The Fund seeks growth of capital through investment in equity securities of companies active in the water-related resource sector, in accordance with the Fund's corporate responsibility standards and strategies.
The Fund normally invests at least 80% of its net assets in equity securities of U.S. and non-U.S. companies whose main business is in the water sector or are significantly involved in water related services or technologies. Investments in the water-related resource sectors and companies include: water treatment, engineering, filtration, environmental controls, water related equipment, water and wastewater services, and water utilities. The Fund invests in securities of all market capitalizations, but may contain more small- and mid-cap stocks than large-cap stocks because many water-related resource companies are relatively new. Sub-advisor Kleinwort Benson Investors International Ltd. combines quantitative (initial screening and evaluation) and fundamental processes. The fundamental process focuses on company strength, growth, and cash flow measures, taking into account sustainable and socially responsible investing initiatives and policies. Top-down views on industries, sectors or regions act as risk controls in portfolio construction.
Investment in mutual funds involves risk, including the possible loss of principal invested. The Fund is subject to the risk that stocks that comprise the water-related sector may fall in value. The water industry can be significantly affected by a number of factors, including availability of water, the level of rainfall, water consumption, price and supply fluctuations, and government regulations and policies. A downturn in the water-related resource sector would impact the Fund more than a fund that does not concentrate in this industry, and the Fund therefore may be more volatile than a typical mutual fund. Foreign investments involve greater risks than U.S. investments, including political and economic risks and the risk of currency fluctuations. The Fund is non-diversified and may be more volatile than a diversified fund.
Water and Wastewater Utilities
Water utilities are often vertically integrated, meaning that they not only distribute water but also collect, treat,
store, and monitor it. they are the lynchpin for providing water for residential and commercial use and treating water
for reuse or remediation back into the environment. They stand to benefit from rising demand for infrastructure improvements,
industry, and agriculture's heightened focus on wastewater recycling. They should also continue to benefit from consolidation
of smaller utilities as well as the growing trend for municipal facilities to outsource operation and maintenance to private service providers.
Water infrastructure companies include manufacturers of pipes, pumps, valves, fluid control systems and irrigation equipment.
They also encompass engineering and consulting firms and construction companies that are involved in the design and implementation of
large scale projects. It is a high beta, long-term growth sector, and will be volatile due to exposure to cyclical variables related to
the economic cycle and capital spending. The need for new infrastructure in the developing world and the replacement of aged infrastructure
in the developed world will drive growth in this sector for decades.
Treatment and efficiency are key themes for water technology companies. Engineering and chemical breakthroughs are advancing
desalination and wastewater treatment processes-both strong drivers of growth for this sector. Higher water prices and the need
for cost-effective solutions to improve efficiencies in water-stressed regions are sparking more demand for metering tools.
Companies offering testing and measurement solutions are another high-growth area, as governments continue to strengthen water
quality standards. Stronger pricing and high barriers to entry make water technology companies particularly attractive.