Q3 Newsletter

Q3 2010 Newsletter

This Newsletter of the Investment Adviser to the Ludgate Environmental Fund Ltd ("LEF" or "Fund"), covers the period from 30 June to 30 September 2010 and describes the Fund's performance, our view on current market conditions, the progress made by investee companies and current transactions in the cleantech sector.

Fund Highlights:

·; LEF raised a further £9.8m from existing and new institutional investors at the prevailing net asset value

·; LEF paid a dividend of 1.65p per share (2009 1.5p)

·; Investment of £0.3 million into UK solar developer Lumicity

·; Streamlining of advisory relationship - LEF Board is now advised directly by Ludgate Investments Ltd not via Ludgate Fund Management (Environmental) Jersey Ltd which has been dissolved

·; Donald Adamson and David Pirouet join the LEF Board replacing Helen Grant and Douglas Maccabe

·; Adjustment of Hydrodec Loan Note Conversion price from 16.66p to 14.64p per share

Investee Company Highlights:

·; agri.capital expands into Italy with 7 projects through the qualification process

·; New Earth Solutions: Avonmouth facility commences construction; this facility will process 120ktpa contracted by the West of England Partnership (Bristol, Bath and other councils in the south west)

·; RAP successfully launches Freshpack sandwich packaging system with take up by two major UK supermarkets

·; Hydrodec successfully raises £2.8m to invest in the growth of the business and to strengthen its balance sheet

·; Terra Nova: plant on schedule to be operational in Q1 2011

·; STX continues to expand its team on the back of consistent revenue generation and profitabilty

In the three months to 30 September 2010, the NAV per share was unchanged at 98.6p compared to the NAV at 30 June 2010. The NAV at 30 September 2010 is stated after payment of a dividend of 1.65p per share which was covered by earnings retained from invested assets.

In September 2010, the Fund made an investment of £0.3 million into Lumicity, a UK solar developer with an experienced management team and a pipeline of projects. The company is developing solar projects in the UK which are expected to benefit from the Feed in Tariff regime established by the UK government following the Comprehensive Spending Review.

On 2 August 2010, LEF announced the placing of 10,293,365 new shares at 97.15p per share (NAV per share at 30 June 2010 less the declared dividend) to provide capital to back a growing pipeline of investments and for follow-ons to support the growth of existing portfolio companies.

Performance Data

The Market

Global cleantech venture investment totalled $1.6 billion in Q3 2010 across 166 deals. This represented around 21% of total global venture investment. The total invested in the three quarters of 2010 now stands at $5.8 billion which already exceeds the investment for the full year 2009 ($5.7 billion) though Europe and Israel has seen its proportion of this drop to 20% (28% first three quarters 2009).

The UK remained the biggest European market for cleantech VC investment in Q3 2010 with $179m into 25 deals followed by France with $77m across 15 deals and Sweden with $39m into 4 deals. As an interesting comparison, Chinese companies raised $153m across 11 deals in the same period.

The leading five sectors for VC investment in Q3 were transportation, biofuels, smart grid, energy efficiency and solar but investment across the various sectors is broadening and becoming more evenly dispersed.

In the area of waste and recycling, where LEF has significant exposure and experience, $159m was invested in Q3 2010. UK government policy is focusing more on this area through its Waste and Recycling Action Programme. In this context, Monsal, the waste to energy business, in the UK was one of the largest deals at $22m confirming the development of anaerobic digestion and biogas production in the UK.

LEF's portfolio company, agri.capital, is Europe's largest biogas producer and we continue to seek and monitor similar opportunities in the UK. The confirmation by the UK Department of Energy and Climate Change that a system guaranteeing consistent subsidies for renewable energy technologies, would apply to biomass plants, including Energy from Waste ("EfW") and Anaerobic Digestion ("AD") will help these areas and is reflected in our pipeline of companies under consideration. The UK coalition government has also stated its intention to retain the banded Renewable Obligation Certificate system and establish a "full system of feed-in-tariffs". This will also help to underpin the development of renewable energy including waste to energy.

The UK government will have to bring in domestic legislation by 12 December 2010 to comply with the revised EU Waste Framework directive. The revised directive will require member states to: set up "separate collections" of waste for at least paper, metal, plastic and glass by 2015 for both household and business waste; recycle 50% of household waste by 2020; recover 70% of construction and demolition waste by 2020.

The UK government is also conducting its own Waste Policy review which us due out in the spring of 2011. This will address the best ways to reduce waste and maximise the money to be made from waste and recycling.

The recent creation of a green investment bank in the UK backed by £1 billion, though a relatively modest amount compared to the capital required to meet EU targets on renewable energy, will at least provide a catalyst for further private sector funding.

The UK government has also confirmed £860m in funding for the Renewable Heat Incentive ("RHI") as a means of pushing the heat generated by renewable sources from its current 1% to 12% by 2020. The programme is expected to launch in June 2011. LEF is actively reviewing opportunities which will benefit from the RHI regime.

In the renewable energy infrastructure area, wind and solar continued to lead with a record $33 billion of project finance raised in Q3 2010. China was the leading country with $13.5 billion. UK solar opportunities are now emerging thanks to the commitment of the UK government, following the Comprehensive Spending Review, to feed in tariffs for solar energy though some adjustment could still occur if larger, "solar farm", installations create more capacity than was expected. The feed in tariffs will benefit developers like Lumicity - the latest addition to the LEF portfolio.

A lack of consistent international support is still undermining the faster expansion of renewable energy however and there is skepticism that the current Cancun summit on climate change will, like the previous meeting in Copenhagen, fail to deliver a binding global agreement on emissions and green energy with many focusing instead on the next summit in South Africa in 2011.

Nevertheless, global spending on new renewable power generating capacity continues to exceed that on fossil-fuelled capacity. Price depression of wind and solar energy equipment, which should continue medium term, has also benefited developers.

The largest VC deals in Q3 were for: Kior ($110m), a Texas-based developer of a catalytic cracking technology for turning biomass into bio-crude; Plasco Energy ($110m) a Canada-based developer of waste to energy technology; Trilliant ($106m), a California-based provider of wireless equipment and management software for smart grid communication networks; e-Gen ($79m) a UK-based wind project developer founded in 2009; and eHi Car rental ($70m), a China-based car sharing company.

Corporate investors continue to grow their exposure with investments from the venture arms of ABB, Chevron, Unilever, Intel, Samsung, Siemens, Dow, Honeywell, GM and BASF.

There were ten cleantech IPOs tracked by the Cleantech Group in Q3 2010 totalling $991m. The three largest were: China Ming Yang Wind Power group, the largest non-state owned wind turbine manufacturer in China which raised $350m on the NYSE; Elster Group, a German electric, gas and water metering company which raised £211m on the NYSE (was owned by CVC Capital Partners); and Ameresco, a US provider of energy efficiency services and developer of renewable energy projects which raised $87m on the Nasdaq.

There were 154 cleantech M&A deals in Q3 2010 totalling $4.5b. Prominent acquisitions included: Green Mountain Energy Company, a US provider of clean energy products and carbon offset solutions, by NRG Energy for $350m in cash; Recurrent Energy, a US solar project developer, by Sharp for $305m; CPower, US energy management and demand response provider, by Constellation Energy for an undisclosed sum.

Investment Portfolio

As at 30 September 2010:

·; Combined investments valued at £29.6m in eleven companies, (53% of net assets).

·; £11.6m (39%) of investments made by the Fund are in the form of income producing convertible loan notes, preferred stock or working capital facilities, each with a coupon of between 8% and 10% per annum.

·; £15.7m (53%) of investments made by the Fund are structured to provide a 1.5x liquidation preference or minimum return.

·; Total income generated from the investments during Q3 2010 totalled £0.25m.

The following table presents the Investment Portfolio as at 30 June 2010 based on historical costs (using the exchange rate at the point of investment):

agri.capital GmbH

Biogas Developer, Owner and Operator

Valuation at 30 September 2010 (method): £6.9m (guaranteed minimum return)

Investment: €3.0m (£2.5m) (8% Preference E Shares with Detachable Warrants) and €4.3m (£3.9m) (10% Preference F Shares with Detachable Warrants)

LEF Ownership:undetermined

Date(s) of Investment:Q4 2008, Q2/Q3/Q4 2009

Company Summary:

agri.capital is a specialist developer, owner and operator of biogas plants, established in 2004. The business uses manure and crop silage to produce biogas. This methane-rich gas mixture is either burned onsite to create electricity and heat, or is cleaned and fed into the existing natural gas network. The fermentation residue is used as a high-quality fertilizer, returning nutrients to the soil. agri.capital uses proven technology from leading German EPC contractors and can rapidly roll-out fixed-price plants. The Company has secured feedstock contracts to match the off-take tariffs resulting in stable plant revenues.

Investment During The Period:

No further investments were made during the period.

Recent Highlights Include:

·; Leading biogas producer in Europe; in Germany it has 19% of the biogas-to-electricity market and 9% of the biogas-to-grid market

·; As at 30 September 2010, the company had 48 MW in operation or under construction with 53 sites currently operating

·; Pipeline of 65.9 MW of projects at qualification level

·; Total pipeline of 143MW across 129 sites

·; Seven projects have passed the qualification process in Italy (15 year guaranteed feed in tariffs)

·; Proportion of biomethane to grid vs CHP higher in new projects

·; Series G fund raising in progress

LEF has an observer seat on the Board of agri.capital. Nick Pople and Bill Weil, of the Investment Adviser, are alternates as the LEF observer.

New Earth Solutions Group Limited

Waste Treatment and Renewable Energy

Valuation at 30 September 2010 (method): £5.9m (at historical cost)

Investment: £3.0m (Preferred Ordinary Shares) and £2.0m (10% Convertible Note)

LEF Ownership:undetermined

Date(s) of Investment:Q3 2009

Company Summary:

New Earth Solutions Group Limited("NESG") is a UK business comprising the waste treatment company, New Earth Solutions Ltd and the renewable energy company New Earth Energy Ltd. New Earth Solutions helps local authorities to meet their obligations to divert waste under the EU Landfill Directive and contributes to composting and recycling rates. It has existing and planned operations in the south and central England and contracts to receive waste from several local authorities. It has pioneered enclosed composting and biological treatment in the UK. New Earth Energy is developing and delivering innovative third party advanced thermal technologies to support the use of waste-derived feedstock for renewable power plants and combined heat and power schemes for public and private customers.

Investment During The Period:

No further investments were made during the period. Conversion of Convertible Loan Notes into shares at a discount to the last funding round

Recent Highlights Include:

·; The Avonmouth facility commenced construction with foundation piling well underway by the close of the period.

·; New Earth signed a contract with the West of England Partnership for 120,800 tpa over 5 + 4 years. The West of England Partnership is a grouping of 4 local authorities comprising the Councils of Bristol City, Bath and North East Somerset, North Somerset and South Gloucestershire. This contract underpins the new facility at Avonmouth.

·; Waste is now being received from Denbighshire and Cardiff councils.

·; New Earth has won 2 new contracts with Bath and North East Somerset Council. The first is a food waste contract in the order of 5,000tpa being sent to the facility in Sharpness for a period of 7 + 4 years. The second is a further commitment from the Council to send additional waste to the Avonmouth facility and represents 25,00tpa of residual waste running from 2013 for 3 years.

·; New Earth has submitted its final bid for a 24 year, 50,000 tpa contract with the Scottish Borders Council. This bid also encompasses a renewable energy solution.

·; New Earth has signed a licensing agreement with EPi giving the company the right to assemble and use the EPi pyrolysis technology in its own renewable energy schemes in England, Scotland and Wales.

LEF has the right to appoint a director to the Board of NESG. Nick Pople and Bill Weil, of the Investment Adviser, are LEF's nominee observers on the NESG Board.

Rapid Action Packaging Limited

Food Packaging Solutions

Valuation at 30 September 2010 (method): £5.8m (at historical cost)

Investment: £1.5m (Ordinary Shares), £2.5m (8% Convertible Notes) and £1.5m drawn down of the £1.5m Working Capital Facility

LEF Ownership:31.3% (assumes full conversion of Convertible Notes and exercise of all Warrants)

Date(s) of Investment:Q2 2008, Q2 2009

Company Summary:

Rapid Action Packaging Ltd ("RAP") specialises in the design, manufacture and supply of innovative, ergonomic, cost effective and environmentally responsible packaging systems particularly for the "food on the move" marketplace. RAP's unique packaging solutions combine the benefits of both paper and film technologies to improve packaging as a vital tool in sales growth for food retailers whilst also putting a strong emphasis on environmental performance and responsibility. All RAP's products are available in fully recyclable materials. It has licensed production of certain of its products to third parties in the US and Asia. In Europe, product design, sales and production are based in Ireland and the UK.

Investment During The Period:

In June 2009, LEF committed to provide a £1.0m working capital facility to RAP to fund the purchase of equipment, installation costs and planned increased stock levels in advance of a new product launch aimed at Continental Europe and North America in the first half of 2010. In the period, RAP drew down a further £0.5m of the working capital facility reaching the facility's £1.0m headroom. In May 2010, LEF agreed to provide a £0.5m extension to the original working capital facility, and as at 30 September 2010, the total £1.5 million facility had been drawn down. In August 2010, LEF's Convertible Unsecured Loan Stock with a nominal value of £2.5m was converted into ordinary shares.

Recent Highlights Include:

·; RAP successfully launched a sandwich packaging system designed for the UK market known as Freshpack.

·; The Freshpack system has been taken up by two major UK supermarkets, as well as petrol stations and other retail outlets. Retailers are reporting an uplift in sales as a result of the launch.

·; The modified atmosphere packaging trials continue with three national US convenience stores with initial feedback indicating a meaningful reduction in waste due to the extended shelf life provided by the packaging.

·; Convertible Unsecured Loan Stock with a nominal value of £4.125m was converted into ordinary shares in the company on 3 August 2010.

LEF has a seat on the Board of RAP. Nick Pople, of the Investment Adviser, is the LEF nominee.

Hydrodec Group Plc (AIM:HYR)

Specialist Oils Recycling

Valuation at 30 September 2010 (method): £4.2m (quoted share price and Black Scholes)

Amounts Invested:£3.5m (Ordinary Shares), £3.0m (8% Convertible Loan)

LEF Ownership:c. 9.0% (assuming full conversion of the Convertible Loan)

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. Hydrodec's first commercial process re-refines the used transformer oils that insulate and cool utility transformer boxes. It currently has commercially operating plants in New South Wales in Australia and Ohio in the US, the largest market for transformer oil in the world.

Investment During The Period:

No further investments were made during the period.

Recent Highlights Include:

§ December 2010 - Q3 volumes of 5.53m litres; volumes H2 2010 already exceed H1 2010 (9.4m litres) with a month to go; number of feedstock suppliers up from 12 to 22 this year but feedstock supplies remain a constraint; transformer oil prices trending higher

§ Current demand for SUPERfine transformer oil exceeds capacity in the US

§ Company expects to achieve operating cash surplus in H1 2011 and be net cash generative thereafter

§ Progress continues in the strategic alliance with Kobelco-Eco Solutions (a member of the Kobe Steel group); engineering plans for the first plant are well advanced (two further plants may be required); Managing Director has been recruited for Hydrodec in Japan.

§ Major new OEM customer in the US

§ October 2010 - Hydrodec successfully raised £2.8m to invest in the growth of the business and to strengthen its balance sheet - share price has risen since this funding

§ Adjustment of Hydrodec Loan Note Conversion price from 16.66p to 14.64p per share as a result of the placing being priced at a discount of more than 10% to the prevailing market price (terms of Loan Note Agreement)

§ Licence from the US Environmental Protection Agency to treat poly-chlorinated biphenyl (PCB) contaminated oil is now expected early next year; in preparation for this, additional work is already underway at Canton and contaminated oil sources are being identified

§ August 2010 - Interim Results for H1 2010

o Revenues increased 82% to $8.2m (H1 2009 $4.5m)

o SUPERfine Sales up 147% to 9.4m litres (H1 2009 3.8m litres)

o Gross profit $3.7m (H1 2009 $2.3m)

o Operating loss $2.9m (H1 2009 $3.8m)

o Gross margin improvement expected to continue

§ July 2010 - Appointment of Stephen Harker to the Board. Stephen strengthens the management team, as COO, with 30 years experience of international marketing of specialist oils at BP/Castrol, Shell and Caltex.

§ July 2010 - Paul Manchester, CFO, joins the Board as Finance Director following his contribution to improved financial management

Terra Nova SAS

Electronic Waste Recycling

Valuation at 30 September 2010 (method): £2.9m (at cost)

Investment: £2.7m (Preference Shares)

LEF Ownership:c.25%

Date(s) of Investment:Q4 2009

Company Summary:

Terra Nova is a French company established to develop a printed circuit board treatment and recycling business. The team behind Terra Nova has extensive experience in the metals industry having worked together for a number of years at Metaleurop, a quoted lead, zinc and precious metal processor. The company has commenced construction of a 30,000 tonnes per annum pyrolysis plant to pre-treat printed circuit boards for the major metal smelters. The new facility will help meet the requirements of the EU Waste from Electrical and Electronic Equipment (WEEE) Directive, easing the pressure to export harmful waste to the developing world. Terra Nova is located within the Arcelor-Mittal industrial site at Isbergues (Pas-de-Calais), France.

Investment During The Period:

No further investments were made during the period.

Recent Highlights Include:

§ Construction of the pre-treatment and recycling plant for printed circuit boards in Northern France continues to be on time and on budget.

§ Positive discussions with potential customers with overall improvements in the price of the off-take product. Discussions have already commenced for production volumes greater than the capacity of the plant.

§ Discussions ongoing with WEEE dismantlers for supply of printed circuit boards sufficient to far exceed capacity of the facility.

§ Operations are expected to start by Q1 2011 as planned.

§ R&D efforts continue to show promise for future operational enhancements.

LEF has a seat and, additionally, has observer status on the Board of Terra Nova. Charles des Forges, a member of LEF's Advisory Panel, has been nominated as Chairman of the Supervisory Committee and Bill Weil and Nick Curtis, of the Investment Adviser, are alternates as the LEF observer.

STX Services B.V.

Environmental Product Broking

Valuation at 30 September 2010 (method): £1.7m (EVCA Valuation methodology)

Investment: €0.8m (£0.6m) (Ordinary Shares)

LEF Ownership:24.9%

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

Company Summary:

STX is an Amsterdam-based company specialising in the broking of environmental financial products with a particular focus on the carbon markets. STX has mostly been active in broking EU Emission Allowances ("EUAs") but has diversified into transactions in Certified Emission Reduction ("CERs"), Biofuel Tickets, Green Certificates and other environmental trading. STX is active across the European markets.

Investment During The Period:

No further investments were made during the period.

Recent Highlights Include:

§ Revenues in Q3 2010 were consistently above those in H1 2010 and 91% above those in Q2 2010

§ Revenues have been well distributed across Biofuel Tickets and Barges, CSOs, RECs and GOOs, EUAs and CERs.

§ Team has expanded and 2 new junior brokers joined the team in Q3 2010. Following these new hires, STX will comprise 15 brokers, 3 support staff and 2 directors.

§ The cap for CO2 discharges in Phase III of the EU Emissions Trading Scheme, which will come into effect from 2013, has been set at 2.04 billion tons, valued at about €31 billion at today's price. This limit includes aluminium and chemical producers and airlines which join the scheme.

LEF has a nominee on the Management Board and on the Credit Committee of STX. Nigel Meir, of the Investment Adviser, is the LEF nominee on the Management Board and on the Credit Committee.

Hightex Group Plc

Membrane Structures and Solar Cooling

Valuation at 30 September 2010 (method): £0.8m (quoted share price)

Investment: £0.7m (Ordinary Shares)

LEF Ownership:5.3%

Date(s) of Investment:Q2 2010

Company Summary:

Hightex is a specialist engineering company with two core activities: Hightex designs, fabricates and installs large area, architectural polymer membranes for roofing and façade structures; its SolarNext subsidiary has developed air-conditioning systems whereby solar energy replaces electric power. The SolarNext solar cooling kit is able to be retro-fitted to many kinds of structures and is managed by an innovative, proprietary controller that can efficiently manage multiple input sources (solar, district heating, biomass, CHP). Hightex membranes are typically used for sporting stadiums and arenas; transport terminals; shopping malls as a competitive alternative to glass: it enables complex shapes to be created and is also safer than glass in the event of an explosion. Hightex uses environmentally friendly materials and is focused on innovative technology and coatings, which help to reduce a building's energy costs.

Investment During The Period:

No further investments were made during the period

Recent Highlights Include:

§ Announced Interim Results for six months ending 30 June 2010:

o Turnover up 90% to €13.8m (2009 €7.3m)

o Pre-tax profit up 432% to €636,000 (2009 €147,000)

o All of 2010 forecasted revenue and 37.5% of 2011 forecasts already secured

o Cash balances at 30 June 2010 were €4.5m (€1.4m at 30 June 2009)

§ Work advancing on: retractable roof above the Olympic Stadium in Kiev; roof over the national Stadium in Warsaw; and the entire retractable roof and fixed façade on the BC Place Stadium, Vancouver - these three contracts total approximately €45.3m

§ Insurance solution obtained from Coface in August for provision of performance and warranty bonds on all contracts, replacing need to deposit cash into blocked deposit accounts and hence freeing up working capital

§ Coface will also finance all substantial costs associated with material supplies for future contracts which will further increase working capital flexibility

§ Frank Molter appointed CEO in June 2010 having been FD and COO previously

§ Other hires and appointments to strengthen the senior management included the Head of Technical Project Management, Key Account Salesman and Group Financial Controller

§ Revenues from the solar cooling business of €175,000 in H1 2010; actively pursuing commercial and financial partners to develop this business for larger scale commercialisation

Dr Charles DesForges, Executive Chairman of Hightex, is on the Advisory Panel of LEF and Chairman of Terra Nova S.A. Charles Sebag-Montefiore, non-executive director of Hightex, is also an executive director of Ludgate Investments Limited, Investment Adviser to LEF.

Phoslock Water Solutions Limited (ASX: PHK) 

Water Treatment Technology

Valuation at 30 September 2010 (method): £0.4m (quoted share price)

Investment: £0.4m (Ordinary Shares and Warrants)

LEF Ownership:3.0%

Date(s) of Investment:Q3 2008, Q2/Q3 2009

Company Summary:

Phoslock is a unique water treatment product, invented and developed by the Commonwealth Scientific & Industrial Research Organisation (CSIRO), Australia's national scientific organization. Phoslock retains phosphorus and provides a protective capping to sediments preventing phosphorus re-release, thus improving water quality for human use and aquatic life as well as preventing harmful algae blooms. Phoslock is used for lakes, drinking water reservoirs and other high value water bodies. PWS is headquartered in Sydney, Australia, with offices in Kunming, China and Bremen, Germany, and is represented by licensees and agents in another ten countries.

Investment During The Period:

In September 2010 LEF acquired 1,500,000 ordinary shares at a price of 3.1 pence per share.

Recent Highlights Include:

§ Announced its Annual Report for year ending 30 June 2010:

o Revenues up 79% to A$1.94m

o EBITDA loss down 38% to A$1.2m

o Cashflow positive for the final quarter of the year

o 25 commercial applications including paid trials during the year (15 in 2009)

§ October - announced A$450,000 contract for a lake in Northern Germany with high levels of blue green algae

§ Company working on 17 projects with total sales value over A$7m across Australia, Europe, Asia and North America

§ Expect sales between 1500 - 2000 tons in 2011 (700 tons in 2010)

§ New product under development for absorption of very high levels of phosphorus

§ Placement of new shares which raised A$1.2m in September 2010

§ Commercial relationship established in China with a lake remediation company

§ Marketing agreement with AquaTechnex in the US with the first applications of Phoslock in California showing positive results; separate agreement signed with a lake remediation company which covers Florida and adjoining states

Renewable Energy Generation (AIM:WIND)

UK Onshore Wind Development

Valuation at 30 September 2010 (method): £0.5m (quoted share price)

Investment: £0.7m (Ordinary Shares)

LEF Ownership:less than 1%

Date(s) of Investment:Q3 2008, Q2 2010

Company Summary:

Renewable Energy Generation ("REG") is a UK focused renewable energy group, quoted on AIM (RWE), principally involved with wind power generation and bio power. The Group develops, owns and operates UK wind farms and also generates power in the UK from refined, used vegetable cooking oil.

Investment During The Period:

No further investments were made during the period

Recent Highlights Include:

§ Results for year ending 30 June 2010:

o Revenues £6.2m (2009 £5.6m)

o Group profit after tax of £2.5m following disposal of the Canadian subsidiary (2009 loss of £9.1m)

o Loss for the year from continuing activities before tax and exceptional items £2.4m (2009 loss of £1.9m)

o Total cash and restricted cash of £22.1m

o Proposal to pay final dividend of 1.5p per share (2009 1.5p)

§ 9 operating projects with total capacity of 37.15MW

§ Expect to add at least 25MW in each of the next two years

§ Company has now brought all maintenance and operations functions in house

§ Project finance now being put in place to release equity investments

§ Wind project pipeline now 560MW across 70 projects

§ Hockwold waste cooking oil processing plant completed - can treat 18,000 tons of oil sufficient to operate 15MW CHP plant

Emergya Wind Technologies B.V.

Wind Turbine Manufacturing

Valuation at 30 September 2010 (method): £0.1m (latest investment round)

Investment: £2.2m (8% Preference Shares) and £0.5m (Preference Shares with Warrants)

LEF Ownership:2.5%

Date(s) of Investment:Q4 2007, Q3 2008, Q2/Q4 2009

Company Summary:

EWT is a Dutch-based manufacturer and supplier of wind turbines and turnkey wind parks. It specialises in the development and manufacture of advanced direct-drive (gearless) wind turbines. EWT was established in 2004 by the acquisition of the intellectual property of Dutch wind turbines manufacturer Lagerwey. The current product consists of the 750 KW and the 900 KW series and EWT is also developing 2 MW wind turbines for onshore applications.

Investment During The Period:

No further investments were made during the period.

Recent Highlights Include:

§ September 2010 - EWT raised €9.7m from existing investors

§ Sales of turbines still hampered by lack of project finance for developers

§ Sales prospects better for 2011

§ First 2MW EWT turbine has been erected in China with its Chinese partner CALT/China Energine; EWT has the licence to sell the 2MW turbine outside China

Lumicity Limited

UK Solar Developer

Valuation at 30 September 2010 (method): £0.3m (latest investment round)

Investment: £0.3m (convertible loan notes)

LEF Ownership:42.7%

Date(s) of Investment:Q3 2010

Company Summary:

Lumicity will develop, finance, construct, own and operate ground mounted and rooftop solar projects in the UK. UK Feed-in Tariffs ("FIT") introduced on 1 April 2010 (fixed until 31/3/12) has created the opportunity for UK solar developers. The Company will focus on building integrated projects, either for retail/industrial sites with large roof areas or sites with multiple installations such as housing associations and large ground mounted sites (up to the 5MW FIT limit).

Investment During The Period:

Purchase of 149,000 Convertible Loan Notes which convert at £2 per share.

Recent Highlights Include:

§ Lumicity has brought together an experienced team with development and solar construction expertise

§ Established partnerships with leading European solar installers

§ Contracted arrangements with local site scouts, including large corporate agents

§ Commenced collaboration with UK-based engineering companies regarding permitting, grid connection and commissioning

§ Over 50MW of projects in active negotiation and more than 650MW in the pipeline

LEF has the right to nominate a director to the Board. Bill Weil, of the Investment Adviser, will act as the LEF nominee, with Nick Curtis as the alternate.

Deal Flow

As Investment Adviser to the Fund, we monitor portfolio companies closely for current performance and future prospects. To facilitate growth, a number are likely to require additional funding in 2010/11 and the Fund would expect to support this through further investment.

We continue to review the new investment opportunities from the marketplace, as well as those generated internally. The placing that the Fund has recently announced will enable the Investment Adviser to recommend several investments which may include opportunities currently in due diligence.

These opportunities reflect a focus on distributed energy including solar and biomass developers. The Fund is also considering an investment in an energy-efficiency technology.

Board of Ludgate Environmental Fund

Donald Adamson and David Pirouet joined the Board of LEF.

Donald was previously Chairman of Ludgate Fund Management (Environmental) Jersey Ltd, which was the Jersey Manager of LEF, and therefore closely involved with LEF since its inception. He is Chairman of the Offshore Committee of the Association of Investment Companies and has 28 years' experience of fund management, private equity and corporate finance. He serves on the Board of a number of listed and privately held investment companies including a number of Pantheon Funds and Cambium Global Timberland.

David is a qualified accountant and was an audit and assurance partner for 20 years with Pricewaterhouse Coopers CI LLP until he retired in 2009. He specialises in the alternative investment management area. He serves on the Board of a number of funds including GCP Infrastructure Investments Ltd and as a non-executive director of the General Partners to the CEE Special Situations Fund LP and to the AEGON Target Healthcare General Partner Ltd.

Other Fund Data 

ISIN Number - shares JE00BIYW3102

ISIN Number - warrants JE00BIYW3L02

Reuters RIC Code - shares LEF.L

Reuters RIC Code - warrants LEFW.L

Bloomberg code - shares LEFLN

Bloomberg code - warrants LEFWLN

For further information contact:

Ludgate Environmental Fund Limited +44 (0) 1534 609329

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

Important Information

Past performance is not a guide to future performance. The value of investments and the income generated from them may go down as well as up and are not guaranteed. You may not get back the amount you originally invested. Changes in rates of exchange and stock market performance may cause the value of investments to fluctuate. Where investments are made in unquoted securities or smaller companies, their potential volatility may increase the risk to the value of, and the income from, the investments. Net Asset Value (NAV) performance is not the same as share price, and you may realize returns that are lower or higher than NAV performance.