10 Sep 2009 07:00
Leaf Clean Energy Company
("Leaf" or "the Company"),
Annual Results for the year ended 30 June 2009
Leaf, a company incorporated for the purpose of acquiring interests in, owning, operating and managing clean energy companies and projects predominantly in North America, is pleased to announce its annual results for the period from 1 July 2008 to 30 June 2009.
Highlights:
* Since the year end, the Company has invested in a further eight new investments representing an aggregate amount of $188 million. These investments were made across several subsectors including wind, biomass, landfill gas and waste-to-energy, taking the total aggregate amount of investment to US$ 243 million across eleven separate transactions. The current portfolio is shown below:
| Name of investment | Principal activity |
| Invenergy Wind, LLC | Wind electricity generation |
| Johnstown Regional Energy, LLC | Landfill gas projects |
| Multitrade Rabun Gap, LLC | Biomass power generation |
| Miasolé, Inc | Development of thin film solar products |
| SkyFuel, Inc | Design and deployment of concentrating solar power systems |
| Multitrade Telogia, LLC | Biomass power generation |
| MaxWest Environmental Systems, Inc | Waste-to-energy gasification facilities |
| Range Fuels, Inc | Cellulosic ethanol production facility |
| Vital Renewable Energy Company, LLC | Brazilian ethanol plantation assets |
| Energía Escalona I, S.A de C.V | Run-of-river hydro plant |
| Greenline Industries, Inc | Biodiesel technology and equipment provider |
* The Company's net asset value increased by 5 pence from 99 pence to 104 pence per share compared with 30 June 2008.
* The Company is now substantially invested, including funds committed to developing the existing portfolio
* 16,366,227 shares purchased for cancellation over the period at an average price of 95 pence per share
* Several of the Company's portfolio investments have achieved prominent milestones:
The successful completion of the 14 MW Multitrade Telogia biomass plant in the south-eastern US. Telogia was completed on budget and on schedule and is now generating electricity and revenues.
The 20MW Multitrade Rabun Gap biomass plant has commenced final stages of construction and is expected to be operating shortly.
MaxWest Environmental Systems inaugurated a first of its kind biosolids gasification facility in Sanford, Florida. The plant provides a cost-effective means of disposing municipal biosolids as well as providing a supply of thermal energy.
SkyFuel, Inc unveiled its parabolic trough assembly (SkyTrough™) demonstration unit near Denver, Colorado, but more importantly, signed a contract for a commercial scale installation at the Cogentrix SEGS facility in California.
Miasolé completed construction of its first solar module production facility and is well on its way to transitioning from a development stage company to a commercial vendor of cost competitive thin-film solar products.
Johnstown Regional Energy ("JRE") continues to increase landfill gas volumes produced at the three Pennsylvanian landfill sites it controls through the drilling of additional wells. JRE has completed drilling 78 of 104 planned wells for this calendar year.
For further information, please contact:
Simon Shaw Director, Energy & Climate Advisors +44 (0) 20 7553 2361
Daniel ShapiroDirector, Energy & Climate Advisors +1 225 987 7408
Ivonne Cantu / Oliver Goad Cenkos Securities plc +44 (0) 20 7397 8900
Chairman's Statement
I am delighted to report the significant progress made by Leaf Clean Energy Company during our last fiscal year. Our aggregate investments and commitments now total $243 million spread across 11 different portfolio companies. While there have been challenges stemming from the current market environment, our results since inception reflect a valuable and well diversified clean energy portfolio.
To put the Company's performance into proper perspective, over the course of the last year the AIM 100 Index was down 52% while the WilderHill New Energy Global Innovation Index, which tracks publicly traded clean tech and renewable businesses, was down 43%. Meanwhile over the same period, the Company's share price remained stable. Our net asset value at 30 June 2009 was £1.04 sterling per share (£0.99 sterling per share at 30 June 2008). Given these sobering economic times, we are proud of our progress.
We believe our steady performance is the result of many factors, including the diversity of our portfolio across clean energy sectors and the balance between project- and technology-oriented investments. The Company continues to make progress on its business plan while also focusing more resources and attention on ensuring the success of our existing investments.
Over the last year, many of our portfolio companies made progress on achieving important milestones and executing key elements of their business plans. Some of the highlights include:
The successful completion of the Multitrade Telogia, LLC 14 MW biomass plant in the south-eastern US. The plant was completed on budget and on schedule and is now generating electricity.
Similarly, the Company's other biomass plant holding, Multitrade Rabun Gap, LLC, has advanced to the final stages of construction and is expected to be operating shortly.
MaxWest Environmental Systems, Inc, inaugurated its first proprietary biosolids gasification facility in Sanford, Florida. This is a significant milestone for the company, demonstrating its ability to successfully develop and commercialize its waste-to-energy gasifiers.
SkyFuel, Inc unveiled its initial demonstration unit near Denver, Colorado, but more importantly, signed a contract for a commercial scale installation at the Cogentrix SEGS facility in California.
Miasolé completed construction of its first solar module production facility and is well on its way to transitioning from a development stage company to a commercial vendor of cost competitive thin-film solar products.
In addition to these specific accomplishments at the portfolio level, there are positive macroeconomic factors at work. We see growing discussion and support for Federal clean energy legislation coming out of the US Congress at the urging of the Obama administration. Illustratively, the US economic stimulus bill was recently enacted and its effects are reverberating through the economy, helping many companies, including our own, meet their near-term objectives. The legislation provides for a loan guarantee programme and a cash grant scheme in lieu of tax credits. These incentives are breathing new life into the clean energy sector and making operations more efficient for our portfolio companies. Other important energy legislative initiatives are also working their way through Congress. The debate on capping greenhouse gas emissions is progressing along with bills establishing renewable energy and renewable fuel standards. Each one of these legislative initiatives has the ability to propel many of our investments in the coming years.
This past year has also seen the Company carry out a limited share buyback program. As at the end of 30 June 2009, we had purchased for cancellation 16,366,227 ordinary shares at an average price of 95 pence per share for a total value of £15.64 million.
Taken together, the progress at the portfolio level combined with the rising tide of favourable US clean energy legislation puts the Company in an enviable position. Looking ahead, your Board is confident that the investment outlook is positive for generating long-term capital appreciation for our shareholders. Jointly with our management company, Energy and Climate Advisors (a joint venture between EEA Fund Management and Shaw Capital), we remain committed to ensuring the success of the Company's portfolio companies and look forward to compelling new investment opportunities in the burgeoning clean energy space.
Peter Tom
Chairman
10 September 2009
Management Company Report
Leaf Clean Energy Company's ("Leaf" or "Company") second Annual Report and Financial Statement encompasses a period marked by a global economic downturn and the collapse of credit markets. Although these circumstances posed some challenges, Energy and Climate Advisors ("E&CA"), the Appointed Representative (acting on behalf of EEA Fund Management in its role as Asset Advisor of Leaf), continued to make significant progress in identifying, developing and executing on investment opportunities for the Company. Since the period covered by the previous Leaf Annual Report, which ended 30 June 2008, the Company closed on eight new investments representing an aggregate amount of $188 million. These investments were made across several subsectors including wind, biomass, landfill gas and waste-to-energy. The new investments broadened Leaf's already diverse clean energy footprint which included solar and biofuels assets acquired in the Company's first year of operation. The current portfolio made up of the following 11 discreet investments:
| Name of investment | Place of incorporation | Investment type | Principal activity |
| Invenergy Wind, LLC | US (Delaware) | Preferred units | Wind electricity generation |
| Johnstown Regional Energy, LLC | US (Pennsylvania) | Ordinary equity + loan | Landfill gas projects |
| Multitrade Rabun Gap, LLC | US (Delaware) | Ordinary equity + loan | Biomass power generation |
| Miasolé, Inc | US (California) | Preferred units | Development of thin film solar products |
| SkyFuel, Inc | US (Delaware) | Preferred units | Design and deployment of concentrating solar power systems |
| Multitrade Telogia, LLC | US (Virginia) | Ordinary equity + loan | Biomass power generation |
| MaxWest Environmental Systems, Inc | US (Nevada) | Preferred units | Waste-to-energy gasification facilities |
| Range Fuels, Inc | US (Delaware) | Preferred units | Cellulosic ethanol production facility |
| Vital Renewable Energy Company, LLC | US (Delaware) | Preferred units | Brazilian ethanol plantation assets |
| Energía Escalona I, S.A de C.V (Energía Escalona) | Mexico | Ordinary equity | Run-of-river hydro plant |
| Greenline Industries, Inc | US (Delaware) | Preferred units | Biodiesel technology and equipment provider |
The Company's assets reflect a balanced and diverse portfolio of clean energy investments principally in North America. There is both sectoral diversity as well as of investment type. The Company invests in active operational assets along with more growth oriented corporate equity. It is the Management Company's view that the Company's portfolio is well positioned to generate shareholder value as the global economy normalizes and the drivers behind the growth in clean energy and climate change continue apace.
E&CA has been cognizant of the potential challenges to our portfolio from the current economic slowdown. The market downturn has clearly exacerbated the financing gap for capital intensive technology companies in the clean energy arena which traditionally require an infusion of outside funding to cross the "valley of death" to full commercialization. This has made our management approach over the past two quarters more introspective in nature as we have focused on ensuring that the Company's existing portfolio companies are properly capitalized and operating in a cost-effective manner. Yet, crisis is always a handmaiden to opportunity, and the current market is no exception. The general constraints on credit and liquidity have given an edge to well-financed investors. The Company is well positioned to take advantage of this opportunity and E&CA continues to actively originate and review potential investments.
The long-term drivers for clean energy in the US remain strong. The on-going consolidation of public and political support for action on the twin problems of energy supply and climate change has only improved the opportunity set. Certainly the US federal government under President Obama has made investing in the clean energy economy in the United States a top priority and has followed up with the enactment of the American Recovery and Reinvestment Act of 2009 ("ARRA"). The ARRA is a stimulus package that provides significant support for clean technologies, energy efficiency and transmission. The Leaf portfolio companies stand to benefit from ARRA and its progeny of increased incentives for renewable energy and clean fuels. As a result, E&CA has worked closely with the senior management teams of Leaf's portfolio companies to ensure that each is positioned properly to take advantage of relevant government grants, guarantees, and incentives.
The developing US response to climate change is another source of momentum around renewable energy. The next twelve months will be instrumental in clarifying the legislative debate around US carbon legislation as well as the international discussions regarding a successor scheme to the Kyoto Protocol. The United Nations Climate Change Conference in Copenhagen later this year will be an important bell-weather for whether the world's largest consumer of fossil fuels (US) and the world's largest emitter of greenhouse gases (China) can reach agreement on global carbon policies beyond 2012. E&CA has worked to position the portfolio companies to take advantage of the growth in the carbon markets when they emerge in the United States.
1. Closed Investments
As of 30 June 2009, the Company is not actively negotiating nor has it entered into any Heads of Terms for investment. As noted, E&CA's short term focus has been on managing the Company's existing portfolio of investments although E&CA has continued to assess and review investment opportunities. Consequently, E&CA does envisage subsequent investments into a number of current portfolio companies to ensure each is appropriately capitalised to execute their respective business plans. Nevertheless, E&CA will continue to seek investment opportunities for Leaf including in new areas such as efficiency technologies, especially in the smart grid and green buildings sectors.
On the whole, Leaf's investments are performing generally as planned and accordingly, the majority of the Company's portfolio investments have been accounted for "at cost" in the present financial statements. In fact, since 30 June, the Multitrade Telogia biomass project and the Multitrade Rabun Gap biomass project are now entering or nearing commercial operation, which is expected to increase their overall market value. However, the Company has not been immune to the effects of the economic downturn, which has resulted in a markdown of the Company's portfolio Fair Value estimate by US$16.4 million. This represents a 4.9% negative change to the Company's net asset value as of the December 2008 Interim Report.
Some selected noteworthy events from the Company's portfolio over the reporting period, are as follows:
• SkyFuel successfully unveiled its parabolic trough assembly (SkyTrough™) at its research and development facility in Arvada, Colorado. Since then the company has executed a contract for a commercial scale project to be installed at the Cogentrix SEGS facility in California.
• The nominal 14 MW Multitrade Telogia biomass facility has been completed on time and under budget. The plant began generating power as of 27 July 2009.
• Construction of the 20 MW Multitrade Rabun Gap biomass facility is nearing completion and initial power generation is expected to commence sometime in September 2009.
• A preliminary Notice to Proceed has been issued to the EPC contractor developing the Energia Escalona run-of-river hydro facility in Mexico, and scenarios to add power capacity at the site are being evaluated. Escalona has also met an important milestone in obtaining both host country approval and UK DNA approval as part of its efforts to register the plant as a Clean Development Mechanism project capable of generating valuable Kyoto Protocol quality carbon credits.
• Johnstown Regional Energy continues to increase landfill gas volumes produced at the three Pennsylvanian landfill sites it controls through the drilling of additional wells. JRE has completed drilling 78 of 104 planned wells for this calendar year.
• MaxWest Environmental Systems inaugurated this past May a first of its kind biosolids gasification facility in Sanford, Florida. The plant provides a cost-effective means of disposing municipal biosolids as well as providing a supply of thermal energy.
• Greenline Industries Greenline Industries' customers faced a lack of available credit to finance construction of biodiesel plants since August 2008. Along with the downward pressure on margins in the worldwide biodiesel markets due to high feedstock prices coupled with lower wholesale pricing for biodiesel, Greenline's sales were materially affected. As a result, Greenline incurred large operating losses and filed for Chapter 7 bankruptcy proceedings on 7 August 2009. This investment has now been written down to US$nil.
2. Note on Currency Exchange Rates
The initial share capital raised from the public offering in June 2007 was £200 million. This was at a time when the US dollar was depreciating against pounds sterling. Between 28 June 2007, when the first allotment of shares took place, and the period ending 30 June 2009, the US dollar has appreciated against pounds sterling by about 17%. The total assets of the Company ($315 million) are predominately US dollar denominated with the remainder held in UK pound sterling. The US dollar to UK pound sterling ratio for the net assets of the Company is 84%/16%. The cash portion of the Company's net assets ($168 million) is held 70% in US dollars and 30% UK pound sterling The aim has been to maintain an average rate that would generally result in lower losses from the appreciation in the US dollar.
Our net asset value at 30 June 2009 increased by 5 pence from 99 pence to 104 pence per share compared to 30 June 2008.
| NAV | GBP (pence) | USD (cents) | Exchange rate |
| 30 June 2008 | 98.91 | 196.86 | 1.9902 |
| 31 December 2008 | 123.68 | 177.82 | 1.4378 |
| 30 June 2009 | 103.81 | 170.97 | 1.6469 |
Energy and Climate Advisors
Appointed Representative
10 September 2009
Consolidated and Company Income Statements
for the year ended 30 June 2009
| Group | Company | ||||
| Note | Year ended 30 June 2009 | Period ended 30 June 2008 | Year ended 30 June 2009 | Period ended 30 June 2008 | |
|
|
| US$'000 | US$'000 | US$'000 | US$'000 |
| Income | |||||
| Interest income on cash balances | 7 | 4,430 | 18,647 | 4,430 | 18,647 |
| Interest income on investments at fair value through profit or loss | 557 | - | - | - | |
| Unrealised losses on revaluation of investments at fair value through profit or loss | (30,400) | - | (30,400) | - | |
| Net foreign exchange loss | (16,818) | (1,958) | (16,818) | (1,958) | |
| Net investment (expense)/income |
| (42,231) | 16,689 | (42,788) | 16,689 |
| Management fees | 8.1 | (6,902) | (7,762) | (6,902) | (7,762) |
| Legal and professional fees | 8.2 | (2,674) | (488) | (2,674) | (488) |
| Directors' remuneration | 16 | (370) | (366) | (370) | (366) |
| Administration fees | 8.3 | (270) | (262) | (270) | (262) |
| Other expenses | 8.4 | (855) | (193) | (855) | (193) |
| Operating expenses |
| (11,071) | (9,071) | (11,071) | (9,071) |
| (Loss)/profit before tax | (53,302) | 7,618 | (53,859) | 7,618 | |
| Income tax expense | 3.12 | - | - | - | - |
| (Loss)/profit for the year/period |
| (53,302) | 7,618 | (53,859) | 7,618 |
| Basic and diluted (loss)/earnings per share (cents) | 15 | (28.09) | 3.81 | (28.38) | 3.81 |
The Directors consider that all results derived from continuing activities.
Consolidated and Company Balance Sheet
as at 30 June 2009
| Group | Company | ||||
| Note | 30 June 2009 | 30 June 2008 | 30 June 2009 | 30 June 2008 | |
|
|
| US$'000 | US$'000 | US$'000 | US$'000 |
| Investments at fair value through profit or loss | 9.1 | 146,722 | 55,000 | - | - |
| Investments in subsidiaries at fair value through profit or loss | 9.2 | - | - | 168,868 | 55,000 |
| Total non-current assets |
| 146,722 | 55,000 | 168,868 | 55,000 |
| Trade and other receivables | 10 | 121 | 315 | 121 | 315 |
| Cash and cash equivalents | 11 | 167,957 | 340,752 | 167,075 | 340,752 |
| Total current assets |
| 168,078 | 341,067 | 167,196 | 341,067 |
| Total assets |
| 314,800 | 396,067 | 336,064 | 396,067 |
| Issued share capital | 12 | 37 | 40 | 37 | 40 |
| Share premium | 12 | 359,603 | 386,067 | 359,603 | 386,067 |
| Retained (losses)/earnings | (45,684) | 7,618 | (46,241) | 7,618 | |
| Total equity |
| 313,956 | 393,725 | 313,399 | 393,725 |
| Unpaid capital contributions to subsidiaries | 13 | - | - | 14,745 | - |
| Total non-current liabilities | - | - | 14,745 | - | |
| Trade and other payables | 14 | 844 | 2,342 | 844 | 2,342 |
| Unpaid capital contributions to subsidiaries | 13 | - | - | 7,076 | - |
| Total current liabilities |
| 844 | 2,342 | 7,920 | 2,342 |
| Total liabilities | 844 | 2,342 | 22,665 | 2,342 | |
| Total equity and liabilities |
| 314,800 | 396,067 | 336,064 | 396,067 |
| Net asset Value per share (cents) | 171.0 | 196.9 | 170.6 | 196.9 | |
Statements of Changes in Equity
for the year ended 30 June 2009
| Group | Share capital | Share premium | Retained earnings | Total |
|
| US$'000 | US$'000 | US$'000 | US$'000 |
| Balance at beginning of period | - | - | - | - |
| Shares issued in the period | 40 | 399,873 | - | 399,913 |
| Share issue costs | - | (13,806) | - | (13,806) |
| Profit for the period | - | - | 7,618 | 7,618 |
| Balance as at 30 June 2008 | 40 | 386,067 | 7,618 | 393,725 |
| Balance at 1 July 2008 | 40 | 386,067 | 7,618 | 393,725 |
| Share repurchases | (3) | (26,464) | - | (26,467) |
| Loss for the year | - | - | (53,302) | (53,302) |
| Balance as at 30 June 2009 | 37 | 359,603 | (45,684) | 313,956 |
| Company | Share capital | Share premium | Retained earnings | Total |
|
| US$'000 | US$'000 | US$'000 | US$'000 |
| Balance at beginning of period | - | - | - | - |
| Shares issued in the period | 40 | 399,873 | - | 399,913 |
| Share issue costs | - | (13,806) | - | (13,806) |
| Profit for the period | - | - | 7,618 | 7,618 |
| Balance as at 30 June 2008 | 40 | 386,067 | 7,618 | 393,725 |
| Balance at 1 July 2008 | 40 | 386,067 | 7,618 | 393,725 |
| Share repurchases | (3) | (26,464) | - | (26,467) |
| Loss for the year | - | - | (53,859) | (53,859) |
| Balance as at 30 June 2009 | 37 | 359,603 | (46,241) | 313,399 |
Consolidated and Company Cash Flow Statements
for the year ended 30 June 2009
| Group | Company | |||
| Year ended 30 June 2009 | Period ended 30 June 2008 | Year ended 30 June 2009 | Period ended 30 June 2008 | |
|
| US$'000 | US$'000 | US$'000 | US$'000 |
| Cash flows from operating activities | ||||
| Interest received on cash balances | 4,599 | 18,449 | 4,599 | 18,449 |
| Operating expenses paid | (12,907) | (6,900) | (12,907) | (6,900) |
| Net cash (used in)/generated from operating activities | (8,308) | 11,549 | (8,308) | 11,549 |
| Cash flows from investing activities | ||||
| Interest income received on investment loan | 557 | - | - | - |
| Purchase of investments at fair value through profit or loss | (122,089) | (54,950) | (122,089) | (54,950) |
| Capital repayment on investment loan | 325 | - | - | - |
| Net cash used in investing activities | (121,207) | (54,950) | (122,089) | (54,950) |
| Cash flows financing activities | ||||
| Proceeds from the issue of shares | - | 399,913 | - | 399,913 |
| Share issue costs | - | (13,806) | - | (13,806) |
| Repurchase of shares in the period | (26,467) | - | (26,467) | - |
| Net cash (used in)/generated from financing activities | (26,467) | 386,107 | (26,467) | 386,107 |
| (Decrease)/increase in cash and cash equivalents | (155,982) | 342,706 | (156,864) | 342,706 |
| Cash and cash equivalents at start of year/period | 340,752 | - | 340,752 | - |
| Effect of exchange rate fluctuations on cash and cash equivalents | (16,813) | (1,954) | (16,813) | (1,954) |
| Cash and cash equivalents at end of year/period | 167,957 | 340,752 | 167,075 | 340,752 |
Consolidated and Company Cash Flow Statements
for the year ended 30 June 2009 (continued)
| Reconciliation of (loss)/profit for the year/period to net cash (used in)/generated from operating activities | Group | Company | ||
| Year ended 30 June 2009 | Period ended 30 June 2008 | Year ended 30 June 2009 | Period ended 30 June 2008 | |
|
| US$'000 | US$'000 | US$'000 | US$'000 |
| (Loss)/profit for the year/period | (53,302) | 7,618 | (53,859) | 7,618 |
| Adjustments: | ||||
| Interest income on cash balances | (4,431) | (18,647) | (4,431) | (18,647) |
| Interest income on investments at fair value through profit or loss | (557) | - | - | - |
| Unrealised losses on revaluation of investments | 30,400 | - | 30,400 | - |
| Net foreign exchange loss | 16,818 | 1,954 | 16,818 | 1,954 |
| Operating loss before changes in working capital | (11,072) | (9,071) | (11,072) | (9,071) |
| Decrease/(increase) in trade and other receivables | 26 | (116) | 26 | (116) |
| (Decrease)/increase in trade and other payables | (1,861) | 2,287 | (1,861) | 2,287 |
| (12,907) | (6,900) | (12,907) | (6,900) | |
| Interest received on cash balances | 4,599 | 18,449 | 4,599 | 18,449 |
| Net cash (used in)/generated from operating activities | (8,308) | 11,549 | (8,308) | 11,549 |
Notes to the Consolidated Financial Statements
1 The Company
Leaf Clean Energy Company (the "Company") was incorporated and registered in the Cayman Islands on 14 May 2007. The Company was established to invest in clean energy projects, predominantly in North America. Clean energy includes activities such as the production of alternative fuels, renewable power generation and the use of technologies to reduce the environmental impact of traditional energy. The Company seeks to achieve long term capital appreciation primarily through making privately negotiated acquisitions of interest (principally equity but also equity-related and subordinated or mezzanine debt securities) in both projects and companies which own assets or which participate in the clean energy sector and through the generation and commercialisation of carbon credits derived from these projects.
Pursuant to an Admission Document dated 22 June 2007 there was an original placing of up to 200,000,000 Ordinary Shares of GB£0.0001 each for GB£1 each.
The Shares of the Company were admitted to trading on the AIM market of the London Stock Exchange ("AIM") on 28 June 2007 when dealings also commenced.
The Company's agents and the Asset Advisor perform all significant functions. Accordingly, the Company itself has no employees.
2 The Subsidiaries
At the year end the Company had the following subsidiary companies:
| Country of incorporation | Percentage of shares held | |
| Leaf Bioenergy Company | Cayman Islands | 100% |
| Leaf Biomass Company | Cayman Islands | 100% |
| Leaf Biomass Investments, Inc.* | USA (Delaware) | 100% |
| Leaf Escalona Company* | Cayman Islands | 100% |
| Leaf Finance Company | Cayman Islands | 100% |
| Leaf Greenline Company* | Cayman Islands | 100% |
| Leaf Hydro Company | Cayman Islands | 100% |
| Leaf Invenergy Company* | Cayman Islands | 100% |
| Leaf Invenergy US Investments, Inc* | USA (Delaware) | 100% |
| Leaf LFG Company | Cayman Islands | 100% |
| Leaf LFG US Investments, Inc.* | USA (Delaware) | 100% |
| Leaf MaxWest Company* | USA (Delaware) | 100% |
| Leaf Miasolé* | Cayman Islands | 100% |
| Leaf Range Fuels Company* | Cayman Islands | 100% |
| Leaf Skyfuels Company* | Cayman Islands | 100% |
| Leaf Solar Company | Cayman Islands | 100% |
| Leaf VREC* | Cayman Islands | 100% |
| Leaf Waste Energy | Cayman Islands | 100% |
| Leaf Wind Company | Cayman Islands | 100% |
*Indirect subsidiaries
3 Significant Accounting Policies
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below.
The annual report of the Company for the year ended 30 June 2009 comprises the Company and its subsidiaries (together referred to as the "Group").
3.1 Basis of presentation
These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") promulgated by the International Accounting Standards Board ("IASB") except for the non-consolidation of investee entities - see note 3.4. Management has concluded that the report fairly represents the entity's financial position, financial performance and cash flows.
These consolidated financial statements are presented in United States Dollars ("US$"), which is the Company's functional currency. All financial information presented in US$ has been rounded to the nearest thousand.
3.2 Use of estimates and judgements
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
The most significant area requiring estimation and judgement by the Directors is the valuation of unquoted investments, see note 9.
3.3 Foreign currency translation
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are recognised in profit or loss.
Assets and liabilities of the Group's overseas operations are measured using their functional currency, being the currency of the primary economic environment in which they operate.
On consolidation, the assets and liabilities of the Group's overseas operations are translated into US Dollars, the presentation currency, at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period unless exchange rates fluctuate significantly. Exchange differences arising, if any, are classified as equity and transferred to the group's foreign exchange translation reserve. Such exchange differences are recognised in the income statement in the period in which the operation is sold.
3.4 Investments
The Group designated its investments, including equity, loan and similar instruments, as at fair value through profit or loss on initial recognition. Gains and losses arising from changes in fair value of investments, including foreign exchange movements, are recognised in the profit or loss for the year.
Unquoted investments are valued using recognised valuation methodologies, based on the International Private Equity and Venture Capital Guidelines, which reflect the amount for which an asset could be exchanged between knowledgeable, willing parties on an arm's length basis. The portfolio valuation methodology is detailed on page 33.
Investee entities over which the Group has the power to exercise control are not consolidated as the Directors consider that consolidation would render the consolidated financial statements misleading, as such investments are held for capital gain as part of an investment portfolio that is measured and its performance evaluated on a fair value basis. They are instead stated at fair value. This is a departure from IAS 27 Consolidated and Separate Financial Statements, which requires all entities over which the Group has the power to exercise control to be consolidated.
The Group holds a number of investments in entities over which it has significant influence which meet the definition of associates in IAS 28 Investment in Associates. The Company has taken advantage of the exemption from applying IAS 28 as these investments are held as part of the Group's portfolio with a view to the ultimate realisation of capital gains. These investments are accounted for at fair value through profit and loss.
Investments in subsidiaries in the Parent Company financial statements are stated fair value through profit or loss. Fair value for this purpose is determined with reference to the valuation of the underlying investee entities.
3.5 Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are short-term highly liquid investments that are readily converted to known amounts of cash and which are subject to an insignificant risk of changes in value.
3.6 Revenue and expense recognition
Interest income is recognised on a time-proportionate basis using the effective interest rate method.
Dividends receivable on equity and non-equity shares, which carry significant equity rights, are recognised as revenue when the shareholders' right to receive payment has been established, normally ex-dividend date. When no ex-dividend date is available, dividends receivable on or before the period end are treated as revenue for the period. Provision is made for any dividends not expected to be received.
Fixed returns on debt securities and loans are recognised on an effective interest rate basis, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.
Expenses are accounted for on an accrual basis. Expenses are charged to the income statement. This includes expenses directly related to making an investment which is held at fair value through profit or loss.
3.7 Share issue costs
Costs directly related to the issue of shares are deducted from equity.
3.8 Basis of consolidation
Subsidiaries
Subsidiaries are those enterprises controlled by the Group but excluding entities which are considered investments (see note 3.4). Control exists where the Group has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases.
Associates
An associate is an entity over which the Group is in a position to exercise significant influence but not control or joint control, through the financial and operating policy decisions of the investee entity. As the Company is an investment company, and its investments held in associates are designated as held at fair value through profit or loss, the provisions of IAS 28 'Investments in Associates' do not apply. Such investments are measured at fair value, with changes in fair value recognised in profit or loss in the period in which they occur.
Joint ventures
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. As the Company is an investment company, and its interests held in joint ventures are designated as held at fair value through profit or loss, the provisions of IAS 31 'Interests in Joint Ventures' do not apply. Such interests are measured at fair value, with changes in fair value recognised in profit or loss in the period in which they occur.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.
3.9 Dividends payable
Dividends payable are recognised as a liability in the period in which they are declared and approved.
3.10 Other receivables
Trade and other receivables are stated at their recoverable amount.
3.11 Trade and other payables
Trade and other payables are stated at their cost.
3.12 Income tax expense
Cayman Islands taxation
The Company received from the Governor-in-Cabinet of the Cayman Islands, an undertaking that, for a period of 20 years from 5 June 2007 no laws of the Cayman Islands imposing any tax on profits, income, gains or appreciation shall apply to the Company and that no such tax or any tax in the nature of estate duty or inheritance tax shall be payable on the shares, debentures or other obligations of the Company. Under the current Cayman Islands law, no tax will be charged on profits or gains of the Company and dividends of the Company would be payable to Shareholders resident in or outside the Cayman Islands without deduction of tax.
3.13 Future changes in accounting policies
IASB and IFRIC have issued the following standards and interpretations with an effective date after the date of these financial statements:
| New/Revised International Financial Reporting Standards (IAS/IFRS) | Effective date (accounting periods commencing after) |
| IAS 1 Presentation of Financial Statements - Comprehensive revision including requiring a statement of comprehensive income (Revised 2007) | 1 January 2009 |
| IAS 1 Presentation of Financial Statements (Revised May 2008)* | 1 January 2009 |
| IAS 1 Presentation of Financial Statements - Amendments relating to disclosure of puttable instruments and obligations arising on liquidation (2008) | 1 January 2009 |
| IAS 1 Presentation of Financial Statements (Revised April 2009)** | 1 January 2010 |
| IAS 7 Statement of Cash Flows (Revised April 2009)** | 1 January 2010 |
| IAS 23 Borrowing Costs - Comprehensive revision to prohibit intermediate expensing (Amended 2007) | 1 January 2009 |
| IAS 23 Borrowing costs (Revised May 2008)* | 1 January 2009 |
| IAS 27 Consolidated and Separate Financial Statements - Consequential amendments resulting from amendments to IFRS 3 (2008) | 1 July 2009 |
| IAS 27 Consolidated and Separate Financial Statements - Amendment relating to cost of an investment on first-time adoption (Revised 2008) | 1 January 2009 |
| IAS 27 Consolidated and Separate Financial Statements (Revised May 2008)* | 1 January 2009 |
| IAS 28 Investments in Associates - Consequential amendments resulting from amendments to IFRS 3 (2008) | 1 July 2009 |
| IAS 28 Investments in Associates* | 1 January 2009 |
| IAS 31 Interests in Joint Ventures - Consequential amendments resulting from amendments to IFRS 3 (2008) | 1 July 2009 |
| IAS 31 Interests in Joint Ventures (Revised May 2008)* | 1 January 2009 |
| IAS 32 Financial instruments: Presentation - Amendments relating to puttable instruments and obligations arising on liquidation | 1 January 2009 |
| IAS 36 Impairment of Assets (Revised May 2008)* | 1 January 2009 |
| IAS 36 Impairment of Assets** | 1 January 2010 |
| IAS 39 Financial Instruments: Recognition and Measurement (Revised May 2008)* | 1 January 2009 |
| IAS 39 Financial Instruments: Recognition and Measurement - Amendments for embedded derivatives when reclassifying financial instruments | 30 June 2009 |
| IAS 39 Financial Instruments: Recognition and Measurement - Amendments for eligible hedged items | 1 July 2009 |
| IAS 39 Financial Instruments: Recognition and Measurement (Revised April 2009)** | 1 January 2010 |
| 3.13 Future changes in accounting policies | |
| IFRS 3 Business Combinations - Comprehensive revision on applying the acquisition method | 1 July 2009 |
| IFRS 8 Operating Segments (Revised April 2009)** | 1 January 2010 |
| IFRS 5 Non-current Assets Held for Sale and Discontinued Operations (Revised May 2008)* | 1 July 2009 |
| IFRS 5 Non-current Assets Held for Sale and Discontinued Operations** | 1 January 2010 |
| IFRS 7 Financial Instruments: Disclosures - Amendments enhancing disclosures about fair value and liquidity risk (Revised March 2009) | 1 January 2009 |
| IFRS 8 Operating Segments (Original issuance 2006) | 1 January 2009 |
| IFRS 8 Operating Segments (Revised April 2009)** | 1 January 2010 |
| IFRIC Interpretation | |
| IFRIC13 Customer loyalty programmes | 1 July 2008 |
| IFRIC 15 Agreement for Construction of Real Estate | 1 January 2009 |
| IFRIC 16 Hedges of a Net Investment in a Foreign Operation | 1 October 2008 |
| IFRIC 17 Distributions of Non-Cash Assets to Owners | 1 July 2009 |
| IFRIC 18 Transfers of Assets from Customers | 1 July 2009 |
*Amendments resulting from May 2008 Annual Improvements to IFRSs
**Amendments resulting from April 2009 Annual Improvements to IFRSs
IFRS 8 introduces the "management approach" to segment reporting, with information based on internal reports. Management are currently assessing the impact of these on the disclosures to be presented regarding segmental reporting.
The Directors do not expect the adoption of the other standards and interpretations to have a material impact on the Group's financial statements in the period of initial application.
4 Segment Reporting
The Group operates in one business and geographic segment, being investment in clean energy projects predominantly in North America.
5 Net Asset Value per Share
Group
The net asset value per share as at 30 June 2009 is 170.97 cents based on consolidated net assets of US$313,956,017 and 183,633,733 ordinary shares in issue as at that date (2008: 196.9 cents based on net assets of US$393,724,686 and 200,000,000 ordinary shares).
Company
The net asset value per share as at 30 June 2009 is 170.67 cents based on net assets of US$313,399,017 and 183,633,733 ordinary shares in issue as at that date (2008: 196.9 cents based on net assets of US$393,724,686 and 200,000,000 ordinary shares).
6 Related Party Transactions
Parties are considered to be related if one party has the ability to control the other party or to exercise significant influence over the other party in making financial or operational decisions.
The Asset Advisor, Management Company, and the Administrator are considered related parties due to the significance of the contracts with these parties. Details of the fee arrangements with these parties are given in note 8.
The Directors are considered related parties as they have authority and responsibility for planning, directing and controlling the activities of the Group. Total Directors' fees and expenses during the year amounted to US$369,515 (period ended 30 June 2008: US$366,000) of which US$135,000 was outstanding at 30 June 2009 (2008: US$87,070)
The Group used the services of companies that are owned by or significantly influenced by shareholders of the Management Company. Total re-charges amounting to US$122,100 were charged by Shaw Capital, Inc to the Company (period ended 30 June 2008: US$50,868) and US$122,100 was outstanding as at 30 June 2009 (2008: US$nil). Total re-charges billed by EEA Fund Management Limited were GB£23,543 (US$38,774 based on 30 June exchange rate) (period ended 30 June 2008: US$nil) and the amount was outstanding at 30 June 2009 (2008: US$nil). Affiliates of Shaw Capital, Inc. billed the Company
6 Related Party Transactions
US$168,278 for professional fees related to specific investment due diligence or engineering and construction support. The amounts were billed based on normal market rates for such services and were due and payable under normal payment terms.
Curtis Moffatt, the Chairman of the Audit Committee and one of the Board members, is a partner at Van Ness Feldman. The Group engaged Van Ness Feldman for providing services in US energy and environmental laws consultations. Total fees for the year ended 30 June 2009 amounted to US$54,044 (period ended 30 June 2008: US$17,800) and the amount accrued but not paid at the year end was US$ nil (2008: US$17,800).
At the time Van Ness Feldman was engaged to assist in the due diligence matter on behalf of Leaf, Mr. Moffatt recused himself from any consideration of the proposed investment by Leaf since such consideration would rely, in part, upon the advice and counsel of Van Ness Feldman.
7 Interest Income on Cash Balances
| Group and Company | Year ended 30 June 2009 | Period ended 30 June 2008 |
| US$'000 | US$'000 | |
| Interest income receivable on Sterling cash balances | 2,090 | 16,279 |
| Interest income receivable on US Dollar cash balances | 2,340 | 2,368 |
| 4,430 | 18,647 |
8 Charges and Fees
8.1 Management fees
Annual fees
Under the Asset Advisory Agreement, the Management Company receives an annual management fee from the Company, payable quarterly in advance, equating to 0.5% per quarter of the Net Asset Value of the Company as determined in accordance with such agreement, as at the quarter end dates (being 31 March, 30 June, 30 September and 31 December).
Management fees for the year ended 30 June 2009 amounted to US$6,902,416 (period ended 30 June 2008: US$7,762,180) and the amount accrued but not paid at the year end was US$ nil. (2008: US$1,970,256)
Performance fees
The Management Company may also, pursuant to the Asset Advisory Agreement, become entitled to receive from the Company an annual performance fee calculated by reference to Total Shareholder Return over the course of a performance period, starting on Admission.
Any performance fee will become payable once annualised Total Shareholder Return in any performance period exceeds an annual rate of 9% ("the Hurdle"). Once the Hurdle is exceeded, the performance fee will become payable in an amount equal to 20% of any aggregate return over and above the Hurdle subject to a high watermark. Total Shareholder Return is calculated on the basis of the increase in market capitalization of the Company, allowing for dividend and other distributions paid to Shareholders in the relevant performance period.
There were no performance fees payable for the year ended 30 June 2009 (period ended 30 June 2008: US$nil).
8.2 Legal and professional fees
Legal and professional fees represent legal, advisory and consultancy fees incurred during and after the implementation of investment acquisitions, as well as work on group and portfolio structuring.
Legal and professional fees for the year amounted to US$2,674,431 (period ended 30 June 2008: US$488,051) and US$233,712 were outstanding as at 30 June 09 (2008: US$181,000).
8.3 Administration fees
EHM International Limited was appointed Administrator of the Company with effect from 1 June 2008. The Administrator is entitled to an administration fee, payable quarterly in arrears and calculated in respect of each quarter or other period, with a minimum fee of GBP25,000 per quarter at the rate of 0.08% per annum where the total assets of the Company less borrowings is less than US$100,000,000; 0.07% where the total assets of the Company less borrowings at the end of the relevant quarter is greater than or equal to US$100,000,000 but less than US$200,000,000; and at the rate of 0.06% per annum where the total assets of the Company less borrowings at the end of the relevant quarter is greater than or equal to US$200,000,000.
EHM International Limited administration fees for the year amounted to US$239,046 (period ended 30 June 2008: US$22,300) and US$52,906 outstanding as at 30 June 2009 (2008: US$22,300). US$30,671 was paid to the previous administrator, Equity Trust Fund Services (Luxembourg) S.A in relation to professional services rendered 1 July to 30 September 2008.
8.4 Other expenses
| Group and Company | Year ended 30 June 2009 | Period ended 30 June 2008 |
| US$'000 | US$'000 | |
| Recharges fees from related parties (see note 6) | 160 | - |
| Nomad retainer fees | 131 | - |
| Sponsorship fees | 75 | - |
| Audit fees | 66 | 50 |
| Directors' and Officers' insurance expense | 59 | 60 |
| Printing and stationery expenses | 47 | 12 |
| Travel and subsistence expenses | 27 | 14 |
| Registrar fees and costs | 25 | 18 |
| Stock exchange fees | 17 | 3 |
| Bank charges | 14 | 7 |
| Other expenses | 234 | 29 |
| Total | 855 | 193 |
Other expenses include US$129,000 contribution for the winding costs of Greenline Industries Inc an investee company.
9 Investments
9.1 Investments at fair value through profit or loss
Investments comprise ordinary stock, loans and preferred stock carrying a cumulative preferred dividend, preferential return of capital and capped rights to share in profits. The Directors, with advice from the Management Company, have reviewed the carrying value of each investment and calculated the aggregate value of the Company's portfolio. Investments are measured at the Directors' estimate of fair value at the reporting date, in accordance with IAS 39 'Financial Instruments: Recognition and measurement'.
| Year ended 30 June 2009 | Period ended 30 June 2008 | ||
| Group | US$'000 | US$'000 | |
| Balance brought forward | 55,000 | - | |
| Purchases at cost | 122,448 | 55,000 | |
| Capital refunded | (326) | - | |
| Losses on investments | (30,400) | - | |
| Balance carried forward | 146,722 | 55,000 |
Investments are stated at fair value through profit or loss on initial recognition. Loans are stated at fair value in conjunction with the related equity investment in the investee company. All investee companies are unquoted.
9.2 Investments in subsidiaries at fair value through profit or loss
| Year ended 30 June 2009 | Period ended 30 June 2008 | ||
| Company | US$'000 | US$'000 | |
| Balance brought forward | 55,000 | - | |
| Additional investments in subsidiaries | 144,268 | 55,000 | |
| Losses on investments in subsidiaries | (30,400) | - | |
| Balance carried forward | 168,868 | 55,000 |
9.3 Portfolio valuation methodology
Unquoted investments are valued by applying an appropriate valuation technique, which makes maximum use of market-based information, is consistent with models generally used by market participants and is applied consistently from period to period, except where a change would result in a better estimation of fair value. The Company primarily invests in unquoted direct investments. Unquoted direct investments have characteristics similar to private equity investments, in that the value is generally determined through the sale or flotation of the entire business, rather than the sale of an individual instrument. Valuations of such investments are based upon the "International Private Equity and Venture Capital Valuation Guidelines."
The Management Company conducted a valuation analysis of the Company's investment portfolio based upon standard valuation approaches compatible with the "International Private Equity and Venture Capital Valuation Guidelines." Given the uncertainties inherent in estimating the fair value of unquoted direct investments, a degree of caution was applied by the Management Company in exercising judgements and making the necessary estimates.
10 Trade and Other Receivables
| Group and Company | 30 June 2009 | 30 June 2008 |
| US$'000 | US$'000 | |
| Interest receivable | 29 | 197 |
| Prepayments | 92 | 118 |
| Total | 121 | 315 |
11 Cash and Cash Equivalents
| 30 June 2009 | 30 June 2008 | |
| Group | US$'000 | US$'000 |
| Short term fixed deposits | 105,154 | 340,752 |
| Bank current account balances | 62,803 | - |
| Total | 167,957 | 340,752 |
| 30 June 2009 | 30 June 2008 | |
| Company | US$'000 | US$'000 |
| Short term fixed deposits | 105,154 | 340,752 |
| Bank current account balances | 61,921 | - |
| Total | 167,075 | 340,752 |
The short-term deposits are subject to interest rates between 0.09% and 0.80% per annum and are fixed for periods ranging up to 3 months from the balance sheet date.
12 Share Capital
| Ordinary shares of GB£0.0001 each | Number of shares | Share capital | Share premium |
| $'000 | $'000 | ||
| In issue at 1 July 2008 | 200,000,000 | 40 | 386,067 |
| Repurchased during the year | (16,366,227) | (3) | (26,464) |
| At 30 June 2009 | 183,633,773 | 37 | 359,603 |
The authorised share capital of the Company is £25,000 divided into 250 million Ordinary Shares of £0.0001 each
Under the terms of the placement on 22 June 2007, the Company issued 200,000,000 shares of GB£0.0001 each par value at a price of GB£1 each. The difference between the issue price and the par value was transferred to share premium account, net of share issue expenses.
Share capital and premium received was translated to US Dollars at the exchange rate prevailing at the date of receipt of the proceeds.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regards to the Company's assets.
During the year 16,366,227 shares were repurchased by the Company leaving 183,633,773 shares in issue as at 30 June 2009. The shares were repurchased in 7 tranches during the year at prices of between 90 pence and 95 pence per share for a total of consideration £15,640,355 (US$26,467,128). The Company's share price has averaged 96.5 pence during the year.
The repurchases of the Company's shares are in line with its capital management philosophy whereby the Board manages the Company's affairs to achieve shareholder returns through capital growth rather than income, and monitors the achievement of this through growth in net asset value per share.
Capital management
The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board manages the Company's affairs to achieve shareholder returns through capital growth rather than income, and monitors the achievement of this through growth in net asset value per share.
Company capital comprises share capital, share premium and reserves. The Company is not subject to externally imposed capital requirements.
13 Unpaid capital contributions to subsidiaries
| Issued share capital | Paid up share capital | Unpaid share capital | |
| $'000 | $'000 | $'000 | |
| Leaf Finance Company | 27,000 | 19,924 | 7,076 |
| Leaf Hydro Company | 20,900 | 6,155 | 14,745 |
| Total | 47,900 | 26,079 | 21,821 |
| Issued share capital | Paid up share capital | Unpaid share capital | |
| $'000 | $'000 | $'000 | |
| Current liabilities | 27,000 | 19,924 | 7,076 |
| Non-current liabilities | 20,900 | 6,155 | 14,745 |
| Total | 47,900 | 26,079 | 21,821 |
14 Trade and Other Payables
| 30 June 2009 | 30 June 2008 | |
| Group and Company | US$'000 | US$'000 |
| Investment call payable | 409 | 50 |
| Amounts due to related parties (note 6) | 160 | - |
| Directors' fees payable | 135 | 87 |
| Administration fees payable | 55 | 141 |
| Audit fees payable | 44 | 50 |
| Other creditors | 41 | 44 |
| Management fees payable | - | 1,970 |
| Total | 844 | 2,342 |
Amounts due to related parties are unsecured, interest free and payable on demand.
15 Basic and Diluted (Loss)/Earnings per Share
Basic and diluted loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year:
| Group | Year ended 30 June 2009 | Period ended 30 June 2008 |
| $'000 | $'000 | |
| (Loss)/profit attributable to equity holders of the Company (US$'000) | (53,302) | 7,618 |
| Weighted average number of ordinary shares in issue (thousands) | 189,760 | 200,000 |
| Basic and fully diluted (loss)/earnings per share (cents per share) | (28.09) | 3.81 |
There is no difference between the basic and diluted earnings per share for the year as there are no potential dilutive ordinary shares.
| Company | Year ended 30 June 2009 | Period ended 30 June 2008 |
| $'000 | $'000 | |
| (Loss)/profit attributable to equity holders of the Company (US$'000) | (53,859) | 7,618 |
| Weighted average number of ordinary shares in issue (thousands) | 189,760 | 200,000 |
| Basic and fully diluted (loss)/earnings per share (cents per share) | (28.38) | 3.81 |
There is no difference between the basic and diluted earnings per share for the year as there are no potential dilutive ordinary shares.
16 Directors' Remuneration
The Directors' annual remuneration was reviewed and recommended to be increased from 1 April 2009 to US$100,000 for the Directors and US$140,000 for the Chairman of the Board per annum. The Director fees are paid quarterly in arrears.
Details of the Directors' remuneration from 1 July 2008 to 31 March 2009 were as follows:
| Remuneration for period 1 July to 31 March 2009 | |
| GB£ | |
| Peter Tom (Chairman) | 45,000 |
| Bran Keogh | 18,750 |
| J. Curtis Moffatt | 22,500 |
| Peter O'Keefe | 22,500 |
| Nora Brownell | 22,500 |
Details of the Directors' annual remuneration effective from 1 April 2009 are as follows:
| Basic annual remuneration | |
| US$ | |
| Peter Tom (Chairman) | 140,000 |
| Bran Keogh | 100,000 |
| J. Curtis Moffatt | 105,000 |
| Peter O'Keefe | 105,000 |
| Nora Brownell | 105,000 |
The Directors are also entitled to receive reimbursement of any expenses in relation to their appointment. Total fees and expenses paid to the Directors for the year ended 30 June 2009 amounted to US$369,515 (period ended 30 June 2008: US$366,125) of which US$135,000 was outstanding at 30 June 2009 (2008: US$87,070).
17 Financial Instruments
The Group's activities expose it to a variety of financial risks: market risk (including currency risk, market price risk and interest rate risk), credit risk and liquidity risk.
Market price risk
The project companies in which the Group invests operate in sectors that may be affected by the prevailing prices of electricity, oil, natural gas and other commodities. As energy and fuels derived from non-renewable sources become more expensive or
scarce, renewable energy and alternative fuels become more valuable. Conversely, if non-renewable energy and fuels become more abundant or, for other reasons become less expensive, the value of renewable or alternative fuels may be negatively affected. As a result, the performance of the project companies is likely to be dependent upon prevailing prices for these commodities, which have been historically, and may continue to be, volatile and subject to wide variations for a variety of reasons beyond the control of the Group or the Asset Advisor. These factors include the level of consumer product demand, weather conditions, governmental regulations in producing and consuming countries, the price and availability of alternative fuels, the supply of oil and natural gas, and overall geo-political and economic conditions. Therefore, volatility of commodity prices may adversely affect the value of the Group's investments.
Market price risk is managed by the Asset Advisor, in accordance with parameters set by the Board.
All of the Group's investments comprise interests in companies which are not publicly traded or freely marketable. The Group's may also be restricted from selling certain securities by contract or regulatory considerations. Such investments may therefore be difficult to value or realise. Any such realisation may involve significant time and expense.
If the value of the Group's investment portfolio increased/decreased by 5%, the net assets of the Group would increase/decrease by US$7,336,100 (2008: US$2,747,450)
Foreign exchange risk
The Group is exposed to foreign exchange risk with regard to transactions made in Sterling and balances held in Sterling.
An analysis of net assets by currency exposure as at 30 June 2009 is as follows:
| Net Assets US$'000s | Net Assets US$'000s | |
| 30 June 2009 | 30 June 2008 | |
| US Dollars | 264,118 | 284,207 |
| Sterling | 49,838 | 109,518 |
| Total | 313,956 | 393,725 |
An appreciation of the Sterling against the US Dollar of 5% would have increased net assets by US$2,500,000 (2008: US$5,500,000). A decrease of 5% would have an equal and opposite effect.
Interest rate risk
The Group is exposed to cash flow interest rate risk on cash balances which are all short term fixed deposits. The weighted average interest rates on short term fixed deposits as at 30 June 2009 were:
| 30 June 2009 | 30 June 2008 | |
| % | % | |
| Cash balances | ||
| US Dollars | 2.29 | 2.41 |
| Sterling | 4.41 | 5.44 |
The table below summarises the Group's exposure to interest rate risks. It includes the Groups' financial assets and liabilities at the earlier of contractual re-pricing or maturity date, measured by the carrying values of assets and liabilities:
| 30 June 2009 | Less than 1month | 1-3 months | 3 months to 1 year | 1-5 years | Over 5 years | Non-interest bearing | Total |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| Financial Assets | |||||||
| Financial assets at fair value through profit or loss | - | - | - | - | 28,074 | 118,648 | 146,722 |
| Trade and other receivables | - | - | - | - | - | 121 | 121 |
| Cash and cash equivalents | 96,826 | 71,131 | - | - | - | - | 167,957 |
| Total financial assets | 96,826 | 71,131 | - | - | 28,074 | 118,769 | 314,800 |
| Financial Liabilities | |||||||
| Trade and other payables | - | - | - | - | - | (844) | (844) |
| Total financial liabilities | - | - | - | - | - | (844) | (844) |
| Total interest rate sensitivity gap | 96,826 | 71,131 | - | - | 28,074 |
| 30 June 2008 | Less than 1month | 1-3 months | 3 months to 1 year | 1-5 years | Over 5 years | Non-interest bearing | Total |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| Financial Assets | |||||||
| Financial assets at fair value through profit or loss | - | - | - | - | - | 55,000 | 55,000 |
| Trade and other receivables | - | - | - | - | - | 315 | 315 |
| Cash and cash equivalents | 149,461 | 191,291 | - | - | - | - | 340,752 |
| Total financial assets | 149,461 | 191,291 | - | - | - | 55,315 | 396,067 |
| Financial Liabilities | |||||||
| Trade and other payables | - | - | - | - | - | 2,342 | 2,342 |
| Total financial liabilities | - | - | - | - | - | 2,342 | 2,342 |
| Total interest rate sensitivity gap | 149,461 | 191,291 | - | - | - |
No fair value interest rate sensitivity analysis has been provided as no financial assets or liabilities are subject to fair value interest rate risk. If interest rates have been 1% higher/lower for the year, interest receivable would have been US$44,000 higher/lower.
Credit risk
Credit risk is the risk that counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group.
The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date. This relates also to financial assets carried at amortised cost, as they have a short term maturity.
At the reporting date, the Group's financial assets exposed to credit risk amounted to the following:
| 30 June 2009 | 30 June 2008 | |
| US$'000 | US$'000 | |
| Financial assets at fair value through profit or loss | 146,722 | 55,000 |
| Trade and other receivables | 121 | 315 |
| Cash and cash equivalents | 167,957 | 340,752 |
| 314,800 | 396,067 |
The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. Management does not expect any counterparty to fail to meet its obligations. No impairment provisions had been made as at the year end and no debtors were past their due date.
Cash balances are held with P-1* financial institutions.
*- A Moody's rating of Prime-1 (P-1) means that the issuer has a superior ability to repay short-term debt for the obligations.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed conditions, without incurring unacceptable losses. The Group's liquidity position is monitored by the Asset Advisor and the Board of Directors.
Residual undiscounted contractual maturities of financial liabilities:
| 30 June 2009 | Less than 1 month | 1-3 months | 3 months to 1 year | 1-5 years | Over 5 years | No stated maturity |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| Financial liabilities | ||||||
| Trade and other payables | 844 | - | - | - | - | - |
| 844 | - | - | - | - | - |
| 30 June 2008 | Less than 1 month | 1-3 months | 3 months to 1 year | 1-5 years | Over 5 years | No stated maturity |
| US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | US$'000 | |
| Financial liabilities | ||||||
| Trade and other payables | 2,342 | - | - | - | - | - |
| 2,342 | - | - | - | - | - |
Fair values
All assets and liabilities at 30 June 2009 are considered to be stated at fair value.
18 Capital Commitments
As at 30 June 2009 capital commitments in respect of investments were as follows:
| Investment | Initial commitment | Drawn down | Remaining commitment |
| US$'000 | US$'000 | US$'000 | |
| Vital Renewable Energy, LLC | 50,000 | (6,226) | 43,774 |
| Multitrade Rabun Gap, LLC | 21,593 | (16,500) | 5,093 |
| Multitrade Telogia, LLC | 12,150 | (10,167) | 1,983 |
| Energía Escalona SV | 20,900 | (6,155) | 14,745 |
| 104,643 | (39,048) | 65,595 |
19 Comparatives
The comparatives are for the period from 14 May 2007 (date of incorporation) to 30 June 2008.
20 Exchange Rates
The following exchange rates were used to translate assets and liabilities into the reporting currency at 30 June 2009:
GBP Sterling to US$ 1.6469 (2008: 1.9902)
21 Post Balance Sheet Events
Greenline Industries, Inc. filed for US bankruptcy protection on 7 August 2009 in the Northern District of California (Santa Rosa). As a result the bankruptcy filing, the Company wrote down its Greenline Industries investment to nil.
On 26 August 2009, the Company has extended $600,000 in interim funding to MaxWest Environmental Systems in the form of a convertible promissory note.
Portfolio valuation methodology
Investments are measured at the Directors' estimate of fair value at the reporting date, in accordance with IAS 39 'Financial Instruments: Recognition and measurement'. Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction.
Unquoted investments
Unquoted investments are valued by applying an appropriate valuation technique, which makes maximum use of market-based information, is consistent with models generally used by market participants and is applied consistently from period to period, except where a change would result in a better estimation of fair value. The Company primarily invests in unquoted direct investments.
Unquoted direct investments
Unquoted direct investments have characteristics similar to private equity investments, in that the value is generally crystallised through the sale or flotation of the entire business, rather than the sale of an individual instrument. Valuations of such investments are based upon the "International Private Equity and Venture Capital Valuation Guidelines," using the following model:
Determine the enterprise value using an appropriate valuation methodology and adjust for surplus assets, excess or unrecorded liabilities and other relevant factors.
Deduct any financial instruments ranking ahead of the highest ranking instrument held by the company.
Apply a marketability discount where appropriate to give the net attributable enterprise value. Such a marketability discount relates to the investment rather than the underlying business and reflects the compensation that willing buyers will demand for the risk arising from the lack of marketability. Factors that will be considered in determining the marketability discount are the closeness to a realisation event, the investors' influence over the timing of realisation and the difficulty and risk of actions required to put the business into a saleable condition. It is a rebutted presumption that a 30% discount is to be applicable to all unquoted direct investments. This presumption may be rebutted if the available evidence and consideration of the foregoing factors indicate that a different marketability discount would be appropriate or that no marketability discount should be applied. Where a discount is applied, it will normally fall in the range of 10% to 30%.
Apportion the net attributable enterprise value between the relevant financial instruments according to their rankings and allocate to the company's holding in each of these financial instruments.
Given the uncertainties inherent in estimating the fair value of unquoted direct investments, a degree of caution is applied in exercising judgements and making the necessary estimates.
Enterprise value is normally determined using one of the following valuation methodologies:
Price of recent investment
Where the investment being valued was made recently, its cost will generally provide a good indication of fair value. Where there has been any recent investment in the investee company, the price of that investment will provide a basis of the valuation. Where the price at which a third party has invested is being considered as the basis of valuation, the background to the transaction will be taken into account to indicate whether or not the price was representative of the fair value at the time. This methodology is likely to be appropriate only for a limited period after the date of the relevant transaction. The period will depend on the specific circumstances of each investment, but one year is usually applied.
Earnings multiple
This methodology involves the application of an earnings multiple to the maintainable earnings of the business being valued. This methodology is likely to be appropriate for an investment in an established business with an identifiable stream of continuing earnings that can be considered to be maintainable.
Maintainable earnings are taxed at the standard tax rate. Generally, the latest historical accounts are used unless reliable forecast results for the current year are available. The earnings multiple used is determined by reference to market-based multiples appropriate for the business and correlate to the period and calculation of earnings of the company being valued. In determining an appropriate earnings multiple, reference may be made to a single comparator company, or a number of companies, or the earnings multiple of a quoted stock market sector or sub-sector where there are similar business activities, markets, served, size, geography and applicable tax rate.
Net assets
The net asset methodology involves deriving the value of a business by reference to the fair value of its net assets. This is likely to be appropriate for a business whose value derives mainly from the underlying value of its assets rather than its earnings, such as property holding companies and investment businesses. It may also be appropriate for a business that is not making an adequate return on assets and for which a greater value can be realised by liquidating the business and selling its assets. Third party valuations may be used to give the fair value of a certain asset or group of assets.