of recycled light vehicle original equipment manufactured products and the second-largest nationwide provider of aftermarket collision replacement products and refurbished wheels.

Investors pay a price for the fund's focus on off-the-grid, off-the-radar-screen companies by having less liquidity. So that Jankowska can have more management flexibility to invest in smaller, less liquid securities, the fund is set up as an "interval fund." This means that, instead of providing daily redemptions, it makes quarterly repurchase offers for between 5% and 25% of outstanding common shares at net asset value. Shares can be purchased daily at net asset value, with the applicable sales charges.


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