Annual Report and Financial Statements

Ludgate Environmental Fund Limited (the "Company")

Final Results for the year ended 30th June 2015

CHAIRMAN'S STATEMENT

I am pleased to report to shareholders on the performance of Ludgate Environmental Fund Limited ("LEF") for the year ended 30th June 2015.

Financial Review

The net asset value of LEF on 30th June 2015 was £32,312,863 (2014: £35,499,215), equivalent to 60.6 (2014: 66.5) pence per share. A net loss of £3,186,351 was recorded (2014: £7,314,554). At the end of the year the cash balance was £867,973 (2014: £1,645,950).

Strategy and Portfolio Review

LEF is fully invested. Our purpose is to realise the maximum value of the assets within the remaining life of the Company and return the cash proceeds of sales to shareholders. At an EGM on 1st September 2014 shareholders voted to extend the life of LEF to 30th June 2018 with the expectation that the portfolio would be mostly sold by mid 2017 and that this additional period was in the best interests of the Company to realise value for shareholders; the investing policy and management and performance fee arrangements and incentives for the Investment Adviser were amended accordingly. The AGM held on 14th November 2014 again confirmed the strategy, investing policy and financial report.

We reorganised our interest in shares of Rapid Action Packaging Limited. After conversion of CULS, we are now the largest shareholder. We do not exercise management control. The company is performing within expectations. STX Services B.V., the broker of environmental certificates, has continued to exceed its budgets. We subscribed for further shares of Tamar Energy Limited, the UK biomass generator, as disclosed in our EGM notice. The company has recently raised debt finance and continues to develop its operations. Ignis has achieved effective operational performance and continued to seek expansion of its supply with key contracts under current negotiation. Lumicity continued to realise its investments and distribute proceeds to shareholders. During the year, we sold our interest in Lumicity with possible further payments to be made dependent on certain performance milestones. Micropelt is developing core products toward commercialisation. In December we wrote off our investment in ECO Plastics Limited, £2 million at the 30th September 2014 NAV date, representing 3.8p of NAV or 5.7% of net assets. The company was insufficiently capitalised to withstand the loss of an advantageous feedstock contract and falling prices in the offtake market. We continue to hold listed securities of Hydrodec Group plc, Renewable Energy Generation plc and Phoslock Water Solutions Limited on an available for sale basis.

Denis Quilty resigned from the board on 27th August 2014. I should like to thank my fellow board members for their commitment and diligence in determining the value of the assets we hold and to the strategy and investing policy recommended and endorsed by shareholders at the EGM and AGM respectively.

For further information contact:

Ludgate Environmental Fund Limited +44 (0) 1534 609034

John Shakeshaft, Chairman

Ludgate Investments Limited +44 (0) 20 3478 1000

Bill Weil

Panmure Gordon (Broker, Nomad) +44 (0) 20 7886 2713

Paul Fincham

STATEMENT OF INVESTMENT POLICY

Ludgate Environmental Fund Limited (the ''Fund'', the ''Company'' or ''LEF'') has made investments in a diverse portfolio of resource efficiency companies for capital growth.

The Fund has focused on the following areas within the resource efficiency sector:

· Waste and recycling

· Renewable energy

· Energy efficiency

· Water

No single investment at subscription had a value greater than 15.0% of the net assets of the Company. No individual holding is reduced or increased due to either relative growth or reductions of the Company's other investments; the Board remains conscious of the risk profile and expected returns from the portfolio.

The Company may borrow up to an amount equivalent to 25.0% of its net assets to finance investments or for any other purpose. The Board does not contemplate any significant borrowing.

Seeking to provide significant total return to shareholders over the remaining life of the Company to 30th June 2018, the Directors may recommend that there should be a distribution of income received or capital realised from investment securities by way of dividend or other means as they have for the years ended 30th June 2009 to 2015.

On 1st September 2014, shareholders approved the recommendation of the Directors to extend the life of the Company to 30th June 2018. They also approved a revised investment policy which states that the policy is to effect the systematic winding down of the activities of the Company and the disposal of its assets in such a way as to seek to achieve the maximum possible value for shareholders. In order to effect such a winding down, the Company's key strategy is to dispose of its portfolio of investments and any other assets and to exercise all legal rights of the Company over time in such a way as to maximise shareholder value and to take any such other action so as to enable it to realise its assets.

No further investments will be made save for those made either: (i) to preserve, protect or enhance the value of an existing investment; or (ii) as part of a prudent cash management programme.

INVESTMENT ADVISER'S REPORT

Highlights and Key Financial Data

· Net assets of £32.3 million at 30th June 2015, with a NAV per share of 60.6 pence (2014: £35.5 million and 66.5 pence)

· No dividend paid during the financial year

· Investments made in the year totaling £3.0 million into 3 existing portfolio companies (2014: £5.6 million invested into 5 existing portfolio companies)

· Interest and dividend income receivable (net of provisions) was £0.6 million

· £1.8 million was realised from the sale of the Company's interest in Lumicity (£2.1 million total to date)

· Cash balances were £0.9 million as at 30th June 2015

Net Asset Value summary

The table below summarises the asset position of the Company as at 30th June 2015.

Adviser to the Company

Ludgate Investments Limited ("Ludgate Investments"), established in London in 2001, is an FCA regulated firm which specialises in private equity investments focused on resource efficiency, in commercially proven industrial applications and services in energy efficiency, recycling, materials and water.

The investment team comprises Gijs Voskamp (Chief Executive Officer), Bill Weil (Chief Investment Officer), Ekaterina Sharashidze (Director), Nigel Meir (Director) and Jim Lelivelt (Senior Associate).

PRINCIPAL INVESTMENTS

Rapid Action Packaging

Food packaging

Valuation at 30th June 2015 (method): £9.9 million (fair value)

Investment: £5.0 million ordinary shares and £2.5 million convertible loan notes (converted on 16th September 2014)

Ownership: 49.5% (46.7% fully converted and fully diluted)

Date(s) of investment: Q2 2008, Q2 2009, Q2 2011

Company summary:

Rapid Action Packaging (RAP) are specialists in the design, manufacture and supply of innovative, cost effective and environmentally responsible packaging systems particularly for the "food on the move" market. Further information can be found at www.rapuk.com.

Investment during the year:

No further investment was made during the year. The convertible loan notes were converted into ordinary shares on 16th September 2014.

Significant events during the year:

· Financial results to year end September 2014 showed a 7.5% increase in revenues to £20.7 million (2013: £19.2 million). Performance in the current year is in line with expectations and profitability has increased

· RAP was shortlisted for supply chain solutions at the annual UK Packaging Awards

· Announced the appointment of Sales Directors for France, Germany and US to drive international growth

· RAP has agreed terms for the extension of its supply contracts with its principal customers

LEF has the right to appoint two directors to the board of RAP and has appointed Gijs Voskamp of Ludgate Investments.

STX Services

Environmental Financial Product Broking

Valuation at 30th June 2015 (method): £8.8 million (fair value)

Investment: £0.9 million (ordinary shares)

Ownership: 29.6% fully diluted

Date(s) of investment: Q4 2007, Q1 2008, Q1 2012

Company summary:

STX Services (STX) is a broker specialising in environmental financial products with a particular focus on the carbon markets. It has mostly been active in EU Emission Allowances but has diversified into Certified Emission Reductions, biofuel tickets, green certificates and other environmental trading. STX is Amsterdam-based and active across the European markets. Further information can be found at www.stxservices.com.

Investment during the year:

No further investment was made during the year.

Significant events during the year:

· Company has consistently achieved year on year growth of revenue and EBITDA, outperforming expectations

· Paid dividends three times during the fiscal year, totalling £1.0 million to LEF. After year-end, a further £0.1 million in dividend was paid to LEF. The total received to date from STX in interest payments and dividends is £3.7 million

LEF has the right to appoint a member of the supervisory board of STX and has nominated Gijs Voskamp, CEO of Ludgate Investments.

Tamar Energy

Biogas project developer, owner and operator

Valuation at 30th June 2015 (method): £6.0 million (fair value)

Investment: £7.0 million (preferred ordinary shares)

Ownership: 7.1% fully diluted

Date(s) of investment: Q2/Q3 2012, Q2/Q4 2013, Q1/Q2 2014

Company summary:

Tamar Energy is a renewable energy business, focusing on anaerobic digestion and offering a range of composting services. Tamar is building a network of facilities around the UK, to generate 100MW of renewable energy through the cost-effective, sustainable treatment of organic waste. Further information can be found at www.tamar-energy.com/.

Investment during the year:

No further investment was made during the year.

Significant events during the year:

· 4 AD plants totalling 8 MW operational, plus portfolio of 6 operational composting sites

· 1 further AD plant with 3 MW is under construction expected to be operational prior to the end of 2015

· DECC announced removal of Levy Exemption Certificates in July 2015

· Secured £32 million non-recourse project finance facility from RBS, the first such facility in the AD industry

LEF has the right to appoint a director to the board and an observer on the Investment Committee of Tamar Energy and has nominated Bill Weil, CIO of Ludgate Investments, as its director on the board, subsequently given the Chair position of the Nominations and Remuneration Committee and a seat on the Audit Committee, as well as its representative on the Investment Committee.

Ignis Biomass

Biomass project developer, owner and operator

Valuation at 30th June 2015 (method): £4.6 million (fair value)

Investment: £1.2 million (ordinary shares), £3.0 million (convertible loan notes) and £0.3 million (unsecured loan)

Ownership: 99.9%

Date(s) of investment: Q2 2011, Q2/Q3/Q4 2012, Q2/Q4 2013, Q2/Q3 2014, Q1/Q2/Q3 2015

Company summary:

Ignis Biomass is developer, owner and operator of biomass heat and power projects, providing UK business and public sector organisations with local solutions for energy, waste management and CO2 emissions reduction. Further information can be found at www.ignis-biomass.com.

Investment during the year:

LEF invested a further £0.2 million in shares and £0.4 million in convertible loan notes during the financial year.

After year-end, a further £0.3 million in convertible loan notes was invested by LEF in Q3 2015.

Significant events during the year:

· Delivery of heat to the Inverhouse Distillery continues to meet management expectations

· Delivery of heat to the Wick NHS hospital expected to commence in October 2015

· A new economiser has been ordered, which is expected to increase the efficiency of operations

· DECC announced removal of Levy Exemption Certificates in July 2015

· Second biomass boiler has been accredited under the RHI regime

· The Company is in detailed negotiations with a potential acquirer to sell its entire holding in Ignis Biomass at an initial price anticipated to be approximately the published Net Asset Value of the Company's investment in Ignis Biomass, with further deferred consideration being contingent on the achievement by Ignis Biomass of specific performance milestones. Final terms of the sale have not yet been agreed and there can be no guarantee that the sale will complete on the anticipated terms (including as to the value at which it is sold), or at all.

LEF has the right to appoint two directors to the board of Ignis Biomass and has nominated Bill Weil, CIO of Ludgate Investments as a director.

Hydrodec (AIM:HYR)

Specialist oils recycling

Valuation at 30th June 2015 (method): £1.0 million (market value)

Investment: £3.5 million (ordinary shares) and £3.0 million (loan - repaid in full in November 2013)

Ownership: 1.9%

Date(s) of investment: Q4 2007, Q1/Q2/Q4 2008, Q1/Q2 2009

Company summary:

Hydrodec's technology is a patented sustainable oil refining process that takes existing spent oil as feedstock to produce new specialty oils thus creating a virtuous green cycle. The process is closed loop and produces no harmful emissions. Further information can be found at www.hydrodec.com.

Investment during the year:

No further investment was made during the year.

Significant events during the year:

· Revenue has grown to $54.7 million (2013: $40.1 million), driven by a full year of income from OSS and the business interruption income from the US

· Operating EBITDA increased to $1.6 million (2013: $0.2 million)

· In June 2015, the Company announced the rebuilt and expanded plant in Canton, Ohio had been commissioned

· In May 2015, Hydrodec confirmed that it had made its first commercial oil sale from its Australian plant now re-located to Southern Oil's Bomen facility in Wagga Wagga

· In April 2015, Hydrodec announced that it acquired Eco-Oil for a purchase price of £2.39 million in cash

· In November 2014, the Company announced an insurance claim settlement relating to a fire at its main US facility in Canton, Ohio for $18.75 million cash

· In August 2014, Hydrodec signed a licence, engineering and technical collaboration agreement with California-based Chemical Engineering Partners (CEP)

Micropelt

Waste heat recovery

Valuation at 30th June 2015 (method): £0.9 million (fair value)

Investment: £5.4 million (of which £1.8 million was invested post restructuring in April 2014)

Ownership: 50.0%

Date(s) of investment: Q2 2012, Q1 2013, Q3 2013, Q2 2014, Q1/Q2 2015

Company summary:

Micropelt is developer and producer of the first thermal energy harvesting powered radiator control valve, a core component of the smart home, which converts waste heat into electricity and eliminates batteries, as well as self-powered wireless sensors. Further information can be found at www.micropelt.com.

Investment during the year:

LEF invested £0.5 million in Q3 2014, £0.4 million in Q1 2015 and £0.4 million in Q2 2015.

Significant events during the year:

· Successfully launched its intelligent thermostatic radiator valve (iTRV) and is actively selling in the B2B commercial market

· Key supply and production partnerships established

· In strategic partnership discussions for smart home offering in the B2C market

· Joint marketing strategy with Eaton for the mNODE (sensor product for electricity distribution)

· Micropelt's growth and sustainability are significantly dependent on winning further industrial endorsements

LEF has the right to appoint a director to the board of Micropelt and has nominated Bill Weil, CIO of Ludgate Investments, as its director and chairman.

INVESTMENT DIVESTMENTS

Lumicity

LEF completed the realisation of its shareholding in Lumicity, resulting in a total return of £2.1 million to date and an annualised IRR on the investment of 10.8%. There are possible further realisations of this investment, dependent upon certain performance milestones.

Eco Plastics

Eco Plastics went into administration in December 2014 and the remaining value of the Company's investment (£2.0 million) was written off.

DIRECTORS' REPORT

The Directors present their report and the audited financial statements for the year ended 30th June 2015.

INCORPORATION

Ludgate Environmental Fund Limited (the "Company") was incorporated in Jersey, Channel Islands on 7th June 2007.

ACTIVITIES

The Company is a closed-ended investment company investing in the cleantech sector including waste management and recycling, renewable energy, energy efficiency, water treatment and management

RESULTS, DIVIDENDS AND OTHER RETURNS

The decrease in net assets attributable to shareholders from operations before dividends for the year amounted to £3,186,351 (2014: £7,314,554).

No interim dividend was paid during the year (2014: £nil). No special dividend was paid during the year (2014: a special dividend of 5.0 pence per share was paid at a total cost of £2,707,539).

2 shares were purchased during the year for administrative purposes and the number of shares in issue at the year end is 53,345,782.

GOING CONCERN

The Directors are of the opinion that the Company is a going concern, and the financial statements have been prepared on that basis. The wind-up date of the Company was extended until 30th June 2018.

CORPORATE GOVERNANCE

The Company was registered with AIM on 2nd August 2007. As a Jersey incorporated company and under the AIM Rules for Companies, the Company is not required to comply with the UK Corporate Governance Code published by the Financial Reporting Council in May 2010 (the "Code"). However, it is the Company's policy to comply with best practice on good corporate governance that is applicable to investment companies.

The Board has therefore considered the principles and recommendations of the AIC's Code of Corporate Governance (the "AIC Code") by reference to the AIC Corporate Governance Guide for Investment Companies (the "AIC Guide"). The AIC Code can be found on www.theaic.co.uk. The AIC Code, as explained by the AIC Guide, addresses all the principles set out in Section 1 of the Code, as well as setting out additional principles and recommendations on issues specific to investment companies.

The Board considers that it is appropriate to report against the principles and recommendations of the AIC Code and by reference to the AIC Guide and that the Company has complied with the principles and recommendations throughout the accounting period, except where indicated below on pages 13 and 14 in respect of the chief executive, executive directors' remuneration, a senior independent director, Board Committees and an internal audit function. The following statements describe how the relevant principles of governance are applied to the Company.

THE BOARD

At the year end, the Board consisted of non-executive Directors and the Chairman was John Shakeshaft. The Directors consider that the Chairman is independent for the purposes of the AIC Code. The Directors do not consider the appointment of a senior independent director to be appropriate due to the size of the Board and the Company.

The Company has no executive directors and no employees. However, the Board has engaged external companies to undertake investment advisory and administrative activities of the Company together with the production of the Annual Report and Financial Statements which are independently audited. Clearly documented contractual arrangements are in place with these external companies that define the areas where the Board has delegated responsibility to them and their contracts are reviewed on an annual basis. Whilst the Board delegates responsibility, it retains accountability for the functions it delegates and is responsible for the systems of internal control.

The Board meets at least four times a year and between these formal meetings there is regular contact with the Investment Adviser, Nominated Adviser and Broker. The Directors are kept fully informed of investment and financial controls, and other matters that are relevant to the business of the Company and that should be brought to the attention of the Directors.

The Board has a breadth of experience relevant to the Company and they have access to independent professional advice at the Company's expense where they deem it necessary to discharge their responsibility as Directors. The Directors believe that any changes to the Board's composition can be managed without undue disruption. With any new appointment of a Director to the Board, consideration is given as to whether a formal induction process is appropriate and if any relevant training is required.

The Board considers agenda items laid out in the notice and agenda which are formally circulated to the Board in advance of a meeting as part of the Board papers and therefore Directors may request any agenda items to be added that they consider appropriate for Board discussion. Additionally, each Director is required to inform the Board of any potential or actual conflicts of interest prior to Board discussion.

All members of the Board are expected to attend each Board meeting and to arrange their schedules accordingly, although non-attendance may be unavoidable in certain circumstances. Members of the Board are deemed to be in attendance when present at meetings in jurisdictions where they may participate in the discharge of the Company's business. All members of the Board may observe meetings from other jurisdictions but neither participate in the conduct of business, vote or be considered for quoracy.

During the year under review the Board met twenty-four times. Of those twenty-four meetings, John Shakeshaft attended twenty-three, Ronald Green attended twenty-three, David Pirouet attended twenty-four and Denis Quilty (resigned 27th August 2014) attended three.

The Board has been continuously engaged in a review of the Company's strategy with the Adviser to ensure the deployment of appropriate strategies under prevailing market, political and economic conditions at any particular time, within the overall investment restrictions of the Company.

To support the review of the strategy, the Board has focused at Board meetings on a review of individual investments and returns, country exposure, the overall portfolio performance and associated matters such as gearing and follow-on investment opportunities. Additionally a strong focus of attention is given to marketing/investor relations, risk management and compliance, peer group information and industry issues.

The Board evaluates each Director's own performance on an annual basis and believes that the mix of skills, experience, ages and length of service are appropriate to the requirements of the Company and in accordance with the AIC Code. Directors shall retire and stand for re-election at intervals of no more than three years. Each Director is appointed subject to the provisions of the Articles of Association in relation to retirement.

BOARD RESPONSIBILITIES

The Board meets at least four times a year to consider, as appropriate, such matters as:

• The overall objectives for the Company;

• Risk assessment and management, including reporting, monitoring, governance and control;

• Any shifts in strategy that may be appropriate in light of changes in market conditions;

• The appointment, and ongoing monitoring, through regular reports and meetings of the Investment Adviser, Administrator and other service providers;

• Review of the Company's investment performance;

• Share price performance;

• Statutory obligations and public disclosures;

• The shareholder profile of the Company; and

• Transactional and other general matters affecting the Company.

These matters are discussed by the Board to clearly demonstrate the seriousness with which the Directors take their fiduciary responsibilities and as an ongoing means of measuring and monitoring the effectiveness of their actions.

COMMITTEES OF THE BOARD

The Board has not deemed it necessary to appoint a nomination or remuneration committee as, being comprised wholly of non-executive Directors, the whole Board considers these matters.

AUDIT COMMITTEE

The Board operates an Audit Committee which, at the year end, consisted of Ronald Green, David Pirouet and John Shakeshaft. David Pirouet serves as the Chairman of the Committee. The Audit Committee operates within defined terms of reference as agreed by the Board which are available from the Secretary upon request. Due to the Company's size, the Board considers it appropriate that all of the Board may sit on the Audit Committee but that the Committee is chaired by one of the independent non-executive Directors other than the Company's Chairman. The Audit Committee's function is to ensure the Company's financial performance is properly reported on and monitored and the Audit Committee reviews the following:

• The Annual and Interim Financial Statements;

• Internal control systems and procedures;

• Accounting policies of the Company;

• The Auditor's effectiveness and independence; and

• The Auditor's remuneration and engagement, as well as any non-audit services provided by them.

When required the Audit Committee meetings are also attended by the Administrator and the Company's Auditors. The Audit Committee meets at least twice a year.

During the year under review the Committee met four times. Of those four meetings, Ronald Green, David Pirouet, John Shakeshaft attended four and Denis Quilty attended one.

INTERNAL CONTROLS

The Board is ultimately responsible for the Company's system of internal control and for reviewing its effectiveness. The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place for the year under review and up to the date of approval of this Annual Report and Financial Statements. In line with general market practice for investment companies, the Directors do not conduct a formal annual review of the internal controls. However, the Board does conduct an annual review of the financial reporting procedures and corporate governance controls and feels that the procedures employed by the service providers adequately mitigate the risks to which the Company is exposed.

The key procedures which have been established to provide effective internal controls are as follows:

• The Directors of the Company clearly define the duties and responsibilities of their agents and advisers in the terms of their contracts;

• The Board reviews financial information produced by the Administrator and the Adviser on a regular basis; and

• The Company does not have an internal auditor. All of the Company's management functions are delegated to independent third parties and it is therefore considered that there is no need for the Company to have an internal auditor.

The internal control systems are designed to meet the Company's particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against misstatement and loss.

RELATIONSHIPS WITH SHAREHOLDERS

The Directors, Investment Adviser, Nominated Adviser and Broker maintain a regular dialogue with major shareholders, the feedback from which is reported to the Board. In addition, Board members will be available to respond to shareholders' questions at the Annual General Meeting.

The Board monitors the trading activity and shareholder profile on a regular basis.

Shareholder sentiment is also ascertained by the careful monitoring of the premium/discount that the shares are traded in the market when compared to those experienced by similar companies. Major shareholders are contacted directly by the Adviser on a regular basis.

The Company reports formally to shareholders twice a year and a proxy voting card is sent to shareholders with the Annual Report and Financial Statements. Additionally, current information is provided to shareholders on an ongoing basis through the Company's website. The Secretary monitors the voting of the shareholders and proxy voting is taken into consideration when votes are cast at the Annual General Meeting. Shareholders may contact the Directors via the Secretary.

NOMINATED ADVISER

PricewaterhouseCoopers LLP resigned on 31st January 2015, on which date Panmure Gordon & Co were appointed with effect from 1st February 2015.

DIRECTORS

The Directors who held office during the year and subsequently were:

J. Shakeshaft (Chairman)

R. Green

D. Pirouet

D. Quilty (Resigned 27th August 2014)

SECRETARY

The Secretary of the Company is State Street Secretaries (Jersey) Limited with registered address at Lime Grove House, Green Street, St Helier, Jersey, JE1 2ST.

INDEPENDENT AUDITORS

BDO Limited has expressed their willingness to continue in office.

REGISTERED OFFICE

Lime Grove House, Green Street, St Helier, Jersey, JE1 2ST.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

The Directors are required to prepare financial statements for each financial year under the Companies (Jersey) Law 1991. As permitted by that law, the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards ("IFRSs") adopted by the European Union and International Accounting Standards Board. The financial statements are required to give a true and fair view of the state of affairs of the Company and the profit or loss of the Company for that period.

International Accounting Standard 1 requires that financial statements present fairly for each financial year the Company's financial position, financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's "Conceptual Framework for Financial Reporting". In virtually all circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs.

The Directors are also required to:

· select suitable accounting policies and apply them consistently;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

· make an assessment of the Company's ability to continue as a going concern.

The Directors are also responsible for keeping accounting records that are sufficient to show and explain its transactions and disclose with reasonable accuracy, at any time, the financial position of the Company and enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors confirm they have complied with the above requirements throughout the year and subsequently.

BY ORDER OF THE BOARD

Authorised Signatory

State Street Secretaries (Jersey) Limited  

Secretary

Date: 4th September 2015

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30TH JUNE 2015

1. REPORTING ENTITY

The Company was registered as a public company on 7th June 2007 with registered number 97690 under the Companies (Jersey) Law 1991. The Company joined the Alternative Investment Market ("AIM") on 2nd August 2007. The registered office of the Company is Lime Grove House, Green Street, St Helier, Jersey, JE1 2ST.

The Company was incorporated with a life of approximately eight years from admission to AIM, expiring on 30th June 2015 (the "Proposed Wind-up Date"). On 12th August 2014, the Directors recommended to the shareholders to extend the Wind-up Date until 30th June 2018 and this was subsequently approved by the shareholders at the Extraordinary General Meeting on 1st September 2014.

2. ACCOUNTING POLICIES

a) Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs") adopted by the European Union ("EU") and International Accounting Standards Board ("IASB"), and its predecessor body, as well as interpretations issued by the International Financial Reporting Interpretation Committee ("IFRIC") and its predecessor body.

The more significant policies are set out below:

New Accounting Standards, amendments to existing Accounting Standards and/or interpretations of existing Accounting Standards (separately or together, "New Accounting Requirements") adopted during the current year

IAS 32, "Financial instruments: Presentation - Offsetting financial assets and financial liabilities" (amendments)

These amendments clarify that rights of set-off must be legally enforceable in the normal course of business and must also be enforceable in the event of default and the event of bankruptcy or insolvency of all of the counterparties to the contract, including the reporting entity itself. The amendments also clarify that rights of set-off must not be contingent on a future event. The standard is effective for annual periods beginning on or after 1st January 2014. The amendments did not have any impact on the Company's financial position or performance.

In the opinion of the Directors, there are no other mandatory new standards, interpretations and amendments to existing standards that are effective for the first time for the financial year beginning 1st January 2014 that would be expected to have a material impact on the Company.

Non-mandatory New Accounting Requirements not yet adopted

The following applicable New Accounting Requirements have been issued. However, these New Accounting Requirements are not yet mandatory and have not yet been adopted by the Company. All other non-mandatory New Accounting Requirements are either not yet permitted to be adopted, or would have no material effect on the reported performance, financial position, or disclosures of the Company and consequently have neither been adopted, nor listed.

IFRS 9, "Financial Instruments"

IFRS 9 addresses the recognition, classification and measurement of financial assets and financial liabilities. It is the IASB's intention that IFRS 9 will replace IAS 39 in its entirety. The IASB has adopted a phased approach to completion of the overall standard. When the first phase was published in November 2009, IFRS 9 addressed only the classification and measurement of financial assets. In October 2010, requirements for the classification and measurement of financial liabilities were published. The phases covering impairment methodology and hedge accounting are scheduled for completion prior to the mandatory effective date.

IFRS 9 requires financial assets to be classified into two measurement categories: (i) those measured at fair value; and, (ii) those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to changes in an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch.

The effective date of the standard is yet to be determined in the EU.

Amendments to IFRS 10, IFRS 12 and IAS 28, "Investment entities: applying the consolidation exception"

These amendments confirm that the exemption from preparing consolidated financial statements continues to be available to a parent entity that is a subsidiary of an investment entity, even if the investment entity measures all its subsidiaries at fair value in accordance with IFRS 10. IAS 28 has been amended to permit an entity to retain the fair value measurement applied by an investment entity associate or joint venture to its interests in subsidiaries. Amendments to IFRS 12, "Disclosure of interests in Other Entities" states that it does not apply to an entity's separate financial statements. The amendments to IFRS 12 clarified that an investment entity that measures all its subsidiaries at fair value should provide the IFRS 12 disclosures related to investment entities. These amendments are effective for annual periods beginning on or after 1st January 2016.

b) Basis of measurement

These financial statements have been prepared on a historical cost basis as modified by the revaluation of financial assets and liabilities held at fair value through profit or loss. The policies have been consistently applied to both years presented. 

Financial instruments at fair value through profit or loss and derivatives at fair value though profit and loss are measured at fair value and changes therein are recognised in the statement of comprehensive income. Information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised within the financial statements are included in note 2 Section (o) 'Determination of fair value'.

c) Functional and presentational currency

These financial statements are presented in sterling, which is the Company's functional and presentational currency.

d) Use of estimates and judgements

The preparation of financial statements in accordance with IFRSs as adopted by the EU requires the Board to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. These estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these 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.

e) Foreign currencies

Transactions in foreign currencies, other than sterling, are translated at the foreign currency exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to sterling at the foreign currency closing exchange rate ruling at the balance sheet date. Foreign currency exchange differences arising on translation and realised gains and losses on disposals or settlements of monetary assets and liabilities are recognised in the statement of comprehensive income. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to sterling at the foreign currency exchange rates ruling at the dates that the values were determined. Foreign currency differences arising on retranslation are recognised in the statement of comprehensive income.

f) Financial instruments

Financial assets and financial liabilities are initially recognised on the Company's balance sheet when the Company becomes party to the contractual provisions of a given instrument.

Purchases and sales of financial instruments are recognised on the trade date. Gains and losses are recognised from that date.

Financial assets cease to be recognised when the contractual rights to cash flows from the assets expire or the Company transfers the financial assets and substantially all of the risks and rewards of ownership have been transferred. Financial liabilities cease to be recognised when the liabilities are extinguished.

Financial instruments comprise investments in equity and debt securities, warrants, loans receivable, trade and other receivables, cash and cash equivalents, trade and other payables and performance fees retained.

Financial instruments are recognised initially at fair value. Subsequent to initial recognition financial instruments are measured as described below.

Financial assets at fair value through profit or loss

An instrument is classified at fair value through profit or loss if it is held for trading or designated as such upon initial recognition. The Company has designated its investment holdings as at fair value through profit or loss as permitted by International Accounting Standard 39 "Financial Instruments: Recognition and Measurement". These financial assets are designated on the basis that they form part of a group of financial assets which are managed and have their performance evaluated on a fair value basis. Upon initial recognition attributable transaction costs are recognised in the statement of comprehensive income when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in the statement of comprehensive income.

Derivatives at fair value through profit or loss

The warrants held by the Company are classified as derivative financial instruments held for trading. Therefore they are recognised at fair value, with realised and unrealised gains and losses being recognised in the statement of comprehensive income. The derivatives are derecognised when the rights to receive cash flows from it have expired or the Company has transferred substantially all risks and rewards of ownership.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than:

a) those that the Company intends to sell immediately or in the short-term, which are classified as held for trading, and those that the entity upon initial recognition designates as at fair value through profit or loss;

b) those that the Company upon initial recognition designates as available for sale; or

c) those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration.

Loans and receivables are initially recognised at fair value, which is the cash consideration to originate or purchase the loan including any transaction costs and measured subsequently at amortised cost using the effective interest rate method, less provision for impairment. Impairment provisions are recognised when there is objective evidence that the Company will be unable to collect all of the amounts due under the terms of the receivable. The Company's loans and receivables comprise loans receivable, trade and other receivables and cash and cash equivalents.

Cash and cash equivalents

Cash comprises fixed deposits, cash balances and call deposits with banks. Cash equivalents are short-term highly-liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

Financial liabilities

All liabilities are classified as other financial liabilities and are measured at amortised cost using the effective interest rate method.

Ordinary shares

Financial instruments issued by the Company are treated as equity only to the extent that they do not meet the definition of a financial liability.

The Ordinary Shares of the Company are treated as equity as they entitled the shareholder to a pro rata share of the Company's net assets in the event of the Company's liquidation.

g) Provisions

A provision is recognised if, as a result of a past event, the Company has a legal or constructive obligation that can be reliably estimated, and it is probable that an outflow of economic benefits will be required to settle the obligation. 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 the risks specific to that liability.

h) Revenue and expenses

Revenue is recognised to the extent that it is possible that economic benefits will flow to the Company and the revenue can be reliably measured. Expenses are accounted for on an accruals basis.

i) Finance income and expenses

Finance income comprises interest income on funds invested (including debt securities at fair value through profit or loss), interest income and loan interest income. Interest income and loan interest income are recognised as they accrue in the statement of comprehensive income, using the effective interest rate method. Dividend income is recognised in the statement of comprehensive income on the date the Company's right to receive payments is established which is usually the ex-dividend date.

Finance expenses comprise interest expense on borrowings and unwinding of discounts on provisions.

Foreign currency gains and losses are reported in the statement of comprehensive income on a net basis.

j) Earnings per share ("EPS") and net asset value ("NAV") per share

The Company presents basic EPS and NAV data for its ordinary shares. Basic EPS is calculated by dividing the comprehensive income attributable to equity shareholders from operations by the weighted average number of ordinary shares in issue during the year (For further details see note 6). NAV per equity share is calculated by dividing net assets attributable to equity shareholders by the number of equity shares outstanding at the year end.

k) Transaction costs

Expenses incurred by the Company that are directly attributable to the offering of new shares have been taken to statement of changes in equity.

l) Taxation

Profits arising in the Company are subject to Jersey Income Tax, currently at the rate of 0%.

The Company is registered under the Reporting Fund regime Regulation 51 of The Offshore Fund (Tax) Regulations 2009 in the United Kingdom effective 1st July 2009.

m) Dividends payable

Dividends payable to ordinary shareholders are accounted for when a legal obligation arises.

Dividends payable, if any, on ordinary shares are recognised in the statement of changes in equity.

n) Offsetting

Financial assets and liabilities are offset and the net amount is reported within assets and liabilities where there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

o) Determination of fair value

A number of the Company's accounting policies and disclosures require the determination of fair value for the financial assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer liability in an ordinary transaction between market participants at the measurement date. Fair values have been determined for disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Financial assets for which quoted closing prices are available from a third party in a liquid market are valued on the basis of quoted bid prices. Where there are no available quoted prices the fair values will be determined in accordance with International Private Equity and Venture Capital Valuation Guidelines ("IPEVCV" Guidelines) as amended from time to time.

The fair value of financial assets traded in active markets are based on quoted market prices at the close of trading on the balance sheet date. The Company adopted IFRS 13, "Fair value measurement", where the last traded market price for financial assets has been utilised and such last traded price falls within the bid-ask spread.

Unquoted equities and unquoted securities are valued using a variety of methods as follows:

- Rapid Action Packaging Limited Ordinary Shares have been valued based on an EBITDA multiple in line with market multiples. This metric has been discounted to reflect the Company's unlisted status.

- STX Services B.V. Ordinary Shares have been valued based on a multiple of profit before tax for the year in line with market multiples. This metric has been discounted to reflect the Company's unlisted status.

- Terra Nova's Preference Shares and Loan Notes have now been written off following the Company being placed into administration.

- ECO Plastics Limited Ordinary Shares and Loan Notes have now been written off following the Company being placed into administration.

- Emergya Wind Technologies B.V. ("Emergya") Preference Shares value was written off following the refinancing of Emergya which led to the Company's shareholding being diluted to an insignificant stake.

- Tamar Energy Limited Ordinary Shares are valued on a discounted cash flow basis and this has been discounted to reflect the Company's unlisted status.

- Ignis Biomass Limited Ordinary Shares are valued on a discounted cash flow basis and the capital value of the unsecured loan stock is valued at par.

- Micropelt GmbH (the old company) unsecured loan stock has been written off following the Company being placed into administration.

- Micropelt GmbH (the new company) Ordinary Shares have been valued based on estimated realisable value which is a 50% discount to cost as the Company is not cash generative as yet.

- Micropatent B.V. Ordinary Shares have been valued based on estimated realisable value which is a 50% discount to cost as the Company is not cash generative as yet.

Investments are made in companies that may be subject to a high degree of operating and financial risk. The values assigned to investments are based upon available information and do not necessarily represent amounts that might ultimately be realised. Because of the inherent uncertainty of valuations, estimated carrying values may differ significantly from the values that would have been realised had a ready market for the investments existed, and these differences could be material.

The fair value of financial liabilities is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the balance sheet date.

The fair value of derivatives at fair value through profit or loss is derived using the Black Scholes Option Pricing Model.

p) Investment entity

The Directors do not believe that the Company has the power to exercise control over the investments, except for Ignis Biomass Limited, as set out in the provisions of paragraph 12 of International Accounting Standard 27 (Consolidated Financial Statements and Accounting for Investments in Subsidiaries), or under the Standard Interpretations Committee pronouncement Number 12 (SIC 12 - Consolidation: Special Purpose Entities). The Directors have arrived at this opinion because the Company in any of its investments with the exception of Ignis Biomass Limited:

- does not hold a controlling stake;

- does not have the power to govern the financial and operating policies;

- does not have the power to remove the majority of the members of the Board of Directors; and

- does not have the power to cast the majority of votes at meetings of the Board of Directors.

Ignis Biomass Limited was not consolidated in these financial statements as the Company qualified for the exemption from the requirement to prepare consolidated financial statements under the IFRS 10 investment entity exemption. The investment in this entity is accounted for at fair value through profit or loss.

q) Associates

Associates are all entities over which the Company has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights.

As the Company operates as a venture capital organisation it uses the scope exemption of IAS 28 'Investment in Associates' and designates upon initial recognition some investments that would otherwise be equity accounted as investments at fair value through profit or loss with subsequent changes in fair value recognised in the statement of comprehensive income in the period of the change.

r) Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses. The Directors perform regular reviews of the operating results of the Company and make decisions using financial information at the entity level only. Accordingly, the Directors believe that the Company has only one reportable operating segment.

The Directors are responsible for ensuring that the Company carries out business activities in line with the transaction documents. They may delegate some or all of the day to day management of the business, including the decisions to purchase and sell securities, to other parties both internal and external to the Company. The decisions of such parties are reviewed on a regular basis to ensure compliance with the policies and legal responsibilities of the Directors. Therefore, the Directors retain full responsibility as to the major allocation decisions of the Company.

3. PERFORMANCE FEES RETAINED AND PAYABLE

Performance fees are payable to the Adviser with reference to the increase in adjusted net asset value per share over the course of each performance period. The Adviser becomes entitled to receive a performance fee if the following conditions are met:

a) The adjusted net asset value per share at the end of the performance period exceeds the Performance Hurdle. The Performance Hurdle is an amount equal to the placing price increased at a rate of 8% per annum on a compounded basis up to the end of the relevant performance period; and

b) The adjusted net asset value per share at the end of the performance period exceeds the High Watermark. The High Watermark is the highest previously recorded adjusted net asset value per share at the end of a performance period for which a performance fee was last earned.

If the above conditions are met the Adviser is entitled to receive a fee equal to 20% of the amount by which the adjusted net asset value exceeds the higher of (i) the performance hurdle and (ii) the relevant High Watermark multiplied by the time-weighted average number of shares in issue since the end of the last performance period for which a performance fee was earned.

The conditions for payment of performance fees were not met for the performance years ended 30th June 2015 and 2014.

20% of any performance fees earned by the Adviser shall be retained and deposited in a Reserve Account (see note 11).

On 1st September 2014 the shareholders approved revised performance fee arrangements for the Investment Adviser, which took effect from 1st July 2014:

- the Advisory fee is calculated at 2% of the Company's Net Asset Value, payable quarterly and any future distributions will no longer be added back for the purposes of the calculation; and

- the basis of the calculation of the performance fee has been reset to 30th June 2014 and is payable to the Adviser if certain conditions are attained.

4. EXPENSES

AUDITOR'S FEES

DIRECTORS' REMUNERATION AND INTERESTS

The details of the Directors' remuneration are as follows:

As at the balance sheet date, the following Ordinary Shares of the Company were held by the Directors, the Directors of the Adviser, the Investment Adviser and the Principals of the Investment Adviser.

Principals of Ludgate Investments Limited include Directors and senior management.

* Ocean Capital Investments BV (an entity related to Ocean Capital Holding II BV), J.N.B. Curtis, N. Pople and B. Weil have an interest in Ludgate Investments Limited.

** Ocean Capital Investments BV (an entity related to Ocean Capital Holding II BV) is a company in which G. Voskamp and J. Voskamp, both directors of Ludgate Investments Limited, have 80% and 20% shareholdings, respectively.

5. DIVIDENDS

No interim dividend was paid during the year (2014: £nil). No special dividend was paid during the year (2014: a special dividend of 5.0 pence per share was paid at a total cost of £2,707,539).

6. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share is based on the following information:

7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Further details of the investments held can be found in note 21 to these financial statements.

IFRS 13 requires the Company to classify fair value measurements using a three level fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 - Inputs for the asset or liability that are not based on observable market data.

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes 'observable' requires significant judgement by the Company. The Company considers observable data to comprise market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The following table analyses within the fair value hierarchy the Company's financial assets measured at fair value at 30th June 2015 and 2014.

Financial assets whose values are based on quoted market prices in active markets, and therefore classified within Level 1, include mainly actively listed equities. The Company does not adjust the quoted market price for these.

Financial assets that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. Level 2 includes mainly convertible bonds. As Level 2 bonds are not traded in an active market, valuations are based on an option valuation method which was carried out by an independent broker.