Annual Report and Financial Statements

Ludgate Environmental Fund Limited (the "Company")

Final Results for the year ended 30th June 2014

CHAIRMAN'S STATEMENT

I am pleased to report to shareholders on the performance of Ludgate Environmental Fund Limited for the year ended 30th June 2014.

Financial Review

The net asset value of your Company on 30th June 2014 was £35,499,215 (2013: £46,516,513), equivalent to 66.5 (2013: 84.2) pence per share. A special dividend of 5.0pence was paid in December 2013 and we purchased 1,104,000 shares in November 2013 for 55.0 pence each, 570,000 shares in December 2013 for 50.0 pence each and 235,000 shares in February 2014 at an average price of 43.8 pence each. The Company recorded a net loss of £7,314,554 (2013: income £2,567,703). At year end we held cash balances of £1,645,950. The Company subscribed for £5,645,520 of additional investments and loans into existing assets (Tamar Energy Limited, ECO Plastics Limited, Ignis Biomass Limited, Micropelt and Terra Nova SAS). We will retain funds, supplemented by the proceeds of sales, to maintain operations through our remaining life.

We shall continue to return capital to shareholders by the purchase of our own shares within established authority, the payment of dividends and other means.

As explained in more detail in Notes 2a and 2p, the Directors have decided not to prepare consolidated financial statements following the amendments to IFRS 10 being endorsed for use in the European Union on 20th November 2013 which were early adopted by the Company.

Portfolio Review

The fund is fully invested, with new investments in the year made only in fulfilment of disclosed obligations to existing assets and subject on each occasion to a reappraisal of realisable and expected returns within our remaining life and recommendations from the Investment Adviser. The portfolio has a distinct and diversified shape within the loosely termed environmental sector especially renewables. Ignis Biomass in Wick is operating and serving the community well, endorsing the developer model in which we invested. Similarly, the anaerobic digestion developer and operator, Tamar has, slower perhaps than hoped, progressed well and is creating scaleable and replicable operations. Added to NERR, the sale of whose securities we completed, these have shown an ability to realise positive returns from greenfield development, adding to the previous success of agri.capital. ECO Plastics has increased its production capacity and after a difficult commercial period, expects to complete a new financing round in September 2014. Similarly, Rapid Action Packaging has successfully exploited the introduction of a second production line to improve operational efficiencies, fulfil larger order runs and develop a broader product range improving the replacement rates which underscore its innovation, enabling the company to also operate profitably and sustainably. Unfortunately Terra Nova despite validating its technology, proved to have inadequate capital to support its trading activities and entered administration; LEF wrote down its investment in its entirety. STX, the environmental broker, continues to perform strongly, yielding significant economic returns and is outperforming its budget. STX has paid dividends bi-annually and is expected to continue to do so. Lumicity, despite the severity of the change in the tariff regime for solar energy production in the UK has developed and sold a number of projects successfully. Micropelt has proven its technology having supplied modest volumes to its customers and is now focusing on expanding its customer base to deploy its energy harvesting products in volume having been restructured during the year and is now well positioned to grow independently or within a larger sales organisation.

Strategy and Outlook

Our strategy is to manage and dispose of the assets in the portfolio at the greatest distributable return to shareholders within the remaining life of the Company. At an Extraordinary General Meeting on 1st September 2014, the shareholders agreed to extend the life of the Company to 30th June 2018 and to amend the terms of the agreement with the Investment Adviser with the intent of disposing the assets of the Company as effectively as possible. Our strategy is to execute sales of invested assets in a timely manner. We have actively managed our interests by taking substantial minority positions and nominating directors who report to us regularly. Of necessity the sale of illiquid and some non-controlling interests in companies does not permit market timing. The board has remained vigilant on the fair valuing of assets at each reporting date to ensure that, to the extent there are relevant, observable inputs or comparable companies these are used to reflect theoretically achievable prices shorn of transaction, maturity, financing and other costs. We therefore look forward to pursuing sales over the coming twelve months.

I should again like to thank my fellow board members for their common commitment and diligence in considering and developing investments in uncertain and occasionally difficult companies. The sustainability of the current portfolio owes much to their thoroughness, the adviser's asset discovery and corporate management and the continued support of shareholders.

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

PricewaterhouseCoopers LLP (Nomad) +44 (0) 20 7212 1798

Chris Clarke

Panmure Gordon (Broker) +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 2014.

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 decreased to £35.5 million at 30th June 2014, with a NAV per share of 66.5 pence (2013: increased to £46.5 million and 84.2 pence)

· A special dividend of 5.0 pence per share was paid on 4th December 2013 (An interim dividend of 1.9 pence per share 10th August 2012)

· Bought back 1,104,000 shares in November 2013 for 55.0 pence each, 570,000 shares in December 2013 for 50.0 pence each and 235,000 shares in February 2014 at an average price of 43.8 pence each in the market, reducing the number of shares in issue to 53,345,784

· Investments made in the year totaling £5.6 million into 5 existing portfolio companies (2013: £8.4 million invested and committed to 5 portfolio companies)

· Interest and dividend income receivable (net of provisions) was £1.7 million

· £1.1 million was realised from the sale of a further 35.0% of the Company's interest in NERR

· £3.0 millionof loan stock was repaid by Hydrodec Group Plc

· Cash balances were £1.6 million as at 30th June 2014

Net Asset Valuation summary

The table below summarises the position of the Company as at 30th June 2014. Investments made subsequent to year end are not included.

Currency £m Investment Amount

Company Activity Equity Covertible/Loan Total Valutation* % of NAV

Rapid Action Packaging Food packaging 5.04 2.47 7.51 8.47 23.86

Tamar Energy Anaerobic Digestion 7.00 - 7.00 7.00 19.72

STX Services Environmental broking 0.92 - 0.92 5.51 15.52

Ignis Biomass developer 1.00 2.69 3.69 4.49 12.65

Lumicity Solar developer 0.55 0.85 1.40 2.63 7.41

Hydrodec Group Oil recycling 3.50 - 3.50 1.70 4.79

ECO Plastics Plastic bottle recycling 5.23 1.59 6.82 1.65 4.65

Renewable Energy Generation Wind developer 0.72 - 0.72 0.59 1.67

Micropelt Thermogenerator Manufacturer 0.29 - 0.29 0.29 0.82

Micropatent IP 0.09 - 0.09 0.09 0.25

Phoslock Water Solutions Water treatment 0.44 - 0.44 0.22 0.62

Hightex Group Solar cooling 0.73 - 0.73 0.03 0.08

Emergya Wind Technologies Turbine manufacturer 4.47 - 4.47 - -

Subtotal 29.98 7.60 37.58 32.67 92.04

Cash at bank 1.65 4.64

Other assets/liabilities 1.18 3.32

35.5 100.0

Note to table:

* Valuation includes accrued interest due

Adviser to the Company

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

The investment team comprises Gijs Voskamp (Chief Executive Officer), Bill Weil (Chief Investment Officer), Nick Curtis (Senior Investment Director) and Jim Lelivelt (Investment Associate).

PRINCIPAL INVESTMENTS

Rapid Action Packaging

Food packaging

Valuation at 30th June 2014 (method): £8.5 million (fair value)

Investment: £5.0 million (ordinary shares) and £2.5 million (convertible loan notes)

Ownership: 36.3% (45.0% fully converted and fully diluted)

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

Company summary:

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.

Significant events during the year:

· Financial results to year end September 2013 showed a 5.3% increase in revenues to £19.3 million (2012: £18.2 million)

· RAP was nominated at the September 2013 UK Packaging Awards for Innovation of the Year

· The Courtauld commitment to reduce food waste provides opportunities for RAP due to the increasing focus on shelf-life extension to reduce food waste

· Softpack began to gain traction with many trials in 2014, boding well for growth in the next financial year

· Greencore, RAP's largest customer extended its contract for a further year and is working actively with RAP to expand its offering in the US

· St Neots Packaging, a manufacturer of cartonboard products for the food-to-go and convenience markets and a competitor of RAP, was acquired by Coveris, a packaging company backed by Sun Capital

LEF has the right to appoint two directors to the board of RAP and has appointed Gijs Voskamp and Nick Curtis, of Ludgate Investments, as its directors.

Tamar Energy

Biogas project developer, owner and operator

Valuation at 30th June 2014 (method): £7.0 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 biogas project developer, owner and operator planning a UK network of over 40 anaerobic digestion (AD) plants to generate 100MW of green electricity over the next five years. Further information can be found at http://www.tamar-energy.com/.

Investment during the year:

LEF invested a further £3.5 million in Q4 2013 and Q1/Q2 2014.

Significant events during the year:

· Willie Heller, a proven manager, ex-CEO of Falck Renewables, the largest independent renewable developer and project owner/operator, appointed CEO in January 2014

· 4 projects totalling 8 MW have completed construction and are ramping up and operating at between 40.0% to 65.0% capacity and generating electricity

· 1 further project with 3 MW is under construction with 2 further projects expected to break ground prior to the end of 2014

· Discussions with banks to raise debt to fund the growing development pipeline are well advanced and expected to close in Q4 2014

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, and Nick Curtis, of Ludgate Investments, as its representative on the Investment Committee.

STX Services

Environmental product broking

Valuation at 30th June 2014 (method): £5.5 million (fair value)

Investment: £0.8 million (ordinary shares)

Ownership: 29.3% 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:

· Significantly outperformed its budget both on revenue and PBT for year ending 31st March 2014

· Performance for the first months of the fiscal year ending March 2015 has also exceeded budget

· Paid dividends twice during the fiscal year, totalling £0.5 million to LEF. The total received to date from STX in interest payments and dividends is £2.6 million

· Potential for STX shareholders to acquire directly a stake in STX Fixed Income (part of STX Group, focused on broking Fixed Income products); an option which is being investigated currently

· STX has been actively pursuing new business opportunities including trading in new products and geographies and setting up a research department

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

Ignis Biomass

Biomass project developer, owner and operator

Valuation at 30th June 2014 (method): £4.5 million (fair value)

Investment: £1.0 million (ordinary shares), £2.2 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 2014

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 http://www.ignis-biomass.com.

Investment during the year:

LEF invested a further £0.2 million in convertible loan notes and £0.1 million in the form of a short-term loan during the financial year. The latter was repaid in the same quarter.

Significant events during the year:

· Deliveries of heat to the Inverhouse Distillery are meeting Ignis' expectations

· The Wick NHS hospital is being connected to the network, with service delivery expected to commence in October 2014

· May 2014: DECC announced amendments to the RHI expected to come into force on 28th May 2014, providing Ignis with higher level of RHI support

· A new hot water boiler has been installed and a steam turbine has been ordered

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

Lumicity

Solar project developer

Valuation at 30th June 2014 (method): £2.6 million (fair value)

Investment: £0.5 million (preferred ordinary shares) and £0.7 million (loan)

Realised: £0.1 million

Ownership: 45.7%

Date(s) of investment: Q3 2010, Q3 2011, Q4 2013

Date(s) of divestment: Q4 2012, Q3 2014

Company summary:

Lumicity is a renewable energy company that develops projects in solar and biomass. The company is a sector specialist in the planning, finance, construction and management of renewable energy projects. Further information can be found at www.lumicity.com.

Investment during the year:

In December 2013, LEF invested £0.2 million in Lumicity in the form of loan notes.

In July 2014, an amount of £0.4 million in loan notes was repaid to LEF.

Significant events during the year:

· 2 solar projects totalling 13 MW were sold during the year to Wirsol (Conergy) and Martifer

· The remainder of Lumicity's solar pipeline was sold to Wirsol (Conergy) for an initial consideration of £2.6 million, with further potential upside from project delivery

· Contract to roll out 179 biomass boilers was signed with Bernard Matthews in February 2014

· As of 30th June 2014, 18 biomass units have been installed and are operating at Bernard Matthews

LEF has the right to appoint a director to the board of Lumicity and has nominated Bill Weil, CIO of Ludgate Investments, as its director, with Nick Curtis, of Ludgate Investments, as alternate.

Hydrodec (AIM:HYR)

Specialist oils recycling

Valuation at 30th June 2014 (method): £1.7 million (market value)

Investment: £3.5 million (ordinary shares) and £3.0 million (loan)

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 54.0% in 2013 to $40.1 million (2012: $26.1 million), driven by 11.0% improvementin core re-refining business and acquisition of OSS recycling business

· Gross profit increased to $9.4 million (2012: $5.4 million)

· In September 2013, the Company acquired the principal assets and business of OSS Group Limited from its administrators. OSS is the UK's largest collector, consolidator and processor of used lubricant oil and the largest seller of processed fuel oil

· In November 2013, Hydrodec repaid LEF the £3.0 million loan and a final interest payment of £72,592

· In November 2013, the company announced it reached Heads of Terms on an agreement to collaborate with Essar Oil UK Ltd. (EOUK) to develop re-refining opportunities in the UK as a joint venture hosted at the Stanlow refinery complex in Cheshire

· In November 2013, Hydrodec announced a relocation of its plant in Australia to Southen Oil Refining Pty Ltd's facility in Wagga Wagga to share infrastructure and R&D

· In December 2013, the re-refining facility in Canton, Ohio had an explosion and has been out of operation. The plant was insured and the company has been paid $5.5million ($2.0 million in February and $3.5 million in June) to date in settlement of its claim. The company has committed to a 50.0% expansion of the Canton facility to be completed by the end of 2014

ECO Plastics

Plastic bottle recycling

Valuation at 30th June 2014 (method): £1.7 million (fair value)

Investment: £5.0 million (preferred ordinary shares), £1.6 million (convertible loan notes) and £0.2 million (short-term loan)

Ownership: 16.8%; 18.5% fully converted and fully diluted; LEF holds 26.6% of the convertible loan notes, which is considered proxy for its economic ownership

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

Company summary:

ECO Plastics is Europe's largest recycler of mixed plastic bottles. Operating the most technically advanced plastics recycling facility in Europe, it produces 11 different streams of plastics, including food-grade recycled PET, suitable for soft drinks packaging. Further information can be found at www.ecoplasticsltd.com.

Investment during the year:

In June 2014, institutional shareholders provided a £0.8 million short-term loan to the company of which LEF provided £0.2 million. A further funding round is expected to be completed in September 2014.

Significant events during the year:

· Strong performance in 2013 with EBITDA outperforming budget in July - October 2013

· Performance dropped in the winter of 2013/4 and has not fully recovered in challenging market conditions

· Short-term funding round of £750,000 completed in June 2014 with a larger equity funding round expected to be completed in September 2014 

· ECO Plastics agrees landmark deal with Gwynedd Council, where ECO will receive all the mixed plastic produced directly from the Council

· Coloured PET pellet, a new premium product for ECO Plastics, started volume production during the year and has been well received in the market

· ECO Plastics recognised as one of the UK's most disruptive businesses at the Everline Future 50 awards

· ECO Plastics was voted Materials Recycler of the Year at the 2013 National Recycling Awards

· New management, hired in Q4 1013, now fully integrated and successfully providing direction for the business

· The Resource Association, the trade association for the reprocessing and recycling industries and their supply chain, elected Jonathan Short as the new Chairman

LEF has the right to appoint a director to the board of ECO Plastics and has appointed Bill Weil, CIO of Ludgate Investments, as its director.

Micropelt

Waste heat recovery

Valuation at 30th June 2014 (method): £0.3 million (fair value)

Investment: £4.1 million (of which £0.4 million was invested post restructuring in April 2014)

Ownership: 50.0%

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

Company summary:

Micropelt is a developer and producer of the world's smallest thermal energy harvesting chips that convert heat into electricity, substituting the need to replace or recharge batteries in micro actuators/controls and wireless sensor networks. Further information can be found at http://www.micropelt.com.

Investment during the year:

LEF invested £0.3 million in Q3 2013 and £0.5 million in Q4 2013. Following administration, LEF invested £0.4 million in Q2 2014.

After year-end, a further £0.5 million was invested by LEF in Q3 2014.

Significant events during the year:

· Micropelt was put into administration in February 2014. Subsequently, LEF and its strategic 50/50 co-investment partner WIKA (family-owned German industrial business with c. €800 million revenue p.a.) acquired the business from the administrator and has in total invested £0.4 million since then. The new investment into the restructured business has been made into the following two companies, Micropelt GmbH (the new company) and Micropatent B.V.

· Successfully launched its new intelligent thermostatic radiator valve (iTRV), a 'smart home'- enabled radiator valve powered by the heat in the radiator itself

· Key partnerships now established, commercial trials underway

· Sensor product for electricity distribution fully introduced in 2013; mNODE continuously monitors temperature and current, identifying overheating early to prevent disruption

· Whilst the product is successful operationally, the timeline to market has been delayed because of some operating difficulties in the old company and by the subsequent restructuring, versus initial forecasts. As a result of both of these, the initial investment was written down.

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

New Earth Recycling and Renewables

LEF completed the realisation of its shareholding in New Earth, realising £2.5 million. The redemption of the remaining 15.0% holding was completed in October 2013. This resulted in a total profit of £1.8 million and an annualised IRR on the investment of 10.8%.

Terra Nova

Terra Nova was placed into liquidation in August 2013 and the remaining value of the Company's investment (£0.5 million) was written off.

DIRECTORS' REPORT

The Directors present their report and the audited financial statements for the year ended 30th June 2014.

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 £7,314,554 (2013: increase £2,567,703).

No interim dividend was paid during the year (2013: an interim dividend of 1.9 pence per share was paid at a total cost of £1,068,936). The Company paid a special dividend of 5.0 pence per share at a total cost of £2,707,539 on 4th December 2013 (2013: nil).

The Company purchased 1,104,000, 570,000, and 235,000shares in the market in November 2013, December 2013, and February 2014 for 55.0 pence, 50.0 pence and an average price of 43.8 pence each, respectively, reducing the number of shares in issue to 53,345,784.

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

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 18 to 19 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 Adviser, Nomad 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 nineteen times. Of those nineteen meetings, John Shakeshaft attended eighteen, Matt Christensen (resigned 1st January 2014) attended seven, Ronald Green attended nineteen, Sian Hansen (resigned 24th March 2014) attended eleven, David Pirouet attended nineteen and Denis Quilty (appointed 1st January 2014, resigned 27th August 2014) attended seven.

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 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, Denis Quilty 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 three times. Of those three meetings, Matt Christensen attended two, Ronald Green, Sian Hansen, David Pirouet, John Shakeshaft attended three 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, Adviser, Nomad 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.

DIRECTORS

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

J. Shakeshaft (Chairman)

M. Christensen (Resigned 1st January 2014)

R. Green

S. Hansen (Resigned 24th March 2014)

D. Pirouet

D. Quilty (Appointed 1st January 2014, 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 adequate 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:

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30TH JUNE 2014

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 (see note 19).

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 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

IFRS 7, "Disclosures - offsetting financial assets and financial liabilities"

Amendments to IFRS 7, "Disclosures - offsetting financial assets and financial liabilities" require additional disclosures to enable users of financial statements to evaluate the effect or the potential effects of netting arrangements, including rights of set-off associated with an entity's recognised financial assets and recognised financial liabilities, on the entity's financial position. The amendments are effective from annual periods beginning on or after 1st January 2013. The amendments did not have any impact on the Company's financial position or results of operations and did not result in additional disclosure in the notes to the financial statements.

IAS 27 (Revised 2011), "Separate financial statements"

IFRS 10 replaces the portion of IAS 27 that addresses the accounting for consolidated financial statements. The revised standard includes requirements limited to the accounting for investments in subsidiaries, joint ventures and associates in separate financial statements. The standard is effective for annual periods beginning on or after 1st January 2013. The amendment did not have any impact on the Company's financial position or performance, however, has resulted in additional disclosure in the notes to the financial statements.

IFRS 10, "Consolidated financial statements"

IFRS 10 was issued in May 2011 and is mandatory for accounting periods commencing from 1st January 2013, but early adoption is permitted at any time prior to this date. IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company.

Amendments to IFRS 10, IFRS 12 and IAS 27 on investment entities

IFRS 10 was amended on 31st October 2012 to introduce an exception from the requirement to prepare consolidated financial statements for "Investment Entities".

The amendment to IFRS 10 defines an Investment Entity as an entity that: "(a) obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services; (b) commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and (c) measures and evaluates the performance of substantially all of its investments on a fair value basis."

The amendment also provides examples of typical characteristics of an Investment Entity. The characteristics are: holding more than one investment; having more than one investor; having investors that are not related parties of the entity; and having ownership interests in the form of equity or similar interests. However, the absence of one or more of these characteristics will not prevent an entity from qualifying as an Investment Entity.

An entity will not be disqualified from being an Investment Entity where it carries out any of the following activities: provision of investment-related services to third parties and to its investors, even when substantial; or, providing management services and financial support to its investees, but only when these do not represent separate substantial business activity and are carried out with the objective of maximising the investment return from its investees.

An Investment Entity is required to account for its subsidiaries at fair value through profit or loss in accordance with IFRS 9, 'Financial instruments' (or IAS 39, 'Financial instruments: recognition and measurement', where applicable). The only exception is for subsidiaries that provide services to an Investment Entity that are related to its investment activities, which should be consolidated.

The exception from the consolidation requirements of IFRS 10 only applies to a parent of an Investment Entity if such parent is itself an Investment Entity. If the parent is not itself an Investment Entity, then such parent is required to consolidate all of the entities that it controls, including the Investment Entity's investees.

The revised standard is effective for accounting periods commencing on or after 1st January 2014, but early adoption is permitted at any time prior to this date. The amendments were endorsed for use in the EU and were early adopted by the Company.

At the same time as the amendment to IFRS 10 was issued, the International Accounting Standards Board ("IASB") issued corresponding amendments to IFRS 12 "Disclosures of Interests in Other Entities" and IAS 27 "Separate Financial Statements", which must be adopted concurrently with the amendment to IFRS 10, if applicable. These amendments were also endorsed for use in the European Union ("EU") on 20th November 2013 and were early adopted by the Company.

The Company has a controlling holding in Ignis Biomass Limited. The Company meets the definition of an investment entity and therefore did not consolidate controlling holding in this entity. The investment in this entity is accounted for at fair value through profit or loss, on the same basis as the investment where a controlling holding is not held, which is how they are currently presented in the financial statements.

IFRS 12, "Disclosures of interests in other entities"

IFRS 12 was issued in May 2011 and is mandatory for accounting periods commencing from 1st January 2013, but early adoption is permitted at any time prior to this date. IFRS 12 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The new standard did not have any impact on the Company's financial position or performance.

IFRS 13, "Fair value measurement"

IFRS 13 was issued in May 2011 and aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements do not extend the use of fair value accounting, but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs. The amendment did not have any impact on the Company's financial position or performance, however, has resulted in additional disclosures in the notes to the financial statements.

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.

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.

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.

IFRS 9 is effective for annual periods beginning on or after 1st January 2018.

IFRS 13, "Fair value measurement" (amendments)

These amendments clarify the portfolio exception in IFRS 13 that can be applied to financial assets, financial liabilities and other contracts. When measuring fair value, the portfolio exception can be applied to contracts within IAS 39 Financial Instruments: Recognition and Mesurement or IFRS 9 (e.g. commodity derivative contracts) not just to those contracts that meet the definition of financial assets or financial liabilities. The amendments are effective for annual periods beginning on or after 1st July 2014.

The Directors have made an assessment of the potential impact of early adoption of all of the standards listed above, except for IFRS 9, as stated above. In the Directors' opinion, early adoption of any of these standards would have no material effect on the reported performance, financial position, or disclosures of the Company. 

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 values'.

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 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 net assets attributable to equity shareholders.

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 net assets attributable to equity shareholders.

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 values

A number of the Company's accounting policies and disclosures require the determination of fair values 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. Prior to 1st January 2013, the quoted market price used for financial assets held by the Company was the last traded price. The Company adopted IFRS 13, "Fair value measurement", from 1st January 2013; it did not change its fair valuation input 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 non-listed status. The unsecured convertible loan stock is valued at cost.

- STX Services B.V. Ordinary Shares have been valued based on a multiple of profit before tax for the year. This metric has been discounted to reflect the company's non-listed status.

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

- ECO Plastics Limited Ordinary Shares are valued based on an EBITDA multiple in line with market multiples. This metric has been discounted to reflect the company's non-listed status.

- 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.

- Lumicity Limited Class A Preference Shares are valued on a net asset basis and the loan is valued at cost.

- Tamar Energy Limited Ordinary Shares are valued at cost which is consistent with a current valuation derived from a Discounted Cash Flow model .

- Ignis Biomass Limited Ordinary Shares are valued on a discounted cashflow basis and the unsecured loan stock is valued at cost.

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

- Micropelt GmbH (the new company) Ordinary Shares are valued at cost following its recent acquisition.

- Micropatent B.V. Ordinary Shares are valued at cost following its recent acquisition.

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. The investment in this entity is accounted for at fair value through profit or loss. As explained on page 29, the amendments to IFRS 10 were endorsed for use in the EU on 20th November 2013 and were early adopted by the Company.

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 2014 and 30th June 2013.

20% of any performance fees earned by the Adviser shall be retained and deposited in a Reserve Account (see note 9).

On 21st December 2012, the Company entered into a new Investment Advisory Agreement with the Adviser in which the performance fee basis of calculation was reset from an effective date of 30th June 2012 and under the amended terms, the calculation added back any distributions made to shareholders during any performance fee period. In the addition to the above conditions, there are also certain additional criteria which need to be met by the Adviser before any accrued performance fees are payable. Also, as a result of entering into this new agreement, the balance of the previous performance fee retention was released in favour of the Company.

As stated in note 19, on 1st September 2014 the shareholders approved revised performance fee arrangements for the Investment Adviser, which take effect from 1st July 2014.

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 Holding II BV, T. Cooke, J.N.B. Curtis, N. Pople, C. Sebag-Montefiore and B. Weil have an interest in Ludgate Investments Limited.

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

5. DIVIDENDS

No interim dividend was paid during the year (2013: an interim dividend of 1.90 pence per share at a total cost of £1,068,936). The Company paid a special dividend of 5.0 pence per share at a total cost of £2,707,539 on 4th December 2013 (2013: nil).

6. EARNINGS PER SHARE

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

Outstanding Warrants are not dilutive for both periods presented as the exercise price of the Warrants exceeded the average market price of Ordinary Shares issued. As explained in note 13, these Warrants have now expired.

7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS