2010-11-03

World stock markets continued to perform strongly in October on better-than-expected corporate reports for the third quarter and expectations that the Fed will decide on further quantitative easing at its meeting on November 2-3. MSCI World (+1.9%) performed stronger than both the index for renewable energy (-1.3%) and the water index (+1.8%) during the month. Save Earth Fund gained +1.4% in October.

Wind power companies, including General Electric, Gamesa, Hansen Transmission and Vestas Wind, were the biggest losers of the month due to worse-than-expected reports for the third quarter. The wind industry is currently suffering from financing problems, sovereign debt crises in Europe and low natural gas prices - due to these effects a negative growth of 2% is expected in new installations for 2010 compared to 2009. During the last four years the average annual growth rate has been 24% in the sector and for 2011 it is expected to be 19%. The five largest European manufacturers of wind turbines are today trading at an average P/E multiple of 13.5 on expected earnings for 2011.

In October, we increased the fund’s exposure to so-called smart materials - a sector which we believe will benefit from rising commodity prices. We also changed the fund's holdings in the water sector, but without changing the fund’s total exposure of 40% against the sector.

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