Trading Emissions PLC Regulatory News (TRE)

Trading Emissions plc

Annual Report & Financial Statements

Trading Emissions PLC ("TEP" or "the Company"), a closed ended investment company that specialises in renewable energy projects and emissions instruments, today announces its results for the financial year ended 30 June 2015.

Enquiries:

Chairman's Statement

Dear Shareholder

The focus of the Board of Trading Emissions PLC ("TEP" or the "Company") remains the realisation of assets, minimisation of liabilities and control of operating costs with a view to distributing cash to Shareholders as early as practicable.

As previously disclosed the Company has been engaged in arbitration in Hong Kong relating to certain Emission Reduction Purchase Agreements ("ERPA"). Whilst vigorously defending its position, the potential liabilities arising from these processes have, in effect, prevented the Company from distributing cash in the year to 30 June 2015. Since the end of the financial year, however, the first two arbitration tribunals rejected three of the six claims made against TEP. The Board expects that the arbitration-related hurdles will continue to be removed, which, in due course, will permit the Company to resume distributions to Shareholders.

Financial Highlights

Net Asset Value

During the last financial year, the net asset value ("NAV") of the Company reduced to GBP 26.6 million (10.6p per Share) from GBP 37.8 million (15.1p per Share) at 31 December 2014 and a restated GBP 37.9 million (15.2p per Share) at 30 June 2014. The change in NAV during the second half of the financial year was caused mainly by:

· A reduction of GBP 18.1 million in the value of the private equity portfolio

· A reduction of GBP 2.4 million in the liabilities associated with the carbon portfolio

· An increase of GBP 5.0 million in the cash balances held

Further information is provided below.

Change in the basis of preparation and presentation of the Financial Statements

The Company has adopted IFRS 10, as applicable to investment entities, in relation to the preparation and presentation of the Financial Statements for the year ended 30 June 2015. In order to permit like-for-like comparison, information from prior financial periods has been restated. The main consequence of preparing and presenting the Financial Statements consistent with the latest requirements of the accounting standard is that TEP no longer consolidates its subsidiaries. The subsidiaries are now referred to throughout the Financial Statements as "TEP Investment Companies". TEP now carries all investments at their fair values.

Cash

The Company directly held cash of GBP 9.8 million (3.9p per Share) at 30 June 2015 compared with GBP 4.9 million (1.9p per Share) at 31 December 2014 and GBP 5.0 million (2.0p per Share) at 30 June 2014. Cash balances are mainly held in Pounds Sterling, but some balances are held in US dollars and Euros in order to meet foreign currency expenses and liabilities.

At 30 June 2015, an additional GBP 12.4 million (5.0p per Share) of cash was held by TEP Investment Companies, compared with GBP 13.3 million (5.3p per Share) at 31 December 2014 and a restated GBP 7.9 million (3.2p per Share) as at 30 June 2014.

All cash held by the Company is in short term deposit accounts with international banks. Foreign currency balances are held in Euros and US dollars by TEP Investment Companies to cover operating costs and liabilities pending eventual conversion and distribution to TEP. Foreign currency balances are not hedged.

Carbon Portfolio

TEP's current policy is to hold neither long nor short positions in Certified Emissions Reductions ("CERs"). All CERs delivered to TEP under ERPAs are sold in the spot market as and when market conditions permit. Approximately 1.0 million CERs were delivered to TEP during the last financial year, almost all of which were sold at spot prices. Payment by TEP for these CERs was made at market prices, adjusted for a small margin. No fixed price CERs were delivered to TEP during the year.

CER deliveries are expected to remain low for as long as market prices languish and until likely sales proceeds cover at least the price of CER issuance and verification, estimated at approximately EUR 0.4 per CER. There remains considerable market uncertainty over the longer-term direction of CER prices. Some analysts are optimistic that significant new agreements will emerge from the United Nations Climate Change Conference to be held in Paris in December 2015, which will be attended by 196 countries. Although a new climate change agreement is generally expected to enter into force from 2020, the potential impact on CERs remains unclear.

Valuation

The Company's net liability associated with the carbon portfolio, excluding any costs associated with the arbitrations, fell to GBP 0.5 million at 30 June 2015 from GBP 2.2 million at 31 December 2014 and a restated net liability of GBP 2.4 million at 30 June 2014. This remaining carbon liability arises principally from amounts owed to CER issuers that have not yet invoiced TEP. All of the relevant CERs have been delivered and sold, with the related verification and registration costs having, so far, been borne by TEP.

TEP held no tradable CERs at 30 June 2015. As TEP is not expecting to receive any further fixed price CERs, no hedges were in place at the end of the financial year.

ERPAs

In February 2015, TEP agreed with the prospective buyer to terminate the conditional sale of the 24 floating rate ERPAs, which had previously announced in March 2014. TEP has since been working with three alternative potential counterparties with a view to replacing TEP as a project participant and the focal point under the ERPAs. TEP does not expect to receive any consideration for its withdrawal from these ERPAs.

With respect to the remaining ERPAs to which TEP is counterparty, the Company considers these to have lapsed, been terminated, or the projects are unviable or non-operational. In relation to the ERPAs that have not terminated, TEP will not exercise its right to purchase CERs at fixed prices.

Arbitrations

In March and June 2014 TEP received notices of arbitration challenging the amendments that had been made to six ERPAs, each between TEP and a project company owned by Yunnan Dianneng (Group) Holding Co. Ltd ("Dianneng").

Each claimant is a special purpose company, which operates a hydro-power project in Yunnan province, and is counterparty to an ERPA with TEP. These companies are subsidiaries of Dianneng, which is ultimately controlled by the China Power Investment Group ("CPI"), one of China's largest energy companies. A subsidiary of CPI is listed on the Stock Exchange of Hong Kong. Attempts by TEP to resolve the disputes amicably have not been met with any constructive response from Dianneng and/ or CPI.

The associated claims originally amounted to, in aggregate, approximately EUR 24.1 million, but, during the first two arbitration processes, were revised by Dianneng to an aggregate of approximately EUR 26.3 million. These claims do not include costs incurred as a result of the arbitration processes, which are usually paid, at least in part, by the losing party to the winning party. Each of the disputes is subject to arbitration proceedings in Hong Kong under Hong Kong law. TEP continues to believe that the basis of all of the claims is spurious and misconceived and that the quantum of the claims is in any event incorrect.

In September 2015, two of the arbitration tribunals found in favour of TEP and dismissed three claims, amounting to approximately EUR 15.1 million, in their entirety. In total, TEP was awarded costs of approximately GBP 0.9 million.The arbitration processes in respect of the remaining three claims, amounting to approximately EUR 11.2 million, were deferred by mutual agreement between Dianneng and TEP, but are expected to resume in due course.

Hong Kong arbitration awards are enforceable in China in accordance with the 'Arrangement Concerning Mutual Enforcement of Arbitral Awards Between the Mainland and the Hong Kong Special Administrative Region'. This Arrangement provides for the enforcement of Hong Kong arbitration awards in the courts in the People's Republic of China without re-opening the merits of the underlying disputes. Possible challenges to such enforcement are limited.

Each of the claims lodged by Dianneng's subsidiaries is based on substantially similar ERPA contractual terms and arguments. However, Dianneng's manipulation of the rules applicable to arbitrations in Hong Kong resulted in the HKIAC, the Hong Kong International Arbitration Centre, appointing different sole arbitrators to preside over each of four of the claims. This has resulted in an inefficient and unnecessarily expensive resolution process for these disputes, with the inherent risk that the tribunals could render inconsistent decisions.

During the financial year ended 30 June 2015, TEP paid tribunal, mediation, legal, expert and related expenses in connection with these arbitrations of approximately GBP 1.4 million. Following a detailed review of the projected costs of enforcing the awards and defending the Company in the remaining three actions, TEP retained a provision for estimated future costs related to the arbitrations of GBP 1.4 million at 30 June 2015. Given that the first two tribunals' decisions were issued following the end of the financial year, no account has been taken of the tribunals' awards in the Statement of Comprehensive Income included in the Financial Statements.

Private Equity Portfolio

During the financial year, proceeds from disposals and distributions of GBP 14.2 million were generated by TEP Investment Companies. The principal sources of cash from investment activities were:

· an initial amount equivalent to GBP 5.6 million received by TEP (Renewables Holding) in July 2014, from the sale of EWG Slupsk; and

· the equivalent to GBP 8.5 million from Element Markets distributed to TEP between December 2014 and May 2015.

Valuation

The aggregate fair value of the private equity portfolio in accordance with IFRS 10 was GBP 19.5 million (7.8p per Share), compared with restated fair values of GBP 37.7 million (15.1p per Share) on 31 December 2014 and a restated GBP 37.2 million (14.9p per Share) on 30 June 2014. The fall in the fair value of the private equity portfolio was due principally to the cash distributed by Element Markets and revised assumptions applied to the valuations of TEP (Solar Holdings) and TEP (Renewables Holding). These fair values include cash held by TEP Investment Companies.

Consistent with past periods, in order to protect commercial sensitivities, TEP does not disclose the carrying values of individual investments.

Surya/ TEP (Solar Holdings)

There has been significant activity in relation to the investment in TEP (Solar Holdings) during the financial year.

Following the enactment of the 'spalma incentivi' legislation in Italy and with the support of our Italian financial advisors, TEP (Solar Holdings) made the relevant choices in respect of the three alternative tariff structures, following consultation with each of the lenders. The terms of each the limited recourse financings to each of the subsidiaries of TEP (Solar Holdings) were subsequently restructured.

Operationally, TEP (Solar Holdings)' five photovoltaic ("PV") plant subsidiaries generated aggregate revenues of EUR 13.7 million during the financial year to 30 June 2015, compared with EUR 7.6 million during the first six months and EUR 15.1 million during the financial year ended 30 June 2014. The decline in revenues was caused principally by reduced sales tariffs, panel degradation and oxidation issues. Work continues with the O&M contractors and the suppliers to resolve the panel performance issues. Although the Sicilian provincial authority has agreed to reroute the public road that had been planned to cut through the Librandello PV plant, final approval is awaited from the regional Government.

At the end of June 2015, the equivalent of GBP 1.0 million of cash was held by TEP (Solar Holdings). In addition, the equivalent of GBP 6.8 million was held by subsidiaries of TEP (Solar Holdings), of which the equivalent of GBP 5.6 million was restricted.

EWG Slupsk

At the beginning of the financial year TEP (Renewables Holding), sold its interest in EWG Slupsk to a Polish special purpose vehicle owned and controlled by Winergy Last Mile. EWG Slupsk's principal activity is the development of 8 wind farm clusters in northern Poland with a projected revised final capacity of approximately 230MW.

TEP (Renewables Holding) received an initial consideration of EUR 7.0 million in July 2014 and, under the terms and conditions of the sales and purchase agreement, is contractually entitled to further amounts, currently estimated at between EUR 14.2 million and EUR 17.5 million over a period of up to 48 months from the date of sale. The timing and final consideration is dependent principally on the proportionate amount of debt financing raised as well as on the final permitted capacity of the wind farm.

The largest amounts are receivable by TEP following arrangement of the debt financing to fund the development of the project. TEP (Renewables Holding) provided various representations and warranties to the buyer customary for this type of transaction, which expire in July 2016 and are capped at 66% of all amounts actually received by TEP (Renewables Holding).

Winergy Last Mile failed to meet its internal projection of end-June 2015 for arranging a first tranche of debt financing. Failure by EWG Slupsk to put the debt in place by July 2016 and effect the consequent payments to TEP (Renewables Holdings) would constitute a default. TEP is, of course, keen to see the project develop, even if amendments are required to the current terms of the sale and purchase. Despite protracted negotiations, the Board is disappointed that a sensible and coherent restructuring agreement has yet to be reached with Winergy Last Mile and its partners.

At the end of June 2015, the equivalent of GBP 4.6 million of cash was held by TEP (Renewables Holding).

Element Markets

The management of Element Markets continues to progress the de-risking of the company's asset portfolio. In the year to 30 June 2015, distributions by Element Markets of, in total GBP 8.5 million, including GBP 3.2 million during the first half of the financial year, were received by TEP. TEP is endeavouring to dispose of the remainder of its interest in Element Markets.

Bionasa

Billiter Participações, is still unable to increase its 25% equity interest to over 99% through the conversion of its preference shares in biodiesel plant operator, Bionasa. The final arbitration decision to permit conversion awaits the payment by our joint venture partners of their outstanding arbitration fees.

Bionasa's biodiesel plant has been abandoned. The controlling Brazilian investor has removed all management and has caused the company to become, in effect, dormant. The poor state of Bionasa's affairs, the management and operational vacuum and the level of liabilities have so far prevented TEP from selling either its Brazilian holding company or the equity interest in Bionasa.

Santa Rita/ Electricidad Andina

In April 2012, TEP announced the sale by Santa Rita of Electricidad Andina, a company incorporated in Peru with rights to a 255MW run-of-river hydro project to a subsidiary of AIM-listed Rurelec. TEP holds a 97.3% equity interest in Santa Rita. The consideration was USD 0.1 million, with USD 9.9 million payable on certain milestones up to financial close and an additional amount capped at USD 5.0 million in the event that certain performance targets are met. Rurelec has experienced significant challenges in many of its operations during the past year and its ability to successfully tender for, develop and finance the project is uncertain.

Operating Expenses

Aggregate operating expenses, including legal costs and provisions in connection with the arbitrations, in the financial year amounted to GBP 4.1 million, compared with GBP 2.8 million at the half year stage and GBP 5.5 million in the financial year ended 30 June 2014. Excluding carbon arbitration costs the operating expenses for the year were GBP 2.2 million compared to GBP 1.3 million at the half year stage and GBP 4.4m for the year ended 30 June 2014. A detailed breakdown of the expenses is provided in Notes 6 and 9 to the Financial Statements.

The services of EEA Fund Management ("EEA") continue to be retained by TEP in relation to (a) TEP's carbon portfolio, including support for the arbitration processes in Hong Kong; and (b) EWG Slupsk. Performance fees are also payable to EEA based on receipts from the sale or other transfer of the carbon portfolio and EWG Slupsk. Aggregate fees paid to EEA during the financial year ended 30 June 2015 amounted to GBP 0.4 million compared with GBP 0.3 million for the 6 months ended 31 December 2014 and GBP 1.0 million in the previous financial year.

The Board continues to actively monitor all operating expenses.

Corporate Governance

Given the reduced scale of activity of the Company and the overlapping membership, the Board decided to dissolve the audit committee in March 2015. The activities previously performed by the audit committee are now the responsibility of the full board and continue to be overseen by Neil Duggan.

Distributions

Recent changes in UK tax legislation have reduced the attraction of the B share schemes, which the Company had previously utilised to effect distributions to Shareholders. The Board intends to consult with key Shareholders to assist it in ascertaining the optimum way to effect future distributions.

TEP is unlikely to resume distributions of cash to Shareholders until the remaining carbon arbitrations have been resolved one way or another.

Outlook

The Board continues to implement the various processes to maximise proceeds from the sale of TEP's remaining investments and to minimise any remaining potential liabilities of, or claims against, the Company. We will also endeavour to bring to a conclusion the remaining arbitrations in order to permit a resumption of distributions to Shareholders as quickly as possible.

Thank you for your continued support.

Martin M. Adams

Chairman

30 October 2015

Directors' Report

The Directors present their report and the audited Financial Statements for the year ended 30 June 2015.

Principal activities, trading review and future developments

Trading Emissions PLC ("TEP" or the "Company") was incorporated in the Isle of Man as a public limited company on 15 March 2005 for the purpose of investing in environmental and emission assets, companies providing products and services related to the reduction of green-house gas emissions and associated financial products. On 22 December 2011, the Company was re-registered as a company under the Isle of Man Companies Act 2006.

On 13 September 2010, Shareholders amended the investment policy such that TEP is committed to realising assets and distributing the net proceeds as soon as practicable to Shareholders, subject to retaining sufficient cash to meet current and future liabilities.

Results and distributions

The results for the year ended 30 June 2015 are set out in the Statement of Comprehensive Income.

A review of the Company's activities is contained in the Chairman's Statement.

There were no distributions declared or paid in the year ended 30 June 2015.

The following distribution was declared in the prior financial year:

The transfers to and from reserves are as set out in the Statement of Changes in Equity.

Particulars of the authorised and issued share capital are set out in note 17 to the Financial Statements.

Directors

The Directors during the year and to date were as follows:

Martin Adams (Chairman)

Neil Duggan

Mark Lerdal

Philip Scales

Christopher Agar (resigned 5 December 2014)

Norman Crighton (resigned 5 December 2014)

No Director holding office at 30 June 2015 or 30 June 2014 had any interest in the Shares of the Company.

Company Secretary

The Company Secretary throughout the year and to date was Philip Scales.

Auditor

During the financial year, PricewaterhouseCoopers LLC resigned and KPMG Audit LLC was appointed as auditor. KPMG Audit LLC, being eligible, has expressed its willingness to continue in office.

Subsequent events

For a summary of significant events occurring subsequent to 30 June 2015, please refer to note 23 of the Financial Statements.

By Order of the Board

Philip Scales

Company Secretary

30 October 2015

Statement of Directors' Responsibilities in Respect of the Directors' Report & Financial Statements

The Directors are responsible for preparing the Directors' Report and the Financial Statements in accordance with applicable law and regulations. In addition, the Directors have elected to prepare the Financial Statements in accordance with International Financial Reporting Standards as adopted by the EU.

The Financial Statements are required to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing the Financial Statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with International Financial Reporting Standards as adopted by the EU; and

· prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another.

By Order of the Board

Philip Scales

Company Secretary

30 October 2015

Corporate Governance Statement

The Directors recognise the value of the Principles of Good Governance and Code of Best Practice.

The Board communicates frequently and meets at regular intervals, and at these meetings the Directors are responsible for approval of the overall strategy and major developments of the Company. The Board directs the Company's activities through its regular Board meetings and monitors performance through timely and relevant reporting procedures.

The members of the Board, all of whom are non-executive, have met regularly, as detailed in Table 1 below. Accurate and detailed minutes are taken at each meeting. In addition to formal Board and Committee meetings, Directors also attend a number of informal meetings to represent the Company's interests.

It is the Board's policy that the appointment of new Directors is considered and, if appropriate, approved by the full Board, following recommendation by the Nomination and Remuneration Committee.

The Company Secretary, to whom all Directors have access, attended Board and Committee meetings, and ensured compliance with relevant procedural obligations, as well as being available for the provision of advice to the Company and Directors.

Table 1 - Directors' meetings

* Resigned 5 December 2014

Of the six non-executive Directors who held office during the year, five are considered independent. These are Martin Adams, Christopher Agar, Norman Crighton, Neil Duggan and Mark Lerdal. Philip Scales is not considered independent as he is a Director and shareholder of FIM Capital Limited (formerly IOMA Fund and Investment Management Limited) ("FIM"). FIM is the Company's Administrator.

Each Director shall retire at the annual general meeting held in the third calendar year following the year in which he was elected or last re-elected by the Company.

Each Director (other than the Chairman and any Director holding an executive office) shall retire at each general meeting following the ninth anniversary of the date on which he was appointed or elected (as the case may be).

The Company maintains Directors' & Officers'insurance.

Committees of the Board

The Board operated two committees: the Audit Committee and the Nomination and Remuneration Committee. In line with the reduced scale of activities of the Company, the Audit Committee was dissolved on 9 March 2015. All matters previously dealt with by the Audit Committee are now dealt with by the Board. The Company Secretary acts as Secretary to all committees.

Audit Committee

Prior to being dissolved during the financial year, the Audit Committee made recommendations to the Board, which retained the right of final decision. The Audit Committee was advisory in nature to the Board, and its terms of reference required it to be independent in relation to its operations.

The Audit Committee had primary responsibility for reviewing the Financial Statements and the accounting policies, principles and practices underlying them. Neil Duggan was appointed as Chairman of the Audit Committee on 10 February 2014.

Table 2 below contains details of all meetings of the Committee that were held during the year, together with attendances by each member.

Table 2 - Audit Committee

* Resigned 5 December 2014

Nomination and Remuneration Committee

The Nomination and Remuneration Committee was established in February 2012 and makes recommendations to the Board, which retains the right of final decision.

The Nomination and Remuneration Committee has responsibility for exercising the full powers and authority of the Board in regularly reviewing the structure, size and composition required of the Board compared to its current position along with succession planning for Directors, taking into account the challenges and opportunities facing the Company, and what skills and expertise are therefore needed on the Board in the future.

Additionally, the Nomination and Remuneration Committee determines and agrees with the Board the framework or broad policy for the remuneration of the Company's non-executive Directors, ensures that the Company's non-executive Directors are provided with appropriate incentives to encourage enhanced performance and attract, motivate and retain non-executive Directors of the high calibre needed to enhance the Company's performance and to reward them for improving Shareholder value.

No Director plays a part in any discussion about his own remuneration.

The Nomination and Remuneration Committee has met regularly since its formation. The Chairman of the Nomination and Remuneration Committee was Christopher Agar up until his resignation from the Board of Directors on 5 December 2014, whereby Philip Scales was appointed Chairman.

Table 3 below contains details of all meetings of the Committee that were held during the year, together with attendances by each member.

Table 3 - Nomination and Remuneration Committee

* Resigned 5 December 2014

Relations with Shareholders

The Company is committed to good investor communications and seeks to build and maintain good relationships with its Shareholders. The Company values the views of Shareholders and recognises their interests in the Company's strategy and performance.

Meetings are held with Shareholders on a regular basis and briefings are held with institutional fund managers, analysts and other investors, primarily following the announcement of interim and final results, as well as at other times during the year, as appropriate.

Care is taken to ensure that any price sensitive information is released to all Shareholders at the same time in accordance with AIM requirements. Separate resolutions on each substantially separate issue, in particular any proposal relating to the Report & Financial Statements, will be made at the Annual General Meeting.

Communication is also provided through the Annual Report and the Interim Report and the investor relations area on the Company's website (www.tradingemissionsplc.com). The Company's website provides information as required by Rule 26 of the AIM Rules in addition to general corporate and investor information. All material public and regulatory announcements are reviewed by the Board and the Company's Nominated Adviser prior to release and publication.

Philip Scales

Director and Company Secretary

30 October 2015

Report of the Independent Auditors, KPMG Audit LLC, to the members of Trading Emissions PLC

We have audited the Financial Statements of Trading Emissions PLC for the year ended 30 June 2015 which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Cash Flows and the Statement of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU.

This report is made solely to the Company's members, as a body. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditor

As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of financial statements that give a true and fair view. Our responsibility is to audit, and express an opinion on, the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

 Scope of the audit of the Financial Statements

An audit involves obtaining evidence about the amounts and disclosures in the Financial Statements sufficient to give reasonable assurance that the Financial Statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the Financial Statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited Financial Statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on the Financial Statements

In our opinion the Financial Statements:

· give a true and fair view of the state of the Company's affairs as at 30 June 2015 and of its loss for the year then ended; and

· have been properly prepared in accordance with IFRSs as adopted by the EU.

KPMG Audit LLC

Chartered Accountants

Heritage Court

41 Athol Street

Douglas

Isle of Man IM99 1HN

Statement of Comprehensive Income

 * See note 2

The notes below form an integral part of the Financial Statements.

Statement of Financial Position

* See note 2

The notes below form an integral part of the Financial Statements.

The Financial Statements were approved and authorised for issue by the Board on 30 October 2015 and signed on its behalf by:

Neil Duggan Philip Scales

Director Director

Statement of Changes in Equity

For the year ended 30 June 2014 Restated*

For the year ended 30 June 2015

* See note 2

The notes below form an integral part of the Financial Statements.

Cash Flow Statement

* See note 2

The notes below form an integral part of the Financial Statements.

Notes to the Financial Statements

1 General information

Trading Emissions PLC (the "Company") invests in environmental and emissions assets which provide products and services related to the reduction of greenhouse gas emissions and associated financial products. The Investing Policy of the Company is to carry out an orderly realisation of the portfolio of carbon and private equity assets, distribution of the net proceeds to Shareholders and then undertake a voluntary winding-up of the Company. No new investments will be made except where the Board of Directors of the Company (the "Board") considers it necessary to provide follow-on capital to protect an existing investment.

The Company is a closed-ended investment company domiciled in the Isle of Man and the address of its registered office is IOMA House, Hope Street, Douglas, Isle of Man. The Company was incorporated on 15 March 2005 in the Isle of Man as a public limited company and is quoted on AIM (formerly the Alternative Investment Market) operated and regulated by the London Stock Exchange. In December 2011, the Company was re-registered under the Isle of Man Companies Act 2006.

During the financial year, the Company adopted IFRS 10 'Consolidated Financial Statements'. The Company is an "investment entity", as defined in IFRS 10. As a result, the Company has changed its accounting policy for its subsidiaries to measure them at fair value through profit or loss (see note 2). All subsidiaries are now referred to as "TEP Investment Companies".

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of the Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The Financial Statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"), International Financial Reporting Interpretations Committee ("IFRIC") interpretations and the Isle of Man Companies Act 2006. The Financial Statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) and inventory, at fair value through profit or loss.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Directors to exercise their judgement in the process of applying accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the Financial Statements are explained in note 8.

a) The Company has adopted the following standards and amendments to IFRS as of 1 July 2014:

IFRS 10 'Consolidated Financial Statements'. The standard builds on existing principles for the presentation and preparation of consolidated financial statements and provides additional guidance to determine control where it is difficult to assess.

IFRS 12, 'Disclosures of Interests in Other Entities'. The standard requires disclosure for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.

Investment Entities (Amendments to IFRS 10, IFRS 11, IFRS 12 and IAS 27). The amendments define an investment entity and introduce an exception to consolidating particular subsidiaries of investment entities and instead require those subsidiaries to be measured at fair value through profit or loss in accordance with IAS 39.

In accordance with the adoption of IFRS 10, the Board has concluded that the Company meets the essential elements of definition of an investment entity because:

(a) The Company has obtained funds for the purpose of providing investors with investment management

services.

(b) The Company's initial Investing Policy, which was communicated directly to investors, is investment solely for returns from capital appreciation and investment income.

(c) The performance of investments is measured and evaluated on a fair value basis.

Also the Company has the following typical characteristics of an investment entity:

(a) It has more than one investment.

(b) It has more than one investor.

(c) It has investors that are not related parties of the entity.

(d) It has ownership interests in the form of equity or similar interests.

As a result, the Company has changed its accounting policy in relation to TEP Investment Companies, to measure them at fair value through profit or loss. Before adoption of the amendments, the Company prepared consolidated financial statements.

The net asset value ("NAV") has changed due to TEP Investment Companies that were historically recorded at their consolidated NAV now being accounted for as financial assets or liabilities at fair value through profit or loss. Changes in fair value are accounted for through net change in fair value of financial assets and financial liabilities at fair value through profit or loss in the Statement of Comprehensive Income. As the Company's interest in TEP Investment Companies is now reported at fair value the share of equity attributable to non-controlling interests no longer exists. As part of the restatement the translation reserve has been removed and released to retained earnings.

The change in the accounting policy resulted in an adjustment to the net assets attributable to Total equity. The tables below presents, in respect of the financial year immediately preceding the date of initial application, the resulting changes for each financial statement line affected.

Restatement of Statement of Financial Position

Restatement of Statement of Comprehensive Income

b) New standards, amendments and interpretations issued and endorsed by the EU unless otherwise stated but not effective for the financial year beginning 1 July 2014 which are relevant to the Company and have not been early adopted;

IFRS 9, 'Financial Instruments' - The standard is the first step in the process to replace IAS 39 Financial Instruments: Recognition and Measurement. It introduces new requirements for classifying and measuring financial assets and financial liabilities. The standard will be effective for accounting periods beginning on or after 1 January 2018, subject to EU endorsement.

IAS 27 (revised 2011) 'Separate Financial Statements' - This standard includes provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10.

There are no other IFRS or IFRIC interpretations that are not yet effective that would be expected to have a material impact to the Company.

2.2 Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, which is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board.

2.3 Foreign currency translation

(a) Functional and presentation currency

The Financial Statements are presented in Pounds Sterling (GBP), which is the functional and presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the dates of the transactions. Foreign currency gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income. All financial information presented in Pounds Sterling has been rounded to the nearest thousand.

2.4 Financial assets and financial liabilities

(a) Recognition and classification

Financial assets and financial liabilities are recognised on the date the Company becomes a party to the contractual provisions of the instrument. It classifies its investments in private equity and carbon as financial assets and financial liabilities at fair value through profit or loss. The Board determine the classification of financial assets and financial liabilities at initial recognition and re-evaluate the designation at each reporting date.

(b) Financial assets and financial liabilities at fair value through profit or loss

These are financial assets and financial liabilities held for trading, or those designated at fair value through profit or loss at inception. Financial assets or financial liabilities held for trading are acquired or incurred principally for the purpose of selling or repurchasing in the short term. Assets and liabilities in this category are classified as current assets if expected to be settled within 12 months, otherwise they are classified as non-current.

The Company accounts for its investments, including private equity and carbon at fair value through profit or loss on initial recognition. Attributable transaction costs are recognised in the Statement of Comprehensive Income as incurred. Gains and losses arising from changes in fair value of investments, including foreign exchange movements, are recognised in the Statement of Comprehensive Income.

Financial assets and financial liabilities accounted for at fair value through profit or loss are managed and their performance evaluated on a fair value basis.

(c) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables comprise trade and other receivables and cash and cash equivalents.

(d) Measurement

Financial assets and financial liabilities are initially recognised at fair value. Transaction costs for all financial assets and financial liabilities carried at fair value through profit or loss are expensed as incurred. Subsequent to initial recognition all instruments classified at fair value through profit or loss are measured at fair value with changes in their fair value recognised in the Statement of Comprehensive Income.

All TEP Investment Companies are unquoted. There is an established control framework with respect to the measurement of fair values of TEP Investment Companies. The Directors have overall responsibility for all significant fair value measurements.

Financial assets classified as loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less any impairment losses.

Financial liabilities, other than those at fair value through profit or loss, are measured at amortised cost using the effective interest rate.

Unrealised gains and losses arising from changes in fair value of financial assets and financial liabilities at fair value through profit or loss are included in the Statement of Comprehensive Income as net change in fair value of financial assets and financial liabilities at fair value through profit or loss. Realised gains and losses are recognised on the sale of CERs when the CERs are delivered to a buyer. Sales of CERs are settled gross and revenue is recognised on delivery of the CERs to the buyer.

Interest income is recognised in the Statement of Comprehensive Income for all interest bearing instruments using the effective interest rate method.

The effective interest rate method is a method of calculating the amortised cost of a financial asset and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset. No income is accrued with regards to financial assets that are in default.

(e) Fair value measurement principles

The fair values of investments traded in active markets (such as CERs) are based on quoted market prices at the reporting date. The quoted market prices used for assets held are the last traded price.

If a quoted market price is not available on a recognised exchange or from a broker/dealer for non-exchange-traded financial investments, the fair value of the investment is estimated using valuation techniques, including use of recent arm's length market transactions, reference to the current fair value of another instrument that is substantially the same, discounted cash flow techniques, option pricing models or any other valuation technique that provides a reliable estimate of prices obtained in actual market transactions.

(f) Impairment

If any such indication exists, an impairment loss is recognised in the Statement of Comprehensive Income as the difference between an asset's carrying amount and the present value of estimated future cash flows discounted at a discount rate as determined by the Board.

Evidence of the impairment may include indications that a debtor is experiencing significant financial difficulties, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and/ or where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with default.

If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost decreases and the decrease can be linked objectively to an event occurring after the write-down, the write-down is reversed through the Statement of Comprehensive Income.

2.5 Offsetting financial assets and liabilities

Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

2.6 Cash and cash equivalents and restricted cash

Cash and cash equivalents comprise cash on hand, short-term deposits held with banks and other short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

2.7 Reserves

Ordinary shares ("Shares") are classified as equity. Incremental costs attributable to the issue of new Shares are shown in equity as a deduction from the proceeds.

In the event that any Shares are cancelled the nominal value is debited to the capital redemption reserve. Where such Shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in Total equity.

Share premium represents the difference between the original issue price of GBP 1.00 of the Shares and the par value of GBP 0.01. Amounts are recorded net of issuance costs.

2.8 Trade and other payables

Trade and other payables are classified as current liabilities if payment is due within one year or less. If not they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

2.9 Current Income tax

Current income tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the reporting date in the countries where the Company operates and generates taxable income.

Directors periodically evaluate positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. Provisions are established where appropriate on the basis of amounts expected to be paid to the tax authorities.

2.10 Provisions

Provisions comprise liabilities of uncertain timing or amount that may arise. Provisions are recognised when there is a present obligation, legal or constructive, as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost.

2.11 Contingent assets and liabilities

Contingent assets and liabilities are possible rights and obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events

not fully within the control of the Company. Any such contingent assets and liabilities are explained in the notes to the Financial Statements.

2.12 Expenses

Expenses are recognised when the risks and rewards of goods are transferred to the Company or when services are received. Expenses are accounted for on an accruals basis.

2.15 Distributions

Distribution payments to Shareholders are recognised as a liability in the Financial Statements in the period in which the distribution is approved by Shareholders.

3 Segmental information 

The Board has determined the operating segments based on the reports and financial information provided to it by the administrator. These reports are used by the Board to make strategic decisions. The Board manages the assets across three segments.

Carbon  

The carbon segment comprises investments and associated costs and provisions. The segment is the sum of these as measured in a manner consistent with IFRS.

Private equity

Private equity consists of all TEP Investment Companies, with the exception of those which hold ERPAs and trade in CERs. Given the Board's realisation strategy, all private equity investments are aggregated into one reportable segment and the Board reviews the NAV of the segment attributable to the Company. NAV is measured in a manner consistent with IFRS.

Corporate

The corporate segment comprises all assets and liabilities not otherwise attributable to the carbon or private equity segments and includes cash. The Company incurs certain costs and holds certain assets and liabilities, which are not attributable to the carbon or private equity segments. The Board reviews material expenses incurred on a regular basis. Cash resources as reported in the Statement of Financial Position, are monitored by the Board to ensure there is sufficient cash to meet its obligations as they fall due.

Net Asset Value

*See note 2

The above includes under Corporate, cash of GBP 9,821,000 (2014: GBP 5,029,000).

In addition to financial assets at fair value through profit or loss - carbon, the carbon segment includes GBP 482,000 of CER creditors (2014: GBP 537,000) and GBP 1,401,000 (2014: GBP 1,023,000) for the provision for legal and arbitration related costs, as detailed in note 20.

Total comprehensive loss

*See note 2

In addition to the unrealised movements in Level 3 carbon investments (as detailed in the Level 3 reconciliation of note 4.5) and the realised gain in Level 1 carbon investments of GBP 120,000 (2014: a loss of GBP 511,000), carbon segment also includes expenses related to CERs of GBP 260,000 (2014: GBP 616,000) and arbitration fees of GBP 1,817,000 (2014: GBP 1,117,000).

4 Financial risk management

The Company's activities expose it to a variety of financial risks: market risk (including price risk, cash flow and fair value interest rate risk and foreign exchange risk), credit risk and liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on financial performance. In line with the Board's realisation strategy, the financial risk management policy has been to minimise new, and manage existing exposures the Company from any new, and manage existing exposures and only enter into new instruments as needed by its existing asset portfolio.

Risk management is carried out in accordance with policies approved by the Board. The Board identifies and evaluates financial risks taking into account exposure to its carbon, private equity and corporate segments.

4.1 Market risk

(a) Price risk

The Company is exposed to price risk in respect of:

· Carbon

· Private equity

Price risk has been reflected in the fair values of these assets and liabilities as described in note 4.5.

All TEP Investment Companies comprise interests in companies which are not publicly traded or freely marketable. Such investments may therefore be difficult to value or realise. Any such realisation may involve significant time and expense.

(b) Cash flow and fair value interest rate risk

Cash and cash equivalents are held with financial institutions and as a result interest income and cash flows are subject to changes in market interest rates, primarily changes in the base rates of Pounds Sterling, Euros and US Dollars.

During the year, interest income from cash and deposits with financial institutions was GBP 15,000 (2014: GBP 54,000). At 30 June 2015, if interest rates on average had increased by 0.25% with all other variables held constant, the total comprehensive loss/gain for the year would decrease/increase by GBP 31,000 (2014: GBP 81,000).

If the interest rates were to increase, the fair value of the interest rate swaps would change to compensate for the overall impact of the interest rate movement noted above.

(c) Foreign currency risk

In addition to commitments to purchase CERs under its ERPAs, which are denominated in Euros, the Company also has investments in companies that are located in a number of different countries and are measured at fair value. Therefore the Company is exposed to foreign currency risk arising from various currency exposures, primarily with respect to the Euro and US Dollar. No foreign currency hedging is carried out.

TEP Investment Companies

TEP Investment Companies hold net assets that are exposed to foreign currency translation risk. Currency exposure arising from the net assets of TEP Investment Companies is monitored by the Board.

Cash and trade receivables

Significant cash balances are held denominated in Euros and US Dollars. A 10% strengthening of Pounds Sterling against the Euro would result in a GBP 33,000 (2014: GBP 76,000) decrease in cash and cash equivalents. A 10% strengthening of Pounds Sterling against the US Dollar would result in a GBP 167,000 (2014: GBP 50,000) decrease in cash and cash equivalents. 

No significant trade receivables are held denominated in foreign currencies.

An analysis of net assets by currency exposure is as follows:

4.2 Credit risk

Financial instruments that are subject to concentrations of credit risk consist primarily of cash and cash equivalents of GBP 9,821,000 (2014: GBP 5,029,000) and trade and other receivables of GBP 77,000 (2014: GBP 241,000).

Cash

All cash is deposited are held with two international financial institutions that have high credit ratings from recognised global credit rating agencies.

4.3 Liquidity risk

Cash flow forecasting is performed on a quarterly basis. The forecasting takes into consideration the strategy of achieving an orderly realisation of assets and the investment policy to return capital to Shareholders. The Board monitors liquidity requirements to ensure there is sufficient cash to meet its operational needs.

The Company maintains most of its liquid assets in cash and cash equivalents in order to meet its future financial commitments. At 30 June 2015 cash and cash equivalents of GBP 9,821,000 (2014: GBP 5,029,000) were held.

The table below analyses financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity dates on an undiscounted basis.

*See note 2

4.4 Capital risk management

Capital is defined as Total equity. The objectives in managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for Shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the distributions paid to Shareholders, return capital to Shareholders or sell assets to reduce debt. The Board manages the capital structure and the return of capital to Shareholders. The Company is not subject to externally imposed regulatory capital requirements.

The Company's cash balance as at 30 June 2015 was GBP 9,821,000 (2014: GBP 5,029,000). No distributions were declared or paid during the financial year. On 20 May 2014, during the prior financial year, the Company announced the distribution via a B share scheme of GBP 19,984,000, which was distributed on 24 June 2014.

4.5 Fair value estimation

Assets and liabilities held are carried at fair value include carbon investments and private equity.

1. Carbon

The carbon investments or "carbon" are CERs (included in Level 1), ERPAs and TEP Investment Companies which trade in CERs and hold ERPAs (shown below).

Carbon investments are held at fair value. Fair value is determined using third party purchase offer data in the first instance. If this is not available the fair value is determined using the income approach based on historical data and Directors' estimates and assumptions.

2. Private Equity

Private equity is held at fair value. Private equity consists of all TEP Investment Companies, with the exception of those which trade in CERs and hold ERPAs. Fair value is determined using third party purchase offer data in the first instance. If this is not available the fair value is determined using the income approach based historical data and Directors estimates and assumptions.

Assets and liabilities carried at fair value by valuation method. The different levels have been defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability either directly (that is, as prices) or indirectly (that is, derived from prices); and

Level 3: Inputs for assets or liabilities that are not based on observable market data (that is, unobservable inputs).

The categorisation of a financial asset or liability within the hierarchy is based upon the pricing transparency of the asset or liability and does not necessarily correspond to the perceived risk. A financial assets or liabilities level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgement by the Board.

A market is regarded as active if quoted prices are readily and regularly available from an exchange. The quoted market price used for assets held is the last traded price at the date of valuation. Those instruments included within Level 1 are CERs with a fair value of GBP nil (30 June 2014: GBP nil).

The fair value of assets and liabilities that are not traded in an active market are determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on estimates provided by the management of the assets and liabilities. If all significant inputs required to fair value an instrument are observable, the instrument is included in Level 2, otherwise they are classified as Level 3. Where valuation techniques (for example, estimated recovery value) are used to determine fair values, they are validated and reviewed by experienced personnel and where appropriate, third party advisors. Valuation models are calibrated by back-testing to actual transactions to ensure that the outputs are reliable.

The Company holds no Level 2 assets or liabilities.

The instruments included within Level 3 are the Company's:

· Carbon

· Private equity

The following table presents assets and liabilities that are measured at fair value at 30 June 2015.

Level 3 Valuation Methodology

The valuation methodologies, significant assumptions and fair values of investments as at 30 June 2015 are summarised below:

*See note 2

*See note 2

Significant unobservable inputs are developed as follows:

Discounted proposed transaction terms include non-binding offers received from third parties for the purchase of private equity and/ or carbon, which form the basis of current negotiations.

Discount rates represent the rate used to discount projected levered or unlevered forecasted cash flows and terminal value for an investment to their present values as part of the calculation of enterprise value for the investment. The Company uses a Capital Asset Pricing Model ("CAPM") approach to calculate a discount rate appropriate for each project or company.

Forecast cash flows: Cash flows are forecast by the Company and management TEP Investment Companies by considering possible operational scenarios and transaction terms, the amount to be paid or received under each scenario and the probability of each scenario.

Estimated recovery value: Estimated recovery value is the amount estimated by the Directors to be realised on an investment in a disposal or liquidation scenario.

Level 3 reconciliation:

The table below presents the changes in level 3 instruments for the year ended 30 June 2015 and 30 June 2014. There have been no transfers between levels during the year.

Financial assets designated at fair value through the profit and loss

*See note 2

*See note 2

Financial liabilities at fair value through the profit and loss

*See note 2

5 Disposal of a TEP Investment Company

On 7 July 2014, TEP (Renewables Holding) Limited ("TEP (Renewables Holding)"), sold its interest in EWG Slupsk to Pakenham spólka z organiczona odpowiedzialnościa (the "Buyer"). The consideration included EUR 7,000,000 (GBP 5,560,000) that was paid to TEP (Renewables Holding) in July 2014.  The remaining deferred consideration is contractually due to be paid within a 48 month period from the date of sale. The Board has determined that the estimated minimum consideration is the most appropriate basis for valuation.

TEP (Renewables Holding) has provided various representations and warranties to the Buyer customary for this type of transaction. Certain of these warranties lapsed during the year; all remaining representations and warranties will expire on or before 7 July 2016. The maximum aggregate potential liability is capped at 66% of all amounts actually received from the Buyer.

The deferred consideration is included in the fair value of TEP (Renewables Holdings) at the reporting date.

EEA Fund Management Limited ("EEA") is entitled to receive from the Company an equity transaction fee equal to 2.7 per cent of the net aggregate consideration received on the disposal of EWG Slupsk (see note 6). The fee is paid by the Company in line with the receipts of the deferred consideration received by TEP (Renewables Holding). On 25 September 2014 the Company paid an equity transaction fee of GBP 144,000 (EUR 185,000) to EEA. Potential payments of up to GBP 317,000 were potentially payable at 30 June 2015 and have been included in the fair value of the Company's investment in TEP (Renewables Holding) at the reporting date.

6 Investment Services and Administration fees

Investment Services fees

Investment services fees paid to EEA for the year ended 30 June 2015 were GBP 442,000 (for the year ended 30 June 2014: GBP 974,000).

Under a Services Agreement, which became effective from 1 January 2014, EEA was paid a monthly fee of GBP 32,000 to cover services provided in relation to the investment in EWG Slupsk. and the carbon portfolio. After the sale of the investment in EWG Slupsk the monthly fee payable to EEA reduced to GBP 23,700.

* See note 2

Administration fees

FIM Capital Limited ("FIM") (formerly IOMA Fund and Investment Management Limited) receives an administration fee of GBP 212,000 per annum. During the year FIM received additional fees, approved by the Board, of GBP 15,000.

Administration fees paid to FIM for the year ended 30 June 2015 were GBP 227,000 (2014: GBP 212,000).

7 Directors' fees

The Company paid the following fees to Directors during the year:

* Isle of Man resident

The annual non-executive Directors' fees (excluding any additional fees) are currently GBP 60,000 for the Chairman and GBP 40,000 for the other non-executive Directors other than for Philip Scales who receives an annual fee of GBP 5,000. The Directors are also reimbursed for travel and out of pocket expenses incurred. Directors' fees included an additional annual fee of GBP 20,000 payable to the Chairman of the Audit Committee until 30 September 2015. Until he resigned on 5 December 2014, Christopher Agar received an annual fee of GBP 5,000 for Chairing the Nomination and Remuneration Committee.

The Company operates a Directors Incentive Plan ("DIP") which entitles participating Directors to a percentage of distributions made to Shareholders. On 7 January 2015, Shareholders resolved that the DIP be increased to 2% of any distribution to Shareholders.

In total, an amount of GBP 103,000 has been retained from previous DIP payments in line with the terms of the DIP and will be paid to the Participating Directors at a later date. (At 30 June 2014: Retained DIP amount payable at a later date was GBP 181,000).

Amounts relating to Norman Crighton's share of the DIP, which were retained from previous periods, were paid when he resigned from the Board.

In addition to his Directors' fees, during the year Christopher Agar was paid a consultancy fee for services provided in relation to the disposal of the investment in EWG Slupsk of GBP 65,000. GBP 30,000 of this fee was paid during the year. At 30 June 2015, an accrual had been made for the remaining consultancy fee of GBP 35,000.

Other than as detailed above, none of the Directors is entitled to any cash or non-cash benefits in kind, pensions, bonus or share scheme arrangements.

8 Critical accounting estimates and judgements

Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

(a) Company's classification as an Investment Entity

In accordance with the adoption of IFRS 10, the Board has concluded that the Company meets the definition of an investment entity; further details are provided in note 2.

(b) Fair value of TEP Investment Companies

As a result of the Company being recognised as an investment entity under IFRS 10 all TEP Investment Companies are measured at fair value through profit or loss. The fair value determined by the Board of the TEP Investment Companies is a significant estimate.

(c) ERPAs

ERPAs have been measured at fair value through profit or loss. The fair value determined by the Board of the ERPAs is a significant estimate.

(d) Provisions and Contingent Liabilities

The Company exercises judgement in measuring and recognising provisions and the exposures to contingent liabilities related to pending arbitrations (see note 22). Judgement is necessary in quantifying the possible range of the financial settlement. Because of the inherent uncertainty in this evaluation process, actual expenses and losses may be different from the originally estimated provision or contingent liability.

(d) Contingent consideration on sale of private equity

In April 2012, the Company sold its subsidiary Electricidad Andina for USD 10,000,000. USD 9,900,000 is contingent upon Electricidad Andina completing construction of the hydro plant and securing a power purchase agreement. An additional amount capped at USD 5,000,000 may also become receivable in the event that certain performance targets are met.

The Company sold its subsidiary Environmental Credit Corporation in May 2012 for USD 15,000. Should Environmental Credit Corporation be sold subsequently for more than USD 300,000, then the Company would be entitled to receive up to 50% of the consideration paid by the buyer less USD 300,000.

9 Other expenses

* See note 2

** Audit fees includes GBP 26,000 (2014: GBP 21,000) in relation to other assurance services provided to the Company.

10 Finance income - net

11 Taxation

The Company is liable to tax in the Isle of Man at the rate of 0% (2014:0%).

12 ERPAs and CERs

The Company has entered in to a number of ERPAs to buy CERs. The Company's contracted quantities were as follows:

*See note 2

13 Cash and cash equivalents

*See note 2

14 Trade and other receivables

*See note 2

The fair value of trade and other receivables approximates to their carrying value. 

15 Trade and other payables

*See note 2

**Included in the trade payables are CERs delivered before year end but not yet paid for, amounting to GBP 482,000 (2014: GBP 537,000). The fair value of trade and other payables approximates to their carrying value.

16 NAV per Share and loss per Share

The NAV per Share is calculated by dividing the net assets attributable to the Shareholders by the number of Shares in issue at 30 June 2015 and 2014 respectively.

16.1 NAV per Share

* See note 2

16.2 Loss per Share

(a) Basic

The basic loss per Share is calculated by dividing the loss attributable to the Shareholders by the weighted average number of Shares in issue during the year.

* See note 2

(b) Diluted

Diluted earnings per Share is calculated by adjusting the weighted average number of Shares outstanding to assume conversion of all dilutive potential Shares. At 30 June 2015 and 2014 the Company had no dilutive potential Shares.

17 Share capital

The total number of authorised and issued Shares at 30 June 2015 and 2014 together with their rights is explained below.

All issued Shares of 249,800,202 are fully paid, and each Share carries the right to one vote.

18 Reserves

The following table explains the nature and purpose of each reserve within equity.

19 Distributions paid and declared

No distributions from the Company have been declared or paid during the year. In the prior financial year the Company paid a distribution of GBP 19,984,000 (8.0p per Share) to Shareholders by means of a B share scheme on 24 June 2014.

20 Provisions

Provisions include legal fees estimated to be incurred in association with the arbitrations (see note 22) of

GBP 1,401,000 at 30 June 2015, the movement during the year is detailed below:

21 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 Directors, including certain Directors and partners of TEP Investment Companies who meet the definition of "key management personnel" in IAS 24 are considered to be related parties.

21.1 Directors

Directors' fees, the DIP and other transactions with the Directors during the year are explained in note 7.

Philip Scales was a Director throughout the year. Mr Scales is a Director of FIM and has a beneficial ownership interest in FIM. FIM received fees of GBP 227,000 (2014: GBP 212,000) for administration services provided during the year. FIM also received reimbursements for out of pocket expenses. Administration fees are explained in note 6.

21.2 TEP Investment Companies

The Company entered into a Fees and Expenses Agreement with TEP (Renewables Holding) on 6 December 2010. Under the terms of the agreement the Company will reimburse TEP (Renewables Holdings) for any 'agreed company expenses'. During the year fees and expenses reimbursed by the Company to TEP (Renewables Holdings) amounted to EUR 55,000 (2014: EUR 22,000).

On 6 December 2010 the Company entered into a Total Return Swap Agreement ("TRS") to the amount of EUR 10,000,000 with TEP (Renewables Holding). The TRS was for a period of 20 years with a termination date of 6 December 2030 or such earlier date as may be specified by written notice by TEP (Renewables Holding) to the Company. Under the terms of the TRS, TEP (Renewables Holding), after receipt of proper instruction from the Company will make, where practical, investments in target entities. On termination of the TRS any amounts in the cash account from the TRS or investments made must be paid to the Company by TEP (Renewables Holding). As at 30 June 2015 the balance on the TRS stands at EUR 12,028,000 (2014: EUR 9,100,000).

During the year the Company advanced GBP 385,000 (2014: GBP 380,000) to Billiter Participações Ltda to cover its on-going operating expenses. The sums advanced are not repayable. No agreement exists between the Company and Billiter Participações Ltda regarding the payment of its on-going operating expenses, and the Company is under no obligation to pay these expenses.

22 Contingent liabilities

In March and June 2014, the Company received notices of arbitration challenging the amendments that had been made to, in total, six ERPAs, each between TEP and a project company owned by Dianneng.

Subsequent to the reporting date two arbitration tribunals rejected three claims. The decisions of the tribunals are final and the awards are binding.

The aggregate sums alleged to be payable by the Company under the remaining three claims yet to be heard by arbitration tribunals amounted to approximately EUR 11,172,000 (2014: EUR 24,078,000).

The Company is party to several fixed priced ERPAs. The Company considers these to have lapsed, been terminated, or the projects are unviable or non-operational. No provision has been made for potential liabilities arising from these contracts because the Board have assessed the likelihood of any liabilities as being remote.

23 Subsequent Events

During September 2015 two arbitration tribunals rejected three claims and the Company was awarded costs totalling the equivalent of GBP 870,000. The original claims were for EUR 12,907,000, but were subsequently revised to EUR 15,314,000. The decisions of the tribunals are final and the awards are binding. There are very limited rights to appeal. See Note 22 for further details.