Gartmore Global Focus Taps into Agflation

Amid the general gloom and doom (in our view somewhat unjustified), farmers are among those that can be said to be enjoying good fortune.

"An era of falling food prices, spanning some 30 years, would appear to have to come to an end.

This trend has given rise to the new phrase 'agflation' and an awareness that the weekly food shop is now more expensive," according to Neil Rogan, head of global equities at Gartmore Investment Limited.

An expansion in the US ethanol programme to wean the country off its dependence on foreign oil has led to rising grain prices, while demand for cereals to use as animal feed has increased as wealthier Chinese and Indians acquire a taste for meat.

In response to this developing trend, Neil has established holdings in US-based Mosaic in the Gartmore Global Focus Fund and Gartmore SICAV Global Focus Fund, both of which he manages.

Mosaic is one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients.

Fertilisers are applied to improve yield and so help farmers to benefit from rising crop prices.

Among fertilisers, potash has the greatest impact on food quality, and potash prices, which have risen steadily for the past 17 years, are forecast to climb higher, especially in the context of changing dietary habits in emerging economies.

In particular, China, which is negotiating contract prices with Mosaic and rival Potash, remains heavily reliant on imports to satisfy its domestic demand.

Mosaic enjoys a significant cost advantage given that the company owns the majority of the required phosphate ore, a key ingredient.

Additionally, it produces most of its own ammonia and has access to locally produced sulphur, the other key constituents.The Gartmore Global Focus Fund, which celebrated its seventh anniversary at the end of January, returned 61% since inception on 31 January 2001 to end December 2007, resulting in a top-decile positioning[4].

An Associate Member of the UK Society of Investment Professionals, Neil is rated AAA by Citywire[1].

The Gartmore SICAV Global Focus Fund had its third anniversary in October 2007.

China Stake in Rio Tinto Underlines the Attractions of Miners: UK mining stocks spiked higher last week on news that state-owned Aluminum Corp of China (Chinalco) has teamed up with Alcoa of the US to buy a 12% stake in Rio Tinto.

According to Sacha Sadan, manager of Gartmore's £312[2] UK Growth Fund, this news serves to reinforce the considerable attractions of mining stocks.

"China's purchase of a US$14bn stake in Rio Tinto validates the view that there is long term value in the mining sector and emphasises the strength of Rio's cash flow,"; says Sacha.Rio rejected a 3-for-1 all-share offer from BHP Billiton in early November and analysts have long speculated that China might seek to exert an influence as the largest customer of both companies.

BHP raised its offer to 3.4 shares per Rio Tinto share on Wednesday.

"Rio Tinto is a long-term strategic asset coveted by both BHP Billiton and China.

With Xstrata now looking as if it may be involved in future M and A and with no signs of a slowdown in the global demand for industrial commodities, the search is on for mines that can produce for a generation.

Cost pressures are high and rising, so it's considerably cheaper to buy mines than it is to develop new ones." Gartmore has held a significantly overweight exposure (relative to the benchmark)[3] to mining companies in its UK Growth and UK Focus funds over the past year in the belief that positive demand growth in the global economy and scope for further consolidation makes the sector attractive.

These funds currently have 3.9% and 4.1% of their assets invested respectively in Rio Tinto.

[1] As at 31 December 2007.

[2] As at 31 December 2007.

[3] Gartmore UK Growth Fund Benchmark: FTSE All Share Index.

[4] Source: Lipper, Mid to mid.

OEICs - net income reinvested and net of fees.

SICAV - gross income reinvested and net of fees.

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