Impax Asset Management Regulatory News (IPX)

1 April 2011

Impax Asset Management Group plc

Grant of Awards and Employer National Insurance Charge relating to Employee Incentive Arrangement

Impax Asset Management Group plc (the "Company") today announces the grant of awards under its Employee Incentive Arrangement ("EIA") to one of the Company's directors as well as certain other employees and how it is addressing the consequences of recent announcements from Her Majesty's Revenue and Customs ("HMRC"), including certain Related Party Transactions and an employer's National Insurance Contributions ("NIC") charge.

As announced on 16 March 2011, the Company's performance target in relation to the EIA was successfully achieved for the financial year ended 30 September 2010. The performance target included a minimum 52 per cent increase in the share price of the Company since January 2008. The Company's Board of Directors is delighted with this achievement and the contribution of the Company's employees over the three year period covered by the EIA. The Board has accordingly approved the granting of awards in respect of 18.25 million of the Company's ordinary shares of 1p each ("Ordinary Shares") to certain employees (the "EIA Awards"). 

Consequence of Recent HMRC Announcements, Allocation of Awards and Directors Dealings

During December 2010 HMRC issued a consultation paper proposing various changes to the taxation of awards already delivered and yet to be delivered under employee benefit trusts of the type operated by the Company as the delivery vehicle for the EIA. Subsequently, both HMRC and the Chancellor of the Exchequer have provided further clarification. 

In consultation with the Company's advisors, the Company's Board of Directors has determined that, in order to reduce uncertainty over the tax consequences of the EIA, it is in the Company's best interest to offer to employees an option scheme (the "Option Scheme") for the delivery of EIA Awards as an alternative vehicle to the award of Ordinary Shares to employees and their families via the Company's Employee Benefit Trust ("EBT"). 

The Option Scheme comprises options delivered through a long term incentive plan ("LTIP Options") together with an additional payment (the "Additional Payment") 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 company minus the NIC cost suffered by the Company on exercise of the relevant employee's LTIP Options. The LTIP Options awarded are 1p strike options on the Company's Ordinary Shares, will vest to individuals remaining employed by the Company on 30 September 2012, and may be exercised over a period from 1 October 2012 to 31 December 2020. 

The trustee of the EBT yesterday allocated 4 million Ordinary Shares to a sub-fund of the EBT of which Ian Simm, the Company's Chief Executive, and his family are beneficiaries. Under the rules of the EIA the beneficiaries will be able to request distributions of these shares from 1 October 2012 assuming Ian Simm remains employed by the Company on 30 September 2012. At the same time, the trustee of the EBT formalised an earlier allocation of 5 million Ordinary Shares to which Ian Simm and his family are already beneficiaries into another sub-fund of the EBT.

The remaining available EIA Awards are being made to other employees as 14.05 million LTIP Options under the Option Scheme. 

Assuming all of the employment conditions of the EIA are met in respect of the above awards, the Company expects issued share capital to increase to 127.75 million shares.

Separately, and unconnected with the EIA Awards, the trustee of the EBT yesterday also formalised an earlier allocation of 0.95 million Ordinary Shares to which Keith Falconer, the Chairman of the Board of Directors of the Company, and his family are already beneficiaries into another sub-fund of the EBT.

Related Party Transactions

Bruce Jenkyn-Jones, Peter Rossbach, Charlie Ridge and Nigel Taunt (together the "Subsidiary Directors") are directors of the Company's subsidiaries. Under the AIM Rules they are considered to be related parties of the Company and the Additional Payment is considered to be a related party transaction. Having consulted with the Company's Nominated Adviser, the independent directors of the Company consider that the terms of the Additional Payments are fair and reasonable insofar as the Company's shareholders are concerned. The calculation of the Additional Payments is dependent on the Company's share price and relevant tax rates at the time of exercise and accordingly cannot be determined at this time. Based on a share price of 70 pence and current tax rates, the Company calculates that the Subsidiary Directors would be paid the following amounts - Bruce Jenkyn-Jones £311,000, Peter Rossbach £219,000, Charlie Ridge £88,000 and Nigel Taunt £34,000. This calculation assumes that:

(a) all LTIP options held by Subsidiary Directors vest;

(b) all Subsidiary Directors exercise their options; and

(c) the Company will receive the corporation tax benefit.

Employer National Insurance Charge relating to Employee Incentive Arrangement

In light of its review of the recent changes to tax policy referred to above, the Company expects that it is likely that some or all of the EBT beneficiaries in respect of awards granted in previous years will, at some stage, request the trustee of the EBT to transfer Ordinary Shares held in the name of themselves and their families from the EBT to one or more of the beneficiaries, whereupon the Company would be required to pay NIC on the value of the assets removed. In line with the requirements of International Financial Reporting Standards, in its forthcoming Interim Results statement the Company intends to provide for these future payments. Based on a share price of 70 pence, the Company expects the post tax effect of this provision would be a maximum of £1,106,000.

If and when the EBT trustee transfers Ordinary Shares from the EBT to beneficiaries, the Company also expects to be eligible for a corporation tax deduction equal to the value of those Ordinary Shares.

The Company has set out its accounting presentation of the EIA in previous statements.