LEAF.L Regulatory News (LEAF)

Audited results for the year ended 30 June 2011

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 2011.

Highlights of the year are:

·; NAV per share for the Leaf portfolio was 165.60 cents or 103.15 pence at US$1.6054 to the GB£1 (2010: 167.65 cents).

·; Leaf made an additional US$40 million of direct equity and debt investments into existing portfolio businesses.

·; The Company earned US$4.9 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 and its intermediate holding companies received US$8.4 million of principal repayments in respect of outstanding loans to its portfolio companies (US$2.1 million direct to the Company).

·; The Company repurchased 10.2 million shares at an average price of 70.52 pence, taking advantage of weakness in the Company's share price to deliver value to shareholders.

For further information, please contact: 

Ivonne Cantu / Elizabeth Bowman +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 2011. Over the course of the year Leaf has put in place an experienced management and operational advisory team, made strong progress with the portfolio companies and successfully achieved the portfolio stability originally envisaged following the replacement of the former asset advisor. Moreover, overall financial controls, operational procedures and plans for value creation for Leaf's portfolio have been put in place, providing a clearer path for growth.

Despite increased volatility in the US economic and political environment over the last year, and the consequent failure of the US government to establish a clear, long-term national renewable energy policy, I am confident the Company's focus, determination and incentive structure are properly aligned to maximise shareholder value.

Portfolio performance

As previously reported in the interim report, management continues to focus on achieving critical milestones and executing key elements of the business plans of the individual companies. As a result, significant progress has been made in improving the performance of corporate-level investments and in the continued de-risking of operational projects. Highlights include:

·; MaxWest Environmental Systems secured a US$32.5 million investment that will enable delivery of its business plan. Also, MaxWest signed a memorandum of understanding ("MOU") for an additional facility in the US and an initial agreement to pursue facilities in China.

·; SkyFuel executed several MOU's for 150MW of solar projects in Brazil, China and India, and was honoured as "CSP Technology Supplier of the Year" at the CSP Today Summit 2011 in Las Vegas.

·; In May 2011 Vital Renewable Energy Company ("VREC") commenced the operation of the Bom Sucesso unit ("BSA"), an ethanol producing facility located in the state of Goias, Brazil, with installed crushing capacity of circa 1.2 million tons per year and, offering significant expansion potential.

·; Johnstown Regional Energy, LLC ("JRE") began selling its 'green gas' to buyers in California, obtaining a substantial premium for the "green" attributes of the gas and mitigating the impact of current low natural gas prices on JRE's financial performance.

·; Energía Escalona successfully amended several key permits to allow for both the longer construction period required and an increase in its nameplate capacity.

·; Multitrade Rabun Gap and Telogia have continued to improve operationally under the management of the new operations and maintenance (O&M) firm. However, fuel prices at the plants have been impacted by the temporary suspension of the matching payments portion of the USDA's Biomass Crops Assistance (BCAP) program, and the potential defunding of BCAP altogether by the US Congress, which is reflected in Leaf's NAV.

As market fundamentals improve, Leaf will continue to position portfolio companies for financial realization and diversify its overall exposure within the sector.

Economic and political background

Just as the pace of global economic recovery appeared to be increasing, renewed economic concerns and doubts about the sustainability of economic growth in the near- and mid-term have increased volatility in the capital and debt markets. The US debt ceiling debate and the subsequent unprecedented downgrade of the US debt rating by S&P has unsettled investors. All the while, lacklustre US economic indicators, the spreading European sovereign debt crisis, unexpected political uprisings in the Middle East and the Japanese earthquake have weighed down the markets and led investors to focus on capital preservation. The result has been downward pressure on renewable-energy-related quoted stocks.

We believe that the public equity markets will remain volatile for the foreseeable future. Although Leaf's portfolio companies are not currently traded in the public market, the capital intensity of the clean energy sector and its dependence on government subsidy mean that these economic and political factors can impact the ability of Leaf's portfolio companies to raise additional capital and finance new projects.

Sustained commodity price weakness in 2011 has created additional challenges to the adoption of renewable energy in the US, reducing both prices and demand. Low natural gas prices resulting from the discovery of shale gas reserves have in turn reduced electricity prices, since natural gas generation is often the marginal supplier of power in most of the US. Reduced electricity prices make it more challenging for renewable energy to win power purchase agreements, in the absence of regulatory incentives. Finally, oil prices, largely symbolic but widely tracked as a long-term driver of renewable energy, have also trended lower, impacted by a weakened economy and reduced demand.

Despite these short-term and medium-term challenges, Leaf remains bullish on the long-term prospects for energy prices once economic output increases and energy demand rebounds. In addition, renewable energy companies continue to reduce the capital cost and marginal costs of production and are becoming increasingly competitive with non-renewable fuels. Companies capable of thriving in the current pricing environment stand to realize considerable profits once commodity prices return to their long-term trend lines.

Faced with this environment, Leaf works with its portfolio companies to identify strategies for growth that do not rely unduly upon new policy incentives at the national level, while at the same time taking advantage of state-level or existing federal-level incentives in a way that does not create long-term dependence on these uncertain subsidies. The diversity of Leaf's portfolio also provides a clear advantage in the uncertain economic and political climate.

US renewables outlook

Although current uncertainty in the sector will linger in the short- and medium term, as the government struggles with burgeoning debt and stagnant growth the outlook for the US renewables industry remains cautiously optimistic, with expectations of revenue growth and job creation surpassing those for the broader US economy. The long-term renewal in growth of energy demand, continued fuel price volatility, the decreasing levelised cost of clean energy technologies, nuclear energy's uncertain future, and corporate and governmental sustainability initiatives should combine to advance growth across the clean energy spectrum for the foreseeable future.

US federal and state government support for several renewable energy programs have sparked fierce debate this year and no renewals of alternative energy programs were included as part of the negotiated settlement of the recent US debt-limit increase. Without a clear long-term US federal energy policy and increased coordination amongst the states, these critical programs and the sector's growth trajectory may be adversely affected.

In response to these policy challenges and in order to diversify against the risks of changing policies in other countries, many of Leaf's portfolio companies are selectively pursuing opportunities outside the US market, in countries that have established support systems for renewable energy. The US can provide a base for innovation and early-stage technology growth, which can be applied commercially outside the US. Invenergy, MaxWest, Miasolé, and SkyFuel have each been pursuing significant non-US opportunities.

Net assets

For the year ended 30 June 2011, Leaf's net asset value (NAV) per share decreased marginally by 1.2 per cent, from 167.65 cents to 165.60 cents. Of Leaf's US$220 million of net assets, US$41 million was held in cash. The Board is of the view that this balance provides sufficient liquidity to meet the needs of the portfolio.

Outlook

Despite the volatility in the markets over the past year, the Leaf portfolio remains stable. I believe the right team is now in place, proper financial controls have been implemented, milestones for value creation have been set and Leaf is well placed to deliver asset appreciation in the medium term.

The Company's priorities for the next year are to maintain the robust oversight of the portfolio whilst looking for value realization, furthering improvements to resource infrastructure and reviewing selected investment opportunities. Leaf's unwavering commitment remains to delivering value for its shareholders. The Board believes that given the strides the company has made over the last year under the supervision of Executive Director Bran Keogh, Leaf is well positioned to achieve its goals.

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.

Peter Tom

Chairman

26 September 2011

(1) Based on US$/£ exchange rate of 1.6054 on 30 June 2011

MANAGEMENT REPORT

During the year ended 30 June 2011, the investee companies in Leaf's portfolio have continued to face a very challenging political and economic environment. However, as further described later in this report, these companies have generally managed to continue to progress and to accomplish critical milestones, demonstrating the strength of the underlying asset base.

Despite the global recovery in new financial investment in clean energy companies during the year ended 30 June 2011, downward pressure on existing public shares pricing and sluggish acquisition activity indicate that private equity and venture capital investors, including Leaf, will face increased uncertainty and delay with regard to the timing of clean energy company realizations in the short term. The pressure on public equity and mergers and acquisitions in turn has resulted from the current global economic malaise reflecting both budget crises brought on by recent political changes in the United States and the sovereign debt crises in Europe. As a result, management has continued to focus on supporting Leaf's existing portfolio to ensure that its investee companies are well positioned once the market environment improves.

The continued polarization of politics and the weak economy in the US have made it difficult, if not impossible, for a coherent US federal renewable energy policy to emerge. The US climate legislation initially put forward by the Obama administration and passed by the US Congress failed to get the support of the US Senate and has been withdrawn. Consequently, several of Leaf's portfolio companies are pursuing strategies targeted at markets outside the US, where firm renewable energy policies exist.

The political changes in the US have heavily influenced recent budget wrangling between the US Congress and President Obama, resulting in substantial cuts in funding for several important federal renewable energy programs. One casualty of these cuts, the US Department of Agriculture's Biomass Crop Assistance Program (BCAP), had in the past substantially reduced Multitrade Rabun Gap's (MRG) fuel costs, and held the promise of providing similar benefits to Leaf's other biomass power project, Multitrade Telogia (MT). However, as a result of the budget cuts, the USDA has temporarily suspended the matching payments part of the BCAP program and the US House of Representatives has passed an appropriations bill that removes all funding for BCAP in the fiscal 2012 federal budget. The US Senate has yet to propose its version of this appropriations bill, but it appears that BCAP may be in jeopardy. As a result, it appears likely that the benefits of BCAP may be permanently eliminated for both MRG and MT. The impact of the changes to BCAP on these portfolio companies has been reflected in Leaf's reported NAV.

The US production tax credit ("PTC"), a lynchpin of the high growth in US wind installations is another federal program in jeopardy, and may not be renewed for wind assets after 2012. History clearly shows that the PTC has a direct relationship with US wind installations and most analysts would expect a reduction in wind installations in 2013 and 2014 if the PTC is not renewed.

Shale gas has received increasing attention and importance in the political debate over energy issues in the US, as the Obama administration searches for areas of energy policy where it can reach bipartisan agreement with the Republican-controlled House of Representatives. Assuming an abundant US supply of shale gas, its current low price (current prices below US$4.00 per MMBtu, compared to highs above US$13.00 in 2008) and its relatively low emissions, political and industry analysts expect that natural gas will increasingly replace coal for base-load power generation, especially if stringent new Environmental Protection Agency emissions rules affecting coal plants are implemented.

The long-term impact of this trend is unclear, although in the near term the low price of natural gas and the resulting low price of electricity (average peak electricity prices in one US region are at US$56 per MWh in 2011 versus US$93 for the same period in 2008) are clearly detrimental to the renewable energy sector. Uncertainties do, however, remain for shale gas and reserve estimates are undergoing scrutiny. Additionally, it will be one to three years before the decline curves for unconventional gas resources, such as shale gas, are fully characterized on a broad basis. Overall, we may see natural gas increasing its percentage of the overall generation mix, although the extent of this increase remains open to question.

Despite the current difficult environment, Leaf's investee companies managed to make significant progress during the year. Two examples are worth highlighting.

First, MaxWest raised US$32.5 million in a third-round financing. MaxWest builds, owns, and operates renewable energy facilities at wastewater treatment plants. These facilities revolutionize the processing of wastewater residuals, providing an environmentally sustainable process that is often less costly than existing options. Thus, MaxWest provides a renewable energy solution that generates savings in both capital costs and operating costs for local municipalities. The multi-billion dollar global market addressed by MaxWest's solution, combined with its cost-effective process requiring zero government subsidies, make MaxWest an attractive investment opportunity for later-stage investors.

Second, Johnstown Regional Energy LLC (JRE) negotiated the termination of local supply contracts with its former owners and another large customer, enabling JRE to sell its entire production to a buyer in California. The aggressive renewable portfolio standard (RPS) in California translates into a significant price premium for the green attributes of JRE's gas, thereby mitigating the negative impact on JRE of the recent dramatic fall in natural gas prices resulting from the development of shale gas, and preserving value for Leaf's shareholders.

In another development occurring after the end of this reporting period, Escalona obtained an extension of its water concession, including a permitted increase in output for the project, and enabling the development of this project to move forward.

In addition to portfolio-level improvements, management continues to selectively evaluate new investment opportunities. Through its network of entrepreneurs, companies and peer investment funds, Leaf has access to considerable deal flow. Management believes that the flow of attractive investment opportunities is relatively strong, given the current economic and political climate, and has implemented an improved review process for identifying attractive sub-sectors and investment opportunities within clean energy. The goals of the improved process are to deploy additional capital profitably, whilst further increasing diversification within the portfolio.

Financial Performance

Leaf's total NAV at 30 June 2011 was US$220 million, US$20 million lower than the NAV at 30 June 2010. The change in NAV resulted mainly from US$11.5 million of share repurchases, with the balance being the Company's US$8.3 million comprehensive loss for the period. US$41 million of the Company's NAV was held in cash and US$178 million in investments.

NAV per share for the Leaf portfolio was 165.60 cents or 103.15 pence at US$1.6054 to the £1. This was a decrease of 1.2% for the one year period from 30 June 2010. The decrease for the one year period was due primarily to the comprehensive loss for the period (-3.8%), offset by share repurchases (+2.5%), and exchange rate gains (+0.1%).

There were several other noteworthy financial events in the period under review:

·; Leaf made an additional US$40 million in direct equity and debt investments into existing portfolio businesses;

·; The Company earned US$4.9 million of interest income, which was recorded in the intermediate holding companies and included in the assessment of valuations for the relevant subsidiaries. In addition, the Company and its intermediate holding companies received US$8.4 million of principal repayments in respect of outstanding loans to its portfolio companies (US$2.1 million direct to the Company);

·; The Company repurchased 10.2 million shares at an average price of 70.52 pence, taking advantage of weakness in the Company's share price to deliver value to shareholders;

·; Leaf achieved significant cost reductions during the annual report period versus the prior period by replacing the former asset advisor with an in house management team (see Notes 8 and 9 to the Company financial statements).

Market Environment

The rebound in global renewable energy investments which began at the end of the previous fiscal year continued into the period under review. Indeed, in calendar year 2010 global investment in renewable energy resumed its pre-2009 growth trend, increasing by 32% following a flat year in 2009. All categories of new financial investment in the industry experienced global growth, excluding corporate R&D and private equity investments in expansion capital.

This trend masks sharp regional variations. Renewable energy investment in Europe continued to decline and was down 22% in 2010, whilst in North America investment nearly regained its 2008 level, growing 53%. Investments in the United States grew by 58%, and in Canada by 47%.

Venture capital and private equity investment in renewable energy was up 19% in 2010 versus 2009. While investments in wind energy continued to dominate in all other categories, the US$2.2 billion investment in solar energy again outpaced wind (US$1.5 billion), an indication that solar continued to be considered more attractive for early-stage investment.

In the public markets, new fundraisings from renewable energy IPOs were up 15% over 2009 on a global basis, dominated by wind and China. North American IPO investment fell in 2010, as did European IPO investment if Enel Green Power's US$3.5 billion IPO is excluded. Macroeconomic and political pressures depressed prices of existing public renewable energy companies, as measured by the NEX index, which fell by 14.6% in calendar 2010 as compared to the S&P 500 and the NASDAQ, which increased by 12.8% and 16.9% respectively. This decline in public market valuations of 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.

Global acquisition activity in renewable energy was down by 12% in dollar terms in 2010 and the total number of deals at 459 was 34 fewer than in the prior year. However, this global figure masks the fact that acquisition activity in the US was up by 11%, while in Europe it was down 31%. The overall downward trend reflected reduced acquisitions by corporate buyers and asset acquisitions and refinancing, mostly resulting from increased risk aversion, unfavourable regulatory shifts (including reductions in feed-in tariffs in Europe), and a more challenging debt-financing environment. This explains why most of the reduction in activity came in wind and solar.

Given the increase in the expected length of time to liquidity events for its portfolio companies, as a result of the state of the global economy, Leaf has continued to focus in the short term on the management and appropriate financing of its existing portfolio whilst continuing carefully to assess new investment opportunities.

Despite current short-term global economic and political challenges for the renewable energy sector, Leaf's management continues to believe that the diversity and balance of the Leaf portfolio position the Company to benefit from eventual improvements in these conditions and the expected resurgence of the market forces driving growth in the renewable energy sector.

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

Range Fuels Inc Biofuels - Cellulosic Ethanol

Miasolé Solar PV

Parent company statement of comprehensive income

for the year ended 30 June 2011

The accompanying notes form an integral part of these financial statements 

Parent company statement of financial position

as at 30 June 2011

The accompanying notes form an integral part of these financial statements

The financial statements were approved by the Board of Directors on 26 September 2011 and signed on their behalf by:

Parent company statement of changes in equity

for the year ended 30 June 2011

The accompanying notes form an integral part of these financial statements

Parent company statement of cash flows

for the year ended 30 June 2011

The accompanying notes form an integral part of these financial statements

Notes to the parent company financial statements

for the year ended 30 June 2011

1 The Company

Leaf Clean Energy Company ("Leaf" or 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 the Company's 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 inhouse management team perform all significant functions.

2 Basis of preparation

2.1 Statement of compliance

The Company's 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 financial statements of the Company, 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 on 26 September 2011.

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.

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 Investments in subsidiaries

The Company 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.

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.

3.2 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.

3.3 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. Expenses are charged to the 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 Share issue costs

Costs directly related to the issue of shares are deducted from equity.

3.6 Dividends payable

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

3.7 Trade and other receivables

Trade and other receivables are stated at amortised cost less provision for bad debts.

3.8 Trade and other payables

Trade and other payables are stated at amortised cost.

3.9 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.

3.10 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:

*Amendments resulting from May 2010 Annual Improvements to IFRSs

** Original issue May 2011

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's investments.

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$9,015,949 (2010: US$8,431,760)

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 2011 is as follows:

An appreciation of the Sterling against the US Dollar of 5% would have decreased net assets by US$5,232 (2010: US$117,341). 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 2011 were:

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$405,590 (2010: US$896,090) 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 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 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 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 2011 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 significant of inputs used in making the measurements:

·; Level 1: Quoted market price (unadjusted) in an active market for and 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 included 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 basedon quoted market prices or dealer price quotations. For all other financial instruments the Company determines fair values using valuation techniques.

The Group 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 11.

6 Net Asset Value per Share

The net asset value per share as at 30 June 2011 is 165.60 cents based on net assets of US$219,713,487 and 132,675,726ordinary shares in issue as at that date (2010: 167.65 cents based on net assets of US$239,568,000 and 142,900,726ordinary shares).

7 Interest Income on Cash Balances

8 Management Service Fees

In May 2010, Leaf Clean Energy Company terminated its Asset Advisory Agreement with EEA Fund Management Limited, and established its own subsidiary, Leaf Clean Energy USA, LLC ("Leaf USA"), in Washington, DC, from which the subsidiary provides 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 2011 payable to Leaf USA were US$3,775,686 (year ended 30 June 2010: US$nil) and the amount accrued but not paid at the period end was US$364,626 (30 June 2010: US$nil).

Management fees for the year ended 30 June 2011 payable to EEA Fund Management Limited is US$nil (year ended 30 June 2010: US$5,262,702) and the amount accrued but not paid at the year end was US$ nil (2010: US$nil).

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, as well as work on group and portfolio structuring.

In 2010, legal and professional fees included one-off costs in relation to the proposed and aborted merger with Trading Emmissions PLC.

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$312,840 (2010: US$243,173) including additional quarterly administration fees of US$25,000 with effect for the period from July 2010 to December 2010 and a one-off additional administration fees of US50,000 for additional work performed during the termination of the previous asset advisor . US$53,049 was outstanding as at 30 June 2011 (2010: US$56,620).

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:

The Directors are also entitled to receive reimbursement of any expenses in relation to their appointment. Total fees and other expenses paid to the Directors for the year ended 30 June 2011 amounted to US$1,068,500 (2010: US$989,197) of which US$nil was outstanding at 30 June 2011 (June 2010: US$225,000).

Mr J. 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 to 30 June 2011amounted to US$nil (2010: US$5,938) and the amount accrued but not paid at the period end was US$ nil (2010: US$nil).

11 Gain on restructuring of subsidiary

For efficient portfolio management purposes, the Company dissolved one of its subsidiaries, Leaf Finance Company, during the year, and distributed its net assets to the Company. The dissolution resulted in a one-time net gain of US$3,381,454 (2010: US$nil). 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

(1) It was dissolved on 30 June 2011

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

(1) Up to 31 March 2011

(2) Voting rights 81.9%

(3) 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 restricted cash collateral account securing a US$1,381,235 letter of credit with HSBC Cayman which is in relation to one of the Company's investments and credit card cash security of US$67,481. The letter of credit expires on 30 March 2012, at which time Leaf Clean expects the restrictions on the corresponding cash collateral account to be released and the cash in the account to be made available to Leaf Clean again on unrestricted basis.

The short-term deposits are subject to interest rates at 0.05% per annum and are fixed for periods ranging up to 1 month from the balance sheet date.

15 Share Capital

The authorised share capital of the Company is GB£25,000 divided into 250 million Ordinary Shares of GB£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 10,225,000 shares were repurchased by the Company leaving 132,675,726 shares in issue as at 30 June 2011. The shares were repurchased in 6 tranches at an average price of 70.52 pence per share for a total consideration of GB£7,210,210 (US$11,542,237). The Company's share price has averaged 73 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 2011, 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 2011:

GBP Sterling to US$ 1.6054(2010: 1.4961)

21 Subsequent events

There were no significant subsequent events after the reporting date that require to be disclosed in these parent company financial statements.

Consolidated statement of comprehensive income

for the year ended 30 June 2011

The accompanying notes form an integral part of these financial statements

Consolidated statement of financial position

as at 30 June 2011

The accompanying notes form an integral part of these financial statements

The financial statements were approved by the Board of Directors on 26 September 2011 and signed on their behalf by:

Consolidated statements of changes in equity

for the year ended 30 June 2011