LEAF.L Regulatory News (LEAF)

Results for the year ended 30 June 2012

The Board of Leaf Clean Energy Company ("Leaf" or "the Company") are pleased to announce the Company's results for the year ended 30 June 2012.

Highlights of the year are:

·; NAV per share for the Leaf portfolio was 141.22 cents or 90.03 pence at US$1.5685 to the £1 (2011: 165.60 cents).

·; Leaf made an additional US$7.6 million of direct equity and debt investments into existing portfolio businesses.

·; The Company received cash payments of accrued and current interest and repayments of principal on loans to its investee companies totalling US$5.1 million and US$15.5 million respectively.

·; The Company earned US$1.8 million of interest income from debt investments in the portfolio companies. This income has been recorded in the intermediate holding companies and included in the assessment of valuations for the relevant subsidiaries.

·; The Company repurchased 3.9 million shares at an average price of 77.98 pence, taking advantage of weakness in the Company's share price to deliver value to shareholders.

For further information, please contact: 

Bran Keogh +1-202-289-7881

Leaf Clean Energy Company

Ivonne Cantu +44 (0) 207 397 8900 

Cenkos Securities plc 

Chairman's Statement

I am pleased to report on the progress made by Leaf Clean Energy Company ("Leaf" or the "Company") for the year ended 30 June 2012. 

Three years ago we made three key structural changes to deal with the impact on the private equity market of a global contraction, which continues to hamper a return to the targeted gains we came to expect during the mid-2000s:

·; We replaced our asset advisor with experienced professionals who could partner with our portfolio company management teams to help them navigate toward growth; we also replaced the operational teams in several of our active investments with more experienced asset managers and O&M operators;

·; We employed rigorous methods to identify opportunities in areas where others are not focused, such as companies trading at a steep discount or where experienced management teams are in place and growth equity is needed to scale up proven concepts; and

·; We assumed the worst and husbanded our resources to ensure that we could ride out a very difficult and sustained downturn.

Now the focus of the directors and the Leaf management team is to continue to support our portfolio companies and realise the investments when opportune to maximise returns to our shareholders.

Portfolio update

Cumulative public market forces and near-term growth concerns in our industry resulted in generally lower valuations, most prominently in the wind and solar PV sub-sectors. We were therefore rigorous in reflecting mark-to-market values in line with relevant investment barometers in the sector. Although our aggregate NAV consequently decreased, the great majority of Leaf's portfolio companies continued to hit their milestones and several delivered on value creation initiatives put in place since our last annual report, reflecting our successful strategy of actively partnering with management.

Johnstown Regional Energy, LLC ("JRE") secured long-term contracts to sell its reclaimed landfill gas production to buyers in California, commanding premium prices due to the fuel's green attributes. Leaf's management team and board members worked closely with JRE's operators to put the company in a considerably more favorable economic position while natural gas prices remain low for the foreseeable future.

Multitrade Telogia, LLC, one of the company's biomass generation assets, performed above expectations from an operational standpoint, benefiting from the experienced operators and asset managers we had earlier put in place.

Evidence of our ability to be rigorous and opportunistic in our acquisition strategy came shortly after the end of the reporting period with our investment in Atlanta-based Lehigh Technologies, Inc. ("Lehigh"). Lehigh's proprietary technology transforms end-of-life tires and post-industrial rubber into new materials that are incorporated into high-performance tires, consumer and industrial plastics goods, asphalt and coatings and construction materials. This investment further diversifies our portfolio and reduces our exposure to natural gas prices and government incentives. Lehigh has a seasoned management team with which we are partnering closely, delivering solid sales to tire manufacturers and operating in a number of other very promising vertical markets.

SkyFuel, Inc. ("SkyFuel") is an excellent example of the way in which we are conserving our resources and planning for the long term. During the year SkyFuel sold, shipped and delivered on its first large-scale commercial project with a large European power company. It also became the first company in the concentrated solar power (CSP) industry to offer insurance to support the company's product warranties through a first-of-its-kind performance guarantee from Munich Re, a multinational reinsurance company. As a result of Leaf's successful partnership with management and additional financial support, SkyFuel is now one of the few remaining standalone CSP technology providers, with a strongly growing pipeline.

In summary, I am pleased to say that many of the portfolio's operational assets have now been de-risked and optimized for further performance improvements, positioning them for continued growth as our diverse portfolio matures.

Economic and political background

The past year saw continued global equity market volatility and clean energy sector underperformance. Factors contributing to the volatile investment climate included the lingering European sovereign debt crisis, investment concerns over sustained global growth and mixed economic indicators from two of the world's largest economies, the United States and China.

The clean energy sector saw significant challenges over the period, including high-profile solar bankruptcies in North America and Europe and workforce reductions in some of the world's largest wind turbine manufacturers. These events all took place under intense public scrutiny, leading to scepticism amongst media outlets, conservative political leaders and the public at large about the long-term viability of renewables as a supplement to traditional fossil fuels and about the US government's decision to use taxpayer-funded incentives to support a struggling industry. This fallout may continue in the short term, further exacerbating the current trade tensions between China and Western economies, with lasting implications for investors.

Despite these political headwinds, the re-election of President Obama and the positive remarks he made during the State of the Union Address in the early part of 2012, as well as his remarks and those of Governor Cuomo and Mayor Bloomberg of New York regarding increased severe weather and its relationship to climate change, assured us that the renewable energy sector will continue to be a growing part of the US's energy future. To date, this has rung true and the next four years may see renewed focus in the sector. According to Bloomberg New Energy Finance, total installed renewable energy generation capacity in the US grew by 21% over the past year, providing approximately 12% of the nation's energy supply. Furthermore, between the first quarter of 2011 and the first quarter of 2012 US installed capacity from wind and solar power generation increased by 17% and 85% respectively.

Key drivers of installed capacity growth have been the Production and Investment Tax Credits (PTC and ITC) and the precipitous decline in costs of key renewable technologies, most notably solar PV and wind. According to the Solar Energy Industry Association (SEIA), the average price of a solar panel has declined by 47% since the beginning of 2011. Onshore wind costs have fallen by 15% over the same period. These continued cost declines have led to wind and solar PV energy prices coming within striking distance of conventional fossil-fuel alternatives in many parts of the US. However, government support through subsidies or tax credits is expected to be curtailed over the coming years, which undoubtedly reduces the economic incentives for developers of renewable energy sources to construct projects at the current pace.

In a separate development, the past year saw natural gas match coal as a primary fuel source for US power generation for the first time since the government started collecting data in 1977. According to the Energy Information Agency (EIA), natural-gas-fired plants provided 33% of US generation, compared to coal's 34% share. In 2009, natural gas accounted for 23% of US generation, while coal provided 45%. This historic shift is largely due to the unprecedented discovery of large shale gas reserves and stricter environmental controls around emissions for the aging coal fleet in the US.

Sector performance

The public renewable energy market faced significant challenges as governments in the developed economies pared back investment subsidies, consumers enjoyed access to historically low natural gas prices and investor confidence in the broader sector remained depressed. These factors, coupled with the continued challenge of accessing finance for renewable projects, trade tensions between the US and China and negative political sentiment in the US, led to disappointing headline performance for the year relative to other markets. The WilderHill New Energy Global Innovation Index (NEX), which tracks 96 large clean energy stocks worldwide, has underperformed the S&P 500 by 19% so far this year, hitting a nine-year low in the first quarter of 2012.

Global private equity and venture capital renewable energy investment echoed similar trends in 2012, down from a record 2011. Investment in the first half of 2012 fell 16% to $3.6bn from $4.3bn in 2011. Despite this decline in private investment over the past year, large investments continue to reflect the importance and value-creation opportunities of addressing energy and sustainable solutions both domestically and internationally.

As the renewable energy industry continues to mature and the weaker players exit the stage, I believe the sector will emerge strengthened as sustainable business models become essential.

Outlook

Despite the underperformance of the sector over the past year, the large majority of Leaf's portfolio companies are progressing as expected against their business plans. I believe the team's determination and focus have preserved capital in an unstable environment. As the market recovers, the value creation initiatives put in place will position Leaf to deliver significantly improved shareholder value.

We believe that the long-term fundamentals of the clean energy sector remain strong and, as private market investors, we believe that valuations for maturing private companies are at an attractive level. The current environment is also conducive to making investments in lean companies that have exhibited strong fundamentals and continued resilience in a challenging environment.

Our priorities in the current year are to remain focused on partnering with our portfolio companies to deliver further operational improvements, whilst carefully husbanding our resources.

The Annual Report and Accounts set out below incorporate both financial statements for the Company and consolidated financial statements for the wider Leaf Group. References to NAV in my report and the Management Report reflect the Company's NAV.

Net assets

For the year ended 30 June 2012, Leaf's net asset value (NAV) per share decreased by 14.7 percent, from 165.60 cents to 141.22 cents. Of Leaf's US$182 million of net assets, US$42 million was held in cash. The Board is of the view that this balance provides sufficient liquidity to meet the continuing needs of the portfolio.

(1) Based on US$/£ exchange rate of 1.5685 on 30 June 2012

MANAGEMENT REPORT

During the year ended 30 June 2012 the clean energy investment markets faced continued uncertainty and delays to company realizations, largely due to global economic and political conditions, as described below in the "Market Environment" section. The WilderHill New Energy Global Innovation Index (NEX) of publicly-quoted renewable energy companies has lost more than 75% of its value since its high point in December 2007, and is down 44% in the year ended 30 June 2012. In the US, abundant and low-cost shale gas has been a game-changer for renewable and non-renewable energy alike, and is a major cause of the significant and sustained collapse in power prices in the US over the past five years, as natural gas is now setting the marginal price of power. Nonetheless, certain sub-sectors of the investment markets offer compelling investment opportunities, especially those that are not dependent on government incentives and those in geographies with high electricity prices.

The Board and management of Leaf continued to support and grow Leaf's existing portfolio to ensure that its investee companies are well-positioned as the market improves. Selected highlights are as follows (with further details given in the "Portfolio Overview" section at the end of this report).

·; SkyFuel, Inc. (SkyFuel), a leading concentrated solar equipment provider, achieved the first third-party warranty coverage in the CSP sub-sector. Following more than a year of extensive due diligence on SkyFuel's products, Munich Re, a leading worldwide reinsurance company, agreed to underwrite insurance for SkyFuel's product warranties. These warranties guarantee the thermal output of SkyFuel's SkyTrough system for five years and the specular reflectance of the SkyTrough reflectors for 20 years. SkyFuel's ability to offer innovative and capital-efficient insurance backing in support of its equipment sales provides a distinct advantage in a market that is reliant on risk-averse lenders for project finance.

·; Johnstown Regional Energy, LLC (JRE), a large landfill gas reclamation company, negotiated and entered into long-term fixed-price contracts to sell its green biogas to buyers in California. The California market provides an appropriate price incentive for green gas and will partially offset the unfavourable impact on JRE of the dramatic drop in natural gas prices resulting from the development of shale gas.

·; Invenergy Wind LLC (Invenergy), the largest independent wind developer in the US, closed a $200 million long-term loan financing and closed project financing for six wind projects. During the period, five of these projects finished construction and commenced commercial operations. In addition, Invenergy completed construction and began commercial operations at its previously financed 138.6 MW Le Plateau Wind Energy Centre in Quebec. Finally, Invenergy completed the sale of its 81 MW Bishop Hill II wind project in Henry County, Illinois to MidAmerican Renewables, capping off a productive year for the company.

·; Certain sub-sectors of the broader clean energy and sustainable investment market have provided opportunities for attractive investment and portfolio diversification. The Leaf Board and management reviewed hundreds of new opportunities during the year and were pleased to announce in July 2012 that Leaf has led an investment round in Lehigh Technologies, Inc. ("Lehigh"). The investment in Lehigh closed on 20 July 2012, after the end of the current reporting period.

Lehigh is a leading sustainable materials manufacturer whose proprietary, cryogenic turbo mill technology turns end-of-life and post-industrial rubber material into sustainable chemical additives that are used in a wide range of industrial and consumer applications. Lehigh's micronized rubber powder ("MRP") products help customers lower their consumption of oil-derived and energy intensive materials. Its MRPs lower costs, increase the sustainability profile of end products, and deliver performance without sacrificing the reliability offered by traditional raw materials. Lehigh is a late-stage venture-backed company with a growing revenue stream.

Prior to Lehigh, only a few outlets for end-of-life material existed, with it being incinerated, sent to landfills, or reused in lower-value applications. Lehigh addresses these environmental challenges for millions of pounds of material each year, all the while saving customers money and reducing the energy-intensity of its customers' raw materials. This is a disruptive technology, a high-growth company, and is led by a top-tier management team. Lehigh also further diversifies Leaf's investment portfolio.

Financial Performance

Leaf's total NAV on 30 June 2012 was US$182 million, US$38 million lower than the NAV at 30 June 2011. The change in NAV over the annual report period resulted mainly from the US$27.2 million unrealized loss on revaluation of the Company's investments, operating expenses of US$5.9 million, and $4.8 million of share repurchases. US$42 million of the Company's NAV was held in cash and US$143 million in investments.

NAV per share for the Leaf portfolio was 141.22 cents or 90.04 pence at US$1.5685 to the £1. This was a decrease of 14.7 percent for the one year period from 30 June 2011. The decrease for the one year period was due primarily to the unrealised loss on revaluation of the Company's investments (-12.8%) and operating expenses for the period (-2.7%), offset by share repurchases (+0.8%).

For the period under review, there were several other noteworthy events:

·; Leaf made an additional US$7.6 million of direct equity and debt investments in existing portfolio businesses;

·; The Company earned US$1.8 million of interest income from debt investments in the portfolio companies during the period. This income has been recorded in the accounts of the intermediate holding companies and included in the assessment of valuations for the relevant subsidiaries;

·; Leaf repurchased 3.9 million shares at an average price of 77.98 pence, taking advantage of the weakness in the Company's share price to deliver value to shareholders; and

·; The Company received cash payments of accrued and current interest and repayments of principal on loans to its investee companies totalling US$5.1 million and US$15.5 million respectively.

Market Environment

The four quarters ended 30 June 2012 witnessed a pull-back in the global recovery in clean energy investing that had been underway during 2010 and 2011. This contraction was due to the combination of continued global economic problems and interrelated political developments in the US and Europe. The continuing sovereign debt crisis has brought austerity measures and credit tightening into play across Europe. The increasing polarisation of the US Congress, exacerbated by presidential election year politics, has made it difficult, if not impossible, for it to address long-term structural issues in the US federal budget. These factors, combined with the impact of abundant and low-cost shale gas in the US, have had a dampening effect on policy support for clean energy in these geographies. Another clear impact of these global economic issues for the sector and for Leaf's portfolio companies has been that it has become much more difficult for clean energy companies to raise new capital.

Ironically, the resulting weakening and increased uncertainty about the continuation and extent of government renewable energy subsidies in Europe and the US has come about just as several renewable energy technologies are approaching, but have not yet quite attained, grid parity versus the fossil fuels against which they compete. A main goal of government subsidisation of renewable energy has been to enable sustainably profitable business models in order to encourage the private investment in capacity and technology required to achieve grid parity with fossil fuels.

The current pull-back in subsidisation has pulled the carpet out from under many who invested on that premise. The end result may be that the timing of grid parity will be delayed and may require even greater subsidisation to reach this goal than would otherwise have been required had governments stayed the course.

In the case of solar PV, the remarkable progress towards grid parity has come at the expense of many of the early-stage and established US and European players in this market. Manufacturers of solar PV panels have continued to experience a brutal pricing environment due to global over-capacity and competition from Asian panel manufacturers who have been accused by US and European firms of pricing below cost in US and European markets. This resulted in the application by the US in March 2012 of countervailing duties on Chinese solar panels and in May 2012 of countervailing duties and anti-dumping duties on Chinese wind towers and solar panels.

By the end of the current reporting period, massive over-capacity and cutthroat pricing in the solar PV market had resulted in the bankruptcies of an additional 13 solar PV panel manufacturers, in the wake of the high-profile bankruptcy of early-stage Solyndra in August 2011. These bankruptcies included several established manufacturers such as Q-Cells, Evergreen Solar and Solon, while many other PV manufacturers have had to cut jobs and reduce production to conserve cash. As expected, the severe depression of public market prices for solar PV panel manufacturers resulting from this environment has brought about a wave of consolidation M&A activity.

For the year ending 30 June 2012, global investment by venture capital ("VC") and private equity ("PE") firms in clean energy was US$7.5 billion, which was flat compared to the previous year ended 30 June 2011. For the latest quarter ending 30 June 2012, investment was down 28% from the previous calendar quarter and down 39% from the prior-year quarter.

In calendar year 2011 solar was the most popular sector for VC/PE investment, with 30% of the US$2.4 billion of total solar investment directed to crystalline PV and the remainder invested in solar thermal, thin film and service and support. A total of US$367 million was invested by VC/PE in solar thermal.

Global acquisition activity in renewable energy was up year-on-year by 10.5% and 12.1% in dollar terms, respectively, for calendar year 2011 and the year ended 30 June 2012. For calendar year 2011, activity in the US was down by 22%, while in Europe it was up 34%. Two European deals dominated: the US$7.9 billion buyout by EDF of the remaining 50% of EDF Energies Nouvelles it did not own and the US$2.1 billion buyout by Iberdrola of the remaining 20% of Iberdrola Renovables it did not own. Without these two large re-acquisitions of corporate spin-offs by their parents - deals that perhaps indicate the parents' view that public market prices in wind and solar are at irrationally low levels - European acquisitions would have been down 4%.

In the public markets, new raises from renewable energy IPOs were down 15% and 77% on a global basis in dollar terms for calendar year 2011 and the year ended 30 June 2012 respectively. The activity during both periods was dominated by solar, wind and China. Macroeconomic and political pressures depressed prices of existing public renewable energy companies, as measured by the NEX index, which fell 40% and 44%, for calendar year 2011 and the year ended 30 June 2012, respectively, as compared to the S&P 500, which was flat for calendar year 2011 and increased by 1.7% during the four quarters ended 30 June 2012. This decline in public market valuations for renewable energy companies has continued to put pressure on private company valuations, including the prices for many businesses comparable or related to Leaf's portfolio companies.

Outlook

While the short-term data are unfavourable, the long-term drivers for increased adoption of renewable energy in North America remain strong. These long-term drivers include the underlying trend of rising fossil-fuel costs, the need to find new industrial sources of economic growth and job creation, the desire to achieve energy independence and to maintain global competitiveness, increasing global demand for energy, and the need to address climate change issues. Collectively, these factors provide evidence that the NEX is in an oversold position. Public and private valuations are attractive to buyers in many cases and have created opportunities for discerning investors such as Leaf who are in a position to identify and capture this value.

Given the increase in the expected length of time to liquidity events for its existing portfolio companies as a result of the current state of the global economy, Leaf has continued to focus in the short term on the management of its existing portfolio, having prudently maintained sufficient cash to provide appropriate financing for its portfolio.

Portfolio Overview

A. Active Investments - Growth Companies

MaxWest Environmental Systems ("MaxWest") Waste-to-energy gasification

SkyFuel Inc. ("SkyFuel") Concentrated Solar Power

B. Active Investments - Projects

Johnstown Regional Energy, LLC ("JRE") Landfill Gas

Multitrade Rabun Gap ("Rabun Gap") Wood-fuelled biomass

Multitrade Telogia ("Telogia") Wood-fuelled biomass

Vital Renewable Energy Company ("VREC") Biofuels - Ethanol

Energía Escalona ("Escalona") Hydro

C. Passive Investments

Invenergy Wind LLC ("Invenergy") Wind Power

Miasolé Solar PV

12 November 2012

Parent company statement of comprehensive income

for the year ended 30 June 2012

The accompanying notes form an integral part of these financial statements

Parent company statement of financial position

as at 30 June 2012

The accompanying notes form an integral part of these financial statements

The financial statements were approved by the Board of Directors on 12 November 2012 and signed on their behalf by:

Parent company statement of changes in equity

for the year ended 30 June 2012

The accompanying notes form an integral part of these financial statements

Parent company statement of cash flows

for the year ended 30 June 2012

The accompanying notes form an integral part of these financial statements

Notes to the parent company financial statements

for the year ended 30 June 2012

1 The Company

Leaf Clean Energy Company ("Leaf" or the "Company") was incorporated 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 the Company's Admission Document dated 22 June 2007 there was an original placing of up to 200,000,000 Ordinary Shares of GBP0.0001 par value for GBP1 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 in-house management team perform all significant functions.

2 Basis of preparation

2.1 Statement of compliance

The Company's separate financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs). In order to present information that is comparable with other investment companies, Leaf publishes separate financial statements of the Company in addition to consolidated financial statements, which include investments in subsidiaries regarded as part of the Company's investing business at fair value.

The financial statements were authorised for issue by the Board of Directors on12 November 2012.

2.2 Basis of measurement

The financial statements have been prepared on the historical cost basis except for the investments in subsidiaries that are measured at fair value in the statement of financial position.

2.3 Functional and presentation currency

The 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, except when otherwise indicated.

2.4 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 5 and 12.

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

3.1 Financial instruments

(i) Non-derivative financial assets

The Company classifies non-derivative financial assets into the following categories: investments at fair value through profit or loss and, loans and receivables.

The Company initially recognised loans and receivables on the date that they are originated. All other financial assets (including assets designated as at fair value through profit or loss) are recognised initially on trade date, which is the date that the Group becomes a party to the contractual provision of the instrument.

The Company derecognise a financial asset when the contractual rights to the cash flows from the instrument expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in such transferred assets that is created or retained by the Company is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise and settle the liability simultaneously.

Investments in subsidiaries

The Company designated its investments in subsidiaries, including equity, loan and similar instruments, as at fair value through profit or loss on initial recognition. Attributable transaction costs are recognised in the profit or loss as incurred. Gains and losses arising from changes in fair value of investments, including foreign exchange movements, are recognised in the profit or loss.

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.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Loans and receivables comprise cash and cash equivalents, and trade and other receivables.

Cash and cash equivalents

Cash and cash equivalents comprises cash balances and call deposits with maturities of three months or fewer from the acquisition date that are subject to an insignificant risk of changes in value, and are used by the Company in the management of its short-term commitments.

(ii) Non-derivative financial liabilities

The Company classifies non-derivative financial liabilities into the other financial liability category. Such financial liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised costs using the effective interest method.

The Company initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated as at fair value through profit or loss) are recognised initially on trade date, which is the date that the Group becomes a party to the contractual provision of the instrument.

The Company derecognises a financial liability when the contractual obligations are discharged, cancelled or expire.

Other financial liabilities comprise bank overdrafts, and trade and other payables.

Bank overdrafts that are repayable on demand and form an integral part of the Company's cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

3.1 Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

Repurchase of share capital

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity.

3.3 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 and are charged to profit or loss. This includes expenses directly related to making an investment which is held at fair value through profit or loss.

3.4 Foreign currency translation

Transactions in foreign currencies are translated to the functional currency of the Company 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.

3.5 Dividends payable

Dividends payable are recognised as a liability in the period in which they are declared and approved.

3.6 Earnings per share

The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.

3.7 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.

3.8 Future changes in accounting policies

IASB (International Accounting Standards Board) and IFRIC (International Financial Reporting Interpretations Committee) have issued the following standards and interpretations with an effective date after the date of these financial statements:

The Directors do not expect the adoption of the standards and interpretations to have a material impact on the Company's financial statements in the period of initial application.

4 Financial risk management

The Parent Company's investments 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 subsidiaries in which the Company 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 Company. 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 Company'sinvestments.

Market price risk is managed by the management team of the Company, in accordance with parameters set by the Board.

All of the Company'sinvestments comprise interests in companies which are not publicly traded or freely marketable. The Company 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 Company'sinvestment portfolio increased/decreased by 5%, the net assets of the Company would increase/decrease by US$7,232,372 (2011: US$9,015,949)

Foreign exchange risk

The Company 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 2012 is as follows:

An appreciation of the Sterling against the US Dollar of 5% would have decreased net assets by US$5,034 (2011: US$5,232). A decrease of 5% would have an equal and opposite effect.

Interest rate risk

The Company 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 2012 were:

Interest rate risk (continued)

The table below summarises the Company's exposure to interest rate risks. It includes the financial assets and liabilities at the earlier of contractual re-pricing or maturity date, measured by the carrying values of assets and liabilities:

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$350,265 (2011: US$405,590) higher/lower.

Credit risk

Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company.

The carrying amounts of financial assets best represent the maximum credit risk exposure at the reporting date. This relates also to financial assets carried at amortised cost, as they have a short term maturity.

At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:

The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position. Management does not expect any counterparty to fail to meet its obligations. No impairment provisions have 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 Company will not be able to meet its financial obligations as they fall due. The Company'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 Company's liquidity position is monitored by the Board of Directors.

Residual undiscounted contractual maturities of financial liabilities:

Fair values

All assets and liabilities at 30 June 2012 are considered to be stated at fair value.

5. Critical accounting estimates and assumptions

These disclosures supplement the commentary on financial risk management (see note 4).

Key sources of estimation uncertainty

Determining fair values

The determination of fair values for financial assets for which there is no observable market prices requires the use of valuation techniques as described in accounting policy 3.1. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument. See also "Valuation of financial instruments" below.

Critical judgements in applying the Company's accounting policies

Critical judgements made in applying the Company's accounting policies include:

Valuation of financial instruments

The Company's accounting policy on fair value measurements is discussed in accounting policy 3.1. The Company measures fair value using the following hierarchy that reflects the significance of inputs used in making the measurements:

·; Level 1: Quoted market price (unadjusted) in an active market for an identical instrument.

·; Level 2: Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e., derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments: quoted market prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data.

·; Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments the Company determines fair values using valuation techniques.

The Company, through its wholly-owned subsidiaries, holds full or partial ownership interests in a number of unquoted clean energy companies. The Company's investments are classified as level 3 in the fair value hierarchy. A reconciliation from the beginning balances to the ending balances is shown in note 12.

6 Net Asset Value per Share

The net asset value per share as at 30 June 2012 is 141.22 cents based on net assets of US$181,808,657 and 128,745,726ordinary shares in issue as at that date (2011: 165.60 cents based on net assets of US$219,713,487 and 132,675,726ordinary shares).

7 Interest income on cash balances

8 Management service fees

Leaf's wholly-owned subsidiary, Leaf Clean Energy USA, LLC ("Leaf USA"), in Washington, DCprovides assets advisory, portfolio management and certain administrative services to the Company. Leaf USA is entitled to management fees which are calculated based on 20% mark up on the costs of the asset advisory and portfolio management services provided to Leaf Clean Energy Company. The administrative services provided to Leaf Clean Energy Company are at cost base with nil mark up.

Leaf USA Service fees for the year ended 30 June 2012 payable to Leaf USA were US$3,721,087 (year ended 30 June 2011: US$3,775,686) and the amount accrued but not paid at the period end was US$584,690 (30 June 2011: US$364,626).

9 Other administration expenses

9.1 Legal and professional fees

Legal and professional fees represent legal, advisory and consultancy fees incurred during and after the implementation of investment acquisitions.

9.2 Administration fees

With effect from November 2009, the Company 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 0.1% per annum where the total assets of the parent company less borrowings is less than US$100,000,000; 0.09% 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 0.08% 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.

Administration fees for the year amounted to US$195,056 (2011: US$312,840) and US$42,493 was outstanding as at 30 June 2012 (2011: US$53,049).

10 Directors' remuneration

In February 2011, Mercer Limited ("Mercer") was engaged to conduct an independent remuneration review, and Mercer's recommendation was adopted by the Board at its meeting on 3 March 2011. As recommended by Mercer, the basic annual remuneration for the Chairman and the Executive Director was maintained at US$200,000 and US$400,000 respectively. In addition, the Executive Director is eligible to receive an annual bonus of US$350,000. The Non-Executive Directors fees were reduced from US$150,000 to US$60,000 with a US$2,500 fee for each board meeting attendance, a US$10,000 fee for Audit Committee membership and a US$1,500 fee reimbursement for each additional day attending the Company's meetings.

Details of the Directors' basic annual remuneration during the year were as follows:

Directors' fees and expenses paid during the year were as follows:

The Directors are also entitled to receive reimbursement of any expenses in relation to their appointment. Total reimbursement fees paid to the Directors for the year ended 30 June 2012amounted to US$218,230 (2011: US$216,750) of which US$nil was outstanding at 30 June 2012 (June 2011: US$nil).

11 Gain on restructuring of subsidiary

For efficient portfolio management purposes, the Company dissolved one of its subsidiaries in 2011, Leaf Finance Company, and distributed its net assets to the Company. The dissolution resulted in a one-time net gain of US$3,381,454. This had no effect on profit or loss or net assets of the Company as investments in subsidiaries are stated at fair value and there was a consequent movement in the unrealised gain/loss on revaluation.

12 Investments

12.1 The subsidiaries

Since incorporation, for efficient portfolio management purposes, the Company has established the following subsidiary companies:

*Indirect subsidiaries

The Company also has control over the following underlying investee companies:

 (1) Voting rights 81.9%

(2) Voting rights 66.25%

12.2 Investments in subsidiaries at fair value through profit or loss

12.3 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 in-house management 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 in house management in exercising judgements and making the necessary estimate.

13 Trade and other receivables

Amounts due from group companies are unsecured, interest free and receivable on demand.

14 Cash and cash equivalents

* Restricted cash balance consists of a credit card cash security of US$67,481.

The short-term deposits are subject to interest rates at 0.12% per annum and are fixed for periods ranging up to 1 month from the statement of financial position date.

15 Share capital

The authorised share capital of the Company is GBP25,000 divided into 250 million Ordinary Shares of GBP0.0001 each.

Under the terms of the placement on 22 June 2007, the Company issued 200,000,000 shares of GBP0.0001 each par value at a price of GBP1 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 3,930,000 shares were repurchased by the Company leaving 128,745,726 shares in issue as at 30 June 2012. The shares were repurchased in 3 tranches at an average price of 77.98 pence per share for a total cost, including transaction costs, of GBP3,086,097 (US$4,766,063). The Company's share price has averaged 77 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.

 16 Trade and other payables

*Amounts due to subsidiaries and other related parties are unsecured, interest free and payable on demand.

17 Basic and diluted loss 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:

There is no difference between the basic and diluted loss per share for the year as there are no potential dilutive ordinary shares.

18 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 Company administrator and the Directors 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 notes 9.2 and 10.

19 Capital commitments

As at 30 June 2012, there were no capital commitments in respect of investments.

20 Exchange rates

The following exchange rates were used to translate assets and liabilities into the reporting currency at 30 June 2012:

GBP Sterling to US$ 1.5685 (2011: 1.6054)

21 Conversion to US GAAP

There is no material difference between the net assets as stated under International Financial Reporting Standards and as they would have been stated if the accounts had been prepared under US GAAP.

22 Subsequent events

On 20 July 2012, Leaf announced that it had made a $5 million equity investment in Lehigh Technologies, Inc.

Consolidated statement of comprehensive income

for the year ended 30 June 2012

The accompanying notes form an integral part of these financial statements

Consolidated statement of financial position

as at 30 June 2012

The accompanying notes form an integral part of these financial statements

The financial statements were approved by the Board of Directors on 12 November 2012 and signed on their behalf by:

Consolidated statements of changes in equity

for the year ended 30 June 2012