Proposed Placing, Dividend and other matters-Amend

13 July 2010

The following amendment has been made to the "Proposed dis-application of pre-emption rights, cash placing of Shares to raise up to approximately £15 million, announcement of the unaudited NAV as at 30th June 2010, declaration of interim dividend, proposed reorganisation of management arrangements, appointment of a new director, and amendments to articles of association" announcement released on 9 July 2010 at 4.07pm under RNS Number 1505P. 

The record date for the Interim Dividend is 30 July 2010 rather than 4 August 2010. All other details, including the payment date, remain unchanged.

The full amended text is shown below.

Ludgate Environmental Fund Limited

("Ludgate Environmental" or the "Company")

Proposed dis-application of pre-emption rights,

cash placing of Shares to raise up to approximately £15 million,

announcement of the unaudited NAV as at 30th June 2010,

declaration of interim dividend,

proposed reorganisation of management arrangements,

appointment of a new director, and

amendments to articles of association

Ludgate Environmental Fund Ltd ("the Company") announces that it proposes to raise up to approximately £15 million (before expenses) through a conditional placing of Shares and take authority from Shareholders to issue up to 25 million Shares on a non-pre-emptive basis. As the authority will be for an amount in excess of 10 per cent. of the Company's issued share capital, it will require the approval of Shareholders by special resolution, as set out in the admission document published by the Company on 30 July 2007. The authority may be used for other non-pre-emptive share issues in the future as well as for the Placing. The Placing Shares will be issued at 97.15p per Share, which is equal to the Company's unaudited NAV per Share as at 30 June 2010 of 98.8p less the Interim Dividend of 1.65p per Share declared.

The Company also announces that it proposes to reorganise the management arrangements that have been in place since the Company's admission to AIM in August 2007. The management reorganisation will involve the termination of both the existing Management Agreement and the existing Investment Advisory Agreement and replacing them with a new Investment Advisory Agreement between the Company and the current Investment Adviser, Ludgate Investments Limited. As the Articles contain certain provisions requiring the Company to have a non-UK manager in place, the implementation of the management reorganisation are conditional on the amendment of the Articles and all other consents and approvals (including that of the Jersey Financial Services Commission) being obtained.

The Company also announced that it proposes to increase the maximum aggregate annual fees payable to Directors from £100,000 to £160,000.

The resolutions required to effect these proposals will be proposed at an Extraordinary General Meeting to be held on 2 August 2010.

The Directors intend to vote in favour of the Resolutions in respect of their holdings of 125,445 Shares, representing, in aggregate, approximately 0.27 per cent. of the Company's issued share capital as at the date of this document.

The Company is also declaring an Interim Dividend of 1.65p per Share, which compares with the final dividend of 1.5p per Share that was paid in respect of the financial year ending 30 June 2009.

The Company has declared the Interim Dividend now, with a Record Date prior to the issue of additional Shares pursuant to the Placing, so that existing Shareholders' income will not be diluted by the Placing. The Interim Dividend is in lieu of a final dividend and the Directors do not currently expect that any further dividends will be declared in respect of the financial year ended 30 June 2010.

1. Background to and reasons for the Placing

The Company is proposing to raise up to approximately £15 million through an issue of new Shares. The Placing Price of 97.15p per Share is equal to the unaudited NAV per Share as at 30 June 2010 less the interim dividend of 1.65p per Share, which was declared today. Assuming the Placing is fully subscribed, this would represent an enlargement of approximately 34 per cent. of the Company's issued share capital as at 30 June 2010.

The Board believes that this is an opportune time to seek to enlarge the Fund for a number of reasons:

(i) approximately 84 per cent. of the Company's existing net assets are either invested already (approximately 62 per cent.) or ear-marked for follow-on investments into the existing portfolio (approximately 22 per cent.), which comprises 10 investments. A fundraising to raise new capital would enable the Company to make new investments which would broaden the investment portfolio;

(ii) the Investment Adviser has identified a number of potential investment opportunities, which it believes may be available on attractive investment terms. In general, the Investment Adviser believes that there continues to be a shortage of development capital (both equity and debt) to finance emerging businesses in the Cleantech sector such that many opportunities are available which meet the Company's investment criteria; and

(iii) increasing the Company's net assets should enable it to achieve economies of scale with regard to its fixed costs, which should result in a modest reduction in the total expense ratio for the Company in future.

In order to implement the Placing and to provide flexibility in the future, the Company is proposing to take authority to issue up to 25 million Shares on a non-pre-emptive basis. Whilst it is intended that the Placing will currently raise a maximum of approximately £15 million, the Directors reserve the right to issue further Shares in excess of this amount if there is sufficient demand at the time of the Placing. If any of the Issue Authority remains unused following the Placing it may be used by the Directors at any time until it expires at the conclusion of the Company's annual general meeting to be held in 2011. Any Shares allotted pursuant to the Issue Authority will be allotted at a price not less than the latest published NAV per Share at the time of allotment.

For illustrative purposes only and assuming all shares were issued at the Placing Price, the Issue Authority would allow the Company to raise up to approximately £24.3 million (before expenses).

2. Details of the Placing

The Placing will consist of the issue of up to approximately 15.5 million Shares at the Placing Price. The Placing is conditional on (i) commitments being received for not less than £7.5 million; (ii) the passing of a special resolution; and (iii) the Admission of the Placing Shares to trading on AIM. The Directors may waive the minimum commitments condition in their absolute discretion.

If the Placing is fully subscribed it is expected to raise approximately £15 million (before expenses estimated to amount to 2 per cent. of the gross proceeds). The net proceeds of the Placing would therefore be expected to be approximately £14.7 million, assuming it is fully subscribed.

In consideration for arranging the Placing, the Investment Adviser will be entitled to a commission of two per cent. of the value of those Placing Shares placed by the Investment Adviser on behalf of the Company (less the other costs of the Placing (including those of the Company's professional advisers), which the Investment Adviser has agreed to bear), out of which the Investment Adviser may pay commissions to third party placement agents. 

Application will be made to the London Stock Exchange for the Placing Shares to be admitted to trading on AIM. It is expected that Admission will become effective at 8.00 a.m. on 6 August 2010.

The Placing Shares will rank pari passu in all respects with the Shares currently in issue, including the right to receive all dividends and other distributions declared on or after the date on which they are issued. The Directors consider that existing Shareholders should be entitled to the distributable income generated by the Company in the financial year that ended on 30 June 2010 and that this income should not be diluted by issue of new Shares pursuant to the Placing. The Directors have therefore declared an Interim Dividend of 1.65p per Share, which will be paid to existing Shareholders by reference to a record date of 30 July 2010.

The Company reserves the right to utilise the authority to allot additional Shares at any time, including as part of the Placing, such that the final amount raised under the Placing could be greater than £15 million, should there be sufficient demand. The authority conferred on the Directors, if passed, will expire at the conclusion of the annual general meeting of the Company to be held in 2011.

3. Background to and reasons for the Management Reorganisation

Amendments to the Company's management arrangements

The Company's existing management arrangements were put in place at the time of the Company's launch in August 2007. Under these arrangements the Investment Adviser is responsible for analysing the environmental and cleantech sector to source, analyse and recommend investment opportunities and disposal options. The Investment Adviser is also responsible for negotiating the terms on which the Company could invest in or dispose of any particular investment. This information is then passed to the Manager, who is able to commit the Company to investment, although as a matter of practice all of the Company's investments have been considered and approved by the Manager and the Board prior to being made.

Whilst the Board considers that the current arrangements have served the Company well over the last three years, it believes that there is room to make the Company's investment advisory and management function more efficient. In particular, the fact that all investments are approved by the Board has meant that the role of the Manager has been re-evaluated. Following careful consideration, the Board, Manager and Investment Adviser have agreed in principle that the functions currently undertaken by the Manager could be undertaken either by the Investment Adviser or by the Board. The Management Reorganisation, which is conditional upon the obtaining of all necessary consents and approvals (including that of the Jersey Financial Services Commission) and the definitive agreement of the board of the Investment Adviser will, if implemented, therefore remove the Manager and expand the current roles of the Investment Adviser and the Board to take its place. A new investment advisory agreement will therefore be put in place between the Company and the Investment Adviser to document the new arrangements. The new arrangements will contain the same provisions as to fees and expenses as the existing arrangements.

Whilst the beneficial ownership of the Investment Adviser has changed recently, as described below, the team of fund managers who currently provide advice to the Company, led by Nick Pople and Nigel Meir, will remain the same and the Investment Adviser will continue to source investment opportunities and recommend disposals as and when it considers them to be appropriate. Each investment or disposal decision, however, will be taken by the Board based on the Investment Adviser's advice.

The changes to the beneficial ownership of the Investment Adviser have resulted in the existing management team and their related parties (including Mr Pople and Dr Meir) retaining a 30 per cent. equity stake, with Ocean Capital Holding II B.V. holding approximately 66 per cent.. Ocean Capital is an investment vehicle for a number of Dutch family offices with extensive environmental and other holdings.

The current management fee, which is payable to the Manager, will be replaced by an investment advisory fee on the same terms, which will be paid directly to the Investment Adviser. Any performance fee will be payable to the Investment Adviser as well. Under the contractual documentation implementing the Proposals, the Investment Adviser has agreed to take responsibility for all actions taken by the Manager prior to the Effective Date. The retained performance fee currently held by the Company in a reserve account will also remain in place and will be available to be off-set against any underperformance by the Company's portfolio. There is therefore no change to the Company's financial position.

The Directors have received advice that the Proposals should not lead to an increased risk of the Company being considered to be tax resident in the United Kingdom or being treated or being treated as carrying on a trade in the United kingdom, although this will depend on the ongoing operation of the Company and the view taken by relevant tax authorities cannot be guaranteed.

Pursuant to the AIM Rules, the Investment Adviser is a related party of the Company. As the New Investment Advisory Agreement will over its term lead to the payment of fees in excess of 5 per cent. of the Company's market capitalisation to the Investment Adviser, the entry into the New Investment Advisory Agreement constitutes a related party transaction for the purposes of AIM Rule 13. In light of the requirements of that rule, the Directors confirm that they consider, having consulted with the Company's nominated adviser, PricewaterhouseCoopers LLP, that the terms of the New Investment Advisory Agreement are fair and reasonable insofar as the Company's Shareholders are concerned.

The Board wishes to place on record its sincere thanks to the Manager, which has performed its functions under the Management Agreement diligently over the three years since the Company's launch.

Changes to the Board of Directors

As part of its review of the Company's operations, the Board has considered its own composition and role. The increased oversight and more frequent Board involvement that will result from the Management Reorganisation has led to a number of changes being proposed. The first is that Douglas Maccabe intends to step down from the Board at the conclusion of the Extraordinary General Meeting. The board wishes to thank Mr Maccabe for his valuable contribution to the Company over the three years that he has served as a Director and, on behalf of the entire Board, wish him every success in his future endeavours. Subject to Jersey Financial Services Commission approval, it is intended that Mr Maccabe will be replaced on the Board by Donald Adamson. Mr Adamson has been involved with the Company since its launch in 2007 as the chairman of the Manager and will be a valuable addition to the Board. Mr Adamson currently holds 50,000 Shares and 25,000 Manager Warrants.

It is intended that Mr Adamson will remain on the board of the Manager for a transitional period following his appointment to the Board. Assuming the Management Reorganisation is implemented, this will not present any ongoing conflict of interest issues. In the event that the Management Reorganisation is not implemented, procedures will be put in place to ensure that any potential conflicts of interest arising from Mr Adamson's roles as a director of the Manager and the Company are managed effectively.

Helen Grant has also indicated that she wishes to step down from the Board in the near future. The Board is currently engaged in identifying a replacement for Ms Grant and an announcement will be made in due course. Ms Grant does not currently receive any remuneration in recognition of the Company's fee agreement with her employer, State Street, which provides administrative and accounting services to the Company.

The Board considers that any new Directors appointed by the Company, including Mr Adamson, will be paid fees that reflect the responsibilities of their role. The Board has also undertaken a more general review of existing Board remuneration arrangements in the light of the Management Reorganisation and the increased size of the Company. It is the Board's intention to increase the fees of the Directors to £25,000 per annum each and in the case of the Chairman to £60,000. In order to facilitate the above proposed increases, the Board wishes to increase the maximum aggregate annual fees limit payable to Directors from £100,000 to £160,000. This requires the approval of an ordinary resolution of the Company.

Amendments to the Company's articles of association

The Company's Articles currently contain provisions requiring the Company to have a manager in place, as well as stipulating that the manager must not be incorporated in the United Kingdom. Having taken advice, the Company considers that these provisions are no longer required and that the benefit of the Management Reorganisation justifies amending the Articles to remove them. If the Articles are not amended, the Management Reorganisation will not be implemented.

In addition, the New Articles reduce the notice period required for general meetings to 14 clear days from 21 clear days, in line with recent changes to Jersey law.

The implementation of the Management Reorganisation is conditional on the passing of the special resolution proposing the adoption of the new articles of association.

Review of custody arrangements

In conjunction with the Management Reorganisation, the Company has been reviewing the arrangements it has in place for the custody of its assets. A custody agreement was put in place at the Company's launch in 2007 to provide an independent entity to hold any of the Company's assets or documents of title that are held in Jersey. Given the way that the Company's assets have been held since its launch, however, the Board is considering whether these arrangements remain appropriate. An announcement will be made following the conclusion of this review.

4. Expected timetable

\* This event is conditional on the passing of Resolution 1 at the General Meeting.

+ This event is conditional on the passing of Resolution 2 at the General Meeting and all necessary approvals and consents being obtained (inter alia) from the Jersey Financial Services Commission.

DEFINITIONS

About Ludgate Environmental Fund:

Ludgate Environmental Fund Limited ("LEF" or "the Fund") invests in a diverse portfolio of late stage opportunities in the European cleantech sector.

Applying an active management approach, LEF invests growth capital into cleantech companies. The underlying drivers in this sector are strong: increasing strains on natural resources; rising concerns over waste and pollution; increasing public support; and maturing environmental technologies. Focus areas of the Fund include alternative energy; waste management and resource recovery; energy efficiency; water management; industrial process advances and emission reduction technologies.

LEF was launched in August 2007 and further fundraisings completed in March and November 2008 have seen assets increase to approximately £50 million. The Fund is a Jersey domiciled closed-ended investment company, quoted on AIM under the symbols LEF.L for the shares and LEFW.L for the warrants.

Website: www.ludgateenvironmental.com 

For further information contact:

Ludgate Environmental Fund Limited +44 (0) 1534 609 329

John Shakeshaft, Chairman

Ludgate Investments Limited +44 (0) 20 7621 5770

Nick Pople / Nigel Meir

PricewaterhouseCoopers LLP (Nomad) +44 (0) 20 7213 8898

Melville Trimble

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

Paul Fincham

Shared Value Limited +44 (0) 20 7321 5038

Peter Edsinger

DISCLAIMER

PricewaterhouseCoopers LLP is acting as nominated adviser to the Company for the purpose of the AIM Rules for Companies. PricewaterhouseCoopers LLP, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company. PricewaterhouseCoopers LLP is not acting for any other person in connection with the matters referred to in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of PricewaterhouseCoopers LLP or for giving advice in relation to the matters referred to in this announcement.

This announcement has been issued by the Company and is the sole responsibility of the Company.

This announcement does not constitute a prospectus relating to the Company and has not been approved by the UK Listing Authority, nor does it constitute or form any part of any offer or invitation to purchase, sell or subscribe for, or any solicitation of any such offer to purchase, sell or subscribe for, any securities in the Company under any circumstances, and in any jurisdiction, in which such offer or solicitation is unlawful. Accordingly, copies of this announcement, including the appendix, are not being and must not be mailed or otherwise distributed or sent in or into or from the United States, Canada, Australia or Japan or any other jurisdiction if to do so would constitute a violation of the relevant laws of, or require registration thereof in, such jurisdiction or to, or for the account or benefit of, any United States, Canadian, Australian or Japanese person and any person receiving this announcement, including the appendix, (including, without limitation, custodians, nominees and trustees) must not distribute or send it, in whole or in part, in or into or from the United States, Canada, Australia or Japan.