Impax Asian Regulatory News (IAEM)

IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

All information is at 31 March 2012 (unless otherwise stated) and unaudited.

DATA AND PERFORMANCE

* Performance data is for undiluted NAV ex income (unaudited)

The Company is geared via a bank facility (amount drawn down since initial drawdown on 6 May 2011: US$40m)

** Total return. Source: FactSet, WM Reuters

TOP TEN HOLDINGS

PORTFOLIO ANALYSIS*

IMPAX ASIAN ENVIRONMENTAL MARKETS PLC

MANAGER'S COMMENTARY (Q1 2012)

Market Review

News flow and market sentiment were generally positive during Q1, with continuing monetary loosening and a stronger than expected PMI reading in China. Despite improvement of US economic figures and easing sovereign debt concerns in Europe, Asian export orientated economies, in particular South Korea and Taiwan, had rather weak export figures. Small caps and cyclical stocks performed well and environmental policy momentum in Asia remained strong, but the high oil price caused concerns over increasing inflationary pressure.

Performance Summary

Reduced concerns over a hard landing in China, Japan's adoption of an inflation targeting regime and continued recovery in the US and Europe led to an improvement in risk appetite and drove performance over the quarter. Campbell Brothers (environmental testing, Australia) continued to benefit from strong testing activity in the metals and mining sector. China Everbright (water and wastewater treatment, Hong Kong) performed well following strong results and several new project wins, and Lee & Man (paper manufacturing, Hong Kong) rose as management raised product prices in line with normalisation of demand and as margins recovered.

Moderation in Chinese growth, the spike in oil price which may dampen growth in oil dependent Asian economies and a challenging fiscal situation in India caused concern towards the end of the period. SFA Engineering (OLED equipment, South Korea) fell due to delays in customer capex spending on OLEDs, while Energy Development Corp (renewable IPP, Philippines) underperformed due to delays in the rehabilitation of a geothermal power plant. China Automation (industrial and rail automation, China) fell due to weaker than expected results following delays in rail projects.

Policy Update

Japan submitted amendments to its Energy Efficiency Act, expanding the range of products qualified under the "Top Runner" energy efficiency labelling system to building materials and plumbing products, with all new properties required to comply with these standards by 2020. Japan also eased permitting rules for geothermal plants in national parks, where the majority of the country's geothermal sources are based.

China has introduced a new LED-light subsidy program, offering 30% subsidies to qualifying producers. The city of Beijing is introducing stricter vehicle emissions standards, aiming at cutting NOx emissions by 25%, while also implementing the carbon trading scheme in 2013, one year ahead of the previous schedule. In the water sector, China is expecting to invest 160bn Yuan in rural water infrastructure, mainly focusing on water irrigation and construction.

18 April 2012