AQUILA ENERGY EFFICIENCY TRUST PLC

ANNUAL REPORT

FOR THE PERIOD FROM 9 APRIL 2021 (DATE OF INCORPORATION) TO 31 DECEMBER 2021

INVESTING WITH IMPACT

AQUILA ENERGY EFFICIENCY TRUST PLC

ANNUAL REPORT 2021

For more information please contact:

Aquila Group

Valentinskamp 70

20355 Hamburg

Germany

Tel.: +49 (0)40 87 50 50-100

E-Mail: info@aquila-capital.com

Web: www.aquila-capital.com

Hamburg · Frankfurt · London · Luxembourg · Madrid · Oslo · Zurich · Invercargill · Singapore · Tokyo

Important Notice: This document serves informational purposes only. It constitutes neither an investment advice, an investment service nor

the invitation to make offers or any declaration of intent; the contents of this document also do not constitute a recommendation for any

other actions. The validity of the provided information is limited to the date of preparation of this document and may change at any time for

various reasons, especially the market development. The sources of information are considered reliable and accurate, however we do not

guarantee the validity and the actuality of the provided information and disclaim all liability for any damages that may arise from the use of

the information. Historical information cannot be understood as a guarantee for future earnings. Predictions concerning future developments

only represent forecasts. Statements to future economic growth depend on historical data and objective methods of calculation and must

be interpreted as forecasts. No assurances or warranties are given, that any indicative performance or return will be achieved in the future.

The terms Aquila and Aquila Capital comprise companies for alternative and real asset investments as well as sales, fund-management and

service companies of Aquila Group (“Aquila Group” meaning Aquila Capital Holding GmbH and its affiliates in the sense of sec. 15 et seq. of

the German Stock Corporation Act (AktG)). The respective responsible legal entities of Aquila Group that offer products or services to (potential)

investors/customers, are named in the corresponding agreements, sales documents or other product information.

A publication of Aquila Capital Investmentgesellschaft mbH. As at 31.12.2021.

Read more about our

commitment to sustainability

www.aquila-capital.de/esg/

AEET | ANNUAL REPORT FOR THE PERIOD FROM 9 APRIL 2021 (DATE OF INCORPORATION) TO 31 DECEMBER 2021

Contents

Your Company at a Glance ...........................1

Financial Highlights.................................1

STRATEGIC REPORT

Chair’s Statement ..................................2

nvestment Adviser‘s Report..........................6

Investment Adviser Background .....................6

Investment Activity and Pipeline .....................7

Market Commentary: Energy Efficiency ..............14

Environmental, Social and Governance ................21

Investment Policy .................................23

Risk Management .................................26

Section 172 Report ................................31

Other Information .................................33

GOVERNANCE

Directors’ Report..................................36

orporate Governance Statement . . . . . . . . . . . . . . . . . . . . 41

Directors’ Remuneration Report......................46

Report of the Audit and Risk Committee ...............49

Statement of Directors’ Responsibilities ...............52

Independent Auditor‘s Report........................53

FINANCIAL STATEMENTS

Statement of Profit or Loss and Comprehensive Income . . . 59

tatement of Financial Position ......................60

Statement of Changes in Equity ......................61

Statement of Cash Flows............................62

Notes to the Financial Statements ....................63

OTHER INFORMATION

Alternative Performance Measures ...................

Glossary.........................................76

Company Information ..............................78

For more information please visit our website

www.aquila-energy-efficiency-trust.com

INVESTING WITH IMPACT

ANNUAL REPORT 2021

DESIGNED AND PRINTED BY PERIVAN

YOUR COMPANY AT A GLANCE

Investment Objective

AQUILA ENERGY EFFICIENCY TRUST PLC (THE “COMPANY” OR “AEET”) SEEKS

TO GENERATE ATTRACTIVE RETURNS, PRINCIPALLY IN THE FORM

OF INCOME DISTRIBUTIONS BY INVESTING IN A DIVERSIFIED PORTFOLIO OF

ENERGY EFFICIENCY INVESTMENTS.

Management

The Company has appointed International Fund Management Limited

as its Alternative Investment Fund Manager (“AIFM”) to provide

portfolio and risk management services. The AIFM is part of the

Sanne Group, one of the largest independent financial services groups

based in the Channel Islands and is listed on the Main Market of the

London Stock Exchange.

The AIFM has appointed Aquila Capital Investmentgesellschaft mbH

as its Investment Adviser (“Aquila” or “Investment Adviser”). The

Investment Adviser is part of the Aquila Group, which was founded

in 2001. Since its inception it has undertaken a range of advisory

mandates, mostly focused on renewable energy infrastructure,

including energy efficiency.

The Board comprises individuals, all of whom are independent of

the Investment Adviser, from relevant and complementary backgrounds

offering experience in the management of listed funds, as well as in

the energy efficiency and infrastructure sectors.

Capital Structure

As at 31 December 2021 the Company’s share capital comprised of

100,000,000 Ordinary shares of GBP 0.01 each. The Ordinary Shares

are admitted to trading on the Main Market of the London Stock

Exchange and are listed on the premium segment of the Official List.

Financial Highlights

Financial information

As at

31 Dec 2021

NAV per Ordinary Share (pence)

97.38

Ordinary Share price (pence) 95.75

Ordinary Share price discount to NAV

1.7%

Net assets in GBP million 97.38

Ongoing charges

0.9%

Performance summary % change

NAV total return per Ordinary Share

(0.6%)

Share price total return per Ordinary Share

(4.3%)

1 These are Alternative Performance Measures for the period from commencement of operations on 9 April 2021 to 31 December 2021. Share price total return is based on

an opening share price of GBP 1.00 and NAV total return is based on an opening NAV after launch expenses of GBP 0.98 per Ordinary Share.

CHAIR’S STATEMENT

Strategic review

Despite the optimism at the time of flotation in June last year,

deployment of monies raised proved to be very disappointing over

the period and on 31 January 2022, we announced that given the

slower investment deployment than originally anticipated, the Board

was undertaking a comprehensive review of the Company’s investment

strategy with a view to ascertaining how best to accelerate deployment,

whilst maintaining the Company’s prudent credit criteria and return

objectives.

The Board appointed Complete Strategy Ltd, a consultancy firm

experienced in the energy sector, to assist with this review. The review

concluded that whilst certain changes are required to enable the

Investment Adviser to execute on the Company’s investment strategy,

the market opportunity for Energy Efficiency Investments located in

Europe remains attractive, particularly in the context of high energy

prices. The Board consulted extensively with

Shareholders before undertaking the review

and at its conclusion. Shareholders as a whole

were supportive of the continuation of the

Company with the certain changes announced

on 21 April 2022 and which are outlined below.

Changes following the Strategic

review

The Initial Continuation Resolution (for more

details see page 36) originally intended for

2025 will now be brought forward and is

expected to be voted on by Shareholders

during February 2023. Should the Directors

determine that the rate of deployment has

not improved in the period from conclusion

of the review to the end of July 2022, they

will consider bringing that date forward.

The Investment Adviser has agreed to amend

the current Investment Advisory Agreement

such that any advisory fees payable are charged

only on committed capital (being the sum of funds actually invested

and funds committed for investment in Energy Efficiency Investments),

this amendment will be applied retrospectively from the time of the

Company’s IPO in June 2021. The original Agreement entitled the

Investment Adviser to charge fees on the Company’s NAV which

would have included uninvestedcash. This resulted to a reduction

of the Investment Adviser fee from £537,331 to £76,698.

In addition, the Investment Adviser has increased the resources

allocated to the investment team to help them meet the full deployment

target by the end of December 2022 or early 2023.

The Board has also engaged Complete Strategy Ltd for an initial

period of six months from April 2022 to provide it with a detailed

analysis of monthly deployment performance against agreed

performance milestones with the costs of this borne by the Investment

Adviser.

The Board are of the view that these actions, together with a focus

by the Investment Adviser on larger transactions, partnering arrangements

with repeat introducers of transactions and a smaller number of

geographies, should provide a basis to enable the Investment Adviser

to meet its deployment targets.

Update on deployment & dividends

At the last published update on 21 April 2022, the Company had

agreed to invest a total of approximately £19.1 million, of which it

had deployed a total of approximately £15.1 million.

As at 31 May 2022, the Company has committed

a further £0.5 million and deployed £0.6 million,

taking total commitments to £19.7 million and

deployment approximately £15.7 million.

In light of slower than anticipated deployment

and the current expectation that the IPO

proceeds will not be significantly deployed

within twelve months of Admission, theCompany

does not expect that its stated dividend target

of 3.5 pence per Ordinary Share for the financial

year ending 31 December 2022 will be covered

by earnings. The Board will review the position

in respect of any dividend which may be

declared for the financial year ending

31December 2022 in light of the deployment

of the IPO proceeds as the year progresses.

Due to the delay in receiving income for

distribution and that the financial statements

are yet to be filed, at the date of this report

the Board is not recommending payment of

a dividend for the first quarter of 2022.

Board changes

Following the resignations of two Directors, we have appointed

David Fletcher a highly experienced non-executive Director and Chair

of the Audit Committee, as our new Chair of the Audit and Risk

Committee (“ARC”) and as Chair of the Remuneration Committee.

I would like to thank my fellow Director Nick Bliss for standing in as

interim Chair of the ARC. We are well advanced in our recruitment

process to appoint our fourth Board member.

I AM PLEASED TO PRESENT MY FIRST CHAIR’S STATEMENT FOR THE AQUILA

ENERGY EFFICIENCY TRUST PLC WHICH COVERS THE PERIOD FROM 9 APRIL 2021

(THE DATE OF INCORPORATION) TO 31 DECEMBER 2021 (THE “PERIOD”). IT HAS

BEEN A VERY BUSY PERIOD FOR YOUR BOARD FOR THE REASONS DISCUSSED

BELOW.

Miriam Greenwood OBE,

Chair

CHAIR’S STATEMENT

CONTINUED

Green Economy Mark

We are pleased to report that the Company was awarded with

London Stock Exchange’s Green Economy Mark, which recognises

companies that derive 50 per cent or more of their total annual

revenues from products and services that contribute to the global

green economy. We are committed towards reducing CO2 emissions

and improving air quality, while achieving strong returns for our

investors and allowing them to contribute to the European Union

(“EU”) goal of a climate neutral economy.

The need for Energy Efﬁciency

We believe that energy efficiency is the natural partner to renewable

energy if we are to achieve the European goal of net zero by 2050.

The more efficient use of energy is one of the main pillars of the

energy transition. The reduction of daily energy consumption is

Europe’s greatest energy resource. We need to make energy efficiency

part of our everyday lives, to consume less and consume it better. It

protects business and consumers against increases in energy prices,

is better for the environment and it improves the competitiveness of

our economies. Increasing energy efficiency also ensures reduced

dependence on energy imports, thereby improving energy security

and reduces conflicts in distribution.

AEET was launched in recognition of the opportunities, both

economic and social, that are available in monetising energy

efficiency. In terms of implementation, energy efficiency lags the

focus and attention that renewables have received and is an area

with significant growth potential and opportunities, both currently

and for the foreseeable future.

Foreseeable Future

We understand that the actual scope of energy efficiency remains

uncertain to many investors. However, our definition includes all

processes and measures that optimise energy consumption to save

energy. Energy utilisation is increased, and energy losses resulting

from the transport, conversion and storage of energy are reduced.

We distinguish energy efficiency by its aim of reducing primary energy

consumption differentiating from other areas of efficiency in the

power sector, such as generation efficiency from renewables and

from enablers of distribution efficiency, such as grid-scale batteries.

Being energy efficient means using and paying for less energy, even

as value creation increases, producing more competitively and

sustainably. In simple terms: the economies across Europe are more

competitive and sustainable the more energy-efficient they are.

Energy efficiency drives modernisation and innovation processes in

all sectors and opens up new markets for export opportunities. It

also has the potential to boost employment as it can stimulate local

value creation (e.g., through energy-efficient building renovation).

Most importantly, energy efficiency is critical in achieving the EU

climate targets.

It is widely recognised that there is a financing gap with energy

efficiency investments in both the public and private sectors, often

because of scale and complexity, thus capital should be directed to

focus where it is not currently invested. AEET aims to be among the

important private market conduits to facilitate additional energy

efficiency investment on a pan-European basis.

Annual General Meeting

We look forward to welcoming Shareholders to the Company’s Annual

General Meeting (“AGM”) to be held on 28 June 2022 at Cannon

Place, 78 Cannon Street, London EC4N 6AF. The Company will also

hold a General Meeting on 25 July 2022 at 10:00 AM, where this

Annual Report will be laid before Shareholders. The reasons for holding

two general meetings are explained in detail in the Chair’s Letter

accompanying the Notice of Meeting published on 1 June 2022.

Outlook

The Board and the Investment Adviser, have considered the risks

posed by the war in Ukraine in the context of the Company and are

of the view that these risks are counter-balanced by the recent

increase in energy prices which brings with it renewed government

focus on energy efficiency. We are, of course, very mindful of the

terrible tragedy that conflict produces.

We firmly believe that AEET has a differentiated pan-European

investment strategy that offers attractive opportunities now, and,

in the future, and has the potential to provide Shareholders with an

attractive risk-return profile while achieving a positive environmental

impact for the real economy and society. Whilst risks around

deployment remain, your Board will be actively engaged with the

Investment Adviser to support them to reach deployment targets

and grow the Company.

Miriam Greenwood OBE DL

Chair of the Board

23 June 2022

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

SUSTAINABLE DEVELOPMENT GOALS AND THE IMPORTANCE OF ADDITIONALITY

Introduction

To qualify as additional, capital investments must generate an activity

(e.g. related to a UN sustainable development goal (UN SDG), such

as Goal 7: Affordable Energy, Goal 9: Industries, Innovation and

Infrastructure, or Goal: 11 Sustainable Cities and Communities) that

would not have occurred without that capital, i.e. they must be “in

addition to” a baseline scenario that would have occurred anyway

or, in other words, be made knowing that they will make a real,

positive difference. The concept of additionality originated in carbon

offset markets but, more recently, the term additionality has increasingly

appeared in the context of investment, particularly in the case of

sustainable finance (for example, as green bonds) or impact investing.

As with many concepts in the impact investing world, there is no

consensus on additionality as yet. Moreover, measuring additionality

remains challenging because of the need to quantify both the impact

of investment and its longer-term benefits. Nonetheless, we believe

that it can facilitate funding for otherwise lower priority initiatives;

help to integrate increased risk management; encourage more

comprehensive project designs; lead to improved outcomes; and

align projects with environmental, social, and governance standards.

In the AEET context , we believe that investments which financially

support new, expanding, or developing sources of energy efficiency,

as opposed to purchasing those already available, should be able to

claim additionality. The chosen projects will have a significant impact

on displacing emissions by reducing primary energy consumption.

Additionality, we would suggest, is new capital provided to address

specific problems or underinvested areas highlighted by the UN SDGs.

By definition, additionality puts the focus on more innovative financial

arrangements, transactions that tend to be smaller, often more

complex, as well as time intensive. We recognise that additionality

can never be determined with certainty, as it involves a prediction

of future outcomes; it will always require analysis and judgments.

The inclusion of additionality is an important consideration for AEET,

as our investment strategy seeks to provide funding for a high

percentage of new energy efficiency projects, rather than investing

in operations and, thus, existing energy efficiency assets. Therefore,

the relevant additionality test for us is whether a project creates an

“incremental” reduction in emissions which would not have been

possible within the same time frame and/or investment value, without

the availability of this funding.

WHAT DOES “ADDITIONALITY” MEAN AND WHY IS IT IMPORTANT?

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

INVESTMENT ADVISORY TEAM

Alex Betts has over 30 years’ experience in

private equity and 15 years in resource efficiency

and has invested in a range of industries,

geographies and stages. Based in London,

he joined Aquila Capital from

Adaxia Capital Partners. Alex is a former

member of the private equity team at CCC,

was Head of Royal Dutch Shell’s corporate

venture capital unit and a former partner of

Montagu Private Equity. He is British and

graduated in Classics from Oxford University.

Franco Hauri has over 20 years of experience

in private equity with 15 years in resource

efficiency of which the last five years have

been focused on investing in energy efficiency

projects. Based in Zurich, he joined Aquila

Capital from Adaxia Capital Partners. Prior

to Adaxia, Franco was a member of the private

equity team at Climate Change Capital (“CCC”),

which span out into Adaxia and prior to CCC

he was an investment advisor at

NanoDimension, a venture capital firm investing

in nanotechnology, and a consultant with

Bain & Company. Franco holds an MBA from

Harvard Business School and a master’s degree

in finance, accounting & controlling from the

University of St. Gallen (HSG). He is Swiss and

speaks German and Italian, Spanish and

French.

Bruno Derungs has over 25 years’ experience

in private equity and 21 years in resource

efficiency and has invested in a range of

industries, geographies and stages. Based in

Zurich, he joined Aquila Capital part time

from Adaxia Capital Partners. Bruno is a

former member of the private equity team

at CCC, principal at SAM Private Equity,

managing director of ATV a Swiss-based

venture capital fund and consultant with Bain

& Company. He holds a master’s degree in

electrical engineering from the ETH in Zurich

and an MBA from Columbia Business School

in New York. He is Swiss and speaks German,

Italian and French.

Alex Betts

Senior Investment Manager

Bruno Derungs

Senior Investment Manager

Franco Hauri

Senior Investment Manager

INVESTMENT ADVISER`S REPORT

Investment Adviser’s Background

The Company’s AIFM, International Fund Management Limited (part

of Sanne Group), has appointed Aquila Capital Investmentgesellschaft

mbH as the Investment Adviser to the AIFM in respect of the Company.

The Investment Adviser offers advice on potential energy efficiency

investments in line with the Company’s Investment Policy. Aquila

Capital Investmentgesellschaft mbH is part of Aquila Group, an

experienced and long-term investor in real asset investments. Founded

in 2001 by Dieter Rentsch and Roman Rosslenbroich, Aquila Group

currently manages and/or advises assets worth around €13.9 billion

on behalf of institutional investors worldwide (as at 31 December

2021). Daiwa, one of Asia’s largest investors, is a minority shareholder

in the Group.

By investing in clean energy and sustainable infrastructure, Aquila

Capital contributes to the global energy transition and strengthens

the world’s infrastructure backbone. The company initiates, develops,

and manages these essential assets along their entire value chain

and lifetime. Aquila Capital’s primary objective is to generate

performance for its clients by managing the complexity of essential

assets.

Currently, Aquila Capital manages wind energy, solar PV and

hydropower assets with a generating capacity of more than 15 GW.

Additionally, 1.9 million square metres of real estate and green

logistics projects have been completed or are under development.

Aquila Capital also invests in energy efficiency, carbon forestry, and

data centres. Aquila Capital has been carbon neutral since 2006.

Sustainability has always been part of the company’s value system

and is an integral part of its investment strategies, processes and the

general management of its assets. The company has more than 600

employees from 48 nations, operating in 16 offices in 15 countries

worldwide.

Aquila Capital believes in stringent corporate governance. It is licensed

as an alternative investment fund manager (for the avoidance of

doubt, it is not acting as AIFM to the Company) in Germany and is,

therefore, subject to high European regulatory standards.

INVESTMENT ACTIVITY AND PIPELINE

INVESTMENT ADVISER`S REPORT

Investment activity in the period

Since its IPO in June 2021, the Company has begun executing on its

strategy to invest in energy efficiency projects which are characterised

by projects with (i) a low technology risk through the use of proven

technologies; (ii) medium to long term contracts providing for highly

predictable cash flows; and (iii) counterparties with good creditworthiness.

As at the period end, the Company had entered into commitments

to invests £14.1 million of its IPO proceeds of which total investments

were £12.3 million. In the period between 1 January 2022 and 31May

2022, the Company made additional commitments accounting to

£5.5 million bringing the total income generating capital deployed

since IPO £15.7 million. The Investment Adviser expects the remaining

proceeds of the IPO to be deployed by the end of December 2022

or early 2023.

£14.0 million investment in Italian “Superbonus” projects

In December 2021, the Company entered into commitments to

finance two clusters of “Superbonus” energy efficiency projects for

apartments and other residential buildings in Italy amounting to

£14.0 million. “Superbonus” is an incentive measure introduced by

the Italian government through Decree “Rilancio Nr. 34” on 19 May

2020, which aims to make residential buildings (condominiums and

single houses) more energy efficient through improvements to thermal

insulation and heating systems. When qualifying measures are

completed, the energy services company (“ESCO”) delivering the

measures is awarded a tax credit equal to 110% of the cost of the

measures. These tax credits can then be sold to banks and, thus,

projects can be financed without the need for a financial contribution

from landlords.

The projects which the Company has committed to finance are being

managed by two ESCOs – Enerstreet and Enerqos Energy Solutions

and entail commitments of £8.94 million and £5.15 million respectively.

The projects involve a range of energy efficiency measures including

insulation, the replacement of heating systems with more efficient

solutions, and energy efficient windows.

As at 31 December 2021, £11.9 million had been committed to these

projects and was earning a contractual rate of return. Of this, £0.2million

had been deployed in cash. The balance of the commitments is forecast

to be deployed before the end of October this year. These projects,

which are being delivered in a series of stages, generate tax credits

which exceed the cost of the Company’s investments. Two Italian banks

have agreed to purchase these tax credits, and the proceeds from this

will redeem the investments within a period of up to 15 months from

December 2021. The investments are structured to deliver a contractual

return of 8% p.a. from the expected project start dates. This means

that the investment commitments become income generating from

the dates set out in the investment documentation and not from the

date of cash deployment. The two Italian banks have credit ratings of

A and B, respectively with the lower rated bank majority owned by the

Italian state.

£0.4 million investments in Acetificio Galletti & Enofrigo

projects with project developer, Noleggio Energia

The Company has completed two rooftop solar PV investments developed

by Noleggio Energia, for two Italian industrial businesses, enabling these

companies to reduce their energy expenses and CO2 emissions and

avoid grid losses through the self-consumption of the electricity produced.

Noleggio Energia was established in 2017 and is an Italian company

that specialises in providing operating leases for energy efficiency and

renewable energy projects for commercial and industrial clients in Italy.

The first investment of £0.29 million was completed at the end of

June to finance a rooftop solar PV project located in Lombardy for

the Italian food product manufacturer Galletti di Galletti Aurelio e

C. snc (“Acetificio Galletti”). The project, which is operational, is

structured as an operating lease for Acetificio Galletti, which has

agreed to make fixed monthly payments for a contractual period of

seven years. The investment is expected to deliver a contractual

return of 7.2% p.a. Acetificio Galletti is a family-owned business

founded in 1871 and is a renowned producer of vinegars, dressings,

pickles and other food products. It has an investment grade credit

rating (B1.2/BBB) from credit ratings agency Cerved.

The second investment of £0.11 million was completed at the end of

December 2021 to finance a rooftop solar PV project in Veneto for

Enofrigo SpA. The project, which is also operational, has the same

seven-year operating lease structure and contracts similar to those used

in the Acetificio Galletti investment. The investment is expected to deliver

a contractual return of 9.4% p.a. Enofrigo SpA, founded in 1978, is an

Italian designer and manufacturer of wine cabinets and both hot and

cold food display units for bars, restaurants, small supermarkets and

larger retail chain stores. The company nowadays serves more than

5,000 clients in more than 100 countries. Its Cerved rating is B2.1/BB+.

£0.3 million investment in lighting as a service project

developed by Lumenstream

In December 2021 the Company, through its wholly owned subsidiary,

Attika Holdings Limited (Attika), invested £0.3 million in a group of

four operational lighting projects developed by a Northern Ireland

based lighting services company, Lumenstream Limited. The Company

has purchased receivables under existing five-year contracts with

industrial companies and a leisure business. The investment is forecast

to generate a contractual return of 9.6% p.a. over the five years.

The industrial companies have investment grade ratings of A1.1-A1.3/

AAA-AA- from Cerved. The leisure business is not rated but all

payments due under its lighting as a service agreement in the two

and a half years up to the time of the investment have been paid.

The investment agreement with Lumenstream Limited also included

a framework agreement under which the Company has an option

to finance future projects developed by Lumenstream, on agreed

terms, and under which the Company expects to make

additionalinvestments.

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

INVESTMENT ACTIVITY AND PIPELINE

CONTINUED

INVESTMENT ADVISER`S REPORT

Investments completed after 31 December 2021

We are pleased to report that, since the period end, the Company has completed the following investments:

£0.7 million investment for the refinancing of the acquisition

of an existing rooftop solar PV plant, with project developer

CO-VER Power Technologies.

In January 2022, the Company refinanced the acquisition of an

existing rooftop solar PV plant in Ascoli Piceno (Central Italy) with a

generating capacity of 901.6 kWp (kilowatts peak). The investment

is based on the purchase of receivables generated by an energy

service contract between the leading Italian engineering firm CO-VER

Power Technologies (CO-VER) and its subsidiary Futura APV srl

(“Futura”). The contract governs the management of an operating

roof-mounted solar PV plant until April 2028. Thereafter, the investment

is based on a feed-in-tariff for an additional six years, aggregating

to a 12-year tenor. The investment is forecast to generate a return

ranging of between 7.0% and 7.3% p.a.

CO-VER has a successful 20-year history in developing industrial

projects in the areas of energy storage systems, co/tri-generation

plants and renewable energies. Futura, which was established in

1981, specialises in the design and construction of overhead and

floor conveyors and is the owner of the PV plant which is backed by

the payments of Gestore dei dervizi energetici (GSE). GSE is a joint

stock company managed by the Italian government which is responsible

for promoting and developing the growth of renewable assets in

Italy. GSE has a credit rating of BBB+ from the Italian government.

£1.2 million investment in rooftop solar PV plant,

developed by Noleggio Energia.

In April 2022, the Company invested £1.2 million in a rooftop solar

PV plant in self consumption, including the refurbishment of the

roof, in Lombardy (Northern Italy). The plant has a capacity of 1 MWp

(Megawatt peak) and is for the engineering company Tecnocryo

s.p.a (Tecnocryo). The investment is based on the purchase of

receivables generated by a 10-year operating lease contract between

Tecnocryo and Noleggio Energia. The investment is forecast to

generate a contractual return of 7.8% p.a. over a 10-year period.

Tecnocryo has been operational since 1992 and focuses on the design

and realisation of machines for handling cryogenic fluids. The company

has a Cerved credit rating of B2.1, equivalent to BB+, which is just

below investment grade.

£1.7 million investment in Comgy GmbH & Co KG (Comgy)

In April 2022 the Company, through Attika, purchased a note for

£1.7 million with a tenor of 10 years issued by Comgy. The note

provides for a fixed interest rate of 6.5% p.a. and a variable component

and is forecast to generate a total return in excess of 10% p.a. Comgy

is a wholly owned subsidiary of Comgy GmbH, active in the German

sub-metering market. Comgy provides metering equipment, billing

and O&M services mainly to housing companies with an average

rating comparable to S&P BBB+/BBB. The note purchased by Attika

is secured by sub-metering contracts, including equipment rental

and billing as well O&M services with tenors of between five and

ten years. The structure for the investment in Comgy (transfer of

assets and issuing of a note) can be viewed as a framework under

which Attika has the opportunity to purchase a series of notes from

Comgy secured by additional sub-metering contracts.

£0.1 million additional projects with Lumenstream

In January and April 2022 Attika committed to invest £0.1 million in

additional lighting projects developed by Lumenstream for a UK

subsidiary of Siemens, which has an investment grade credit rating

of AAA/AA- from Cerved and Bearmach Limited, respectively. The

projects use the same five-year lighting as a service agreement as

the other projects financed by Attika. The total Lumenstream portfolio

of projects is forecast to generate a return of in excess of 10.0% p.a.

over the contractual period of five years.

£1.5 million additional investment in Italian “Superbonus”

projects

In April 2022, the Company committed a further £1.5 million to

additional Superbonus projects in Italy. These investments are

structured in a very similar way to the first Superbonus investments,

using almost identical documentation, to provide for a contractual

return of 8% p.a. These projects are being managed by Sol Lucet

S.r.l., an energy services company which, since 2013, has successfully

installed renewable energy plants with a generating capacity of

17.0MWp as well as combined heat and power (CHP) plants producing

3.2 MWe (Megawatts electric). Sol Lucet is currently managing solar

PV plants with a generating capacity of 14.0 MWp. The tax credits,

which these projects are expected to generate by the end of 2022,

will be acquired by Credit Agricole, which has a short-term rating of

A+ from S&P.

INVESTMENT ACTIVITY AND PIPELINE

CONTINUED

INVESTMENT ADVISER`S REPORT

Energy Efﬁcient Renovation

Solar PV

LED Lighting

96%

20 years +

16-20 years

11-15 years

6-10 years

0-5 years

96%

>10m

5-10m

2-5m

1-2m

<1m

62%

34%

Italy

99%

BB+ to BB-

BB+ to BBB-

A+ to A-

AAA to AA-

36%

62%

Operating

Construction

96%

Portfolio Breakdown Based on Committed Capital as at 31 December 2021

Technology

Term

Size

Country

Client Credit Rating

Status

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

INVESTMENT ACTIVITY AND PIPELINE

CONTINUED

INVESTMENT ADVISER`S REPORT

Solar PV

CHP

LED Lighting

Energy Efﬁcient

Renovation

Sub-Metering

47%

35%

10%

20 years +

16-20 years

11-15 years

6-10 years

0-5 years

50%

36%

>10m

5-10m

2-5m

1-2m

<1m

14%

50%

Italy

Germany

Spain

57%

12%

25%

BB+ to BB-

BB+ to BBB-

A+ to A-

AAA to AA-

23%

38%

23%

Construction

Operating

64%

36%

Portfolio Breakdown Based on Committed Capital as at 30 April 2022

Technology

Term

Size

Country

Client Credit Rating

Status

INVESTMENT ACTIVITY AND PIPELINE

CONTINUED

INVESTMENT ADVISER`S REPORT

Investment Structures

All the investments in Italy have been made by the Company through

directly purchasing notes issued by an Italian special purpose vehicle

(SPV) established under securitisation laws in Italy. This SPV has made

the capital investments in return for which receivables have been

transferred to it. The receivables are the payments due from the

purchase of tax credits in the case of the Superbonus investments and

from operating leases in the case of the investments developed by

Noleggio Energia and EES. The notes issued by the SPV, entitle the

Company to the economic return from the receivables and are structured

to provide a fixed interest rate amounting to a 3% p.a. return on

capital and variable interest to capture the return above 3% p.a.

As with its investments in Italy, the structure of the Company’s UK

investments is also based on the purchasing of receivables. In this

instance, Attika has purchased the receivables due under Lumenstream’s

five-year lighting as a service contract. Lumenstream has established

a special purpose subsidiary to own the lighting installations financed

by Attika and subsidiary has contracted with Lumenstream’s clients

to provide energy saving services through the provision of energy

efficient lighting. The receivables from these contracts have been

transferred to Attika.

The structure for the Comgy investment in Germany has elements

of both the Italian investment structure and the Lumenstream

investment structure with Attika, purchasing a note issued by Comgy.

This entitles Attika to the economic return from receivables and is

structured to provide a fixed interest rate amounting to a 6.5% p.a.

return of capital and variable interest to capture the return above

6.5% p.a. As with the Lumenstream structure, Comgy’s parent

company has transferred a portfolio of sub-metering and other

services contracts to Comgy, the receivables from which are payable

to Attika, the noteholder.

Investment Pipeline

At the time of the IPO, the Company had access to an advanced

pipeline with a value of £180 million spread across 60 potential

projects. As at 31 May 2022, the Company’s pipeline of investment

opportunities had increased to an amount in excess of £282 million

across 135 potential projects, many of which were in the advanced

pipeline and remain available to the Company. The pipeline is well

diversified in terms of (i) geography across Europe; (ii) technologies;

(iii) ESCO partners; and (iv) counterparties. Projects with a value of

£34 million are in exclusivity and are expected to be completed within

three months of the date of this report.

Some projects in the advanced pipeline have been lost for a combination

of reasons including (i) the projects did not meet the criteria of the

Company, for example, from a return or credit risk perspective; (ii)

the projects are no longer being pursued by either the ESCO or the

underlying client; and (iii) the projects were lost to competing financiers

or ESCOs. However, the main factor affecting planned levels of capital

deployment has been delay to completing new projects. We have

found that the Company’s focus on investing in new or newly

completed energy efficiency projects that deliver incremental

environmental benefits has led to delays in the expected levels of

capital deployment.

Nevertheless, the Company has been able to complete investments

developed by ESCOs that are expected to develop numerous projects

in the future which the Company is well placed to invest in. Furthermore,

the Investment Adviser believes that capital deployment achieved in

the period since end December 2021 is encouraging.

Summary of Deals that have Committed Capital as at 31 May 2022

Project Name Technology

Business

Country Developer Counterparty

Credit

Rating

AEET Approval

Date

TIV

(£’000)

Tenor

(Yrs) IRR

Galetti Solar PV Italy Noleggio Energia s.r.l. Acetificio Galletti SNC BBB+/BBB- 28/06/2021 293 7 7.2%

Enofrigo Solar PV Italy Noleggio Energia s.r.l. Enofrigo s.p.a. BB+-BB 12/10/2021 116 7 9.4%

Lumenstream 1+2 LED Lighting UK Lumenstream 4 Northern Ireland Corporates AAA 12/10/2021 267 5 9.6%

Superbonus

ENERQOS

Energy efficient

Renovation

Italy Enerqos Energy Solution s.r.l.

Banca Monte Paschi di Siena or

MedioBanca Factoring

BBB+/BBB- 29/10/2021 5,154 1 8.0%

Superbonus

ENERSTREET

Energy efficient

Renovation

Italy Enerstreet s.r.l.

BNL Paribas or Banca Intesa A+/A/A- 29/10/2021 8,940 1 8.0%

Tecnocryo Solar PV Italy Noleggio Energia s.r.l. Tecnocryo s.p.a BB+-BB 06/01/2022 1,247 10 7.8%

COVER Solar PV Italy CO-VER Futura APV srl A- 28/12/2021 690 12 7.0-7.3%

Comgy Sub-Metering Germany Comgy KG Comgy GmbH Not rated 02/02/2022 1,730 9 10.8%

Lumenstream 3 LED Lighting UK Lumenstream 2 UK Corporates AAA/AA- 23/02/2022 121 5 >10%

Superbonus –

Sol Lucet

Energy efficient

Renovation

Italy Sol Lucet Credit Agricole AA- 14/03/2022 1,526 1 8.0%

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

INVESTMENT ACTIVITY AND PIPELINE

CONTINUED

INVESTMENT ADVISER`S REPORT

Market Trends

Electricity prices for industrial and residential customers across Europe have increased significantly since the completion of the Company’s IPO.

Given this strong upward pressure on energy prices, we have seen a noticeable increase in investment opportunities in recent months. From

our discussions with ESCOs and other market participants, it is clear that marked increases in power prices are accelerating investments in

energy efficiency projects and the Company is well positioned to benefit from this increased demand for funding such projects.

Wholesale electricity prices (EUR/MWh)

100

150

200

250

300

350

Apr-22Mar-22Feb-22Jan-22Dec-21Nov-21Oct-21Sep-21Aug-21Jul-21Jun-21May-21Apr-21Mar-21Feb-21Jan-21

GER FRA ITA SPA

CASE STUDIES

INVESTMENT ADVISER`S REPORT

PROJECT SUPERBONUS (IT)

Counterparty Intesa Sanpaolo S.p.A. is an Italian international banking group.

It is Italy’s largest and the world’s 27th largest bank by total assets.

Banca Monte dei Paschi di Siena S.p.A. (“MPS”) is an Italian bank founded in 1472. It is the

world’s oldest bank and the fourth largest Italian commercial and retail bank.

Banca Intesa has a short-term rating of A; MPS has a short-term, stand-alone rating of B (but in light

of the fact that it is 68.20% owned by the Italian government, it implicitly has a state guarantee).

Project The Superbonus is an incentive introduced by the Italian government through the decree

“Rilancio Nr. 34” of May 19th 2020, which aims to make residential buildings (condominiums and

single houses) more energy efficient through improvements to thermal insulation and heating

systems. When qualifying measures are completed, the ESCO is awarded a tax credit equal to

110% of the costs of the measures. These tax credits can be sold to banks. Thus, the projects can

be financed without the need for a financial contribution from landlords.

Two clusters of energy efficiency projects for large scale residential buildings (insulation, energy

efficient heating systems and other measures) developed under the Superbonus scheme in Italy have

been developed by two ESCOs, Enerstreet Srl (“Enerstreet”) and Enerqos Energy Solution Srl (“EES”).

Key data A total investment amount of £14.09 million, with the Enerstreet cluster requiring £8.94 million

and EES cluster requiring £5.15 million.

First capital deployment in December 2021.

Forecast net cash profits £1.0 million¹.

IMPROVING THE SAFETY AND ENERGY EFFICIENCY OF THE ITALIAN

RESIDENTIAL SECTOR

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

1 The targeted project return is for information purposes only and does not constitute a binding profitability requirement or a guaranteed return.

INVESTMENT ADVISER`S REPORT

MARKET COMMENTARY: ENERGY EFFICIENCY

1. An introduction to energy efﬁciency

By definition, energy efficiency aims to reduce primary energy demand.

Primary energy demand is understood to mean the use of energy

carriers which, in the field of conventional energy production, are

fuels such as coal and gas.

Energy efficiency refers to measures whose implementation results in

the same or a better performance with less energy consumption.

According to the laws of economics, scarcity of energy makes it

necessary to relate the input to the output to maximise the benefit.

This means that, for a fixed energy input, the aim is to achieve maximum

output or, for a fixed output, the energy input is minimised. An

illustrative example of this is the use of energy-saving lamps, which

are now mandatory within the EU. Whereas conventional incandescent

lamps convert electrical energy into desired lighting and undesired

heat, the energy requirement for efficient light sources is reduced due

to lower heat losses for the same amount of lighting. However, this

simple, obvious and at the same time economically sensible change

had to be brought about through legislation. The principle of voluntariness

would not have worked here because energy-saving lamps consume

less energy but are more expensive to buy.

This contradiction is often encountered when it comes to energy

efficiency, but the focus should rather be on the “win-win” situation.

The savings potential specific to lighting is up to 70%, which ensures

short payback times. By contracting, i.e. outsourcing financing and

installation, immediate savings can be achieved, as the measures pay

for themselves through part of the savings. Under current conditions,

Europe offers a cost-efficient savings potential of 20% to 40% of

primary energy.

Energy efficiency is a cornerstone of the energy system transformation.

In addition to the savings needed to achieve climate targets, synergy

effects with renewable energies offer further great potential for the

decarbonisation of the economy. For this reason, the speed of

implementation and the visibility of energy efficiency must be

accelerated and increased. Only in this way can the limitation of

global warming to below 1.5°C be achieved. To achieve this goal,

the International Energy Agency (“IEA”) estimates that, from 2035

onwards, almost half of the world’s energy investments will have to

be committed to energy efficiency.

2. Energy Efﬁciency improvements are crucial to make

the energy transition a reality

“The cleanest energy is that which is not consumed at all”

On the path towards a climate-neutral economy and society, a

reorganisation of the energy system is vital. Systems of conventional

energy production and supply are characterised by high inefficiencies.

Up to two thirds of the primary energy used is wasted in the process.

The potential for making efficiency improvements along the value

and supply chains is correspondingly large.

Final energy consumption only covers two thirds of the energy

generated in the EU and the UK, as it does not account for losses

during energy production and transportation. The relationship can

be illustrated using the example of a coal-fired power plant, which

has an efficiency of only 30%-40% based on the primary energy

used in the form of coal. This means that, when the thermal energy

is converted into electricity, around 60%-70% of the energy is not

available to the consumer due to heat loss.

Despite the efficiency gains which can be attributed, in particular,

to the use of renewable energies and the use of more efficient

gas-fired power plants (using CCGTs – combined cycle gas turbines),

significant energy losses remain within this process. Not included in

this context are grid-related curtailments of renewable energies,

which are caused by the high inflexibility of thermal power plants.

In addition, the use of energy-efficient technologies in cross-sectional

applications, i.e. applications used across sectors such as IT systems

and lighting, open up a further savings potential of up to 70%.

Generation Transmission &

Distribution

Consumption

Up to 66% inefficiencies in energy supply

Savings potential in specific

appliances up to 70%

Inefficiencies in generation and

transmission result in energy losses of 1/3

1 IEA (2020) Carbon Brief “The Marginal Cost of Two Degrees”

INVESTMENT ADVISER`S REPORT

MARKET COMMENTARY: ENERGY EFFICIENCY

CONTINUED

Synergies between Energy Efﬁciency and Renewable Energy

There are considerable interactions between renewable energies

and energy efficiency that reinforce each other. On the one hand,

renewables are an energy-efficient measure per se. For example,

since wind power and solar PV do not require the use of fuels, they

are 100% efficient from a primary energy perspective. On the other

hand, energy-saving measures on the consumption side increase

the share of renewable energies in the national energy mix.

This correlation can be illustrated by comparing 2019 with 2020,

the latter being characterised by the ramifications of the pandemic.

The graph illustrates that, in 2020, the importance of renewable

energies in the energy mix increased significantly as demand fell.

In particular, countries with already high shares of renewable

energies (e.g. Spain, Germany) showed a significant inverse

correlation between demand and the share of renewables.

In view of the EU’s goals to increase very significantly the share of

renewable energy, the central importance of establishing energy

efficiency as a quasi independent energy source (first fuel) becomes

clear.

Comparison energy consumption and renewables share 2019-2020



































      



   

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

2 Aquila Capital Research based on data from ENTSO-E (2021)

INVESTMENT ADVISER`S REPORT

MARKET COMMENTARY: ENERGY EFFICIENCY

CONTINUED

3. Energy Efﬁcient measures in Generation,

Transmission and Distribution

Efficiency through decentralised in-house energy generation

Based on the advantages of increased decentralised power generation,

renewable energy systems, energy efficiency and small power

generators are becoming more important. System efficiency is

increasingly becoming the focus of debate. Photovoltaic systems can

contribute significantly to the decentralised approach. Existing

surfaces, such as roofs, can be used to generate electricity. This

means that there are no additional costs for the area and additional

land consumption is limited. The technological progress achieved in

the recent past and associated cost reductions promise short payback

periods and, thus, favourable access to renewable energy. Any excess

capacity that results can be fed into the grid, which can generate

additional income. From the point of view of efficiency, an additional

burden on the grid is avoided because savings of electricity downstream

of the meter compared to the direct consumption of locally generated,

clean energy have the same effect from the perspective of the public

power supply as neither requires grid capacity. Avoiding transport-

related energy losses also contributes to the efficiency of energy

produced and consumed in-house. Corresponding implementations

offer cost-efficient possibilities to increase energy efficiency.

Energy efficiency investments can generate cost savings and income

for end users; for example, through the fitting of solar PV systems

to already built-up areas, such as the roofs of factories, end users

can reduce their energy costs and also generate income through the

sale of surplus capacity. The decisive factor in this orientation is the

prevailing level of energy prices.

The figure, above, illustrates that potential energy efficiency savings

are greatly influenced by fixed price components. This means that

energy bills are not as volatile as electricity spot prices. Energy

efficiency investments can, therefore, offer diversification for

investments in renewable energy generating assets.

65%

35%

170.5 EUR/MWh

Spain

67%

33%

120.7 EUR/MWh

France

229.8 EUR/MWh

Germany

214.2 EUR/MWh

Italy

42%

58%

65%

35%

Electricity price Taxes and levies

Offtaker prices for electricity in Europe in 2018 (EUR/MWh)

Smart meter rollout

In addition to the energy transition, we are also in the midst of a

digital transformation. But instead of seeing this as an additional

challenge, the focus should be on synergising both transitions. An

accelerated expansion of smart meters makes it possible to use

potential lying in the grid. Smart meters offer a digital exchange of

consumption data and storage capacities in real time and bring

benefits for utilities and consumers. For example, the bidirectional

charging and discharging of batteries of an increasing number of

Electric Vehicles (‘EVs’) would increase flexibility on the demand side.

While consumers could benefit from lower prices, there would be

additional benefits in terms of the loads on grids and efficient use

of renewable energy.

Effects of decentralisation

The decentralisation of energy generation plus digitalisation could

make the energy supply much more efficient. Increasing demand

flexibility in the context of electrification would significantly improve

the integration of renewable energies. In combination with renewable

self-production, such as through rooftop solar systems, inefficient

and emission-heavy fossil fuel generation would decrease significantly.

In addition, excessive grid loads would be avoided, minimising

transport losses and curtailments of renewable energy sources.

In addition to the positive effects on system efficiency, these effects

can realise competitive cost savings, especially for companies.

3 Entsoe (2020)

INVESTMENT ADVISER`S REPORT

MARKET COMMENTARY: ENERGY EFFICIENCY

CONTINUED

Excursus on combined heat and power (“CHP”)

Initial situation - separate decentralised heat generation

and centralised supply of electricity

Many EU member states (e.g. Germany) continue to pursue the

construction of flexible gas-fired power plants (gas peakers) in

order to close future electricity gaps or to ensure energy security

in hours with low renewable energy generation. As a result,

further inefficiencies in electricity generation are to be expected

(efficiency around 50%). In addition, there are sometimes loads

on the grids that even result in renewable energy curtailments.

In contrast, CHP plants offer the possibility of companies supplying

themselves with energy while covering their heating needs with

otherwise unused waste heat. This is particularly advantageous

for companies that require process heat, while benefiting overall

from lower costs, fewer emissions and the more effective use of

renewable energies.

4. Consumption side – Spotlight building sector

The building sector is by far the largest energy consumer within the

EU. Accounting for 40% of total energy consumption, buildings are

responsible for more than one third of energy-related greenhouse

gas emissions (36%) and are thus at the centre of the European

“efficiency first” approach.

Recent efficiency improvements have made it possible for new

buildings to have an approximately 50% lower energy demand

compared to 20 year old buildings. However, since 220 million

buildings - about 80% of the EU’s building stock - were built before

2001, most buildings are not energy efficient. Many of them are

heated with fossil fuels and have technologies and appliances with

high energy consumption.

Structure EU building Stock:

Share Residential/Non-Residential

Residential Stock Age

Non-Residential Stock Age









 

 



  



  

 

 

 





  



  

 









Separated generation power/heat

33% heat

35% heat

36% electricity

Combined heat and power

Efficiency 55%

*to achieve same output as CHP

Efficiency 71%

54% loss

4% loss

29% loss

90%

39%

129%

natural

gas*

100% natural

gas

91%

Residential (2016) Non-Residential (2016)

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

4 EU Building Stock Observatory (2020)

Recovery plans for buildings sector by country

GreeceRomaniaGermanyPortugalPolandFranceSpainItaly

10%

15%

20%

25%

INVESTMENT ADVISER`S REPORT

MARKET COMMENTARY: ENERGY EFFICIENCY

CONTINUED

4. Consumption side – Spotlight building sector

continued

As 85%-95% of today‘s buildings are expected to still be in use in

2050, extensive energy retrofits of buildings are a prerequisite for

achieving the EU‘s climate targets. The goal of reducing emissions

by 55% by 2030 requires reducing the emissions from buildings by

60%, energy consumption by 14%, and energy consumption for

heating and cooling by 18%. Currently, however, the annual rate of

energy retrofits is only running at about 1%, while comprehensive

renovations, which have the potential to meet the targets, apply to

only 0.2% of the EU’s building stock annually.

To achieve the EU’s goals, the annual rate of energy renovations must

at least double to 2%. By 2030, about 35 million buildings would have

to undergo energy-efficient refurbishment, which corresponds to an

annual investment requirement of about €275 billion.

Energy efficient measures range from insulation to the electrification

of heating and cooling, which can be supplied by renewable energies

in the future, to digitalisation via smart applications. The EU is pursuing

a strategy that it calls the renovation wave. In view of the ramifications

of the pandemic, this is a “win-win” situation. On the one hand, this

approach contributes to achieving ambitious goals, in particular, the

realisation of electrification via renewable energies; on the other, up

to 160,000 additional green jobs could be created. For these reasons,

member states are free to use the EU’s recovery fund, which prescribes

a fixed quota of green investments, to create additional incentives

for private investments.

According to plans that recipient states had to submit to the European

Commission for review, there is a strong focus on buildings. Apart

from Italy, which tops the list of the eight largest beneficiary countries

in absolute terms (around €15 billion) an average of 12% of the EU

funds are to be used to boost the renovation wave.

Example Italy: Superbonus 110

With the so-called Superbonus 110, the Italian government creates

incentives for the energy-efficient refurbishment of buildings. Costs

incurred for measures that increase the energy efficiency of buildings can

be claimed for at a rate of 110% against tax. When qualifying measures

are completed, the ESCO

- that carried out the technical installation - is

awarded a tax credit equal to 110% of the costs of the measures. These

tax credits can be sold to banks and, thus, the projects can be financed

without the need for a financial contribution from landlords.

The Superbonus scheme is expected to lead to investments in excess

of € 8.75bn, with a net positive contribution for the Italian government

of approximately EUR 800m. As of 1 July 2021, more than 24,500

projects for a total investment of € 3.5bn have been submitted, of which

11% are related to condominiums, 43% of the total investment volume.

The expectation is that the Superbonus arrangements will be extended

for a number of years past the current end date of 31 December 2023,

thereby creating attractive and sustainable opportunities for institutional

investors in the residential sector. To achieve its climate targets, the EU

aims to ensure that targeted renovation rates are incorporated into the

national legislation of member countries. The guiding principle in relation

to the financing of the renovation wave strategy is:

Ensuring accessible and well-targeted funding, including

through the ‘Renovate’ and ‘Power Up’ Flagships in the Recovery

and Resilience Facility under NextGenerationEU, simpliﬁed

rules for combining different funding streams, and multiple

incentives for private ﬁnancing”

In accordance with EU targets, the already allocated EU funds and the

economic stimulus that is expected to result courtesy of the construction

sector, further incentive programmes for European member states are

to be expected, analogous to the example set by Italy (Superbonus 110).

In this context, we expect a further expansion of sustainable investment

opportunities in the area of energy efficiency within the EU.

In addition to financial incentives, ESCOs, which are responsible for

technical implementation, will also play a key role. Within the EU,

however, the development of this sector is very heterogeneous and

requires a correspondingly selective approach in conjunction with the

perspective development of partnerships.

5 BNEF, 2021

6 EU Commission (2022)

INVESTMENT ADVISER`S REPORT

MARKET COMMENTARY: ENERGY EFFICIENCY

CONTINUED

ESCO market development across the EU

The map below, shows that, in Western Europe in particular, structures

are already in place that offer the essential prerequisites for energy-

efficient renovations. However, Italy offers the best overall conditions

currently. The triad of EU funding (€ 15bn), a national incentives

programme (Superbonus 110) and a mature and institutionalised ESCO

market offers an ideal environment for private sector investors.

Future efforts will primarily be directed towards improvements in

thermal insulation, to reduce energy consumption, and the heating

of buildings.

Energy consumption residential buildings EU

,'"-+./-/+0

Solid fuels

Gas

Derived heat

Electricity

Renewables and waste

Oil & petroleum products

100%

90%

Share nal energy

consumption

Share of fuels in

space heating

Fossil

Fuels

>50%

80%

70%

60%

50%

40%

30%

20%

10%

Space heating

64%

Space cooling

Water heating

Cooking

Lighting and

appliances

Other end uses

The figure, above, illustrates the importance of heating in buildings,

which is responsible for around two thirds of total energy consumption.

As more than 50% of this consumption is based on fossil fuels, the

need for energy renovations is of particular importance. The EU’s

ambitious plans, as well as the urgently needed and time-critical

reorganisation of the building sector, will lead to high capital

requirements in the future. In the short to medium term, a steadily

improving environment for private sector investors in search of

sustainable impact investments can therefore be expected. Within

the EU, investment opportunities in the field of energy efficiency will

show significant growth.

5. Policy Update

Energy efficiency is a main pillar of the energy transition. In this context,

the European Commission’s increased target of reducing GHG emissions

by 55% by 2030 has significantly increased the efficiency targets. With

the strategy paper “Fit for 55”, the EU Commission published guidelines

that must be anchored in national law by the member states.

However, in view of the current situation and the urgent need for

independence from Russian energy imports, it is clear that even this

increase in targets is not enough. There is an urgent need in particular

to substitute the supply of Russian natural gas or, ideally, to reduce

gas demand altogether. Since energy-efficient measures have the

potential to reduce demand in the short term, they are at the centre

of the politically, socially and economically necessary efforts.

With the “REPowerEU” package, the aim of which is to end dependence

on Russian gas supplies as quickly as possible, the EU Commission

once again adapted the goals to the changed, explosive framework

conditions.

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

7 BPIE (2020) “ENERGY SERVICES AND THE RENOVATION WAVE”

8 Eurostat (2022)

Embryonic

Developing

Well-developed

Mature

INVESTMENT ADVISER`S REPORT

MARKET COMMENTARY: ENERGY EFFICIENCY

CONTINUED

5. Policy Update continued

EU gas consumption by sector and scenario targets 2030

100

150

200

250

300

350

400

450

137

-34%

-12%

-34%

-54%

-49%

-69%

4293

105

135

-30% -56%

EU gas consumption 2020

Electricity and heat Industry Buildings Other

Billion cubic meters

Fit for 55 target 2030 REPowerEU target 2030

EU Commission; Bloomberg New Energy Finance (2022)

With the focus on electrification in the areas of buildings, energy

supply and industry, the targets are almost double the already ambitious

approach of the “Fit for 55” package. Energy efficiency has the power

to drastically accelerate the energy transition in accordance with the

new requirements. It is an ongoing responsibility of governments to

create efficient and intelligent framework conditions to optimise the

market conditions for energy efficiency and simultaneously enable

sufficient renewable energy capacities.

In this environment, the use of synergies between the private sector

and government subsidy programmes is of central importance. One

example is the Italian “Superbonus 110”, which has already given a

strong boost to the implementation of efficiency measures in the

residential segment in Italy in recent years.

6. Conclusion and Outlook

Energy efficiency is a cornerstone of energy system transformation.

In addition to the savings needed to achieve climate targets, synergy

effects with renewable energies offer further great potential for the

decarbonisation of the economy. For this reason, the speed of

implementation and the visibility of energy efficiency must be accelerated

and increased. Only in this way can we achieve the goal of keeping

global warming below 1.5°C. The IEA estimates that, from 2035

onwards, almost half of the world’s energy investments will have to

be committed to energy efficiency if we are to reach this target.

Furthermore, it must be emphasised that adaptations and the

implementation of efficiency measures usually create monetary benefits

for the consumer. The negative investment costs of many efficiency

measures are significantly lower than the savings that can be made

over time, while the entire supply system benefits from higher efficiency

both through the avoidance of grid related curtailments and the

implementation of smart solutions.

Additional support comes from the governments in Europe. In particular,

the public focus is on the building sector which, on the one hand, is

the largest consuming sector in Europe and, on the other, is a potential

source of enormous economic stimulus that could provide a sustainable

and efficient way out of the recent crisis.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)

Introduction

AEET’s goal is to generate attractive returns for investors by reducing

Primary Energy Consumption (“PEC”). AEET seeks to achieve this

through investing principally in a diversified portfolio of energy

efficiency projects with high-quality counterparties. AEET’s investments

positively impact the environment by reducing the amount of carbon

dioxide produced, by decreasing PEC and by increasing the amount

of renewable energy used. The synergies generated by the reduction

of PEC and simultaneously using renewable energy sources further

decrease CO2 emissions.

This is reflected across the investment philosophy and approach,

including the Company’s investment adviser, Aquila Capital

Investmentgesellschaft mbH (“Investment Adviser” or “Aquila”),

who is dedicated to the green energy transition. The Company is

committed to be a responsible investor, ensuring that environmental,

social and governance criteria are incorporated into day-to-day

investment decisions as well as generating a positive impact for

society. By reducing PEC, the Company often improve life standards

for end users, for example, better lights, easier maintenance, reduced

danger, security of supply and very importantly, the reduction of

emissions like Nitrogen Oxides (NOX).

Investment Approach and ESG Approach

AEET’s investment approach is focused on investments in energy

efficiency projects located primarily in Europe. These assets are

predominantly proven operational projects that deliver energy savings

for commercial, industrial, and public sector buildings. AEET seeks

to invest in projects for the long term with a focus on optimising

and improving the assets’ PEC.

Technologies typically include:

 LED Lighting System: signiﬁcant reduction of consumed

energy (up to 70%) and other positive outcomes: reduced heat

emission and therefore less need for ventilation and cooling;

better light for workplaces; less maintenance work; reduction

in the use of glass (particularly beneﬁcial in food production).

 LED Street Light Systems: signi

ﬁcant reduction of consumed

energy, increased safety (better light, light where needed,

choice of light color); integration of other technologies such as

sensing (trafﬁc control), mobile communication systems etc.

 Solar PV: in

creases the level of efﬁcient and locally produced

renewable energy. Lower transportation costs, free energy

source.

 Biomass Boilers: l

ocally consumed; generate energy (heat,

cooling and electricity) from renewable sources, very often

contributing to local job creation. The exhaust for dust needs

to be managed and fulﬁl strict environmental regulations.

 Combined Heat and Power plants (CHP): High

ly efﬁcient

generation of combined energy outputs like electricity and

heat or cooling.

 Electriﬁcation of transportation vehicles (batteries) such

s trains, trams, buses, ferries, boats etc; replacement or

hybridization of large fossil fuel engines; signiﬁcant reduction

of fossil fuel consumption, other emissions (NOX) and Sulphur

oxides (SOX); often create a greener and healthier local envi

ronment e.g. by electriﬁcation of inner-city buses.

 HVAC/buildings: H

ighly efﬁcient heating, ventilation and air

conditioning systems. Often a combination of more efﬁcient

use of energy while simultaneously increasing wellbeing,

effectiveness, and controllability of system, e.g., avoid over-

heating/cooling of workspace by taking weather conditions

into consideration.

 Smart Metering/Submetering: O

ften providing real-time or

timely information about personal consumption volume,

patterns and costs of energy (heating, electricity, water or gas)

in order to enable energy consumers to manage usage and

costs. Pre-requisite to change consumer behaviour which in

itself could reduce energy consumption by up to 20% (e.g.

avoiding standby electricity consumption).

Environmental Impact

The Company’s investment approach is focused on reducing PEC,

which should lead to significant reductions in carbon dioxide emissions.

In addition, local production of energy (CHP, Biomass Boilers, Solar

PV) reduces transportation energy losses and grid over-utilisation.

Smart Meters and other control technologies enable a better visibility

and management of energy and therefore represent a basis for

energy savings.

All projects are managed within the guidelines of local, regional,

and national environmental laws in order to adhere to the DNSH (do

no significant harm) principals. Aquila Capital will ensure all required

regulations and corresponding approvals are completed prior to the

acquisition of the assets (planning permission).

Social Impact

Energy efficiency measures not only reduce PEC but typically also

increase the life quality and health aspects for different stakeholder,

like employees, users of public facilities and/or private individuals.

This is mainly achieved through advanced solutions for lighting,

heating, cooling and ventilation and the associated control units.

All project developers are required to adhere to local, regional, and

national health & safety laws, to train and educate employees

accordingly in order to make sure casualties and injuries are voided.

We incorporate Aquila Capital’s ESG policy, which excludes suppliers

and manufacturers that do not meet Aquila Capital’s criteria (exclusion

of sectors/subsectors, companies that use unfavourable labour

conditions etc).

For all counterparties a rating is performed (in collaboration with a

third-party rating agency) assessing creditworthiness of the client

as well as a Know Your Client check will be done for the relevant

parties involved to increase transparency of the company’s activities.

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)

CONTINUED

Governmental Impact

All our business partners are required to adhere to the requirements

of the national social security and tax authorities.

Where required by local, regional and/or national authorities our

business partner need to provide evidence that they adhere to anti

bribery and corruption laws.

Due Diligence

The Investment Advisor performs detailed ESG due diligence for each

asset prior to investment. The investment management team follows

a structured screening, due diligence and investment process which

is designed to ensure that investments are reviewed and compared

on a consistent basis. Execution of this process is facilitated by the

team’s deep experience in energy efficiency project investing. As

part of this process, the Investment Adviser will, as relevant for each

investment, consider:

 total PEC reduction, and implied greenhouse gas emissions

reduced and/or avoided; and/or

 total energy production from renewable and non-renewable

urces.

As part of this due diligence, various risks are assessed and documented

including risk of climate change, risk of harm to local biodiversity

and other environmental risks. These risks are evaluated as part of

the technical, legal, and insurance due diligence as applicable. The

independent risk management team evaluates the initial evaluation

of the investment management team in assessing each asset for

acquisition. The Investment Adviser considers the ability for the

acquisition to contribute to the UN Sustainable Development Goals

and whether it fits within the Principles for Responsible Investment

(“PRI”).

Governance Framework

AEET benefits from an independent Board of Directors, as well as

International Fund Management Limited (part of Sanne Group)

functioning as the Alternative Investment Fund Manager (“AIFM”).

The Board of Directors supervise the AIFM, which is responsible for

making recommendations in relation to any investment proposals

put forward by the Investment Adviser. The Investment Adviser is

fully regulated and supervised by BaFin in Germany.

The Company has established procedures to deal with any potential

conflicts of interest in circumstances where Aquila Capital (or any

affiliate) is advising both the AIFM (for the Company) and other

Aquila Capital managed funds who are counterparties to the Company.

In the context of an investment decision, these procedures may

include a fairness opinion in relation to the valuation of an investment,

which is obtained from an independent expert.

Monitoring of Environmental, Social & Governance Characteristics

After an investment has been made, continuous ongoing monitoring

commences at both the portfolio and asset levels by the Investment

Adviser. The aim of this ongoing monitoring is to monitor and calculate

the energy consumption/reduction and derive the CO2 reduction

from that.

The environmental characteristics of the Company are monitored on

a continuous basis throughout the lifecycle of investments, including:

 ongoing monitoring of the PEC based on the energy consump-

tion and derive from that the CO2 savings, where appropriate,

monitoring additional environment and ESG relevant develop-

ments both at the portfolio and asset level;

 annual reporting, including ESG aspects, to relevant stake-

olders including ad-hoc reporting of any material and urgent

issues identiﬁed in the monitoring process;

 semi-annual ESG risk reporting to the Board.

AEET has been awarded the Green Economy Mark from the London

Stock Exchange. The Green Economy Mark identifies London-listed

companies and funds that generate between 50% and 100% of

total annual revenues from products and services that contribute to

the global green economy.

INVESTMENT POLICY

The Company’s investment policy (including defined terms) are as

set out in its IPO prospectus dated 10 May 2021.

The Company will seek to achieve its investment objective through

investment in a diversified portfolio of Energy Efficiency Investments

(as defined below) located in Europe, with private and public sector

counterparties. The Company will predominantly invest in (i) energy

efficiency investments including the installation, in the built environment,

transportation industry and other sectors of the economy, of proven

technologies and solutions such as energy efficient lighting, smart

building and metering services, cogeneration plants, heating, ventilation

and air conditioning (HVAC) systems, efficient boilers, solar photo

voltaic plants, batteries, other energy storage solutions, electric

vehicles and associated charging infrastructure as well as (ii) in the

acquisition of majority or minority shareholdings in companies with

a strategy that aligns with the Company’s investment objective, such

as developers, operators or managers of energy efficiency projects

(“Equity Investments”) (“Energy Efficiency Investments”). These

investments seek to reduce primary energy consumption, reduce

CO2 emissions and in many cases deliver economic savings and other

benefits to the counterparties including improved air quality. The

Company will not invest in fossil fuel extraction or mineral extraction

projects. The capital value of the investment portfolio will be

supplemented and supported through reinvestment of excess cash

flows, asset management initiatives and the use of leverage.

The Energy Efficiency Investments will typically include long term

contracts, which entitle the Company or its subsidiaries to receive

stable, predictable cash flows payable by the counterparties, who

will benefit from the use of the installed equipment during a contractual

period typically ranging from five to fifteen years.

The Company will make Energy Efficiency Investments in operational,

ready-to-build or under construction assets. The Company may,

when making Equity Investments, through such investments, indirectly

hold investments that are in the development phase.

In respect of each type of investment, the Company will seek to

diversify its commercial exposure by contracting, where practicable,

with a range of different equipment manufacturers, project developers

and other service providers, as well as off-takers.

Whilst the Company will seek to diversify its commercial exposure

by investing in a diversified mix of technologies, the assets of the

Company may be predominantly concentrated in a small number of

proven technologies.

Investments may be acquired from a single or a range of vendors

and the Company may also enter into joint venture or co-investment

arrangements alongside one or more co-investors, including Aquila

Managed Funds.

The Company will acquire controlling and, opportunistically, non-controlling

interests in Energy Efficiency Investments and may use a range of

investment instruments in the pursuit of its investment objective,

including but not limited to equity, mezzanine or debt investments.

In circumstances where the Company does not hold a controlling

interest in the relevant investments, the Company will secure its

rights through contractual and other arrangements, to, inter alia,

ensure that the Energy Efficiency Investment is operated and managed

in a manner that is consistent with the Company’s Investment Policy.

Investment restrictions

The Company aims to achieve diversification principally through

investing in a range of portfolio assets across a number of distinct

geographies and a mix of technologies. The Company will observe

the following investment restrictions when making investments:

 no more than 20 per cent. of its Gross Asset Value will be

inve

sted in any single asset;

 no more than 20 per cent. of its Gross Asset Value will be

inve

sted in Energy Efﬁciency Investments with the same

Counterparty;

 following full investment of the Net Issue Proceeds, the

ompany’s portfolio will comprise no fewer than ten Energy

Efﬁciency Investments;

 no investments will be made outside of Europe; and

 no more than 7.5 per cent. of its Gross Asset Value, in aggre

gate

, will be invested in Equity Investments, and at all times

such investments will only be made with appropriate share-

holder protections in place.

The Company will hold its investments directly or through one or

more SPVs and the investment restrictions will be applied on a look-

through basis.

The Company complies with the investment restrictions set out below

and will continue to do so for so long as they remain a requirement

of the FCA:

 neither the Company nor any of its subsidiaries will conduct

y trading activity which is signiﬁcant in the context of the

Group as a whole;

 the Company must at all times, invest and manage its assets in

a way w

hich is consistent with its object of spreading invest

ment risk and in accordance with the published investment

policy; and

 not more than 15 per cent. of the Gross Asset Value at the

ime an investment is made will be invested in other closed-

ended investment funds which are listed on the Ofﬁcial List.

The Directors do not currently intend to propose any material changes

to the Company’s Investment Policy. As required by the Listing Rules,

any material changes to the Investment Policy of the Company will

be made only with the approval of Shareholders by way of ordinary

resolution.

Currency and hedging

The Company does not intend to use hedging or derivatives for

investment purposes but may use derivative instruments such as

forwards, options, futures contracts and swaps to hedge currency,

inflation, interest rates, commodity prices and/or electricity prices.

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

INVESTMENT POLICY

CONTINUED

Borrowing policy

The Company may make use of long-term debt on both a limited

recourse and full recourse basis to finance the acquisition or construction

of Energy Efficiency Investments and for working capital purposes.

Gearing will be employed at the level of the Company, at the level

of any intermediate wholly owned subsidiary of the Company or at

the level of the relevant SPV, and any limits set out in this document

shall apply on a look-through basis. In addition, the Company may

make use of short-term debt, such as a revolving credit facility, to

assist with the acquisition of or investment in suitable opportunities

as and when they become available. Aggregate gearing, whether

via long-term or short-term debt, will not exceed 50 per cent. of

Gross Asset Value, calculated at the time of drawdown. The Company

will target aggregate gearing, whether via long term or short term

debt, of 35 between 40 per cent. of Gross Asset Value, but in any

event will not exceed 50 per cent. of Gross Asset Value, in each case

calculated at the time of drawdown.

Debt may be secured with or without a charge over some or all of

the Group’s assets depending on the optimal structure for the Group

and having consideration to key metrics including lender diversity,

cost of debt, debt type and maturity profiles. Intra-group debt

between the Company and subsidiaries will not be included in the

definition of borrowings for these purposes.

In circumstances where the above limits are exceeded as a result of

gearing of one or more Energy Efficiency Investments in which the

Company has a non-controlling interest, the borrowing restrictions

will not be deemed to be breached. However, in such circumstances,

the matter will be brought to the attention of the Board who will

determine the appropriate course of action.

Cash management

Cash held pending investment in Energy Efficiency Investments or

for working capital purposes will either be held in cash or invested

in cash, cash equivalents, near cash instruments, bearer bonds and/

or money market instruments (“Cash and Cash Equivalents”). There

is no restriction on the amount of Cash and Cash Equivalents that

the Company may hold and there may be times when it is appropriate

for the Company to have a significant Cash and Cash Equivalents

position. For the avoidance of doubt, the restrictions set out above

in relation to investing in UK listed closed-ended investment companies

do not apply to money market type funds.

Changes to and compliance with the Investment Policy

The Directors do not currently intend to propose any material changes

to the Company’s investment policy. As required by the Listing Rules

any material changes to the Company’s investment policy set will

require the approval of Shareholders by way of an ordinary resolution

at a general meeting and the approval of the FCA.

Compliance with the above restrictions will be measured at the time

of investment and non-compliance resulting from changes in the

price or value of assets following investment will not be considered

as a breach of the investment restrictions.

In the event of a breach of the investment guidelines and the

investment restrictions set out above, the AIFM shall inform the

Board upon becoming aware of the same and if the Board considers

the breach to be material, notification will be made to a Regulatory

Information Service.

KEY PERFORMANCE INDICATORS

Deployment of IPO proceeds

In the Company’s prospectus published on 10 May 2021, it was

stated that the proceeds would be significantly deployed or committed

to acquire suitable assets within twelve months from IPO (2 June

2022). As announced on 21 April 2022, the Investment Adviser

revised this target to the end of December 2022. As at 31 December

2021 and as at 31 May 2022, £14.1 million and £19.6 million of the

total IPO proceeds of £100 million have been deployed, respectively.

The Board has engaged an independent adviser, Complete Strategy

Ltd for an initial period of six months from the date of the above

announcement in April 2022. Complete Strategy will assist the Board

in monitoring the deployment of the IPO proceeds by providing the

Board with a detailed analysis of monthly deployment performance

during the period and its costs will be borne by the Investment

Adviser.

To meet its target total dividend in each ﬁnancial year

As disclosed in the Company’s prospectus published on 10 May 2021,

the Company is targeting a dividend of a minimum of 3.5 pence per

Ordinary Share in relation to the financial year ending 31 December

2022, and a minimum of 5 pence per Ordinary Share in relation to

the financial year ending 31 December 2023, with the aim of increasing

this dividend progressively over the medium term. The Company did

not intend to pay a dividend in the first financial period to 31 December

2021, whilst it was deploying the IPO Proceeds.

However as announced on 21 April 2022, in light of slower than

anticipated deployment to date and the current expectation that the

IPO proceeds will not be significantly deployed within twelve months

of Admission, the Company does not expect that its stated dividend

target of 3.5 pence per Ordinary Share for the financial year ending

31 December 2022 will be covered by earnings. The Board will review

the position in respect of any dividend which may be declared for

the financial year ending 31 December 2022 in light of the deployment

of the IPO proceeds as the year progresses. The Board recognises

that over the medium to long term dividends form a key component

of the total return to shareholders.

Premium or discount of share price to NAV

The Board monitors the price of the Company’s shares in relation to

their NAV and the premium or discount at which they trade. As at

period end, the share price has closed at a (1.7%) discount to the

NAV as at 31 December 2021.

Following the Company’s period-end, the discount of share price to

NAV widened considerably. The Board performed an Investment

Strategy Review and engaged very closely with the Company’s major

Shareholders. For more details please see Chair’s Statement on

page2. The Company has shareholder authority to issue and buy

back shares if appropriate.

Green credentials

The Investment Adviser for every project, considers the potential

energy savings and energy production respectively as well as

emission savings. Since the beginning of commercial operations

of the first project (solar plant) in mid-October 2021 and as at 31

December 2022, energy savings of 54.5 MWh were estimated and

25.1 tonnes of reduced CO

emissions were calculated. The CO

avoidance

achieved by all the Aquila Capital Funds is in excess of eight million

tonnes, which is equivalent to emissions of 0.5 million European

households (https://www.aquila-capital.de/en/ ).

Quality of investments

Investment opportunities are initially analysed by the Investment

Adviser. The goal of this analysis is to determine the key characteristics

and value drivers of the investment opportunity, including: (i)counterparty

creditworthiness; (ii) volume and size of the investment; (iii) duration

and price level of remuneration schemes; (iv) expected life of

investment; (v) stability of regulatory and tax framework; (vi) visibility

into future performance; (vii) other barriers to entry; (viii) correlation

of cash flows to inflation; (ix) resilience within the economic environment;

(x) expected returns; and (xi) the ability to close successfully on the

investment. A portfolio analysis can be found at the Investment

Adviser’s report at pages 7 to 11.

Maintenance of a reasonable level of ongoing charges

The expenses of managing the Company are carefully monitored by

the Board. The Board receives and reviews management accounts

which contain an analysis of expenditure which are reviewed at their

quarterly Board meetings. The Board reviews the ongoing charges

on a quarterly basis and considers these to be reasonable in comparison

to peers.

Based on the Company’s average net assets during the period ended

31 December 2021, the Company’s ongoing charges figure calculated

in accordance with the AIC methodology was 0.94%.

THE BOARD MEASURES THE COMPANY’S SUCCESS IN ACHIEVING ITS INVESTMENT

OBJECTIVE BY REFERENCE TO THE FOLLOWING KEY PERFORMANCE INDICATORS (‘KPIS’):

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

RISK MANAGEMENT

Principal risks and uncertainties

During the period the Company has carried out a robust assessment

of its principal and emerging risks and the procedures in place to

identify any emerging risks are described below.

Procedures to identify principal or emerging risks:

The Board regularly reviews the Company’s risk matrix, with a focus

on ensuring that the appropriate controls are in place to mitigate

each risk. The experience and knowledge of the Board is important,

as is advice received from the Board’s service providers, specifically

the AIFM, who is responsible for the risk and portfolio management

services and outsources the portfolio management to the Investment

Adviser.

1. Investment Adviser: the Investment Adviser provides a report to

the Board on a quarterly basis or such other period as required

on industry trends, insight into future challenges in the energy

efficiency sector including the regulatory, political and economic

changes likely to impact the sector;

2. Alternative Investment Fund Manager (“AIFM”): following advice

from the Investment Adviser and other service providers, the

AIFM maintains a register of identified risks including emerging

risks likely to impact the Company;

3. Broker: provides advice periodically specific to the Company on

the Company’s sector, competitors and the investment company

market whilst working with the Board and Investment Adviser

to communicate with shareholders;

4. Company secretary: briefs the Board on forthcoming legislation/

regulatory change that might impact on the Company; and

5. AIC: The Company is a member of the Association of Investment

Companies (“AIC”), which provides regular technical updates as

well as drawing members’ attention to forthcoming industry and

regulatory issues.

Procedure for oversight

Audit and Risk Committee: Undertakes a review at least twice a year

of the Company’s risk matrix and a formal review of the risk procedures

and controls in place at the AIFM and other key service providers to

ensure that emerging (as well as known) risks are adequately identified

and, so far as practicable, mitigated.

Principal risks

The Board considers the following to be the principal risks faced by the Company along with the potential impact of these risks and the steps

taken to mitigate them.

Portfolio Risk

Principal Risks Potential Impact/Description Mitigation

Counterparty /

Credit

The Company allocates funds to a Counterparty that defaults

on its obligations.

This would impact the Company’s ability to meet dividends

and achieve its intended goals and returns for its investors.

Continued monitoring of the investments and the counterparties/

service providers, including the use of credit rating data providers,

allows the Investment Adviser to identify and address risks early.

The Investment Adviser seeks to mitigate credit risks, for example,

in the case of Solar PV investments, by the counterparty having

the opportunity to sell electricity to the grid or other customers.

The Investment Adviser also seeks to structure investments whereby

contracts can be adapted/extended to accommodate periods of

payment defaults.

Diversification of counterparties and service providers ensures any

impact is limited. In addition, a diversified portfolio provides further

mitigation.

Concentration

Risk

Concentration of exposure to investments in a limited

number of countries, counterparties, geographical markets,

tenure and currencies can lead to default on loans or other

obligations resulting in Company underperformance and

inability to meet targets.

The Investment Adviser and AIFM constantly monitor existing and

proposed investments/portfolio on a pre trade basis, enabling the

effective observation of portfolio concentrations and prospectus

limits.

Environmental /

Social /

Governance

ESG)

Not integrating ESG adequately into the investment and

monitoring processes can lead to reputational risk and

exposure to greenwashing claims.

The Investment Adviser performs detailed due diligence on ESG

for each asset prior to recommendation.

General standards including IFS Performance Standards, IFC

Environmental Health and Safety Guidelines (“EHS”) and Equator

Principles as well as local health and safety and social laws are

reviewed on a regular basis for all assets depending on the location

and development status of each asset.

Economic and Markets Risks

Principal Risks Potential Impact/Description Mitigation

Premium/

Discount

Management

Market sentiment moves share price to a discount which

may it more difficult for the Company to issue new equity.

The Ordinary Shares may trade at a discount to Net Asset

Value and not be liquid making Shareholders unable to

realise their investments through the secondary market at

Net Asset Value or at market price.

Loss of market confidence in the Board / Investment Manager.

The Company’s Broker monitors the market for the Company’s

shares and report at quarterly Board meetings. The Company has

the authority if appropriate, to purchase Ordinary Shares in the

market with the result of, amongst other things, enhancing the Net

Asset Value per Ordinary Share.

The Company seeks to maintain engagement with

share-holders.

Interest Rates/

Inflation

Changes to interest rates may impact discount rates applied

to the portfolio valuations and attractiveness of returns.

Can affect the spread between, amongst other things, the

income on the Company’s assets and the expense of its

interest-bearing liabilities, the value of its interest-earning

assets and its ability to realise gains from the sale of assets

(should this be desirable).

The Company may use derivative instruments such as futures,

options and swaps to protect the Company from fluctuations of

interest rates.

Aquila’s Asset Management team regularly monitor effectiveness

of hedging together with Risk Management.

Investment Advisor will manage correlation of cash flows to inflation

and resilience to the economic environment.

Investment Advisor seeks to incorporate RPI adjustments in

investment documentation where possible.

In addition, Renewable energies represent an effective protection

against inflation, as renewable energies benefit from rising electricity

prices with no burden on the cost side in relation to the use of

re-sources.

RISK MANAGEMENT

CONTINUED

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

Economic and Markets Risks continued

Principal Risks Potential Impact/Description Mitigation

Exchange Rates

The Company holds investments in currencies other than

British Pounds. Changes in foreign currency rates may

therefore impact the value in sterling between periods of

investments and of the income received.

The Company maintains the majority of uninvested cash in base

currency (GBP).

For any non-base currency assets, the Investment Advisor can use

forward foreign exchange contracts to seek to hedge up to 100%

of non-GBP exposure.

Pandemic

(COVID-19)

COVID-19 and the response by Governments, has had a

significant impact on economies across the world over the

last two years resulting in market volatility, uncertainty,

supply chain issue and speed of decision making.

The Company’s response is focused on dealing with the economic

impact of COVID-19.

All parties to the Company operate effective work from home

policies and these are assessed annually.

Equity Market

Volatility

The Company’s ability to raise equity from investors to repay

debt or to support further investments could be impacted

by stock market volatility and pricing.

The Company’s adviser and broker monitors market conditions

and reports regularly to the Board. In the event that the Company

is unable to raise new equity or debt capital, the Company could

hold back from making new investments until the stock market

recovered and, in extremis, investments could be sold to raise

liquidity.

Portfolio Management

Principal Risks Potential Impact/Description Mitigation

Investment

Performance

With investment concentration in energy efficiency space,

unquoted investments, changes to regulatory framework

or poor investment decisions, there is a risk that the portfolio

underperforms and as a result, the target returns are not

met over the longer term. This could lead to the dividend

not being covered and/or an inability to pay the target

dividend.

The Investment Advisor has a well-defined investment strategy

and process in place which is regularly reviewed and monitored

by the AIFM and the independent Board of Directors.

There is limited regulatory risk exposure due to focus on projects

with authorisation and project business plans with limited or no

exposure to government subsidies.

The Investment Advisor has good experience in renewable

sustainability/energy transition and understands and manages the

risks closely.

Pipeline,

Investment

Deployment and

Cash Drag

An important part of the Investment Adviser’s role is its

ability to source high quality potential investment opportunities

in line with the Company’s investment strategy.

Should suitable opportunities not be forthcoming and cash

remains uninvested the portfolio returns could be lower

than that required meet the dividend targets.

Slow deployment of investments and excess cash on deposit.

Cash drag can lead to reduced portfolio income and inability

to pay dividends out of income.

Reputational risk of not meeting prospectus targets.

As announced on 31 January 2022 and 21 April 2022, the Board

undertook a comprehensive review of the Company’s investment

strategy, due to slower investment deployment than originally

anticipated. The Board appointed Complete Strategy Ltd, a consultancy

firm experienced in the energy sector, to conduct this review.

The Board with the assistance of Complete Strategy Ltd and the AIFM

monitor the investment pipeline received from the Investment Adviser.

The Investment Adviser has a track record in originating potential

investments.

The Investment Adviser continues to build a diversified pipeline of

investment opportunities for possible acquisition by the Company.

In addition, it is developing relationships with energy services

companies, project developers and technology providers which

bring multiple investment opportunities to the Investment Adviser.

The Investment Adviser continues to originate potential investments

and is actively increasing the value of its pipeline.

As of 31 May 2022, the total investment value of the pipeline has

increased from £178.5 million to £233 million since the time of IPO.

The team has expanded to help the origination activity.

Further, an emphasis on repeat business with existing partners has

been effective in closing transactions and deploying capital.

RISK MANAGEMENT

CONTINUED

RISK MANAGEMENT

CONTINUED

Portfolio Management continued

Principal Risks Potential Impact/Description Mitigation

Competition for

Assets

With increasing numbers of investors seeking exposure to

energy efficiency assets, it is possible that new competitors

will enter the market in which the Company operates. This

could lead to increased pricing for the Company’s target

investments with corresponding lower returns and slower

deployment of uninvested cash.

The Board and AIFM oversee the investment pipeline and monitor

its progress in relation to Company targets.

The Investment Adviser continues to build a diversified pipeline of

investment opportunities for possible acquisition by the Company.

In addition, it is developing relationships with energy services

companies, project developers and technology providers which

bring multiple investment opportunities to the Investment Manager.

Changes to

subsidies or

other support

mechanisms for

the Company’s

investments

The value of the Company’s investments may be adversely

affected if subsidies or other support mechanisms, on which

such investments may depend, are changed negatively.

Diversification of investments by technology and geography

mitigates the impact of any such risks. Many of the investments

which the Investment Adviser seeks do not rely on subsidies or

other support mechanisms.

Inappropriate

Investment

Advice

Lack of resource, experience or depth in the team to source

and vet appropriate investments.

Possible conflicts with other private Aquila clients and

private investing vehicles of which Aquila cannot disclose

to Board or AIFM.

The Investment Adviser is dependent on key people to

identify, acquire and manage the Company’s investments.

The Investment Adviser has substantial resources and is not required

to commit all of its resources to the Company.

The Company and AIFM are made aware of and review potential

conflicts of interest at the time of each investment being made.

Conflicts of interest and investment allocation policies are in place

agreed with the Board.

The strength and depth of the Investment Adviser’s resources

mitigate the risk of a key person departure and provides ability to

draw skills from other areas if need be.

Investment focus on proven technologies and standardized technical

and financial suppliers’ DD, including an assessment of supplier’s

reference projects, reduce the acquisition risks.

Operational Risk

Principal Risks Potential Impact/Description Mitigation

IT Security

A hacker or third party could obtain access to the Investment

Adviser or any other service provider and destroy data or

use it for malicious purposes resulting in reputational damage

and possible GDPR concern.

Data records could be destroyed resulting in an inability to

make investment decisions and/or monitor investments.

Service providers have been carefully selected for their expertise

and reputation in the sector. Each service provider has provided

assurances to the AIFM and Company on their cyber policies and

business continuity plans along with external audit reviews of their

procedures where applicable.

The AIFM, Administrator and Board include Cyber Risk in their

reviews of counter parties.

Financial Risk

Principal Risks Potential Impact/Description Mitigation

Portfolio

Valuation

The principal component of the Company’s balance sheet

is its portfolio of energy efficiency assets. The Investment

Adviser is responsible for preparing a fair market value of

the investments which rely on projections and cashflows.

There is a risk that these valuations and underlying assumptions

such as discount rates being applied are not a fair reflection

of the market meaning that the investment portfolio could

be over or under valued.

The Investment Adviser has experience in undertaking valuations

of renewable sustainability/energy transition assets.

The AIFM and the Board review and interrogate the valuations and

underlying assumptions provided by the Investment Adviser.

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

Regulatory Risks

Principal Risks Potential Impact/Description Mitigation

Regulatory Risk

The Company is required to comply with Section 1158 of

the Corporation Tax Act to ensure maintenance of investment

trust status, UK Listing Authority regulations including

Listing rules, Foreign Account Tax Compliance Act and

Alternative Investment Fund Managers Directive (“AIFMD”).

The Company looks to comply with relevant ESG rules and

regulations and continue to monitor those such as the

Sustainable Finance Disclosure Regulation (“SFDR”).

Failure to comply with the relevant rules and obligations

may result in reputational damage to the Company or have

a negative financial impact.

Impact of post Brexit on the Company and the portfolio.

The Board continues to review the impact of Brexit in terms

of the new trading deal and general business environment,

including possible tax and other issues.

All service providers including the Broker, Administrator, Investment

Adviser and AIFM are experienced in these areas and provide

comprehensive reporting to the Board and on the compliance of

these regulations.

The Company complies with article 8 of the SFDR and as noted

under “ESG” looks to comply with local requirements in order to

mitigate potential risks.

Mitigation measures for post Brexit impact includes inflation and

interest rate management, currency and cash management, tax

and legal advice as appropriate, and Fund marketing through

approved channels and AIFM oversees this reporting accordingly.

The Board are of the opinion that these are the principal risks, but mindful of their obligations under the changes made to the AIC Code of

Corporate Governance, the Board has also considered below emerging risks.

Emerging Risk

Principal Risks Potential Impact/Description Mitigation

Act of War /

Sanctions

As evidenced with the ensuing war in Ukraine and the various

sanctions and restrictions imposed, there is a possibility there

could be supply delays for Operations and Maintenance

(O&M), sanction considerations, volatile markets and general

uncertainty. More difficult energy markets expected along

with inflationary pressures on inputs.

It has also led to short term price increases and more focus

on renewable energy infrastructure.

Possible change to the world order and globalisation.

The invasion of Russia to Ukraine brings uncertainty to the

commodities market and how price levels of modules and

other hardware will be impacted directly or indirectly. The

Company does not have any direct exposure in Ukraine or

Russia, there are also no direct business relations with

counterparties from these countries; therefore, preliminary

assessments lead us to the conclusion that our investments

in Europe are not impacted directly at this time.

RISK MANAGEMENT

CONTINUED

SECTION 172 REPORT

In accordance with section 172 of the Companies Act 2006 (the

“Act”), the Board has a duty to promote the long-term success of

the Company for the benefit of its shareholders as a whole and, in

doing so, the Board is required to consider the likely consequences

of its actions over the long-term and on other stakeholders and the

environment.

The Directors are required to describe how they have had regard to

matters set out in section 172 of the Act.

Employees and stakeholders

As an externally managed investment company, the Company does

not have any employees. Its main stakeholders are as set out in the

diagram below which explains the relationship between the Company

and each of its stakeholders. The Company’s stakeholders are the

Board, Shareholders, Investment Adviser, AIFM, Administrator,

Company Secretary, Broker, Legal Adviser and its Registrar. The Board

believes the best interests of the Company are aligned with its

stakeholders as all parties aim to ultimately benefit from achieving

the Company’s investment objectives in compliance with regulatory,

legal, ethical and commercial standards.

Company

Investment

Adviser

Broker

Registrar

AIFM

Legal

Advisers

Board

Share-

holders

Company

Secretary

Administrator

Company’s Operating Model

The Company was listed on the main market of the London Stock

Exchange on 2 June 2021. The Company can hold investments directly

or via its sole subsidiary, Attika Holdings Limited, which in turn can

invest via Special Purpose Vehicles.

Engagement with Key Service Providers

The Board has identified that its key service providers are the Company’s

AIFM, Administrator, Corporate Secretary, Brokers, Legal Adviser,

Registrars, PR Consultants and Investment Adviser.

In order to ensure strong working relationships, the Company’s key

service providers are invited to attend the regular Board meetings to

present their respective reports. The Board seeks to maintain constructive

relationships with the Company’s key service providers on behalf of

the Company through regular communications, meetings and the

provision of relevant information and update meetings. This enables

the Board to exercise effective oversight of the Company’s activities.

On at least an annual basis, the Board has committed to undertake

a thorough evaluation of each of its service providers during which

it considers their performance against the terms of their engagement,

including each service provider’s fees to ensure that each remain

competitive within the market. Additionally, on an annual basis the

Board reviews the internal reports produced on behalf of those

service providers that are key to the Company’s day-to-day administration

(the AIFM, Administrator and Registrar) to ensure that there have

been no failings in their systems or procedures considered relevant

to the Company’s operations.

The Investment Adviser is the most significant service provider to

the Company and a description of its role can be found on page 6.

The Board receives regular reports from the Investment Adviser,

discusses the portfolio at each Board meeting and maintains a

constructive dialogue between meetings. The Investment Adviser’s

remuneration is charged only on committed capital (being the sum

of funds actually invested and funds committed for investment in

Energy Efficiency Investments) and is taken in shares in the Company

which aligns the Investment Adviser’s interests with those of the

Company’s Shareholders.

Engagement with Shareholders

Shareholders’ views are considered by the Board at their quarterly

meetings and assist in the Board’s decision-making process.

During the Investment Strategy Review described in the Chair’s

Statement at page 2, the Board and the Broker engaged constructively

with major Shareholders and a number of meetings took place where

Shareholders’ expectations were communicated to the Board.

In addition, and in order to help the Board in its aim to act fairly

between the Company’s members, the Board seeks to ensure effective

communication is provided to all Shareholders. The Board encourages

Shareholders to attend the Annual General Meeting and the General

Meeting in July at which the Board and representatives of the

Investment Adviser will be available to meet Shareholders in person

and to answer questions. The Annual Report has been issued to

Shareholders and will be available to view on the Company’s website

(www.aquila-energy-efficiency-trust.com ) as are the Company’s

factsheets and press releases.

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

Board Decisions

Engage Service Providers

As a newly incorporated Company which was formed with the

intention of listing on the London Stock Exchange as an investment

trust with the objective as described on page 1, the Board approved

the appointment of each of the Company’s service providers to help

achieve this goal. Each service provider was carefully chosen based

on its merits including the length of experience of each working with

investment trusts, and in particular their experience working with

renewable funds. The Board considers that each service provider’s

appointment is in the best interest of the Company’s shareholders.

Issue of Equity

In June 2021 the Board approved the issue of 100 million Ordinary

shares to those shareholders who had subscribed for shares in

accordance with the Company’s prospectus issued on 10 May 2021.

Whilst considering their decision, the Board consulted with the

Company’s service providers and concluded that this sum allowed

the Company’s portfolio to be suitably diversified and that it would

allow economies of scale which would be to the benefit of the

Company’s long-term interest and the interest of the Company’s

shareholders.

Acquisitions

The Board was presented with each investment opportunity identified

by the Investment Adviser. These had undergone a process of analysis

and challenge by the AIFM, including considerations relating to

environmental, social and governance issues. The Board considered

each proposal against the Company’s investment objective, investment

policy and strategy as disclosed on page 23.

As at 31 December 2021, over 9.30% of the capital raised was

invested and a further 14.13% of the proceeds committed. Further

details of these acquisitions can be found on page 8.

Investment Strategy Review

Following the period-end and as per the Company’s announcements

on 31 January 2022 and 21 April 2022, given slower investment

deployment than originally anticipated, the Board undertook a

comprehensive review of the Company‘s investment strategy with

a view to ascertain how best to accelerate deployment, whilst

maintaining the Company‘s prudent credit criteria and return objectives.

More details can be found at the Chair’s Statement on page 2.

SECTION 172 REPORT

CONTINUED

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

Taskforce for Climate-Related Financial Disclosures

(“TCFD”)

The Company notes the TCFD recommendations on climate related

financial disclosures. As stated above, the Company is an investment

trust with no employees, internal operations or property and, as

such, is exempt from TCFD disclosure requirements. However, it is

an asset owner and therefore the Company will work to develop

appropriate disclosures about the portfolio. Information sources are

developing and consultations on reporting requirements are underway,

and we will continue to work alongside our Investment Adviser to

provide more information as it becomes available. The Investment

Adviser supports the TCFD’s recommendations and is in the process

of assessing the guidance to ensure disclosure going forward.

Anti-bribery, corruption and tax evasion

It is the Company’s policy to conduct all of its business in an honest

and ethical manner. The Company takes a zero-tolerance approach

to bribery and corruption and is committed to acting professionally,

fairly and with integrity in all its business dealings and relationships

wherever it operates. The Company does not tolerate the criminal

facilitation of tax evasion. The Company’s AIFM, Investment Adviser,

Company Secretary and Administrator have confirmed that anti-

bribery policies and procedures are in place and that they do not

tolerate bribery. The Company’s policy and the procedures that

implement it are designed to support that commitment.

Conﬂicts of Interest

As required by law, a Director must avoid a situation where he or

she has an interest that conflicts with the Company’s interests. The

Company’s Articles of Association provide the Directors with the

authority to authorise potential conflicts of interest. The Directors

are able to impose limits or conditions when giving authorisation if

they think this is appropriate. The procedure observed by the Board

in considering dealing with conflicted matters is as follows:

 any Board member so conﬂicted must recuse themself from

the discussion involving the relevant conﬂict;

 only Directors who have no interest in the matter being consid

red are able to debate the matter and take the relevant

decision; and

 in taking the decision, the Directors must act in a way they

nsider, in good faith, will be most likely to promote the

Company’s success.

The Directors have declared any potential conflicts of interest to the

Company. These are entered into the Company’s register of potential

conflicts, which is reviewed regularly by the Board. The Directors are

obliged to advise the Company Secretary as soon as they become

aware of any potential conflicts of interest.

The Company has established procedures to deal with any potential

conflicts of interest in circumstances where the Aquila Group is

advising both the AIFM (for the Company) and Aquila managed

funds that are counterparties to the Company. These procedures

may, on a case-by-case basis, include:

 separate teams at the Investment Adviser being established in

relation to any proposed transaction to represent the Company

and the relevant counterparty;

 a fairness opinion on the value of the Energy Efﬁciency Invest

ents to be obtained from an independent expert;

 a due diligence and reporting package from relevant profes-

onal advisers on which the Company (or other applicable

vehicles) can place reliance;

 the AIFM operating its own risk management system and

inte

rnal control system as well as monitoring approved systems

operated by the Investment Adviser; and

 any conﬂict of interest arising in the course of the transaction

eing resolved in accordance with procedures agreed between

the Investment Adviser and the AIFM, subject to Board

agreement.

Employees

The Company has no employees. As at 31 December 2021 the

Company had four Directors, of whom three were female and one

of whom is male. As at the date of this Report, the Company has

three Directors, of whom one is female and two are male. The Board’s

policy on diversity is contained in the Corporate Governance Statement

(see page 44).

Viability statement

In accordance with the UK Corporate Governance Code (“UK Code”)

and the Listing Rules, the Directors have assessed the prospects of

the Company over a longer period than the 12 months required by

the ‘Going Concern’ provision.

In reviewing the Company’s viability, the Directors have assessed the

viability of the Company for the period to 31 December 2024 (the

“Look-forward Period”). The Board believes that the Look-forward

Period, being approximately three years, is an appropriate time

horizon over which to assess the viability of the Company, particularly

when taking into account the long-term nature of the Company’s

investment strategy, which is modelled over three years and the

principal risks outlined above.

In considering the prospects of the Company, the Directors looked

at the key risks facing the Company, focusing on the likelihood and

impact of each risk as well as any key contracts, future events or

timescales that may be assigned to each key risk. The Directors are

satisfied that the Company would continue to remain viable under

downside scenarios, including decreasing government regulated

tariffs and a decline in long term power price forecasts. The Directors

believe that the Company is well placed to manage its business risks

successfully over both the short and long term and, accordingly, the

Board has a reasonable expectation that the Company will be able

to continue in operation and to meet its liabilities as they fall due for

a period of at least three years.

OTHER INFORMATION

CONTINUED

The internal control framework of the Company’s service providers

is subject to a formal review on at least an annual basis. On a half-

yearly basis, the Board reviews the risk report prepared by the AIFM.

The Directors do not expect there to be any material increase in the

annual ongoing charges of the Company over the Look-forward

Period, with the exception of the Investment Advisory fees as explained

in the Chair’s Statement, and as the Company grows the annual

ongoing charges ratio is expected to decrease. The Company’s

available cash and income from investments provide substantial cover

to the Company’s operating expenses, and any other costs likely to

be faced by the Company over the Look-forward Period of the

assessment.

The Directors have agreed to bring forward the Initial Continuation

Resolution to February 2023, or earlier if appropriate. The Directors

assessed that the Initial Continuation Resolution will pass, however,

the Directors recognise that the outcome of this is not yet known

and therefore creates material uncertainty around going concern,

and may cast significant doubt about the Company’s viability. A

Continuation vote as to whether the Company continues its business

as a closed-ended investment is due to take place during February

2023, which, if passed, will allow the Company to continue for a

further year. If the Continuation vote is not passed, then the Directors

shall, within six months of such Continuation vote not being passed,

put proposals to shareholders for the reconstruction, reorganisation

or liquidation of the Company.

Outlook

The outlook for the Company, including the future development and

performance of the Company, is discussed in the Chair’s Statement

on page 3 and the Investment Adviser’s Report on page 20.

Strategic Report

The Strategic Report set out on pages 2 to 34 of this Annual Report

was approved by the Board of Directors on 23 June 2022.

For and on behalf of the Board

Miriam Greenwood

Chair of the Board

23 June 2022

Governance

STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

DIRECTORS’ REPORT

The Directors present their report and financial statements for the

period ended 31 December 2021.

Corporate Governance

The Corporate Governance Statement on pages 41 to 45 forms part

of this report.

Introduction and Status

The Company is incorporated in England and Wales as a public limited

company and is domiciled in United Kingdom. It is an investment

company as defined in section 833 of the Act 2006 and has a premium

listing on the London Stock Exchange.

The Company has received approval as an investment trust from

HMRC. The Company must meet eligibility conditions and ongoing

requirements in order for investment trust status to be maintained.

In the opinion of the Directors, the Company has met the conditions

and requirements for approval as an investment trust for the period

ended 31 December 2021, and the Directors, under advice, expect

the affairs of the Company to continue to satisfy the conditions of

an investment trust. The Company seeks to continue to operate as

an investment trust in accordance with section 1158 and 1159 of the

Corporation Tax Act 2010 (as amended by section 42(2) of the Finance

Act 2011).

Greenhouse Gas Emissions (“GHG”) and Streamlined

Energy and Carbon Reporting (“SECR”)

As the Company has outsourced operations to third parties, there

are no significant GHG emissions to report in relation to the operation

of the Company. In relation to the Company’s investments, the level

of GHG emissions arising from a low volume of electricity imports

and from operation and maintenance activity is not considered

material for disclosure purposes. The Company as low user (< 40,000kwh)

falls below the threshold to produce an energy and carbon report

under the SECR framework.

Retail distribution of Investment Company shares via

ﬁnancial advisers and other third-party promoters

As a result of the Financial Conduct Authority (“FCA”) rules determining

which investment products can be promoted to retail investors,

certain investment products are classified as ‘non-mainstream pooled

investment products’ and face restrictions on their promotion to

retail investors.

The Company has concluded that the distribution of its shares, being

shares in an investment trust, is not restricted as a result of the FCA

rules described above.

The Company currently conducts its affairs and intends to do so for

the foreseeable future so that the exclusion continues to apply. The

Company’s ordinary shares are eligible for inclusion in a stocks and

shares ISA.

Articles of Association

Amendments to the Company’s Articles of Association require a

Special Resolution to be passed by Shareholders.

Life of the Company

The Company has been established with an indefinite life. However,

under the Articles, Shareholders will have the opportunity to vote

on an ordinary resolution on the continuation of the Company at

the Annual General Meeting (“AGM”) to be held in 2023 (the “Initial

Continuation Resolution”), and every four years thereafter

(a“Continuation Resolution”). If the Initial Continuation Resolution

or any Continuation Resolution is not passed, the Directors shall

draw up proposals for the voluntary liquidation, unitisation, reorganisation

or reconstruction of the Company for consideration by Shareholders

as soon as reasonably practicable following the date on which the

Initial Continuation Resolution or any Continuation Resolution (asthe

case may be) is not passed. These proposals may or may not involve

winding up the Company and, accordingly, failure to pass the Initial

Continuation Resolution or any Continuation Resolution will not

necessarily result in the winding up of the Company.

In light of the Investment Strategy Review, the Board is keeping under

consideration the option to propose the amendment of the Company’s

Articles and provide the Shareholders with the opportunity to vote

on a Continuation Resolution at the AGM to be held in 2025, instead

of 2027 as described above.

Following the Investment Strategy Review described in the Chair’s

Statement, the Initial Continuation Resolution will be brought forward

and is expected to be voted on by Shareholders during February

2023 or earlier.

Alternative Investment Fund Manager (“AIFM”)

The Company is classified as an Alternative Investment Fund under

The Alternative Investment Fund Managers’ Directive and is therefore

required to have an AIFM. International Fund Management Limited

is the AIFM of the Company.

The AIFM is responsible for portfolio management of the Company,

including the following services:

i. monitoring the Energy Efficiency Investments in accordance with

the Investment Policy;

ii. evaluating investment opportunities identified by the Investment

Adviser and making relevant recommendations to the Board;

and

iii. acting upon instructions from the Board with regard to the

execution of transactions on behalf of the Company.

Under the terms of the AIFM Agreement, the AIFM is required to

provide risk management services to the Company, including:

i. assisting the Board with the establishment of a risk reporting

framework; monitoring the Company’s compliance with Investment

Policy and the Investment Restrictions in accordance with the

AIFM risk management policies and procedures and providing

regular updates to the Board;

ii. carrying out a risk analysis of the Company’s exposures, leverage,

counterparty and concentration risk; and

iii. analysing market risk and liquidity risk. The AIFM will be required

to record details of executed transactions, carry out reporting

obligations to the FCA and prepare investor reports. In addition,

the AIFM is required to assist the Board in establishing, maintaining

and reviewing valuation policies for calculating the NAV.

The AIFM is entitled to:

i. a management fee of £87,500 per annum plus an additional

amount which is equal to 0.015 per cent. per annum of the Net

Asset Value of the Company that exceeds £250 million;

ii. an additional fee of £3,000 per annum in respect of each

jurisdiction in which a marketing notification has been made in

accordance with the UK AIFMD Laws and the EU AIFM Directive;

and

iii. the reimbursement of the investment adviser fee payable by the

AIFM to the Investment Adviser.

The AIFM Agreement is terminable by either party on not less than

six months’ notice in writing. The AIFM Agreement may be terminated

earlier by the AIFM with immediate effect in certain circumstances.

The AIFM has the benefit of an indemnity from the Company in

relation to liabilities incurred by the AIFM in the discharge of its duties

other than those arising by reason of gross negligence, wilful

misconduct or fraud of or by the AIFM.

Investment Adviser

The AIFM has appointed Aquila Capital Investmentgesellschaft mbH

as the Investment Adviser to provide investment advisory services to

the AIFM in respect of the Company pursuant to the Investment

Advisory Agreement.

The Investment Adviser is responsible for certain investment advisory

services to the Company, including sourcing potential opportunities

in which the Company may invest, as well as on-going monitoring

of the Energy Efficiency Investments.

The Company will benefit from the advisory services provided to the

AIFM in respect of the Company and its Energy Efficiency Investments.

The Investment Advisory Agreement will continue in force for an

initial period of four years from the date of Admission. The Investment

Advisory Agreement will continue thereafter on a rolling basis and

may be terminated following the Initial period on 12 months’ notice

in writing.

The AIFM has also agreed to indemnify the Investment Adviser for

losses that the Investment Adviser may incur in the performance of

its duties pursuant to the Investment Advisory Agreement that are

not attributable to the fraud, gross negligence or wilful default of,

the Investment Adviser determined by a court of competent jurisdiction.

Under the Investment Advisory Agreement, the following fee is

payable to the Investment Adviser:

(i) 0.95 per cent. per annum of committed capital (plus VAT) of the

Company up to and including £500 million; and (ii) 0.75 per cent.

per annum of committed capital (plus VAT) of the Company above

£500 million.

During the first year of its appointment, the Investment Adviser has

undertaken to apply its fee (net of any applicable tax) in subscribing

for, or acquiring, Ordinary Shares. If the Ordinary Shares are trading

at a premium to the prevailing NAV, the Company will issue new

Ordinary Shares to the Investment Adviser. If, however, the Ordinary

Shares are trading at a discount to the prevailing NAV at the relevant

time, no new Ordinary Shares will be issued by the Company and

instead, the Investment Advisory Agreement provides, the Company

will instruct its broker to acquire Ordinary Shares to the value of fee

due in the relevant period.

Following the Investment Strategy Review described in the Chair’s

Statement on page 2, the Investment Adviser has agreed to amend

the current Investment Advisory Agreement such that any advisory

fees payable are charged only on committed capital and apply this

amendment retrospectively from the time of the Company’s IPO.

The original agreement entitled the Investment Adviser to charge

fees on the Company’s NAV which would have included uninvested

cash.

Company Secretary and Administrator

Sanne Fund Services (UK) Limited has been appointed to provide

company secretarial and administration services to the Company.

The AIFM, Company Secretary and Administrator are part of the

Sanne group of companies.

Alternative Investment Fund Portfolio Managers’ Directive

In accordance with the AIFMD, the AIFM must ensure that an annual

report containing certain information on the Company is made

available to investors for each financial year. The investment funds

sourcebook of the FCA (the “Sourcebook”) details the requirements

of the annual report. All the information required by those rules are

included in this Annual Report or will be made available on the

Company’s website.

Continuing Appointment of the Investment Adviser

Following the Investment Strategy Review described in the Chair’s

Statement, the performance of the Investment Adviser is subject to

a rigorous review by the Board. The continuing appointment of the

Investment Adviser is recommended the Board, subject to the outcome

of the Initial Continuation Resolution in early 2023 as announced on

21 April 2022.

Share Capital

At the date of incorporation the Company issued 1 Ordinary Share

of GBP 0.01 and 50,000 Management Shares of GBP 1.00 each.

Atlisting on 2 June 2021 the Company issued 99,999,999 Ordinary

Shares. On 2 June 2021 the 50,000 Management Shares were

redeemed. The Ordinary Shares are admitted to trading on the Main

Market for listed securities of the London Stock Exchange and are

listed on the premium segment of the Official List.

At the period end the Company’s issued share capital comprised

100,000,000 Ordinary Shares.

DIRECTORS’ REPORT

CONTINUED

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

DIRECTORS’ REPORT

CONTINUED

Voting rights

Each Ordinary Share held entitles the holder to one vote. All Ordinary

Shares carry equal voting rights and there are no restrictions on those

voting rights. Voting deadlines are stated in the Notice of Meeting

and Form of Proxy and are in accordance with the Act.

Restrictions

There are no restrictions on the transfer of Shares, nor are there any

limitations or special rights associated with regard to control attached

to the Ordinary Shares. There are no agreements between holders

regarding their transfer known to the Company, no restrictions on

the distribution of dividends and the repayment of capital, and no

agreements to which the Company is a party that might affect its

control following a successful takeover bid.

Results and dividend

The Company’s revenue loss after tax for the period amounted

GBP0.6 million. As disclosed in the Company’s IPO Prospectus, the

Company did not intend to pay a dividend in the first financial period

to 31December 2021, whilst it was deploying the IPO Proceeds.

As per the Company’s announcement released on 21 April 2022, in

light of slower than anticipated deployment to date and the current

expectation that the IPO proceeds will not be significantly deployed

within twelve months of Admission, the Company does not expect

that its stated dividend target of 3.5 pence per Ordinary Share for

the financial year ending 31 December 2022 will be covered by

earnings. The Board will review the position in respect of any dividend

which may be declared for the financial year ending 31 December

2022 in light of the deployment of the IPO proceeds as the year

progresses.

Notifiable Interest in the Company

As at 31 December 2021, the Directors have been formally notified

of the following interests in the Company’s Ordinary Shares, comprising

3% or more of the issued share capital of the Company:

Shareholder Holding

Percentage

Held*

Investec Wealth & Investment

Limited

25,776,761 25.78

Lion Umbrella Fund I S. A.

SICAV-RAIF

12,978,637 12.98

Schroders Plc 11,402,743 11.4

Stichting Juridisch Eigendom

Privium Sustainable Impact Fund

6,000,000 6.00

Marmarkon 4 S.à r.l. 5,847,819 5.85

City of Bradford - West Yorkshire

Pension Fund

5,000,000 5.00

* Based on number of Ordinary Shares in issue of 100,000,000 at the Company’s

period end.

Subsequent to the period end the Company was notified that the

holding of Investec Wealth & Investment Limited was reduced to

24,988,431 Ordinary shares, representing 24.99% of the Company’s

shares in issue as at the latest practicable date.

Shareholder Engagement

The Board is mindful of the importance of engaging with the

Company’s shareholders to gauge their views on topics affecting

the Company. During the Investment Strategy Review, the Board

engaged closely with major shareholders to discuss their expectations

and requirements.

The Company’s Annual General Meeting will be held on 28 June

2022 at 2.00pm at CMS Law, Cannon Place, 78 Cannon St, London

EC4N 6AF and the Company’s General Meeting will be held on

25July2022 at 10:00 am. Shareholders are encouraged to attend

both meetings. Proxy voting figures will be made available shortly

after the AGM and the General Meeting on the Company’s website

where Shareholders can also find the Company’s quarterly factsheets,

dividend and other relevant information.

Appointment of Auditor

The Company’s auditors, PricewaterhouseCoopers LLP (“PwC)”,

having expressed their willingness to continue in office as auditors,

will be put forward for appointment at the Company’s General

Meeting and the Board will seek authority to determine their

remuneration for the forthcoming year.

Going concern

The Directors have adopted the going concern basis in preparing the

financial statements. The following is a summary of the Directors’

assessment of the going concern status of the Company.

The Company continues to meet day-to-day liquidity needs through

its cash resources. The Directors have a reasonable expectation that

the Company has adequate resources to continue in operational

existence for at least twelve months from the date of this document.

In reaching this conclusion, the Directors have considered the

Company’s cash position, income and expense flows. The Company’s

net assets at 31 December 2021 were GBP 97.4million. As at

31December 2021, the Company held GBP 80million in cash and

cash equivalents. The total expenses for the period ended 31 December

2021 was GBP0.6million, which represented approximately 0.6%

of average net assets during the period. At the date of approval of

this document, based on the aggregate of investments and cash

held, the Company has substantial operating expenses cover.

The major cash outflows of the Company are the payment of dividends

and costs relating to the acquisition of new investments. The Directors

are confident that the Company has sufficient cash balances to fund

commitments to acquisitions should they become payable.

In light of the continuing COVID-19 pandemic and the war in Ukraine,

the Directors have considered each of the Company’s investments.

The Directors do not foresee any immediate material risk to the

Company’s investment portfolio and income from underlying SPVs.

A prolonged and deep market decline could lead to falling values to

the underlying business or interruptions to cashflow, however, the

Company currently has more than sufficient liquidity available to

meet any future obligations.

Following the slower than anticipated investment deployment and

the consequential appointment of an independent consultant to

review the Company’s investment strategy, the results of this review

were announced on 21 April 2022. The review concluded that the

market opportunity for the Company remains attractive and that the

actions to be taken in relation to the execution of the investment

strategy and other changes provided an improved basis for the

Company to execute its investment objective, with full deployment

targeted by the end of December 2022 or early 2023. In reaching

this conclusion, the Directors consulted with shareholders who,

overall, were supportive of the continuation of the Company with

these changes. An element of the consultation process was the

Directors’ proposal to bring forward the Initial Continuation Resolution

to February 2023, or earlier if appropriate. A further resolution will

be put at the February 2023 General Meeting, conditionally upon

the Continuation resolution being passed, to amend the Articles of

Association of the Company so that a Continuation vote will be put

at the AGM of the Company to be held in 2026 and every four years

thereafter, as envisaged in the May 2021 IPO Prospectus. If any

Continuation resolution put to shareholders is not passed, then the

Directors shall, within six months of such Continuation resolution

not being passed, put proposals to shareholders for the reconstruction,

reorganisation or liquidation of the Company. Taking into account

the factors above, the Directors have assessed that the Initial

Continuation Resolution will pass, however, the Directors recognise

that the outcome of this is not yet known and therefore creates

material uncertainty around going concern, due to the event falling

within 12-month period from the approval of this Annual Report.

The Directors note that these conditions indicate the existence of

material uncertainty which may cast significant doubt about the

Company’s ability to continue as a going concern.

Based on the assessment and considerations above, the Directors

have concluded that the financial statements of the Company should

be prepared on a going concern basis.

Auditor information

Each of the Directors at the date of the approval of this report confirms

that:

I. so far as the Director is aware, there is no relevant audit information

of which the Company’s auditors are unaware; and

II. the Director has taken all steps that he/she ought to have taken

as director to make himself/herself aware of any relevant

information and to establish that the Company’s auditors are

aware of that information.

This confirmation is given and should be interpreted in accordance

with the provisions of Section 418 of the Companies Act 2006.

Annual General Meeting

Resolutions relating to the following items will be proposed at the

forthcoming Annual General Meeting (“AGM”) to be held on

28June2022.

Ordinary resolutions

Resolution 1. To elect Miriam Greenwood OBE as a director of the

Company.

Resolution 2. To elect David Fletcher as a director of the Company.

Resolution 3. To elect Nicholas Bliss as a director of the Company.

Special resolutions

Resolutions 4 and 5. To give authority to issue new shares and to

dis-apply pre-emption rights

At the forthcoming AGM, the Board are seeking authority to allot

up to a maximum of 10% of the Company’s shares in issue as at the

date of the Notice of AGM (equating to 10 million Ordinary Shares)

and to dis-apply pre-emption rights. Authority granted under these

resolutions will expire at the conclusion of the AGM to be held in

2023 unless renewed prior to this date via a General Meeting.

The authority granted by Shareholders to issue Ordinary Shares will

provide flexibility to grow the Company and further expand the

Company’s list of assets. Ordinary Shares will only be issued at a

premium to the NAV (cum income) after the costs of issue. Ordinary

Share issues are at the discretion of the Board.

Resolution 6. To give authority for the Company to purchase its own

shares.

The Directors recommend that an authority to purchase up to

14,999,000 Ordinary Shares (subject to the condition that not more

than 14.99% of the Ordinary Shares in issue, excluding Treasury

Shares, at the date of the AGM are purchased) be granted and a

resolution to that effect will be put to the AGM. Any Ordinary Shares

purchased will either be cancelled or, if the Directors so determine,

held in treasury.

The Companies Act 2006 permits companies to hold shares acquired

by way of market purchase as treasury shares, rather than having to

cancel them. This provides the Company with the ability to re-issue

Ordinary Shares quickly and cost effectively, thereby improving

liquidity and providing the Company with additional flexibility in the

management of its capital base. No Ordinary Shares will be sold from

treasury at a price less than the (cum-income) NAV per existing

Ordinary Share at the time of their sale unless they are first offered

pro rata to existing Shareholders. At the period end the Company

did not hold any shares in treasury.

Unless otherwise authorised by Shareholders, Ordinary Shares will

not be issued at less than NAV and Ordinary Shares held in treasury

will not be sold at less than NAV.

Resolution 7. To authorise calling general meetings (other than Annual

General Meetings) on 14 clear days’ notice.

The Board believes that it is in the best interests of Shareholders of

the Company to have the ability to call meetings on 14 days’ clear

notice on matters requiring urgent approval. The Board will therefore

propose resolution 7 at the AGM to approve the reduction in the

minimum notice period from 21 to 14 clear days for all general

meetings other than annual general meetings.

DIRECTORS’ REPORT

CONTINUED

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

DIRECTORS’ REPORT

CONTINUED

Once approval is granted, the approval would be effective until the

Company’s next AGM, when it is intended that a similar resolution

will be proposed. In accordance with the Shareholders’ Rights

Directive, the Company will offer the Shareholders the ability to vote

by electronic means. This facility will be accessible to all Shareholders,

should the Board call a General Meeting at 14 clear days’ notice.

Short notice will only be used by the Board under appropriate

circumstances.

General Meeting

Resolutions relating to the following items will be proposed at the

forthcoming General Meeting (“GM”) to be held on 25 July 2022.

Ordinary resolutions

1. To receive the Company’s Annual Report and Accounts for the

period ended 31 December 2021, with the reports of the Directors

and auditors thereon.

2. To approve the Directors’ Remuneration Policy Report included

in the Annual Report and Accounts for the period ended

31December 2021.

3. To approve the Directors’ Remuneration Implementation Report

included in the Annual Report and Accounts for the period ended

31 December 2021.

4. To appoint PricewaterhouseCoopers as auditors to the Company.

5. To authorise the Directors to fix the remuneration of the auditors

until the conclusion of the next Annual General Meeting of the

Company.

6. To approve the Company’s dividend policy being the payment

of four quarterly interim dividends.

Regulatory Disclosures – Information to be disclosed in accordance

with Listing Rule 9.8.4.

The Listing Rules require listed companies to report certain information

in a single identifiable section of their annual financial reports. The

Company confirms that only LR 9.8.4(7) (issue of shares) is applicable

during the period under review.

Outlook

The outlook for the Company, including the future development and

performance of the Company, is discussed in the Chair’s Statement

on page 3 and the Investment Advisers’ Report on page 20.

By order of the Board

Maria Matheou

For and on behalf of

Sanne Fund Services (UK) Limited

Company Secretary

23 June 2022

Corporate Governance Framework

Responsibility for good governance lies with the Board. The governance

framework of the Company reflects the fact that it is an investment

company with no employees and outsources investment management

and other key functions to external service providers.

Statement of Compliance and Application of the AIC

Code’s Principles

The Board has considered the principles and provisions of the AIC

Code of Corporate Governance issued in February 2019 (the “AIC

Code”). The AIC Code addresses the principles and provisions set

out in the UK Code, as well as setting out additional provisions on

issues that are of specific relevance to the Company.

The Board considers that reporting against the AIC Code, which has

been endorsed by the Financial Reporting Council, provides more

relevant information to Shareholders.

The AIC Code is available on the AIC website (www.theaic.co.uk)

and the UK Corporate Governance Code can be found on the Financial

Reporting Council’s website (www.frc.org.uk). The AIC Code includes

an explanation of how it adapts the principles and provisions set out

in the UK Code to make them relevant for investment companies.

Compliance

Throughout the period ended 31 December 2021 the Company

complied with the recommendations of the AIC Code except, as

explained below, where the Company does not believe it appropriate

to comply.

The Board has decided not to nominate a Senior Independent Director.

The Board considers that all Directors have different qualities and

areas of expertise on which they may lead where issues arise and to

whom concerns may be conveyed.

The UK Code includes provisions relating to the role of the chief

executive, executive Directors’ remuneration and the need for an

internal audit function. For reasons set out in the AIC Code, the

Board considers these provisions are not relevant to the Company

as it is an externally managed investment company. In particular, all

of the Company’s day-to-day management and administrative

functions are outsourced to third parties. As a result, the Company

has no executive Directors, employees or internal operations. The

Company has therefore not reported further in respect of these

provisions.

BOARD LEADERSHIP AND PURPOSE

Purpose

The Company is an investment company and its investment objective

and policy are set out on page 1. Any material change to the investment

policy requires Shareholder approval.

The Company is governed by a Board of Directors, all of whom are

non-executive, and it has no employees. The business model adopted

by the Board to achieve the Company’s objective has been to contract

the services of the Investment Adviser and AIFM to manage the

portfolio and the risks associated in accordance with the Board’s

strategy and under its oversight. The Board monitors adherence to

the Company’s investment policy and regularly reviews the Company’s

performance in meeting its investment objective.

All other functions are provided by third parties under the oversight

of the Board.

The Board reviews the performance of the AIFM and Investment

Adviser and its other key service providers on an ongoing basis.

Experience and Contribution of Directors

During the period, the Board of Directors comprised of Miriam

Greenwood, Nicholas Bliss, Lisa Arnold and Laura Sandys. Lisa Arnold

and Laura Sandys both resigned on 28 January 2022. David Fletcher

was appointed to the Board subsequent to the period end, on

29April2022.

CORPORATE GOVERNANCE STATEMENT

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

CORPORATE GOVERNANCE STATEMENT

CONTINUED

The experience and contribution of the Directors, following David Fletcher’s appointment on 29 April 2022, can be summarised as follows:

With qualifications as a barrister and in corporate finance, Miriam

has spent more than 30 years working for a number of leading

investment banks and other financial institutions and has been a

non-executive director of a several publicly listed and private companies.

She was, for nine years until 2013, a non-executive director of the

Gas and Electricity Markets Authority (Ofgem) and, until recently,

Chair of the Gas Network Innovation Competition for seven years

and has extensive experience in the energy and utilities industry.

Miriam is Chair of SMS plc and holds non-executive director positions

at River and Mercantile Group plc and at Gulf International Bank

(UK) where she also chairs their respective Remuneration Committees.

She is also a non-executive director of Canopius Managing Agents

Ltd. Beyond Board roles, Miriam is an adviser to Ofgem on the current

RIIO2 price control and to the Mayor of London’s Energy Efficiency

Fund. A Deputy Lieutenant of the City of Edinburgh, Miriam was

awarded an OBE for services to corporate finance. Miriam chairs the

Management Engagement Committee and the Nomination Committee.

Miriam Greenwood OBE DL

(Non-Executive Chair)

Appointed on 19 April 2021

Nicholas established and led the global infrastructure and transport

sector group at the international law firm Freshfields Bruckhaus

Deringer LLP where he was a partner for over 20 years and also

served on the Partnership Council, the supervisory board of the firm.

During this period he led on mandates involving some of the most

notable infrastructure projects across the UK, Europe, Africa and the

Gulf. In particular, he was heavily involved in the development and

application of PFI, PPP and other project finance techniques to the

delivery of major infrastructure projects. Since leaving Freshfields,

he has developed an expertise in both advising and acting as an

independent director in “distressed situations” at SPV corporates

owned by infrastructure funds or industrials. Among his other

engagements, he is Of Counsel at Chatham Partners LLP, a Hamburg

based infrastructure/energy/real estate “boutique” law firm. Nicholas

acted as interim Chair of the Audit & Risk Committee as well as

Remuneration Committee between 28 January 2022 and 29 April2022.

Nicholas Bliss

(Non-Executive Director)

Appointed on 19 April 2021

David was group finance director of Stonehage Fleming Family &

Partners, a leading independently owned multi-family office, until

2019 having joined in 2002. Prior to that, he spent 20 years in

investment banking with JPMorgan Chase, Robert Fleming & Co.

and Baring Brothers & Co Limited, latterly focused on financial services

in the UK (asset management and life insurance). He started his

career with Price Waterhouse and is a chartered accountant. David

is an independent non-executive director of Ecofin U.S. Renewables

Infrastructure Trust PLC, where he is the chair of the audit committee,

and an independent chair of JP Morgan Claverhouse Investment

Trust plc. Additionally, David is an independent non-executive director

of abrdn Smaller Companies Income Trust plc, where he is the chair

of the audit committee. With effect from his appointment to the

Board on 29 April 2022, David is Chair of the Audit and Risk Committee.

David Fletcher

(Non-Executive Director)

Appointed on 29April2022

All Directors are members of each Committee.

Board Committees

The Board decides upon the membership and chairmanship of its

committees.

Audit and Risk Committee

The committee has formal terms of reference which clearly define

roles and responsibilities. It meets at least three times a year or more

often if required. A separate report of the work of the Committee

during the period under review is set out on pages 49 to 51. The

Committee comprises all the independent non-executive Directors.

During the period, Lisa Arnold acted as a Committee Chair. Following

the Board restructure on 28 January 2022, Nicholas Bliss acted as

interim Chair of the Committee until he was succeeded by David

Fletcher on 29 April 2022.

Remuneration Committee

The committee has formal terms of reference which clearly define

roles and responsibilities. It meets at least once a year or more often

if required. Its principal duties include (i) agreeing the policy for the

remuneration of the Directors and reviewing any proposed changes

to the policy; (ii) reviewing and considering ad hoc payment to the

Directors in relation to duties undertaken over and above normal

business; and (iii) if required, appointing independent professional

remuneration advice. The Committee comprises all the independent

non-executive Directors. During the Period, Lisa Arnold acted as a

Committee Chair. Following the Board restructure on 28 January

2022, Nicholas Bliss acted as interim Chair of the Committee until

he was succeeded by David Fletcher on 29 April 2022.

Nomination Committee

The committee has formal terms of reference which clearly define

roles and responsibilities. It meets at least once per annum. Its principal

duties include:

i. identifying individuals qualified to become Board members and

selecting the director nominees for election at general meetings

of the Shareholders or for appointment to fill vacancies;

ii. determining director nominees for each committee of the Board;

iii. considering the appropriate composition of the Board and its

committees; and

iv. undertaking an annual performance evaluation of the Board and

its committees.

Following the resignation of the two Directors on 28 January 2022,

the Committee initiated a search for their replacements. This process

included preparing a job description for each role and engaging an

external search agency. As a result of this exercise, David Fletcher

was appointed as a Director to the Board on 29 April 2022 and the

appointment of another Director is expected to be completed soon.

The Nomination Committee comprises all the independent non-executive

Directors and is chaired by Miriam Greenwood.

Management Engagement Committee

The committee has formal terms of reference which clearly define

roles and responsibilities. It meets at least once a year or more often

if required. Its principal duties include regularly reviewing the contracts,

the performance and the remuneration of the Company’s key service

providers. The Management Engagement Committee comprises all

the independent non-executive Directors and is chaired by Miriam

Greenwood. The results of the review of the performance of the

Investment Adviser in the context of the Investment Strategy Review

are explained in the Chair’s Statement on page 2.

In addition, a number of ad hoc Board and Committee meetings

were held during the period to deal with administrative matters and

the formal approval of documents, investment proposals and to

consider the valuation of the Company’s portfolio which were

considered time critical.

Since the Company had only launched in June 2021, a Management

Engagement Committee meeting was not held during the first

financial period, due to its short life to the Company’s period end

and the Board’s need to spend longer in developing a true understanding

of the Company’s service providers before analysing their performance.

The Management Engagement Committee met in February 2022 to

carry out the review of the Company’s key service providers and

consider their continuing appointment for the next financial year

ending 31 December 2022.

Decision Making

The Board is responsible for the overall stewardship of the Company’s

affairs and has adopted a schedule of matters specifically reserved

for decision by the Board. Strategic issues and all operational matters

of a material nature are considered at its meetings, including reviewing

the Company’s performance by reference to the Company’s key

performance indicators.

The Board has access to independent advice at the Company’s

expense where it judges it necessary in order to discharge its

responsibilities properly.

CORPORATE GOVERNANCE STATEMENT

CONTINUED

Meeting Attendance

Board

Audit and Risk

Committee

Management

Engagement

Committee

Nomination

Committee

Remuneration

Committee

Miriam Greenwood 4/4 2/2 0/0 1/1 1/1

Lisa Arnold 4/4 2/2 0/0 1/1 1/1

Nicholas Bliss 4/4 2/2 0/0 1/1 1/1

Laura Sandys 4/4 2/2 0/0 1/1 1/1

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

CORPORATE GOVERNANCE STATEMENT

CONTINUED

Prior to being presented to the Board, each transaction was considered

by the AIFM who reviewed it against an agreed set criteria of items

to ensure it was suitable for the Company’s long-term success and

in Shareholders’ best interests.

Directors’ share dealings

The Directors comply with the Share Dealing Code adopted by the

Company in accordance with UK Market Abuse Regulations (the

“Share Dealing Code”) in relation to their dealings in Ordinary Shares.

The Board is responsible for taking all proper and reasonable steps

to ensure compliance with the Share Dealing Code by the Directors.

DIVISION OF RESPONSIBILITIES

The independent Board is responsible to Shareholders for the overall

management of the Company. The following sets out the division

of responsibilities between the Chair, the Board and its Committees.

Role of the Chair

The Chair leads the Board and is responsible for its overall effectiveness

in directing the Company. The Chair sets the agenda for the Board

and, in conjunction with the Company Secretary, ensures that accurate,

timely and clear information is circulated to the Directors five working

days prior to the meeting. The Board has implemented various policies

and procedures to ensure the Company runs effectively and efficiently.

An open, informed and transparent environment is promoted at each

Board meeting and the Chair maintains open communication channels

with the other Directors, AIFM, Investment Adviser and Company

Secretary between Board meetings.

Senior Independent Director

Due to the size and structure of the Board it was considered unnecessary

to identify a senior independent non-executive director. The Board

considers that all Directors have different qualities and areas of

expertise on which they may lead where issues arise and to whom

concerns may be conveyed.

Role of the Board

All Board members are independent non-executive Directors, who

continue to be independent of the Investment Manager. The Board

is responsible for the governance of the Company, notwithstanding

any delegation of responsibilities to third parties. It has oversight

over the management and conduct of the Company’s business,

strategy and development. The Board determines the Investment

Objective and Investment Policy as well as risk appetite and has

overall responsibility for the Company’s activities, including review

of investment activity and performance. The Board ensures the

maintenance of a sound system of internal controls and risk management

(including financial, operational and compliance controls) and reviews

the overall effectiveness of systems in place. The Board is responsible

for approval of any changes to the capital, corporate and/or management

structure of the Company. The Board Members offer strategic

guidance and specialist advice; whilst providing constructive and

effective challenge, especially to the decisions of the Investment

Adviser. The Board scrutinises and assesses the performance of third

party service providers (including the Investment Adviser and AIFM).

The Board’s main focus is to promote the sustainable long-term

success of the Company, to deliver value for Shareholders and

contribute to wider society. The Board does not routinely involve

itself in day-to-day business decisions. The AIFM is responsible for

the risk management of the Company pursuant to AIFMD and the

Investment Adviser for portfolio management.

Appointment and Replacement of Board

The rules concerning the appointment and replacement of Directors

are contained in the Company’s Articles of Association which require

that a Director shall be subject to election at the first AGM after

appointment and re-election at least every three years thereafter.

However, in accordance with the UK Code, the Board has resolved

that all Directors shall stand for annual re-election at each AGM.

Further details of the Board’s process for the appointment and

replacement of Board members can be found on page 47.

Independent advice

A procedure has been adopted for Directors, in the furtherance of

their duties, to take independent professional advice at the expense

of the Company. No professional advice has been independently

sought during the Period. The Directors have access to the advice

and services of the Company Secretary.

Role of Committees

The role of each Committee is described in their respective terms of

reference, which can be found on the Company’s website.

COMPOSITION, SUCCESSION AND EVALUATION

Composition

At the date of this report, the Board consists of three independent

non-executive Directors including the Chair.

A search for the appointment of an additional non-executive Director

is underway. All of the Directors are independent of the Investment

Adviser and are able to allocate sufficient time to the Company to

discharge their responsibilities effectively.

The Directors have a broad range of relevant experience to meet the

Company’s requirements and their biographies are shown on page42.

In line with the AIC Code, the Board has decided that each Director

should be subject to annual re-election by Shareholders, although

this is not required by the Company’s Articles of Association.

The Board recommends that all the Directors should be elected for

the reasons highlighted in the Notice of Annual General Meeting.

Board diversity

The Board recognises the benefits of diversity and supports the

recommendations of the Davies Report. All Board appointments will

be made on merit and have regard to diversity including factors such

as ethnicity, gender, skills, background and experience. As at

31December 2021 the Company had four Directors, three of whom

were female and one of whom was male. As at the date of this

Report, the Company has three Directors, one female and two male.

Board tenure and succession

The Directors recognise that independence is not a function of service

or age and that experience is an important attribute within the Board.

In order to ensure continuity, the Board has adopted a succession

plan that allows for a gradual refreshment. Accordingly, the Board

may decide to recommend a Director with more than nine years’

service for re-election at the Company’s AGM.

Performance evaluation

Due to the fact the Company only launched in June 2021, a performance

evaluation of the Board, its committees and the individual Directors

has not taken place during the period under review. An evaluation

requiring the Directors to complete detailed questionnaires on the

operation of the Board, and its committees, and the individual

contribution of each Director and the performance of the Chair will

take place during the year ending 31 December 2022.

A policy of insurance against Directors’ and Officers’ liabilities is

maintained by the Company.

A procedure has been adopted for Directors, in the furtherance of

their duties, to take independent professional advice at the expense

of the Company.

AUDIT, RISK AND INTERNAL CONTROL

Audit

The Audit and Risk Committee monitors the performance, objectivity

and independence of the external auditors and this is assessed before

the approval of the Annual Report. In evaluating PwC’s performance,

the Audit and Risk Committee examine robustness of the audit process,

the independence and objectivity of the auditor and the quality

ofdelivery.

The Audit and Risk Committee satisfy themselves that the Annual

Report taken as a whole is fair, balanced and understandable. The

assessment of the performance during the period and the judgements,

estimates and assumptions made throughout the annual report are

considered formally as a committee agenda item.

Risk

The Directors confirm that they have carried out a robust assessment

of the principal risks facing the Company, including those that would

threaten its business model, future performance, solvency or liquidity.

The principal risks and how they are being managed are set out in

the Strategic Report on pages 26 to 30.

Internal control

The AIC Code requires the Board to review the effectiveness of the

Company’s system of internal controls. The Board recognises its

ultimate responsibility for the Company’s system of internal controls

and for monitoring its effectiveness. The system of internal controls

is designed to manage rather than eliminate the risk of failure to

achieve business objectives. It can provide only reasonable assurance

against material misstatement or loss. The Board has undertaken a

review of the aspects covered by the guidance and has identified

risk management controls in the key areas of business objectives,

accounting, compliance, operations and secretarial as being matters

of particular importance upon which it requires reports from the

relevant key service providers. The Board believes that the existing

arrangements, set out below, represent an appropriate framework

to meet the internal control requirements. The Directors review the

effectiveness of the internal control system throughout the period.

Financial aspects of internal control

These are detailed in the Report of the Audit and Risk Committee

on page 49.

Other aspects of internal control

The Board will hold at least four regular meetings each year, plus

additional meetings as required. Between these meetings there is

regular contact with the AIFM, the Investment Adviser and the

Company Secretary and Administrator.

The Administrator and Company Secretary, Sanne Fund Services (UK)

Limited, reports separately in writing to the Board concerning risks

and internal control matters within its remit, including internal financial

control procedures and company secretarial matters. Additional ad

hoc reports are received as required and Directors have access at all

times to the advice and services of the Company Secretary, which is

responsible to the Board for ensuring that Board procedures are

followed and that applicable rules and regulations are complied with.

Contact with the Investment Adviser, the AIFM and the Administrator

enable the Board to monitor the Company’s progress towards its

objectives and encompass an analysis of the risks involved. The

effectiveness of the Company’s risk management and internal controls

systems is monitored regularly and a formal review, utilising a detailed

risk assessment programme, takes place at least annually. This includes

review of the internal controls reports of the Administrator, the AIFM

and the Registrar.

Based on the work of the Audit and Risk Committee, and the reviews

of the reports received by the Audit and Risk Committee on behalf

of the Board, the Board has concluded that there were no material

control failures during the period under review and up to the date

of this report.

REMUNERATION

The Remuneration Committee comprises all the Directors of the

Board. It meets at least annually and is responsible for considering

and making appropriate recommendations to the Board in relation

to Directors’ remuneration.

The Company does not have any executive Directors or employees,

and, as a result, operates a simple and transparent remuneration

policy with no variable element, that reflects the non-executive

Directors’ duties, responsibilities and time spent. The Company’s

remuneration policy will be put to Shareholders for approval at the

Company’s General Meeting to be held on 25 July 2022 and is

detailed within the Directors’ Remuneration Report on page 46.

During the period, there have been no major decisions or changes

related to the Directors’ remuneration from their remuneration

awarded prior to the Company’s listing. No director is involved in

deciding their own remuneration outcome.

CORPORATE GOVERNANCE STATEMENT

CONTINUED

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

DIRECTORS’ REMUNERATION REPORT

Annual Chair’s statement

I am pleased to present the first Remuneration Committee (the

“Committee”) report for the period ended 31 December 2021. It is

set out in two sections: a) Remuneration Policy – a summary of our

current Policy which will be put to vote for the first time at the

Company’s upcoming General Meeting in July 2022; and b) Remuneration

Implementation Report – a description on how the Directors’

Remuneration Policy has been implemented during the period.

During the period, the Remuneration Committee undertook a review

of Directors’ fees. As this is the first financial period of the Company’s

operations, no change in the Directors’ remuneration was proposed

and therefore the Directors’ remuneration remains consistent with

the disclosures included in the Company’s prospectus published on

10 May 2021.

The Remuneration Committee Report for the period to 31 December

2021 has been prepared in accordance with sections 420-422 of the

Act, Schedule 8 of the Large and Medium-sized Companies and

Groups (Accounts and Reports) Regulations 2008, as amended (the

Regulations) and the Listing Rules. The law requires the Company’s

auditor to audit certain sections of the Remuneration Report; where

this is the case, the relevant section has been indicated as such. The

Remuneration Committee met once during the period under review.

General Meeting approval of the Remuneration Policy

and Remuneration Implementation Report

The Company’s Remuneration Policy will be put forward for approval

by Shareholders at the Company’s General Meeting on 25 July 2022.

In accordance with the requirements of Schedule 8 of the Large and

Medium-sized Companies and Groups (Accounts and Reports)

Regulations 2008, as amended (the Regulations), the Remuneration

Policy is required to be put to Shareholders for approval every three

years, unless a material variation to the Remuneration Policy is

proposed and in which case Shareholder approval will be sought to

amend the policy.

Remuneration Policy

Directors are remunerated in the form of fees, in respect of their

appointment as a non-executive Director of the Company and their

appointment as non-executive Director of Attika Holdings Limited,

with the split of fees between these appointments agreed between

the parties in writing. Directors’ fees are payable in quarterly instalments

in arrears. The Company’s Articles of Association limit the fees payable

to the Directors in aggregate to £250,000 per annum. Subject to

the overall limit, the Company’s policy is that the fees payable to the

Directors should reflect the time spent by the Board on the Company’s

affairs and the responsibilities borne by the Directors and should be

sufficient to promote the long-term success of the Company. All

Directors, including any new appointments to the Board, are paid

at the same rate, apart from the Chair of the Board (also Chair of

the Nomination and Management Engagement committees) and

the Chair of the Audit and Risk Committee (also Chair of the

Remuneration Committee), who are paid a higher fee in recognition

of their additional responsibilities. As provided for in clause 107 of

the Articles of Association and the Directors’ appointment letters,

the Directors are entitled an additional fee where a Director undertakes

any special duties, or services outside their ordinary duties as a

Director.

The policy is to review fee rates annually, although such review will

not necessarily result in any change to the rates, and account is taken

of fees paid to the directors of other similar investment trust companies.

Consideration of Shareholders’ views

Shareholders have not expressed any views on the Company’s

Remuneration policy. The General Meeting to be held on 25 July

2022 will be the first opportunity for Shareholders to vote on the

Directors’ Remuneration Policy.

Effective date

The Remuneration Policy will become effective from the date of the

Company’s General Meeting on 25 July 2022, should it be approved

by Shareholders.

Remuneration Implementation Report

Directors’ Remuneration

Each of the Directors is entitled to receive a fee of £37,000 perannum,

save for the Chair of the Board (also Chair of the Nomination and

Management Engagement committees), who is entitled to receive

an additional fee of £18,000 per annum and the Chair of the Audit

and Risk Committee (also Chair of the Remuneration Committee),

who is entitled to receive an additional fee of £5,000 per annum.

Each of the Directors’ fees are in respect of their appointment as a

non-executive director of the Company and their appointment as

non-executive director of Attika Holdings Limited. The Board also

considered the split of Directors’ fees between such appointments

and decided that a split between the Company and Attika Holdings

Limited of 70%/30% respectively was appropriate with effect from

1 January 2022.

During the period the Committee reviewed the Directors’ remuneration,

and it was agreed that the remuneration levels would remain as set

out in the Company’s Prospectus.

The table below provides a single figure for the total remuneration

of each Director for the period ended 31 December 2021.

Single ﬁgure for total remuneration (audited)

Date of

appointment to

the Board

Fees to

31 December

2021*

Expenses

reimbursed to

31 December

2021

Total

Miriam Greenwood 19 April 2021 35,679 – 35,679

Nicholas Bliss 9 April 2021 24,003 – 24,003

Lisa Arnold** 9 April 2021 27,246 – 27,246

Laura Sandys** 9 April 2021 24,003 – 24,003

Total 110,931 110,931

* From 7 May 2021.

** Resigned on 28 January 2022.

Directors receive fixed fees and do not receive bonuses or other

performance related remuneration, share options, pension contributions

or other benefits apart from the reimbursement of allowable expenses.

No commissions or performance related payments will be made to

the Directors by the Company.

No Director has waived or agreed to waive any emoluments from

the Company or any subsidiary undertaking.

Directors’ service contracts, term and loss of ofﬁce

The Directors do not have service contracts with the Company. The

Directors have appointment letters which provide for an initial term

of three years. In accordance with the AIC Code, each member of

the Board will seek annual re-election by Shareholders at the AGM.

There are no agreements in place to compensate the Board for loss

of office.

Directors’ indemnities

Subject to the provisions of the Act, the Company has agreed to

indemnify each Director against all liabilities which any Director may

suffer or incur arising out of or in connection with any claim made

or proceedings taken against him, or any application made by him,

on the grounds of his negligence, default, breach of duty or breach

of trust in relation to the Company or any Associated Company.

Performance

The following chart shows the performance of the Company’s NAV

and share price (total return) by comparison to the FTSE All share

index for the period since the Company was listed. The Company

does not have a specific benchmark but has deemed the FTSE All

share index to be the most appropriate comparator for its performance.

DIRECTORS’ REMUNERATION REPORT

CONTINUED

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

DIRECTORS’ REMUNERATION REPORT

CONTINUED

Relative importance of spend on pay

The following table sets out the total level of Directors’ remuneration

compared to the distributions to Shareholders by way of dividends

and share buybacks, the Investment Adviser’s fees and operating

expenses incurred by the Company.

Period ended

31 December

2021

Directors’ fees 110,931

Investment Adviser’s fee* 76,698

Proposed dividend

Nil

Operating expenses 476,660

* For more details on the calculation of the Investment Adviser’s fees please see page 37.

The disclosure of the information in the table above is required under

The Large and Medium-sized Companies and Groups (Accounts and

Reports) (Amendment) Regulations 2013 with the exception of,

investment advisory fees and operating expenses which have been

included to show the total expenses of the Company.

Directors’ holdings (Audited)

At 31 December 2021 and at the date of this report the Directors

had the following holdings in the Company. There is no requirement

for Directors to hold shares in the Company. All holdings were

beneficially owned.

As at

31 December 2021

Miriam Greenwood 24,000

Lisa Arnold* 20,100

Nicholas Bliss 20,000

Laura Sandys* 15,000

David Fletcher**

n/a

* Resigned on 28 January 2022 and following the Period-end.

** Appointed on 29 April 2022.

Remuneration Consultants

Remuneration Consultants were not engaged by the Company during

the period under review and in respect of the Remuneration Report.

Recruitment agencies

The Board will not pay any incentive fees to any person to encourage

them to become a director of the Company. The Board may, however,

pay fees to external agencies to assist the Board in the search and

selection of Directors. No such external agency was engaged during

period under review. After the period-end, the Board agreed that

an executive search firm would be best positioned to identify potential

candidates following the Board restructure on 28 January 2022.

Following a tender process, the Company engaged Longwater

Partners subsequent to period end to assist in the recruitment of

David Fletcher. Longwater Partners have no other connection to the

Company or the individual Directors, and there are processes in place

to ensure the advice received by the Board is independent.

Statement

On behalf of the Board and in accordance with Part 2 of Schedule

8of the Large and Medium-sized Companies and Groups (Accounts

and Reports) (Amendment) Regulations 2013, I confirm that the

above Remuneration Policy and Remuneration Implementation Report

summarises, as applicable, for the period to 31 December 2021:

a) the major decisions on Directors’ remuneration;

b) any substantial changes relating to Directors’ remuneration made

during the period; and

c) the context in which the changes occurred and decisions have

been taken.

David Fletcher

Chair of the Remuneration Committee

23 June 2022

Introduction

I am pleased to present the first Audit and Risk Committee (the

“Committee”) report for the period ended 31 December 2021. At least

once a year the Committee meets with the external Auditors without

any representative of the Manager or Administrator being present. The

Committee’s effectiveness will be reviewed on an annual basis as part

of the Board’s performance evaluation process (see page 43).

Role and Composition

The role of the Committee is to ensure that shareholder interests are

properly protected in relation to the application of financial reporting

and internal control principles and to assess the effectiveness of the

audit. The Committee’s role and responsibilities are set out in full in

its terms of reference which are available on request from the Company

Secretary and can be found on the Company’s website (www.aquila-

energy-efficiency-trust.com). A summary of the Committee’s main

responsibilities and how it has fulfilled them is set out below. Review

of the Company’s internal control and risk management fall within

the terms of reference of the Committee.

The Committee comprises all the Directors and the Board is satisfied

that the Committee has sufficient and recent financial experience,

and as a whole, has competence relevant to the sector in which the

Company operates to discharge its functions effectively. Following

the resignation of two members of the Audit and Risk Committee

including its Chair, Nicholas Bliss acted as interim Committee Chair

until 29April2022, when I was appointed to the Board and became

the new Chair of the Audit and Risk Committee. Between 28 January

2022 and 27 April 2022, the interim Chair was assisted by Mazars

LLP, with the costs borne by the Investment Adviser. The experience

of the members of the committee can be assessed from the Director’s

biographies set out on page 42.

Main Activities of the Committee

The Company was listed on the London Stock Exchange on 2 June

2021. The Committee met formally twice during the period and three

times after the period-end. PwC, the external Auditors, attended

the second meeting during the period. The AIFM’s risk function

provided reports on their monitoring programme for these meetings.

As this is the first, partial year of operation, with no interim reports

or NAV required, the Committee worked with its advisers to set an

appropriate governance framework. The matters considered, monitored

and reviewed by the Committee during the course of the period

included the following:

• monitored and reviewed the Company’s emerging and principal

risks and internal controls;

• considering the ongoing assessment of the Company as a going

concern;

• considered the appointment, independence, objectivity and

remuneration of the Auditor;

• reviewed the audit plan;

• approved the accounting principles including valuation methodology

and fair value;

• monitored the preparation and timetable for the production of

the Annual Report & Accounts; and

• considered the financial and other implications on the independence

of the auditor arising from the provision of non-audit services.

Going concern

The Committee reviewed the Company’s going concern assessment

and concluded that although there are conditions that indicate the

existence of material uncertainty which may cast significant doubt

about the Company’s ability to continue as a going concern, it is

appropriate for the Company’s financial statements to be prepared

on a going concern basis as described in the Directors’ Report on

page 38.

Internal control and risk

During the period the Committee together with the AIFM and other

service providers carefully considered the Company’s matrix of risks

and uncertainties (including emerging risks) and appropriate mitigating

actions. The procedure for identifying emerging risks can be found

on page 30 and the Company’s principal risks can be found on

pages27 to 30.

The Committee also considered the internal control reports of its

AIFM, Investment Adviser, Administrator and Registrar. The Committee

reviewed these reports and concluded that there were no significant

control weaknesses or other issues that needed to be brought to the

Board’s attention.

Financial aspects of internal control

The Directors are responsible for the internal financial control systems

of the Company and for reviewing its effectiveness. The aim of the

internal financial control system is to ensure the maintenance of

proper accounting records, the reliability of the financial information

upon which business decisions are made and which is used for

publication, and that the assets of the Company are safeguarded.

The Board has contractually delegated to external agencies the

services the Company requires, but they are fully informed of the

internal control framework established by each relevant service

provider who provide reasonable assurance on the effectiveness of

internal financial controls.

The Statement of Directors’ Responsibilities in respect of the financial

statements is on page 52 and a Statement of Going Concern is on

page 38. The Report of the Independent Auditor is on pages 53

to57.

Financial statements and signiﬁcant accounting

matters

The Committee reviewed the financial statements and considered

the following significant accounting issues in relation to the Company’s

financial statements for the period ended 31 December 2021.

REPORT OF THE AUDIT AND RISK COMMITTEE

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

Valuation and existence of investments

The Company’s accounting policy is to designate investments at fair

value through profit or loss. Therefore, the most significant risk in

the Company’s financial statements is whether its investments are

fairly valued due to the uncertainty involved in determining the

investment valuations. The Committee reviewed the procedures in

place for ensuring the accurate valuation and existence of investments,

and approved the valuation of the Company’s investments and their

existence at the period end with the Investment Adviser, the AIFM

and other service providers.

The Board has approved a Valuation Policy which sets out the valuation

process. The process includes a valuation by the Investment Adviser

using fair market valuations of the investments on an annual basis

as at 31 December each year. The valuations are updated as at

30Juneeach year. The valuation principles used to calculate the fair

value of the assets are based on International Private Equity and

Venture Capital Valuation Guidelines.

Fair value for each investment is derived from the present value of

the investment’s expected future cash flows, using reasonable

assumptions and forecasts for revenues and operating costs, and an

appropriate discount rate.

The Audit and Risk Committee has satisfied itself that the investments

have been fairly valued. The investment’s fair value as at 31 December

2021 is the purchase cost, adjusted by any foreign exchange differences.

The purchase cost is deemed to be appropriate basis of fair value

due to the timing of investment acquisition (i.e. close to period

enddate).

Recognition of income

Income may not be accrued in the correct accounting period. The

Committee reviewed the Administrator’s procedures for recognition

of income and reviewed the treatment of income receivable in the

period under review.

Tax status

The Company may suffer tax on gains on the realisation of investments

if investment trust status is not maintained. The Committee reviewed

the compliance of the Company during the period, against the

eligibility conditions and ongoing requirements it must meet in order

for investment trust status to be maintained.

Calculation of the Investment Adviser’s fees

The Committee reviewed the Investment Adviser’s fees and concluded

that they have been correctly calculated, details of the Investment

Adviser’s fees can be found in note 6 to the financial statements.

Internal Audit

The Committee has considered the need for an internal audit function

and considers that this is not appropriate given the nature and

circumstances of the Company as an externally managed investment

company with external service providers. The Committee keeps the

need for an internal audit function under periodic review.

Audit arrangements

PwC was selected as the Company’s auditor at the time of the

Company’s launch. The auditor was formally engaged in November

2021. This is Richard McGuire’s first year as the Company’s audit

partner. The appointment of the auditor will be reviewed annually by

the Committee and the Board and is subject to approval by Shareholders.

In accordance with the Financial Reporting Council’s (“FRC”) guidance,

the audit will be put out to tender within ten years of the initial

appointment of PwC. Additionally, the audit partner must be rotated

every five years and is next eligible for rotation in 2026.

The audit plan was presented to the Committee at its December

2021 Committee meeting, ahead of the commencement of the

Company’s period-end audit. The audit plan sets out the audit

process, materiality, scope and significant risks.

Auditors’ Independence

The Audit and Risk Committee considered the independence of the

auditor and the objectivity of the audit process and is satisfied that

PwC has fulfilled its obligations to Shareholders and as independent

auditor to the Company for the year. After due consideration, the

Audit and Risk Committee recommends the re-appointment of PwC

and their re-appointment will be put forward to the Company’s

Shareholders at the General Meeting on 25 July 2022.

The Audit and Risk Committee is satisfied that there are no issues in

respect of the independence of the auditors.

Effectiveness of external audit

The Committee is responsible for reviewing the effectiveness of the

external audit process. The Committee received a presentation of

the audit plan from the external auditor prior to the commencement

of the audit and a presentation of the results of the audit following

completion of the main audit testing. Additionally, the Committee

received feedback from the Company Secretary, Administrator and

AIFM regarding the effectiveness of the external audit process.

Following the above review, the Committee has agreed that the

re-appointment of the auditors should be recommended to the Board

and the Shareholders of the Company.

Provision of non-audit services

The Audit and Risk Committee has reviewed the FRC’s Revised Ethical

Standard 2019 Guidance on Audit Committees and has formulated

a policy on the provision of non-audit services by the Company’s

auditor. The Audit and Risk Committee has determined that the

Company’s appointed auditor will not be considered for the provision

of certain non-audit services, such as accounting and preparation of

the financial statements, internal audit and custody. The auditor may,

if required, provide other non-audit services however, and this will

be judged on a case-by-case basis.

During the period, the Company engaged PwC to perform reporting

accountant services in relation to the Company’s Initial Public Offering.

PwC received a fee of £109,200 (including VAT of £18,200) for

non-audit services.

REPORT OF THE AUDIT AND RISK COMMITTEE

CONTINUED

The Audit and Risk Committee has assessed that this non-audit service

is a permissible service in accordance with the FRC Ethical Standard.

Conclusion with respect to the Annual Report

The production and audit of the Company’s Annual Report is a

comprehensive process requiring input from different contributors. In

order to reach the conclusion that the Annual Report when taken as

a whole is fair, balanced and understandable, the Board has requested

that the Committee advises on whether it considers these criteria

satisfied. In so doing the Committee has considered the following:

• the comprehensive control framework around the production

of the Annual Report;

• the extensive levels of review undertaken in the production

process, by the Investment Adviser and the Committee;

• the internal control environment as operated by the Investment

Adviser and other suppliers including any checks and balances

within those systems; and

• the unqualified audit report from the Auditor confirming their

work based on substantive testing of the financial statements.

As a result of the work performed, the Committee has concluded

that the Annual Report and Financial Statements for the period ended

31 December 2021, taken as a whole, are fair, balanced and

understandable and provide the information necessary for shareholders

to assess the Company’s performance, business model and strategy,

and it has reported on these findings and provided such conclusion

to the Board.

David Fletcher

Chair of the Audit and Risk Committee

23 June 2022

REPORT OF THE AUDIT AND RISK COMMITTEE

CONTINUED

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and

the financial statements in accordance with applicable law and

regulation.

Company law requires the Directors to prepare financial statements

for each financial year. Under that law the Directors have prepared

the financial statements in accordance with UK adopted international

financial reporting standards in conformity with the requirements

of the Companies Act 2006.

Under company law, Directors must not approve the financial

statements unless they are satisfied that they give a true and fair

view of the state of affairs of the Company and of the profit or loss

of the Company for that period. In preparing the financial statements,

the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• state whether applicable UK adopted international financial

reporting standards in conformity with the requirements of the

Companies Act 2006 have been followed, subject to any material

departures disclosed and explained in the financial statements;

• make judgements and accounting estimates that are reasonable

and prudent; and

• prepare the financial statements on the going concern basis

unless it is inappropriate to presume that the Company will

continue in business.

The Directors are also responsible for safeguarding the assets of the

Company and hence for taking reasonable steps for the prevention

and detection of fraud and other irregularities.

The Directors are responsible for keeping adequate accounting records

that are sufficient to show and explain the Company’s transactions

and disclose with reasonable accuracy at any time the financial

position of the Company and enable them to ensure that the financial

statements and the Directors’ Remuneration Report comply with the

Companies Act 2006.

The Directors have delegated responsibility to the Investment Adviser

for the maintenance and integrity of the corporate and financial

information included on the Company’s website. Legislation in the

UK governing the preparation and dissemination of Financial Statements

may differ from legislation in other jurisdictions.

Directors’ conﬁrmations

The Directors consider that the Annual Report and Accounts, taken

as a whole, is fair, balanced and understandable and provides the

information necessary for shareholders to assess the Company’s

position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the

Corporate Governance section confirm that, to the best of their

knowledge:

• the Company’s financial statements, which have been prepared

in accordance with UK adopted international financial reporting

standards in conformity with the requirements of the Companies

Act 2006, give a true and fair view of the assets, liabilities,

financial position and loss of the Company; and

• the Strategic Report includes a fair review of the development

and performance of the business and the position of the Company,

together with a description of the principal risks and uncertainties

that it faces.

In the case of each Director in office at the date the Directors’ report

is approved:

• so far as the Director is aware, there is no relevant audit information

of which the Company’s auditors are unaware; and

• they have taken all the steps that they ought to have taken as a

Director in order to make themselves aware of any relevant audit

information and to establish that the Company’s auditors are

aware of that information.

For and on behalf of the Board,

Miriam Greenwood

Chair

23 June 2022

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AQUILA ENERGY EFFICIENCY TRUST PLC

Report on the audit of the ﬁnancial statements

Opinion

In our opinion, Aquila Energy Efficiency Trust PLC’s financial statements:

• give a true and fair view of the state of the Company’s affairs as

at 31 December 2021 and of its loss and cash flows for the period

from 9 April 2021 to 31 December 2021;

• have been properly prepared in accordance with UK-adopted

international accounting standards; and

• have been prepared in accordance with the requirements of the

Companies Act 2006.

We have audited the financial statements, included within the Annual

Report, which comprise: Statement of Financial Position as at

31December 2021; the Statement of Profit or Loss and Comprehensive

Income, the Statement of Changes in Equity and the Statement of

Cash Flows for the period then ended; and the notes to the financial

statements, which include a description of the significant accounting

policies.

Our opinion is consistent with our reporting to the Audit and Risk

Committee.

Basis for opinion

We conducted our audit in accordance with International Standards

on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities

under ISAs (UK) are further described in the Auditors’ responsibilities

for the audit of the financial statements section of our report. We

believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our opinion.

Independence

We remained independent of the Company in accordance with the

ethical requirements that are relevant to our audit of the financial

statements in the UK, which includes the FRC’s Ethical Standard, as

applicable to listed public interest entities, and we have fulfilled our

other ethical responsibilities in accordance with these requirements.

To the best of our knowledge and belief, we declare that non-audit

services prohibited by the FRC’s Ethical Standard were not provided.

Other than those disclosed in the Report of the Audit and Risk

Committee and Note 7, we have provided no non-audit services to

the Company in the period under audit.

Material uncertainty related to going concern

In forming our opinion on the financial statements, which is not

modified, we have considered the adequacy of the disclosure made

in note 2 to the financial statements concerning the Company’s

ability to continue as a going concern. A Continuation vote as to

whether the Company continues its business as a closed-ended

investment trust is due to take place during February 2023 which,

if passed, will allow the Company to continue for a further year. A

further resolution will be put at the February 2023 General Meeting,

conditionally upon the Continuation resolution being passed, to

amend the Articles of Association of the Company so that a Continuation

vote will be put at the AGM of the Company to be held in 2026 and

every four years thereafter, as envisaged in the May 2021 IPO

Prospectus. If the Continuation vote is not passed, then the Directors

shall, within six months of such Continuation vote not being passed,

put proposals to shareholders for the reconstruction, reorganisation

or liquidation of the Company. However, the outcome of the vote is

not yet known and cannot at this stage be determined with any

certainty considering the performance of the Company compared

with its strategy. These conditions, along with the other matters

explained in note 2 to the financial statements, indicate the existence

of a material uncertainty which may cast significant doubt about the

Company’s ability to continue as a going concern. The financial

statements do not include the adjustments that would result if the

Company were unable to continue as a going concern.

In auditing the financial statements, we have concluded that the

Directors’ use of the going concern basis of accounting in the

preparation of the financial statements is appropriate.

Our evaluation of the Directors’ assessment of the Company’s ability

to continue to adopt the going concern basis of accounting included:

• evaluating the Directors’ updated risk assessment and considering

whether it addressed the relevant threats presented by the

macroeconomic environment;

• evaluating the Directors’ assessment of potential operational

impacts, considering their consistency with other available

information and our understanding of the business and assessed

the potential impact on the financial statements;

• reviewing the Directors’ assessment covering a period of 12

months from the date of approving the financial statements, of

the Company’s financial position in the context of its ability to

meet future expected operating expenses, their assessment of

liquidity as well as their review of the operational resilience of

the Company and oversight of key third party service providers;

• the Directors’ assessment that the continuation vote would pass;

• the strategic review and changes to the future investment strategy

of the Company;

• the Company’s recent performance compared with its strategy,

in particular during 2022; and.

• the discussions with and/or feedback received by the Board and

its professional advisers from a wide range of shareholders.

In relation to the Directors’ reporting on how they have applied the

UK Corporate Governance Code, other than the material uncertainty

identified in note 2 to the financial statements, we have nothing

material to add or draw attention to in relation to the Directors’

statement in the financial statements about whether the Directors

considered it appropriate to adopt the going concern basis of

accounting, or in respect of the Directors’ identification in the financial

statements of any other material uncertainties to the Company’s

ability to continue to do so over a period of at least twelve months

from the date of approval of the financial statements.

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

Our responsibilities and the responsibilities of the Directors with

respect to going concern are described in the relevant sections of

this report.

Our audit approach

Overview

Audit scope

• The Company invests in renewable energy infrastructure investments

through Special Purpose Vehicles (SPVs) and investment in its

wholly-owned subsidiary, Attika Holdings Limited.

• The Company is an Investment Trust Company and has appointed

Aquila Capital Investmentgesellschaft mbH (the “Investment

Adviser”) to manage its assets.

• The financial statements are prepared for the Company by Sanne

Fund Services (UK) Limited (the “Administrator”) to whom the

Directors delegated the provision of certain administrative

functions

Key audit matters

• Material uncertainty related to going concern

• Valuation of investments held at fair value through profit or loss

Materiality

• Overall materiality: £1,947,620 based on 2% of net assets.

• Performance materiality: £1,460,715.

The scope of our audit

As part of designing our audit, we determined materiality and assessed

the risks of material misstatement in the financial statements.

Key audit matters

Key audit matters are those matters that, in the auditors’ professional

judgement, were of most significance in the audit of the financial

statements of the current period and include the most significant

assessed risks of material misstatement (whether or not due to fraud)

identified by the auditors, including those which had the greatest

effect on: the overall audit strategy; the allocation of resources in

the audit; and directing the efforts of the engagement team. These

matters, and any comments we make on the results of our procedures

thereon, were addressed in the context of our audit of the financial

statements as a whole, and in forming our opinion thereon, and we

do not provide a separate opinion on these matters.

In addition to going concern, described in the Material uncertainty

related to going concern section above, we determined the matters

described below to be the key audit matters to be communicated in

our report. This is not a complete list of all risks identified by our

audit.

Key audit matter How our audit addressed the key audit matter

Valuation of investments held at fair value through profit or loss

Refer to the Report of the Audit and Risk Committee and Note 4 to

the financial statements. The Company has £12.307 million of

investments held at fair value through profit or loss.

The Company holds renewable energy efficiency investments through

its investment in Special Purpose Vehicles (SPVs) and Attika Holdings

Limited (“HoldCo”). The SPV investments have been made by the

Company through directly purchasing notes issued by the SPV.

The investments held within the SPVs have been made by purchasing

notes issued by the SPVs. The fair value of the investments at

31December 2021, is equal to its purchase cost given the investments

were completed close to the balance date.

Determining the valuation methodology and determining the inputs

and assumptions within the valuation is subjective and complex.

This,combined with the significance of the investments balance in

the statement of financial position, meant that this was a key audit

matter for our current year audit.

On a sample basis, we agreed investments acquired during the

reporting period to underlying agreements and bank statements.

We planned our audit to critically assess management’s assumptions

and the investment valuation in which they are applied. We have

assessed whether the valuation methodology adopted for the underlying

investments within the SPVs was appropriate and in line with accounting

standards and industry guidelines.

No material issues were identified in our testing.

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AQUILA ENERGY EFFICIENCY TRUST PLC

CONTINUED

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed

enough work to be able to give an opinion on the financial statements

as a whole, taking into account the structure of the Company, the

accounting processes and controls, and the industry in which it

operates.

As part of designing our audit, we determined materiality and assessed

the risks of material misstatement in the financial statements. In

particular,we looked at where the Directors made subjective judgements,

for example in respect of significant accounting estimates that involved

making assumptions and considering future events that are inherently

uncertain.

Materiality

The scope of our audit was influenced by our application of materiality.

We set certain quantitative thresholds for materiality. These, together

with qualitative considerations, helped us to determine the scope of

our audit and the nature, timing and extent of our audit procedures

on the individual financial statement line items and disclosures and

in evaluating the effect of misstatements, both individually and in

aggregate on the financial statements as a whole.

Based on our professional judgement, we determined materiality for

the financial statements as a whole as follows:

Overall Company materiality

£1,947,620

How we determined it

2% of net assets

Rationale for benchmark applied

Net assets are deemed the appropriate benchmark because Investment Trusts measure their performance

on their net assets.

We use performance materiality to reduce to an appropriately low

level the probability that the aggregate of uncorrected and undetected

misstatements exceeds overall materiality. Specifically, we use

performance materiality in determining the scope of our audit and

the nature and extent of our testing of account balances, classes of

transactions and disclosures, for example in determining sample

sizes. Our performance materiality was 75% of overall materiality,

amounting to £1,460,715 for the Company financial statements.

In determining the performance materiality, we considered a number

of factors - the history of misstatements, risk assessment and

aggregation risk and the effectiveness of controls - and concluded

that an amount at the upper end of our normal range was appropriate.

We agreed with the Audit and Risk Committee that we would report

to them misstatements identified during our audit above £97,381

as well as misstatements below that amount that, in our view,

warranted reporting for qualitative reasons.

Reporting on other information

The other information comprises all of the information in the Annual

Report other than the financial statements and our auditors’ report

thereon. The Directors are responsible for the other information. Our

opinion on the financial statements does not cover the other

information and, accordingly, we do not express an audit opinion

or, except to the extent otherwise explicitly stated in this report, any

form of assurance thereon.

In connection with our audit of the financial statements, our

responsibility is to read the other information and, in doing so,

consider whether the other information is materially inconsistent

with the financial statements or our knowledge obtained in the

audit, or otherwise appears to be materially misstated. If we identify

an apparent material inconsistency or material misstatement, we are

required to perform procedures to conclude whether there is a

material misstatement of the financial statements or a material

misstatement of the other information. If, based on the work we

have performed, we conclude that there is a material misstatement

of this other information, we are required to report that fact. We

have nothing to report based on these responsibilities.

With respect to the Strategic Report and Directors’ Report, we also

considered whether the disclosures required by the UK Companies

Act 2006 have been included.

Based on our work undertaken in the course of the audit, the

Companies Act 2006 requires us also to report certain opinions and

matters as described below.

Strategic Report and Directors’ Report

In our opinion, based on the work undertaken in the course of the

audit, the information given in the Strategic Report and Directors’

Report for the period ended 31 December 2021 is consistent with

the financial statements and has been prepared in accordance with

applicable legal requirements.

In light of the knowledge and understanding of the Company and

its environment obtained in the course of the audit, we did not

identify any material misstatements in the Strategic Report and

Directors’ Report.

Directors’ Remuneration

In our opinion, the part of the Directors’ Remuneration Report to be

audited has been properly prepared in accordance with the Companies

Act 2006.

Corporate governance statement

The Listing Rules require us to review the Directors’ statements in

relation to going concern, longer-term viability and that part of the

corporate governance statement relating to the Company’s compliance

with the provisions of the UK Corporate Governance Code specified

for our review. Our additional responsibilities with respect to the

corporate governance statement as other information are described

in the Reporting on other information section of this report.

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AQUILA ENERGY EFFICIENCY TRUST PLC

CONTINUED

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

Based on the work undertaken as part of our audit, we have concluded

that each of the following elements of the corporate governance

statement is materially consistent with the financial statements and

our knowledge obtained during the audit, and, except for the matters

reported in the section headed ‘Material uncertainty related to going

concern’, we have nothing material to add or draw attention to in

relation to:

• The Directors’ confirmation that they have carried out a robust

assessment of the emerging and principal risks;

• The disclosures in the Annual Report that describe those principal

risks, what procedures are in place to identify emerging risks and

an explanation of how these are being managed or mitigated;

• The Directors’ statement in the financial statements about whether

they considered it appropriate to adopt the going concern basis

of accounting in preparing them, and their identification of any

material uncertainties to the Company’s ability to continue to

do so over a period of at least twelve months from the date of

approval of the financial statements;

• The Directors’ explanation as to their assessment of the Company’s

prospects, the period this assessment covers and why the period

is appropriate; and

• The Directors’ statement as to whether they have a reasonable

expectation that the Company will be able to continue in operation

and meet its liabilities as they fall due over the period of its

assessment, including any related disclosures drawing attention

to any necessary qualifications or assumptions.

Our review of the Directors’ statement regarding the longer-term

viability of the Company was substantially less in scope than an audit

and only consisted of making inquiries and considering the Directors’

process supporting their statement; checking that the statement is

in alignment with the relevant provisions of the UK Corporate

Governance Code; and considering whether the statement is consistent

with the financial statements and our knowledge and understanding

of the Company and its environment obtained in the course of the

audit.

In addition, based on the work undertaken as part of our audit, we

have concluded that each of the following elements of the corporate

governance statement is materially consistent with the financial

statements and our knowledge obtained during the audit:

• The Directors’ statement that they consider the Annual Report,

taken as a whole, is fair, balanced and understandable, and

provides the information necessary for the members to assess

the Company’s position, performance, business model and

strategy;

• The section of the Annual Report that describes the review of

effectiveness of risk management and internal control systems;

and

• The section of the Annual Report describing the work of the

Audit and Risk Committee.

We have nothing to report in respect of our responsibility to report

when the Directors’ statement relating to the Company’s compliance

with the Code does not properly disclose a departure from a relevant

provision of the Code specified under the Listing Rules for review by

the auditors.

Responsibilities for the financial statements and the audit

Responsibilities of the Directors for the ﬁnancial statements

As explained more fully in the Statement of Directors’ Responsibilities,

the Directors are responsible for the preparation of the financial

statements in accordance with the applicable framework and for

being satisfied that they give a true and fair view. The Directors are

also responsible for such internal control as they determine is necessary

to enable the preparation of financial statements that are free from

material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible

for assessing the Company’s ability to continue as a going concern,

disclosing, as applicable, matters related to going concern and using

the going concern basis of accounting unless the Directors either

intend to liquidate the Company or to cease operations, or have no

realistic alternative but to do so.

Auditors’ responsibilities for the audit of the ﬁnancial statements

Our objectives are to obtain reasonable assurance about whether

the financial statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue an auditors’ report that

includes our opinion. Reasonable assurance is a high level of assurance,

but is not a guarantee that an audit conducted in accordance with

ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered

material if, individually or in the aggregate, they could reasonably

be expected to influence the economic decisions of users taken on

the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with

laws and regulations. We design procedures in line with our

responsibilities, outlined above, to detect material misstatements in

respect of irregularities, including fraud. The extent to which our

procedures are capable of detecting irregularities, including fraud,

is detailed below.

Based on our understanding of the Company and industry, we identified

the principal risks of non-compliance with laws and regulations related

to ongoing qualification as an Investment Trust under the Corporation

Tax Act 2010, and we considered the extent to which non-compliance

might have a material effect on the financial statements. We also

considered those laws and regulations that have a direct impact on

the financial statements such as the Companies Act 2006. We evaluated

management’s incentives and opportunities for fraudulent manipulation

of the financial statements (including the risk of override of controls),

and determined that the principal risks were related to posting

inappropriate journal entries to increase revenue (investment income

and unrealised gains on investments) or to increase total shareholders’

funds, and management bias in accounting estimates, such as the

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AQUILA ENERGY EFFICIENCY TRUST PLC

CONTINUED

valuation of investments held at fair value through profit or loss. Audit

procedures performed by the engagement team included:

• Enquiries of the Board of Directors, Investment Adviser and the

Administrator, including consideration of known or suspected

instances of non-compliance with laws and regulation and fraud;

• Challenging assumptions and judgements made by the Board

of Directors and the Investment Adviser in their significant

accounting estimates, in particular in relation to the valuation of

investments held at fair value through profit or loss (see related

key audit matter above);

• Identifying and testing of selected journal entries;

• Reviewing relevant meeting minutes, including those of the Board

of Directors and Audit and Risk Committee;

• Assessment of the Company’s compliance with the requirements

of Section 1158 of the Corporation Tax Act 2010, including

calculation of numerical aspects of the eligibility conditions;

• Reviewing of financial statement disclosures to underlying

supporting documentation; and

• Designing audit procedures to incorporate unpredictability around

the nature, timing or extent of our testing.

There are inherent limitations in the audit procedures described

above. We are less likely to become aware of instances of non-compliance

with laws and regulations that are not closely related to events and

transactions reflected in the financial statements. Also, the risk of

not detecting a material misstatement due to fraud is higher than

the risk of not detecting one resulting from error, as fraud may involve

deliberate concealment by, for example, forgery or intentional

misrepresentations, or through collusion.

Our audit testing might include testing complete populations of

certain transactions and balances, possibly using data auditing

techniques. However, it typically involves selecting a limited number

of items for testing, rather than testing complete populations. We

will often seek to target particular items for testing based on their

size or risk characteristics. In other cases, we will use audit sampling

to enable us to draw a conclusion about the population from which

the sample is selected.

A further description of our responsibilities for the audit of the

financial statements is located on the FRC’s website at:

www.frc.org.uk/auditorsresponsibilities. This description forms part

of our auditors’ report.

Use of this report

This report, including the opinions, has been prepared for and only

for the Company’s members as a body in accordance with Chapter

3 of Part 16 of the Companies Act 2006 and for no other purpose.

We do not, in giving these opinions, accept or assume responsibility

for any other purpose or to any other person to whom this report is

shown or into whose hands it may come save where expressly agreed

by our prior consent in writing.

Other required reporting

Companies Act 2006 exception reporting

Under the Companies Act 2006 we are required to report to you if,

in our opinion:

• we have not obtained all the information and explanations we

require for our audit; or

• adequate accounting records have not been kept by the Company,

or returns adequate for our audit have not been received from

branches not visited by us; or

• certain disclosures of Directors’ remuneration specified by law

are not made; or

• the financial statements and the part of the Directors’ Remuneration

Report to be audited are not in agreement with the accounting

records and returns.

We have no exceptions to report arising from this responsibility.

Appointment

Following the recommendation of the Audit and Risk Committee,

we were appointed by the Directors on 16 November 2021 to audit

the financial statements for the year ended 31 December 2021 and

subsequent financial periods. This is therefore our first year of

uninterrupted engagement.

Richard McGuire (Senior Statutory Auditor)

For and on behalf of PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

London

23 June 2022

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF AQUILA ENERGY EFFICIENCY TRUST PLC

CONTINUED

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION

Financial Statements

STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME

FOR THE PERIOD FROM 9 APRIL 2021 (DATE OF INCORPORATION) TO 31 DECEMBER 2021

Revenue

£‘000

Capital

£‘000

Total

£‘000Notes

Unrealised losses on investments 4 – (17) (17)

Net foreign exchange losses – (29) (29)

Investment Income 5 91 – 91

Investment Advisory fees 6 (77) – (77)

Other expenses 7 (587) – (587)

Loss on ordinary activities before taxation (573) (46) (619)

Taxation 8–––

Loss on ordinary activities after taxation (573) (46) (619)

Return per Ordinary Share 9 (0.01p) (0.00p) (0.01p)

The total column of the Income Statement is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during

the period

Return on ordinary activities after taxation is also the “Total comprehensive income/(expense) for the period”.

The notes on pages 63 to 73 form part of these financial statements.

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS OTHER INFORMATION

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2021

2021

£‘000Notes

Fixed assets

Investments at fair value through profit or loss 4 12,307

Current assets

Trade and other receivables 10 5,274

Cash and cash equivalents 80,129

85,403

Creditors: amounts falling due within one year 11 (329)

Net current assets 85,074

Net assets 97,381

Capital and reserves: equity

Share capital 12 1,000

Share premium –

Special reserve 13 97,000

Capital reserve (46)

Revenue reserve (573)

Shareholders' funds 97,381

Net assets per Ordinary Share 14 97.38p

No. of ordinary shares in issue 100,000,000

Approved by the Board of Directors and authorised for issue on 23 June 2022.

Signed on behalf of the Board of Directors

The notes on pages 63 to 73 form part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

capital

£‘000

premium

account

£‘000

Special

reserve

£’000

Capital

reserve

£’000

Revenue

reserve

£’000

Total

£‘000Notes

Opening equity as at 9 April 2021 – – – – –

Shares issued in period 12 1,000 99,000 – – – 100,000

Share issue costs – (2,000) – – – (2,000)

Transfer to special reserve 13 – (97,000) 97,000 – – –

Loss for the period – – – (46) (573) (619)

Closing equity as at 31 December 2021 1,000 – 97,000 (46) (573) 97,381

The notes on pages 63 to 73 form part of these financial statements.

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS OTHER INFORMATION

STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM 9 APRIL 2021 (DATE OF INCORPORATION) TO 31 DECEMBER 2021

2021

£‘000Notes

Operating activities

Loss on ordinary activities before taxation (619)

Adjustment for unrealised losses on investments 17

Increase in trade and other receivables (5,274)

Increase in creditors 329

Net cash flow used in operating activities (5,547)

Investing activities

Purchase of investments 4 (12,324)

Net cash flow used in investing activities (12,324)

Financing activities

Proceeds of share issues 12 100,000

Share issue costs (2,000)

Net cash flow generated from financing activities 98,000

Increase in cash 80,129

Cash and cash equivalents at start of period –

Cash and Cash equivalents at end of period 80,129

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS OTHER INFORMATION

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD FROM 9 APRIL 2021 (DATE OF INCORPORATION) TO 31 DECEMBER 2021

1. GENERAL INFORMATION

Aquila Energy Efficiency Trust Plc (the “Company”) is a public

Company limited by shares incorporated in England and Wales

on 9 April 2021 with registered number 13324616. The Company

is domiciled in England and Wales. The Company is a closed-ended

investment company with an indefinite life. The Company commenced

its operations on 2 June 2021 when the Company’s Ordinary

Shares were admitted to trading on the London Stock Exchange.

The Directors intend, at all times, to conduct the affairs of the

Company as to enable it to qualify as an investment trust for the

purposes of section 1158 of the Corporation Tax Act 2010,

asamended.

The registered office address of the Company is 6th Floor,

125London Wall, London, EC2Y 5AS.

The Company’s investment objective is to generate attractive

returns, principally in the form of income distributions, by investing

in a diversified portfolio of Energy Efficiency Investments.

Sanne Fund Management (Guernsey) Limited acts as the Company’s

Alternative Investment Fund Manager (the “AIFM”) for the purposes

of Directive 2011/61/EU on alternative investment fund managers

(“AIFMD”).

The Company’s Investment Adviser is Aquila Capital

Investmentgesellschaft mbH authorised and regulated by the

German Federal Financial Supervisory Authority.

Sanne Fund Services (UK) Limited (the “Administrator”) provides

administrative and company secretarial services to the Company

under the terms of an administration agreement between the

Company and the Administrator.

2. BASIS OF PREPARATION

The financial statements have been prepared in accordance with

the UK adopted international accounting standards in conformity

with the requirements of the Companies Act 2006

The financial statements have also been prepared as far as is

relevant and applicable to the Company in accordance with the

Statement of Recommended Practice (“SORP”) issued by the

Association of Investment Companies (“AIC”) in April 2021.

The financial statements are prepared on the historical cost basis,

except for the revaluation of certain financial instruments at fair

value through profit or loss. The principal accounting policies

adopted are set out below. These policies are consistently applied.

The functional currency of the Company is Sterling. Accordingly,

the financial statements are presented in Sterling rounded to the

nearest thousand. They have been prepared on the basis of the

accounting policies, significant judgements, key assumptions and

estimates as set out below. However, fluctuations in foreign

exchange differences are considered in the sensitivity analysis,

see note 4.

Accounting for Subsidiary

The Company owns 100% of its subsidiary Attika Holdings Limited

(“HoldCo”), the registered office address of the HoldCo is 6thFloor,

125 London Wall, London, EC2Y 5AS. The Company has acquired

Energy Efficiency Investments through its investment in the HoldCo.

The Company will finance the HoldCo through a mix of SPV

investments, equity and direct investments. The Company meets

the definition of an investment entity as described by IFRS 10.

Under IFRS 10 an investment entity is required to hold subsidiaries

at fair value through profit or loss and therefore does not consolidate

the subsidiary.

The HoldCo is an investment entity and as described under IFRS10

values its SPVs investments at fair value through profit or loss.

Characteristics of an investment entity

Under the definition of an investment entity, the Company should

satisfy all three of the following tests:

I. Company obtains funds from one or more investors for the

purpose of providing those investors with investment management

services;

II. Company commits to its investors that its business purpose

is to invest funds solely for returns from capital appreciation,

investment income, or both; and

III. Company measures and evaluates the performance of substantially

all of its investments on a fair value basis.

In assessing whether the Company meets the definition of an

investment entity set out in IFRS 10 the Directors note that:

I. the Company has multiple investors and obtains funds from

a diverse group of shareholders who would otherwise not

have access individually to investing in Energy Efficiency

Investments due to high barriers to entry and capital requirements;

II. the Company intends to hold these Energy Efficiency Investments

over the contractual period of the asset for the purpose of

capital appreciation and investment income. Thereby, the exit

strategy for AEET refers to the end point of the contractual

period for all Energy Efficiency investments. The existing Energy

Efficiency Investments that have committed capital are expected

to generate renewable energy output between 1 and 7 years

from their relevant commercial operation date (this has the

potential to be longer depending on the tenor of future

investments), the Directors believe the Company is able to

generate returns to the investors during that period; and

III. the Company measures and evaluates the performance of all

of its investments on a fair value basis which is the most

relevant for investors in the Company. Management use fair

value information as a primary measurement to evaluate the

performance of all of the investments and in decision making.

The Directors are of the opinion that the Company meets all the

typical characteristics of an investment entity and therefore meets

the definition set out in IFRS 10. The Directors agree that investment

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

entity accounting treatment appropriately reflects the Company’s

activities as an investment trust.

The Directors have also satisfied themselves that Attika Holdings

Limited meets the characteristic of an investment entity. Attika

Holdings Limited has one investor, Aquila Energy Efficiency Trust

Plc, however, in substance Attika Holdings Limited is investing

the funds of the investors of Aquila Energy Efficiency Trust Plc on

its behalf and is effectively performing investment management

services on behalf of many unrelated beneficiary investors.

The Directors believe the treatment outlined above provides the

most relevant information to investors.

Going concern

The Directors have adopted the going concern basis in preparing

the financial statements. The following is a summary of the

Directors’ assessment of the going concern status of the Company.

The Company continues to meet day-to-day liquidity needs through

its cash resources. The Directors have a reasonable expectation

that the Company has adequate resources to continue in operational

existence for at least twelve months from the date of this document.

In reaching this conclusion, the Directors have considered the

Company’s cash position, income and expense flows. The Company’s

net assets at 31 December 2021 were GBP 97.4million. As at

31December 2021, the Company held GBP 80million in cash. The

total expenses for the period ended 31 December 2021 was

GBP0.6 million, which represented approximately 0.6% of average

net assets during the period. At the date of approval of this

document, based on the aggregate of investments and cash held,

the Company has substantial operating expenses cover.

The major cash outflows of the Company are the payment costs

relating to the acquisition of new investments. The Directors are

confident that the Company has sufficient cash balances to fund

commitments to acquisitions should they become payable.

In light of the continuing COVID-19 pandemic and the war in

Ukraine, the Directors have considered each of the Company’s

investments. The Directors do not foresee any immediate material

risk to the Company’s investment portfolio and income from

underlying SPVs. A prolonged and deep market decline could lead

to falling values to the underlying business or interruptions to

cashflow, however the Company currently has more than sufficient

liquidity available to meet any future obligations.

Following the slower than anticipated investment deployment

and the consequential appointment of an independent consultant

to review the Company’s investment strategy, the results of this

review were announced on 21 April 2022. The review concluded

that the market opportunity for the Company remains attractive

and that the actions to be taken in relation to the execution of

the investment strategy and other changes provided an improved

basis for the Company to execute its investment objective, with

full deployment targeted by the end of December 2022 or early

2023. In reaching this conclusion, the Directors consulted with

shareholders who, overall, were supportive of the continuation

of the Company with these changes. An element of the consultation

process was the Directors’ proposal to bring forward the Initial

Continuation Resolution to February 2023, or earlier if appropriate.

A further resolution will be put at the February 2023 General

Meeting, conditionally upon the Continuation resolution being

passed, to amend the Articles of Association of the Company so

that a Continuation vote will be put at the AGM of the Company

to be held in 2026 and every four years thereafter, as envisaged

in the May 2021 IPO Prospectus. If any Continuation resolution

put to shareholders is not passed, then the Directors shall, within

six months of such Continuation resolution not being passed, put

proposals to shareholders for the reconstruction, reorganisation

or liquidation of the Company. Taking into account the factors

above, the Directors have assessed that the Initial Continuation

Resolution will pass, however, the Directors recognise that the

outcome of this is not yet known and therefore creates material

uncertainty around going concern, due to the event falling within

12-month period from the approval of this Annual Report. The

Directors note that these conditions indicate the existence of

material uncertainty which may cast significant doubt about the

Company’s ability to continue as a going concern.

Based on the assessment and considerations above, the Directors

have concluded that the financial statements of the Company

should be prepared on a going concern basis.

Critical accounting judgements, estimates and assumptions

The preparation of the financial statements requires the application

of estimates and assumptions which may affect the results reported

in the financial statements. Estimates, by their nature, are based

on judgement and available information.

The estimates and assumptions that have a significant risk of

causing a material adjustment to the carrying value of assets and

liabilities are those used to determine the fair value of the

investments as disclosed in note 4 to the financial statements.

As disclosed above, the Directors have concluded that the Company

meets the definition of an investment entity as defined in IFRS10.

This conclusion involved a degree of judgement and assessment

as to whether the Company met the criteria outlined in the

accounting standards.

The key assumptions that have a significant impact on the carrying

value of the Company’s underlying investments in SPVs are

contractual period of the assets, the discount factors, the rate of

inflation, the price at which the power and associated benefits

can be sold and the amount of electricity the assets are expected

to produce.

The discount factors are subjective and therefore it is feasible that

a reasonable alternative assumption may be used resulting in a

different value. The discount factors applied to the cashflows are

reviewed annually by the Investment Adviser to ensure they are

at the appropriate level. The Investment Adviser will take into

consideration market transactions, where of similar nature, when

considering changes to the discount factors used.

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS OTHER INFORMATION

The operating costs of the operating companies are frequently

partly or wholly subject to indexation and an assumption is made

that inflation will increase at a long-term rate.

Energy Efficiency investments are not sensitive to fluctuations in

future revenues if a fixed indexation clause is applied to its cashflow

schedule.

Adoption of new IFRS standards from 1 January 2022

A number of new standards, amendments to standards and

interpretations are effective for the annual periods beginning

after 1 January 2022. None of these are expected to have a

significant effect on the measurement of the amounts recognised

in the financial statements of the Company.

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been

published that are not mandatory for 31 December 2021 reporting

periods and have not been early adopted by the Company. These

standards are not expected to have a material impact on the entity

in the current or future reporting periods and on foreseeable

future transactions.

Amendments to IAS 1: Classification of Liabilities as Current

or Non-current

In January 2020, the IASB issued amendments to paragraphs 69

to 76 of IAS 1 to specify the requirements for classifying liabilities

as current or non-current. The amendments are effective for

annual reporting periods beginning on or after 1 January 2023.

Reference to the Conceptual Framework – Amendments to

IFRS 3

In May 2020, the IASB issued Amendments to IFRS 3 Business

Combinations - Reference to the Conceptual Framework. The

amendments are effective for annual reporting periods beginning

on or after 1 January 2022.

Definition of Accounting Estimates - Amendments to IAS 8

In February 2021, the IASB issued amendments to IAS 8, in which

it introduces a definition of ‘accounting estimates’. The amendments

are effective for annual reporting periods beginning on or after

1 January 2023.

Disclosure of Accounting Policies - Amendments to IAS 1

and IFRS Practice Statement 2

In February 2021, the IASB issued amendments to IAS 1 and IFRS

Practice Statement 2 Making Materiality Judgements. The

amendments to IAS 1 are applicable for annual periods beginning

on or after 1 January 2023.

3. SIGNIFICANT ACCOUNTING POLICIES

Financial Instruments

Financial assets

The Company’s financial assets principally comprise of cash and

cash equivalents, investments held at fair value through profit

and loss, and trade and other receivables.

The Company’s investment in HoldCo is held at fair value through

profit or loss. Gains or losses resulting from the movements in

fair value are recognised in the Company’s Statement of Profit or

Loss and Comprehensive Income at each valuation point.

Trade and other receivables are initially recognised at fair value

and subsequently measured at amortised costs using the effective

interest rate method.

SPV investments and equity investments in HoldCo are designated

at fair value through profit or loss. Gains or losses resulting from

the movements in the fair value are recognized in the Company’s

Statement of Profit or Loss and Comprehensive income at each

valuation point.

Financial liabilities

The Company’s financial liabilities include trade and other payables

and other short term monetary liabilities which are initially

recognised at fair value and subsequently measured at amortised

cost using the effective interest rate method.

Recognition, derecognition and measurement

Financial assets and financial liabilities are recognised in the

Company’s Statement of Financial Position when the Company

becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at

fair value. Transaction costs that are directly attributable to the

acquisition or issue of financial assets and financial liabilities (other

than financial assets and financial liabilities at fair value through

profit or loss) are added to or deducted from the fair value of the

financial assets or financial liabilities, as appropriate, on initial

recognition. Transaction costs directly attributable to the acquisition

of financial assets or financial liabilities at fair value through profit

or loss are recognised immediately in profit or loss.

A Financial liability (in whole or in part) is derecognised when the

Company has extinguished its contractual obligations, it expires

or is cancelled. Financial assets are derecognised when the rights

to receive cash flows from the investments have expired or the

Company has transferred substantially all risks and rewards of

ownership.

Subsequent to initial recognition, financial assets at fair value

through profit or loss are measured at fair value. Gains and losses

resulting from the movement in fair value are recognized in the

Statement of Profit or Loss and Comprehensive Income. Financial

liabilities are subsequently measured at amortised cost using the

effective interest rate method.

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

Taxation

Investment trusts which have approval under Section 1158 of the

Corporation Tax Act 2010 are not liable for taxation on capital

gains. Shortly after listing the Company received approval as an

Investment Trust by HMRC. Current tax is the expected tax payable

on the taxable income for the period, using tax rates that have

been enacted or substantively enacted at the date of the Statement

of Financial Position.

Deferred taxation

Deferred tax is the tax expected to be payable or recoverable on

differences between the carrying amounts of assets and liabilities

in the financial statements and the corresponding tax bases used

in the computation of taxable profit, and is accounted for using

the statement of financial position liability method. Deferred tax

liabilities are recognised for all taxable temporary differences and

deferred tax assets are recognised to the extent that it is probable

that taxable profits will be available against which deductible

temporary differences can be utilised.

Deferred tax is calculated at the tax rates that are expected to

apply in the period when the liability is settled or the asset is

realised. Deferred tax is charged or credited to the Statement of

Profit or Loss and Comprehensive Income except when it relates

to items charged or credited directly to equity, in which case the

deferred tax is also dealt with in equity.

Segmental reporting

The Chief Operating Decision Maker (“CODM”), which is the

Board, is of the opinion that the Company is engaged in a single

segment of business, being investment in energy efficiency assets

to generate investment returns whilst preserving capital. The

financial information used by the CODM to manage the Company

presents the business as a single segment.

Income

Income includes investment income from financial assets at fair

value through profit or loss.

Investment income from financial assets at fair value through

profit or loss is recognised in the Statement of Profit or Loss and

Comprehensive Income within investment income when the

Company’s right to receive income is established.

Dividend income is recognised when the right to receive it is

established and is reflected in the Statement of Profit or Loss and

Comprehensive Income as Investment Income.

Expenses

All expenses are accounted for on an accruals basis. In respect of

the analysis between revenue and capital items presented within

the Statement of Profit or Loss and Comprehensive Income, all

expenses are presented as revenue items as they are directly

attributable to the operations of the Company.

Payment of Investment Advisory fees in shares

The Company issues shares to the Investment Adviser in exchange

for receiving investment advisory services. The fair value of the

investment advisory services received in exchange for shares is

recognised as an expense at the time at which the investment

advisory fees are earned, with a corresponding increase in equity.

The fair value of the investment advisory services is calculated by

reference to the definition of investment advisory fees in the

Investment Advisory Agreement.

Foreign currency

Transactions denominated in foreign currencies are translated into

Sterling at actual exchange rates as at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies

at the period end are reported at the rates of exchange prevailing

at the period end. Any gain or loss arising from a change in

exchange rates subsequent to the date of the transaction is

included as an exchange gain or loss to capital or revenue in the

Statement of Profit or Loss and Comprehensive Income as

appropriate. Foreign exchange movements on investments are

included in the Capital account of the Statement of Profit or Loss

and Comprehensive Income.

Cash and cash equivalents

Cash and cash equivalents includes deposits held at call with

banks and other short-term deposits with original maturities of

three months or less.

Trade and other payables

Trade and other payables are initially recognised at fair value, and

subsequently re-measured at amortised cost using the effective

interest method where necessary.

Share capital and share premium

Ordinary Shares are classified as equity. Costs directly attributable

to the issue of new shares (that would have been avoided if there

had not been a new issue of new shares) are recognised against

the value of the ordinary share premium account.

Repurchase of the Company’s own shares are recognised and

deducted directly in equity. No gain or loss is recognised in profit

or loss on the purchase, sale, issue or cancellation of the Company’s

own equity instruments.

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS OTHER INFORMATION

4. INVESTMENTS

(a) Summary of valuation

SPV

investments

£‘000

Equity

investments

£‘000

Total

£‘000

Investments at fair value through profit or loss 12,154 153 12,307

12,154 153 12,307

(b) Movements during the period:

Opening balance of investments, at cost – – –

Additions, at cost 12,324 – 12,324

Cost of investments at 31 December 2021 12,324 – 12,324

Revaluation of investments to fair value:

Unrealised movement in fair value of investments (170) 153 (17)

Balance of capital reserve – investments held at 31 December 2021 (170) 153 (17)

Fair value of investments at 31 December 2021 12,154 153 12,307

Comprehensive Income)

Movement on unrealised valuation of investments held

(170) 153 (17)

Loss on investments (170) 153 (17)

Fair value measurements

IFRS 13 requires disclosure of fair value measurement by level. The level of fair value hierarchy within the financial assets or financial liabilities

is determined on the basis of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities

are classified in their entirety into only one of the following 3 levels:

Level 1

The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

Level 2

Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either

directly or indirectly.

Level 3

Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.

The classification of the Company’s investments held at fair value is detailed in the table below:

31 December 2021

Level 1

£’000

Level 2

£’000

Level 3

£‘000

Total

£‘000

Investments at fair value through profit or loss

––

12,307 12,307

– – 12,307 12,307

Due to the nature of the investments, they are always expected to be classified as level 3. There have been no transfers between levels during

the period ended 31 December 2021.

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

The movement on the Level 3 unquoted investments during the period is shown below:

31 December

2021

£‘000

Opening balance –

Additions during the period 12,324

Unrealised loss on investments adjustments (17)

Closing balance 12,307

Valuation Methodology

SPV investments

The Company acquired SPV investments during the period. The SPV investments have been made by the Company through directly purchasing

notes issued by an Italian SPV established under securitisation laws in Italy. The Investment Adviser has determined that the fair value as at

31 December 2021 is the purchase cost, adjusted by any foreign exchange differences. The purchase cost is deemed to be appropriate basis

of fair value due to the timing of investment acquisition (i.e. close to period end date). The Directors have satisfied themselves as to the fair

value of the SPV investments as at 31 December 2021.

Equity investments

The Company owns 100% of its subsidiary Attika Holdings Limited (“HoldCo”). The Company meets the definition of an investment entity as

described by IFRS 10, as such the Company’s investment in the HoldCo is valued at fair value. HoldCo’s working capital balances and fair value

of investments are included in calculating fair value of the HoldCo.

Valuation Assumptions

31 December

2021

Foreign exchange rates

GBP / EUR

0.84

Foreign Exchange Rate Sensitivity

This sensitivity considers a 10% movement in relevant non-GBP currencies, which in the case of the Portfolio Valuation at 31 December 2021

is EUR. A 10% increase in foreign exchange rates would result in a NAV per share reduction of 1.22p based on the Portfolio Valuation as at

31 December 2021.

A 10% decrease in foreign exchange rates would result in a NAV per share increase of 1.22p based on the Portfolio Valuation as at

31December2021.

5. INVESTMENT INCOME

For the period

ended 31

December 2021

£‘000

Investment income 36

Bank interest income 55

Total Investment Income 91

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS OTHER INFORMATION

6. INVESTMENT ADVISORY FEES

For the period ended 31 December 2021

Revenue

£’000

Capital

£’000

Total

£‘000

Investment Advisory fees

77 –

Under the Investment Advisory Agreement, the following fee is payable to the Investment Adviser:

(i) 0.95 per cent. per annum of Committed Capital of the Company up to and including £500 million; and

(ii) 0.75 per cent. per annum of Committed Capital of the Company above £500 million.

7. OTHER EXPENSES

For the period ended 31 December 2021

Revenue

£’000

Capital

£’000

Total

£‘000

Secretary and administrator fees

108 –

108

Tax compliance

13 –

Directors’ fees

111 –

111

Broker fees

30 –

Auditor’s fees

119 –

119

AIFM fees

51 –

Registrar’s fees

13 –

Marketing fees

58 –

FCA and listing fees

12 –

Other expenses

72 –

Total expenses 587 – 587

Prior to appointment as the Company’s Auditor, the auditors received a fee of £109,200 (including VAT of £18,200) for non-audit reporting

accountant services, which have been treated as a capital expense and included in ‘share issue costs’ disclosed in the Statement of Changes

in Equity on page 62.

8. TAXATION

(a) Analysis of charge in the period

For the period ended 31 December 2021

Revenue

£’000

Capital

£’000

Total

£‘000

Corporation tax

–––

Taxation

–––

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

(b) Factors affecting total tax charge for the period:

The effective UK corporation tax rate applicable to the Company for the period is 19.00%. The tax charge differs from the charge resulting

from applying the standard rate of UK corporation tax for an investment trust company.

The differences are explained below:

Revenue

£’000

Capital

£’000

Total

£‘000

Loss on ordinary activities before taxation

(573) (46)

(619)

Corporation tax at 19%

(109) (9)

(118)

Effects of:

Utilised management expenses

109 –

109

Losses on investments not taxable

–9

Total tax charge for the period

––

–

Investment companies which have been approved by the HM Revenue & Customs under section 1158 of the Corporation Tax Act 2010 are

exempt from tax on capital gains. Due to the Company’s status as an Investment Trust, and the intention to continue meeting the conditions

required to obtain approval in the foreseeable future, the Company has not provided for deferred tax on any capital gains or losses arising on

the revaluation of investments.

9. RETURN PER ORDINARY SHARE

Return per share is based on the loss for the period of £619,000 attributable to the weighted average number of Ordinary Shares in issue

79,699,248 in the period to 31 December 2021. Revenue loss and capital losses are £573,000 and £46,000 respectively.

10. TRADE AND OTHER RECEIVABLES

As at

31 December

2021

£‘000

Intercompany receivable 5,170

Interest income receivable 36

Prepaid Expenses 68

Total 5,274

11. TRADE AND OTHER PAYABLES

As at

31 December

2021

£‘000

Accrued expenses 329

Total 329

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS OTHER INFORMATION

12. SHARE CAPITAL

As at

31 December

2021

No. of shares £‘000

Allotted, issued and fully paid:

Ordinary Shares of 1p each (‘Ordinary Shares’) 100,000,000 1,000

Total

On incorporation, the issued share capital of the Company was 1 ordinary share of £0.01 issued to the subscriber to the Company’s memorandum.

The Company’s issued share capital was increased by £50,000 represented by 50,000 Management Shares of nominal value £1.00 each, which

were subscribed for by the Investment Adviser. Following admission, the Management Shares were redeemed by the holder.

On admission 2 June 2021, 99,999,999 Ordinary Shares were allotted and issued to shareholders as part of the placing and offer for subscription

in accordance with the Company’s prospectus dated 10 May 2021.

For the period from 9 April 2021 to 31 December 2021

Shares is issue

at the beginning

of the period

subscribed

Shares in issue

at the end of

the period

Management shares –

Ordinary shares – 100,000,000 100,000,000

13. SPECIAL RESERVE

As indicated in the Company’s prospectus dated 10 May 2021, following admission of the Company’s Ordinary Shares to trading on the

London Stock Exchange, the Directors applied to the Court and obtained a judgement on 12 August 2021 to cancel the amount standing to

the credit of the share premium account of the Company. The amount of the share premium account cancelled and credited to a special

reserve was £97,000,000.

14. NET ASSETS PER ORDINARY SHARE

Net assets per ordinary share as at 31 December 2021 is based on £97,381,000 of net assets of the Company attributable to the

100,000,000Ordinary Shares in issue as at 31 December 2021.

15. FINANCIAL RISK MANAGEMENT

The Investment Adviser, AIFM and the Administrator report to the Board on a quarterly basis and provide information to the Board which

allows it to monitor and manage financial risks relating to its operations. The Company’s activities expose it to a variety of financial risks:

market risk (including price risk, interest rate risk and foreign currency risk), credit risk and liquidity risk. These risks are monitored by the AIFM.

Each risk and its management is summarised below.

(i) Currency risk

Foreign currency risk is defined as the risk that the fair values of future cashflows will fluctuate because of changes in foreign exchange rates.

The Company’s financial assets and liabilities are denominated in GBP and substantially all of its revenues and expenses are in GBP. The

Company is not considered to be materially exposed to foreign currency risk.

(ii) Interest rate risk

The Company’s interest rate risk on interest bearing financial assets is limited to interest earned on cash and investments.

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

The Company’s interest and non-interest bearing assets and liabilities as at 31 December 2021 are summarised below:

Interest

bearing

£’000

Non-interest

bearing

£’000

Total

£‘000

Assets

Cash and cash equivalents

38,055 42,074 80,129

Trade and other receivables

–

5,274 5,274

Investments at fair value through profit or loss

12,154 153 12,307

Total assets 50,209 47,502 97,710

Liabilities

Creditors –

(329) (329)

Total liabilities –(329)(329)

(iii) Price risk

Price risk is defined as the risk that the fair value of a financial instrument held by the Company will fluctuate. Investments are measured at

fair value through profit or loss. As at 31 December 2021 the Company held investments with an aggregate fair value of £12,307,000. All

other things being equal, the effect of a 10% increase or decrease in the share prices of the investments held at the period end would have

been an increase or decrease of £1,231,000 in the loss after taxation for the period ended 31 December 2021 and the Company’s net assets

at 31 December 2021. The 10% sensitivity has been used based on the industry practice for listed investment trusts and is deemed to be

appropriate for the Company.

The Investment Adviser has determined that the fair value of the investments as at 31 December 2021 is the purchase cost, adjusted by any

foreign exchange differences. The purchase cost is deemed to be appropriate basis of fair value due to the timing of investment acquisition

(i.e. close to period end date). The Directors have satisfied themselves as to the fair value of the investments as at 31 December 2021.

Credit risks

Credit risk is the risk of loss due to the failure of a borrower or counterparty to fulfil its contractual obligations. The Company is exposed to

credit risk in respect of Trade and other receivables and cash at bank. The Company’s credit risk exposure is minimised by dealing with financial

institutions with investment grade credit ratings. The Company has advanced share holder loans to Holdco, however it does not consider these

loans a risk as they are intra-Group. No balances are past due or impaired.

As at

31 December

2021

£‘000

Investments at fair value through profit or loss 12,154

Trade and other receivables 5,274

Cash and cash equivalents 80,129

Total 97,557

The table below shows the cash balances of the Company and the credit rating for each counterparty:

Rating

As at

31 December

2021

(£’000)

Goldman Sachs-Liquid reserve fund

AAA-S&P Rating 25,000

EFG Deposit account

A / F1-Fitch Rating 38,055

Royal Bank of Scotland International A–2 / BBB-S&P Rating 17,074

80,129

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS OTHER INFORMATION

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

Liquidity risks

Liquidity risk is the risk that the Company may not be able to meet a demand for cash or fund an obligation when due. The Investment Adviser,

AIFM and the Board continuously monitor forecast and actual cashflows from operating, financing and investing activities to consider payment

of dividends or further investing activities.

Financial assets and liabilities by maturity at the period end are shown below:

Less than

1 year

£‘000

1-2 years

£‘000

2-5 years

£‘000

Total

£‘000

Assets

Investments at fair value through profit or loss – –

12,307 12,307

Trade and other receivables 5,274

––

5,274

Cash and cash equivalents

80,129

––

80,129

Liabilities

Other creditors

(329)

––

(329)

85,074 – 12,307 97,381

Capital management

The Company considers its capital to comprise ordinary share capital, distributable reserves and retained earnings. The Company is not subject

to any externally imposed capital requirements.

The Company’s primary capital management objectives are to ensure the sustainability of its capital to support continuing operations, meet

its financial obligations and allow for growth opportunities. Generally, acquisitions are anticipated to be funded with a combination of current

cash and equity.

16. RELATED PARTY TRANSACTIONS

Fees payable to the Investment Advisor are shown in the Income Statement. As at 31 December 2021, the fee outstanding to the Adviser was

£77,000. The Company owns 100% of Attika Holdings Limited, as disclosed in note 2. As at 31 December 2021, the Company has a receivable

balance of £5.17 million against Attika Holdings Limited.

Fees are payable to the directors at an annual rate of £55,000 to the Chairman, £42,000 to the Chairman of the Audit and Risk Committee

and £37,000 to the other directors. These fees were effective from the date of appointment of each director being 9 April 2021 for each

Board member except Miriam Greenwood who was appointed on 19 April 2021.

During the period, £36,000 was paid to the Chairman; £27,000 was paid to the Chairman of the Audit Risk Committee; and £24,000 was

paid to the other directors. Total payment made during the period is £87,000.

The directors had the following shareholdings in the Company, all of which were beneficially owned.

Ordinary

shares At

31 December

2021

Miriam Greenwood OBE DL 24,000

Nicholas Bliss 20,000

17. SUBSEQUENT EVENTS

The Company entered into £5,659,000 amount of investments post 31 December 2021 through 23 June 2022.

Other Information

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS

OTHER INFORMATION

In reporting financial information, the Company presents alternative performance measures, “APMs”, which are not defined or specified under the

requirements of IFRS. The Company believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide

stakeholders with additional helpful information on the performance of the Company. The APMs presented in this report are shown below:

ALTERNATIVE PERFORMANCE MEASURES

(Discount)/Premium

The amount, expressed as a percentage, by which the share price is more than the Net Asset Value per Ordinary Share.

As at 31 December 2021 (Audited) Page

NAV per Ordinary Share (pence) a

197.38

Share price (pence)

195.75

(Discount)/Premium (b÷a)-1 -1.7%

Ongoing charges

A measure, expressed as a percentage of average net assets, of the regular, recurring annual costs of running an investment company.

As at 31 December 2021 (Audited) Page ‘000

Period end NAV a

n/a 97,381

Annualised expenses (prorated based on the total number of days per year

over the number of days from date of incorporation: £664,000 x 365 days/

266 days)

bn/a

911

Ongoing charges (b÷a) 0.9%

Total return

A measure of performance that includes both income and capital returns. This takes into account capital gains and reinvestment of dividends

paid out by the Company into the Ordinary Shares of the Company on the ex-dividend date.

As at 31 December 2021 (Audited) Page Share price NAV

Opening at 2 June 2021 (pence) a

n/a 100.00 98.00

Closing at 31 December 2021 (pence)

95.75

97.38

Total return (b÷a)-1 -4.3% -0.6%

n/a = not applicable.

Note: There were no dividends paid during the period ended 31 December 2021.

OTHER INFORMATION

AIC

Association of Investment Companies.

Alternative Investment Fund or “AIF”

An investment vehicle under AIFMD. Under AIFMD (see below) Aquila

Energy Efficiency Trust Plc is classified as an AIF.

Alternative Investment Fund Managers Directive or “AIFMD”

A European Union directive which came into force on 22 July 2013 and

has been implemented in the UK.

Annual General Meeting or “AGM”

A meeting held once a year which shareholders can attend and where

they can vote on resolutions to be put forward at the meeting and ask

directors questions about the company in which they are invested.

the Company

Aquila Energy Efficiency Trust Plc.

Discount

The amount, expressed as a percentage, by which the share price is less

than the net asset value per share.

Dividend

Income receivable from an investment in shares.

Ex-dividend date

The date from which you are not entitled to receive a dividend which

has been declared and is due to be paid to shareholders.

EMEA

Europe, the Middle East and Africa.

European Union.

Financial Conduct Authority or “FCA”

The independent body that regulates the financial services industry in

the UK.

Gearing

A way to magnify income and capital returns, but which can also magnify

losses. A bank loan is a common method of gearing. See also “leverage”

below.

Gearing effect

The effect of borrowing on a company’s returns.

General Meeting “GM“

A meeting which shareholders can attend and where they can vote on

resolutions to be put forward at the meeting and ask directors questions

about the company in which they are invested.

Gross Asset Value

The sum of the value of the assets a company owns

GWh

Gigawatt hour.

The Holdco

Attika Holdings Limited.

IEA

International Energy Agency

Index

A basket of stocks which is considered to replicate a particular stock

market or sector.

Investment company

A company formed to invest in a diversified portfolio of assets.

IPO

Initial Public Offering.

Investment Trust

An investment company which is based in the UK and which meets

certain tax conditions which enables it to be exempt from UK corporation

tax on its capital gains. The Company is an investment trust.

IRR

Internal rate of return.

Leverage

An alternative word for “Gearing”.

Under AIFMD, leverage is any method by which the exposure of an AIF

is increased through borrowing of cash or securities or leverage embedded

in derivative positions.

Under AIFMD, leverage is broadly similar to gearing, but is expressed

as a ratio between the assets (excluding borrowings) and the net assets

(after taking account of borrowing). Under the gross method, exposure

represents the sum of a company’s positions after deduction of cash

balances, without taking account of any hedging or netting arrangements.

Under the commitment method, exposure is calculated without the

deduction of cash balances and after certain hedging and netting

positions are offset against each other.

GLOSSARY

STRATEGIC REPORT

GOVERNANCE FINANCIAL STATEMENTS

OTHER INFORMATION

Liquidity

The extent to which investments can be sold at short notice.

Net assets or net asset value (‘NAV’)

An investment company’s assets less its liabilities.

NAV per Ordinary Share

Net assets divided by the number of Ordinary Shares in issue (excluding

any shares held in treasury)

Ongoing charges

A measure of the regular, recurring annual costs of running an investment

company, expressed as a percentage of average net assets.

Ordinary Shares

The Company’s ordinary shares in issue.

Portfolio

A collection of different investments held in order to deliver returns to

shareholders and to spread risk.

Premium

The amount, expressed as a percentage, by which the share price is

more than the net asset value per share.

Share buyback

A purchase of a company’s own shares. Shares can either be bought

back for cancellation or held in treasury.

Share price

The price of a share as determined by a relevant stock market.

Total return

A measure of performance that takes into account both income and

capital returns. This may take into account capital gains, dividends,

interests and other realised variables over a given period of time.

GLOSSARY

CONTINUED

Directors (all non-executive)

Miriam Greenwood OBE DL (Chair)

Nicholas Bliss

David Fletcher

Registered office

(Registered in England and Wales with

Company number. 11932433)

6th Floor

125 London Wall

London

England

EC2Y 5AS

AIFM

Sanne Fund Management (Guernsey) Limited

Sarnia House

Le Truchot

St Peter Port

Guernsey

GY1 1GR

Investment Adviser

Aquila Capital Investmentgesellschaft mbH

Valentinskamp 70

D-20335

Hamburg

Germany

Broker

Peel Hunt LLP

100 Liverpool Street

London

EC2M 2AT

Administrator and Company Secretary

Sanne Fund Services (UK) Limited

6th Floor

125 London Wall

London

England

EC2Y 5AS

Registrar

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol

BS99 6AH

Independent Auditors

PricewaterhouseCoopers LLP

7 More London Riverside

London

SE1 2RT