Clean Energy Brazil PLC 01 August 2007 Clean Energy Brazil PLC MAIDEN RESULTS FOR THE PERIOD ENDED 30 APRIL 2007 Clean Energy Brazil plc ("CEB") is a leading specialist investment company focused on Brazil's sugar cane/ethanol industry. The Company's investments produce sugar, ethanol, electricity and other bi-products from our own sugar cane, a renewable feedstock. CEB operates through its investment manager, Temple Capital Partners Ltd. ("TCP"), which brings together the highly experienced team from Czarnikow Group (a leading worldwide sugar and ethanol market services provider), Agrop (a leading Brazilian agricultural and industrial specialist services company) and Numis (a leading UK investment bank with specialists focusing on new energy). CEB invests through partnership with existing Brazilian sector participants offering funds for accelerated expansion, professional execution of business growth, development of its own greenfield assets and the opportunity to consolidate this highly fragmented business sector. These financial results are for the first period to 30 April 2007. The period of the 'off-crop' when cane is not harvested, runs from January until March. Therefore, this first reporting period is necessarily short and runs through the 'dormant' off-crop economic activity in our investment in Usaciga. HIGHLIGHTS • Admission to AIM on 18 December 2006 and placing of £100 million • Completed initial investment of approximately US$127 million in Usaciga on 27 March 2007 • At the Usaciga site, agricultural and industrial efficiency gains have been achieved in line with management's best expectations • Maiden interim dividend of 2.5 pence was paid to shareholders on 19 July 2007 • Active risk management by TCP has meant that CEB's existing assets are largely protected from current short term price volatility. However, CEB is exposed to medium and longer term trends which management believes to be very positive • CEB is building an integrated group of scale, working with its chosen partners to take full advantage of the significant growth potential and consolidation opportunities in this industry • CEB is currently negotiating additional opportunities to replicate its existing strategy to build a significant profitable sugar and ethanol group with operating capacity to crush up to 30 million tonnes of sugar cane per annum • With Usaciga and the planned acquisition and subsequent capital expenditure in Pantanal (CEB's greenfield development in Mato Grosso do Sul), CEB has fully committed the investment funds raised at its IPO Antonio Monteiro de Castro, Chairman of Clean Energy Brazil, commented: "I am confident that our strategy of investing directly into existing and greenfield Brazilian sugar/ethanol assets and actively managing and developing them is creating value for shareholders. This has been clearly demonstrated by the acquisition of Usaciga and the improvements CEB has already successfully made in the relatively short period that we have been actively managing it. I am pleased to report that the partnership of service providers in our investment manager is working very well, providing a flexible structure that allows easy access to some of the best relationships in the industry whilst offering expertise, enthusiasm and commitment. To date this team has achieved very good results especially given the commercial environment in which we are operating. I remain optimistic about the prospects for the company and I look forward to reporting further progress in the year ahead and beyond." www.cleanenergybrazil.com Further enquiries: Clean Energy Brazil Tel: +44 (0)20 7839 4321 Antonio Monteiro de Castro a.castro@cleanenergybrazil.com Temple Capital Partners Tel: +44 (0)20 7972 6643 Peter Thompson p.thompson@cleanenergybrazil.com Numis Securities Limited Tel: +44 (0)20 7260 1000 David Shapton Smith & Williamson Corporate Finance Limited Tel: +44 (0)20 7131 4000 Azhic Basirov David Jones Fishburn Hedges Tel: +44 (0)20 7544 3133 James Benjamin Mob: +44 (0)7747 113 930 Andy Berry Mob: +44 (0)7767 374 421 ceb@fishburn-hedges.co.uk Chairman's Statement I am pleased to report my first set of results as Chairman of Clean Energy Brazil. It has been a busy and successful period for the business. These financial results are for the first period to 30 April 2007. The Board believes it is important for CEB to have an accounting year from May to April in order to capture fully the economic activity of the sugar cane crop cycle where, in the centre-south of Brazil, the harvest runs from May until December each year. The period of the 'off-crop', when cane is not harvested, runs from January until March and is the time when modifications to existing industrial infrastructure, investments and maintenance must be made prior to the run-up to the harvesting season. CEB's investee companies, as is the case at our first investment in Usaciga, will where possible adopt a similar policy which, the Board believes, will enhance the transparency of our activities. Therefore, this first reporting period is necessarily short and runs through the 'dormant' off-crop economic activity in our investment in Usaciga. I am pleased to confirm that a maiden interim dividend of 2.5 pence was paid to shareholders on 19 July 2007 and a further interim dividend of 2.5 pence is planned to be paid during 2007. Dividends for 2007/08 are unlikely to be fully covered by this stage in the development of our business. On 18 December 2006, CEB commenced trading on the AIM market in London having successfully raised £100 million through a placing. CEB's business model is to invest directly into existing and greenfield Brazilian sugar/ethanol assets and to actively manage and develop them - the Board believes that investing in new projects will capture the inherent development premium, whereas acquiring equity in existing assets will capture immediate cash flows. We are building an integrated group of scale, working with our chosen partners to take full advantage of the significant growth potential and consolidation opportunities in Brazil's sugar/ethanol industry. Whilst CEB is a new entrant, its management team is not; the team has personal, long standing relationships within the sector in Brazil. Our investment manager, Temple Capital Partners ("TCP"), can count on professional executives from its services providers, Czarnikow and Agrop. The Board believes that this constitutes one of the largest, most connected teams of professionals working in the sugar/ethanol sector in Brazil. The target assets comprise agricultural sugar cane plantations, industrial milling facilities, sugar/ethanol production facilities, and associated export logistics infrastructure - CEB invests in fully integrated businesses from cane to final customer. We produce sugar, ethanol and electricity from our own sugar cane which is a renewable feedstock. CEB is an energy company and the Board believes that our wider prospects are related to the new energy revolution that is taking place. The world needs more energy but from sources producing less carbon emissions. CEB has entered this arena and the Board believes our plans for the future will take CEB advantageously to the fulcrum of this revolution. Brazil is the world's largest sugar producer and exporter and is the lowest cost significant producer of raw sugar in the world. Ethanol produced from Brazilian sugar cane and processed using the energy derived from the plant itself, reduces greenhouse gases by over 90% when it substitutes gasoline in motor cars. Growing acceptance of climate change therefore offers an excellent backdrop to our activities. Brazil is unique in having such a huge area of land available for cane expansion that does not encroach into the rainforest or other environmentally protected areas. Indeed cane itself will not flourish in such humid conditions. We completed our initial investment of approximately US$127 million in Usaciga on 27 March 2007. Usaciga is a new joint venture company and comprises interests in a producing sugar/ethanol mill, three greenfield developments, a bulk sugar terminal and an ethanol trading company. At Usaciga, we are on track to increase significantly its cane crushing capacity over the next two to three years by utilising CEB's investment proceeds, active management expertise and debt refinancing, with the aim of creating a mill company with a cane crushing capacity of more than 8 million tonnes per annum. For this first period to 30 April 2007 no dividend income was received from invested units and the financial results are the product of cash management and some small commercial activity. Therefore, these accounts are not typical or representative of future results, the expectations for which are dealt with in more detail in the Investment Manager's Report below. Importantly for CEB, our first cornerstone investment in Usaciga, accounting for approximately US$127 million of the US$182 million net funds raised from the IPO, was based on the business valuation as at 31 December 2006. This removed any of our business exposure for the economic period of the 2006/07 crop year when CEB was not part of the Usaciga business. In addition, since CEB's investment manager assumed operational control from January 2007, prior to completion of the investment transaction, this allowed CEB to implement fully our plans to improve the operational performance of the existing mill and our implementation of the hedging programme under Usaciga's price risk management policy initiated by CEB. CEB also successfully brought on stream Usaciga's new co-generation facility, beginning essential work on it during the 'off crop' period, and from which CEB is now benefiting in the current crop season. I would now like to comment on the financial results for Usaciga prior to our investment, for the period ended 31 December 2006. This resulted in a disappointing loss of R$51.6 million (Brazilian GAAP). The principal reason for this was a shortfall in the amount of cane harvested during the 2006 crop of 1.5 million tonnes compared with our earlier expectations of 1.7 million tonnes. This was a result of a lack of investment in cane renovation over previous years. In addition, general administrative expenses were higher than expected and higher than industry averages. I am pleased to report that management is confident of reaching a crushing capacity from the current harvest of approximately 2.0 million tonnes. In addition, we have been successfully taking out costs from within the joint venture since TCP assumed operational control and we expect to see the benefits of this going forward. Prior to CEB's involvement, Usaciga had run an overly conservative approach to risk management which meant that it had not adequately participated in the price spike in sugar prices seen during the course of 2006. This was not a surprise to us and we have now instituted a more appropriate risk management policy. This seeks to protect our business objectives against a defined 'aversion to risk' whilst using proactive market view driven actions in order to extract value from the typical volatility of the commodity markets. The financial results for Usaciga before CEB's investment led to a greater than expected indebtedness of approximately US$10 million above our estimates at the time of the IPO. The CEB investment agreement with Usaciga allowed for our investment consideration to be fully adjusted to reflect this, ensuring CEB shareholders will not have been impacted by the poor economic performance of the mill in the period running up to our investment. Furthermore, your Board is satisfied that the underlying causes of the loss have all been addressed by TCP in the context of the 2007/08 crop season. With the completion of the investment in Usaciga and the planned acquisition and subsequent capital expenditure in Pantanal (CEB's green field development in Mato Grosso do Sul), the Company has fully committed the investment funds raised at the IPO. By leveraging the personal, long standing relationships of our experienced investment management team within TCP, CEB is currently negotiating additional opportunities to replicate our existing strategy to build a significant, profitable sugar and ethanol group with operating capacity to crush up to 30 million tonnes of sugar cane per annum. Should these negotiations develop into investment opportunities, your Board anticipates that CEB would require additional equity funds. During the first 6 months of 2007 sugar prices have been under pressure and from May seasonal pressure was seen on the domestic ethanol price with the crop coming on stream. However, CEB anticipates that sugar and ethanol prices will continue to show volatility providing opportunities to hedge risk. Beyond 2008 the expectation is for the raw sugar futures market price as quoted on the New York Exchange (The No. 11 contract) to recover into a range of US12-15 cents, particularly given the sustained strength of the Brazilian Real currency which has the effect of increasing the dollar cost of production from Brazil. CEB intends to negotiate under exclusive terms with interested parties who wish to remain in the sector and do business with us, thus avoiding competitive bidding. TCP's strong relationships and CEB's partnership model together should help cushion CEB from the competitive landscape and should assist greatly in opening up and creating these investment opportunities from which the Company will aim to maximise value. I am confident that our strategy of investing directly into existing and greenfield Brazilian sugar/ethanol assets and actively managing and developing them is creating value for shareholders. We are building an integrated group of scale, working with our chosen partners to take full advantage of the significant growth potential and consolidation opportunities in this industry despite the competition from other investors to acquire assets and enter the sector. This has been a very active period for CEB during a rapidly changing environment both in the context of market conditions and the investment and acquisition dynamics of the Brazilian cane sector. Of paramount importance to CEB's performance is the effectiveness of our investment manager TCP. I am pleased to report that the partnership of service providers is working very well, providing a flexible structure that allows easy access to some of the best relationships in the industry whilst also offering access to their expertise, enthusiasm and commitment. To date this team, led by Peter Thompson and Marcelo Junqueira, has achieved very good results especially given the commercial environment in which we are operating. I remain optimistic about the prospects for the Company and I look forward to reporting further progress in the year ahead and beyond. Antonio Monteiro de Castro Chairman 1 August 2007 Investment Advisor's Report Upon the Admission to AIM on 18 December 2006 of CEB, the Investment Manager's Agreement between CEB and its investment manager Temple Capital Partners ("TCP") and, in turn, the Service Agreements between TCP and its service providers, Czarnikow and Agrop, were initiated. Within TCP we have established a number of operating and reporting procedures in order to manage effectively the business entrusted to TCP by CEB. TCP acts as investment adviser to CEB with responsibility for originating, appraising and presenting investment opportunities in accordance with the Group's investment strategy and aims. The Directors believe that the relationships enjoyed by Agrop and Czarnikow, to which CEB has access through these long term Service Agreements with TCP, is helping to provide a flow of investment opportunities which meet CEB's investment objectives. TCP has access to over 40 sugar/ethanol professionals based in Sao Paulo, Rio de Janeiro, Ribeirao Preto and London. TCP believes that this represents one of the largest professional teams dedicated to investment in sugar and ethanol assets in Brazil. Immediate Operations in Usaciga In January 2007, prior to CEB's formal completion of its investment, Marcelo Junqueira, Director of TCP, assumed the position of temporary Chief Executive Officer within Usaciga in order that Marcelo and the team from TCP could manage more effectively the implementation of our business plans during the 'off crop' period. Gilberto Macioli from TCP was appointed temporary Operations Director during this period. Initial industrial improvements involving the investment of approximately US$3.0 million have been made by the TCP team in the existing Usaciga facility, which we expect to yield an increase in industrial efficiency to 92% from an average of 85% during the 2006 crop. In addition, the Usaciga joint venture invested approximately US$32.0 million in a new co-generation facility which is now operational and was officially inaugurated on 30 July 2007. We expect that the electricity generated will result in a new income stream which will add approximately US$4.0 million to the 2007/08 crop year revenue for the Usaciga joint venture. Usaciga's co-generation facility now uses bagasse, the biomass remaining after sugarcane stalks are crushed, as a renewable feedstock for power generation. The bagasse is used as a fuel source for Usaciga's sugar mill, as it produces sufficient heat energy to supply the needs of the sugar mill, with energy to spare. The spare energy is then sold into the consumer electricity grid where there is a growing regional demand for power. From January 2007, a comprehensive price risk management framework and policy was agreed for Usaciga. This policy, which includes details of the business earnings objectives, risk profile and overall market exposure, is being applied in order to assist the hedging actions. As at 30 June 2007, this has resulted in approximately 65% of the sugar under management for the 2007/08 crop season being hedged or realised at an average of US12.44 cents (basis the No.11 market). Commercial policies and production flexibility, successfully implemented by TCP, are addressing the early season selling opportunities where ethanol was trading at a considerable premium to sugar values and, for the first time, white sugar, which has also been trading at attractive premiums, was produced from the Usaciga factory for the domestic retail market. TCP is continuing its financial restructuring in order to reduce the current cost of debt. TCP decided on making an early repayment of its US$ pre-payment facilities, which has also mitigated Usaciga's US$/Real currency exposure for the 2007/08 crop which would otherwise have been a concern given the current strengthening of the Brazilian Real. In comparison to the crop at 30 June the previous year, at the Usaciga site, agricultural and industrial efficiency gains have been achieved in line with our best expectations and its performance is very satisfactory in key areas: 1. field productivity in tonnes of cane per hectare has increased by 7%; 2. sugar/ethanol recovery has increased by 2.5%; and 3. fermentation efficiency has increased from 89% to 93%. These improvements have resulted in an increased forecast of 2.5 million tonnes to be crushed during the 2008/09 season, up from our earlier forecast of 2.3 million tonnes. Developments of the Usaciga greenfield sites at Santa Monica and Rio Parana are progressing well with cane planting, the ordering of the necessary industrial equipment and the build out of the factories all leading to ethanol production in 2009. In addition, Usaciga has negotiated to take 100% control in Rio Parana from its previous ownership of 33% in return for a R$12 million cane planting investment on behalf of the previous 67% owners. This will result in increased capital expenditure for the Usaciga joint venture but gives investors, the Directors believe, greater opportunity to benefit from capital appreciation than anticipated at the IPO. On account of TCP's debt restructuring, we believe Usaciga will have sufficient funds to meet fully these commitments. A further development opportunity owned by Usaciga, Santa Cruz de Montecastelo, is now under consideration for the further expansion of the Usaciga business. This will potentially add a further 2 million tonnes of crushing capacity and will be dependent on successful negotiation of debt finance. Since April 2007, we have completed the management reorganisation in Usaciga adding three new members to the executive team to service the needs of the business more effectively. These comprise: - Finance & Administration Director ("Superintendente"), Dario Gaeta, 15 years' experience in multinational companies previously with Hoechst and Clariant - Commercial & New Business Development Director, Francisco Campiolo, agronomist with 26 years' experience - Operations Director, Rui Pinotti, agronomist with 36 years' experience We have also invested in Usaciga's infrastructure such as accounting and IT processes, together with new personnel incentive schemes, to help to underpin our growth strategy. This will incur some significant costs for Usaciga during the current crop year but will put in place the framework for a first class, professional management team, which will now report to a board consisting of three representatives on behalf of CEB and three from the Barea family. Usaciga is now on track to build a business which is expected to grow over the next 4 years to a crushing capacity of approximately 8 million tonnes per annum. Investment Performance TCP reviews investment opportunities considering its key investment criteria developed from CEB's investment strategy. Whilst we aim to meet most of these to a significant extent for any given investment, these are applied with a degree of flexibility in consideration of the practical realities of the investment landscape. TCP's investment criteria comprises: a) We seek to maximise the proportion of own managed cane that is supplied within the business to give the greatest economic exposure to the long term positive outlook for ethanol and sugar prices; b) Balance between existing business acquisition which can generate current cash flow, brownfield expansion which can generate rapid increase in cash flow and greenfield growth which maximises the capital appreciation that CEB believes will be realised upon the sale of consolidated assets in the future; c) Underlying productivity/profitability with key indicators being: land yield versus land lease cost, industrial efficiency, industrial improvement potential, additional revenue streams such as electricity generation, product flexibility between sugar and ethanol and storage and logistics infrastructure. d) Consolidation potential. As CEB builds a network of investments that could be pulled together at a later stage, accessing the premium which CEB believes can be obtained by creating a group with critical mass; and e) Relationships with TCP service providers. We prefer to do business with partners known to Czarnikow and Agrop who already share our strategy and are willing to negotiate with CEB on an exclusive basis. During the first half of 2007, TCP has examined 29 investment opportunities taking 10 of these through to a more detailed investigation and negotiation. Some of these we reasonably expect will be able to be finalised on attractive terms for which CEB will require further equity funds. Pantanal (as detailed at IPO) We have structured the investment agreement on this established greenfield site in Mato Grosso do Sul which will give CEB 92% ownership and we are finalising some conditions precedent before completing the transaction. Planting has been continuing and factory equipment is held under options and will be ordered following the completion of the acquisition to give expected ethanol production commencing in 2009. We are planning for an initial crushing capacity of 1.5 million tonnes. CEB has the available funds to manage the capital expenditure required to reach this initial capacity and will later seek to use debt to finance further expansion. Agua Limpa (as detailed at IPO) CEB is pleased to announce that the Environmental Licence for its greenfield development project located in Goias was awarded on 18th July 2007. This project benefits from irrigation which means that cane planting will commence immediately with a plan to grow out the plantation with the production of ethanol in 2010. The initial crushing capacity of this plant will be 1.6 million tonnes. CEB will need to raise additional funds to meet all of the capital expenditure required to complete fully the Agua Limpa project. Investment Market Many new investors have arrived in the Brazilian market. This has had the effect of increasing asset values even though spot sugar and ethanol prices have declined. This has impacted on potential yields from investments but at the same time has enhanced the total return from investment opportunities including capital appreciation. We believe that our partnership model offers an alternative investment case to some of the other competition for assets in the cane sector and enables us to open and maximise new opportunities that are exclusive to CEB. We understand that a number of existing milling groups are considering coming to the market through IPO's mainly on the BOVESPA Sao Paulo exchange and we believe this will assist in the valuation of CEB's assets. These groups can be expected to accelerate the consolidation of the sector and lead to an increased willingness on the part of some of our target opportunities to protect their position by partnering with CEB. Therefore, we see the dynamics and interest in the sector as positive attributes for CEB's business. TCP's Sugar and Ethanol Market View Active risk management by TCP has meant that CEB's existing assets are largely protected from current short term price volatility. For 2008 exposure, we believe whilst sugar prices could be under pressure from Indian exports, there will be sufficient volatility to give hedging opportunities above costs of production. Domestic ethanol prices will continue to show seasonality and therefore the ability to carry stock into the off-crop period is an important feature for our business. Through 2008, we believe the trend of Dollar weakness against the Real is a risk that should be protected against through hedging. CEB is also exposed to medium and longer term trends which we believe to be very positive. Demand growth for commodities in general and energy in particular will continue to bring investor money into commodity markets. Ethanol blending around the world will lead to increasing export business from Brazil but this will on occasions have to be met by pricing ethanol out of the Brazilian flex-fuel fleet and into the international market. The 'tipping' point for this is US16 cents/lb basis No 11 sugar price. In respect of the current international sugar prices, we would like to emphasise our view that lower prices this year compared to last is not the result of the over-expansion of the Brazilian sugar cane sector. In fact, the additional cane is being absorbed by ethanol production which has shown a premium to sugar returns and whilst ethanol prices have also fallen, this has opened up new demand from flex-fuel motorists where the ethanol prices in some states were not competitive with gasoline. The potential untapped demand from this is estimated at 4 billion litres and whilst we do not expect that all this will be accessed, we also anticipate that ethanol prices will recover substantially during the next off crop period which is why we have planned to carry a substantial quantity of Usaciga ethanol production into 2008. With respect to sugar, given the diversion of cane towards ethanol we estimate that there will in fact be marginally less sugar exports this season compared to last year, despite the increase in the cane crop of about 50 million tonnes in the centre-south. The explanation for current sugar prices is to be found in India where government support of the sector has created a huge swing from deficit to surplus production. Whilst most of this surplus is not able to come out into the international market since its cost of production is higher than the international market price and the government can only subsidise a certain quantity, it has created the negative sentiment which has in turn allowed speculative funds to pressure the market lower. The mills in India which are required to buy the cane from the farmers are caught between the high cane price and the low sugar price as a result of the surplus. These mills are losing money and building up payment arrears to the farmers who in turn can be expected to be deterred from cane planting in the 2009 cycle, leading to a violent swing once again to deficit, which will create a more positive background to the sugar market, in our view. Therefore, we conclude that current prices do not reflect the underlying structure of the market and combined with the developments of increasing use of cane towards ethanol, not only in Brazil, increasing concerns for climate change and political appetite for action, we continue to see a positive market outlook over the medium term, two years out from the present. The strength of the Brazilian Real can negatively affect export margins and we do have some concerns on this exposure. We have initiated a currency risk management policy in Usaciga and will do so in other investments which will seek to reduce the business exposure to this risk, which we see as a part of a longer term trend that should be addressed at the operating business level. Meanwhile CEB will continue to operate in US$ and report results in this currency. Looking Ahead Global sugar consumption continues to show sustained growth. Ethanol consumption growth in Brazil is exponential due to new flex-fuel vehicles which today still only represent 15% of the overall domestic fleet. Electricity consumption in Brazil is increasing rapidly with the CNI (National Confederation of Industry) and many other analysts warning of actual shortages expected by 2009. Many countries are switching to a blend of ethanol in gasoline, initially based on domestic supply but once introduced we believe there will be a ratchet effect that will lead to increased blending rates that in turn will need to be supplied with imports. These facts give us great confidence for the market environment into which CEB sells its products. Our clear strategy of partnership, growth and consolidation is showing proven results with our investment in Usaciga. As CEB is becoming established in the sector, it has also opened up new opportunities. We have been able to put investors money to work quickly and economically. We are confident that the business will continue to deliver sustained profitability as CEB moves to become an efficient low cost producer in Brazil. In addition, we believe CEB will be very well placed to benefit from the revaluation of its assets as we move from a Brazilian agricultural based value to a value based on international energy markets. Peter Thompson Chairman, Temple Capital Partners Ltd. Marcelo Junqueira Director, Temple Capital Partners Ltd. 1 August 2007 Consolidated Income Statement For the period from 19 September 2006 (date of incorporation) to 30 April 2007 $'000 Bank interest received 2,662 Foreign exchange gain 934 Fees and commissions 240 ------- Net investment income 3,836 ------- Investment advisor's fees 952 Other administration fees and expenses 728 ------- Administrative expenses (1,680) ------- Finance costs (31) ------- Profit for the period before tax 2,125 ------- Tax - ------- Profit for the period after tax 2,125 ======= Earnings per share $0.02 Consolidated Balance Sheet at 30 April 2007 Group $'000 Non-current assets Interests in subsidiaries - Investments 3 93,768 ------- Total non-current assets 93,768 Current assets Trade and other receivables 413 Cash and cash equivalents 4 98,386 Group balances - ------- Total current assets 98,799 ------- Total assets 192,567 ------- Non-current liabilities Loan from portfolio company 5 (6,730) Current liabilities Trade and other payables (451) ------- Total liabilities (7,181) ======= Net assets 185,386 ======= Represented by: Share capital 6 1,964 Share premium 7 181,297 Retained reserves 2,125 ------- 185,386 ======= Net asset value per ordinary share ($ per share) $1.85 ======= Consolidated Statement of Changes in Equity For the period from 19 September 2006 (date of incorporation) to 30 April 2007 Share Capital Share Premium Retained Total Reserves $'000 $'000 $'000 $'000 Share issue proceeds 1,964 194,381 - 196,345 Share issue costs - (13,084) - (13,084) Net profit for the period - - 2,125 2,125 -------- -------- -------- -------- Net assets at end of period 1,964 181,297 2,125 185,386 ======== ======== ======== ======== Consolidated Cash Flow Statements For the period from 19 September 2006 (date of incorporation) to 30 April 2007 Group $'000 Cash flows from operating activities Profit for the period after tax 2,125 Change in trade and other receivables (413) Change in trade and other payables 451 -------- Net cash flows from operating activities 2,163 -------- Cash flows from investing activities Purchase of investments (93,768) Loan from portfolio company 6,730 -------- Net cash flows used in investing activities (87,038) -------- Cash flows from financing activities Proceeds on issue of equity shares net of issue costs 196,345 Issue costs paid (13,084) -------- Net cash flows from financing activities 183,261 -------- Net Increase in cash and cash equivalents 98,386 Cash and cash equivalents at start of period - -------- Cash and cash equivalents at end of period 98,386 ======== Notes to the Financial Statements For the period from 19 September 2006 (date of incorporation) to 30 April 2007 1. General information The Company is a closed-end investment company incorporated on 19 September 2006 in the Isle of Man as a public limited company. The address of its registered office is IOMA House, Hope Street, Douglas, Isle of Man. The Company is listed on the AIM market of the London Stock Exchange. The Group has no employees. 2. Summary of significant accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the entities included in the consolidated financial statements. Basis of preparation The financial statements of the Company are prepared in accordance with International Financial Reporting Standards ("IFRS"), which comprise standards and interpretations approved by the International Accounting Standards Board and International Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee that remain in effect, and applicable legal and regulatory requirements of Isle of Man law and the London Stock Exchange. All assets and liabilities are measured on an historical cost basis except for investments, which are stated at fair value. The period from 19 September 2006 to 30 April 2007 is the first period of the Group's operation and, therefore, no comparatives are presented. Use of estimates The preparation of financial statements in conformity with International Financial Reporting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be responsible under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. In particular, the valuation of unquoted investments relies heavily on such estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The area of the financial statements most affected by the use of estimates is the determination of the fair value of unquoted investments. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries and subsidiary undertakings). Control is achieved where the Company has the power to govern the financial and operating policies of a portfolio company so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Segment reporting No segment reporting is provided as the Group is engaged in only one business sector and geographic location. Income Dividend income from investments is recognised when the Company's right to receive payment has been established, normally the ex-dividend date. Interest income is accrued on a time basis. Expenses All expenses are accrued for on an accruals basis and are presented as revenue items except for expenses that are incidental to the disposal of an investment which are deducted from the disposal proceeds. Taxation Income tax expense comprises current tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Foreign currency Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which it operates (the "functional currency"). The consolidated financial statements are presented in US dollars, which is the Company's functional and presentation currency. Transactions in currencies other than US Dollars are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated into US Dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the Income Statement. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated into US Dollars at foreign exchange rates ruling at the dates the fair value was determined. The fair value of forward exchange contracts is their marked to market price at the balance sheet date. Financial instruments Financial assets and financial liabilities are recognised on the Company's balance sheet when the Company becomes a party to the contractual provisions of the instrument. The Company shall offset financial assets and financial liabilities if the Company has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis. Investments The portfolio investments of the Company are initially recognised at cost as of the date of investment. The portfolio's unquoted investments are subsequently re-measured at fair value at least every six months by the Directors using the most appropriate valuation techniques. Unrealised gains and losses arising from the revaluation of investments at the year end are taken directly to the income statement. Securities quoted or traded on a recognised stock exchange or other regulated market, will be valued by reference to the last available bid price quoted on an active market. Securities which are quoted but not marketable due to securities law restrictions will be valued at an appropriate discount rate from the public market price. Other receivables Other receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. Financial liabilities and equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangement entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Financial liabilities and equity instruments are recorded at the proceeds received, net of issue costs. Interest-bearing loans and borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the Income Statement over the period of the borrowings on an effective interest basis. Other payables Other payables are not interest bearing and are stated at their nominal value. Provisions A provision is recognised in the balance sheet when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation, and the obligation can be reliably measured. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Share issue costs The share issue costs of the Company directly attributable to the Placing and costs associated with the establishment of the Company that would otherwise have been avoided have been taken to the share premium account Deferred income tax Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Dividend distribution Dividend distribution to the Company's shareholders is recognised as a liability in the Group's financial statements in the period in which the dividends are approved. 3. Investments Investments comprise one holding as follows: Name Country of Proportion of Incorporation ownership interest Usaciga - Acucar,Alcool E Energia Eletrica SA Brazil 49% The investment is stated at fair value, which the Directors' estimate to be equivalent to cost. 4. Escrow Account Under the terms of the Investment Agreement with Usaciga - Acucar,Alcool E Energia Eletrica SA, an Escrow account was established to protect the Company against certain possible liabilities. At 30 April 2007 $16.8 million was held in the Escrow account. 5. Loan The Group has borrowed $6,730,000 from Usaciga - Acucar,Alcool E Energia Eletrica SA on a market based floating rate. The loan is repayable no later than 2012, but may be paid at the rate of 1/5 of the total outstanding per year. Repayment may be effected through offsetting against dividends due from the lender. 6. Share capital Ordinary shares of 1p each Number of Ordinary shares shares (thousands) £,000 Issued 100,000,000 1,000 Authorised 600,000,000 6,000 The Company was incorporated on 19 September 2006 with an authorised share capital of £2,000 divided into 200,000 ordinary shares of £0.01 each. At incorporation, two ordinary shares were subscribed for, nil paid, by the subscribers to the Memorandum of Association. On 4 December 2006, the Company's authorised share capital was increased from £2,000 to £6,000,000 divided into 600,000,000 ordinary shares of £0.01 each. Following the admission of the ordinary shares to trading on AIM on 18 December 2006, 100,000,000 ordinary shares of £0.01 par value were placed at £1.00 per share. All shares are fully paid and each ordinary share carries one vote. In addition to the placing of ordinary shares, 25,000,000 equity warrants were admitted to trading on AIM. Each warrant entitles the holder to subscribe for one new ordinary share at £1.00 per share, subject to adjustment as detailed in the Admission Document. 7. Share premium The Company's share premium has arisen on the issue of ordinary shares, and represents the difference between the issue price of £1.00 per share and the par value of £0.01 per share. Issue costs of $13,083,826 have been expensed against share premium. 8. Events after the balance sheet date On 15 June 2007, the High Court in the Isle of Man approved a reduction in the share capital of the Company by way of cancellation of the share premium account. The amount cancelled has been credited to distributable reserve. On 19 July 2007 an interim dividend of 2.5p per share was paid to holders of ordinary shares. On 16 July 2007 US$8.8million was released from the Escrow account following agreement on the completion of terms contained within the Investment Agreement with Usaciga. 9. Basis of preparation The above financial information does not constitute statutory accounts within the meaning of the Isle of Man Companies Acts. Statutory accounts for the period ended 30 April 2007 will be finalised on the basis of the information presented in this preliminary announcement and will be delivered to the Isle of Man Financial Supervision Commission and sent to shareholders following their publication. 10. Copies of the Annual Report and Accounts for the Company for the period ended 30 April 2007 will be sent to shareholders today and will be available from the offices of Smith & Williamson Corporate Finance Limited, 25 Moorgate, London, EC2R 6AY. This information is provided by RNS The company news service from the London Stock Exchange