Iaem Half-yearly Report to 31 Dec 2011

8/2/2019 Iaem Half-yearly Report to 31 Dec 2011

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Half-yearly Financial Report

For the period from 11 September 2009

to 31 December 2009

For the period from 10 September 2010

to 31 December 2010

For the six months ended

31 December 2011


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IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

Investment Objective

The Companys investment objective is to generate long-term capital growth throughinvestment in a diverse portfolio of quoted companies in the markets for cleaner or moreefficient delivery of basic services of energy, water and waste in the Asia Pacific Region. Tobe eligible for investment, such companies must have at least 20% of their turnover, profitsor invested capital in these markets.

Financial Information

At At31 December 30 June

2011 2011 % change

Net assets 188.1m 257.1m 26.8%Bank debt (in sterling terms) 25.9m 15.4m +67.5%

Number of Ordinary Shares in issue(excluding shares held in treasury) 213,105,198 214,985,682 0.9%

Net asset value (NAV) per Ordinary Share Undiluted 88.3p 119.6p 26.2% Diluted 88.3p1 116.6p 24.3%

NAV per Ordinary Share (excluding currentperiod net revenue) Undiluted 87.5p 118.5p 26.2% Diluted 87.5p1 115.7p 24.4%

NAV per Ordinary Share performance2

Undiluted 25.4% Diluted 23.5%

FTSE Environmental Opportunities Asia Pacific(ex-Japan) Index (sterling)2 24.4%

FTSE Environmental Opportunities Japan Index(sterling)2 12.4%MSCI AC Asia Pacific (ex-Japan) Index (sterling)2 14.5%

Ordinary Share price (mid-market) 73.6p 106.4p 30.8%Subscription Share price (mid-market) 5.8p 21.0p 72.4%

Ordinary Share price (discount)/premiumto diluted NAV (16.6%) (8.7%)

1 No dilution due to NAV being below subscription share exercise price.2

Total return in pounds sterling.

KEY FEATURES


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During the six month period ended 31 December 2011 (the Period), financial marketvolatility was pronounced as political leaders failed to resolve the on-going sovereign debtproblem in Europe. In Asia, concerns about inflation and the risk of a hard landing in China

dominated sentiment.

Despite a number of positive policy developments that further strengthened the long-termoutlook for environmental markets in the Asia-Pacific region and are outlined throughout thisreport, Impax Asian Environmental Markets plc (the Company) experienced adisappointing six months, particularly during the three months from July to September.

Price and Performance

Over the Period, the Company posted a negative undiluted net asset value total return of

25.4%; the corresponding falls in the FTSE Environmental Opportunities Asia Pacificex-Japan Index (EOAX), the FTSE Environmental Opportunities Japan Index (EOJP) andthe MSCI AC Asia Pacific ex-Japan Index (MXAPJ) were 24.4%, 12.4% and 14.5%respectively1.

The Companys Ordinary Share price fell 30.8% from 106.4p to 73.6p as a wideningdiscount exacerbated the fall in net asset value (NAV). The Companys SubscriptionShares were trading at 5.8p at the end of the Period.

Sector DevelopmentsNotwithstanding the disappointing performance of stocks in the Asian environmentalmarkets, the sectors long-term drivers continued to develop positively as governmentsacross the region responded to resource, infrastructure and environmental challenges withsupportive policy. The earthquake and subsequent nuclear disaster in Japan triggeredincreases in renewable energy targets across the region, while the Chinese governmentconfirmed an investment of US$770 billion in low carbon energy (with particular emphasison wind, solar, hydro and gas) by 2020 and the Australian government adopted a carbon taxwhich has materially improved domestic prospects for both renewable energy and energyefficiency. Floods in both Thailand and Australia highlighted the need to improve

management and quality of water resources, and the Chinese government set asideUS$450 billion for water sector spending over the next five years. The Board and theManager believe that these developments may contribute positively to the Companysperformance over the medium to long-term.

Gearing

At the start of the Period the Company had drawn down US$25 million from its US$50million revolving credit facility. On 9 November 2011, the Company made an additionaldrawdown of US$15 million, a decision supported by the increasingly attractive valuation of

CHAIRMANS REVIEW

1 Total return in pounds sterling.


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shares within the sector and the positive long-term outlook for environmental markets givenpolicy and economic drivers. The proceeds were invested during the final two months of thePeriod.

Discount and Buybacks

Over the six months ended 31 December 2011, the IAEM Ordinary Share price traded at anaverage discount to NAV of 11.5% and in a range between 1.9% and 17.7%; at the end ofthe Period, the discount stood at 16.6%.

Recognising that buying back stock at a discount to NAV is accretive, the Board bought back1,885,000 Ordinary Shares during the Period; these shares are currently held in treasury.The Board and the Companys advisers continue to monitor the discount closely and the

Board will continue to exercise its buy back powers when it deems circumstances to beappropriate.

Update and Outlook

The recovery in equity markets towards the end of the Period has extended into the NewYear, as US economic data pointed to a more sustained recovery, inflation across Asiamoderated and liquidity conditions in China eased.

As at 17 February 2012, the undiluted NAV (excluding income) of IAEM had risen 13.9%

since the end of the Period to 99.7p while the Ordinary Share price had risen 19.6% to88.0p. The corresponding increases in the EOAX and the EOJP were 16.4% and 7.7%respectively whilst the MXAPJ had risen by 11.7%1.

The Companys portfolio is currently trading at a price earnings ratio of approximately 12times expected forward earnings, based on forecast earnings growth of 19%. Taking intoaccount these metrics and the strengthening drivers of Asian environmental markets, theDirectors continue to believe that the Companys shares offer an attractive medium tolong-term proposition for investors seeking to benefit from the growth potential of Asianenvironmental markets.

Allan McKenzie

Chairman23 February 2012

CHAIRMANS REVIEWCONTINUED

1 Total return in pounds sterling.


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MANAGERS REPORT

Investment Performance

The Companys performance for the six months ended 31 December 2011 (the Period)suffered due to a continued de-rating of smaller companies, particularly those in the Chineseindustrial and technology sectors. We expect this trend to reverse with improving liquidityand falling interest rates, and have maintained IAEMs exposure to these areas.

Investment Universe & Portfolio Structure

We continue to focus on the bottom-up stock picking of companies with attractive businessmodels and valuations, whilst taking developments in the environmental market sub-sectorsand the wider macro-environment into account. The universe of Asian environmentalcompanies has remained broadly stable over the last six months (ca. 460 companies) dueto a slowing in the number of initial public offerings and a few companies falling below the

market capitalisation threshold.

The Company ended the period with investments in 53 companies. The portfolio isdiversified by both geography and sub-sector, with a particular focus on China, followed byJapan, Taiwan, and South Korea. On a sub-sector basis, the portfolio has its largestallocation to Energy Efficiency and smallest allocations to Diversified Environmental andRenewable & Alternative Energy. An analysis of the structure of the portfolio as well as thesub-sector contribution to performance is shown on page 9.

Environmental Sub-sectors

There were significant developments in each of the principal environmental sub-sectorsduring the period. These are highlighted below together with the key contributors anddetractors to performance and portfolio changes:

Renewable & Alternative Energy (RAE) 13% weighting

Following the earthquake, the Japanese government announced a solar target of 28gigawatts (GW) by 2020, an eight times increase from current levels; Korea announcedplans to increase renewables to 13% of the total energy mix by 2030; and China raised its2020 target for wind from 100GW to 150GW and doubled its 2020 solar target to 30GW.

Despite positive policy developments in Asia, oversupply and pricing pressure have led toslowing global demand for renewable energy. The Company had limited exposure to thissub-sector, having previously taken profits in polysilicon suppliers, and was concentrated inthe more defensive developers and operators including Aboitiz Power and EnergyDevelopment Corporation (EDC) and China Longyuan.

The Companys RAE weighting grew from 9% to 13% over the Period as Xinyi Glass wasre-classified due to the growth of its solar business. We took profits in EDC and added to

Xinyi Glass on weakness. We also added Trina Solar (China) as we anticipate downstreamsolar players will benefit from lower raw material prices.


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Energy Efficiency (EE) 40% weighting

The performance of the EE sector over the Period was disappointing despite favourablepolicy developments. Following the approval of Chinas 12th Five Year Plan in the first halfof 2011, industrial energy efficiency has been designated a strategic industry, and therewere initiatives to boost the energy efficient lighting market. However, the high speed railcrash in China in July, and the on-going overcapacity in the light emitting diode (LED)sector, led to weakness in a number of stocks.

Positive contributions came from SFA Engineering (organic LED equipment manufacturer,Korea) and Rinnai (efficient water heaters, Japan). A significant negative contributor toperformance was China High Precision Automation (CHPA, automation and efficiency)which was suspended from trading and written down in the portfolio resulting in a 0.9%

negative impact on the NAV at the Period end. We expect CHPA to return to trading on theHong Kong Stock Exchange in due course.

The Companys EEweighting increased from 39% to 40% in the Period. We shifted our LEDexposure to stocks further down the value chain by selling out of chip manufacturers SeoulSemiconductor and Samsung Electromechanics (both Korea) and increasing exposure tothe lighting integrator NVC Lighting (efficient lighting, China). We also added Airtac (factoryautomation and efficiency, Taiwan).

Water Infrastructure & Technologies (WIT) 14% weighting

China accelerated a number of water contracts as part of the 12th Five Year Plan budget of$450bn for water conservancy, waste water treatment and recycling. Meanwhile, investmentmomentum in the Indian water sector improved in line with policy objectives to control waterscarcity and polluted water sources. In contrast, instability in the Middle East led to delaysto water projects which affected a number of our companies with exposure to that region andtriggered increased competition in the Asian water market, particularly in the context ofdesalination.

In the WIT sector, Manila Water (water utility, Philippines) and Thai Tap (water utility,

Thailand) contributed positively as they grew in line with the regional economy. TheCompanys Indian holdings (Jain Irrigation, VA Tech Wabag and IVRCL) all contributednegatively to performance as projects were delayed due to weak finance markets. We soldout of IVRCL (water infrastructure, India) on balance sheet concerns. We also added twonew holdings, China Liansu (water pipes, China) and Woongjin Coway (water filters, Korea).The Companys exposure to the WIT sector increased from 13% to 14%.

Pollution Control (PC) 13% weighting

The PC sub-sector once again contributed positively to performance, with the Chinese gas

sector continuing to report strong volume growth. Beijing Enterprises (gas transmission anddistribution, China) rose on expectations of further increases in demand after a Beijing

MANAGERS REPORTCONTINUED


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based gas fired power plant operator secured funding for expansion. Campbell Brothers(environmental testing, Australia) extended gains on the back of strong results and inclusionin a number of regional indices, and Horiba (environmental & engine testing, Japan) was

supported by strong earthquake related sales.

The Companys PC weighting decreased from 14% to 13% over the Period. Additionsincluded Towngas China (urban gas supply). We exited Shimadzu (environmental testingand gas sensing, Japan) as the stock reached its target price.

Waste Management & Technologies (WMT) 14% weighting

The WMT sector was weak overall due to volatile commodity prices. However, China MetalRecycling outperformed on positive earnings and continued expansion while China

Everbright International (water and waste treatment) performed well on the announcementof a number of new projects. Conversely, Lee and Man (paper recycling, China)underperformed as margins contracted by energy cost increases and Fook Woo (paperrecycling, China) was suspended and written down in the portfolio, resulting in a 0.3%negative impact on the NAV at the Period end. We expect Fook Woo to return to trading onthe Hong Kong Stock Exchange in due course.

The Companys WMT weighting remained stable at 14% over the Period. We added to ourexisting position in China Everbright International and sold out of Transpacific IndustriesGroup (integrated waste management, Australia) after a period of strength.

Diversified Environmental (DE) 6% weighting

Despite a fall in overall performance, DE was one of the best performing sectors. YingdeGases (industrial gases, China) rose on results that demonstrated a resilient businessmodel and a number of new project wins. In contrast, weaker end markets impacted LGChem (batteries, Korea). The Companys DE weighting fell from 11% to 6% over the Periodas Xinyi Glass was reclassified (see above).

Macro & Regional Factors

During the Period global equity markets suffered a sharp correction, principally due toconcerns about the continued European sovereign debt crisis, a situation that wasexacerbated by US partisan politics creating uncertainty around the US debt ceiling. In Asia,the extended monetary tightening in China led to concerns about access to capital and ade-rating of small and midsized companies.

Confidence towards the end of the Period was partially restored by the injection of liquidityby the Federal Reserve and the European Central Bank into the European Banking system.In addition, a reduction in inflation allowed the Chinese authorities to ease monetary

conditions and announce measures to support bank lending to smaller companies.



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Amendments to management arrangements

The Manager has taken further steps to develop its resources in the Asia-Pacific region. InAugust 2011, Impax Asset Management (Hong Kong) Limited (IAMHK), a wholly-ownedsubsidiary of Impax Asset Management Group plc, secured its Hong Kong Securities andFutures Commission licence to conduct asset management and advisory activities. Inaddition, David Hok Kwan Li joined IAMHK as a full time employee, having previously beenemployed by the Managers investment adviser, Ajia Partners Asset Management (HK)Limited (Ajia), and seconded to the Manager. As a result of these changes the advisoryarrangement which was in place between the Manager and Ajia was terminated.

Outlook

Following a difficult twelve months, we are beginning to see a moderation in inflation and

easing of monetary conditions in Asia. For example, India has started to ease liquidityconditions by reducing the amount of money that banks are required to hold in reserve. Weanticipate that equity markets in the region will re-rate higher over the next few months andthat smaller sized companies will recover as earnings growth continues. The momentum ofenvironmental policy and legislation in the Asia Pacific region is strong and we remainconfident in the long-term outperformance potential of environmental markets in the region.

We will continue to post monthly updates on the Companys performance and sector newson www.impax.co.uk.

Impax Asset Management Limited

23 February 2012



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Yingde Gases (industrial gases, China) (4.4% of net assets)

Yingde Gases is the largest provider of on-site industrial gases in China, supplying oxygento improve the energy efficiency and productivity of steel furnaces. China is the largestgrowth market for industrial gases, and Yingde is expected to more than double in size overthe next two years.

ENN Energy (city gas distribution, China) (4.3% of net assets)

ENN is the largest privately run city gas distributor in China. The company is set to benefitfrom policy objectives to improve air quality, reduce coal utilisation and increase the naturalgas share of primary energy from 4% to 8% by 2015. The company has long-term exclusiveconcessions in over 90 cities, covering an urban population of over 46 million people.

SFA Engineering (OLED equipment manufacturer, Korea) (4.3% of net assets)

SFA is a leading Korean manufacturer of specialised factory automation equipment andmanufacturing equipment for LCD panels. The company has developed manufacturingequipment for Organic Light Emitting Diodes (OLED) which is a new display technologybenefiting from lower energy use and a thinner screen. The company is expected to benefitfrom sales to Samsung which acquired a 10% stake in SFA in 2010.

China Longyuan (renewable IPP, China) (4.2% of net assets)

China Longyuan is the largest independent wind power producer (IPP) in China, the

worlds largest wind market. Longyuan has an installed base over 8.5GW, representing 19%of Chinas total wind capacity. The company has a large development pipeline and plans toadd 1.6-1.7GW per annum.

Rinnai (efficient water heaters, Japan) (3.7% of net assets)

Rinnai is Japans largest manufacturer of domestic gas appliances, with a global presencein highly efficient gas-fired water-heaters. The company has unique technologies protectedunder patents which create strong barriers to entry.The domestic gas market is an oligopolywith the top two companies each holding a 40% share. The company has raised profitability

by increasing the in-house production of key components and focusing on profitablecustomer relationships.

FIVE LARGEST INVESTMENTSAS AT 31 DECEMBER 2011


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BREAKDOWN BY COUNTRY OF DOMICILE AND QUOTATION

(in market value terms)

Domicile Quotation1

China and Hong Kong2 41% 34%Japan 20% 20%Taiwan 9% 10%South Korea 8% 8%Philippines 7% 7%India 6% 5%Australia 5% 3%Thailand 3% 3%Singapore 1% 3%United States 6%United Kingdom 1%

Total 100% 100%

1 Where a participatory note is held, the exposure is reported for the underlying security. American depositary receipts

are included under United States.2 Companies quoted in Hong Kong represented 34% (by market value) of the Companys portfolio.

BREAKDOWN AND PERFORMANCE CONTRIBUTION BY SECTOR

Weighting1 Contribution1

Renewable & Alternative Energy 13% 4%Energy Efficiency 40% 14%Water Infrastructure & Technologies 14% 4%Pollution Control 13% +1%Waste Management & Technologies 14% 4%Diversified Environmental 6% 1%

Total 100% 26%

1 Source: Impax Asset Management using Factset methodology.

BREAKDOWN BY MARKET CAPITALISATION

>US$5bn 17%US$1bn US$5bn 48%


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The Chairmans review on pages 2 and 3 and the Managers report on pages 4 to 7 providedetails on the performance of the Company. Those reports also include an indication of theimportant events that have occurred during the first six months of the financial year ending

30 June 2012 and the impact of those events on the condensed set of financial statementsincluded in this Half-yearly financial report.

Details of the largest five investments held at the period end are provided on page 8 and thestructure of the portfolio at the period end is analysed on page 9.

Principal Risks and Uncertainties

The Board considers that the main risks and uncertainties faced by the Company fall intothe categories of (i) Asia Pacific region risks; (ii) Market risks and (iii) Corporate governance

and internal control risks. A detailed explanation of these risks and uncertainties can befound in the Companys most recent Annual Report for the year ended 30 June 2011. Therisks and uncertainties facing the Company remain unchanged from those disclosed in theAnnual Report.

Related Party Transactions

Details of the investment management arrangements were provided in the Annual Report.There have been no changes to the related party transactions described in the AnnualReport that could have a material effect on the financial position or performance of the

Company. Amounts payable to the investment manager in the period are detailed in theIncome Statement on page 12.

Board of Directors23 February 2012

INTERIM MANAGEMENT REPORT


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The Directors confirm to the best of their knowledge that:

The condensed set of financial statements contained within the half-yearly financial

report has been prepared in accordance with the guidance issued by the AccountingStandards Board on Half-yearly financial reports.

The interim management report includes a fair review of the information required by4.2.7R and 4.2.8R of the FSAs Disclosure and Transparency Rules.

Allan McKenzie

Chairman of the Board of Directors23 February 2012

DIRECTORS STATEMENT OF RESPONSIBILITY FORTHE HALF-YEARLY REPORT


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Six months ended31 December 2011

(unaudited) (unaudited) (unaudited)

Revenue Capital TotalNote 000 000 000

Gains/(losses) on investments (64,966) (64,966)Net foreign currency loss (1,137) (1,137)Income 3 2,566 2,566Investment management fees (224) (897) (1,121)Other expenses (307) (307)

Return on ordinary activities before

finance costs and taxation 2,035 (67,000) (64,965)

Finance Costs 4 (66) (265) (331)

Return on ordinary

activities before taxation 1,969 (67,265) (65,296)

Taxation 5 (267) (267)

Return on ordinary

activities after taxation 1,702 (67,265) (65,563)

Return per Ordinary Share 6 undiluted 0.79p (31.34p) (30.55p) diluted 0.79p (31.34p) (30.55p)

The total column of the Income Statement is the profit and loss account of the Company.

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 andlosses are recognised in the Income Statement.

INCOME STATEMENTFOR THE SIX MONTHS ENDED 31 DECEMBER 2011


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Six months ended Year ended31 December 2010 30 June 2011

(unaudited) (unaudited) (unaudited) (audited) (audited) (audited)

Revenue Capital Total Revenue Capital Total000 000 000 000 000 000

34,744 34,744 2,923 2,923 (498) (498) (1,074) (1,074)

1,058 1,058 3,901 3,901(189) (757) (946) (458) (1,834) (2,292)(281) (281) (665) (665)

588 33,489 34,077 2,778 15 2,793

(65) (548) (613)

588 33,489 34,077 2,713 (533) 2,180

(77) (77) (295) (295)

511 33,489 34,000 2,418 (533) 1,885

0.34p 22.21p 22.55p 1.42p (0.31p) 1.11p

0.33p 21.54p 21.87p 1.38p (0.30p) 1.08p

INCOME STATEMENTCONTINUED


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At 31 At 31 At 30December December June

2011 2010 2011

(unaudited) (unaudited) (audited)Note 000 000 000

Fixed assetsInvestments at fair valuethrough profit and loss 2 210,843 286,063 267,173

Current assetsIncome receivable 125 89 447Sales future settlements 1,639 Other debtors 165 14 9

Cash at bank and in hand 4,309 3,989 5,551

6,238 4,092 6,007

Creditors: amounts falling duewithin one yearPurchases future settlements 2,655 948 Accrued liabilities 263 310 361

2,918 1,258 361

Net current assets 3,320 2,834 5,646

Total assets less current liabilities 214,163 288,897 272,819

Creditors: amounts falling due aftermore than one yearBank loan 7 25,879 15,448Fair value of interest rate swap 8 192 231

Total net assets 188,092 288,897 257,140

Capital and reservesShare capital 2,189 2,188 2,189

Share premium 10,060 9,986 10,056Capital redemption reserve 129,982 129,982 129,982Share purchase reserve 100,903 102,350 102,350Capital reserve (57,241) 43,759 10,024Revenue reserve 2,199 632 2,539

Shareholders funds 188,092 288,897 257,140

Net asset value per Ordinary Share undiluted 6 88.26p 134.42p 119.61pNet asset value per Ordinary Share

diluted 6 88.26p 129.13p 116.60p

BALANCE SHEETAS AT 31 DECEMBER 2011


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Share Capital Share

Share premium redemption purchase Capital Revenuecapital account reserve reserve reserve reserve Total

000 000 000 000 000 000 000

Opening

shareholders funds 2,189 10,056 129,982 102,350 10,024 2,539 257,140

Exercise of

Subscription Shares 4 4Share buy backs

(see note 11) (1,447) (1,447)Dividends paid (2,042) (2,042)

Profit for the period (67,265) 1,702 (65,563)

Closingshareholders

funds as at

31 December 2011 2,189 10,060 129,982 100,903 (57,241) 2,199 188,092

FOR THE SIX MONTHS ENDED 31 DECEMBER 2010 (unaudited)

Opening

shareholders funds 1,170 9,986 102,350 12,890 581 126,977

Conversion of C Shares

into Ordinary Sharesand bonus issue of

Subscription Shares 1,018 129,982 (2,620) 128,380Dividends paid (460) (460)

Profit for the period 33,489 511 34,000

Closing

shareholders

funds as at

31 December 2010 2,188 9,986 129,982 102,350 43,759 632 288,897

RECONCILIATION OF MOVEMENT IN SHAREHOLDERS FUNDSFOR THE SIX MONTHS ENDED 31 DECEMBER 2011 (unaudited)


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FOR THE YEAR ENDED 30 JUNE 2011 (audited)

Share Capital Share

Share premium redemption purchase Capital Revenuecapital account reserve reserve reserve reserve Total

000 000 000 000 000 000 000

Opening

shareholders funds 1,170 9,986 102,350 12,890 581 126,977

Conversion of C Sharesinto Ordinary Shares

and bonus issue of

Subscription Shares 1,018 129,982 (2,333) 128,667Exercise of

Subscription Shares 1 70 71Dividends paid (460) (460)

Profit for the period (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

RECONCILIATION OF MOVEMENT IN SHAREHOLDERS FUNDSCONTINUED


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Six months Six months Yearended ended ended

31 December 31 December 30 June

2011 2010 2011(unaudited) (unaudited) (audited)

000 000 000

Operating activities

Cash inflow from investment income andbank interest 2,884 1,138 3,623Cash outflow from management expenses (1,592) (1,115) (2,787)Cash inflow from disposal of investments 84,861 153,073 220,562Cash outflow from purchase of investments (92,481) (281,841) (363,213)

Cash outflow from net foreign exchange costs (1,149) (498) (772)Cash outflow from taxation (266) (77) (295)

Net cash flow from operating activities (7,743) (129,320) (142,882)

Returns on investments and servicing

of finance

Interest paid (245)

Net cash flow from returns on investments

and servicing of finance (245)

Equity dividends paid (2,042) (460) (460)

Financing

Proceeds of share issues 4 131,000 131,071Expenses of share issues (2,620) (2,620)Share buy backs (1,447) Bank loan draw down 10,231 15,053

Net cash flow from financing 8,788 128,380 143,504

(Decrease)/increase in cash (1,242) (1,400) 162

Opening balance 5,551 5,389 5,389

Closing balance 4,309 3,989 5,551

CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 31 DECEMBER 2011


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1 ACCOUNTING POLICIES

The Half-yearly financial report has been prepared in accordance with applicable UK accountingstandards and UK GAAP. The accounting policies used by the Company are the same as those stated in

its most recent Annual Report. The accounting policy in relation to investments is stated in note 2 below.

The Company manages its affairs to enable it to qualify as an investment trust for taxation purposesunder section 1158 of the Corporation Tax Act 2010. The Company therefore presents its accounts inaccordance with the Statement of Recommended Practice for Investment Companies.

2 INVESTMENTS

Investments have been classified as fair value through profit or loss and are initially recognised on thetrade date and measured at fair value. Investments are measured at subsequent reporting dates at fairvalue by reference to the following criteria:

Any securities of companies quoted on an investment exchange are valued at fair value byreference to market bid price.

Any investments in derivatives are valued at fair value. In the case of Participatory Notes this is byreference to latest broker quotations or, if unavailable or lower, by reference to the equivalent marketbid 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 IncomeStatement as a capital item.

3 INCOMESix months Six months Year

ended ended ended31 December 31 December 30 June

2011 2010 2011000 000 000

Income from investments:Dividends from overseas investments 2,562 1,037 3,880Treasury bill income receivable 4 17 17

Total 2,566 1,054 3,897

Other income:Interest receivable 4 4

Total income 2,566 1,058 3,901

NOTES TO THE ACCOUNTS


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4 FINANCE COSTS

Six months ended Six months ended Year ended

31 December 2011 31 December 2010 30 June 2011

Revenue Capital Total Revenue Capital Total Revenue Capital Capital000 000 000 000 000 000 000 000 000

Interest payable 51 205 256 16 63 79

Direct costs 10 41 51 3 13 16

Fair value of swap 5 19 24 46 185 231

C share finance costs 287 287

66 265 331 65 548 613

5 TAXATION

The tax charge in the Income Statement is in respect of overseas tax suffered on dividend income.

6 RETURN PER SHARE

Undiluted return per Ordinary Share is based on the net return attributable on ordinary activities aftertaxation attributable to the weighted average of 214,605,268 Ordinary Shares in issue (excluding sharesheld in treasury) during the period (Six months ended 31 December 2010: 150,806,405; Year ended 30June 2011: 170,708,369).

Diluted return per Ordinary Share is based on the net return attributable on ordinary activities aftertaxation attributable to the diluted weighted average of Ordinary Shares during the period. There wasno dilution of net assets per Ordinary Share at 31 December 2011 (Six month ended 31 December2010: 155,438,175;Year ended 30 June 2011: 175,160,467). Each Subscription Share carries the rightto subscribe for one Ordinary Share at a price of 100p. The average bid price per Ordinary Share duringthe period was lower than 100p and consequently the Subscription Shares had an anti-dilutive impacton return per share during the period.

7 BANK LOAN

The Company has a US dollar revolving credit facility with the Royal Bank of Scotland plc. Under theterms of the facility the Company may draw down loans of up to, in aggregate, US$50 million. A firstloan of US$25 million was made to the Company on 6 May 2011 and a further US$15 million was drawndown on 9 November 2011. Therefore the total drawn down at 31 December 2011 was US$40 million.

Interest is payable on amounts drawn down under facility computed at the rate of 3 month US$ LIBOR

plus a margin of 1.85%. A commitment fee computed at the rate of 0.925% per annum is payable onany amounts not drawn under the facility.

8 INTEREST RATE SWAP

The Company has entered into a swap agreement under which the interest rate on the facility has beenfixed. The fixed rate payable under the swap arrangement is 1.0575% with the Company receivinginterest at 3 month US$ Libor. In the event of early repayment of the loan, break costs may apply.

NOTES TO THE ACCOUNTSCONTINUED


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9 NET ASSETS PER SHARE

The undiluted net assets per Ordinary Share figure is based on the net assets of 188,092,000 at31 December 2011 (31 December 2010: 288,897,000; 30 June 2011: 257,140,000) divided by

213,105,198 Ordinary Shares in issue (excluding shares held in treasury) at 31 December 2011(31 December 2010: 214,915,100; 30 June 2011: 214,985,682).

There was no dilution of net assets per Ordinary Share at 31 December 2011 due to the net asset valueper share being lower than the Subscription Share exercise price of 100p at that date. (31 December2010: 327,973,000; 30 June 2011: 296,145,000). The number of diluted Ordinary Shares for thecomparative periods was 31 December 2010: 253,990,591; 30 June 2011: 253,990,591. The dilutedfigures assume that the number of Subscription Shares in issue at the end of those periods,31 December 2010: 39,075,491; 30 June 2011: 39,004,909, were converted into Ordinary Shares onthat date at a price of 100p per Ordinary Share.

10 SHARE ISSUESDuring the period the Company issued 4,516 Ordinary Shares as a result of the exercise of 4,516Subscription Shares at a subscription price of 1 per Ordinary Share.

Each Subscription Share carries the right to subscribe for one Ordinary Share at 100p per share on anybusiness day between 1 November 2009 and 31 October 2014 inclusive. The subscription price andnumber of Ordinary Shares are subject to adjustment on the occurrence of certain events includingsubdivision or consolidation of Ordinary Shares. Subscription Shares carry limited voting rights.

11 PURCHASE OF OWN SHARES

During the six months ended 31 December 2011, 1,885,000 Ordinary Shares were bought back to be

held in treasury at an aggregate cost of 1,447,230.

The number of Ordinary Shares in issue (excluding treasury Shares) at 31 December 2011 was213,105,198.

The number of Subscription Shares in issue at 31 December 2011 was 39,000,393.

12 RELATED PARTY TRANSACTIONS

Fees payable to Impax Asset Management Limited (the Manager) are shown in the Income Statement.At 31 December 2011 the fee accrual outstanding to the Manager was 178,447 (31 December 2010:240,959; 30 June 2011: 227,045). These fees were subsequently paid following the period end.

13 STATUS OF THIS REPORT

These financial statements are not the Companys statutory accounts for the purposes of section 434of the Companies Act 2006. They are unaudited and have not been subject to an audit review. TheHalf-yearly financial report will be sent to shareholders and copies will be made available to the publicat the registered office of the Company. The report will be available in electronic format on theManagers website (www.impaxam.com).

The Half-yearly financial report was approved by the Board on 23 February 2012.

The Companys statutory accounts for the year ended 30 June 2011 received an unqualified audit reportand have been filed with the registrar of companies at Companies House.

NOTES TO THE ACCOUNTSCONTINUED


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DIRECTORS INVESTMENT MANAGER

Allan McKenzie (Chairman) Impax Asset Management LimitedSimon Atiyah Norfolk HouseAlan Barber 31 St Jamess SquareRichard Franklin London SW1Y 4JRTerence Mahony

BROKER SECRETARY AND ADMINISTRATOR

Collins Stewart Europe Limited Cavendish Administration Limited88 Wood Street 145-157 St. John StreetLondon EC2V 7QR London EC1V 4RU

SOLICITOR REGISTRAR

CMS Cameron McKenna LLP Capita RegistrarsMitre House The Registry160 Aldersgate Street 34 Beckenham RoadLondon EC1A 4DD Beckenham

Kent BR3 4TU

CUSTODIAN AUDITOR

BNP Paribas Securities Services Ernst & Young LLP

BNP Paribas London Branch 1 More London Place10 Harewood Avenue London SE1 2AFLondon NW1 6AA

REGISTERED OFFICE*

145-157 St. John StreetLondon EC1V 4RU

*Registered in England and Wales No. 7016550

DIRECTORS, MANAGER AND ADVISERS

Documents

Iaem Half-yearly Report to 31 Dec 2011