FORESTA GROUP HOLDINGS LIMITED — Proxy Solicitation & Information Statement 2012

Feb 16, 2012

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Leaf Energy Limited ABN 18 074 969 056

Notice of General Meeting

10.00am (Brisbane time) Monday 26 March 2012 Corrs Chambers Westgarth Level 35 Waterfront Place, 1 Eagle Street Brisbane, Queensland, Australia

Part 1: Notice of General Meetin g

A General Meeting of Shareholders of Leaf Energy Limited will be held at Corrs Chambers Westgarth, Level 35 Waterfront Place, 1 Eagle Street, Brisbane, Queensland, Australia on 26 March 2012 commencing at 10.00 am (Brisbane time).

Special business

Part A – Issue of Performance Shares to Directors and Company Officers in lieu of cash payments

Resolution 1 – Approval of issue of Performance Shares to nonexecutive Directors

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

That for the purposes of ASX Listing Rule 10.11 and for all other purposes, Shareholders approve the issue of a total of 1,586,666 Performance Shares to Directors Melvyn Bridges, Charles Wilson and Dr Jay Hetzel on the terms and conditions set out in the Explanatory Statement.

Resolution 2 – Approval of issue of Performance Shares to Kenneth Richards

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

That for the purposes of ASX Listing Rule 10.11 and for all other purposes, Shareholders approve the issue of 2,100,000 Performance Shares to the Company’s Managing Director, Kenneth Richards, on the terms and conditions set out in the Explanatory Statement.

Resolution 3 – Approval of issue of Performance Shares to Company Officers

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

That for the purposes of ASX Listing Rule 7.1 and for all other purposes, Shareholders approve the issue of a total of 1,073,333 Performance Shares to James Dale and Stephen Denaro on the terms and conditions set out in the Explanatory Statement.

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Part B – Approval to allow Directors the opportunity to participate in the issue of Shortfall Shares

Resolution 4 – Approval to allow Directors the opportunity to participate in the issue of Shortfall Shares

To consider and, if thought fit, to pass the following resolution as an ordinary resolution :

That for the purposes of ASX Listing Rule 10.11 and for all other purposes, Shareholders approve the issue of up to 28,205,687 Shares to Directors at an issue price of $0.05 per Share, details of which are set out in the Explanatory Statement.

Voting exclusion statement – Resolutions 1, 2, 3 and 4

The Company will disregard any votes cast on:

• Resolution 1 by:

• (i) Melvyn Bridges, Charles Wilson, Dr Jay Hetzel and any of their respective associates; and

• (ii) proxy where the proxy is a:

  • (A) member of Key Management Personnel of the Group; or

  • (B) a Closely Related Party of such a member,

where the appointment does not specify the way the proxy is to vote on the Resolution;

 Resolution 2 by:

• (i) Kenneth Richards and any of his associates; and

• (ii) proxy where the proxy is a:

• (A) member of Key Management Personnel of the Group; or

• (B) a Closely Related Party of such a member,

• where the appointment does not specify the way the proxy is to vote on the Resolution;

 Resolution 3 by James Dale, Stephen Denaro and any of their respective associates; and

 Resolution 4 by a Director and any associate of a Director.

However, the Company need not disregard a vote if it is cast:

 by a person as proxy for a person who is entitled to vote (in accordance with the directions on the proxy form); or

 by the chairman of the meeting as proxy for a person who is entitled to vote (in accordance with a direction on the proxy form to vote as the proxy decides).

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Please refer to the important information about the appointment of proxies below.

Other information

Explanatory Statement

The accompanying Explanatory Statement forms part of this Notice and should be read in conjunction with it.

Proxies

Please note that:

• (a) a Shareholder entitled to attend and vote at the meeting is entitled to appoint a proxy;

• (b) a proxy need not be a Shareholder;

• (c) a Shareholder may appoint a body corporate or an individual as its proxy;

• (d) a body corporate appointed as a Shareholder’s proxy may appoint an individual as its representative to exercise any of the powers that the body may exercise as the Shareholder’s proxy; and

• (e) Shareholders entitled to cast two or more votes may appoint two proxies and may specify the proportion or number of votes each proxy is appointed to exercise, but where the proportion or number is not specified, each proxy may exercise half of the votes.

The enclosed proxy form provides further details on appointing proxies and lodging proxy forms. If a Shareholder appoints a body corporate as its proxy and the body corporate wishes to appoint an individual as its representative, a certificate of the appointment of corporate representative should be completed and lodged in the manner specified below.

If proxy holders vote on a poll, they must cast all directed proxies as directed. Any directed proxies which are not voted on a poll will automatically default to the chairman of the meeting, who must vote the proxies as directed.

The chairman of the meeting intends to vote all undirected proxies in favour of each Resolution.

Proxy forms must be lodged by 10.00am (Brisbane time) on 24 March 2012.

Important information concerning proxy votes on Resolutions 1 and 2

The Corporations Act now places certain restrictions on the ability of Key Management Personnel and their Closely Related Parties to vote on Resolutions 1 and 2, including where they are voting as proxy for another Shareholder.

To ensure that your votes are counted, you are encouraged to direct your proxy as to how to vote on Resolutions 1 and 2 by indicating your preference on the proxy form.

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If you appoint the chairman of the meeting as your proxy but you do not direct the chairman how to vote in respect of Resolutions 1 and 2, the chairman will not be able to vote as your proxy unless you mark the box indicated on the proxy form to authorise the chairman to vote on those items. Marking this box will authorise the chairman to vote as your proxy on Resolutions 1 and 2 even though they are connected with the remuneration of Key Management Personnel and you have not directed the chairman how to vote.

The chairman intends to vote all undirected proxies in favour of each Resolution .

Corporate representatives

Any:

• corporate Shareholder; or

• corporate proxy appointed by a Shareholder,

which has appointed an individual to act as its corporate representative at the meeting should provide that person with a certificate or letter executed in accordance with the Corporations Act authorising them to act as that company’s representative. The authority may be sent to the Company or its share registry, Security Transfer Registrars Pty Limited, in advance of the meeting or handed in at the meeting when registering as a corporate representative. An Appointment of Corporate Representative form is available by contacting Security Transfer Registrars Pty Limited on +61 8 9315 2333 during business hours.

If you have any queries on how to cast your votes, please call Security Transfer Registrars Pty Limited, on +61 8 9315 2333 during business hours.

Voting entitlements

In accordance with Regulation 7.11.37 of the Corporations Regulations 2001 (Cth), the Board has determined that a person’s entitlement to vote at the meeting will be the entitlement of that person set out in the register of Shareholders as at 10.00am (Brisbane time) on 24 March 2012. Accordingly, transactions registered after that time will be disregarded in determining Shareholders’ entitlements to attend and vote at the meeting.

By order of the Board of Directors

---

Stephen Denaro Company Secretary

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Part 2: Ex lanator Statement p y

This Explanatory Statement has been prepared for the information of Shareholders in connection with the resolutions to be considered by them at the general meeting of Shareholders to be held at Corrs Chambers Westgarth, Level 35 Waterfront Place, 1 Eagle Street, Brisbane, Queensland, Australia on 26 March 2012 commencing at 10.00am (Brisbane time).

The purpose of this Explanatory Statement is to provide Shareholders with the information known to the Company that the Board considers material to their decision on whether to approve the Resolutions in the accompanying Notice. This document is important and should be read in conjunction with all of the information contained in this booklet, including the Notice.

Capitalised terms in this Explanatory Statement are defined in the Glossary in section 3.

1 Part A – Issue of Performance Shares to Directors and Company Officers in lieu of cash payments

1.1 Background

To assist the Company to conserve cash, the Company’s non-executive Directors (Melvyn Bridges, Charles Wilson and Dr Jay Hetzel), Managing Director (Kenneth Richards) and the Company Officers (the Chief Scientific Officer, James Dale, and the Company Secretary, Stephen Denaro) have agreed to be paid their fees and base remuneration by way of Performance Shares rather than cash in relation to the following periods:

• for Kenneth Richards, from 1 August 2011 to 30 June 2012 (in respect of the approximate amount of the after tax portion of his salary); and

• for the non-executive Directors and Company Officers, from 1 December 2011 to 30 June 2012 (in respect of all of their fees and base remuneration),

(the relevant period being a Performance Period ).

Each Performance Share will convert into one fully paid ordinary share in the Company ( Share ) should the relevant Director or Company Officer retain their position with the Company until 1 July 2012 ( Milestone ).

The Performance Shares will not be quoted on the ASX and are not transferable. However, any Shares issued upon the achievement of the Milestone will be quoted on ASX and will be freely tradeable.

If one or more of the Directors or Company Officers do not achieve the Milestone, the Company will redeem and cancel their Performance Shares for the nominal consideration of $0.00001 per Performance Share (in accordance with the terms of the Performance Shares).

The full terms of the Performance Shares are set out in the Schedule.

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No funds will be raised as a result of the grant of Performance Shares to the relevant Directors and Company Officers. However, the grant of Performance Shares in lieu of cash payments for fees and remuneration will save the Company approximately $238,000 cash.

The Company is seeking Shareholder approval to issue the following Performance Shares:

• (a) in respect of Resolution 1:

• (i) 770,000 Performance Shares to Melvyn Bridges; and

• (ii) 408,333 Performance Shares to each of Charles Wilson and Dr Jay Hetzel;

• (b) in respect of Resolution 2, 2,100,000 Performance Shares to Kenneth Richards; and

• (c) in respect of Resolution 3:

• (i) 583,333 Performance Shares to James Dale; and

• (ii) 490,000 Performance Shares to Stephen Denaro.

The Company has determined the number of Performance Shares proposed to be issued to each Director and Company Officer by dividing the fees and remuneration due to them during the relevant Performance Period by an issue price of $0.05 per Performance Share, being the issue price of Shares under the Entitlement Offer.

1.2 Benefits of Shareholder approval

The issue of Performance Shares will help conserve the Company’s cash by reducing its cash expenditure over the Performance Periods by approximately $238,000.

The issue of Performance Shares has the added benefit of further aligning the interests of the Directors and Company Officers with the interests of Shareholders.

Each Performance Share will convert into one Share upon the achievement of the Milestone, which requires the relevant Director or Company Officer to retain their position with the Company until 1 July 2012. The issue price of the Performance Shares is the same as the issue price of Shares under the Entitlement Offer ($0.05), thereby ensuring that the Directors and Company Officers will not receive a benefit beyond that offered to eligible Shareholders under the Entitlement Offer.

If Shareholders do not approve the issue of Performance Shares to the Directors and Company Officers under Resolutions 1, 2 and 3, it will be necessary for the Company to pay the fees and remuneration due to the Directors and Company Officers in cash which will reduce the cash available to the Company to fund its research, development and commercialisation strategies.

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1.3 Approvals sought

The Company is seeking the following Shareholder approvals:

Resolution	ASX Listing Rule	Details
Resolution 1	10.11	Approval of issue of Performance Shares to non-executive Directors
Resolution 2	10.11	Approval of issue of Performance Shares to Kenneth Richards
Resolution 3	7.1	Approval of issue of Performance Shares to Company Officers

1.4 Resolutions 1 and 2 – Approval of the issue of Performance Shares to Directors under ASX Listing Rule 10.11

ASX Listing Rule 10.11 prohibits the Company from issuing equity securities (such as Performance Shares) to a related party of the Company, such as a Director, without the Company obtaining Shareholder approval, unless an exception applies. None of the exceptions to ASX Listing Rule 10.11 apply in respect of Resolutions 1 or 2.

ASX Listing Rule 7.1 provides that without Shareholder approval, the Company must not issue or agree to issue equity securities comprising more than 15% of the Company’s issued capital as at 12 months before the date of issue of the relevant securities, subject to certain adjustments set out in the Rule.

ASX Listing Rule 7.2 exception 14 provides that the issue of equity securities in accordance with a Shareholder approval under ASX Listing Rule 10.11 will be treated as having been made with Shareholder approval for the purposes of ASX Listing Rule 7.1 so long as the notice of meeting discloses this fact. This means that if Shareholder approval is obtained for the issue of Performance Shares under ASX Listing Rule 10.11, it is not separately required under ASX Listing Rule 7.1. Accordingly, if Resolutions 1 and 2 are approved by Shareholders, the issue of Performance Shares to the Directors will not be counted in the Company’s 15% limit under ASX Listing Rule 7.1.

ASX Listing Rule 7.2 exception 4 provides that the issue of equity securities upon the conversion of convertible securities will be treated as having been made with Shareholder approval for the purposes of ASX Listing Rule 7.1 so long as the entity complied with the ASX Listing Rules when issuing the convertible securities. As the Performance Shares are convertible into Shares, they are convertible securities for the purposes of the ASX Listing Rules. Accordingly, if Resolutions 1 and 2 are approved by Shareholders and any of the Performance Shares issued to the Directors are subsequently converted into Shares upon the achievement of the Milestone, the Shares issued will not need to be counted in the Company’s 15% limit under ASX Listing Rule 7.1.

1.5 Information required by ASX Listing Rule 10.13

For approvals under ASX Listing Rule 10.11, ASX Listing Rule 10.13 requires the Company to disclose certain information to Shareholders.

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	Resolution 1	Resolution 2
Name of the persons to be issued the securities	Melvyn Bridges, Charles Wilson, Dr Jay Hetzel or any of their respective related parties	Kenneth Richards or a related party of Kenneth Richards
Maximum number of securities to be issued to each person	(a) 770,000 Performance Shares to Melvyn Bridges or a related party of Melvyn Bridges (b) 408,333 Performance Shares to Charles Wilson or a related party of Charles Wilson (c) 408,333 Performance Shares to Dr Jay Hetzel or a related party of Dr Jay Hetzel	2,100,000 Performance Shares
Date of issue	No later than one month after the date of the approval
Issue price of the securities and a statement of the terms of the issue	$0.05 per Performance Share The terms of the Performance Shares are set out in the Schedule
Use of funds	The Company will not receive any additional funds from the issue of the Performance Shares. The issue of the Performance Shares to the Directors in lieu of cash payments for Directors’ fees (and, in the case of Kenneth Richards, for the approximate amount of the after tax portion of his salary) will help conserve the Company’s cash

1.6 Resolution 3 – Approval of the issue of Performance Shares to Company Officers under ASX Listing Rule 7.1

As noted in section 1.4, ASX Listing Rule 7.1 provides that without Shareholder approval, the Company must not issue or agree to issue equity securities comprising more than 15% of the Company’s issued capital as at 12 months before the date of issue of the relevant securities, subject to certain adjustments set out in the Rule.

Approval is sought under ASX Listing Rule 7.1 for Resolution 3 so that the Performance Shares proposed to be issued to James Dale and Stephen Denaro within three months

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of the date of the approval will not need to be counted in the Company’s 15% limit under ASX Listing Rule 7.1.

While the Company currently has sufficient room within its 15% limit to issue the Performance Shares to the Company Officers, the Company does not propose to issue the Performance Shares unless Shareholder approval is obtained.

As noted in section 1.4, ASX Listing Rule 7.2 exception 4 provides that the issue of equity securities upon the conversion of convertible securities will be treated as having been made with Shareholder approval for the purposes of ASX Listing Rule 7.1 so long as the entity complied with the ASX Listing Rules when issuing the convertible securities. As the Performance Shares are convertible into Shares, they are convertible securities for the purposes of the ASX Listing Rules. Accordingly, if Resolution 3 is approved by Shareholders and any of the Performance Shares issued to the Company Officers are subsequently converted into Shares upon the achievement of the Milestone, the Shares issued will not need to be counted in the Company’s 15% limit under ASX Listing Rule 7.1.

Information required by ASX Listing Rule 7.3

For approvals under ASX Listing Rule 7.1, ASX Listing Rule 7.3 requires the Company to disclose certain information to Shareholders.

Maximum number of securities the entity is to issue or the formula for calculating the number of securities the entity is to issue	(a) 583,333 Performance Shares to James Dale or a related party of James Dale (b) 490,000 Performance Shares to Stephen Denaro or a related party of Stephen Denaro
Date of issue	No later than three months after the date of the approval
Issue price	$0.05 per Performance Share
Name of the allottees	(a) James Dale or a related party of James Dale (b) Stephen Denaro or a related party of Stephen Denaro
Terms of the securities	As set out in the Schedule
Use of funds	The Company will not receive any additional funds from the issue of the Performance Shares. The issue of the Performance Shares to the Company Officers in lieu of cash payments for their fees and remuneration will help conserve the Company’s cash
Date of allotment	No later than three months after the date of the approval

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1.7 Directors’ recommendation

Although the Company’s non-executive Directors (Mel Bridges, Charles Wilson and Dr Jay Hetzel) have an interest in the outcome of Resolution 1 and Managing Director Kenneth Richards has an interest in the outcome of Resolution 2, they each believe it is still appropriate for them to give a recommendation to Shareholders on these Resolutions.

Each of the Directors unanimously recommend that Shareholders vote in favour of Resolutions 1, 2 and 3.

2 Part B – Approval to allow Directors the opportunity to participate in the issue of Shortfall Shares

2.1 Background

On 3 February 2012 the Company announced a pro rata non-renounceable entitlement offer of ordinary shares in the Company ( Entitlement Offer ) to eligible Shareholders in Australia and New Zealand ( Eligible Shareholders ). The Entitlement Offer booklet was lodged with ASX on 17 February 2012 and despatched to Eligible Shareholders in the same package as this Notice (Shareholders that are not Eligible Shareholders will have received a letter explaining the key terms of the Entitlement Offer in the same package as this Notice). A copy of the Entitlement Offer booklet is available on the Company’s website (www.leafenergy.com.au) and on ASX’s company announcements platform (accessible from ASX’s website, www.asx.com.au).

The key terms of the Entitlement Offer are as follows:

• Eligible Shareholders are entitled to subscribe for one new Share for every Share held in the Company to raise up to approximately $1.4 million. Eligible Shareholders that subscribe for their full entitlement may also apply for additional new Shares, although any such applications may be subject to a full or partial scaleback;

• the Entitlement Offer is not subject to a minimum subscription being raised;

• the issue price is $0.05 per new Share;

• the Entitlement Offer is not underwritten; and

• the Directors have reserved the right to place any shortfall of Shares under the Entitlement Offer ( Shortfall Shares ) within three months of the date of the close of the Entitlement Offer at an issue price not less than the issue price under the Entitlement Offer. The placement of Shortfall Shares in these circumstances would fall within ASX Listing Rule 7.2 exception 3, meaning that any Shortfall Shares issued would not need to be counted in the Company’s 15% limit under ASX Listing Rule 7.1.

At the time this Notice was printed, the Entitlement Offer was due to close on 9 March 2012 and it was not known how many Shortfall Shares would be available to be placed by the Company to take advantage of ASX Listing Rule 7.2 exception 3.

Under Chapter 10 of the ASX Listing Rules, the Directors who are Eligible Shareholders (Melvyn Bridges, Kenneth Richards and Charles Wilson) are only permitted to subscribe

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for new Shares under the Entitlement Offer up to their entitlement – unlike all other Eligible Shareholders, they are prohibited from applying for additional new Shares in excess of their entitlement without Shareholder approval.

To provide the Directors who are Eligible Shareholders with an opportunity to effectively acquire additional Shares in excess of their entitlements (should they wish to do so), and to provide the Company with maximum flexibility in the issue of any Shortfall Shares and the raising of additional funds (having regard to the fact that Directors Kenneth Richards and Charles Wilson are both substantial holders in the Company, each controlling approximately 10% of Shares currently on issue), the Company is seeking Shareholder approval under ASX Listing Rule 10.11 to allow all Directors to participate in any placement of Shortfall Shares.

However, until the Entitlement Offer closes and the number of Shortfall Shares is known, the Directors will not make any decisions in relation to participating personally in any placement of Shortfall Shares (including any decision relating to the extent of that participation).

2.2 Maximum number of Shares to be issued to Directors if Shareholder approval for Resolution 4 is obtained

As noted in section 2.1, no decision has been made on the number of Shortfall Shares which may be issued to the Directors. However, it is a requirement of ASX Listing Rule 10.13 that the maximum number of Shares to be issued to each Director be set out in this Notice. If Shareholder approval for Resolution 4 is obtained, the maximum number of Shortfall Shares that could possibly be issued to the Directors is 28,205,687 (this scenario assumes that no funds are raised under the Entitlement Offer and all of the Shortfall Shares are issued to the Directors).

Using the same assumptions, the maximum number of Shortfall Shares that could possibly be issued to each individual Director is subject to:

• the extent to which those Directors who are Eligible Shareholders participate in the Entitlement Offer; and

• the general prohibition on a person acquiring a relevant interest in Shares under Chapter 6 of the Corporations Act which takes their holding from below 20% to above 20% of voting shares in the Company.

For the purpose of complying with ASX Listing Rule 10.13, the table below provides Shareholders with an indication of the maximum number of Shares that each Director would be able to acquire as a result of the Entitlement Offer and the participation in the placement of the Shortfall Shares (on the assumption that each Director who is an Eligible Shareholder takes up their entitlement under the Entitlement Offer in full).

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Director	No. of Shares held before the Entitlement Offer (direct and indirect)	No. of new Shares that can be acquired under the Entitlement Offer	Maximum no. of Shortfall Shares the Director may be issued	Total number of Shares that could be issued to each Director under the Entitlement Offer and the placement of Shortfall Shares
Melvyn Bridges	119,619	119,619	11,043,036	11,162,655
Kenneth Richards	2,700,000	2,700,000	5,882,274	8,582,274
Charles Wilson	2,341,286	2,341,286	6,599,702	8,940,988
Dr Jay Hetzel	nil	nil	11,282,274	11,282,274

The Company notes that it is not possible for each Director to acquire the maximum number of Shortfall Shares allocated against their name in the table above as this would exceed the maximum number of Shortfall Shares that could theoretically be available to place (28,205,687). The Company further notes that it is unlikely that all of the Shortfall Shares will be issued to the Directors given that it is currently intended that any Shortfall Shares would also be offered to sophisticated and professional investors, including new and/or existing Shareholders.

2.3 Approval under ASX Listing Rule 10.11

As noted in section 1.4:

• the Company cannot issue equity securities (such as Shares) to a related party of the Company, such as a Director, without the Company obtaining Shareholder approval, unless an exception applies. None of the exceptions to ASX Listing Rule 10.11 apply in this case;

• ASX Listing Rule 7.1 provides that without Shareholder approval, the Company must not issue or agree to issue equity securities comprising more than 15% of the Company’s issued capital as at 12 months before the date of issue of the relevant securities, subject to certain adjustments set out in the Rule; and

• ASX Listing Rule 7.2 exception 14 provides that the issue of securities in accordance with a Shareholder approval under ASX Listing Rule 10.11 will be treated as having been made with Shareholder approval for the purposes of ASX Listing Rule 7.1 so long as the notice of meeting discloses this fact. This means that if Shareholder approval is obtained for the issue of securities under ASX Listing Rule 10.11, it is not separately required under ASX Listing Rule 7.1. Accordingly, if Resolution 4 is approved by Shareholders, the issue of any Shortfall Shares to Directors will not be counted in the Company’s 15% limit under ASX Listing Rule 7.1.

2.4 Information required by ASX Listing Rule 10.13

As noted in section 1.5, for approvals under ASX Listing Rule 10.11, ASX Listing Rule 10.13 requires the Company to disclose certain information to Shareholders.

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Name of the persons to be issued the securities	Any of Melvyn Bridges, Kenneth Richards, Charles Wilson, Dr Jay Hetzel and their respective related parties
Maximum number of securities to be issued to each person	(a) 11,162,655 Shares to Melvyn Bridges or a related party of Melvyn Bridges (b) 8,582,274 Shares to Kenneth Richards or a related party of Kenneth Richards (c) 8,940,988 Shares to Charles Wilson or a related party of Charles Wilson (d) 11,282,274 Shares to Dr Jay Hetzel or a related party of Dr Jay Hetzel
Date of issue	No later than one month after the date of the approval
Issue price of the securities and a statement of the terms of the issue	$0.05 per Share, being the same issue price under the Entitlement Offer. The Shares will be fully paid ordinary shares and will rank equally with all existing Shares
Use of funds	The funds raised from the issue of the Shortfall Shares will be applied in the same manner as funds raised under the Entitlement Offer, namely to:  fund research into the development of Debaryomyces hansenii (DH) as a production platform for bio-energy and proteins/enzymes;  fund further work on the commercialisation of Leaf Energy technologies;  progress the formulation of a feasibility plan for the production of bio-energy and proteins/enzymes; and  provide Leaf Energy with working capital.

2.5 Consequences if Resolution 4 is not approved

If Resolution 4 is not approved by Shareholders, the Directors will not be entitled to participate in any placement of Shortfall Shares. This will restrict the Company’s flexibility to obtain further funds in the short term after the close of the Entitlement Offer.

2.6 No recommendation

As each Director has an interest in the outcome of Resolution 4, the Directors decline to provide a recommendation to Shareholders on this Resolution.

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3 Glossary

In this Explanatory Statement, and in the Notice, the following terms have the following meaning unless the context otherwise requires:

ASX means ASX Limited or the securities exchange it operates, as the context requires.

ASX Listing Rules means the listing rules of ASX.

Board means board of Directors.

Closely Related Party of a member of Key Management Personnel means:

• (a) a spouse or child of the member;

• (b) a child of the member’s spouse;

• (c) a dependent of the member or of the member’s spouse;

• (d) anyone else who is one of the member’s family and may be expected to influence the member, or be influenced by the member, in the member’s dealings with the Company;

• (e) a company that the member controls; or

• (f) a person described by the Corporations Regulations 2001 (Cth).

Company means Leaf Energy Limited.

Company Officers means the Chief Scientific Officer, James Dale and the Company Secretary, Stephen Denaro.

Corporations Act means Corporations Act 2001 (Cth).

DH means Debaryomyces hansenii, an oil producing marine yeast.

Director means a director of the Company which, as at the date of this Notice, included Melvyn Bridges, Kenneth Richards, Charles Wilson and Dr Jay Hetzel.

Eligible Shareholder means a Shareholder with a registered address in Australia or New Zealand and who is otherwise entitled to participate in the Entitlement Offer in accordance with its terms.

Entitlement Offer means the pro rata non-renounceable entitlement offer to raise up to $1.4 million as announced by the Company on 3 February 2012.

Group means the Company and subsidiaries of the Company.

Key Management Personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any director (whether executive or not).

Notice means the notice in Part 1 under which the general meeting of Shareholders is convened.

Performance Shares means the LER A Class Shares proposed to be issued under the terms set out in the Schedule.

Shareholders means persons whose names are entered in the register of Shares, maintained by or on behalf of the Company.

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Shares means fully paid ordinary shares in the Company.

Shortfall Shares means the number of Shares that could be issued under the Entitlement Offer less the Shares actually issued to Eligible Shareholders.

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Schedule

Terms of the Performance Shares

• 1 LER A Class Shares are performance shares and will confer on the holders thereof the following rights and privileges:

• In the event that a holder of LER A Class Shares achieves the Milestone described in paragraph 6 below, each LER A Class Share they hold will convert to one ordinary fully paid share in LER, ranking equally with and having the same rights as the existing ordinary shares on issue in LER.

• In the event that a holder of LER A Class Shares does not achieve the Milestone, the LER A Class Shares will be redeemed by LER for $0.00001 per share as per paragraph 5 below.

• 2 The LER A Class Shares do not confer on the holders the following rights and privileges:

• The right to vote at general meetings or any other voting rights except as required by law.

• The right to receive dividends.

• Participation rights or entitlements, including the right to receive notices, reports and audited accounts, and attend meetings.

• The right to participate in new issues of capital, including without limitation bonus issues and entitlement issues prior to the conversion of the LER A Class Shares (except to the extent that if there is a bonus issue undertaken prior to the achievement of the Milestone, the holder of an LER A Class Share may upon achievement of that Milestone and conversion of the LER A Class Shares into ordinary share, have issued to it additional securities equal to the number of securities that it would have received had the conversion of those LER A Class Shares occurred before the record date of the bonus issue).

• The right upon winding up of LER to any priority payment to the holders of ordinary shares in LER.

• The right to participate in the profits or assets of LER on a liquidation or any other return of capital.

• 3 The LER A Class Shares are also subject to the following conditions:

• The LER A Class Shares will not be quoted on the ASX or any equivalent exchange.

• The LER A Class Shares are not transferable.

• 4 In the event that a holder of LER A Class Shares achieves the Milestone (as described in paragraph 6 below), all of the LER A Class Shares held by that

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holder will immediately convert to ordinary shares in LER on the basis of one fully paid ordinary share in LER for each LER A Class Share held.

• 5 In the event that the Milestone (as described in paragraph 6 below) is not achieved by a holder of LER A Class Shares, LER will redeem all of the LER A Class Shares held by that holder for $0.00001 per share.

• 6 The Milestone will be achieved in respect of a holder of LER A Class Shares if that holder or a controller of that holder is an officeholder or employee of the Company on 1 December 2011 and retains that position until 1 July 2012.

The maximum period for achievement of the Milestone is six months from the date of issue of the LER A Class Shares.

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PROXY FORM

THIS DOCUMENT IS IMPORTANT. IF YOU ARE IN DOUBT AS TO HOW TO DEAL WITH IT, PLEASE CONTACT YOUR STOCK BROKER OR LICENSED PROFESSIONAL ADVISOR.

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LEAF ENERGY LIMITED

REGISTERED OFFICE: LEVEL 4 88 MUSK AVENUE KELVIN GROVE QLD 4059

ABN: 18 074 969 056

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SHARE REGISTRY: Security Transfer Registrars Pty Ltd All Correspondence to: PO BOX 535, APPLECROSS WA 6953 AUSTRALIA 770 Canning Highway, APPLECROSS WA 6153 AUSTRALIA T: +61 8 9315 2333 F: +61 8 9315 2233 E: registrar@securitytransfer.com.au W: www.securitytransfer.com.au

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Code: LER Holder Number:

SECTION A: Appointment of Proxy

I/We, the above named, being registered holders of the Company and entitled to attend and vote hereby appoint:

OR

The meeting Chairperson The name of the person you are appointing (mark with an "X") (if this person is someone other than the Chairperson of the meeting). or failing the person named, or if no person is named, the Chairperson of the Meeting, as my/our Proxy to act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the Proxy sees fit) at the General Meeting of the Company to be held at 10.00am (Brisbane time) Monday 26 March 2012 at Corrs Chambers Westgarth, Level 35 Waterfront Place, 1 Eagle Street, Brisbane, Queensland, Australia and at any adjournment of that meeting.

SECTION B: Voting Directions to your Proxy

Please mark "X" in the box to indicate your voting directions to your Proxy.

Resolution

For Against Abstain*

1. Approval of issue of Performance Shares to non-executive Directors

2. Approval of issue of Performance Shares to Kenneth Richards

3. Approval of issue of Performance Shares to Company Officers

4. Approval to allow Directors the opportunity to participate in the issue of Shortfall Shares

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If no directions are given my proxy may vote as the proxy thinks fit or may abstain.

• If you mark the Abstain box for a particular item, you are directing your Proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

If you wish to appoint the Chairperson as your proxy and you do not wish to direct the Chairperson how to vote in relation to resolutions 1, 2 and 4, please mark "X" in the box.

By marking this box, you acknowledge that the Chairperson may exercise your proxy even if he has an interest in the outcome of the resolutions 1 and 4 and votes cast by him/her other than as a proxy holder will be disregarded because of that interest. You also acknowledge that the Chairperson may exercise you proxy for resolutions 1 and 2 even though these resolutions are connected with the remuneration of key management personnel. If you do not mark this box, and you have not directed your proxy how to vote on resolutions 1, 2 and 4, the Chairperson will not cast your votes on resolutions 1, 2 and 4 and your votes will not be counted in calculating the required majority if a poll is called on these resolutions. The Chairperson of the Meeting intends to vote undirected proxies in favour of each resolution.

SECTION C: Please Sign Below

This section must be signed in accordance with the instructions overleaf to enable your directions to be implemented.

Individual or Security Holder Security Holder 2 Security Holder 3 Sole Director and Sole Company Secretary Director Director / Company Secretary

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Reference Number:

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6478112166

LER

1

1

My/Our contact details in case of enquiries are: NAME

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TELEPHONE NUMBER ( )

NOTES

1. Name and Address

This is the name and address on the Share Register of Leaf Energy Limited. If this information is incorrect, please make corrections on this form. Shareholders sponsored by a broker should advise their broker of any changes. Please note that you cannot change ownership of your shares using this form.

2. Appointment of a Proxy

If you wish to appoint the Chairperson of the Meeting as your Proxy please mark "X" in the box in Section A. Please also refer to Section B of this proxy form and ensure you mark the box in that section if you wish to appoint the Chairperson as your Proxy.

If the person you wish to appoint as your Proxy is someone other than the Chairperson of the Meeting please write the name of that person in Section A. If you leave this section blank, or your named Proxy does not attend the meeting, the Chairperson of the Meeting will be your Proxy. A Proxy need not be a Shareholder of Leaf Energy Limited.

3. Directing your Proxy how to vote

To direct the Proxy how to vote place an "X" in the appropriate box against each item in Section B. Where more than one Proxy is to be appointed and the proxies are to vote differently, then two separate forms must be used to indicate voting intentions.

4. Appointment of a Second Proxy

You are entitled to appoint up to two (2) persons as proxies to attend the meeting and vote on a poll. If you wish to appoint a second Proxy, an additional Proxy form may be obtained by telephoning the Company's share registry +61 8 9315 2333 or you may photocopy this form.

To appoint a second Proxy you must:

• (a) On each of the Proxy forms, state the percentage of your voting rights or number of securities applicable to that form. If the appointments do not specify the percentage or number of votes that each Proxy may exercise, each Proxy may exercise half of your votes; and

• (b) Return both forms in the same envelope.

5. Signing Instructions Individual: where the holding is in one name, the Shareholder must sign.

Joint Holding: where the holding is in more than one name, all of the Shareholders must sign.

Power of Attorney: to sign under Power of Attorney you must have already lodged this document with the Company's share registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: where the Company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the Company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director may sign alone. Otherwise this form must be signed by a Director jointly with either another Director or Company Secretary. Please indicate the office held in the appropriate place.

If a representative of the corporation is to attend the meeting the appropriate "Certificate of Appointment of Corporate Representative" should be lodged with the Company before the meeting or at the registration desk on the day of the meeting. A form of the certificate may be obtained from the Company's share registry.

6. Lodgement of Proxy

Proxy forms (and any Power of Attorney under which it is signed) must be received by Security Transfer Registrars Pty Ltd no later than 10.00am (Brisbane time) Saturday 24 March 2012, being 48 hours before the time for holding the meeting. Any Proxy form received after that time will not be valid for the scheduled meeting.

Security Transfer Registrars Pty Ltd PO BOX 535 Applecross, Western Australia 6953

Street Address: Alexandrea House, Suite 1 770 Canning Highway Applecross, Western Australia 6153

Telephone +61 8 9315 2333 Facsimile +61 8 9315 2233 Email registrar@securitytransfer.com.au

PRIVACY STATEMENT

Personal information is collected on this form by Security Transfer Registrars Pty Ltd as the registrar for securities issuers for the purpose of maintaining registers of securityholders, facilitating distribution payments and other corporate actions and communications. Your personal details may be disclosed to related bodies corporate, to external service providers such as mail and print providers, or as otherwise required or permitted by law. If you would like details of your personal information held by Security Transfer Registrars Pty Ltd or you would like to correct information that is inaccurate please contact them on the address on this form.

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