Miscellaneous

Issue of C Shares IMPAX ENVIRONMENTAL MARKETS PLC - ISSUE OF C SHARES Introduction On 12 September 2005 the Company announced that the Directors were considering proposals for a further issue of Ordinary Shares with Warrants. Proposals have been announced today for a Placing and Offer for Subscription of C Shares which will convert into Ordinary Shares to raise up to £80 million before expenses. Warrants will be issued on the basis of one Warrant for every five Ordinary Shares resulting from Conversion. Holders of existing Ordinary Shares on the Register at the close of business on the business day prior to the Conversion Date will also be issued, at no cost, with one Warrant for every five existing Ordinary Shares then held. The Placing and Offer is not being underwritten and will not proceed unless subscriptions are received in aggregate for at least £25 million. The Proposals also involve changes to the Company's articles of association in relation to the continuation of the Company. The Company has convened an Extraordinary General Meeting, to be held on 14 November 2005, at which Shareholders' approval for the Proposals will be sought. Background The Company is an investment trust whose Ordinary Shares were admitted to the Official List on 22 February 2002. The Company's objective is to enable investors to benefit from rapid and sustained growth in the markets for cleaner or more efficient delivery of basic services of energy, water and waste. Investments are made predominantly in quoted companies which provide, utilise, implement or advise upon technology-based systems, products or services in Environmental Markets, particularly those of alternative energy and energy efficiency, water treatment and pollution control, and waste technology and resource management. The Company's investment manager is Impax Asset Management Limited. As at 18 October 2005, the Company had unaudited net assets of £44.4 million. The Company's Net Asset Value per Share (unaudited) performance over various periods to 18 October 2005, compared with those of the FTSE All-Share and MSCI World indices, was as follows: % return % return % return % return since since since since 31 December 31 December 31 December 22 February 2002 2003 2004 2002* NAV per Share 63.2 33.9 15.7 (9.7) (unaudited) FTSE All-Share Index 33.6 17.6 9.3 4.2 MSCI World Index 36.3 15.8 10.1 1.3 (sterling adjusted) * The Company was listed on 22 February 2002 Source: Thomson Datastream As at 18 October 2005, the Ordinary Shares were trading at a 3.6 per cent. premium to NAV per Share (unaudited). The average discount on the Ordinary Shares to NAV per Ordinary Share (unaudited) over the twelve months to that date was 3.2 per cent. The Proposals The Board believes that there is significant demand for Ordinary Shares from investors who are unable to purchase sufficient shares in the secondary market. Consequently, the Board is taking the opportunity provided by this demand, the Company's strong performance since March 2003 and the premium to NAV per Share at which the Ordinary Shares are trading to expand the Company by making C Shares available to Qualifying Shareholders and new investors. The Proposals involve: - a Placing and Offer for Subscription of C Shares to raise up to £80 million before expenses; - an issue of Warrants on the Conversion Date to holders of C Shares on the basis of one Warrant for every five Ordinary Shares arising on Conversion; - an issue of Warrants to holders of existing Ordinary Shares on the Register at the close of business on the business day prior to the Conversion Date (other than certain Overseas Investors who are prevented by legal or regulatory requirements from receiving Warrants) on the basis of one Warrant for every five existing Ordinary Shares then held; and - adoption of new Articles to provide for the C Share rights and restrictions attaching to the C Shares and changes to the continuation provisions of the Company. Placing and Offer for Subscription The Company is seeking to raise up to £80 million, before expenses, through the Placing and Offer for Subscription of C Shares. The Placing and Offer are not being underwritten and, as a result, will not proceed unless aggregate subscriptions are received which represent a minimum of £25 million. Dresdner Kleinwort Wasserstein has agreed, as agent for the Company, to use reasonable endeavours to procure placees for up to 70 million C Shares in the Placing at a price of 100p per share. A further 10 million C Shares are being made available to Shareholders and new investors (other than certain Overseas Investors) through the Offer for Subscription at a price of 100p per share. In the event that applications under the Offer in excess of this amount are received, subscriptions under the Offer will be scaled back, with existing Shareholders (other than certain Overseas Investors) being allocated C Shares in preference to new investors under the Offer. To the extent that less than 70 million C Shares are subscribed for in the Placing the surplus C Shares will be available under the Offer. If less than 10 million C Shares are validly applied for under the Offer the surplus C Shares may be placed pursuant to the Placing. The Placing and Offer are conditional, inter alia, on the Placing and Offer Agreement becoming unconditional, and not being terminated, Admission of the C Shares and the passing of the resolutions to be put forward at the Extraordinary General Meeting. The result of the Placing and Offer will be announced on the date of the Extraordinary General Meeting. The Directors intend to apply the Net Proceeds in making investments in accordance with the Company's investment objective as described above and subject to applicable investment restrictions. Pending investment, the Net Proceeds will be invested in short-term money market instruments (including gilts and treasury bills) and cash with institutions (or wholly owned subsidiaries of institutions) which are rated A1 (or above) by Standard & Poor's or an equivalent rating agency. C Shares The Placing and Offer will be of a new class of shares, C Shares, at an issue price of 100p per share. An issue of C Shares is designed to overcome the potential disadvantages for existing Shareholders which could arise out of a conventional fixed price issue of further Ordinary Shares for cash. In particular: - the assets representing the Net Proceeds from the issue of the C Shares will be accounted for and managed as a distinct pool of assets until the Conversion Date. By accounting for the Net Proceeds separately, holders of existing Ordinary Shares will not be exposed to a portfolio containing a substantial amount of uninvested cash before the Calculation Date; - the Net Asset Value of the existing Ordinary Shares will not be diluted by the expenses associated with the Proposals which will be borne by the subscribers for C Shares; and - the basis upon which the C Shares will convert into Ordinary Shares is such that the number of Ordinary Shares to which holders of C Shares will become entitled will reflect the relative investment performance and value of the pool of new capital attributable to the C Shares raised pursuant to the Placing and Offer up to the Calculation Date as compared to the assets attributable to the Ordinary Shares in issue at that time. As a result, the Net Asset Value attributable to the Ordinary Shares then in issue will not be adversely affected by Conversion. The Net Proceeds and the investments made with them will be accounted for and managed as a separate pool of assets until the date on which at least 90 per cent. of the Net Proceeds have been invested or committed to be invested or, if earlier, 31 March 2006. The Conversion Ratio will then be calculated and the C Shares in issue will convert into a number of Ordinary Shares calculated by reference to the net assets then attributable to C Shares compared to the net assets at the same time attributable to Ordinary Shares then in issue. Entitlements to Ordinary Shares arising on Conversion will be rounded down to the nearest whole number. The Ordinary Shares arising on Conversion of the C Shares will rank pari passu with the Ordinary Shares then in issue and will have the rights set out in the Company's new Articles of Association. Example of Conversion mechanism The following example illustrates the basis on which the number of Ordinary Shares arising on Conversion will be calculated. The example is not, and is not intended to be, a forecast of the number of Ordinary Shares which will arise on Conversion. The example illustrates the number of Ordinary Shares which would arise on the Conversion of 1,000 C Shares held at the Conversion Date, using assumed Net Asset Values attributable to the C Shares and Ordinary Shares in issue at the Calculation Date. The assumed Net Asset Value attributable to an Ordinary Share is that at the close of business on 18 October 2005. The assumed Net Asset Value attributable to each C Share is on the basis that there are no returns on the Net Proceeds to the Calculation Date. Example: Number of C Shares subscribed 1000 Amount subscribed £1,000 Net Asset Value attributable to a C Share at the Calculation Date £0.9825 Net Asset Value attributable to an Ordinary Share at the Calculation Date £0.8876 Conversion Ratio 1.1069 Number of Ordinary Shares arising on Conversion 1,106 In this example, 221 Warrants would also be issued on Conversion. Fractions of Ordinary Shares arising on Conversion and Warrants will be aggregated and sold for the benefit of the Company. Warrants Investors who subscribe for C Shares will be issued with one Warrant for every five Ordinary Shares arising on Conversion at no additional cost. In addition, holders of existing Ordinary Shares on the Register at the close of business on the business day prior to the Conversion Date, other than certain Overseas Investors who are prevented by legal or regulatory requirements from receiving Warrants, will be issued, at no cost, Warrants on the basis of one Warrant for every five existing Ordinary Shares then held. The Warrants will be exercisable on 15 June in each of the years 2006 to 2010 inclusive. The exercise price of a Warrant will be 105 per cent. of the NAV per Ordinary Share (as certified by the auditors) on the Calculation Date. Benefits of the Proposals The Directors believe that the Proposals have the following principal benefits: - Shareholders will be able to subscribe for further shares in the Company; - the market capitalisation of the Company will increase significantly following the Placing and Offer and it is expected that the liquidity of the Ordinary Shares will be enhanced through a wider shareholder base; - the Placing and Offer will increase the size of the Company and enable it to spread its fixed operating expenses over a larger number of Ordinary Shares; - the increased size of the Company will provide the Board with the opportunity to utilise the share buyback powers on a more proactive basis; and - the issue of Warrants will represent a potentially attractive option to subscribe in the future for further Ordinary Shares. Extraordinary General Meeting An EGM of the Company has been convened for 10 a.m. on 14 November 2005 in order to obtain Shareholders' approval for implementation of the Proposals. Continuation of the Company The existing Articles require the Board to propose an ordinary resolution at the Annual General Meeting of the Company to be held in 2007, and at every third annual general meeting of the Company convened thereafter, that the Company should continue in existence as an investment trust for a further three year period. In the event that the continuation resolution is not passed the Board is required, within three months, to put forward proposals for consideration by Shareholders for the reorganisation, winding-up or reconstruction of the Company. In order to provide a reasonable investment horizon for those considering investing in the Company under the Placing and Offer, a special resolution will be proposed at the Extraordinary General Meeting to adopt new Articles in substitution for the existing Articles to provide that continuation resolutions will be proposed at the Annual General Meeting of the Company to be held in 2010 and every three years thereafter. If this resolution is passed no continuation resolution will be proposed at the Annual General Meeting of the Company to be held in 2007. Increase in Share Capital, Authority to Allot and Disapplication of Pre-emption Rights The Company proposes to increase the Company's authorised share capital by the creation of 80 million C Shares and to seek authority under section 80 of the Companies Act to allot relevant securities with an aggregate nominal amount of up to £97 million which represents 1,940 per cent. of the Company's ordinary share capital in issue as at 20 October 2005. This authority will only be used to allot C Shares and Warrants in accordance with the Proposals. Any unutilised part of this authority will lapse on 31 March 2006. The Company will also seek to disapply statutory pre-emption rights otherwise applicable to the C Shares and Warrants intended to be issued under the Proposals. The number of C Shares to which this disapplication will apply is 80 million. This disapplication will also lapse in respect of any unutilised part of the section 80 authority referred to above on 31 March 2006. Authority to Repurchase Ordinary Shares The Company also proposes to update the authority to make market purchases of the Company's Ordinary Shares which was granted at the Annual General Meeting of the Company on 4 May 2005. By means of a special resolution the Company will seek Shareholder approval for repurchases of up to 19,487,000 Ordinary Shares, or, if less, such number of Ordinary Shares as represents approximately 14.99 per cent. of the Company's issued ordinary share capital immediately following Conversion. Any repurchase made pursuant to the authority will be made at a price that is not less than 10p per Ordinary Share (being the par value of each Ordinary Share) and not more than 105 per cent. of the average of the middle market price per Ordinary Share as taken from the Daily Official List of the London Stock Exchange for the five business days preceding the day of purchase. The authority being sought will last until the date of the next Annual General Meeting or, if less, a period of twelve months. Any Ordinary Shares so purchased will be cancelled. Following the Placing and Offer, the increased size of the Company will provide the Board with the opportunity to utilise the share buyback powers on a more proactive basis. Admission and Dealings Applications have been made to the UK Listing Authority for up to 80 million C Shares to be admitted to the Official List and to the London Stock Exchange for the same number of C Shares to be admitted to trading on the London Stock Exchange's market for listed securities. It is expected that Admission will become effective, and that dealings in the C Shares will commence, on 15 November 2005. Applications will be made to the UK Listing Authority for the Ordinary Shares arising on Conversion and the Warrants to be issued on the Conversion Date to be admitted to the Official List, and to the London Stock Exchange for the Ordinary Shares and Warrants to be admitted to trading on the London Stock Exchange's market for listed securities. Admission of the Ordinary Shares arising on Conversion and the Warrants will become effective and dealings in them will commence on the London Stock Exchange by no later than 31 March 2006. Certificates and CREST The C Shares, the Ordinary Shares arising on Conversion and the Warrants will be issued in registered form and may be held in certificated or uncertificated form. Temporary documents of title will not be issued pending the despatch of definitive certificates for C Shares and Warrants. Dealings in C Shares in advance of the crediting of the relevant CREST accounts or the issue of share certificates will be at the risk of the persons concerned. Costs and Expenses The costs of the Placing and Offer will be borne out of the proceeds of the Placing and Offer and, accordingly, will effectively be borne by those subscribing for C Shares. The total costs of the Placing and Offer (including any commissions) will be 1.75 per cent. of the gross proceeds of the Placing and Offer. Directors' Intentions in relation to the Offer Directors intend to make subscriptions under the Offer in the aggregate amount of £22,500. Recommendation to Shareholders The Board considers that the Proposals are in the best interests of Shareholders as a whole. The Board has received advice from Dresdner Kleinwort Wasserstein and, in giving that advice, Dresdner Kleinwort Wasserstein has placed reliance on the Board's commercial assessments. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolutions to be proposed at the EGM. The Board intends to vote in favour of the Resolutions in respect of its own beneficial holdings of Ordinary Shares which amount in aggregate to 30,000 Ordinary Shares. Expected Timetable Record Date for Priority Application Forms 5 p.m. on 19 October under the Offer 2005 Latest time and date for receipt of Priority 3 p.m. on 7 November Application Forms and Application Forms and 2005 payment under the Offer Latest time and date for receipt of Forms of 10 a.m. on 12 November Proxy 2005 Extraordinary General Meeting 10 a.m. on 14 November 2005 C Shares issued; Admission of C Shares and 8 a.m. on 15 November dealings in C Shares commence; CREST accounts 2005 credited in respect of C Shares issued in uncertificated form Certificates for C Shares issued in Week commencing 21 certificated form despatched November 2005 Latest date for Conversion 31 March 2006 Admission of the Ordinary Shares arising on Conversion and of the Warrants to the Official List and to dealings on the London Stock Exchange's market for listed securities will occur on the Conversion Date. On the Conversion Date, holders of existing Ordinary Shares on the Register at the close of business on the business day prior to the Conversion Date will be issued with one Warrant in respect of every five existing Ordinary Shares then held. Contacts Impax Environmental Markets plc Tel: 020 7434 1122 Ian Simm Bruce Jenkyn-Jones Dresdner Kleinwort Wasserstein Tel: 020 7623 8000 Dominic Waters David Yovichic Dresdner Kleinwort Wasserstein Securities Limited (which is authorised and regulated by the Financial Services Authority) is acting exclusively for the Company in connection with the proposals described in this announcement, and will not regard any other person (whether or not a recipient of this announcement or other information) as its customer in relation to such proposals and will not be responsible to any other person for providing the protections afforded to its customers or for providing any advice in connection with the proposals and/or the contents of this announcement. Persons requiring advice should consult an independent financial adviser. 20 October 2005 ---END OF MESSAGE---
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