Interim Results for 6 Months to 31 December 2013

Ludgate Environmental Fund Limited ("LEF" or the "Company")

Interim Results for the six months ended 31 December 2013

CHAIRMAN'S STATEMENT

I am pleased to report to shareholders on the performance of Ludgate Environmental Fund Limited in the six months to 31st December 2013.

Financial Review

The net asset value of your Company on 31st December 2013 was £37,886,299 (2012: £46,498,889), equivalent to 70.7 (2012: 82.7) pence per share. A special dividend of 5.0 pence was paid in December 2013 and we purchased 1,104,000 and 570,000 shares in the market in November and December 2013 for 55 and 50 pence each respectively. The Company recorded a net loss in the period of £5,030,475 (2012: income of £1,997,329). At period end we held cash balances of £5,322,039. The Company subscribed for £2,626,498 of additional investments in existing assets (Terra Nova, Lumicity, Micropelt, Ignis and Tamar). Consistent with managing the Company's assets toward our anticipated wind up date in June 2015 we do not expect to make any investments outside the existing portfolio. We will also retain sufficient 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. Total return to shareholders on an NAV basis since launch is positive and we hope to enhance this over our remaining life. Both the liquidity in our shares and the discount at which they trade to NAV are disappointing; however, the discipline we apply to the calculation and reporting of NAV, the stability of the share register and discussions with shareholders would support this assessment; sales will substantiate it.

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 and these were early adopted by the Company.

Portfolio Review

The fund is fully invested. Any further subscriptions into existing assets would only be made if they were expected to enhance the value achievable on disposal by LEF in accordance with our established investment policy and expected life. ECO Plastics has significantly increased its sales and improved consistency of operation and commissioned its new plant. The reduction in the fair value of ECO Plastics is partly due to a change in valuation methodology together with a change in ECO Plastics' internal accounting treatment of a debt instrument. Rapid Action Packaging has similarly increased and diversified sales and capacity utilization in its operations. Ignis Biomass is operating effectively and has added to its customer base. Tamar has two operational plants and is developing according to plan and has recently strengthened its management team. Terra Nova was put into administration and LEF wrote down its interest in its entirety. STX performed strongly in the period and continued to develop its business portfolio. Lumicity continues to develop its pipeline and has a number of projects in planning. On NERR, the final sale of securities for £1.1 million completed a positive return from the disposal of this investment. Hydrodec repaid convertible securities due to LEF and others and this was distributed as a special dividend. The performance of their ordinary shares continues to disappoint despite significant strategic developments. Micropelt is establishing the commercial viability of its products in development; there remain significant challenges to its success and we have reduced our carrying value accordingly.

Strategy and Outlook

We continue to manage the assets in the portfolio actively to achieve the greatest distributable return to shareholders within the life of the fund. We have set targets for the adviser to realise this substantially in 2014.

I should like to thank my fellow board members for their common commitment and diligence in considering and developing investments in uncertain and occasionally challenging circumstances.

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, Chief Investment Officer

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

Chris Clarke

Panmure Gordon (Broker) +44 (0) 20 7866 2713

Paul Fincham

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD 1ST JULY 2013 TO 31ST DECEMBER 2013

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 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

The unaudited interim financial information included in the half-year report for the six months ended 31st December 2013, has been prepared in accordance with International Accounting Standard (IAS) 34 "Interim Financial Reporting". It does not include all of the information required for full annual financial statements. The half-year report should be read in conjunction with the annual report and audited financial statements for the year ended 30th June 2013, which have been prepared in accordance with International Financial Reporting Standards ("IFRSs"). The extra column of comparatives for the half-year ended 31st December 2012in the statement of financial position is an AIM requirement, and notes to these accounts are not required.

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 period

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.

a) Basis of preparation - (continued)

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

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 controlling holdings in Ignis Biomass Limited and Micropelt GmbH. An amendment to IFRS 10 exempts "Investment Entities" from the need to consolidate controlling holdings in investments if certain conditions are met. The Company meets the definition of an Investment Entity under IFRS 10 and is therefore exempt from preparing consolidated financial statements. The investments would be accounted for at fair value, on the same basis as the investments 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.

The Directors have not yet assessed the full potential impact of IFRS 9, but intend to do so once the standard is complete. The Company intends to adopt IFRS 9 no later than the mandatory effective date, which is yet to be established by IASB.

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 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 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.

f) Financial instruments - (continued)

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.

f) Financial instruments - (continued)

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 period. (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 period 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.

o) Determination of fair values - (continued)

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 period / year. This metric has been discounted to reflect the company's non-listed status.

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

- 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.

- 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.

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

- Micropelt GmbH unsecured loan stock is valued at its estimated net realisable value.

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 Biomass Limited and Micropelt GmbH, as set out in the provisions of paragraph 12 of International Accounting Standard 27 (Consolidated and Separate Financial Statements), 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 Micropelt GmbH:

- 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 and Micropelt GmbH were not consolidated in these financial statements as the Company qualified for the exemption from the requirement to prepare consolidate financial statements. As explained on page 12, 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 period ended 31st December 2013 and year ended 30th June 2013.

20% of any 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.

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 will add 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 performance fee retention was released in favour of the Company.

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 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.

* 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 this period (for the six months ended 31st December 2012: 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 (for the six months ended 31st December 2012: nil).

6. EARNINGS PER SHARE

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

7. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Further details of the investments held can be found in note 20 to these financial statements.

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

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

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

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

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

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

The following table analyses within the fair value hierarchy the Company's financial assets measured at fair value at 31st December 2013 and 30th June 2013.