Trading Emissions PLC Regulatory News (TRE)

30 March 2012

Trading Emissions PLC

Results for the six month period ended 31 December 2011

Trading Emissions PLC ("TEP" or "the Company"), a closed end investment company that specialises in renewable energy projects and emissions instruments such as carbon credits, today announces its results for the six month period ended 31 December 2011.

Financial Highlights

·; Independent portfolio valuation concludes:

- Net Asset Value of combined Cash, Private Equity Portfolio and Carbon Portfolio: £184m (73.63 pence per share);

- Cash: £62m (24.63 pence per share);

- Carbon Portfolio: negative £18m (negative 7.20 pence per share);

- Private Equity Portfolio: £140m (56.20 pence per share);

·; Unhedged exposure to carbon stands at 11m tonnes as at 28 March 2012

Operational Highlights

·; Sale of individual private equity assets proceeding

·; Renegotiation of unprofitable carbon contracts showing initial encouraging signs

·; Two solar assets refinanced in the period and a third in the course of refinancing

Francis Hackett, Chairman of Trading Emissions PLC said:

"We have made a start on the realisation process which is a complex and time consuming exercise. It will be a challenge to extract maximum value from these assets over a reasonable time frame but we remain committed to doing that and returning capital to shareholders as soon as possible."

--ENDS-

For further information:

EEA Fund Management Limited +44 (0)20 7553 2361

Simon Shaw, Investment Adviser to TEP

Liberum +44 (0)20 3100 2222

Steve Pearce / Tom Fyson

Trading Emissions PLC

Consolidated Interim Financial Statements

For the period ended 31 December 2011

  Chairman's Statement

Interim results for the period ended 31 December 2011

Dear Shareholder

This is the first set of results for Trading Emissions PLC ("TEP" or the "Company") presented under the auspices of your new Board which was appointed by shareholders on 2 December 2011. The interim accounts cover the period from 1 July 2011 to 31 December 2011 during which the new Board was in situ for just one month.

We have endeavoured in the presentation of the interim report and accounts to be as transparent as possible, having regard to commercial sensitivities and regulatory requirements.

The consolidated interim financial statements have been prepared on a consistent basis with the financial statements for the year ended 30 June 2011 in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"). The interim financial statements include cash held by the parent company and its subsidiaries, our portfolio of carbon and our private equity portfolio. Where we have control of a private equity asset it is consolidated in our financial statements. Where we own less than 50 per cent. and/or do not have control, the investment is recorded at fair value in accordance with applicable IFRSs. Similarly where a firm decision has been made to dispose of an investment during the financial period, it is recorded at the lower of carrying value and fair value less costs to sell in accordance with IFRS 5, "Non-current assets held for sale and discontinued operations". As a result of the above IFRS requirements, it is not possible to provide a simple statement to shareholders showing the cost less impairment, where applicable, of each private equity investment, which then ties back to one line in the financial statements. The Board will continue to work with its advisers to endeavour to improve the transparency of the Company's financial statements.

I believe it would be useful to begin by outlining for shareholders the actions the members of the Board have taken since their appointment and bring to your attention certain significant post balance sheet events.

Upon their appointment, the newly constituted Board spent a significant period of time familiarising themselves with the affairs of the Company and its subsidiaries. In particular, we obtained a detailed briefing from the Investment Adviser EEA Fund Management Limited ("EEA" or "the Investment Adviser") and the individual portfolio managers employed by it on each of the private equity assets and the carbon portfolio. I also met with the main advisers to the Company including the auditors (PricewaterhouseCoopers), the administrators and sub administrators (Chamberlain and IOMA respectively) the NOMAD and broker (Liberum) and the Company's legal advisers (Shepherd and Wedderburn). Together with one or more of the newly appointed Directors, I have visited each of the six major private equity investments namely:

1. Bionasa (Brazil)

2. Element Markets(USA)

3. Asia Biogas (Thailand)

4. TEP Solar (Italy)

5. EWG Slupsk (Poland)

6. Chapel Steet (USA)

In addition, we have met the EEA team in Beijing that is tasked with renegotiating the contractual arrangements in relation to the carbon portfolio and visited one of the projects in China.

I am aware from shareholder feedback since my appointment, that there are concerns in relation to the precise quantum of exposure of the Company in respect of its carbon portfolio, the value of of the private equity assets and certain legacy issues. As a result of these concerns, the Board engaged a leading independent international firm of accountants to provide a portfolio valuation report in respect of both the carbon portfolio and the principal private equity assets. The Board received that report on 27 March 2012 and has considered its contents in conjunction with the preparation of the interim report and accounts.

The report concludes that the composite unaudited fair market value of the cash, the carbon portfolio and the private equity assets is GBP 184 million as at 31 December 2011 or 73.64 pence per share. This comprises a cash balance of GBP 62 million (24.64 pence per share), a negative valuation of the carbon portfolio of GBP 18 million1 (negative 7.20 pence per share) and a valuation of GBP 140 million for all of the private equity assets (56.20 pence per share).

The Board has carefully considered the report and has resolved to write down those investments which are valued in the report at a lower valuation than our carrying value. However, the Board has been advised that under accounting standards it is not always appropriate to write up those investments where the carrying value in our accounts is lower than valuations set out in the independent report owing to the application of IFRS. Accordingly we have prudently written down the value of our private equity investments in our financial statements as at 31 December 2011 by GBP 14 million leaving us with a net asset value of GBP 170 million attributable to the Company's shareholders.

As at 30 June 2011 the net asset value ("NAV") attributable to the Company's shareholders shown in the audited report and accounts was GBP 302 million. The principal reason for the reduction in net asset value is the fall in the price of carbon during the period, the CER spot price of which fell from EUR 11.05 at 30 June 2011 to EUR 4.21 at 31 December 2011. I refer later in my report to the steps the Board and the Investment Adviser are taking to mitigate the liability in respect of our carbon commitments.

The NAV of GBP 170 million equates to 68.01 pence per share. This excludes costs associated with the realisation of assets and ongoing operating costs.

The Directors are conscious that the current NAV is still significantly in excess of the current share price of the Company. We acknowledge that the realisation of fair market value of the assets of the Company is still uncertain and is dependent on a number of factors including the market price of carbon, a successful renegotiation of key contracts in connection with the carbon portfolio and a successful conclusion of the sales processes that have commenced in relation to the individual private equity assets.

 As previously stated, the Board remains committed to distribute the net proceeds of the sale of any material private equity assets to shareholders subject only to the Company retaining sufficient cash after the distribution to meet its current and future liabilities.

The following is a summary of the current position in respect of the carbon portfolio, the material investments in the private equity portfolio and cash:

1. Carbon Portfolio

The EEA team in China has been charged with renegotiating the major emission reduction purchase agreements (ERPAs) in recognition of the fact that they have become unprofitable duetothe current price of carbon. TEP is not alone in commencing such price renegotiation and there are encouraging initial signs that Chinese counterparties are taking a pragmatic approach to the problem. Further information in relation to this is set out in Section 1 of the Investment Adviser's report. The Investment Adviser has advised the Board that its current estimate of the unhedged exposure of the Company to carbon obligations is approximately 11 million of CERs. That estimate includes a number of CERs that will be delivered post December 2012. The Board has instructed EEA to take all actions that are lawfully available to it to minimise the Company's exposure to unprofitable carbon contracts.

2. Private Equity Portfolio

(a) Bionasa

Following a meeting of principals in January this year, an agreement was reached to appoint a financial adviser to Bionasa tasked with refinancing Bionasa to enable a realisation of the Company's investment. The arbitration process is suspended for a period of three months to allow for the appointment of the financial adviser. That process is ongoing. In the meantime the plant is operating normally and continues to participate in quarterly biodiesel auctions.

(b) TEP Solar

TEP Solar has completed the acquisition of three projects of the existing portfolio during the period 30 June 2011 to 31 December 2011 and has successfully refinanced, via project finance, two of the three projects acquired (Ravano and Olivia). TEP Solar is proceeding with the refinancing of the third project (Librandello - a 9.2MW solar plant) and expects this refinancing to close in the second quarter of 2012. The Company anticipates that the loan it advanced to Surya plc in the sum of EUR 17.7 million and the loan advanced by EEA to Surya plc in the sum of EUR 12 million will both be repaid out of the Project Librandello refinancing.

TEP Solar has also terminated the agreement to purchase another solar asset (Albanese) and has recovered the sum of EUR 3.6 million paid by it by way of deposit to the project promoter and contractor.

The overall portfolio of solar assets owned by the Company now stands at 24.6MW. The portfolio is performing in accordance with expectations.

We believe that following the completion of the refinancing of Project Librandello, TEP Solar assets will represent an attractive fully-financed operating portfolio.

(c) EWG Slupsk

The Company is in negotiations with a Polish utility for the sale of this 265MW wind farm in northern Poland. The permitting of the wind farm is proceeding well and it is anticipated that all of the necessary permits will have been applied for by the end of June 2012 and we have been advised that they should be issued by the end of the third quarter 2012. A twelve month wind monitoring report has been completed by Garrard Hassan and it is expected that the energy assessment of the project will be positive.

(d) Element Markets

Element Markets has engaged an investment bank to seek to raise equity on its behalf to enable it to complete its business plan to expand new facilities. This processs is ongoing and there is interest from a number of parties.

(e) Asia Biogas

Asia Biogas has refocussed its activites on a number of major projects it hopes to deliver in the first half of 2012. The advisers engaged to facilitate a sale of the business have received a number of indicative bids which are currently being evaluated.

(f) Chapel Street

We have requested that funds in excess of current requirements be returned to TEP. We have also sought a proposal from the general partner to ensure an orderly exit from the partnership.

Further details on the other private equity assets are contained in the Investment Adviser's report

 3. Cash

The Company's cash balance as at 31 December 2011 was GBP 61.5 million of which GBP 21.2 million is restricted cash in connection with the World Bank umbrella carbon facility. The Board considers that it is prudent to retain a significant cash balance to meet contingent liabilities in connection with the carbon portfolio. Cash in excess of prudent requirements will be distributed to shareholders.

We are reviewing the service levels and contractual arrangements of all service providers to the Company. We have also introduced enhanced cost control measures and procedures for the approval of payments out of the Company.

In summary, although we have made a start, we hope shareholders will recognise that the realisation of the Company's assetsis a complex and time consuming exercise. The marketplace for carbon and renewable energy private equity projects remains difficult and it will be a challenge to extract the maximum value from these assets over a reasonable time frame. The Board intends to implement appropriate management and remuneration arrangements for the Company going forward and will consult with shareholders in due course.

We remain committed to extracting maximum value for shareholders and returning capital within as short a timeframe as is reasonably possible. We ask for your continued support in this challenging task.

Yours sincerely

Francis Hackett

Chairman

29 March 2012

Investment Adviser's Report

Interim Results for the period ended 31 December 2011

This report updates investors on the Company's activities for the period from 1 July 2011 to 31 December 2011 (the "Reporting Period"), including material post-balance sheet events up to the date of publication. The report is presented in two parts, reflecting the format of the Company's asset segmentation which follows in the accounts. First, the risk adjusted carbon credit portfolio is presented, including an update of the Clean Development Mechanism ("CDM") status of major projects in the portfolio and transactions that were undertaken to create this Certified Emission Reductions ("CER") portfolio; followed by an update on the Company's portfolio of energy and climate related private equity investments.

Following the Company's announcement in August 2010, the Investment Adviser ceased origination of new equity investment and carbon credit opportunities on the Company's behalf other than in relation to approved and funded investment activity within portfolio companies where funds had already been reserved at that time and follow-on investments in existing portfolio companies. This was especially relevant for the solar sector, but project origination in this area has now ceased. Activities have shifted in focus towards realisation of the Company's private equity and carbon portfolios.

Due to the persistent depressed demand for CERs causing low prices, a majority of the Company's Emission Reduction Purchase Agreements ("ERPAs"), notably in China, are no longer profitable in their current form. The Investment Adviser has initiated ERPA renegotiations on behalf of the Company to limit, and in some cases reverse, contingent liabilities. Initial reception from many sellers has been positive, provided that, as part of the negotiations, the Company agrees to purchase Post-2012 CERs at an agreed discount to the market price at the time of delivery. If pursued by the Company, the outcome of such negotiations and amendments to existing ERPAs will be (i) the reduction of the Company's contingent liabilities and future losses relating to the ERPAs and (ii) the Company committing to purchase Post-2012 CERs, albeit at an agreed discount to the market price at the time of delivery. This would mean that the Company's risk adjusted contracted CER portfolio would increase during 2012. The Investment Adviser is hopeful of the successful execution of this strategy in the coming months, if supported by the Company.

It should be recognised that as the Company's carbon portfolio matures, payments will have to be made to obtain CERs. This will necessitate close monitoring and management of the Company's cash flow position, and CERs will be sold as appropriate.

PART 1: CER PORTFOLIO

The Company's rights to CERs have been acquired principally through ERPAs whereby the Company enters into a contract with a vendor for the spot or forward purchase of primary CERs, with payment on delivery. As noted above, ERPAs representing the majority of the existing carbon portfolio are currently being renegotiated.

The Company has also provided debt finance to companies developing or operating CDM projects. These loans are repayable in CERs directly from the relevant projects and secured with project or company assets, or guarantees.

The Company has also received, and projects that it will continue to receive, CERs related to a number of its equity investments, described in more detail in part two of this report.

The portfolio quantities set out below include CERs received, or to be delivered as a result of these three types of transactions.

This report includes statements that are forward-looking statements and tables that include projections or statements that use terms such as "projects", "expects", "will" or "should". In each case, these statements and tables reflect the current expectations of the Company and/or the Investment Adviser based on risk-adjusted calculations, but actual deliveries of CERs and/or other emission reduction credits may differ materially from those predicted by the projections or other forward-looking statements in this report.

CER Commercialisation and Trading

As of the date of this report, the Company has a risk adjusted portfolio of approximately 24.2 million CERs expected for delivery before the end of March 2013, of which approximately 14.6 million have been delivered as at the date of this report. In all reports, we differentiate between commercialisation activities (secondary trading activities which result in the net sale of CERs, and with the effect of reducing the size of the unsold portfolio, effectively hedging the Company's forward position) and trading activities (activities which do not alter the Company's overall CER position but generate cash or favourably adjust the composition of the portfolio).

The Company's average CER purchase price is EUR 6.29 for delivered and future risk adjusted CERs. Commercialisation activity to date has been completed largely through physical delivery against exchange traded fund positions, with some Over the Counter ("OTC") forwards plus spot sales.

As at 27 March 2012, the Company had inventory of approximately 1.9 million CERs, which are valued at EUR 7.4 million as of that date. As at 30 June 2011, the Company had inventory of approximately 2.8 million CERs and 1.5 million European Union Allowances ("EUAs"), which were valued at GBP 46.7million at that date. The Company has since 30 June 2011 adopted a policy of the realisation of delivered carbon stocks.

Credit standing and availability of free cash remain significant determinants of a market participant's ability to participate efficiently in the secondary CER and EUA markets. The Company has been selective in dealing with counterparties. The Company has sold CERs to European Governments and traded through the IntercontinentalExchange ("ICE"). Commercialisation and trading activities through ICE for the Reporting Period and also up to 27 March 2012 are summarised below.

The Company has delivered CERs against its 2009, 2010 and 2011 futures positions. In the period 1 July 2011 to 31 December 2011, the Company has undertaken the realisation of delivered carbon stocks resulting in the disposal of approximately 3.9 million CERs with net proceeds of approximately EUR 24.8 million. In addition, the Company has forward sold approximately 0.7 million CERs for March 2012 delivery for aggregate proceeds of approximately EUR 2.8 million and 2.0 million CERs for December 2012 delivery for aggregate proceeds of approximately EUR 11.5 million.

Risk Adjusted CER Portfolio

The Company values its rights to CERs under the ERPAs at fair value in the financial statements. The fair value is determined using a valuation model which adjusts the CER delivery quantities set out in each ERPA by a risk adjustment factor that takes into account (i) project technology, (ii) CDM and project financing status, and (iii) the development and construction status.

The Company's risk adjusted portfolio is quoted in aggregate for two periods; firstly, CERs projected to be generated prior to the end of 2012 and issued before the end of March 2013 ("Pre-2012 CER's"); and secondly, CERs that are either generated after 2012, or delivered after March 2013 if generated in 2012 ("Post-2012 CERs").

The 31 December 2011 period end positions are summarised below in Table 1, rounded to the nearest 1,000 CERs:

The Company had a Pre-2012 risk adjusted contracted CER portfolio of approximately 24.2 million, of which approximately 12.7 million had been delivered on or before 31 December 2011. In addition the Company projects that it will receive approximately 4.4 million Post-2012 CERs.

The delivered portfolio has been boosted by the issuance of approximately 1.9 million CERs since the end of the Reporting Period. The Company has yet to pay for approximately 1.0 million of these CERs.

Overall, as of the date of this report, the Company's total risk adjusted portfolio stands at 28.6 million CERs, with 24.2 million Pre-2012 CERs (of which 14.6 million CERs have been delivered) and 4.4 million Post-2012 CERs (Table 2).

The December 2011 RNS update issued by the Company indicated a net unhedged obligation of approximately 13.5 million CERs at that time. As at the date of this report, the Company has a net unhedged obligation to buy an estimated maximum of approximately 11.0 million CERs. The Company has received advice that it is likely to be obliged to take delivery of CERs that are projected to be generated in 2012 but only delivered after March 2013. These CERs are included in the risk adjusted estimate of 14.0 million CERs to be delivered.This figure also includes 2.3 million CERs due to be delivered pursuant to ERPAs that are subject to renegotiation which, if successful, would further reduce the Company's potential liabilities under those ERPAs.

A reconciliation resulting in the approximately 11.0 million net unhedged CERs is detailed below:

The Company is covering its exposures to these 11.0 million CERs as follows:

As at 31 December 2011, the risk adjusted quantities have been valued using ICE CER prices as at this date. Estimated cash flows are then discounted to determine the net present value of the rights to CERs under each ERPA.

The following are the CER prices used in valuing the ERPA at 31 December 2011:

If the negotiations of ERPAs are pursued by the Company, the outcome of such negotiations and amendments to existing ERPAs will be (i) the reduction of the Company's contingent liabilities and future losses relating to the ERPAs and (ii) the Company committing to purchase Post-2012 CERs, albeit at an agreed discount to the market price at the time of delivery. This would mean that the Company's risk adjusted contracted CER portfolio would increase during 2012.

CDM Project Registration and Issuance

The Company received approximately 1.8 million CERs issued from non-industrial gas and approximately 0.7 million CERs issued from hydrofluorocarbon ("HFC") projects during the Reporting Period.

Out of the approximately 1.9 million CERs issued to the Company after the Reporting Period and prior to 27 March 2011, approximately 0.7 million CERs came from industrial gas projects.

CDM Project Portfolio under ERPA (China)

·; Natural Gas Projects

The Company has contracts with four registered natural gas power generation CDM projects in its China portfolio. Levels of power generation have been increasing and are now at levels expected in the registered Project Design Document ("PDDs"). The United Nations Framework Convention on Climate ("UNFCCC") methodology for these projects requires that the grid emission factor used to determine the emission reductions is updated in each monitoring period. In the previous year grid emissions in the Eastern China Power Grid and Central China Power Grid fell by between 2.46 per cent. and 7.75 per cent. respectively reducing the emissions factor for the grid and the resulting CER count for projects in these locations. On 25 November 2011, the CDM Executive Board rejected a small-scale natural gas project, Hongyi, the ERPA for which has subsequently been terminated.

·; Hydro Power

The Company has contracts with fifteen large scale hydro projects which, apart from one project, Youfanggou, are all registered. The Youfanggou project was rejected by the Executive Board ("EB") during the previous Reporting Period, and following revalidation has since been resubmitted to the UNFCCC.

The Company's portfolio of twelve registered large scale hydro projects is projected to generate over 4.7 million Pre-2012 CERs.

The Company's portfolio also includes six registered small scale hydro projects, which are projected to generate approximately 500,000 Pre-2012 CERs. A further three small hydro projects have been submitted for registration with a further two projects still in the validation process. Since the previous reporting period, one small hydro project, Maoxu, was rejected by the DOE during the validation process.

All of the Company's large-scale hydro projects have been audited against principles set out by the World Commission on Dams which involves a review on the development effectiveness of large dams and assesses alternatives, and sets internationally-acceptable criteria and guidelines for planning, design, construction, operation, monitoring, and decommissioning of projects. This permits CERs generated by these projects to be eligible for compliance use in the EU Emissions Trading Scheme.

·; Coal Mine Methane

The Company has contracts with a portfolio of three coal mine methane ("CMM") projects. The Fengrun project is projected to continue to outperform expected CER generation. A second project, Qinxin, was registered in October 2010 and is projected to generate over 150,000 Pre-2012 CERs with the first verification scheduled for later in 2012. The remaining CMM project in the portfolio, Duanwang, was registered on 5 March 2012 (with its formal registration back dated to 8 November 2011). Since the previous reporting period, the ERPA for one CMM project, Lanjin, was terminated due to the project's inability to complete the validation process.

·; Wind Power

The portfolio includes contracts with four registered Chinese wind projects which continue to perform in line with projections. All of the Chinese wind projects have issued CERs.

·; Biomass and Waste Water Utilisation

The Company has contracts with two biomass projects: a 25MW biomass project Nongan, which is projected to generate almost 120,000 Pre-2012 CERs and the Luyi project which is registered and operating. The Luyi project is projected to generate over 900,000 Pre-2012 CERs. Since the previous reporting period, the ERPA for one biomass project, Jiutai, was terminated as the seller did not proceed with the construction of the project.

The Company has agreements with two small-scale Chinese wastewater projects, the Anning project which was registered in November 2010 and the Mashan project which is pending registration.

·; Landfill Gas

The Company has a contract to acquire CERs from two registered landfill gas projects in China. The projects were built by a European developer as part of a joint venture with a Chinese counterparty. The Company projects that it will receive over 150,000 Pre-2012 CERs from these projects. A third project, Qiaoyi, was submitted for registration in February 2012.

·; Waste Energy Recovery from Industrial Processes

The Company's waste energy recovery portfolio includes agreements with four registered projects including two in the cement sector (Qingsong and Wannianqing), one in the coke sector (Huanda) and one in the chemicals sector (Zhangjiagang).

The Zhangjiagang project continues to perform in line with projections and has delivered approximately 496,000 CERs to date, with a further 277,000 Pre-2012 CERs projected. The Huanda coke Waste Heat Recovery project's CER generation continues to be adversely affected by the Chinese government's constraints on coke production in an attempt to curb oversupply problems experienced in this industry in the past. Monitoring for the Qingsong and Wannianqing projects is on-going.

·; Umbrella Carbon Facility

The Company has agreements with two HFC-23 destruction projects through the World Bank Umbrella Carbon Facility ("UCF") for a total of approximately 11.4 million CERs. Delivery takes place quarterly. The Company has received approximately 7.3 million CERs to date. The Company has an obligation to purchase CERs from these projects out to early 2014. The Company's outstanding bank guarantee in favour of the World Bank currently stands at EUR 20.8 million.

CDM Project Portfolio under ERPA (Rest of the World)

·; Hadera Paper fuel switch project - Israel

The Company signed an ERPA with a small-scale heavy fuel oil ("HFO") to natural gas ("NG") fuel switch project at the Hadera Paper manufacturing site. Approximately 90,000 CERs have been issued to date.

·; Amman East - Jordan

The Company signed an ERPA in November 2008 for the acquisition of CERs generated from the Amman East 380MW greenfield Combined Cycle Gas Turbine ("CCGT") project. The validation site visit took place in November 2009 and a draft validation report was prepared by SGS in December 2009. On SGS's recommendation, two Requests for Clarification ("RfCs") regarding the eligibility of the selected additionality approach under the applied methodology were submitted to the CDM Methodology Panel ("Meth Panel") in December 2010. In March 2011, the Meth Panel issued a negative decision on the RfCs which meant that the additionality approach needed to be changed in order to fulfill the requirements of the methodology. As a consequence, new supporting data and information was needed in order to be able to re-draft the PDD. This information was not forthcoming and so SGS, the Designated Operational Entity ("DOE") for the project and the Company agreed that the project could not be validated and registered. The Company therefore terminated the ERPA in August 2011.

·; Durban- eThekwini Landfill - South Africa

The Company signed an ERPA with eThekwini Municipality (the owner of the project) in November 2008. One of the conditions precedents in the ERPA had not been satisfied and the Company therefore terminated the ERPA in September 2011.

·; Asia Biogas Singapore - South East Asia

As a result of its investment in Asia Biogas Singapore Pte Limited (see section on Private Equity Portfolio), the Company projects that it will receive a total of 1.3 million CERs from Asia Biogas' projects located in South East Asia.

·; Swine Wastewater Treatment Turnkey projects - Philippines

The Company has signed a secondary ERPA in respect of nine registered small-scale anaerobic digestion swine wastewater treatment projects. These projects were built by Asia Biogas (see section on Private Equity Portfolio) on a turnkey basis and are owned and operated by local farm owners.

CDM Project Portfolio from Carbon Loans

·; Alto Tietê Biogás - Brazil

The Company agreed to provide a loan facility to the Alto Tietê Biogás ("ATB") landfill gas capture and flaring project located in Itaquaquecetuba, State of São Paulo, Brazil in March 2011. The project is registered with the UNFCCC and began operation in September 2008.

The loan facility provided ATB with a combination of cash and CERs. The entire cash facility has been drawn down in five tranches. The CER facility of 41,000 CERs has also been drawn down in full to allow ATB to comply with its immediate obligations under two ERPAs signed in the past to raise working capital.

It was intended that the loan would be repaid in CERs from the project's first and second issuances. However both of these issuances were rejected by the UNFCCC. The Company intends to instruct local lawyers to pursue the recovery of its loan.

·; Dairy farm finance facility - Mexico

The Company signed an agreement in April 2009 with Environmental Credit Corp (("ECC"), see section on Private Equity Portfolio) making available a carbon loan facility to finance the construction of biodigesters at a number of dairy farms in Mexico. A total of USD 875,000 has been drawn down. A bundle of biodigesters had been financed and they are now operational. The projects are projected to yield the Company a gross quantity of approximately 200,000 CERs by 2016 through carbon loan and interest repayments and under an ERPA.

The project bundle was registered in October 2011 and the monitoring plans for the projects have been implemented. The Company executed an Assignment and Assumption Agreement which passed rights and title for all five of the projects to the Company, in exchange for forgiveness of ECC's CER backed loan obligations of USD 875,000. The Company will now be the beneficiary of CERs generated by the projects, and is considering options for the sale of the projects and rights to the CERs.

·; Escalona - Mexico

In 2007 the Company provided a USD 500,000 loan for working capital purposes to a 9.3MW run-of-river hydro project in Mexico under development with a local project development business called Energia Escalona. The loan is due to be repaid in CERs generated by the project before 2012.

The project has suffered delays to its development programme. Given these delays, the Company considers it unlikely that the project would be operational substantially prior to 2012. The Company intends to pursue the recovery of its loan.

PART 2: PRIVATE EQUITY PORTFOLIO

The Company has made a series of equity investments in projects that will generate CERs, and in companies or facilities that will, by their nature, be exposed to climate change policy or carbon price in a diverse range of markets. Following the Company's announcement in August 2010, the Investment Adviser has ceased origination of new equity investment opportunities on the Company's behalf, other than in relation to approved and funded investment activity within portfolio companies where funds had already been reserved at that time and follow-on investments in existing portfolio companies. This was especially relevant for the solar sector, but project origination in this area has now ceased.

This section of the report sets out activities during the Reporting Period and progress for each of these investments. The private equity portfolio is currently subject to an individual asset realisation strategy over the short to medium term.

The Company disposed of its 1.54 per cent. interest in Jantus for EUR 1.9 million in December 2011. The proceeds of this sale were received on 21 December 2011. The original investment value was EUR 2.7 million. 

Bionasa Combustivel

Total Investment 125

Company Overview

Bionasa Combustivel Natural S.A. is a special purpose Brazilian biodiesel company established in 2007 for the development of a 200,000 tonnes (approx. 55 million gallons/annual) greenfield multi-feedstock biodiesel production plant in Poranguatu in the State of Goias. The plant is located at kilometre 65 of the principal north-south highway route of central Brazil (BR 153 - Trans-Brazilian Highway). The Bionasa plant is fully operational and licensed as of May 2011. Since inauguration the plant has participated in each of the quarterly state-run biodiesel auctions for total Bionasa sales of 70,650m3 at gross revenues of BRL 159.7 million.

The purpose of the plant is to take advantage of the Brazilian market for biodiesel driven in part by the establishment of mandatory targets for the proportion of biodiesel blended in petroleum-derived diesel. The location of the Bionasa plant allows it to both source oilseed feedstock and tallow (animal fats) from the ranching industry. The Bionasa site also has the expansion potential for an additional 100,000 tpa (tonnes per annum) production line. Bionasa also benefits from deferred State tax incentives.

The Bionasa plant was built under an Engineering Procurement and Construction ("EPC") contract with Dedini Industrias de Base, a large Brazilian industrial manufacturing company. The multi-feedstock technology was provided by Desmet Ballestra. The Desmet Ballestra technology was selected for its ability to allow the use of different feedstock in varying compositions.

The Bionasa project was developed and implemented by Bionasa's original shareholders - Jaragua and Canabrava. The Company provided the bulk of the development capital (BRL 125m) through a convertible preferred equity investment. Pursuant to the preferred equity terms of its investment, the Company had a contractual right to convert its minority stake into a majority ownership (up to 99.4 per cent.). The Company became entitled to convert its preference shares into 99.4 per cent. of Bionasa's ordinary share capital on 31 July 2010 as a result of Bionasa's non-payment of dividends. The Company filed for conversion. The conversion is the subject of an on-going arbitration dispute before the arbitral chamber of the Sao Paulo Stock Exchange (BOVESPA).

Exit/ Realisation Strategy

On 25 January, 2012, the Company, Jaragua and Canabrava agreed to defer the arbitration process at least until 14 April 2012 and pursue a joint capital raise intended to provide the Company with a realisation of its investment in Bionasa. Under the agreement, the parties will work jointly to raise capital at the Bionasa level for the purpose of buying back the Company's preference shares at a price in excess of BRL 125 million. The capital raise may take the form of debt, equity or a hybrid structure. All assets of Bionasa and at least 25 per cent of Bionasa's equity shall be made available to support the capital raising exercise. To that end, the parties are in the process of retaining a financial adviser to lead the capital raise.

In the event the capital raise efforts break down, the Company will return to the arbitration process to affect itsconversion rights.

Surya PLC - TEP (Solar Holdings) Limited - Europe

Company Overview

·; Market Overview

The last decade has seen photovoltaic ("PV") technology emerging as a major technology sector for power generation, and it is anticipated that it will continue to grow in the coming years. The PV industry experienced significant growth in 2011. Global capacity additions grew from 16.6 gigawatts (GW) installed in 2010 to 27.7 GW in 2011. The total installed capacity in the world now amounts to around 67 GW, producing some 80 terawatt-hours (TWh) of electrical power every year. This major increase was linked to the rapid growth of the German and Italian markets. With 7.5 GW installed in Germany in 2011, the country continues to dominate the PV market world-wide in terms of total cumulative capacity. Italy has installed 9.0 GW in 2011 starting to exploit some of the potential of its huge natural solar resources. Since the introduction of the feed-in tariff scheme in 2007, Italy has seen its installed capacity rising year by year, reaching around 12.4 GW at the end of 2011, distributed among 328,000 operating plants. With 12.4 GW of installed capacity at the end of 2011, Italy has become the second largest market for installed capacity after Germany. (Source: EPIA).

·; Project Overview

Surya PLC ("Surya") is a 100 per cent. subsidiary of the Company, which owns the entire issued share capital of TEP (Solar Holdings) Ltd ("TEP Solar" or ''TS''), an Irish incorporated company that invests in companies operating in the renewable energy industry.

Surya, through TS, has invested primarily in companies which own and operate solar PV projects located in Italy. The Company believes that incentivised Feed-in Tariffs ("FiT") enshrined in government legislation in Italy have made the sector an attractive investment opportunity. The Company's strategy, executed through Surya, has been to build critical mass in solar PV assets to leverage economies of scale and to create an operational platform dedicated to the operation and management of the PV assets.

As at the date of this report, TS directly owns 5 special purpose vehicles ("SPVs" or "Project Companies") that in turn own and operate 8 PV plants in southern and central Italy with a total installed capacity of approximately 24.6 MW. The current group structure consists of the following five SPVs, plus an additional company, Solar Services Italia S.r.l., which has been set up as a local platform dedicated to the operational management of the assets:

1. Solar Energy Italia 1 S.r.l. ("Ragusa or SEI 1") owns and operates a single-site solar PV plant in Sicily (Italy) with a capacity of 8.4 MW with First Solar thin film modules. In commercial operation since December 2010, the plant is expected to generate 14 GWh of electricity in 2012. Ragusa has financed approximately 80 per cent. of the capital costs of the project, through a project finance facility signed in November 2010, with Deutsche Bank and Centrobanca, which provides an amount of approximately EUR 36.8 million of total facilities (including VAT).

2. ETuno S.r.l. ("Abruzzo" or "ETuno") owns and operates a 2 MW project in Abruzzo (Italy), comprising two plants of approximately 1 MW capacity each with BP Solar crystalline modules. In commercial operation from September 2010, both plants are together expected to generate approximately 2.7 GWh of electricity in 2012. ETuno has refinanced approximately 80 per cent. of the capital costs of the project and the VAT through a sale and leaseback structure signed with Leasint, (part of the Gruppo Intesa Sanpaolo), which provides an amount of approximately EUR 7.7 million of total facilities (including VAT and net of the financing costs).

3. Solar Energy Italia 6 S.r.l. ("Librandello" or "SEI 6") owns and operates a single site PV plant in Sicily (Italy) with a capacity of 9.2 MW with First Solar thin film modules. In commercial operation since April 2011, the plant is expected to generate approximately 15 GWh of electricity in 2012.

4. RPG Puglia 1 S.r.l. ("Ravano" or "RGP") owns and operates a 2.7 MW project situated in Apulia (Italy), comprising of three plants with approximately 1 MW capacity each, with Trina crystalline modules. In commercial operation since April 2011, the plants are together expected to generate approximately 3.8 GWh of electricity in 2012. RGP has financed approximately 80 per cent. of the costs of the project and 100 per cent. of the VAT through a project finance facility agreement signed in November 2011 with Centrobanca, which provides an amount of approximately EUR 11 million of total facilities (including VAT).

5. Florasolar S.r.l. ("Oliva" or "Florasolar") owns and operates a single site PV plant in Sicily (Italy) with a capacity of 2.3MW with First Solar thin film modules. In commercial operation since August 2011, the plant is expected to generate approximately 3.7 GWh of electricity in 2012. Oliva has financed approximately 80 per cent. of the capital costs of the project and the VAT through a project finance facility signed in November 2011 with Centrobanca, which provides an amount of approximately EUR 8.3 million (including VAT).

·; Investment update - Reporting Period

As at 31 December 2011, the Company had invested approximately EUR 36 million in Surya via equity, EUR 17.7 million via debt instruments, while an additional EUR 12 million was provided by EEA Group Limited (parent company of the Investment Adviser) by way of a secured, repayable on-demand facility. EEA Group Limited has since requested repayment of this facility of EUR 12 million. Surya cannot distribute any amounts or repay any loans to the Company before repaying EEA Group Limited.

Since the end of the Reporting Period, the Company has invested an additional EUR 3.36 million in Surya via debt instruments, as part of the total amount committed by the Board of Directors for follow-on investments in private equity assets. The Company (directly or through TS) has also received proceeds from its investments for EUR 4.56 million, which are the EUR 3.36 million and EUR 1.2 million development fees paid by RGP and Florasolar to the Company.The results of Surya and its subsidiaries are consolidated in the financial statements.

During the Reporting Period, TS acquired Librandello, RGP and Oliva in Italy with a total installed capacity of approximately 14.2 MW. Librandello benefits from Italy's April 2011 FiT, RGP benefits from Italy's 2010 FiT and Oliva benefits from Italy's August 2011 FiT.

In November 2011 TS signed a project finance facility for RGP and Oliva with Centrobanca that in aggregate amounts to approximately EUR 19.3 million, with a term of approximately 18 years.

Since the end of the Reporting Period, TS has terminated the agreement for the acquisition of one further project located in Sicily (Albanese), with a capacity of approximately 4.8 MW. The acquisition was subject to the satisfaction of certain conditions precedent that were not satisfied in full and therefore TS has decided to terminate the agreement. TS has recovered the sum of EUR 3.6 million initially paid (by way of deposit) to the project developer.

Valuation

The Company believes that following the completion of the re-financing of Project Librandello, TS's assets will represent an attractive fully-financed operating portfolio.

Element Markets

* This investment amount of USD 54 million includes USD 6 million of capitalized interest.

Company Overview

Founded in 2005 with an initial focus on air emissions ("ERC"), greenhouse gas ("GHG") credit and Renewable Energy Certificate ("REC") marketing, Element Markets developed an insight into USA environmental compliance markets that can be directly applied to the USA biogas market. Today Element Markets is a leading producer and marketer of biogas and environmental commodities in the USA.

Element Markets has a contracted biogas supply of over 2.5 MMBtu/year and has off-take agreements for over 3m MMBtu/year. Element Markets owns and operates the Huckabay Ridge Renewable Natural Gas Facility in Stephenville, Texas, one of the largest anaerobic digestion projects producing pipeline-quality biogas in the USA, and is currently developing and constructing several landfill gas-based biogas projects. In addition to its proprietary development efforts, Element Markets also provides biogas marketing services to third-party projects.

Element Markets is an active participant in the regional USA ERC markets and has a substantial presence in both the GHG and REC markets. Element Markets intends to enter the carbon cap and trade program in California (AB32) as this market opens in 2013.

Exit/Realisation Strategy

Element Markets retained an investment bank in 2011 to run an organised process to either sell Element Markets, or raise capital for Element Markets to develop and grow its biogas business. At this point in time, the main realisation option is likely to be a sale of Element Markets to a strategic buyer.

EWG Slupsk Sp.zo.o (EWGS)

Company Overview

The project consists of 8 wind farm clusters located in Northern Poland with an installed capacity of at least 240MW. The Company, through TEP (Renewables Holding) Limited, bought a 60 per cent. share in the project development company EWG Slupsk Sp. Zoo. ("EWGS") with the aim of taking the project to a fully permitted and ready for construction stage, before managing a profitable exit.

The Polish renewable energy incentive regime provides for a Green Certificate support mechanism and "green" power enjoys priority of dispatch. Both electricity price and Green Certificate revenue per kWh together from 2012 to 2020 range from EUR 0.125 to EUR 0.115.

EWGS has a signed grid connection agreement with PSE Operator, the Polish transmission grid operator. Obtaining the grid connection agreement was a major milestone for the project.

Permits and licenses for construction are progressing. Land rights have been acquired under leases. Environmental decisions have been obtained. In total, 50 building permits need to be obtained, of which 18 have already been received, four are pending and the remainder are expected to have been applied for by the end of June 2012. No permits have been refused, but the approval process takes time and the Investment Adviser is working closely with the relevant authorities with the aim of having all permits issued by the end of Q3 2012. The number of permits needed has almost doubled as EWGS is applying for turbine units individually rather than by cluster. Tender design is complete, with both civil and electromechanical contract proposals received. Garrad Hassan has been contracted to carry out a final annual energy yield assessment in April 2012 following 12 months' wind data collection.

EWGS has entered into a management agreement with EWG, the other shareholder in EWGS. EWG is responsible for land selection and acquisition and for the execution of design works related to the wind farms, the transformer stations and the electrical interconnections during Q2 2012.

Exit/Realisation Strategy

The valuation of the project based on Bloomberg's Portfolio Hunters Wind valuation report gave an average price paid to permitted projects in Poland of EUR 155,000/MW in 2010, valuing EWGS in excess of EUR 30 million, based on 247.5 MW being permitted. Discussions are taking place with several parties with regard to the sale of the project.

The Company hopes to agree on a disposal of the EWG project by the end of Q3 2012.

Asia Biogas Singapore Pte. Ltd ("ABS")

These equity and loan investments were issued in PHP, VND and THB local currencies as well as in USD. For the purposes of disclosure we denominate in USD above, as this is the functional currency of ABS.

Company Overview

ABS is an 81 per cent. subsidiary of the Company. ABS was formed in September 2010 to facilitate a reorganisation of the interests of the Company and Silk Roads Limited (a holding company for the Asia Biogas founders).

ABS and its subsidiaries (the "ABS Group") is one of Southeast Asia's largest biogas systems design, engineering, construction and operating groups. It has won a number of awards, most recently in August 2011 when it was awarded, for the second time, Company of the Year (Bioenergy) by Frost and Sullivan. ABS Group employs more than 240 staff across its operations in Thailand, the Philippines, Vietnam, Indonesia and Malaysia.

Following the establishment of ABS, a major restructuring of the Asia Biogas group has been undertaken. A largely new management team has been recruited. The CEO of the group was changed in November 2011, with the CFO, Martin Kyle stepping in to act as CEO. A new and highly experienced Chief Technology Officer, Chief Scientist, CFO and new Head of Business Development have all been put in place. The new management team is in a strong position to capitalize on the excellent pipeline of opportunities which have been built up over the previous twelve months. In addition, the new management team is undertaking major operational reviews, seeking to identify opportunities to improve efficiency of operations.

·; Operating Projects Review

ABS operates two projects at starch facilities in Thailand: Korat Waste to Energy and Kalasin Waste to Energy. The Korat project is in its ninth year of operation and continues to perform strongly, generating in excess of USD 200,000 per month cash for the ABS Group through the sale of gas and electricity to the host facility. The project at Kalasin has struggled to generate significant net cash since its commissioning. Insufficient gas is being produced to operate the installed generator. The new management team recently took a fresh look at operations at the plant and has identified improvements which management anticipates could increase revenue substantially with minimal capital investment. These operational changes are being implemented and improvements are expected before the end of the financial year.

The ABS Group operated 31 projects hosted on pig farms in the Philippines which are owned through the SPV Hacienda Bioenergy Corporation. These projects have generally performed poorly, due in part to changes in the CDM rules, which has meant the ability of the projects to generate CERs has been significantly curtailed, but also due to lower than anticipated gas production and higher than anticipated operational costs due to failure of poor quality generator-sets. An extensive review of these projects has been undertaken and management has implemented an action plan to maintain positive cash flows at Hacienda. To date six projects have been sold back to the host farms. A further five were closed in March 2012. Six projects have been identified where there is sufficient demand for power and sufficient gas production to warrant investment in the projects, which was completed during the Reporting Period. The balance of the farms are being maintained as they are cash flow positive, but they do not justify further investment and may need to be shut if there are any major technical failures. In Thailand, the ABS Group operates four projects hosted at pig farms. As in the Philippines the smaller projects have struggled, with a lack of expected carbon income, lower than expected gas production and higher than anticipated operations costs. Management is reviewing options for these projects including a sale back to the host of the underperforming projects. A legal dispute with the host of the largest farm within Swine Waste to Energy has been settled.

·; Development Projects

Asia Biogas has historically developed projects under a Build Own Operate Transfer ("BOOT") model. It continues to develop new BOOT projects in the region and, as reported in the previous Annual Report, management had prepared a highly ambitious plan which had significant capital investment requirements. The ABS board has requested a more focused approach from management and it has split development projects into short and medium term. Short term projects are those expected to reach financial close before 30 June 2012. There are five short term projects which are currently being actively developed by the ABS Group:

·; First Leyte Biomass, Philippines

·; Krabi Palm Oil Cooperative Biogas and Biomass Gasification, Thailand

·; Natural Palm Oil Biomass Gasification, Thailand

·; Greenfields Dairy Biogas, Indonesia

·; Sime Darby Ulu Remis and Sandakan Bay Palm Oil Mill Effluent Biogas, Malaysia

The ABS Group expects fees and a carried equity interest in each of these projects once they achieve financial close. In total the five projects require a total investment of approximately USD 60 million. This is being sourced from third party debt and equity investors.

In addition to the BOOT pipeline, the new management team has made it a priority for each of the country managers to secure new design and engineering contracts in the near term. The ABS Group is currently completing the commissioning of a project in Thailand utilizing a new cassava starch industry by-product which was not previously digested. The project is hosted by the same facility as Korat Waste to Energy and, once operational the ABS Group believes it will be able to roll out this technology to other cassava plants in Thailand.

Exit/Realisation Strategy

During the Reporting Period, ReEx Capital Asia and Brighton Capital were appointed as joint financial advisers to manage the sale of ABS. As part of the sales process the Company's loan will be repaid or acquired as will the Company's interest in CERs being generated by certain projects. An information memorandum was released to interested parties in November 2011 and bids invited. Indicative bids have been received and are currently being evaluated with a view to concluding a transaction before the end of 2012.

Separate to the sale process certain non-core assets are being disposed of separately. This includes underperforming projects within Hacienda Bioenergy Corporation and also the sale of an 11.4 per cent. stake in Thai Biogas Energy Company Limited which concluded in March 2012.

Chapel Street

Chapel Street is advised by CK Environmental Capital Management LLC ("CKECM"). This section of the report is prepared by the Investment Adviser from information provided by CKECM and the Company. This information has not been independently verified by the Investment Adviser.

Company Overview

The Investment Adviser understands that Chapel Street has invested in three natural gas digestion projects in the USA, two in Arizona and one in South Dakota. Chapel Street has confirmed that these projects are operational and are flaring off natural gas, for which they can receive US carbon credits. Chapel Street is also investigating the possibility of connecting to the grid for the Arizona facilities to sell the natural gas as clean power.

At the South Dakota project, the lagoon temperature fell sufficiently in December such that it was not meeting the criteria for credit generation. It was shut for the winter and Chapel Street expects to resume production in late March 2012 or April 2012.

The Investment Adviser understands that the Arizona contracts include renewal terms extending 20 years or more and that the South Dakota digester has a remaining primary term of six years.

Exit/Realisation Strategy

The Chapel Street general partner has also been requested to provide a proposal for an orderly exit from the partnership.

Electricidad Andina

Company Overview

Through its participation in the Santa Rita Limited Partnership ("SRLP"), the Company owns 97.3 per cent. of Electricidad Andina S.A., a company incorporated in Peru, with the rights to a 255MW run-of-river hydro project in northern Peru. The project is amongst the few large hydro development prospects in Peru. It has an approved environmental impact assessment, transmission concession and statement of lack of archaeological remains, and further benefits from 46 years of consistent hydrology data, no population displacement and strong local support for the project.

Electricidad Andina's failure to secure a long term contract to sell power has meant that it has been unable to move forward with project finance and also led to the cancellation of the project's generation concession in July 2011.

Exit/Realisation Strategy

SRLP is presently pursuing a sale, where the final consideration payment will ultimately depend upon the project reaching financial close. It is proposed that USD 100,000 will be paid upon the signing of a sale and purchase agreement, USD 400,000 upon the project receiving a power purchase agreement, and USD 9.5 million on financial close.

The Company expects SRLP to conclude the signing of the sale and purchase agreement in the coming weeks. In terms of a potential guidance on the timing of the project receiving a power purchase agreement, the Investment Adviser estimates that this may occur in approximately 15 months' time. For a financial close, the Investment Adviser estimates that this may occur in approximately 27 months' time.

Company Overview

Carbon Capital Markets, ("CCM") provides investment management services to the Carbon Assets Fund ("CAF"). CCM is also closing out its various trading positions and oversees the Zybranka Landfill recovery project in the Ukraine. CCM has one full time employee. CCM is also continuing to pursue the recovery of GBP 1.1 million from the UK tax authorities in connection with denial of input tax.

Exit Realisation Strategy

CCM is in run off but continues to settle its ERPA forward delivery obligations; the latest delivery obligation falls due in March 2013. With counterparty consent, earlier settlement of CCM deliveries is practicable and management are working towards this.

Under its investment management agreement, CAF is a debtor to CCM. CAF is itself also effectively in run-off with CAF's assets either being sold or being prepared for sale. Negotiations continue concerning CAF's fees and it's restructuring.

The Zybranaka project continues operating with over 160 Emission Reduction Units ("ERUs") either monitored or under verification. The sale of the project and its related CCM ERPA has been hampered by delays in the adoption of the Landfill Gas component of the Ukrainian Feed in Tariff laws.

CCM is attempting to resolve the recovery of GBP 1.1 million of input tax. CCM anticipates that any conclusion on this is likely to take until late 2013 or early 2014.

 Environmental Credit Corp. (“ECC”)

Company Overview

Founded in 2004 and located in State College, Pennsylvania, ECC is a leading developer of carbon offset projects in the USA. Carbon offset credits resulting from ECC's projects can be used to satisfy both voluntary and compliance needs of a variety of buyers throughout the USA and certain other international markets. ECC registers its offset credits primarily through the Climate Action Reserve.

ECC's recent focus has been the creation of carbon offset credits which comply with the California Air Resource Board's ("ARB") requirements for compliance offsets under its upcoming cap and trade program. ECC has developed substantial expertise and experience in agricultural methane and ozone depleting substance destruction projects, projects accepted by the ARB for compliance needs, creating one of the largest portfolios of California-eligible projects.

ECC owns or provides services to 51 offset projects primarily in the USA. ECC offers its clients a broad suite of carbon offset services, including feasibility and eligibility analysis; project design and development; data collection and management; monitoring and verification support; registry and transaction services; and credit monetization. ECC earns revenues primarily through the share of carbon assets it receives from the successful provision of these services and through consulting services it offers clients.

Exit/Realisation Strategy

As at 31 December 2011, the main realisation option is likely to be a sale of ECC's primary assets or a potential management buyout.

The Investment Adviser believes that a transaction may happen during Q2 2012.

EcoTraders ("ET")

Company Overview

ET is considered an investment and accounted for in the financial assets at fair value through profit or loss on the statement of financial position. ET is an Israeli carbon consultancy business established in 2003. It is based in Tel Aviv and has specialised in consultancy services related to the development of CDM projects under the UNFCCC Kyoto Protocol. The services provided by ET comprise (i) the identification of greenhouse gas emission reduction projects that can be eligible under the CDM; (ii) the preparation of the project documentation needed for the registration of a project as a CDM project, mainly the PDD; (iii) management of the validation and registration process of the projects; (iv) assistance with the monitoring of the CDM project activity post registration; (v) management of the periodic verification and issuance process of the CERs; (vi) commercialisation of the CERs; and related Advisory services.

ET has developed a portfolio of 17 potential CDM projects in Israel. 11 projects of the portfolio have been registered so far, six of which are already generating CERs, and four of these six projects are already issuing CERs. The remaining projects are at various stages of PDD development and validation. The technologies covered comprise landfill gas, fuel switch, magnesium production ("SF6"), energy efficiency and renewable energy, mainly solar and wind. ET's revenues primarily comprise success fees determined as a certain percentage of the revenues from the sale of the CERs or as a percentage of the issued CERs. Due to substantial delays in the UNFCCC validation, registration, verification and issuance processes, cash flows from success fees have been delayed and ET has grown more slowly than expected. As at 31 December 2011, ET is still loss making. ET has started to expand into new business areas, mainly consultancy services, such as carbon foot printing, and emissions inventories.

Exit/Realisation Strategy

The Company is currently pursuing a management buy out option for ET.

Sun Biofuels ("SBF")

Overview

In July 2011, SBF was put into liquidation and the Company is due to receive approximately GBP 300,000 once the liquidation process of Sun Biofuels Limited has been completed.

EEA Fund Management Limited

Investment Adviser

29 March 2012

Consolidated Statement of Comprehensive Income

Consolidated Statement of Financial Position

Consolidated Statement of Financial Position (continued)

The consolidated interim financial statements were approved and authorised for issue by the Board of Directors on 29 March 2012 and signed on its behalf by:

Francis Hackett Peter Vanderpump

Director Director

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

* Includes £21,556,000 (December 2010: £218,000, June 2011: £2,394,000) cash in disposal group classified as held for sale

Notes to the Consolidated Interim Financial Statements

1 Operations

Trading Emissions PLC ('the Company') and its subsidiaries (together 'the Group') invest in environmental and emissions assets, companies providing products and services related to reduction of green house gas (GHG) emissions and associated financial products. The Company is currently pursuing a realisation strategy which aims to optimise the cash value of the Company's assets through a controlled realisation process.

The Company is a closed-ended investment company domiciled in the Isle of Man and the address of its registered office is 3rd Floor, Exchange House, 54-62 Athol Street, Douglas, Isle of Man. It was incorporated on 15 March 2005 in the Isle of Man as a public limited company and is quoted on the Alternative Investment Market (AIM) operated and regulated by the London Stock Exchange.

2 Basis of Preparation

The unaudited consolidated interim financial statements have been prepared using the recognition measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively IFRSs).

The principal accounting policies applied in the preparation of the consolidated interim financial statements are those the Company expects to apply in its financial statements for the year ended 30 June 2012 and are unchanged from those disclosed in the annual audited financial statements for 30 June 2011. These policies have been consistently applied to all the periods presented unless otherwise stated. The audited financial statements for the year ended 30 June 2011 are available at www.tradingemissionsplc.com.

While the financial information included in the consolidated interim financial statements has been prepared in accordance with the AIM Rules for Companies, the consolidated interim financial statements do not themselves contain sufficient information to comply fully with IFRSs. As permitted, the Company has chosen not to adopt IAS 34 'Interim Financial Statements' in preparing its consolidated interim financial statements.

3 Investment Advisory and Performance fees

The Company entered into a revised agreement with its Investment Adviser, EEA Fund Management Limited ('EEA') with effect from 1 July 2010.

EEA is entitled to a fixed fee of GBP 6,000,000 per annum payable quarterly in arrears (which may be subject to increase as set out in the agreement). Investment Advisory fees for the 6 months to 31 December 2011 were GBP 3,000,000.

For the period up to 31 December 2012, EEA is entitled to a performance fee of up to GBP 10,000,000 in aggregate which will become payable to EEA based on (subject to exceptions) realised and received returns to the Company's shareholders during the calculation period of between 150 and 230 pence per Ordinary Share to be calculated on a linear basis. Interim installments of the new performance fee may be paid to the Investment Adviser as at 31 December 2010 and as at 31 December 2011 where the actual returns to shareholders at such dates satisfy the relevant performance criteria.

The payment of the performance and Investment Advisory fees may be accelerated, inter alia, in the event of a takeover or an insolvency event or an early termination of the Investment Advisory Agreement. 

No performance fees under the terms of the new Investment Advisory Agreement have been triggered or paid as at 31 December 2011.

The new Investment Advisory Agreement will terminate on 31 December 2012.

4 Net foreign exchange (losses)/gains

Net foreign exchange gains have arisen on the translation of EUR and USD denominated cash deposits and certain EUR and USD denominated loans to British pounds, the Company's functional and presentation currency.

5 Other expenses

6 Property, plant and equipment

Plant Project Furniture

Six months ended 31 December 2011

Opening net book amount at 1 July 2011 48,211 5,647 99 4,176 58,133

Exchange differences (3,059) 270 - 267 (2,522)

Additions 148 1,779 1 421 2,349

Acquisitions (note 13) 41,844 - - 191 42,035

Disposals - - (4) (140) (144)

Transfer of assets 529 - - (529) -

Depreciation charge (3,047) (22) (19) (280) (3,368)

Impairment charge (21) (4,897) - (425) (5,343)

Transferred to disposal group

At 31 December 2011

Cost 542 - - - 542

Six months ended 31 December 2010

Opening net book amount at 1 July 2010 9,360 7,308 475 1,583 18,726

Exchange differences (26) (248) (146) (73) (493)

Additions 14,411 1,181 - 244 15,836

Acquisitions 19,235 - - 3,171 22,406

Disposals - - - - -

Transferred to disposal group

 classified as held for sale - (2,142) - - (2,142)

Depreciation charge (1,037) - (71) (194) ( 1,302)

At 31 December 2010

Cost 47,816 6,099 1,202 5,414 60,531

7 Disposal groups classified as held for sale

The Board is presently pursuing a strategy around sales of individual private equity assets in the short to medium term to targeted strategic buyers, in the context of maximising returns to shareholders. As a result of this and in accordance with IFRS 5, the Company is required to present various assets and associated liabilities as classified as held for sale in the Consolidated Statement of Financial Position as at 31 December 2011.

Private equity investments included in this category are:

·; Element Markets LLC

·; EWG Slupsk

·; TEP (Solar Holdings) Limited

·; Asia Biogas Singapore

·; Electricidad Andina

·; Environmental Credit Corporation

·; Sun Biofuels Limited

Further information about these private equity investments is given in the Investment Adviser's Report.