Final Results

RNS Number : 8177A

Impax Environmental Markets PLC

04 April 2012

 



IMPAX ENVIRONMENTAL MARKETS PLC

ANNUAL FINANCIAL REPORT ANNOUNCEMENT

FOR THE YEAR ENDED 31 DECEMBER 2011

HIGHLIGHTS OF THE YEAR

·     Company outperformed environmental index (FTSE ET50)

·     Environmental markets underperformed wider equity markets

·     Company bought back 23,066,266 Ordinary Shares in response to widening discount to NAV

FINANCIAL INFORMATION SUMMARY

	At 31 December 2011	At 31 December 2010	% change
Net assets	£344.8m	£453.4m	-24.0%
Number of Ordinary Shares in issue1	294,734,070	317,800,336	-7.3%
Net asset value ("NAV") per Ordinary Share	117.0p	142.7p	-18.0%
NAV per Ordinary Share (excluding current year net revenue)	115.9p	141.8p	-18.3%
MSCI World Index2			-6.9%
MSCI World Small Cap Index2			-9.8%
FTSE ET50 Index2			-28.2%
Ordinary Share price (mid-market)	95.8p	129.8p	-26.2%
Ordinary Share price discount to NAV	18.1%	9.0%	n/a

¹Excluding shares held in Treasury

² Capital return in pounds sterling

CHAIRMAN'S STATEMENT

2011 was a difficult year for equity markets in general, dominated by the escalating European sovereign debt crisis and concerns about the sustainability of global growth. Although the Company outperformed the relevant environmental markets index (the FTSE ET50), environmental markets faced challenges and performed significantly less well than the MSCI World indices.  The Company's investments in defensive subsectors and merger and acquisition activity made positive contributions, but the broad sell-off in environmental markets and especially in small cap Asian stocks, led to disappointing headline performance for the year.

Notwithstanding this recent period of underperformance, we believe the fundamental investment hypothesis of environmental markets appears to remain intact. In October, the United Nations announced that the global population had breached the seven billion mark, which will over time place extra demands on increasingly scarce natural resources, while catastrophic flooding in Thailand and the Fukushima Daiichi nuclear disaster highlighted the shortcomings of existing infrastructure.  The global response to these issues continues to create powerful drivers for growth in environmental markets.  Although support for renewables in Europe experienced setbacks, the overall momentum behind environmental policy remained positive, with a focus on Asia and energy efficiency.  We believe that this, together with technology advances, will drive long term growth in environmental markets.

Investment Performance

During the year, the Company's net asset value ("NAV") per Ordinary Share decreased from 142.7p to 117.0p, a fall of 18.0%.  This represented an outperformance of the FTSE ET50, an index of the 50 largest specialist environmental markets companies, which fell 28.2% during the year.  However the Company underperformed the MSCI World and the MSCI World Small Cap Indices (capital return priced in pounds sterling), which fell by 6.9% and 9.8% respectively. Over the same period, IEM's share price fell 26.2% from 129.8p to 95.8p.

At the end of the year, the Company's investments in six unquoted companies accounted for 4.1% of NAV, approximately the same proportion as at the end of 2010. The Manager remains focussed on securing exits, albeit supporting selective existing holdings with small additional investments.

Discount

During the year, the discount to NAV at which the Company's Ordinary Shares traded ranged between 8% and 23%, with an average for the year of 14%. The Ordinary Shares ended the year at a discount to NAV of 18%.  While the Board remains confident that improved portfolio performance will help to narrow the discount in the longer term, it has sought to address its concerns as to the share rating more immediately through the use of share repurchases, buying in 23,066,266 of the Company's own Ordinary Shares over the course of the year at an average discount to NAV of 17%. The Board remains mindful of the discount and, accordingly, will continue to utilise its powers to buy back shares when it considers the circumstances to be appropriate; furthermore, it is exploring, in conjunction with the Manager and the Company's broker, means of widening the shareholder base through the identification of new avenues of demand for the Company's share capital.

Dividend

The Company's net revenue for the year was £3.1 million. As a result, the directors are recommending a slightly increased final dividend for the year ended 31 December 2011 of 0.9p per share. If approved at the Company's Annual General Meeting ("AGM"), this dividend will be paid on 24 May 2012 to shareholders on the register as at the close of business on 27 April 2012. As the primary objective of the Company is capital growth, it should not be assumed that this level of dividend will be paid in future years.

Board of Directors

As part of a programme of refreshment of the Board, Julia Le Blan and William Rickett were appointed to the Board on 27 January 2011 and Bill Brown stood down as a director at the AGM held in May 2011. Rob Arnott will retire at the forthcoming AGM to be held on 17 May 2012 and will not stand for re-election. My Board colleagues and I would like to thank Rob for his valuable contribution to the Company since its formation and we wish him every success in the future. All other directors will stand for re-election at the AGM.

The Board has agreed that Keith Niven will step down as chairman of the Audit Committee immediately following the AGM and that Julia Le Blan will be appointed in his place.  We wish to thank Keith for his valuable contribution in this function.

In accordance with the recommendations of the UK Corporate Governance Code, the Board appointed a third party to conduct an external evaluation of the Board and this process was completed in March 2012.

Current Status and Outlook

The Company's NAV has had a reasonable start to 2012, as positive earnings momentum and a recovery in Asian holdings have helped performance. As at 30 March 2012, the NAV had risen 9.6% since the year end, while the share price had risen by 3.9%. The MSCI World, MSCI World Small Cap and FTSE ET50 indices (capital return in pounds sterling) had risen 7.9%, 10.0% and 4.3% respectively over the same period.

With strong long term fundamentals within environmental markets and with the current valuation appearing relatively inexpensive compared to the historical range and to global equity markets, the Manager and the Board continue to believe that IEM offers an attractive opportunity for long-term investors.

Richard Bernays

4 April 2012

MANAGER'S REPORT

The fragile state of the global economy and ongoing uncertainty over resolution of the European sovereign debt crisis provided a difficult backdrop to 2011. Asian markets were especially weak, creating a significant headwind to performance, which obscured some more positive trends. The Company's US and European holdings performed broadly in line with global indices, with more defensive sectors such as hazardous waste and filtration significantly outperforming.

Drivers of environmental markets in 2011

Developments in environmental policy and regulation were positive for the Company in 2011. The Chinese government implemented a plan to invest RMB 5 trn (US$ 770 bn) in low carbon energy by 2020 in order to cut annual carbon dioxide emissions by 1.2bn tonnes and sulphur dioxide emissions by 7.8m tonnes. In light of the catastrophic damage to Japan's Fukushima Daiichi reactors, Germany, Belgium and Switzerland decided to abandon nuclear power generation and increase the rate of adoption of renewable energy.

Corporate activity also accelerated during 2011, with four portfolio holdings taken over at full valuation, while a further three holdings made material acquisitions. We believe that the combination of strong long term growth prospects and cheap valuations will result in continued corporate activity in 2012.

Alternative Energy and Energy Efficiency (45% portfolio weighting at 31 December 2011)

(i) Renewable and Alternative Energy ("RAE") - 18% weighting

During 2011, the RAE sector continued to struggle with regulatory uncertainty, challenging power markets and reduced availability of project finance. Overcapacity and margin pressure remain significant issues for the wind and solar generation equipment sectors, and the sell-off of these stocks has continued.

In the solar segment, 50% declines in module prices led to a record 25 GW installations during 2011. However, ongoing subsidy cuts and substantial overcapacity led to earnings disappointments and an uncertain near term outlook. For this reason, the Company held only 2% exposure to the solar sector, with a focus on technology leaders and low cost manufacturers. In the longer term, dramatic price declines are expected to open up new markets that are less reliant on subsidy.  Profitability is currently challenging, but we expect winners to emerge and added Trina Solar (China) to the portfolio during the year with this in mind.

The wind segment faced similar challenges to solar. IEM held an average position of about 3% in wind power generation equipment providers over the year, with a negative contribution to performance from Vestas (wind turbines, Denmark). The Company's wind and solar holdings benefitted from corporate activity, with Total taking a 60% stake in SunPower (solar, US) and Hansen Transmissions (wind gearboxes, Belgium) acquired by ZF Group, both at full valuations.

Given the problems faced by the renewable energy equipment suppliers, IEM has remained focussed on the renewable energy independent power producers that develop, own and operate renewable energy projects. These represent around half of our total renewables exposure and benefit from more defensive characteristics, together with attractive valuations with zero value attributed to pipeline projects.  Long term value is supported by corporate activity, with Iberdrola and EDF both buying back their renewables businesses.  We continue to favour this segment, adding Innergex (Canada) during the year.

(ii) Energy Efficiency ("EE") - 27% weighting

Energy efficiency remained a key theme in the portfolio during 2011. Policy momentum remains strong, as shown by the Better Buildings Initiative in the US, a ban on incandescent lighting in China, the announcement of draft energy efficiency legislation in the EU, and significant smart metering initiatives in the UK and France. Subsector performance was mixed, with investor concerns on the outlook for industrial and construction activity weighing on share prices and the Light Emitting Diode ("LED") sector experiencing temporary overcapacity.

M&A contributed positively to performance, with Schneider Electric of France acquiring top ten holding Telvent (automated meter reading, Spain). NIBE Industrier (ground source heat pumps, Sweden), another top ten holding, acquired Schulthess in a substantial deal that extended its geographic reach and product portfolio.

We remain positive on this subsector on the basis of policy momentum and strong commercial sales propositions offered by portfolio holdings. During the year we added Infineon (power electronics, Germany), the global market leader in power management for the automotive and industrial market and Spirax Sarco (steam-based energy efficiency, UK), a provider of consultation, service and products for the control and efficient management of steam and industrial fluids. We sold out of Active Power (flywheels, US) following a deterioration in its core business.

Water Treatment and Pollution Control (23% portfolio weighting at 31 December 2011)

(i) Water Infrastructure & Technologies ("WIT") - 17% weighting

Global demand for water continues to increase, driven especially by population growth and increasing industrialisation in emerging markets. This is resulting in substantial capital allocations, with the Chinese government allocating US$ 450bn in the current 5 year plan for water conservation, urban wastewater treatment and water recycling.

The Company's investments in the water treatment equipment subsector performed well in 2011, with Pall Corporation (filtration, US) making progress on restructuring and benefitting from lower economic sensitivity and Nalco (water treatment chemicals, US) being taken over by US peer Ecolab. The performance of water infrastructure companies was mixed. Asian names with relatively high capital requirements, such as Jain Irrigation (micro-irrigation systems, India) and IVRCL (water infrastructure, India) fared poorly, whilst conservatively-managed Hydro International (stormwater and wastewater management, UK) performed well.

During the year we added three new holdings. Xylem (water infrastructure, US) is a global leader in the provision of infrastructure and treatment technologies for both clean and waste water applications. Ecolab (water treatment equipment, US) recently acquired Nalco to become the world's largest global water treatment chemicals company, gaining significant access to non-US markets in the process. Finally, Kemira (water treatment equipment, Finland) is another leading water treatment chemicals business. We sold out of Bioteq (mining effluent treatment, Canada) and Mueller Water (water infrastructure, US).

(ii) Pollution Control ("PC") - 6% weighting

The economically resilient PC sector performed well in general over the year, driven by strong performance from defensive companies such as Clarcor (air pollution control, US) and Horiba (environmental and engine testing, Japan).

During the year we added Norma (pollution control, Germany), the market leading supplier of joining components to the automotive OEMs with growth coming from tightening emissions and fuel efficiency regulations. We sold out of TSO3 (ozone sterilisation, Canada) as it had reached its target price.

Waste Technologies and Resource Management (32% portfolio weighting at 31 December 2011)

(i) Waste Management & Technologies ("WMT") - 27% weighting

The environmental policy ratchet continued to tighten in the WMT subsector, with the EU proposing stricter targets on electronic waste as lawmakers said they wanted member states to collect at least 85% of discarded electronics by 2016, compared with only 33% today.

Hazardous waste saw the strongest performance within the waste sector, as market leaders with good pricing power such as Clean Harbors and Stericycle (both US) experienced strong organic growth and made complementary acquisitions. Companies active in value-added waste processing saw mixed results. Exposure to softening commodity prices hurt the performance of Lee & Man (cartonboard manufacturing, China) and Sims (metals recycling, Australia), while companies with good competitive positions in niche businesses such as LKQ (automotive recycling, US) performed well.

Performance of the general waste management segment was muted by slow economic growth, impacting Lassila & Tikanoja (Finland) and Shanks (waste management, UK); nevertheless, given low valuations and early signs of corporate activity, we are optimistic that sentiment will improve in the near term. During the year we sold out of Headwaters (recycled materials, US) on concerns about its balance sheet strength.

(ii) Environmental Support Services ("ESS") - 5% weighting

Environmental consultants, our focus within the ESS subsector, are exposed to government expenditure and infrastructure and construction markets. Poor sentiment in these areas led to disappointing performance during the year. However, earnings releases from portfolio holdings have shown that government expenditure has remained largely intact and that commercial and industrial markets are recovering. With recovering organic growth, strong balance sheets for acquisitions and cheap valuations, we remain positive on this subsector.

We exited our position in Camco International (carbon trading, UK) early in the year. We are generally cautious on the prospects for carbon markets, although there was some positive news when Australia announced a fixed carbon price would be introduced from 1 July 2012 and an emissions trading scheme would be launched three years later.

Portfolio Activity and Current Structure (excluding unquoted companies)

The Company started the year with 78 listed holdings. By year end, this number had fallen to 76, as we sold out of 14 and invested in 12 new companies. The portfolio remains diversified by subsector, with a positive bias towards energy efficiency and low exposure to renewable energy. Regional exposure is relatively unchanged, with 42% in North America, 38% in Europe and 20% in Asia-Pacific. The focus remains on profitable companies which represented 98% of the portfolio, excluding the unquoted holdings. At year end, 4% of the portfolio was invested in unquoted companies, 15% in companies with a market capitalisation of less than US$ 500m, 44% in companies between US$ 500m and US$ 2bn, and 37% in companies above US$ 2bn. The median market cap was US$ 646m and the weighted average market cap was US$ 1.7bn.

Unquoted Companies

At 31 December 2011, the value of the Company's investments in unquoted companies stood at £14.1m, representing 4.1% of the portfolio. Movements in the year were as follows:

	£m
Valuation at 1 January 2011	16.6
Additional investments	1.4
Valuation and FX changes	(3.9)
Valuation at 31 December 2011	14.1

Market conditions remained challenging throughout the year, with all the usual sources of finance reluctant to commit capital to developing unquoted businesses. This resulted in a £500k net increase in the £3.4m net downward revaluations reported in the interim report. Whilst seeking to minimize additional exposure to this asset class, we worked with other shareholders to support selected holdings, resulting in incremental investments of £1.4m during the year.

Following the year end, further net aggregate write downs of £1.7m have been made in relation to the Company's existing holdings, all of which arose as a result of transactional events which took place in the first quarter of 2012. Our focus remains on nurturing our portfolio companies through to an exit event with the minimum of incremental investments.

Outlook for 2012

With early signs of stabilisation of the European sovereign debt crisis, we are cautiously optimistic on the prospects for equity markets. Risks remain, however, and against this backdrop, we are maintaining a well-balanced and diversified portfolio consisting of a balance of stocks with varying levels of sensitivity to economic cycles. The portfolio is composed of high quality companies with proven track records, successful management teams and solid balance sheets that are exposed to long term secular growth themes.

We believe that the long term fundamentals of environmental markets remain strong, earnings momentum is positive and valuation is compelling relative to both historical levels and global indices.  With corporate activity set to continue, we continue to believe that the Company represents an attractive long term investment opportunity.  We will continue to post monthly updates on sector news and on the Company's performance at www.impaxam.com.

Impax Asset Management Limited

4 April 2012

PRINCIPAL RISKS AND UNCERTAINTIES

The Board considers that the principal risks and uncertainties faced by the Company fall into the following main categories.

(i) Market risks

Price movements of the Company's investments are highly correlated to performance of global equities in general and small and mid-cap equities in particular. Consequently falls in stock markets are likely to negatively affect the performance of the Company's investments.

The Company invests in companies with small market capitalisations, which are likely to be subject to higher valuation uncertainties and liquidity risks than larger capitalisation securities.  The Company also invests in unquoted securities which generally have higher valuation uncertainties and liquidity risks than securities listed or traded on a regulated market.

The Company invests in securities which are not denominated or quoted in sterling. Movements of exchange rates between sterling and other currencies in which the Company's investments are denominated may have an unfavourable effect on the return in the investments made by the Company.

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 in three main sectors and at the year end the Company held investments in 76 quoted companies plus 6 unquoted companies. The Company will not normally hedge against foreign currency movements affecting the value of its investments, but the Manager takes account of this risk when making investment decisions. 

(ii) Environmental Markets

The Company invests in companies in Environmental Markets.  Such companies carry risks that government liberalisation may not occur as expected, costs of technology may not fall, capital spending by their customers is reduced or deferred and their products or services are not adopted.

(iii) Corporate governance and internal control risks

The main risk areas are poor allocation of the Company's assets by the 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 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 accounts for each financial year.  Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (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 year and of the net return for the year.  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 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.

The accounts are published on the www.impaxam.com 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 auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the auditors accept 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 accounts, 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

William Rickett

Director

4 April 2012

INCOME STATEMENT

For the year ended 31 December 2011

			2011			2010
		Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
(Losses) / gains on investments		-	(82,442)	(82,442)	-	50,929	50,929
Income		5,246	-	5,246	4,602	-	4,602
Investment management fees		(933)	(2,798)	(3,731)	(936)	(2,807)	(3,743)
Other expenses		(764)	-	(764)	(725)	-	(725)
Return on ordinary activities before taxation		3,549	(85,240)	(81,691)	2,941	48,122	51,063
Taxation		(413)	-	(413)	(316)	-	(316)
Return on ordinary activities after taxation		3,136	(85,240)	(82,104)	2,625	48,122	50,747
Return per ordinary share		1.01p	(27.40p)	(26.39p)	0.84p	15.36p	16.20p

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 year.

A Statement of Total Recognised Gains and Losses has not been presented as all gains and losses are recognised in the Income Statement.

BALANCE SHEET

At 31 December 2011

		2011		2010
		£'000		£'000
Fixed assets
Investments at fair value through profit and loss		342,213		439,766
Current assets
Income receivable		244		171
Sales - future settlements		1,782		58
Taxation recoverable		106		10
Other debtors		32		33
Cash at bank and in hand		1,162		14,789
		3,326		15,061
Creditors: amounts falling due within one year
Purchases - future settlements		(359)		(1,003)
Accrued liabilities		(429)		(459)
		(788)		(1,462)
Net current assets		2,538		13,599
Total net assets		344,751		453,365
Capital and reserves: equity
Share capital		32,451		32,451
Share premium account		16,035		16,035
Share purchase reserve		258,875		283,016
Capital reserve		33,533		118,773
Revenue reserve		3,857		3,090
Shareholders' funds		344,751		453,365
Net assets per Ordinary Share		116.97p		142.66p

 

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 31 December 2011

		Share Capital £'000	Share  Premium Account £'000	Share Purchase Reserve £'000	Capital Reserve £'000	Revenue Reserve £'000	Total £'000
	Opening shareholders' funds
	as at 1 January 2011	32,451	16,035	283,016	118,773	3,090	453,365
	Share buy backs	-	-	(24,141)	-	-	(24,141)
	Dividend paid (May 2011)	-	-	-	-	(2,369)	(2,369)
	Profit for the year	-	-	-	(85,240)	3,136	(82,104)
	Closing shareholders' funds as at 31 December 2011	32,451	16,035	258,875	33,533	3,857	344,751

For the year ended 31 December 2010

		Share Capital £'000	Share  Premium Account £'000	Share Purchase Reserve £'000	Capital Reserve £'000	Revenue Reserve £'000	Total £'000
	Opening shareholders' funds
	as at 1 January 2010	30,585	-	289,858	70,651	2,746	393,840
	Share buy backs	-	-	(6,842)	-	-	(6,842)
	Exercise of warrants	1,866	16,035	-	-	-	17,901
	Dividend paid (May 2010)	-	-	-	-	(2,281)	(2,281)
	Profit for the year	-	-	-	48,122	2,625	50,747
	Closing shareholders' funds as at 31 December 2010	32,451	16,035	283,016	118,773	3,090	453,365

CASH FLOW STATEMENT

For the year ended 31 December 2011

	2011		2010
	£'000		£'000
Operating activities
Cash inflow from investment income and bank interest	5,173		4,567
Cash outflow from management and other expenses	(4,529)		(4,440)
Cash inflow from disposal of investments	117,718		131,569
Cash outflow from purchase of investments	(104,924)		(132,352)
Cash outflow from foreign exchange costs	(49)		(394)
Cash outflow from taxation	(506)		(317)
Net cash flow from operating activities	12,883		(1,367)
Equity dividends paid	(2,369)		(2,281)
Financing
New share issues	-		17,901
Share buy backs	(24,141)		(6,842)
Net cash flow from financing	(24,141)		11,059
(Decrease) / Increase in cash	(13,627)		7,411
Opening balance at 1 January	14,789		7,378
Balance at 31 December	1,162		14,789

NOTES TO THE ACCOUNTS

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 accounts are prepared in accordance with UK Generally Accepted Accounting Practice ("UK 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

Securities of companies quoted on regulated stock exchanges 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 their market bid prices.  Any unquoted investments are measured at fair value which is determined by the directors in accordance with the International Private Equity and Venture Capital guidelines.

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.  Overseas income is grossed up at the appropriate rate of tax but UK dividend income is not grossed up for tax credits. 

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 and changes in fair value arising upon the revaluation of investments that remain in the portfolio are all charged to the capital column of the Income Statement and allocated to the capital reserve. 

(e)            Investment Management Fees

In accordance with the Company's stated policy and the directors' expectation of the split of future returns, three quarters of investment management fees, net of attributable tax, are charged as a capital item in the Income Statement.  If applicable, 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.

(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.

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
	£'000		£'000
Income from investments:
Dividends from UK listed investments	632		902
Dividends from overseas listed investments	4,513		3,642
Loan note interest	101		55
Total	5,246		4,599
Other income:
Interest receivable	-		3
Total income	5,246		4,602

4.               FEES AND EXPENSES

		2011				2010
	Revenue	Capital	Total		Revenue	Capital	Total
	£'000	£'000	£'000		£'000	£'000	£'000
Investment management fees	933	2,798	3,731		936	2,807	3,743
Secretary and administrator fees	161	-	161		155	-	155
Custodian's fees	157	-	157		168	-	168
Directors' fees	137	-	137		109	-	109
Directors' other employment costs	18	-	18		9	-	9
Broker retainer	52	-	52		54	-	54
Auditors remuneration
- for audit services	26	-	26		28	-	28
- for taxation	13	-	13		7	-	7
Association of Investment Companies	34	-	34		38	-	38
Registrar's fees	31	-	31		40	-	40
Marketing fees	28	-	28		-	-	-
Public relations fees	25	-	25		22	-	22
Legal fees	18	-	18		-	-	-
Consultant fees	-	-	-		35	-	35
Other expenses	64	-	64		60	-	60
	764	-	764		725	-	725
Total expenses	1,697	2,798	4,495		1,661	2,807	4,468

5.             DIRECTORS' FEES

Since 1 March 2010, the fees of the Chairman have been £30,000 per annum, of Mr Niven (Chairman of the Audit Committee) have been £24,000 per annum and of the other directors have been £20,000 per annum.  Prior to 1 March 2010 the fees were payable at a rate of £25,000 per annum for the Chairman, £18,000 per annum for Mr Niven and £16,000 per annum for the other directors.  There were no other emoluments. Employers' National Insurance or VAT upon the fees is included as appropriate in directors' other employment costs under note 4.

6.             RETURNS PER ORDINARY SHARE

Return per share is based on the net loss on ordinary activities after taxation of £82,104,000 comprising a revenue return of £3,136,000 and a capital loss of £85,240,000 (2010: £50,747,000 comprising a revenue return of £2,625,000 and a capital return of £48,122,000) attributable to the weighted average of 311,170,086 (2010: 313,164,696) Ordinary Shares of 10p in issue (excluding Treasury shares) during the year.  

7.             DIVIDENDS

The directors propose that the Company will pay a final dividend for the year ended 31 December 2011 of 0.9p per Ordinary Share.  The dividend record date will be 27 April 2012. If approved at the Annual General Meeting, the dividend will be paid on 24 May 2012.

8.             NET ASSETS PER ORDINARY SHARE

Net assets per Ordinary Share is based on net assets of £344,751,000 (2010: £453,365,000) divided by 294,734,070 (2010: 317,800,336) Ordinary Shares in issue (excluding shares held in Treasury) at the Balance Sheet date.

9.            RELATED PARTY TRANSACTIONS

Fees payable to the Manager are detailed in note 4; the relevant amount outstanding as an accrual at the year end was £270,462 (2010: £344,415).  The directors' fees are disclosed in note 5.

10.          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 year ended 31 December 2011 was approved on 4 April 2012.  It will be posted to shareholders and will be made available on the Manager's website at www.impaxam.com

This announcement contains regulated information under the Disclosure Rules and Transparency Rules of the FSA.

11.          ANNUAL GENERAL MEETING

The Annual General Meeting will be held on 17 May 2012 at 2:30 p.m. at Norfolk House, 31 St. James's Square, London SW1Y 4JR.

4 April 2012

Secretary and registered office:

Cavendish Administration Limited

145-157 St John Street

London

EC1V 4RU

For further information contact:

Anthony Lee

Cavendish Administration Limited

Tel: [phone]

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FR USURRUKASRAR