Final Results for the Year Ended 30 June 2012

Ludgate Environmental Fund Limited (the "Company")

Final Results for the year ended 30th June 2012

CHAIRMAN'S STATEMENT

I am pleased to report to our shareholders on the performance of Ludgate Environmental Fund Limited in the year to 30th June 2012.

Financial Review

As foreseen at the launch of the Company as a limited life investment company in 2007 and confirmed with our major shareholders during the year, 2012 was the end of our investment cycle and the beginning of our expected return of capital. An interim dividend of 1.75p was paid in August 2011, a special dividend of 12p in October 2011 and an interim dividend proposed for the current year of 1.9p. As at 30th June 2012, the net asset value of the Company, after the return of capital, was £45,570,496 (2011: £58,843,944) equivalent to 81p (2011: £1.05) per ordinary share outstanding.

Recognising the return of capital, fair value accounting and continued investment, the Company made a loss of £5,537,728 (2011: £4,459,594 income).

At year end the Company held cash of £15.2 million. The Company has agreed to invest £14.1 million into further investments, of which £5.94 million has been invested as to date. Consistent with ensuring that the Company has sufficient capital to maintain operations through its life we shall return capital by dividends and the purchase of our own shares.

Portfolio Review

During the year to 30th June 2012, we made new investments across the portfolio in accordance with our established strategy of diversification in the cleantech and environmental sector, expected financial performance and anticipated cash distribution horizon within the life of the company. We invested in Lumicity (£1.0 million) which, despite the government's unheralded and punitive amendment of the feed in tariffs supporting the solar industry, has managed to develop certain legacy assets. We committed £7 million to Tamar, a well supported and capitalised developer of anaerobic digestion plants in the UK; we believe that this business has the combined strengths of diversified good locations, contracted feedstock and offtake arrangements, sound and proven management and engaged, committed and significant shareholders. Similarly, we were pleased to sponsor Ignis Biomass and commit £3.1 million to its first biomass district heat and power project at Wick, Scotland; other opportunities have been identified for this management team and company elsewhere in the UK. We also committed £4.1 million to Micropelt, a German high technology company developing small scale thermoelectric generators which harvest waste heat to obviate batteries; the technology is proven, installed and capable of industrial commercial exploitation.

Rapid Action Packaging ("RAP"), of which we own 45% (fully diluted and converted), improved its revenue significantly, increased its product and customer range and expanded its production capabilities with a new machine expected to come on stream in the third quarter. We are confident that RAP's improving commercial performance will give the Company an attractive economic return. While ECO Plastics has successfully expanded capacity with our investment of last year and now has attractions to identified strategic acquirors, the appropriate fair value accounting have caused us to reduce the NAV to £4.2 million. Terra Nova has established and proven production for new process technology in a critical sector; however, the difficulty of financing projects and working capital in France, largely contingent on the enduring capital constraints on domestic banks, have affected the company and development has been slower than expected. Necessarily this will delay divestment; NAV has been adjusted to reflect fair value (£1.6 million). We increased our shareholding in STX, the environmental financial products broker, to 29.3%; the company diversified its product range within the sector, increased its repeat client transactions and enjoyed profits significantly ahead of budgets. Our interests in New Earth (£5.9 million) were reorganised to allow progressive sales at an agreed return 1.2x greater than original cost for the 50% redeemed to date. We continued to receive enhanced dividends on our original investment. Sadly, our holdings in the listed companies, Hydrodec, Hightex, Renewable Energy and Phoslock all, in different ways, continue to disappoint despite the strategic reasons for each investment and management discussions through which we have sought to promote the interests of the Company. We shall be looking to dispose of our holdings in a timely manner.

Strategy

We would expect the progressive return of capital and the increased expectation of performance from the remaining assets to narrow the discount to NAV over the remaining life of the fund. We will continue to consider, in consultation with our major shareholders, the optimum means of return.

Over our investment period the Company has developed considerable experience and expertise in the active management of companies specialised in resource efficiency. With the adviser we have built a sustainable business of industry knowledge, connections and diversified and yet coherent portfolio. As a limited life investment company the worth of such sustainability to our shareholders can only be in realisations of financial assets at greater value than published NAV. We also need to ensure that we are not bound at the end of the company's life to sell assets at prices which do not reflect their intrinsic value. We have nominated directors on the boards of most of our unlisted holdings; their principal roles are both to ensure that the companies budget, perform and invest in a manner consonant with our expected disposal of interests and to engage with other shareholders to pursue these ends. We will continue to monitor and assess the performance of the adviser on their discharge of these responsibilities and on their management and recommendation for the divestment of assets, consistent with the sustainable interests of the Company itself. We have considered the competence and economic viability of the present adviser to act through the period of divestment and management for value and concluded from their creation, understanding and management of the portfolio companies that they should. 

To ensure the adviser is appropriately incentivised to realise assets in a timely manner prior to the end of the Company's life whilst maximising value, the Company has entered into negotiations with the adviser to amend the existing agreement, including rebasing the NAV for the purposes of calculating the performance fee. Following conclusion of these negotiations, the board expects to put the proposed changes to the adviser's agreement for approval by shareholders at the next AGM of the Company.

Outlook

The Company has grown and developed through times of enduring financial distress particularly for small companies needing bank finance for working capital or projects. There is no current sign of this easing. Though only 15% of current NAV is held in Eurozone countries and only in those among the strongest in the region, in all our geographic markets the availability and certainty of bank finance has weakened requiring greater equity subscriptions to sustain companies, the practical effect, perhaps, on our portfolio of worldwide deleveraging. In turn this depresses anticipated returns from the portfolio and leads to questions about the appropriate cost and under pricing of equity. The weakening of some commodity prices also reduces short term interest in efficiency investments. Across Europe the volatility of energy, planning and tariff policies has added to political risks in the portfolio again reducing returns and access to capital. We also consider the capability of our partners and co-investors to continue to support each of our financial assets in this context. At each statement of NAV we have rigorously applied fair value methodologies under International Financial Reporting Standards reflecting, as each does, the value of our assets compared with publicly traded companies discounted for illiquidity and size. For this reason we consider that the realised value of our assets should, over the remaining life of the company, exceed the current NAV.

I wish to thank my fellow board members for a level of engagement with the Company, its assets and advisers exceptional for an investment company, contributing significantly to our sustainability. Donald Adamson left us during the year; we are very grateful for his advice, sagacity and commitment over five years. Ronald Green joined the board and we look to his experience to help guide us through the period of value management.

The Company has shown that there is an investable universe of cleantech and environmental assets and that we have created a sustainable and well supported company.

For further information contact:

Ludgate Environmental Fund Limited +44 (0) 1534 609034

John Shakeshaft, Chairman

Ludgate Investments Limited +44 (0) 20 7621 5770

Bill Weil

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

Chris Clarke

Matrix Corporate Capital LLP (Broker) +44 (0) 20 3206 7175

Paul Fincham

STATEMENT OF INVESTMENT POLICY

The Ludgate Environmental Fund is looking to make active investments in a diverse portfolio of cleantech companies that require capital growth

The Fund focuses on the following core areas within the cleantech sector:

* Waste and recycling

* Renewable energy

* Energy efficiency

* Water

Our target cleantech companies demonstrate the following attributes:

* Clear environmental improvement

* Proven technology with a scalable business model

* Revenue generation or clear, near-term visibility to substantial sales

* Experienced management with technical expertise and track record of delivery

* Defensible, differentiable intellectual property or know-how

* Significant potential market with high existing, or expected, growth rates

* Clear exit strategy within the anticipated life of the fund

No single investment at subscription has a value greater than 15% 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% of its net assets to finance investments or for any other purpose. The Board does not contemplate making any significant borrowing until and unless the portfolio is substantially invested in financial assets in the cleantech sector.

Seeking to provide significant total return to shareholders over the expected life of the Company to August 2015, 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 2012.

INVESTMENT ADVISER'S REPORT

Highlights and Key Financial Data

·; Net assets decreased to £45.6 million at 30th June 2012, with a NAV per share of 81.0 pence (2011: £58.8 million and 104.6 pence).

·; Cash balances were £15.2 million as at 30th June 2012.

·; The Company is now over 90 per cent invested including commitments.

·; Before realisations, £51.5 million had been invested into 16 companies by 30th June 2012 (2011: £38.3 million into 11 companies).

·; During the year investments totalling £18.2 million were made into nine companies.

·; £3.0 million was realised from the sale of 50 per cent of the Company's interest in New Earth.

·; Interest and dividend income receivable of £1.0 million from investments and cash deposits.

·; An interim dividend of 1.75 pence per share was paid on 12th August 2011 (2011: a final dividend of 1.65 pence per share) and a special dividend of 12 pence per share was paid on 27th October 2011.

At the Balance Sheet Date, the Company had outstanding commitments to invest up to £9.65 million into Ignis Biomass Limited, Micropelt and Tamar Energy of which £1.6 million has subsequently been drawn down by Ignis Biomass Limited. Subsequent to the balance sheet date, £0.2 million was invested into a convertible unsecured loan note in ECO Plastics.

Net Asset Valuation summary

The table below summarises the position of the Company as at 30th June 2012. Investments made subsequent to year end are not included.

Advisor to the Company

Ludgate Investments Limited (LIL) acts as adviser to the Company. LIL was established in 2001 and has built a record as a specialist private equity investor in resource efficiency investment.

During the year Gijs Voskamp succeeded Nick Pople as chief executive of LIL. Gijs is also managing partner and a shareholder of Ocean Capital Holdings, the majority shareholder of LIL. Ocean also holds 10.38% directly and indirectly in the Company. Bill Weil, the chief investment officer of LIL, was appointed as a director of LIL. Charles Sebag Montefiore became chief financial officer and head of compliance for LIL. Nick Curtis remains as a senior investment director and Matthew Sheppee as investment analyst.

Dr. Bernie Bulkin and Ms. Ekaterina Sharashidze joined the board of LIL as non executive directors. Further information of the above can be obtained from www.ludgate.com.

MAJOR INVESTMENTS

Rapid Action Packaging

Food packaging solutions

Valuation at 30th June 2012 (method): £7.6 million (fair value)

Investment: £5.0 million (ordinary shares) and £2.5 million (12.0 per cent convertible loan notes).

Ownership: 36.3 per cent; 45.0 per cent after conversion of CULS and fully diluted after warrants

Date(s) of investment: Q2 2008; Q3 2010; Q3 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" marketplace.

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 2011 showed a 29.1 per cent increase in revenues to £16.1 million (2010: £12.5 million).

·; Turnover in the first nine months of the financial year to June 2012 was 16 per cent ahead of the equivalent period in the previous year.

·; The increase in turnover reflects the strong performance of the Freshpack product with further supermarket launches announced earlier in the year.

·; Customer trials on the modified atmosphere tray and Softpacks continue with launches planned during the Autumn of 2012.

·; Record production levels as management action to improve manufacturing efficiencies are delivered.

·; The new production equipment is expected to be operational in September 2012, increasing capacity by between 150 - 200 million units.

The Company has the right to two seats on the board of RAP and has appointed Nick Curtis and Nick Pople, of the Investment Adviser, as its directors.

ECO Plastics

Plastic bottle recycling

Valuation at 30th June 2012 (method): £4.2 million (fair value)

Investment: £5.0 million (ordinary shares)

Ownership: 17.1 per cent; 16.6 per cent fully diluted

Date(s) of investment: Q3 2011

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 (rPET) suitable for soft drinks packaging.

Further information can be found at www.ecoplasticsltd.com.

Investment during the year:

In July 2011, the Company completed an investment of £5.0 million into ECO Plastics alongside £5.0 million from Coca-Cola Enterprises and a debt package from Close Brothers bringing the funding to £24.0 million committed during this round. The Company's investment was structured as ordinary shares.

Significant events during the year:

·; Plant expansion to increase processing capacity by 50 per cent to 150,000 tonnes.

·; Final Coca-Cola Enterprises (CCE) milestone was met with approval received on 25th May 2012. ECO Plastics is the first supplier of rPET to have received validation on first application.

·; ECO Plastics will supply rPET to CCE for all their bottles at the Olympic Games.

·; Agreement reached with London Organising Committee of the Olympic and Paralympic Games (LOCOG) to take all waste plastic bottles from the venues.

·; Winner of 'deal of the year' at the New Energy Awards.

·; Additional 'cost plus' deal signed for rPET and significant 'cost plus' deal signed for HDPE outputs into an industrial product.

·; Engagement with a second major international brand for rPET supply.

·; A further 10,000 tonnes per annum of contracted feedstock supply agreed.

The Company has the right to a seat on the Board of ECO Plastics and has appointed Bill Weil, of the Investment Adviser, as its director.

Hydrodec (AIM:HYR)

Specialist oils recycling

Valuation at 30th June 2012 (method): £4.5 million (market value)

Investment: £3.5 million (ordinary shares); £3.0 million (8.0 per cent convertible loan notes)

Ownership: 3.4 per cent; 6.9 per cent fully diluted

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:

·; Revenues in 2011 increased 26 per cent to $22.6 million (2010: $17.8 million).

·; The Environmental Protection Agency has issued Hydrodec with a final permit for the storage and treatment of polychlorinated biphenyl (PCB) contaminated used transformer oil in the US.

·; In June 2012 Hydrodec reported that sales volumes were significantly up, gross unit margins have continued to improve and plant use was 70 per cent compared with 55 per cent in the same period last year.

·; Mexico's national electricity utility has awarded Hydrodec a joint mandate to export and process 900,000 litres of PCB contaminated oil at the group's plant in Australia.

·; Ian Smale appointed CEO and Chris Ellis CFO, based in London. Paul Manchester will step down from the Board but remain with the company, based in Sydney.

·; The Company's investment in Hydrodec's convertible unsecured loan notes may be converted into ordinary shares at any time prior to 1st November 2012. Those elements not converted into shares by this date are repayable, at the Company's determination, between 1st November 2012 and 31st October 2014 and carry an interest rate of 8 per cent p.a.

Convertible unsecured loan stock holders, including the Company, have the right to nominate a director to the board. No appointment has yet been made.

STX Services

Environmental product broking

Valuation at 30th June 2012 (method): £2.9 million (fair value)

Investment: £0.9 million (ordinary shares)

Ownership: fully diluted 29.3 per cent

Date(s) of investment: Q4 2007; Q1and Q2 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 Reduction, 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:

In March 2012, the Company invested a further £0.2 million in STX by acquiring ordinary shares from another shareholder.

Significant events during the year:

·; In March 2012 the Company increased its shareholding in STX Services from 23.8 per cent to 29.3 per cent.

·; STX continues its strong revenue and top line growth. The number of brokers grew from 20 in March to 33 in July 2012.

·; The company has further diversified its product portfolio and is now trading over 40 different environmental commodities.

·; First company to provide electronic brokerage services for Green Certificates with the launch of its exclusive auction model.

·; In July 2012, STX paid the Company a dividend of £0.2 million, bringing the total received to date from STX in interest payments and dividends to £1.9 million.

The Company has the right to nominate a member on the supervisory board of STX and has nominated Gijs Voskamp, of the Investment Adviser.

New Earth Recycling & Renewables (Infrastructure)

Waste treatment and renewable energy

Valuation at 30th June 2012 (method): £3.2 million (market value)

Original Investment: £5.0 million (preferred B ordinary shares and CULS in New Earth Solutions Group) exchanged for shares in New Earth Recycling & Renewables (Infrastructure) at a subscription value of £5.9 million

Realised: £3.0 million (50 per cent realised)

Ownership: n/a

Date(s) of investment: Q3 2011

Date(s) of divestment: Q3 2011; Q2 2012

Company summary:

New Earth Recycling & Renewables (Infrastructure) plc is an open-ended fund with a net asset value currently in excess of £120.0 million and registered as a specialist fund with the Isle of Man Financial Supervision Commission (Isle of Man Company Number: 123613C), which was created principally to finance the recycling facilities of New Earth Solutions Group Limited, a waste treatment and renewable energy specialist providing sustainable waste treatment processes to local authority and commercial customers across the UK.

Further information about New Earth Solutions can be found at www.newearthsolutions.co.uk.

Investment/Divestment during the year:

In October 2011, the Company exchanged its shares in New Earth Solutions Group in consideration for the issue of an equivalent value of shares in New Earth Recycling & Renewables (Infrastructure) at a subscription value of £5,882,689. The initial investment of £5.0 million into New Earth Solutions Group was transferred into New Earth Recycling & Renewables (Infrastructure), recognizing an increase in value of circa 17.6 per cent. In November 2011 and April 2012 the Company redeemed 25 per cent of its holding in New Earth Recycling & Renewables (Infrastructure) at each time leaving it with 50 per cent remaining.

Significant events during the year:

·; First redemption of 25 per cent of holding completed, realising £1.5 million on 7th November 2011, and second redemption of a further 25 per cent, realising £1.5 million on 10th April 2012.

·; New Earth Recycling & Renewables has now exceeded £120.0 million in assets, as at 11th July 2012, and was featured in Investor Chronicle's "Top 100 Funds".

·; Construction of New Earth's first commercial scale energy recovery plant continues to progress on-time and on-budget at a site next to the MBT facility in Avonmouth. It will use Advanced Thermal technology to process 120,000 tonnes per annum of refuse-derived fuel (RDF) and export around 13MW of power, enough to meet the needs of nearly 25,000 homes in the Bristol area.

·; Community engagement activities in support of a planning application for Anaerobic Digestion (AD) at New Earth's Blaise facility have begun. The addition of AD will cover the full range of technologies appropriate for the treatment of organic wastes at the site.

·; Planning permission granted for the Scottish Borders facility and a 24 year feedstock contract signed for 65,000 tonnes.

Terra Nova

Electronic waste recycling

Valuation at 30th June 2012 (method): £1.6 million (fair value)

Investment: £2.7 million (preference shares); £1.3 million convertible unsecured loan notes

Ownership: 25.1 per cent; 27.0 per cent fully diluted and after conversion of loan notes

Date(s) of investment: Q4 2009; Q4 2011; Q1/Q2 2012

Company summary:

Terra Nova developed, constructed and now operates a printed circuit board treatment and recycling business. The company has a 30,000 tonne per annum pyrolysis plant to pre-treat recovered metals from waste electronics for the major metal smelters.

Further information can be found at www.terranovametal.com.

Investment during the year:

The Company subscribed to three tranches of 6 per cent convertible loan notes totalling £1.3 million during the year.

Significant events during the year:

·; Construction of 30,000 ton per annum pre-treatment and recycling plant complete.

·; Commissioning challenges required refinement of plant design, leading to circa 6 month delay.

·; Wide international network of feedstock supply relationships established.

·; Delays in initial market acceptance, however significant, long-term contracts now signed with Metallo Chimique (Belgium), LS (South Korea), KGHM (Poland), with others in advanced trials; material international shipments have commenced.

·; Research and development contract with Nyrstar from 2009 to design, help build and ramp up a full industrial process for indium recovery has successfully completed and will now provide material royalty income stream.

·; Opportunities for further expansion, both to the existing process and into the recycling of other metals.

·; Winner of a regional prize for innovation.

The Company has the right to one seat and one observer on the board of Terra Nova and has appointed Charles DesForges (adviser to the Investment Adviser), who has been named Chairman and Bill Weil, of the Investment Adviser, respectively as its director and observer.

Micropelt

Waste heat recovery

Valuation at 30th June 2012 (method): £2.2 million (cost)

Investment: £2.2 million (convertible loan notes) with a further £1.9 million committed; £280 (ordinary shares)

Ownership: 30.3 per cent fully drawn, 27.3 per cent fully diluted

Date(s) of investment: Q2 2012

Company summary:

Micropelt is a developer and producer of the world's smallest thermal energy harvesting chips, with operations in Germany. The thermoelectric microchips are based on a patented and scalable thin-film technology which reduces component size while maximising power density. The chips scavenge free electric power from waste heat to replace or recharge batteries in wireless sensor networks and micro actuators.

Further information can be found at www.micropelt.com.

Investment during the year:

In May 2012, the Company completed an investment of £2.2 million as part of a £2.8 million round into Micropelt structured as convertible loan notes. The total commitment by the Company is £4.1 million.

Significant events during the year:

·; £5.3 million raised in May 2012 from the Company, Mitsubishi UJF Capital Co. Ltd and existing shareholders.

·; As part of the Company's investment Micropelt's balance sheet was re-structured and strengthened.

·; Presenter at 2012 Munich Energy Harvesting Congress.

·; Japanese branch office opened for intensification of business development.

·; Starting serial production at site in Halle, Germany, in August 2012.

·; Joint presentation at Techno-Frontier exhibition in Tokyo with Hitachi High Tech Materials.

·; ISO 9000 Quality Management and ISO 14000 Environmental Monitoring Systems preparations aiming for September certification.

The Company has the right to a seat on the board of Micropelt and has appointed Bill Weil, who has been named Chairman.

Tamar Energy

Biogas project developer, owner and operator

Valuation at 30th June 2012 (method): £1.8 million (cost)

Investment: £1.8 million (ordinary shares) with a further £5.2 million committed

Ownership: 7.8 per cent fully drawn, 7.1 per cent fully diluted

Date(s) of investment: Q2 2012

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 www.tamar-energy.com.

Investment during the year:

In May 2012, the Company completed an investment of £1.8 million into Tamar as part of a £7.0 million commitment. The Company's investment was structured as ordinary shares.

Significant events during the year:

·; First round of equity fundraising closed at end of July 2012, with £95.8 million committed including RIT Capital Partners, Fajr Capital, Sainsbury's and the Duchy of Cornwall.

·; Experienced management team now in place with an initial focus on securing feedstock and developing the pipeline.

·; Build started on first plant in Holbeach Hurn, Lincolnshire, with a further six to seven planned (15-17MW) to be under construction by 31st March 2013.

·; Strategic options being considered by management to secure feedstock and sites in London, South East and East Anglian regions.

The Company has the right to a seat on the board of Tamar and a seat on the investment committee and has appointed Bill Weil and Nick Curtis respectively, of the Investment Adviser.

Lumicity

Solar project developer

Valuation at 30th June 2012 (method): £0.5 million (fair value)

Investment: £0.5 million (preference shares) and £0.8 million (unsecured loan notes)

Ownership: 45.8 per cent

Date(s) of investment: Q3 2010; Q3 2011

Company summary:

Lumicity is a renewable energy company that develops projects across solar, wind 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 August 2011, the Company completed an investment of £1.0 million into Lumicity structured as a combination of preference shares and unsecured loan notes.

Significant events during the year:

·; The announcement in October 2011 by the Department of Energy and Climate Change of a reduction in the UK solar feed-in tariffs significantly impacted the initial strategy of Lumicity and required a shift of focus.

·; Diversified focus across three renewable energy sectors:1) large scale, ground-based solar; 2) small scale (sub-200kW) biomass; 3) small / medium scale (sub 250kw) wind.

·; First 13 solar projects with exclusivities signed, now entering planning.

·; Exclusivities signed on a further 93 MW cumulative of solar projects.

·; Established two key partnerships with Lightsource/Octopus Ventures and Hazel Capital for further funding of these projects.

·; Signed JV agreement with Endurance to develop, fund and sell wind portfolio.

The Company has the right to a seat on the board of Lumicity and has appointed Bill Weil, of the Investment Adviser with Nick Curtis as his alternate.

Ignis Biomass

Biomass project developer, owner and operator

Valuation at 30th June 2012 (method): £0.8 million (cost)

Investment: £0.5 million (ordinary shares), £0.3 million loan

Ownership: 100 per cent

Date(s) of investment: Q2 2011; Q2 2012

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:

The Company has invested total of £0.8 million into Ignis as part of a £3.1 million commitment. The Company's investment is structured as ordinary shares, a development loan and convertible loan notes. After year end a further £1.65 million was drawn down.

Significant events during the year:

·; On 31st May 2012 Ignis Biomass subsidiary Ignis Wick Ltd took over the district heating scheme in Wick from the Highland Council.

·; Ignis Wick is now supplying heat to 165 homes with many more customers expected to sign up.

·; Plans are in progress to convert the system from oil to locally sourced wood chip in order to reduce operating costs.

·; A contract with the local whisky distillery for steam supply has been signed and will commence after the new boiler has been installed, which is expected to take place in Q4 2012.

The Company has the right to two seats on the board of Ignis and has appointed Bill Weil and Nick Curtis of the Investment Adviser.

INVESTMENT REALISATION

The Company exchanged its initial investment of £5.0 million in New Earth Solutions Group in consideration for the issue of an equivalent value of shares in New Earth Recycling & Renewables (Infrastructure) for the value of £5.9 million. Subsequently a partial sale of the Company's interest in New Earth Recycling & Renewables (Infrastructure) occurred during the year, realising £3.0 million. This realisation related to 50 per cent of the shares issued from the Company's original investment of £5.0 million and represents a 1.2x multiple and 9% IRR to the Company.

REPORT OF THE DIRECTORS

The Directors present their report and the audited financial statements for the year ended 30th June 2012.

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 AND DIVIDENDS

The decrease in net assets attributable to shareholders from operations before dividends for the year amounted to £5,537,728 (2011: increase of £4,459,594).

The Company paid an interim dividend of 1.75 pence per share at a total cost of £984,546 (2011: an interim dividend of 1.65 pence per share) on 12th August 2011 and on 27th October 2011 paid a special dividend of 12 pence per share at a cost of £6,751,174 (2011: £nil).

Subsequent to the balance sheet date, the Directors recommended an interim dividend of 1.9 pence per share at a cost of £1,068,936 (2011: 1.75 pence per share) on shares in issue as at 27th July 2012, paid on 10th August 2012.

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.

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 21-22 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

The Board consisted of five 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.

Up to 31st March 2012, Donald Adamson was a director of the Company when he resigned. On 12th April 2012, Ronald Green was appointed as a non-executive Director.

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 ---sixteen times. Of those sixteen meetings, John Shakeshaft attended eleven, Donald Adamson attended thirteen, Matt Christensen attended fourteen, Ronald Green attended one, Sian Hansen attended ten and David Pirouet attended fifteen.

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 pipeline 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 disclosure;

• 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 consists of Donald Adamson (up to 31st March 2012), Matt Christensen, Ronald Green (from 13th July 2012), Sian Hansen, 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 three times. Of those three meetings, Matt Christensen, Sian Hansen, David Pirouet and John Shakeshaft attended three and Donald Adamson attended two.

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 (except where stated) were:-

J. Shakeshaft (Chairman)

D. Adamson (resigned 31st March 2012)

M. Christensen

R. Green (appointed 12th April 2012)

S. Hansen

D. Pirouet

SECRETARY

The Secretary is State Street Secretaries (Jersey) Limited of 22 Grenville Street, St. Helier, Jersey, JE4 8PX.

INDEPENDENT AUDITORS

The Company's auditors, BDO Alto Limited, were succeeded by BDO Limited on 1st January 2012 and BDO Limited have been the appointed auditors to the Company from that date. BDO have expressed their willingness to continue in office.

REGISTERED OFFICE

22 Grenville Street, St. Helier, Jersey, JE4 8PX

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) as issued by the 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.

However, directors are also required to:

* properly select and apply accounting policies;

* 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

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 22 Grenville Street, St Helier, Jersey, JE4 8PX.

The Company will have a life of approximately eight years from admission to AIM, expiring on 30th June 2015 (the "Proposed Wind-up Date"). The Directors may, not less than three months prior to the Proposed Wind-Up Date, propose a special resolution to extend the life of the Company by four years. Further such resolutions may then be proposed in the same manner not less than three months prior to the expiry of each such four year period.

2. ACCOUNTING POLICIES

a) Basis of preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") 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

The Directors have assessed the impact, or potential impact, of all New Accounting Requirements. In the opinion of the Directors, there are no mandatory New Accounting Requirements applicable in the current year that had any material effect on the reported performance, financial position, or disclosures of the Company. Consequently, no mandatory New Accounting Requirements are listed. The Company has not adopted any New Accounting Requirements that are not mandatory.

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 1, "Presentation of Financial Statements" (amendments)

The main change resulting from these amendments that is relevant to the Company is a requirement for entities to group items presented in other comprehensive income ("OCI") on the basis of whether they may potentially be reclassified to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI.

The revised standard is effective for accounting periods commencing on or after 1st July 2012, but early adoption is permitted at any time prior to this date.

IFRS 9, "Financial Instruments" (Replacement of IAS 39, "Financial Instruments: Recognition and Measurement")

IFRS 9 was issued in November 2009 and October 2010 and addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. 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 an entity's own credit risk is recorded in other comprehensive income rather than the statement of comprehensive income, unless this creates an accounting mismatch. The standard also results in one impairment method replacing the numerous impairment methods in IAS 39 that arise from the different classification categories.

The standard is mandatory for accounting periods commencing on or after 1st January 2015, but early adoption is permitted at any time prior to this date.

IFRS 10, "Consolidated Financial Statements"

IFRS 10 is effective for annual periods beginning on or after 1st January 2013 and 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. The standard provides additional guidance to assist in the determination of control where this is difficult to assess.

IFRS 12, "Disclosure of interest in other entities"

IFRS 12 is effective for annual periods beginning on or after 1st January 2013 and includes the disclosure requirements for all forms of interest in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles.

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 standard is mandatory for accounting periods commencing on or after 1st January 2013, but early adoption is permitted at any time prior to this date. IFRS 13 also requires certain additional disclosures for financial instruments categorised within Level 3 of the fair value hierarchy.

The Directors have made an assessment of the potential impact of early adoption of all of the standards listed 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 periods 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 presentation currency

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

d) Use of estimates and judgements

The preparation of financial statements in accordance with IFRS 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

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised at fair value plus directly attributable transaction costs and are subsequently carried 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.

Financial liabilities

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

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.

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 amount for which an asset or liability could be exchanged or settled between knowledgeable, willing parties in an arms length transaction. 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.

As at the balance sheet date, the fair values of quoted equities are based on quoted bid prices at the year end. 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 a multiple of sales 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.

- Hydrodec Group plc Convertible Bonds are valued using the Black Scholes option valuation method, which is carried out by an independent broker.

- STX Services B.V. shares have been valued based on a multiple of profit after tax for the year.

- New Earth Recycling and Renewables (Infrastructure) Plc is valued at the most recent published monthly valuation published by the fund administrator.

- Terra Nova SAS shares are valued on a discounted cash flow basis. The unsecured loan stock is valued at cost.

- ECO Plastics Limited shares are valued based on a multiple of sales in line with market multiples less net debt. This metric has been discounted to reflect the company's non-listed status.

- Lumicity Limited shares and loan valuation is based on its estimated net realisable value.

- Tamar Energy Limited shares are valued at cost, given the short period of time between acquisition and the year end.

- Ignis Biomas Limited shares and unsecured loan stock are valued at cost, given the short period of time between acquisition and the year end.

- Micropelt GmbH unsecured loan stock is valued at cost , given the short period of time between acquisition and the year end.

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) Non-consolidation

The Directors do not believe that the Company has the power to exercise control over the investments, except for Ignis Biomas 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 and its wholly owned subsidiary Ignis Wick 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 Biomas Limited and Ignis Wick Limited were not consolidated in these financial statements as the Directors considered that these subsidiary companies are immaterial to the Group as a whole. Therefore in the opinion of the Directors, the Company has no material subsidiaries and consequently there is no requirement to present consolidated financial statements.

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) Segmental 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 2012 and 30th June 2011.

20% of performance fees earned by the Adviser shall be retained and deposited in a Reserve Account (see note 9). The Reserve Amount shall only be released on the final calculation date when the Administrator will calculate the Reserve Release Amount in accordance with Schedule 1 of the Advisory Agreement.

4. DIRECTORS' REMUNERATION AND INTERESTS

The details of the Directors' remuneration is as follows:

As at the balance sheet date, the following Ordinary Shares and Warrants 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.

5. DIVIDENDS

The Company paid an interim dividend of 1.75 pence per share at a total cost of £984,546 (2011: an interim dividend of 1.65 pence per share) on 12th August 2011 and on 27th October 2011 paid a special dividend of 12 pence per share at a cost of £6,751,174 (2011: £nil).

Subsequent to the balance sheet date, the Directors recommended an interim dividend of 1.9 pence per share at a cost of £1,068,936 (2011: 1.75 pence per share) on shares in issue as at 27th July 2012, paid on 10th August 2012.

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.

7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

As noted above the Company has designated its investment holdings in cleantech companies at fair value through profit or loss. Financial assets are initially recognised on the Company's balance sheet at fair value when the Company becomes party to the contractual provisions of a given instrument and changes thereafter are recognised in the statement of comprehensive income.

Further details of the investments held can be found in note 22 to these financial statements.

IFRS 7 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 2012 and 2011.