3/25/2008

A MESSAGE FROM WINSLOW’S PORTFOLIO MANAGERS REGARDING ONGOING MARKET CONDITIONS

March 25, 2008 -- Given the impact that continuing market events have had on stock prices and in particular on the Winslow Green Mutual Funds, we want to share our perspective and outlook with our Fund investors. With this message we hope to communicate three main points:

a) We believe that our portfolios are not unduly exposed to firms that are at risk of credit default.

b) We acknowledge the volatility that our investors have experienced, as our investment strategy focuses significantly on a select group of high-growth companies whose stocks have suffered during this difficult quarter.

c) We believe that the companies and industries in our portfolio are extremely well-positioned to capitalize on the most powerful trend of the next decade – rapidly growing market demand for green solutions.

Credit Market Turmoil

When the financial community finds an opportunity for profit, it is guided by natural market forces to take advantage of that opportunity. Every so often that process goes too far, the system becomes unbalanced, and problems occur. Over the years, investors have experienced the painful results of that process. It happened in 2000 with the collapse of the dot-com bubble, and it is happening now with the ongoing crisis in credit markets.

Over the past several quarters, we have witnessed the market backlash brought on by excessive residential mortgage lending to unqualified borrowers. The first wave of this backlash was limited to subprime mortgage specialists such as IndyMac Bancorp and Countrywide. More recently, larger financial institutions and investment banks, which built significant businesses on the shaky foundations of risky mortgage-backed securities, have written down tens of billions of dollars in bad loans. On March 16, one of the oldest and largest investment banks in the United States, Bear Stearns, had to be rescued from potential bankruptcy by JP Morgan and the federal government, leading to even greater unease among investors in both the debt and equity markets.

While many other analysts and experts are offering their perspective on the credit crisis in general, we want to offer some observations specific to the Winslow Green Mutual Funds.

• First, we recognize and share the concerns that investors may have regarding the fate of other financial services firms. Currently, none of our portfolios hold any brokerage firms, banks, or financial intermediaries of any kind.
• Second, investors may be concerned about firms that are particularly dependent on debt as a source of capital. For years, part of Winslow’s strategy has been to focus on companies with little to no debt, and currently our mutual funds are primarily invested in companies we believe are very well capitalized at the moment and are not likely to suffer from an environment of constrained corporate borrowing.
• Third, we are invested in smaller, high-growth companies within markets such as renewable energy and energy efficiency; stock prices for these companies have suffered bigger-than-average losses during this period. However, we have closely re-examined each of our portfolio holdings during the past month, and across the board we have confirmed that their underlying businesses are intact, strong, and well positioned in multi-billion dollar green growth markets in which they participate.

Winslow’s Approach

So, it bears repeating: we want to reassure our Fund investors of our belief that our portfolios are not invested in companies that represent any sort of near-term default risk as a result of the turmoil we currently face within the credit markets. In fact, we are invested exactly where we want to be – in companies that are leaders and innovators in the race to address the huge global market demand for green solutions. Over the next five to ten years, we believe that green industries such as solar and wind power, green building products, organic foods, and others will experience explosive growth. That belief is what guides and shapes our investment decisions today.

However, our intent is not to gloss over the performance losses our portfolios have experienced during this grueling first quarter, and we acknowledge that our Funds have underperformed the general market and their respective benchmarks. It is important to remind Fund investors that Winslow does not focus on short-term performance against benchmarks or indexes as part of its investment strategy. When fund managers are primarily driven by short-term performance vs. an index, they are likely to create portfolios that look like that index, and are unlikely to generate performance that is significantly different from that index. Winslow’s philosophy opposes this sort of “closet indexing.” As active managers looking to provide significant long-term value to our shareholders, we deploy an investment strategy that seeks to invest in a select group of companies we believe are poised for rapid growth. Our strategy requires patience to hold those companies for the long haul, especially during the times when they suffer inevitable price breakdowns - from simple growing pains, or from the adverse effects of broader economic scenarios. Our investment style is inherently volatile and it can increase the chances of short-term performance setbacks. However, we also believe that our approach offers a much higher probability of generating superior performance over the long run.

Final Thoughts For Shareholders

Stock prices, particularly growth stock prices, will continue to suffer as the full extent of the damage to the financial markets is revealed in the coming months. The temptation to sell during times such as this is strong; however, it is often the worst decision one can make within the context of a long-term investment plan. Just as market setbacks are inevitable, so are the subsequent recoveries from those setbacks. Although past performance is not an indicator of future results, it is during such recoveries that our Funds and our investment strategies have generated the bulk of their value for investors. Just as we are exercising patience with our portfolio holdings, we encourage investors in the Funds to exercise patience as they review their long-term investment plans and consider their options.

We thank the investors in the Winslow Green Mutual Funds for their continued investment and for their trust in our environmentally-focused investment strategy. While the economy continues to suffer short-term pain, we see absolutely nothing to deter us from our long-term approach of investing in carefully selected, innovative companies with clean business practices and/or exposure to rapidly growing green market sectors.

Sincerely,
Jackson Robinson
Portfolio Manager, Winslow Green Growth Fund

Matthew Patsky
Portfolio Manager, Winslow Green Solutions Fund

In connection with the Winslow Green Mutual Funds, investors should call to request a prospectus that includes investment objectives, risks, fees, expenses and other information that they should read carefully and consider carefully before investing. Distributed by Foreside Fund Services, LLC.

 

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