Half-yearly Financial Report

For the six months ended For the periodDecember 2011 10 September 2010 For the period from 11 September 2009 31 to 31 December 2010 to 31 December 2009

KEY FEATURES

Investment Objective The Companys investment objective is to generate long-term capital growth through investment in a diverse portfolio of quoted companies in the markets for cleaner or more efficient delivery of basic services of energy, water and waste in the Asia Pacific Region. To be eligible for investment, such companies must have at least 20% of their turnover, profits or invested capital in these markets. Financial Information At 31 December 2011 Net assets Bank debt (in sterling terms) Number of Ordinary Shares in issue (excluding shares held in treasury) Net asset value (NAV) per Ordinary Share Undiluted Diluted NAV per Ordinary Share (excluding current period net revenue) Undiluted Diluted NAV per Ordinary Share performance2 Undiluted Diluted FTSE Environmental Opportunities Asia Pacific (ex-Japan) Index (sterling)2 FTSE Environmental Opportunities Japan Index (sterling)2 MSCI AC Asia Pacific (ex-Japan) Index (sterling)2 Ordinary Share price (mid-market) Subscription Share price (mid-market) Ordinary Share price (discount)/premium to diluted NAV
1 2

At 30 June 2011 257.1m 15.4m

% change 26.8% +67.5% 0.9% 26.2% 24.3%

188.1m 25.9m

213,105,198 214,985,682 88.3p 88.3p1 119.6p 116.6p

87.5p 87.5p1

118.5p 115.7p

26.2% 24.4% 25.4% 23.5% 24.4% 12.4% 14.5%

73.6p 5.8p (16.6%)

106.4p 21.0p (8.7%)

30.8% 72.4%

No dilution due to NAV being below subscription share exercise price. Total return in pounds sterling.

1
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

CHAIRMANS REVIEW

During the six month period ended 31 December 2011 (the Period), financial market volatility was pronounced as political leaders failed to resolve the on-going sovereign debt problem 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-term outlook for environmental markets in the Asia-Pacific region and are outlined throughout this report, Impax Asian Environmental Markets plc (the Company) experienced a disappointing 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 Pacific ex-Japan Index (EOAX), the FTSE Environmental Opportunities Japan Index (EOJP) and the 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 widening discount exacerbated the fall in net asset value (NAV). The Companys Subscription Shares were trading at 5.8p at the end of the Period. Sector Developments Notwithstanding the disappointing performance of stocks in the Asian environmental markets, the sectors long-term drivers continued to develop positively as governments across the region responded to resource, infrastructure and environmental challenges with supportive policy. The earthquake and subsequent nuclear disaster in Japan triggered increases in renewable energy targets across the region, while the Chinese government confirmed an investment of US$770 billion in low carbon energy (with particular emphasis on wind, solar, hydro and gas) by 2020 and the Australian government adopted a carbon tax which has materially improved domestic prospects for both renewable energy and energy efficiency. Floods in both Thailand and Australia highlighted the need to improve management and quality of water resources, and the Chinese government set aside US$450 billion for water sector spending over the next five years. The Board and the Manager believe that these developments may contribute positively to the Companys performance over the medium to long-term. Gearing At the start of the Period the Company had drawn down US$25 million from its US$50 million revolving credit facility. On 9 November 2011, the Company made an additional drawdown of US$15 million, a decision supported by the increasingly attractive valuation of
1

Total return in pounds sterling.

2
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

CHAIRMANS REVIEW
CONTINUED

shares within the sector and the positive long-term outlook for environmental markets given policy and economic drivers. The proceeds were invested during the final two months of the Period. Discount and Buybacks Over the six months ended 31 December 2011, the IAEM Ordinary Share price traded at an average discount to NAV of 11.5% and in a range between 1.9% and 17.7%; at the end of the Period, the discount stood at 16.6%. Recognising that buying back stock at a discount to NAV is accretive, the Board bought back 1,885,000 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 be appropriate. Update and Outlook The recovery in equity markets towards the end of the Period has extended into the New Year, as US economic data pointed to a more sustained recovery, inflation across Asia moderated 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% to 88.0p. 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 12 times expected forward earnings, based on forecast earnings growth of 19%. Taking into account these metrics and the strengthening drivers of Asian environmental markets, the Directors continue to believe that the Companys shares offer an attractive medium to long-term proposition for investors seeking to benefit from the growth potential of Asian environmental markets. Allan McKenzie Chairman 23 February 2012

Total return in pounds sterling.

3
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

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 Chinese industrial and technology sectors. We expect this trend to reverse with improving liquidity and 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 business models and valuations, whilst taking developments in the environmental market sub-sectors and the wider macro-environment into account. The universe of Asian environmental companies has remained broadly stable over the last six months (ca. 460 companies) due to 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 is diversified by both geography and sub-sector, with a particular focus on China, followed by Japan, Taiwan, and South Korea. On a sub-sector basis, the portfolio has its largest allocation to Energy Efficiency and smallest allocations to Diversified Environmental and Renewable & Alternative Energy. An analysis of the structure of the portfolio as well as the sub-sector contribution to performance is shown on page 9. Environmental Sub-sectors There were significant developments in each of the principal environmental sub-sectors during the period. These are highlighted below together with the key contributors and detractors to performance and portfolio changes: Renewable & Alternative Energy (RAE) 13% weighting Following the earthquake, the Japanese government announced a solar target of 28 gigawatts (GW) by 2020, an eight times increase from current levels; Korea announced plans to increase renewables to 13% of the total energy mix by 2030; and China raised its 2020 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 to slowing global demand for renewable energy. The Company had limited exposure to this sub-sector, having previously taken profits in polysilicon suppliers, and was concentrated in the more defensive developers and operators including Aboitiz Power and Energy Development Corporation (EDC) and China Longyuan. The Companys RAE weighting grew from 9% to 13% over the Period as Xinyi Glass was re-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 downstream solar players will benefit from lower raw material prices. 4
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

MANAGERS REPORT
CONTINUED

Energy Efficiency (EE) 40% weighting The performance of the EE sector over the Period was disappointing despite favourable policy developments. Following the approval of Chinas 12th Five Year Plan in the first half of 2011, industrial energy efficiency has been designated a strategic industry, and there were initiatives to boost the energy efficient lighting market. However, the high speed rail crash 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 to performance 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 the Hong Kong Stock Exchange in due course. The Companys EE weighting increased from 39% to 40% in the Period. We shifted our LED exposure to stocks further down the value chain by selling out of chip manufacturers Seoul Semiconductor and Samsung Electromechanics (both Korea) and increasing exposure to the lighting integrator NVC Lighting (efficient lighting, China). We also added Airtac (factory automation 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, investment momentum in the Indian water sector improved in line with policy objectives to control water scarcity and polluted water sources. In contrast, instability in the Middle East led to delays to water projects which affected a number of our companies with exposure to that region and triggered increased competition in the Asian water market, particularly in the context of desalination. 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. The Companys Indian holdings (Jain Irrigation, VA Tech Wabag and IVRCL) all contributed negatively to performance as projects were delayed due to weak finance markets. We sold out of IVRCL (water infrastructure, India) on balance sheet concerns. We also added two new 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 and distribution, China) rose on expectations of further increases in demand after a Beijing 5
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

MANAGERS REPORT
CONTINUED

based gas fired power plant operator secured funding for expansion. Campbell Brothers (environmental testing, Australia) extended gains on the back of strong results and inclusion in 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. Additions included Towngas China (urban gas supply). We exited Shimadzu (environmental testing and 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 Metal Recycling outperformed on positive earnings and continued expansion while China Everbright International (water and waste treatment) performed well on the announcement of a number of new projects. Conversely, Lee and Man (paper recycling, China) underperformed as margins contracted by energy cost increases and Fook Woo (paper recycling, 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 on the Hong Kong Stock Exchange in due course. The Companys WMT weighting remained stable at 14% over the Period. We added to our existing position in China Everbright International and sold out of Transpacific Industries Group (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. Yingde Gases (industrial gases, China) rose on results that demonstrated a resilient business model and a number of new project wins. In contrast, weaker end markets impacted LG Chem (batteries, Korea). The Companys DE weighting fell from 11% to 6% over the Period as Xinyi Glass was reclassified (see above). Macro & Regional Factors During the Period global equity markets suffered a sharp correction, principally due to concerns about the continued European sovereign debt crisis, a situation that was exacerbated 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 a de-rating of small and midsized companies. Confidence towards the end of the Period was partially restored by the injection of liquidity by 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. 6
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

MANAGERS REPORT
CONTINUED

Amendments to management arrangements The Manager has taken further steps to develop its resources in the Asia-Pacific region. In August 2011, Impax Asset Management (Hong Kong) Limited (IAMHK), a wholly-owned subsidiary of Impax Asset Management Group plc, secured its Hong Kong Securities and Futures Commission licence to conduct asset management and advisory activities. In addition, David Hok Kwan Li joined IAMHK as a full time employee, having previously been employed by the Managers investment adviser, Ajia Partners Asset Management (HK) Limited (Ajia), and seconded to the Manager. As a result of these changes the advisory arrangement 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 liquidity conditions by reducing the amount of money that banks are required to hold in reserve. We anticipate that equity markets in the region will re-rate higher over the next few months and that smaller sized companies will recover as earnings growth continues. The momentum of environmental policy and legislation in the Asia Pacific region is strong and we remain confident 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 news on www.impax.co.uk. Impax Asset Management Limited 23 February 2012

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IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

FIVE LARGEST INVESTMENTS

AS AT 31 DECEMBER 2011

Yingde Gases (industrial gases, China) (4.4% of net assets) Yingde Gases is the largest provider of on-site industrial gases in China, supplying oxygen to improve the energy efficiency and productivity of steel furnaces. China is the largest growth market for industrial gases, and Yingde is expected to more than double in size over the 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 benefit from policy objectives to improve air quality, reduce coal utilisation and increase the natural gas share of primary energy from 4% to 8% by 2015. The company has long-term exclusive concessions 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 and manufacturing equipment for LCD panels. The company has developed manufacturing equipment for Organic Light Emitting Diodes (OLED) which is a new display technology benefiting from lower energy use and a thinner screen. The company is expected to benefit from 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 to add 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 presence in highly efficient gas-fired water-heaters. The company has unique technologies protected under patents which create strong barriers to entry. The domestic gas market is an oligopoly with 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 profitable customer relationships.

8
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

STRUCTURE OF PORTFOLIO
AS AT 31 DECEMBER 2011

BREAKDOWN BY COUNTRY OF DOMICILE AND QUOTATION (in market value terms) Domicile China and Hong Kong2 Japan Taiwan South Korea Philippines India Australia Thailand Singapore United States United Kingdom Total
1

Quotation1 34% 20% 10% 8% 7% 5% 3% 3% 3% 6% 1% 100%

41% 20% 9% 8% 7% 6% 5% 3% 1% 100%

Where a participatory note is held, the exposure is reported for the underlying security. American depositary receipts are included under United States. 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 Energy Efficiency Water Infrastructure & Technologies Pollution Control Waste Management & Technologies Diversified Environmental Total
1

13% 40% 14% 13% 14% 6% 100%

4% 14% 4% +1% 4% 1% 26%

Source: Impax Asset Management using Factset methodology.

BREAKDOWN BY MARKET CAPITALISATION >US$5bn US$1bn US$5bn <US$1bn Total 17% 48% 35% 100%

The above breakdowns and other information exclude the 2% cash position at 31 December 2011. 9
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

INTERIM MANAGEMENT REPORT

The Chairmans review on pages 2 and 3 and the Managers report on pages 4 to 7 provide details on the performance of the Company. Those reports also include an indication of the important 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 statements included in this Half-yearly financial report. Details of the largest five investments held at the period end are provided on page 8 and the structure 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 into the 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 be found in the Companys most recent Annual Report for the year ended 30 June 2011. The risks and uncertainties facing the Company remain unchanged from those disclosed in the Annual 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 Annual Report 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 the Income Statement on page 12. Board of Directors 23 February 2012

10
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

DIRECTORS STATEMENT OF RESPONSIBILITY FOR THE HALF-YEARLY REPORT

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 Accounting Standards Board on Half-yearly financial reports. The interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the FSAs Disclosure and Transparency Rules.

Allan McKenzie Chairman of the Board of Directors 23 February 2012

11
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

INCOME STATEMENT
FOR THE SIX MONTHS ENDED 31 DECEMBER 2011

Note Gains/(losses) on investments Net foreign currency loss Income Investment management fees Other expenses Return on ordinary activities before finance costs and taxation Finance Costs Return on ordinary activities before taxation Taxation Return on ordinary activities after taxation Return per Ordinary Share undiluted diluted 6 5 4

Six months ended 31 December 2011 (unaudited) (unaudited) (unaudited) Revenue Capital Total 000 000 000 2,566 (224) (307) 2,035 (66) 1,969 (267) 1,702 (64,966) (1,137) (897) (67,000) (265) (67,265) (67,265) (64,966) (1,137) 2,566 (1,121) (307) (64,965) (331) (65,296) (267) (65,563)

0.79p 0.79p

(31.34p) (31.34p)

(30.55p) (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 and losses are recognised in the Income Statement.

12
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

INCOME STATEMENT
CONTINUED

Six months ended 31 December 2010 (unaudited) (unaudited) (unaudited) Revenue Capital Total 000 000 000 1,058 (189) (281) 588 588 (77) 511 34,744 (498) (757) 33,489 33,489 33,489 34,744 (498) 1,058 (946) (281) 34,077 34,077 (77) 34,000

(audited) Revenue 000 3,901 (458) (665) 2,778 (65) 2,713 (295) 2,418

Year ended 30 June 2011 (audited) Capital 000 2,923 (1,074) (1,834) 15 (548) (533) (533)

(audited) Total 000 2,923 (1,074) 3,901 (2,292) (665) 2,793 (613) 2,180 (295) 1,885

0.34p 0.33p

22.21p 21.54p

22.55p 21.87p

1.42p 1.38p

(0.31p) (0.30p)

1.11p 1.08p

13
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

BALANCE SHEET
AS AT 31 DECEMBER 2011

Note Fixed assets Investments at fair value through profit and loss Current assets Income receivable Sales future settlements Other debtors Cash at bank and in hand

At 31 December 2011 (unaudited) 000

At 31 December 2010 (unaudited) 000

At 30 June 2011 (audited) 000

210,843 125 1,639 165 4,309 6,238

286,063 89 14 3,989 4,092

267,173 447 9 5,551 6,007

Creditors: amounts falling due within one year Purchases future settlements Accrued liabilities

2,655 263 2,918

948 310 1,258 2,834 288,897

361 361 5,646 272,819

Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Bank loan Fair value of interest rate swap Total net assets Capital and reserves Share capital Share premium Capital redemption reserve Share purchase reserve Capital reserve Revenue reserve Shareholders funds Net asset value per Ordinary Share undiluted Net asset value per Ordinary Share diluted 14 6 6

3,320 214,163

7 8

25,879 192 188,092 2,189 10,060 129,982 100,903 (57,241) 2,199 188,092 88.26p 88.26p

288,897 2,188 9,986 129,982 102,350 43,759 632 288,897 134.42p 129.13p

15,448 231 257,140 2,189 10,056 129,982 102,350 10,024 2,539 257,140 119.61p 116.60p

IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

RECONCILIATION OF MOVEMENT IN SHAREHOLDERS FUNDS

FOR THE SIX MONTHS ENDED 31 DECEMBER 2011 (unaudited)

Share capital 000 Opening shareholders funds Exercise of Subscription Shares Share buy backs (see note 11) Dividends paid Profit for the period Closing shareholders funds as at 31 December 2011 2,189

Share Capital premium redemption account reserve 000 000 10,056 4 129,982

Share purchase reserve 000 102,350 (1,447)

Capital reserve 000 10,024 (67,265)

Revenue reserve 000 2,539 (2,042) 1,702

Total 000 257,140 4 (1,447) (2,042) (65,563)

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 Conversion of C Shares into Ordinary Shares and bonus issue of Subscription Shares 1,018 Dividends paid Profit for the period Closing shareholders funds as at 31 December 2010

9,986

102,350

12,890

581

126,977

129,982

(2,620) 33,489

(460) 511

128,380 (460) 34,000

2,188

9,986

129,982

102,350

43,759

632

288,897

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IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

RECONCILIATION OF MOVEMENT IN SHAREHOLDERS FUNDS

CONTINUED

FOR THE YEAR ENDED 30 JUNE 2011 (audited)

Share capital 000 Opening shareholders funds 1,170 Conversion of C Shares into Ordinary Shares and bonus issue of Subscription Shares 1,018 Exercise of Subscription Shares 1 Dividends paid Profit for the period Closing shareholders funds as at 30 June 2011

Share Capital premium redemption account reserve 000 000 9,986

Share purchase reserve 000 102,350

Capital reserve 000 12,890

Revenue reserve 000 581

Total 000 126,977

70

129,982

(2,333) (533)

(460) 2,418

128,667 71 (460) 1,885

2,189

10,056

129,982

102,350

10,024

2,539

257,140

16
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

CASH FLOW STATEMENT

FOR THE SIX MONTHS ENDED 31 DECEMBER 2011

Six months Six months ended ended 31 December 31 December 2011 2010 (unaudited) (unaudited) 000 000 Operating activities Cash inflow from investment income and bank interest Cash outflow from management expenses Cash inflow from disposal of investments Cash outflow from purchase of investments Cash outflow from net foreign exchange costs Cash outflow from taxation Net cash flow from operating activities Returns on investments and servicing of finance Interest paid Net cash flow from returns on investments and servicing of finance

Year ended 30 June 2011 (audited) 000

2,884 (1,592) 84,861 (92,481) (1,149) (266) (7,743)

1,138 (1,115) 153,073 (281,841) (498) (77) (129,320)

3,623 (2,787) 220,562 (363,213) (772) (295) (142,882)

(245) (245)

Equity dividends paid Financing Proceeds of share issues Expenses of share issues Share buy backs Bank loan draw down Net cash flow from financing (Decrease)/increase in cash Opening balance Closing balance

(2,042)

(460)

(460)

4 (1,447) 10,231 8,788 (1,242) 5,551 4,309

131,000 (2,620) 128,380 (1,400) 5,389 3,989

131,071 (2,620) 15,053 143,504 162 5,389 5,551

17
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

NOTES TO THE ACCOUNTS

ACCOUNTING POLICIES

The Half-yearly financial report has been prepared in accordance with applicable UK accounting standards 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 purposes under section 1158 of the Corporation Tax Act 2010. The Company therefore presents its accounts in accordance 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 the trade date and measured at fair value. Investments are measured at subsequent reporting dates at fair value by reference to the following criteria: Any securities of companies quoted on an investment exchange are valued at fair value by reference to market bid price. Any investments in derivatives are valued at fair value. In the case of Participatory Notes this is by reference to latest broker quotations or, if unavailable or lower, by reference to the equivalent market bid price valuation of the relevant underlying security. Any other investment is valued at best estimate of fair value as determined by the Directors.

Changes in fair value are included in the Income Statement as a capital item. Transaction costs incurred on the acquisition and disposal of investments are charged to the Income Statement as a capital item. 3 INCOME Six months ended 31 December 2011 000 Income from investments: Dividends from overseas investments Treasury bill income receivable Total Other income: Interest receivable Total income 2,562 4 2,566 2,566 Six months ended 31 December 2010 000 1,037 17 1,054 4 1,058 Year ended 30 June 2011 000 3,880 17 3,897 4 3,901

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IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

NOTES TO THE ACCOUNTS

CONTINUED

FINANCE COSTS

Six months ended Year ended Six months ended 31 December 2010 30 June 2011 31 December 2011 Revenue Capital Total Revenue Capital Total Revenue Capital Capital 000 000 000 000 000 000 000 000 000 Interest payable 51 205 256 16 63 79 Direct costs 10 41 51 3 13 16 Fair value of swap 5 19 24 46 185 231 287 287 C share finance costs 66 265 331 65 548 613

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 after taxation attributable to the weighted average of 214,605,268 Ordinary Shares in issue (excluding shares held in treasury) during the period (Six months ended 31 December 2010: 150,806,405; Year ended 30 June 2011: 170,708,369). Diluted return per Ordinary Share is based on the net return attributable on ordinary activities after taxation attributable to the diluted weighted average of Ordinary Shares during the period. There was no dilution of net assets per Ordinary Share at 31 December 2011 (Six month ended 31 December 2010: 155,438,175; Year ended 30 June 2011: 175,160,467). Each Subscription Share carries the right to subscribe for one Ordinary Share at a price of 100p. The average bid price per Ordinary Share during the period was lower than 100p and consequently the Subscription Shares had an anti-dilutive impact on 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 the terms of the facility the Company may draw down loans of up to, in aggregate, US$50 million. A first loan of US$25 million was made to the Company on 6 May 2011 and a further US$15 million was drawn down 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 on any 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 been fixed. The fixed rate payable under the swap arrangement is 1.0575% with the Company receiving interest at 3 month US$ Libor. In the event of early repayment of the loan, break costs may apply.

19
IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

NOTES TO THE ACCOUNTS

CONTINUED

NET ASSETS PER SHARE

The undiluted net assets per Ordinary Share figure is based on the net assets of 188,092,000 at 31 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 value per share being lower than the Subscription Share exercise price of 100p at that date. (31 December 2010: 327,973,000; 30 June 2011: 296,145,000). The number of diluted Ordinary Shares for the comparative periods was 31 December 2010: 253,990,591; 30 June 2011: 253,990,591. The diluted figures 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 on that date at a price of 100p per Ordinary Share. 10 SHARE ISSUES During the period the Company issued 4,516 Ordinary Shares as a result of the exercise of 4,516 Subscription 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 any business day between 1 November 2009 and 31 October 2014 inclusive. The subscription price and number of Ordinary Shares are subject to adjustment on the occurrence of certain events including subdivision 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 was 213,105,198. 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 434 of the Companies Act 2006. They are unaudited and have not been subject to an audit review. The Half-yearly financial report will be sent to shareholders and copies will be made available to the public at the registered office of the Company. The report will be available in electronic format on the Managers 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 report and have been filed with the registrar of companies at Companies House.

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IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

DIRECTORS, MANAGER AND ADVISERS

DIRECTORS Allan McKenzie (Chairman) Simon Atiyah Alan Barber Richard Franklin Terence Mahony BROKER Collins Stewart Europe Limited 88 Wood Street London EC2V 7QR SOLICITOR CMS Cameron McKenna LLP Mitre House 160 Aldersgate Street London EC1A 4DD

INVESTMENT MANAGER Impax Asset Management Limited Norfolk House 31 St Jamess Square London SW1Y 4JR

SECRETARY AND ADMINISTRATOR Cavendish Administration Limited 145-157 St. John Street London EC1V 4RU REGISTRAR Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU AUDITOR Ernst & Young LLP 1 More London Place London SE1 2AF

CUSTODIAN BNP Paribas Securities Services BNP Paribas London Branch 10 Harewood Avenue London NW1 6AA REGISTERED OFFICE* 145-157 St. John Street London EC1V 4RU
*Registered in England and Wales No. 7016550

IMPAX ASIAN ENVIRONMENTAL MARKETS PLC