Impax Asian Environmental Markets Plc ("IAEM" or the "Company")
Interim Management Statement
For the three months ended 31 March 2012
This interim management statement covers the period from the 1 January 2012 to 31 March 2012 (the "Period"), and is prepared in accordance with the UK Listing Authority's Disclosure and Transparency Rule 4.3.
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.
During the Period, the Company's undiluted NAV per Ordinary Share (excluding current year net revenue) rose by 12.3% from 87.5p to 98.2p whilst the MSCI AC Asia Pacific ex-Japan Index and the FTSE Environmental Opportunities Asia Pacific ex-Japan Index rose by 8.8% and 11.4% respectively (price returns in pounds sterling).
After a very difficult year in 2011, it is encouraging that IAEM has started 2012 with strong performance. Equity markets posted their strongest first quarter performance since 1998 as economic data in the US continued to exceed expectations and Eurozone risks diminished as the ECB offered a second tranche of long-term funding to Eurozone banks and private holdings of Greek government debt underwent an orderly restructuring. Whilst economic data in China and India were at the lower end of expectations, lower inflation rates enabled policy makers to respond by cutting reserve rate requirements.
Environmental markets outperformed led by the energy efficiency, water infrastructure and waste management. China announced plans to support the domestic light-emitting diode ("LED") market. Korea confirmed details of its offshore wind development. Japan continued to investigate its energy options with a New Energy Bill expected in the third quarter.
At the start of the period the Company had drawn down US$40 million from its US$50 million revolving credit facility.
Over the three months ended 31 March 2012, the IAEM Ordinary Share price traded at an average discount to net asset value of 14.4%. At 31 March 2012 the discount stood at 15.4%. The current market conditions remain difficult for specialist closed-end funds. The Board has utilised the Company's buy back facility and 2,000,000 Ordinary shares were bought back in the Period to be held in treasury. The Board and the Company's advisers continue to monitor the discount closely and the Board will continue to exercise its buy back powers when it deems circumstances to be appropriate.
During the Period, the Company added seven new holdings to its portfolio and sold out of three positions. Three of the additions had previously been sold by the Company on valuation grounds but share price weakness resulting from macro-economic concerns offered an opportunity to re-enter at attractive levels. The five largest holdings as at 31 March 2012 are set out below and illustrate the Manager's continued preference for a diversified portfolio.
Country where listed
Natural gas distribution
Efficient gas water heaters
Efficient power electronics
Following the strong start to the year we expect a period of consolidation in equity markets as investors await confirmation that the recovery in US economic activity is sustainable and that European sovereign risk issues will not re-emerge. Uncertainty remains regarding the strength of the Chinese economy but we anticipate that further easing in China will continue to support the re-rating of smaller companies. We also anticipate further easing in India in order to support economic activity in 2012 but this has been discounted too some extent. The momentum of environmental policy and legislation in the Asia Pacific region remains strong with energy efficiency and the water sector being key areas of focus for the Chinese Government. Given the attractive valuation and superior expected growth rates, the Manager and the Board believe that the Company offers a good opportunity for medium to long term investors seeking exposure to the Asian environmental sector.
The interim management statement will be made available on the Manager's website www.impax.co.uk
20 April 2012
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