Final Results

Chairman's Statement

After a relatively encouraging start, 2011 has proven to be a challenging year for investors. Signs of a faltering economy became more frequent during the year and, from June, political paralysis both in the United States and in the Eurozone undermined confidence in many markets. In this context, Impax has delivered a creditable performance. 

During the Company's financial year (the "Period") from 1 October 2010 to 30 September 2011, assets under discretionary and advisory management ("AUM") initially expanded from £1,823 million, reaching £2,362 million by 31 March 2011 (the end of the first half) before falling back to £1,896 million as of 30 September 2011. Since the end of the Period, assisted by a limited recovery in equity markets, AUM rose, reaching £1,979 million as of 31 October 2011.

Although weakening economic conditions affected the short-term outlook for many of the investment opportunities targeted by Impax, the prospects for significant expansion of the environmental sector over the longer term continued to improve. Most notably, in March, catastrophic damage at Japan's Fukushima nuclear plant led to a dramatic reduction in support for nuclear power worldwide, paving the way for more aggressive policies in favour of energy efficiency.

Results for the year end and proposed dividend

Revenue for the year was £20.9 million (2010: £15.3m), a 36 per cent increase.

Operating earnings* for the year were £6.2 million (2010: £3.8 million) and the associated operating margin was 30 per cent (2010: 25 per cent).

Profit before tax ("PBT") for the year was £1.7 million (2010: £5.2 million). PBT in the Period was impacted inter alia by £5.4 million of charges associated with the Company's historical share based incentive schemes; in future, we expect to receive up to £1.7 million of corporation tax benefits to offset these charges. PBT in 2010 included a £1.0 million gain arising from the repayment of a loan note issued to the Company when it exited from a legacy business (the "Loan Note").

The Board regards the most relevant measure of the year's earnings to be diluted earnings per share ("EPS") as adjusted to exclude the charges for the Company's long-term incentive schemes settled from the issuance of primary shares, and to include the dilutive effect of unvested share awards. On this basis, diluted EPS for the Period was 3.74 pence (adjusted**). For 2010, diluted EPS was 3.49 pence (adjusted). Diluted EPS before adjustment was 0.93 pence in 2011 and 3.49 pence in 2010. EPS in 2010 included a gain of 0.79 pence due to the uplift in value of the Loan Note.

The Group's balance sheet strengthened during the Period and cash generation increased significantly. At the end of the financial year, shareholders' equity had increased to £21.5 million (2010: £16.9 million) and cash reserves held by operating entities of the Group were £20.0 million (2010: £8.3 million). The Group remained debt free during the Period.

In line with the Group's higher earnings, the Board recommends an increased dividend of 0.7 pence per share (2010: 0.6 pence per share). The dividend proposal will be submitted for formal approval by shareholders at the forthcoming Annual General Meeting on 26 January 2012. If approved, the dividend will be paid on or around 6 February 2012. The Board does not currently intend to recommend the payment of interim dividends.

The Company's accounts will be available on the Company's website, www.impaxam.com.

*revenue less operating costs excluding £5.4m charge (2010: nil) due to share incentive schemes

**excludes cash held by the Company's consolidated fund and includes cash invested in money market funds

Remuneration Policy

The quality of our staff and the contribution they make are critical to the Group's ability to realise its potential and I would like to personally thank them for their commitment and excellent work over the year.

Following the successful conclusion of the Company's long term incentive scheme on 1 April 2011, the Board undertook a review of the Company's remuneration policy with the aim of ensuring that the Company remains well positioned to retain and attract talented individuals while staying compliant with accepted market practice. The review was performed with advice from external specialists and in consultation with significant shareholders, and has resulted in the adoption of an updated policy covering salaries and variable remuneration ("Variable Remuneration") comprising cash bonuses and awards under a new Employee Share Option Plan ("ESOP"). 

Under the new policy, the Company will continue to aim to pay market-median salaries to most staff. In any given financial year, aggregate Variable Remuneration across the Company will typically be capped at 45 per cent of earnings before Variable Remuneration, interest and taxes; as the Company's profitability increases, this percentage is likely to fall in line with market norms.

The ESOP has been designed as an options programme to further align the interests of senior staff and shareholders and will comprise options over no more than 14 million shares. The Company's remuneration committee may award these options to staff at the end of any or all of four financial years commencing with the Period, i.e. the year ended 30 September 2011. The strike price of options awarded with respect to any financial year will be 10 per cent above the average of the Company's share price over 30 business days following the publication of the Company's results for the year. Cash bonuses payable in any year (grossed up by applicable employers' national insurance) will be equal to the Variable Remuneration available for the year less the fair value charge arising from the ESOP.

The Board is intending to apply free cash flow generated by operating activities to finance the buyback of the Company's stock into Treasury. Buybacks are intended to occur as and when suitable opportunities arise in the market, and after due consideration of any attractive alternative uses of the Company's cash resources. Shares in Treasury may then be utilised to satisfy employee share based award obligations, reducing any requirement to issue new shares. 

Prospects

The turbulence in financial markets over the 60 days since the end of the Period has been on a par with that over the same period in late 2008, and has been among the most severe in living memory. However, against this backdrop, there have been material signs that prospects for investors in environmental markets are strengthening. We remain confident that the sector will out-perform in the long-term, providing the Company with further opportunities to create value for shareholders.

Chief Executive's Report

Since the interim statement on 1 June, when I reported on Impax's strong first half, market sentiment has deteriorated sharply and asset owners have reduced their appetite for risk. In this uncertain environment the Impax team has focused on building value for clients while carefully extending our platform in order to support future growth.

Sector developments

While economic conditions and financial markets have remained fragile, the fundamental drivers behind Impax's investment thesis have strengthened during 2011. Following the second hottest year on record in 2010, many parts of the world have suffered extended drought, with the United States and China particularly badly affected. The pattern of severe flooding experienced in 2009 and 2010 has also continued, with Thailand experiencing significant damage. Meanwhile, historically high oil prices over much of the Period contributed to worrying levels of inflation, prompting calls for energy efficiency measures and the adoption of alternatives to fossil fuels.

Policies to address these issues and other problems arising from pollution and limited resources have continued to develop. In the wake of announcing its new Five Year Plan, the Chinese government confirmed a significant rise in funding for low carbon energy, with US$770 billion of investment expected by 2020. The Australian government adopted a carbon tax which has materially improved the domestic prospects for energy efficiency and renewable energy, and next month's climate change conference in Durban is expected to reinforce efforts worldwide to reduce emissions of greenhouse gases. In Europe, disappointment with progress to improve energy efficiency prompted the Commission to introduce proposals to ramp up performance in this area, again with a 2020 target, while Germany, Belgium and Switzerland decided to abandon nuclear power generation and increase the rate of adoption of renewable energy in light of the catastrophic damage to Japan's Fukushima reactors.

In spite of these positive developments, environmental sector stocks have recently underperformed global equities. In the 12 months to 30 September 2011, the FTSE Environmental Opportunities All Share Index ("EOAS"), a diversified basket of listed companies around the world that are active in environmental markets, fell by 8.6 per cent (total return, GBP), while the MSCI World Index was down by 3.2 per cent (net return, GBP). However, over a five year period to the same date, the EOAS was up 31.7 per cent while the MSCI World Index was only up 7.1 per cent, illustrating the longer term out-performance of the environmental markets sector.

Assets under management and fund flows

Impax's principal divisions, Listed Equity and Private Equity, both attracted significant additional capital during the Period.

During the Period, Listed Equity funds that we manage or advise secured net inflows of £168 million, comprising £93 million into "Impax-Label" funds, which we typically manage for UK investors, and £76 million into Third Party Funds/Accounts. Included in the former was the £131 million of capital raised in October 2010 for Impax Asian Environmental Markets plc, one of our larger clients.

As shown in Table 1, these net inflows were realised in the first half of the Period; during the second half outflows were modest for the current market conditions and were largely neutralised by inflows.

Table 1: Assets Under Management & Fund Flows

Our Institutional and Segregated Accounts Business developed further during the first half of the year, with a new €75 million mandate from Lønmodtagernes Dyrtidsfond Pension Fund of Denmark. We now manage five segregated accounts and are continuing to engage with potential clients for this area of business.

In March 2011 our Third Party Funds' business was boosted by a new mandate to manage the BNP Paribas L1 Green Future Fund, and we have continued to build relationships with other wholesale partners, particularly BNP Paribas Investment Partners (for or with whom we manage funds domiciled in Luxembourg, Australia, Korea and Malaysia). We are also currently providing management or advisory services for funds in the UK (for Skandia), Japan (for DIAM and for Russell Investments), in the United States (for Pax World) and in the Netherlands (for ASN Bank).

In September 2011 we concluded the fund raising for Impax New Energy Investors II LP ("Fund II"), our second private equity infrastructure fund, with €330 million of capital from 20 limited partners, including the Company, which committed to invest €3.3 million. As described further below, to date we have made four investments from this fund.

Cash flow

Operating cash flow before movements in working capital increased over the Period to £6.8 million (2010: £4.2 million), which was equivalent to an average of £565,000 per month (2010: £354,000).

As noted in last year's statement, in December 2010 we received US$3.7 million of cash as the final redemption proceeds in respect of a loan note from All American Oil and Gas Incorporated.

Investment performance

Listed equity

Although the performance of environmental markets stocks has recently been weak, a majority of our strategies have delivered creditable returns in comparison to their sector benchmarks and to generic equities. For example, over the five years to 30 September 2011, our Environmental Specialists strategy returned 18.8 per cent (total return, GBP), while the FTSE ET50 Index of environmental sector stocks was down 6.9 per cent (total return, GBP) and the MSCI World Index was up 7.1 per cent (net return, GBP). Similarly, between its inception on 1 November 2009 and 30 September 2011, our Water strategy was up 28.5 per cent (total return, GBP) while the MSCI World Index was up 17.7 per cent (net return, GBP).

During 2011, as environmental stocks have de-rated more rapidly than generic equities, our Environmental Leaders strategy, which invests in a diversified portfolio of companies active in environmental markets, has marginally under-performed. From its inception on 3 March 2008 to 30 September 2011, this strategy returned 4.0 per cent (total return, GBP) while the MSCI World Index was up 5.2 per cent (net return, GBP) and the FTSE Environmental Opportunities All Share Index was up 5.6 per cent (total return, GBP). Nevertheless, we believe that this strategy is well positioned for out-performance over the medium to long term.

Private equity

Our private equity business made strong progress during the Period. The principal assets of our first fund, Impax New Energy Investors LP ("Fund I"), which has €125 million of commitments, continued to perform ahead of budget, and we are seeking to achieve an attractive exit when market conditions have improved.

The €330 million of capital attracted by Fund II was sourced from a combination of Fund I investors, other European limited partners including the European Investment Bank, and institutional investors in Japan and the United States. This broader client base provides us with a platform for attracting additional assets in the future.

During calendar year 2011 we have made two more investments from Fund II starting with a portfolio of operating solar power plants in Italy. In October 2011, i.e. after the end of the Period, we completed the acquisition of 100MW of operating, ready-to-build and development stage wind farms in France and Poland from Eolia Renovables, an investment fund managed by Spanish company N+1. We intend to integrate the French portfolio with Fund II's existing wind business.

Distribution

Our approach to distribution remains a key element of our growth plans, and with this in mind we recently completed the recruitment of a new Head of Distribution to coordinate our activity in this area.

We continue to benefit from our external distribution network which has been designed to cover high potential markets. In particular, our relationship with BNP Paribas Investment Partners ("BNPP IP"), led to further promotional activity in much of Europe, Japan and Australia, with significant success as noted above. At the end of the Period, funds raised by or managed for BNPP IP represented ca. 25 per cent of our total AUM.

We continue to see significant potential for the Company to serve clients based in the United States, and have invested further in the development of this channel. As noted in the Interim Report, we recruited a full-time managing director to co-ordinate our marketing activity there and have increased the number of visits by UK staff. The Global Green Fund, which we sub-advise, passed its third anniversary in March 2011 and is now being actively promoted by its sponsor Pax World, which is based in New Hampshire. In early December 2011 we expect to launch the Impax Green Markets Fund LP, a Delaware-based private fund which will be investing in our Environmental Specialists strategy; we expect this fund to be attractive to US-based institutional investors. The Company has committed to invest, from current cash reserves, US$5 million into this fund at launch, alongside a client who is advised by an institutional consultant, with whom Impax has had a relationship for many years.

Infrastructure and support

As our business expands, we continue to strengthen our Support Team in order to provide a robust service to our investment managers. During the Period, we hired a general counsel who has reduced our dependence on third party legal advisers, and an HR director, who is leading a programme to further enhance the Company's working environment and comply with the growing volume of legislation in this area.

In November 2011 we completed the move to larger premises at Norfolk House, 31 St James's Square in London, with a lease that expires in December 2015. With ca. 10,000 square feet of accommodation (compared to ca. 5,000 at our previous offices), we now have adequate space to house our staff and provide room for further growth.

At the end of the Period, our total headcount was 45 permanent and six temporary staff, up from 40 permanent and four temporary staff at the start of the Period.

Hong Kong subsidiary

As noted in previous statements, we have continued to extend our capabilities to provide investment management and related services in Hong Kong and establish a gateway into investment opportunities in China and the wider Asia-Pacific region. During the Period, we secured approval from the Hong Kong Securities and Futures Commission for our subsidiary, Impax Asset Management (Hong Kong) Limited, to provide asset management services, and recruited a second analyst, who has recently moved to Hong Kong from his previous base in Beijing.

As market sentiment improves and investor appetite for exposure to this region increases, we are well positioned to add further resource to this research platform.

Outlook

At the time of writing, with no visibility on a solution to the Eurozone's debt problems and an on-going impasse in the United States over plans to address the budget deficit, it is difficult to be optimistic about the short-term prospects for equity markets. As and when governments are able to agree credible steps to address these issues, it is realistic to assume that investor sentiment will improve and that equity markets will recover; in the meantime, there is a significant prospect of further volatility. While navigating these difficult markets, investors are, we believe, increasingly examining how their portfolios can be repositioned to harness growth opportunities and limit risk. In this context, evidence continues to build that investments in environmental markets have compelling characteristics, and, with a long track record, a strong and stable investment team and a robust balance sheet, the Company should be well positioned, both to withstand short-term headwinds and to expand when market sentiment improves.

IMPAX ASSET MANAGEMENT GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 SEPTEMBER 2011

2011

2010

Notes

 £'000

£'000

Revenue

20,931

15,339

Operating costs

(14,696)

(11,512)

Share based payment charge

(3,647)

-

Exceptional long-term incentive scheme NIC charge

(1,090)

-

Other long-term incentive scheme related charges

(619)

-

Fair value gains on investments

785

3

Change in third party interest in consolidated fund

(117)

152

Investment income

171

1,195

Profit before taxation

1,718

5,177

Taxation

(652)

(1,378)

Profit for the year

1,066

3,799

Other comprehensive income

Tax benefit on long-term incentive schemes

46

-

Increase in value of cash flow hedges

213

-

Tax arising on increase in value of cashflow hedges

(55)

-

Exchange differences on translation of foreign operations

20

1

Total other comprehensive income

224

1

Total comprehensive income for the period attributable to equity holders of the Parent Company

1,290

3,800

Basic earnings per share

0.98p

3.50p

Diluted earnings per share

0.93p

3.49p

IMPAX ASSET MANAGEMENT GROUP Plc

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2011

Notes

2011

2010

£'000

£'000

£'000

£'000

ASSETS

Non-Current Assets

Goodwill

1,629

1,629

Intangible assets

39

76

Property, plant and equipment

491

297

Investments

18

16

Deferred tax asset

-

-

2,177

2,018

Current Assets

Trade and other receivables

3,173

3,919

Derivative Asset

213

-

Other financial assets

-

2,242

Investments

3,930

7,007

Current tax asset

47

217

Cash invested in money market funds

8,546

2,518

Cash and cash equivalents

12,870

9,211

28,779

25,114

TOTAL ASSETS

30,956

27,132

EQUITY AND LIABILITIES

Equity

Ordinary shares

1,156

1,156

Share premium

78

78

Exchange translation reserve

(136)

(156)

Own shares

(59)

(59)

Treasury shares

(453)

(453)

Hedging reserve

158

-

Retained earnings

20,756

16,337

TOTAL EQUITY

21,500

16,903

Current Liabilities

Trade and other payables

7,858

7,128

Third party interest in consolidated fund

-

1,506

Short-term borrowings

-

648

Current tax liability

12

142

7,870

9,424

Non-Current Liabilities

Deferred tax liability

1,586

805

1,586

805

TOTAL EQUITY AND LIABILITIES

30,956

27,132

IMPAX ASSET MANAGEMENT GROUP Plc 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 2011 

Share capital

Share premium

Exchange translation reserve

Own shares

Hedging reserve

Treasury shares

Retained earnings

Total

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

As at 1 October 2009

1,156

78

(157)

(59)

-

-

12,832

13,850

Dividends paid

-

-

-

-

-

-

(435)

(435)

Share buyback

-

-

-

-

-

(453)

-

(453)

Long term incentive scheme charge

-

-

-

-

-

-

141

141

Exchange differences on translation of foreign operations

-

-

1

-

-

-

-

1

Profit for the year

-

-

-

-

-

-

3,799

3,799

As at 30 September 2010

1,156

78

(156)

(59)

-

(453)

16,337

16,903

Dividends paid

-

-

-

-

-

-

(651)

(651)

Long term incentive scheme charge

-

-

-

-

-

-

3,958

3,958

Tax benefit on long-term incentive schemes

-

-

-

-

-

-

46

46

Cashflow hedge

-

-

-

-

213

-

-

213

Tax benefit on cashflow hedge

-

-

-

-

(55)

-

-

(55)

Exchange differences on translation of foreign operations

-

-

20

-

-

-

-

20

Profit for the year

-

-

-

-

-

-

1,066

1,066

As at 30 September 2011

1,156

78

(136)

(59)

158

(453)

20,756

21,500

Own shares relate to the holding of 5,888,273 (2010: 5,888,273) unallocated and unvested ordinary shares held in the Company by the EBT, representing 5.1% (2010: 5.1%) of the ordinary shares in issue at 30 September 2011.

During the Year ended 30 September 2010 the Company purchased 1,240,000 of its own shares and transferred them to Treasury.

IMPAX ASSET MANAGEMENT GROUP Plc

CONSOLIDATED STATEMENT OF CASHFLOWS

FOR THE YEAR ENDED 30 SEPTEMBER 2011

2011

2010

£'000

£'000

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax

1,718

5,177

Adjustments for:

Investment income

(171)

(1,195)

Depreciation of property, plant & equipment

243

206

Amortisation of intangible assets

53

75

Fair value movements in investments

(785)

(3)

Share-based payment

3,958

141

Exceptional long-term incentive scheme NIC charge

1,054

-

Other long term incentive scheme related charges

619

-

Change in third party interest in consolidated fund

117

(152)

OPERATING CASH FLOWS BEFORE MOVEMENT IN WORKING CAPITAL

6,806

4,249

Decrease/(Increase) in receivables

741

(1,115)

(Decrease)/Increase in payables

(931)

2,559

CASH GENERATED FROM OPERATIONS

6,616

5,693

Corporation tax refunded/(paid)

162

(261)

NET CASH GENERATED FROM OPERATING ACTIVITIES

6,778

5,432

Investing activities:

Interest received

77

56

Settlement of loans receivable

2,337

-

Proceeds on sale of investments

426

1,195

Proceeds on sale of investments held by the consolidated fund

3,489

-

Purchase of investments

(53)

(2,134)

Purchase of investment held by the consolidated fund

-

(2,107)

Purchase of intangible assets

(16)

(8)

Purchase of property, plant & equipment

(437)

(82)

NET CASH GENERATED FROM/(USED BY) INVESTMENT ACTIVITIES

5,823

(3,080)

Financing activities:

Dividends paid

(651)

(435)

Share buy back

-

(453)

Increase in cash held in money market funds

(6,028)

(2,518)

Redemption of preference shares issued by the consolidated fund

(1,623)

(1,885)

Issue of preference shares by the consolidated fund

-

1,854

NET CASH USED BY FINANCING ACTIVITIES

(8,302)

(3,437)

NET INCREASE IN CASH AND CASH EQUIVALENTS

4,299

(1,085)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

8,563

9,600

Effect of foreign exchange rate changes

8

48

CASH AND CASH EQUIVALENTS

12,870

8,563

Notes

1. ACCOUNTING POLICIES

Basis of accounting

The financial statements have been prepared in accordance with International Financial Reporting Standards adopted for use by the European Union.

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and has concluded that it is appropriate to adopt the going concern basis in preparing the financial statements of the Group.

The financial statements have been prepared under the historical cost convention, with the exception of the revaluation of certain investments.

2. REVENUE

An analysis of revenue by type of service is shown below

Revenue from two of the Group's customers individually represented more than 10% of Group revenue (2010: two), equating to £3,878,000 and £5,333,000 (2010: £3,636,000 and £2,127,000).

3. OPERATING COSTS

Exceptional long-term incentive scheme NIC charge

Operating costs for the year ended 30 September 2011 include an exceptional charge of £1,090,000 in respect of Employer's National Insurance Contributions ("NIC") now considered payable in connection with the Group's Employee Incentive Arrangement (Original Scheme).

Under this scheme, a total of 16,777,045 shares were allocated to sub-funds for the benefit of employees and their families under the Impax Group Employee Benefit Trust 2004 (the "EBT"). These shares ceased to be subject to the risk of revocation for the employee ceasing employment on 30 September 2007, 2008 and 2009. The Group recorded an IFRS 2 'Share based payment' charge in the periods to 30 September 2009 in respect of these awards. During the year, the Government made various changes to taxation of awards delivered and yet to be delivered under employee benefit trusts. In light of these changes the Group now expects that some or all of the EBT beneficiaries will, at some stage, request the EBT Trustee at its discretion to transfer Impax Ordinary Shares or other assets held in the name of employees and their families from the EBT to one or more of the beneficiaries whereupon the Group would be required to pay Employer's NIC on the value of the shares or other assets removed. In line with requirements of International Financial Reporting Standards the Group has provided for these future payments. Given the one off nature and size of the charge it has been classified as exceptional.

If and when the EBT Trustee agrees to transfer assets held in the EBT to beneficiaries and if the assets transferred are in the form of the Company's Ordinary Shares, the Group also expects to be eligible for a corporation tax deduction equal to the value of those Ordinary Shares. Where the Trustee has transferred Ordinary Shares out of the Trust in the period from December 2010 to the date of this report the benefit of the tax deduction has been recognised in these financial statements. If the amount of the tax deduction exceeds the cumulative share based payment expense the excess of the associated tax benefit is recognised in Other Comprehensive Income. Any amount included in Other Comprehensive Income is included in the Group's definition of adjusted earnings as explained in Note 7. At the date of this report the Trustee had transferred 350,000 shares out of the EBT giving rise to a total tax benefit of £60,000 with £15,000 recorded in profit after taxation and £45,000 in Other Comprehensive Income. At the date of this report 15,118,781 shares remained in the EBT.

EIA Extension

Under this scheme, which was approved by shareholders on 31 January 2008, awards in respect of 18.25 million of the Company's Ordinary shares could be allocated to employees subject only to certain Company share price performance conditions being met for each of the three years ended 30 September 2008, 2009 and 2010. On 16 March 2011 the Group announced that the conditions in respect of the year ended 30 September 2010 had been met and accordingly that shares could be allocated. 

On 1 April 2011, awards were granted when the Trustee of the EBT agreed to allocate four million Ordinary Shares to a sub-fund of the EBT of which Ian Simm, the Company's Chief Executive, and his family are beneficiaries and when 14.05 million Long Term Incentive Plan ("LTIP") options were awarded to other employees. 

The awards allocated to the EBT sub-fund for Ian Simm and his family are subject to revocation in certain circumstances including Ian Simm ceasing to be employed prior to 30 September 2012.

The LTIP options have a 1p or nil exercise price and will vest to individuals remaining employed on 30 September 2012. They may then be exercised over a period from 1 October 2012 to 31 December 2020.

Individuals receiving LTIP Options are also eligible for an additional retention payment (the "Additional Payment") payable six months after the end of the financial year in which each employee exercises his or her LTIP Options. The Additional Payment will be equal to the corporation tax benefit realised by the Group on the exercise of the LTIP Options minus the amount of the Employer's NIC charge suffered by the Group on the exercise of the LTIP Options.

The Group accrues for the IFRS 2 'Share based payment' charge for shares allocated under the EBT and the LTIP options from the date of grant, to the date of vesting which is deemed to be 30 September 2012. This charge is excluded from the Group's definition of adjusted profit after tax as explained in Note 6.

The Group accrues for the Employer's NIC, the Additional Payment and the related tax benefits over the same period. The options granted during the period were valued at a weighted average price of 64p using the Black-Scholes-Merton model.

2009 Share Option Plan

In December 2009 1,240,000 zero exercise price options over the Company's shares were granted to certain employees. The awards do not have performance conditions but do have a time vesting condition such that the options vest on 30 September 2012 subject to the continued employment of the participant. The charge for the year in relation to this scheme is offset by an equal reduction in the total cash bonus pool paid to employees.

2011 Employee Share Option Plan ('ESOP')

In November 2011, the Board approved the grant of 4,900,000 options over the Company's shares to certain employees in respect of services provided from 1 October 2010. The strike price of the options will be set at a 10% premium to the average market price of the Company's shares for the 30 business days following the announcement of the results for the year ended 30 September 2011. The options will not have performance conditions but will have a time vesting condition such that the options vest subject to continued employment on 31 December 2014. The employees will be notified of the key terms and conditions of these awards shortly thereafter. As the accounting grant date occurs after the date of these financial statements the fair value of the options has been estimated based on the Company's share price at 30 September 2011. The charge for the year in relation to this scheme is offset by an equal reduction in the total cash bonus pool paid to employees.

6. EARNINGS AND EARNINGS PER SHARE

Adjusted earnings 

In order to better reflect the underlying economic performance of the Group, an adjusted earnings has been calculated. The adjustment i) excludes the IFRS 2 'Share based payment' charge in respect of schemes where shares awarded are satisfied by the issue of new shares (the EIA Original and EIA Extension), and ii) includes the tax benefit recognised in other comprehensive income in respect of transfers out of the EBT and the exercising of options over the Company's shares.

The earnings per share on an IFRS and adjusted basis are as shown below.

IFRS earnings per share

Adjusted earnings per share

7. DIVIDEND

The Directors propose a dividend of 0.70p per share for the year ended 30 September 2011 (2010: 0.60p per share). The dividend will be submitted for formal approval at the Annual General Meeting to be held on 26 January 2012. These financial statements do not reflect this dividend payable, which will be accounted for in shareholders' equity as an appropriation of retained earnings in the year ended 30 September 2012.

8. CURRENT ASSET INVESTMENTS

Listed investments

Listed investments held at 30 September 2011 and 2010 include those held by the consolidated subsidiary Impax Absolute Return Fund (IARF) and at 30 September 2010 only, the Group's investment in the IFSL Impax Environmental Leaders Fund (IEL). These listed investments are recorded at market value using quoted market prices that are available at the Statement of Financial Position date. The quoted market price is the current bid price.

Impax Absolute Return Fund ('IARF')

On 21 May 2007, the Company made an investment of €2,200,000 (£1,507,000) in the IARF. This fund is managed by a subsidiary of the Company. The investment took the form of a subscription of 22,000 Euro Class A shares in the IARF, at €100 per share. During the year ended 30 September 2010, the shares were redenominated as sterling shares. During the year ended 30 September 2011 the fund Directors made the decision to close the fund to external investors and accordingly redeemed their preference shares. The fund had a total net asset value ("NAV") of £1,661,993 at 30 September 2011. At 30 September 2011 and 30 September 2010 this investment has been reported as a subsidiary and the underlying investments consolidated. The investment has been consolidated from April 2009 when the Group's ownership rose above 50%. As the deemed purchase price at acquisition was the asset value, no goodwill arose.

Unlisted investments

Unlisted investments principally represent the Group's investment in Impax New Energy Investors LP and Impax New Energy Investors II LP.

The Group has a €3,760,000 commitment to Impax New Energy Investors LP, a partnership based in England and Wales (INEI).

The Group has a further commitment of €3,187,000 to Impax New Energy Investors II LP ('INEI II'), a partnership based in England and Wales which was established on 22 March 2010.

9. CASH AND CASH EQUIVALENTS AND INVESTMENTS IN MONEY MARKET FUNDS

In order to mitigate bank default risk and to access favourable interest rates the Group invests part of its surplus cash in money market funds. The Group can redeem these investments within 24 hours. Amounts held in money market funds are as shown below. The Group consider the total of its Cash and cash equivalents and cash invested in money market funds to be its Cash reserves.