TIDMIAEM TIDMIAES
RNS Number : 8245P
Impax Asian Environmental Mkts Plc
07 October 2011
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC ("IAEM")
Annual Financial Report Announcement
For the year ended 30 June 2011
-- Increase in undiluted net asset value ("NAV") per Ordinary
Share of 8.2% over the year
-- Successful raising of GBP131 million of additional capital
through an issue of C Shares
-- Long-term gearing facility of US$50 million secured, with
US$25 million drawn down and invested to date
-- A proposed final dividend of 0.95p per Ordinary Share to be
paid on 1 December 2011 to Shareholders on the register on 28
October 2011
-- Positive outlook for the Company as Asian environmental
markets benefit from significant policy developments in China and
India as well as from new energy policy in Japan following damage
to the Fukushima-Daiichi nuclear power plant.
Allan McKenzie, Chairman, said:
"While short term volatility in global markets is likely to
persist until sovereign debt issues are resolved and recession
fears are overcome there remain positive policy developments and
higher earnings growth prospects for the Company's holdings.
Against this background the Directors continue to believe that IAEM
represents an attractive proposition to investors with a medium to
long term perspective."
Bruce Jenkyn-Jones, Co-Manager of IAEM and Managing Director of
Listed Equities at Impax, said:
"Recent announcements have reinforced the Company's investment
thesis, as Asian governments confirm their determination to deal
with limited fossil fuel resources, worsening pollution and ongoing
droughts and floods, as well as to provide infrastructure for their
urbanising populations.
"Recent falls in regional equity markets have created an
excellent opportunity for long term investors seeking exposure to
this growth sector at an attractive valuation."
INVESTMENT OBJECTIVE AND FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVE
The Company's investment objective is to generate long-term
capital growth through investment in a diverse portfolio of
companies in the markets for cleaner or more efficient delivery of
basic services of energy, water and waste in the Asia Pacific
Region. To be eligible for investment, such companies must have at
least 20% of their turnover, profits or invested capital in these
markets.
FINANCIAL INFORMATION
At 30 June At 30
2011 June 2010 % change
--------------------------------------- ------------ ------------ ---------
Net assets GBP257.1m GBP127.0m +102.4%
--------------------------------------- ------------ ------------ ---------
Number of Ordinary Shares in issue 214,985,682 114,949,000 +87.0%
--------------------------------------- ------------ ------------ ---------
Net asset value ("NAV") per Ordinary
Share
--------------------------------------- ------------ ------------ ---------
- Undiluted 119.6p 110.5p +8.2%
--------------------------------------- ------------ ------------ ---------
- Diluted 116.6p 108.9p +7.1%
--------------------------------------- ------------ ------------ ---------
NAV per Ordinary Share (excluding
current period net revenue)
--------------------------------------- ------------ ------------ ---------
- Undiluted 118.5p 110.0p +7.7%
--------------------------------------- ------------ ------------ ---------
- Diluted 115.7p 108.4p +6.7%
--------------------------------------- ------------ ------------ ---------
MSCI AC Asia Pacific (ex-Japan)
Index (sterling) (1) +17.4%
--------------------------------------- ------------ ------------ ---------
FTSE Environmental Opportunities Asia
Pacific (ex-Japan) Index (sterling)
(1) +16.4%
--------------------------------------- ------------ ------------ ---------
FTSE Environmental Opportunities
Japan Index (sterling) (1) +12.8%
--------------------------------------- ------------ ------------ ---------
Ordinary Share price (mid-market) 106.4p 112.8p -5.7%
--------------------------------------- ------------ ------------ ---------
Subscription Share price (mid-market) 21.0p 33.8p -37.9%
--------------------------------------- ------------ ------------ ---------
Ordinary Share price (discount)
/ premium to diluted NAV (8.7%) +3.6% -
--------------------------------------- ------------ ------------ ---------
(1) Capital return in pounds sterlings
FINANCIAL CALENDAR
Annual General Meeting
24 November 2011 at 11 a.m.
145-157 St John Street
London EC1V 4RU
Dividend
Ex-dividend date: 26 October 2011
Record date: 28 October 2011
Payment date: 1 December 2011
Amount: 0.95p per Ordinary Share
CHAIRMAN'S STATEMENT
Since my last report to investors in Impax Asian Environmental
Markets plc ("IAEM" or the "Company") in February 2011, financial
markets have demonstrated notably higher levels of volatility and
risk aversion. Concerns about growth and sovereign debt in the
developed world unnerved investors in Asian markets despite their
much stronger economic fundamentals. Asian markets were more
specifically worried about inflation and the impact of possible
monetary tightening to address the problem. In this context,
notwithstanding many significant positive developments shaping the
prospects for environmental markets in the Asia-Pacific region (the
"Region"), the Company experienced a challenging end to the
financial year ended 30 June 2011 (the "Period").
Sector Developments
As set out in the Manager's Report, the Period brought high oil
prices and extreme weather events, which, with the Japanese nuclear
accident at Fukushima, highlighted the Region's shortage of fossil
fuel energy and need for robust water supply and flood management
systems.
Policies to address these issues continued to develop rapidly.
As noted in previous statements, China's new Five Year Plan has
established a framework for unprecedented levels of capital
spending in environmental markets, while India made a major
commitment to ramping up renewable power generation infrastructure
over the coming decade. Separately, since the earthquake and
nuclear accident in March, the Japanese government has begun a
programme to overhaul the nation's energy infrastructure, in which
energy efficiency and renewables are likely to be prominent.
Nevertheless, weakness in specific markets affected sentiment
around a number of the Company's holdings. Several businesses that
are exposed to global economic recovery, such as those in the
energy efficient lighting sector, reported disappointing results,
while stocks operating in countries with high inflation,
particularly India, were sold off in anticipation of rising
interest rates. In addition, the pace of roll-out of Chinese rail
infrastructure was slowed, initially by allegations of corruption,
and, in July (i.e. post the end of the Period), by the effects of
the high speed rail accident two hundred miles south of
Shanghai.
Investment Performance
The Company's diluted net asset value (excluding income) rose by
6.7%% compared with the three relevant indices as follows - the
MSCI AC Asia Pacific ex-Japan Index ("MXAPJ") rose 17.4% while the
FTSE Environmental Opportunities Asia Pacific ex-Japan Index
("EOAX") and the FTSE Environmental Opportunities Japan Index
("EOJP") rose 16.4% and 12.8% respectively. The share price fell
5.7% from 112.8p to 106.4p over the Period. The IAEM subscription
shares traded at 21.0p at the end of the Period. In addition to the
specific issues in environmental markets mentioned above, the
Company's bias towards smaller companies, particularly in China,
has contributed to the relative weakness compared with the
indices.
Discount
Over the year, the IAEM share price traded at an average
discount of 0.2% and ranged from a 5.6% premium to an 8.7%
discount. At 30 June 2011 the Ordinary Shares stood at a discount
to diluted NAV of 8.7%.
The Board and its advisers monitor the discount level of the
Company's shares closely, and a buyback mechanism is in place
pursuant to which the Manager is authorised to buy back shares with
Board approval when deemed appropriate.
The Board believes the authority to buy back shares should
remain in place and, accordingly, a resolution to renew this
authority will be proposed at this year's Annual General
Meeting.
Board Evaluation
The Board has noted the recommendation in the updated UK Code of
Corporate Governance Combined Code issued in July 2010 which states
that the evaluation of the boards of FTSE 350 companies should be
externally facilitated at least every three years. Although the
Company is not part of the FTSE 350, the Board has agreed that the
Company should comply with this recommendation and intends to have
an external evaluation conducted in 2012.
Share issues
In October 2010, the Company raised GBP131 million through a C
Share issue. The net proceeds of the C Share issue were invested
and managed as a separate pool of assets until 80% of the net
proceeds were invested. The C Shares subsequently converted into
99,966,100 new Ordinary Shares on 10 December 2010 with holders of
the new Ordinary Shares arising on conversion also receiving a
bonus issue of 1 Subscription Share for every 5.5 new Ordinary
Shares held. During the financial year 70,582 Subscription Shares
were exercised, in aggregate, and as a result 70,582 Ordinary
Shares were issued at a price of GBP1 per Ordinary Share.
Dividend
The Company's net revenue return for the financial year was
GBP2.4 million. The Directors are recommending a final dividend for
the year ended 30 June 2011 of 0.95p per Ordinary Share. If
approved at the Company's Annual General Meeting, the dividend will
be paid on 1 December 2011 to shareholders on the register at close
of business on 28 October 2011. It is the Company's intention to
generate shareholder returns through capital growth rather than
income. Therefore, it should not be assumed that this level of
dividend will be maintained in future years.
Gearing
I stated in the Half-yearly report that the Board and the
Manager believed that conditions may be favourable for the Company
to take on a level of long-term bank debt and that the Board was
exploring the various options available. On 28 April 2011, the
Company entered into a two year US$50 million revolving credit
facility; a decision that was supported by the fact that the
valuation of the companies in the portfolio had fallen to a level
that was very attractive compared with both historic levels and
expected growth rates. One half of the total facility was drawn
down on 6 May 2011 and a further drawdown will be made when
circumstances are considered to be appropriate. The Company has
entered into an interest rate swap to fix the interest rate on
these borrowings. The Manager deployed the funds received from the
initial drawdown during the course of May 2011.
Bribery Act
The Bribery Act 2010 became effective on 1 July 2011. It is the
Company's policy to conduct all of its business in an honest and
ethical manner and we have procedures in place to prevent bribery
and corruption which are proportionate to the Company's
circumstances. The Company takes a zero-tolerance approach to
bribery and corruption and is committed to acting professionally,
fairly and with integrity in all its business dealings and
relationships wherever it operates. The Manager also adopts a zero
tolerance approach and has its own detailed policy and procedures
in place to prevent bribery and corruption.
Outlook
Since the end of the Period, European governments have struggled
to manage sovereign debt concerns and the United States' credit
rating has been downgraded due to uncertainty about the country's
deficit reduction plan. Despite offering higher growth prospects,
Asian markets in general, and the environmental markets in
particular, have seen rising risk aversion and further weakness. As
of 30 September, the IAEM NAV had fallen by 25.1% (share price had
fallen 28.0% leaving the discount at 13.4%) compared with falls of
19.1%, 29.0% and 10.5% for the MXAPJ, EOAX and EOJP respectively.
The IAEM portfolio has seen a substantial derating of its valuation
(from a price to earnings ratio of 13.0 times at the beginning of
the year to 9.1 times at 30 September 2011) such that it is now
trading at a discount to its comparable indices. While short term
volatility in global markets is likely to persist until sovereign
debt issues are resolved and recession fears are overcome there
remain positive policy developments and higher earnings growth
prospects for the Company's holdings. Against this background the
Directors continue to believe that IAEM represents an attractive
proposition to investors with a medium to long term
perspective.
Allan McKenzie
Chairman
7 October 2011
MANAGER'S REPORT
IAEM's NAV advanced overall during the Company's financial year,
with contrasting performance in the two halves. Performance was
strong between July and December 2010, but during the first six
months of 2011 the Company's NAV declined. Challenges in certain
energy efficiency sectors and a high exposure to smaller companies
led to underperformance of regional benchmarks over the full
Period.
The renewable energy, pollution control and diversified
environmental sub-sectors were the most positive contributors to
performance. The energy efficiency sector also performed well, but
significant outperformance reported at the interim stage was eroded
by weakness in Chinese rail-related and light emitting diode (LED)
companies in 2011. Outside of the IAEM portfolio there have been
some corporate governance issues related to a number of Chinese
companies, particularly those listed outside of Hong Kong, which
has led to a derating of the Company's small cap Chinese
holdings.
Overview of Asian Environmental Markets
Environmental policy and regulation during the Period supported
the structural growth of environmental markets, and was enhanced by
macro-events that served to re-focus governments' attention on
resource scarcity and energy security. Following the disaster at
the Fukushima Daiichi nuclear power station in March, Japan
cancelled plans to expand nuclear from 30% to 50% of the energy mix
and Germany announced plans to close all nuclear plants by 2022.
These developments, along with rising power prices resulting from
continued Middle East unrest, strengthened the outlook for the
renewable energy and energy efficiency sectors. Finally, a series
of extreme weather events in the Region, particularly droughts in
Central China, a poor monsoon in India and severe floods in
Australia, highlighted the need for increased investment in water
management and infrastructure.
China's new renewable energy target of 17% of installed capacity
by 2020 will require USD 770bn of investment, and the finalisation
of the Chinese 12th Five Year Plan during the Period further added
to this renewable energy drive, with targets for a cut in energy
consumption per unit of GDP by 16% by 2015, an additional 60GW of
wind (compared with a 40GW installed base at end 2010), and 15GW of
solar power. In addition, USD 450bn is to be allocated to the water
sector.
Other announcements during the Period included South Korean long
term targets for a national LED penetration of 60%, a Taiwanese
target for energy intensity reduction of 2% per year to 2020, an
Australian carbon pricing scheme to promote clean energy, and
Indonesian targets for solar and bio-energy.
Over the Period the investible universe grew from 430 to over
460 companies as established companies expanded their environmental
businesses and there were a number of initial public offerings.
Renewable and Alternative Energy ("RAE") - 9% weighting
The RAE sector was volatile over the Period. However, we were
able to navigate successfully the high volatility seen in solar
stocks and benefit from strong performance in Renewable Energy
Independent Power Producers ("IPPs"), particularly Aboitiz Power
(hydro and geothermal IPP, Philippines), EDC (geothermal IPP,
Philippines) and Greenko (small hydro, India). Nonetheless, the
Company's holdings in the Wind Power Equipment sub-sector performed
poorly due to the continued oversupply of Chinese turbines and slow
recovery of the global wind market. Over the Period the Company's
RAE weighting fell from 17% to 9% as we reduced exposure to
manufacturers in the solar and wind value chain.
Policy developments in RAE were generally favourable. The
Chinese government increased 2015 targets for wind (100GW,
including 5GW of offshore wind farms) and solar installations
(15GW). However, power grid constraints remain a concern for wind
power development. On a positive note, a Chinese national
Feed-in-Tariff was announced for the domestic solar market, and an
Indian scheme for trading renewable energy certificates was
launched.
During the Period, we profitably sold out of Renesola (solar,
China), Trina Solar (solar, China), OCI (polysilicon, South Korea)
and GCL-Poly Energy (polysilicon, China), took profits in Aboitiz
Power and exited Xianjian Goldwind (wind turbine manufacturer,
China).
Energy Efficiency ("EE") - 39% weighting
The EE sub-sector contributed positively over the Period, but
the significant outperformance reported at the Company's interim
stage was eroded by weakness in Chinese rail-related and LED
companies in 2011. The pace of investment in Chinese rail
infrastructure was negatively impacted by the arrest of the
Minister of Rail, and a downward adjustment in the rail
infrastructure budget. The LED industry continues to expand due to
rapid growth in the lighting market, but LED companies were
negatively affected by lower than expected growth in global LED
television sales, which led to rising inventories and disappointing
short term earnings. On a positive note, Japanese companies such as
Rinnai (efficient water heaters) performed well as demand grew
after the earthquake on the back of reconstruction and energy
efficiency policy initiatives. The Company's EE weighting rose from
34% to 39% over the Period, as we added a number of positions.
Positive policy momentum continued during the Period, as
governments increasingly recognised energy efficiency as the most
cost effective means for climate change mitigation and improved
energy security. The new Chinese Five Year Plan included the
creation of industrial energy efficiency as a strategic
environmental industry. Post the earthquake in Japan and the
subsequent power shortages, the Japanese government announced a
target to reduce peak energy consumption by 15% and extended an Eco
points system to subsidise the purchase of energy efficient
equipment.
We sold out of Zhuzhou CSR (efficient rail engines, China),
following a period of strong performance, and added a number of new
positions including NVC Lighting (efficient lighting, China), NSK
(industrial energy efficiency, Japan) and SFA Engineering (organic
LED equipment manufacturer, Korea).
Waste Management & Technologies ("WMT") - 14% weighting
The WMT sub-sector performed well over the Period, particularly
due to rising commodity prices. China Metal Recycling (metal
recycling, China) performed well on a recovery in margins and as
China announced plans to increase the number of recycling bases and
scrap metal plants across several regions, with total government
subsidies potentially reaching USD231m. Lee & Man (paper
recycling, China) underperformed as management reported a weak
short term demand outlook and delayed expansion plans. IAEM's WMT
weighting grew slightly from 12% to 14% in the Period.
We added to the position in Lee & Man on weakness and sold
out of OCI Materials (industrial gases, South Korea).
Water Infrastructure & Technologies ("WIT") - 13%
weighting
The WIT sector contributed negatively to performance as strength
in utilities such as Manila Water (Philippines) was offset by
weakness in the Indian water infrastructure stocks which were
negatively impacted by the tightening interest rate cycle and
delays in domestic infrastructure spending. The Company's WIT
weighting declined from 18% to 13% over the Period.
Strong support for the water infrastructure sector continued,
with the Chinese Government indicating that it will invest up to
USD450bn under the 12(th) Five year Plan. The Indian Government
remained focused on the water sector, particularly on irrigation,
with firm budgets to be announced in the next five year plan.
Despite these positive developments, recent policy and budget
delays have led to uncertainty and disappointing share price
performance of WIT related shares. We are confident that as
spending increases this effect will reverse.
During the Period we added to VA Tech Wabag (water treatment
equipment) and reduced IVRCL (water infrastructure), both Indian
companies. We exited Hyflux (water and waste water treatment
sector, Singapore) and increased the exposure to Sound Global
(water and waste water treatment sector, China) which is less
exposed to the disruptions in the Middle East. We also sold out of
Sinomem Technology (water treatment equipment, Singapore) as the
company delayed plans to raise additional capital on the Hong Kong
Exchange.
Pollution Control ("PC") - 14% weighting
The PC sub-sector was a major positive contributor to
performance. Campbell Brothers (environmental testing, Australia)
saw strong top line and margin growth in its testing business and
ENN Energy (city gas supply, China) reported strong volume growth
and demonstrated resilient margins. Horiba (environmental &
engine testing, Japan) also rose as capital expenditure in the
automotive sector started to recover. The Company's PC weighting
increased slightly from 12% to 14% over the Period.
We added to Horiba (environmental & engine testing, Japan)
and took profits on Campbell Brothers (environmental testing,
Australia).
Diversified Environmental ("DE") - 11% weighting
The DE sector, which includes a number of companies that are "in
transition" as they expand their environmental activities,
performed well. Xinyi Glass (energy efficient and solar glass,
China) announced better than expected results and announced plans
to expand capacity. LG Chem (chemicals and efficient batteries,
South Korea) also performed due to rising earnings expectations.
The share price of Thermax (energy efficiency and pollution
control, India) fell as the growth in the order book slowed as
customers delayed capacity expansion plans in response to rising
interest rates. IAEM's DE weighting rose from 8% to 11% over the
Period.
We took some profits in Xinyi Glass and added to Yingde Gases
(industrial gases, China) making it one of the Company's largest
positions. We also sold out of Air Water (industrial gases, Japan),
as the shares reached our target price.
Portfolio Activity and Current Structure
The Company started the Period with a portfolio of 54 listed
companies. Subsequently we sold out of 13 companies and invested in
12 new companies, to end the Period with 53 listed companies. The
structure of the Portfolio is shown on page 8 of the report.
Reflecting the Region's large environmental markets opportunity,
the Company's exposure to China and Hong Kong rose from 36% to 42%
over the Period and remains the largest proportion of the
portfolio. The Company's Japanese exposure has remained steady at
19%,whilst the Indian and South Korean exposures have declined.
The Company has maintained its diversified sub-sector holdings,
increasing energy efficiency to 39% by adding high efficiency
industrial automation, power electronics and efficient lighting
companies. The weighting in the Waste and Diversified Environmental
sectors increased whilst the exposure to Water and Renewable Energy
sectors fell.
The Company's exposure by market capitalisation has remained
focused in the small to medium range with companies having a market
capitalisation of less than USD 5 billion representing 83% of the
portfolio value at year end.
Deployment of funds from share issues and gearing
As highlighted in the Chairman's Statement, the Company has
increased assets during the year through a C share issue and by
taking on long term bank debt. The funds received were invested
broadly in line with the existing portfolio structures at the time
of these events.
Macro and Regional Perspective
Global concerns persisted, as European politicians continued to
seek a solution to sovereign risk that is acceptable to their
domestic audiences and rising expectations of a further round of
quantitative easing in the US exerted upward pressure on the Yen.
Despite this headwind, the Japanese economy has weathered the
disruptions of the earthquake better than expected and we expect
there to be opportunities for companies participating in the
reconstruction process.
Within the Asian region, we remain positive on China, which has
started to allow its currency to strengthen and reduced its
reliance on monetary tightening measures to control inflation. The
authorities have recently indicated that they believe that
inflation is close to a peak, improving the prospects for a more
balanced agenda between boosting growth and taming inflation. The
technology related markets of South Korea and Taiwan are expected
to fare better over the next six months as inventory cycles adjust
and seasonal demand recovers. India is further through its
tightening cycle, and we anticipate a recovery in growth rates in
the year ahead which we expect to favour companies in the energy
efficiency markets.
IAEM Outlook
As reported in the Chairman's Statement there has been a
substantial correction in global equity markets since the end of
June. This has been due to renewed concerns about European
sovereign debt and a downgrade to the debt rating of the United
States by the credit agency Standard and Poor's. Emerging markets
shares in general have been weak with smaller companies being
particularly badly hit as investors have sought to reduce their
exposure to riskier assets. Meanwhile, in Asia specifically, there
are signs that inflation is under control and that a hard landing
is unlikely. However, given the overall backdrop, we believe that
equity markets will continue to be volatile for the rest of the
year. Despite some specific sub-sector issues, we remain confident
that the long-term fundamentals for the environmental markets in
Asia continue to be positive and that the sell-off represents a
good opportunity for medium to long term investors seeking exposure
to this growth sector at an attractive valuation.
We will continue to post monthly updates on sector news and on
the Company's performance at www.impax.co.uk.
Impax Asset Management Limited
7 October 2011
Principal risks and uncertainties
The Board considers that the main risks faced by the Company
fall into the following categories.
(i) Asia Pacific Region
Generally, investment in emerging markets is suitable only for
sophisticated investors who fully appreciate the significance of
the risks involved. In particular, in certain countries in which
the Company invests:
(a) liquidity and settlement risks may be greater than in
Western Europe and the United States;
(b) accounting standards may not provide the same degree of
shareholder protection as would generally apply
internationally;
(c) national policies may restrict the investment opportunities
available to foreign investors, including restrictions on investing
in issuers or industries deemed sensitive to relevant national
interests;
(d) the fiscal and monetary systems remain relatively
undeveloped and this may affect the stability of the economic and
financial markets of these countries;
(e) substantial limitations may exist with respect to the
Company's ability to repatriate investment income, capital or the
proceeds of sales of securities;
(f) brokerage commissions, custody fees and taxes may be higher
than in Western Europe or the United States;
(g) assets may be subject to increased political and/or
regulatory risk;
(h) the economic and legal structures in place may be less
diverse and mature, and political and regulatory systems may be
less stable, than those of more developed countries;
(i) corporate governance procedures in certain countries in the
Asia Pacific Region may be less extensive or not applied as
rigorously due to the associated costs or business customs of a
country; and
(j) social and religious instability, crime and corruption may
adversely affect performance.
While the Manager will take these factors into consideration in
making investment decisions, there can be no assurance that the
Company will be able to avoid these risks.
Most of the companies in which the Company invests are located
in and conduct their business in the Asia Pacific Region.
Accordingly, performance of the Company's investments and the
results of its operations are predominantly dependent on the
economic and political conditions prevailing in the Asia Pacific
Region. Certain countries in the Asia Pacific Region have less
liquid and developed securities markets than the United States and
Western Europe. Given that some of the organised securities markets
in the Asia Pacific Region have been established relatively
recently, the procedures for settlement, clearing and registration
of securities transactions may be subject to legal uncertainties,
technical difficulties and delays. Investing in industries in the
Asia Pacific Region carries some particular risks:
-- governmental liberalisation of basic services and increased
environmental legislation may not occur at the rate or in the ways
anticipated.
-- the costs of technology in environmental markets may not
continue to fall or may not maintain price competitiveness.
-- the performance of investments in Asia Pacific environmental
market companies are likely to be adversely affected if industrial
and utility capital spending were to decrease or be deferred.
-- the Company's portfolio may include newly established
companies and companies whose future is dependent on widespread
adoption of their products and services.
-- the Company's investments are generally traded on the main
markets in the Asia Pacific Region and a significant fall and/or a
prolonged period of decline in these markets would adversely impact
the performance of the Company. This could be triggered by
unfavourable developments or events within or outside of the Asia
Pacific Region. Poor performance or underperformance may also
result from the Manager's country and/or stock selection or the
market rating of the Company.
Furthermore, the performance of some companies in the Asia
Pacific Region in which the Company invests may be adversely
affected by changes in applicable law and regulation.
Although significant developments have occurred in recent years,
the sophisticated legal and regulatory frameworks necessary for the
efficient functioning of modern capital markets have yet to be
fully developed in some countries in the Asia Pacific Region. In
particular, legal protections against market manipulation and
insider trading are less well-developed in some countries in the
Asia Pacific Region, and less strictly enforced, than in the United
States and Western European countries and existing laws and
regulations may be applied inconsistently with consequent
irregularities in enforcement. In addition, less information
relating to the proposed target entities and certain investments
may be publicly available to investors in securities issued or
guaranteed by such entities than is available to investors in
entities organised in the United States or Western European
countries.
Equities that are listed on the main markets in the Asia Pacific
Region may be less liquid and may carry a higher risk than an
investment in shares listed on markets in the United States and
Western Europe.
(ii) Market risks
The Company may invest in companies with a small market
capitalisation. Such investments are likely to be subject to higher
valuation uncertainties and liquidity risks than larger
capitalisation securities. The Company's portfolio is likely to
have a higher volatility than main equity indices such as the FTSE
100 Index. Securities in some of the investee companies may be
illiquid. Valuations of Asia Pacific environmental companies may
remain at current levels or may fall.
There are inherent risks involved in stock selection. The
Investment Manager is experienced and employs its expertise in
selecting the stocks in which the Company invests. The Manager
spreads the investment risk over a wide portfolio of investments
and at the period end the Company held investments in 54
companies.
The Company invests in securities that are not denominated or
quoted in sterling, the base currency of the Company. The Net Asset
Value per Share is reported in sterling and dividends are declared
and paid in sterling. The movement of exchange rates between
sterling and any other currencies in which the Company's
investments are denominated or its borrowings drawn down may have
an unfavourable or favourable effect on the return otherwise
experienced in the investments made by the Company. The Company
will not normally hedge against foreign currency movements
affecting the value of its investments, but the Manager will take
account of this risk when making investment decisions.
(iii) Internal risks
The main risk areas are poor allocation of the Company's assets
and stock selection by the Investment Manager, poor governance by
the Board and poor compliance or administration including the loss
of investment trust status. These factors could potentially result
in unacceptable returns or losses for shareholders.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable laws and
regulations.
Company law requires the Directors to prepare financial
statements for each financial period. Under that law the Directors
have elected to prepare the financial statements in accordance with
United Kingdom Generally Accepted Accounting Practices (United
Kingdom Accounting Standards and applicable law). Under company law
the Directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of
affairs of the Company as at the end of the period and of the net
return for the period. In preparing these accounts, the Directors
are required to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and estimates which are reasonable and
prudent; and
-- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the accounts.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and which disclose with reasonable accuracy at any
time the financial position of the Company and enable them to
ensure that the accounts comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors' Report, including a
statement of Corporate Governance and a Directors' Remuneration
Report that comply with such law and regulations.
The financial statements are published on the www.impax.co.uk
website which is maintained by the Company's Manager, Impax Asset
Management Limited ("IAM"). The maintenance and integrity of the
website maintained by IAM is, so far as it relates to the Company,
the responsibility of IAM. The work carried out by the auditor does
not involve consideration of the maintenance and integrity of this
website and, accordingly, the auditor accepts no responsibility for
any changes that have occurred to the accounts since they were
initially presented on the website. The accounts are prepared in
accordance with UK legislation, which may differ from legislation
in other jurisdictions.
STATEMENT UNDER THE DISCLOSURE & TRANSPARENCY RULES
4.1.12
The Directors each confirm to the best of their knowledge
that:
(a) the financial statements, prepared in accordance with
applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company; and
(b) this Annual Report includes a fair review of the development
and performance of the business and position of the Company,
together with a description of the principal risks and
uncertainties that it faces.
For and on behalf of the Board
Allan McKenzie
Chairman
7 October 2011
INCOME STATEMENT
Year ended 30 June Period from 11 September
2011 2009 to 30 June 2010
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on
investments - 1,849 1,849 - 13,572 13,572
Income 3,901 - 3,901 1,234 - 1,234
Investment
management
fees (458) (1,834) (2,292) (171) (682) (853)
Other
expenses (665) - (665) (377) - (377)
-------- --------- --------- --------- --------- ---------
Return on
ordinary
activities
before
finance
costs and
taxation 2,778 15 2,793 686 12,890 13,576
Finance
costs (65) (548) (613) - - -
Return on
ordinary
activities
before
taxation 2,713 (533) 2,180 686 12,890 13,576
-------- --------- --------- --------- --------- ---------
Taxation (295) - (295) (105) - (105)
-------- --------- --------- --------- --------- ---------
Return on
ordinary
activities
after
taxation 2,418 (533) 1,855 581 12,890 13,471
-------- --------- --------- --------- --------- ---------
Return per
Ordinary
Share
- undiluted 1.42p (0.31p) 1.11p 0.52p 11.53p 12.05p
- diluted 1.38p (0.30p) 1.08p 0.51p 11.40p 11.91p
The total columns of the Income Statement represent the profit
and loss account of the Company. The revenue and capital columns
contain supplementary information.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the period.
A Statement of Total Recognised Gains and Losses has not been
presented as all gains and losses are recognised in the Income
Statement.
The Company was incorporated on 11 September 2009 and its
business operations commenced when its shares were admitted to
trading on the London Stock Exchange on 23 October 2009.
BALANCE SHEET
At 30 At 30
June June
2011 2010
GBP'000 GBP'000
Fixed assets
Investments at fair value through
profit and loss 267,173 125,017
-------- --------
Current assets
Income receivable 447 169
Sales - future settlements - 587
Other debtors 9 9
Cash at bank and in hand 5,551 5,389
-------- --------
6,007 6,154
-------- --------
Creditors: amounts falling due
within one year
Purchases - future settlements - 4,009
Accrued liabilities 361 185
361 4,194
-------- --------
Net current assets 5,646 1,960
-------- --------
Total assets less current liabilities 272,819 126,977
Creditors: amounts falling due
after more than one year
Bank loan 15,448 -
Fair value of interest rate swap 231 -
Total net assets 257,140 126,977
-------- --------
Capital and reserves: equity
Share capital 2,189 1,170
Share premium account 10,056 9,986
Capital redemption reserve 129,982 -
Share purchase reserve 102,350 102,350
Capital reserve 10,024 12,890
Revenue reserve 2,539 581
-------- --------
Shareholders' funds 257,140 126,977
-------- --------
Net assets per Ordinary Share 119.61p 110.46p
- undiluted
Net assets per Ordinary Share 116.60p 108.85p
- diluted
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 30 June 2011
Share Capital Share
Share Premium redemption purchase Capital Revenue
capital account reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ----------- --------- -------- -------- --------
Opening
shareholders'
funds 1,170 9,986 - 102,350 12,890 581 126,977
Conversion of
C Shares into
Ordinary
Shares and
bonus issue
of
Subscription
Shares 1,018 - 129,982 - (2,333) - 128,667
Exercise of
Subscription
Shares 1 70 - - - - 71
Dividends paid - - - - - (460) (460)
Profit for the
year - - - - (533) 2,418 1,885
-------- -------- ----------- --------- -------- -------- --------
Closing
shareholders'
funds
as at 30 June
2011 2,189 10,056 129,982 102,350 10,024 2,539 257,140
-------- -------- ----------- --------- -------- -------- --------
For the period from 11 September 2009 to 30 June 2010
Share Share
Share premium purchase Capital Revenue
capital account reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- ---------- --------- -------- -------- --------
Ordinary
Shares
issued 1,149 114,559 - - - 115,708
Subscription
Shares
issued 21 (21) - - - -
Share issue
expenses - (2,202) - - - (2,202)
Cancellation
of share
premium - (102,350) 102,350 - - -
Profit for the
period - - - 12,890 581 13,471
-------- ---------- --------- -------- -------- --------
Closing
shareholders'
funds as
at 30 June
2010 1,170 9,986 102,350 12,890 581 126,977
-------- ---------- --------- -------- -------- --------
CASH FLOW STATEMENT
Period from
11 September
Year ended 2009
to 30 June
30 June 2011 2010
GBP'000 GBP'000
------------- -------------
Operating activities
Cash inflow from investment
income and bank interest 3,623 1,065
Cash outflow from management
expenses (2,787) (1,054)
Cash inflow from disposal of
investments 220,562 70,901
Cash outflow from purchase of
investments (363,213) (178,719)
Cash outflow from foreign exchange
costs (772) (205)
Cash outflow from overseas taxation (295) (105)
-------------
Net cash flow from operating
activities (142,882) (108,117)
-------------
Equity dividends paid (460) -
Financing
Proceeds of share issues 131,071 115,708
Expenses of share issues (2,620) (2,202)
Bank loan draw down 15,053 -
------------- -------------
Net cash flow from financing 143,504 113,506
------------- -------------
Increase in cash 162 5,389
Opening balance 5,389 -
Closing balance 5,551 5,389
------------- -------------
NOTES
1. ACCOUNTING POLICIES
The accounts have been prepared in accordance with applicable UK
accounting standards. The particular accounting policies adopted
are described below.
(a) Basis of accounting
The Company manages its affairs to enable it to qualify as an
investment trust for taxation purposes under section 1158 of the
Corporation Tax Act 2010. The accounts are prepared in accordance
with UK Generally Accepted Accounting Practice ("GAAP") and the
Statement of Recommended Practice "Financial statements of
investment trust companies and venture capital trusts" ("SORP"),
issued by the Association of Investment Companies in January
2009.
(b) Investments
Investments have been classified as "fair value through profit
or loss" and are initially recognised on the trade date and
measured at fair value. Investments are measured at subsequent
reporting dates at fair value by reference to the following
criteria:-
-- Any securities of companies quoted on an investment exchange
are valued at fair value by reference to market bid price.
-- Any investments in derivatives are valued at fair value. In
the case of Participatory Notes this is by reference to latest
broker quotations or, if unavailable or lower, by reference to the
equivalent market bid price valuation of the relevant underlying
security.
-- Any other investment is valued at best estimate of fair value
as determined by the Directors.
Changes in fair value are included in the Income Statement as a
capital item.
Transaction costs incurred on the acquisition and disposal of
investments are charged to the Income Statement as a capital
item.
(c) Income from investments
Investment income from shares is accounted for on the basis of
ex-dividend dates. Unfranked dividend income is stated gross of
withholding tax.
Special Dividends are assessed on their individual merits and
may be credited to the Income Statement as a capital item if
considered to be closely linked to reconstructions of the investee
company or other capital transactions. All other investment income
is credited to the Income Statement as a revenue item. Interest
receivable is accrued on a time apportionment basis and reflects
the effective interest rate.
(d) Capital reserves
The Company is precluded by its articles from distributing its
capital profit, except by way of redeeming or purchasing its own
shares. Profits achieved in cash by selling investments are dealt
with in the capital reserve. Changes in fair value arising upon the
revaluation of investments that remain in the portfolio are dealt
with through the capital reserve.
The Company created a share purchase reserve following the
cancellation of its share premium account on 9 December 2009. This
reserve may be used for the buy back of the Company's own
shares.
(e) Investment management fees and other administration
expenses
In accordance with the Company's stated policy and the
Directors' expectation of the split of future returns, 80% of
investment management fees, net of attributable tax, are charged as
a capital item in the Income Statement. Tax relief in respect of
costs allocated to capital is credited to capital via the capital
column of the Income Statement on the marginal basis.
All other administration expenses are charged as revenue items
in the Income Statement.
(f) Deferred taxation
Provision is made for deferred taxation, using the liability
method, on all timing differences to the extent that it is probable
that a liability will crystallise. Deferred tax is recorded in
accordance with FRS19 'Deferred tax'. Deferred tax is provided on
all timing differences that have originated but not reversed by the
balance sheet date. A deferred tax asset is only recognised to the
extent that it is regarded as recoverable.
(g) Foreign currency translation
All transactions and income in foreign currencies are translated
into sterling at the rates of exchange on the dates of such
transactions or income recognition. Foreign currency assets and
liabilities at the balance sheet date are translated into sterling
at the rates of exchange at the balance sheet date. Any gain or
loss arising from a change in exchange rates subsequent to the date
of the transaction is included as an exchange gain or loss in the
Income Statement as either a capital or revenue item depending on
the nature of the gain or loss.
(h) Finance costs
In accordance with Directors' expectation of the split of future
returns, 80% of finance costs are charged as capital items in the
Income Statement. Finance costs include interest payable, direct
loan costs and fair value movements on interest rate swaps.
(i) Dividends
The Company pays dividends to the extent that they are required
in order to maintain investment trust status.
(j) Financial liabilities
Financial liabilities (including bank loans and derivative
liabilities) are classified according to the substance of the
contractual arrangements entered into.
2. INVESTMENT COMPANY STATUS
The Company is an investment company within the meaning of
Section 833 of the Companies Act 2006.
3. INCOME
2011 2010
GBP'000 GBP'000
-------- --------
Income from investments:
Unfranked dividends from overseas
investments 3,880 1,222
Treasury bill income 17 6
--------
Total 3,897 1,228
-------- --------
Other income:
Interest 4 6
--------
Total income 3,901 1,234
-------- --------
4. ADMINISTRATION EXPENSES
2011 2010
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------- -------- --------
Investment
management fees 458 1,834 2,292 171 682 853
-------- -------- --------
Secretary and
administrator
fees 150 - 150 94 - 94
Custodian's fees 150 - 150 61 - 61
Directors' fees 91 - 91 58 - 58
Directors' other
employment
costs 8 - 8 6 - 6
Auditors
remuneration
- for audit
services 26 - 26 27 - 27
- for taxation 7 - 7 7 - 7
Broker fees 59 - 59 43 - 43
Public relations
and marketing 44 - 44 6 - 6
Listing and other
regulatory fees 42 - 42 15 15
Miscellaneous
expenses 88 - 88 60 - 60
-------- -------- --------
665 - 665 377 - 377
-------- -------- -------- -------- -------- --------
Total
administration
expenses 1,123 1,834 2,957 548 682 1,230
-------- -------- -------- -------- -------- --------
Fees of GBP21,150 (inclusive of VAT) were also payable to the
auditor for reporting accounting work performed in connection with
the C Share issue during the year. The fees are included in the
finance costs of C Shares.
5. FINANCE COSTS
2011 2010
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------- -------- --------
Interest payable 16 63 79 - - -
Direct costs 3 13 16 - - -
Fair value of
swap 46 185 231 - - -
C Share finance
costs - 287 287 - - -
-------- -------- -------- -------- -------- --------
65 548 613 - - -
-------- -------- -------- -------- -------- --------
6. RETURNS PER ORDINARY SHARE
Undiluted return per share is based on the net gain on ordinary
activities after taxation of GBP1,885,000 (2010: GBP13,471,000)
comprising a revenue return of GBP2,418,000 (2010: GBP581,000)and a
negative capital return of GBP533,000 (2010: capital return of
GBP12,890,000) attributable to the weighted average of 170,708,369
(2010: 111,762,869) Ordinary Shares of 1p in issue during the year
ended 30 June 2011.
Diluted returns per share are based on the net returns on
ordinary activities after taxation above attributable to the
diluted weighted average of 175,160,467 (2010: 113,130,158)
Ordinary Shares in issue during the year ended 30 June 2011.
Dilution is caused by the Subscription Shares in issue during
the above period. Each Subscription Share carries the right to
subscribe for an Ordinary Share at a price of 100p.
7. DIVIDEND
2011 2010
GBP'000 GBP'000
-------- --------
Dividend reflected in the
financial statements:
Interim dividend for the period 460 -
ended 30 June 2010 of 0.4p
per Ordinary Share
-------- --------
The following are dividends paid and proposed in respect of the
financial year which is the basis on which the requirements of
Section 1158 of the Corporation Tax Act 2010 are considered.
2011 2010
GBP'000 GBP'000
-------- --------
Final dividend for the year
ended 30 June 2011 of 0.95p
per Ordinary Share 2,042 -
Interim dividend for the period
ended 30 June 2010 of 0.4p
per Ordinary Share - 460
-------- --------
2,042 460
-------- --------
If approved at the Annual General Meeting, the final dividend
for the year ended 30 June 2011 will be paid on 1 December 2011 to
shareholders on the register as at the close of business on 28
October 2011.
The revenue return for the period available for distribution by
way of dividend was GBP2,418,000 (2010: GBP581,000).
8. NET ASSETS PER ORDINARY SHARE
Undiluted net assets per Ordinary Share is based on net assets
of GBP257,140,000 (2010: GBP126,977,000) divided by 214,985,682
(2010: 114,949,000) Ordinary Shares in issue at the Balance Sheet
date.
Diluted net assets per Ordinary Share is based on net assets of
GBP296,145,000 (2010: GBP147,877,000) divided by 253,990,591 (2010:
135,849,000) diluted Ordinary Shares in issue at the Balance Sheet
date. The diluted figures are based on the 39,004,909 (2010:
20,900,000) Subscription Shares in issue at 30 June 2011 being
converted into Ordinary Shares on that date at a price of 100p per
Ordinary Share.
9. ANALYSIS OF CHANGES IN NET DEBT
At 30 At 30
June Cash Finance Exchange June
2010 flow costs movement 2011
Cash and short term
deposits 5,389 162 - - 5,551
Bank loans falling due
more than one year - (15,053) (95) (300) (15,448)
5,389 (14,891) (95) (300) (9,897)
------ --------- -------- ---------- ---------
10. RELATED PARTY TRANSACTIONS
Fees payable to the Investment Manager are detailed in note 4 to
these accounts; the relevant amount outstanding as an accrual at 30
June 2011 was GBP227,045 (2010: GBP105,912).
11. FINANCIAL INFORMATION
This announcement does not constitute the Company's statutory
accounts. The financial information for 2011 is derived from the
statutory accounts for 2011, which will be delivered to the
registrar of companies following the Company's Annual General
Meeting. The statutory accounts for 2010 have been delivered to the
registrar of companies. The auditors have reported on the 2011 and
2010 accounts; their reports were unqualified and did not include a
statement under Section 498(2) or (3) of the Companies Act
2006.
The Annual Report for the period ended 30 June 2011 was approved
on 7 October 2011. It will be posted to shareholders and will be
made available on the Manager's website at www.impax.co.uk
This announcement contains regulated information under the
Disclosure Rules and Transparency Rules of the FSA.
7 October 2011
Secretary and registered office:
Cavendish Administration Limited
145-157 St John Street
London
EC1V 4RU
Tel: 020 7490 4355
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
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