HARMONY ENERGY

INCOME TRUST PLC

The Scalpel 18th Floor

52 Lime Street

London

EC3M 7AF

Harmony Energy Income Trust PLC Annual report for the period from 1 October 2021 to 31 October 2022

ANNUAL REPORT

AND ACCOUNTS

FOR THE PERIOD FROM

1 OCTOBER 2021 TO

31 OCTOBER 2022

HARMONY ENERGY

INCOME TRUST PLC

DESIGNED AND PRINTED BY PERIVAN 264678

“We are pleased to be

enabling the transition to an

environmentally, nancially

and socially sustainable energy

system whilst delivering attractive

and sustainable returns to

shareholders and ultimately

playing a role in saving our

planet.”

Norman Crighton, Chair

CONTENTS

STRATEGIC REPORT

Highlights and Statistics

Chair’s Statement

Investment Adviser’s Report

Alternative Investment Fund Manager’s Report

Strategic Report

Environmental, Social and Governance

Principal Risks and Uncertainties

Section 172 Statement

Viability and Going Concern

GOVERNANCE REPORT

Board of Directors

Directors’ Report

Corporate Governance

Directors’ Responsibility Statement

Report of the Audit and Risk Committee

Report of the Remuneration and

Nomination Committee

Directors’ Remuneration Report

Report of the Management Engagement Committee

Independent Auditor’s Report

FINANCIAL STATEMENTS

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

Company Information

Glossary

WWW.HEITP.CO.UK

This document has been prepared by Harmony Energy Income Trust plc (“HEIT” or the “Company”) for information purposes only. The

information provided in this document pertaining to HEIT, its broader group and portfolio companies (“Group”) and the business assets,

strategy and operations related thereto, does not, and is not intended to, constitute or form part of any offer for sale or subscription or any

solicitation for any offer to purchase or subscribe for any securities, options, futures, or other derivatives related to securities. Nor shall it, or

any part of it, form the basis of, or be relied upon in connection with, any contract or commitment whatsoever relating to the Company or

any part of, or afliate to, the Company or its Group. This document has not been approved for the purposes of section 21 of the UK Financial

Services and Markets Act 2000, as amended. Information contained in this document should not be relied upon as advice to buy or sell or

hold such securities or as an offer to sell such securities. This document does not take into account, nor does it provide any tax, legal or

investment advice or opinion regarding the specic investment objectives or nancial situation of any person. The information contained in this

document is given at the date of its publication and is subject to updating, revision and amendment. Whilst the Company reasonably believes

that the facts stated in this document are accurate and that any forecasts, opinions and expectations contained herein are fair and reasonable,

no representation or warranty, express or implied, is made, and no responsibility or liability is accepted by the Company or its representatives

to any person, as to the fairness, accuracy, completeness or correctness of these materials or opinions contained therein and each recipient

of this document must make their own investigation and assessment of the matters contained therein. No responsibility or liability whatsoever

is accepted by any person for any loss howsoever arising from any use of, or in connection with, this document or its contents or otherwise

arising in connection therewith. This document may contain forward-looking statements that reect the Company’s current expectations

regarding future events. Any forward-looking statements or nancial projections contained herein as to future results; level of activity;

performance; achievements or otherwise, are based on the opinions and estimates of management at the date the statements are made. Whilst

considered reasonable, the Company cannot and does not represent or guarantee that actual results achieved will be the same, in whole or

in part, as those set out in any forward looking statements and nancial projections. The forward-looking statements and nancial projections

contained in this document are expressly qualied by this notice and the Company strongly advises against undue reliance on forward-looking

statements or nancial projections.

Farnham

(20 MW / 40 MWh)

This document is printed on Expedia

Satin, a paper sourced from well managed,

responsible, FSC ® certied forests and

other controlled sources. The pulp used in

this product is bleached using an elemental

chlorine free (ECF) process.

Harmony Energy Income Trust Plc (the “Company”) offers Shareholders

the opportunity to participate in the transition to net zero by investing in

commercial scale battery energy storage systems (“BESS”) and renewable

energy generation projects, with an initial focus on a diversied portfolio

of BESS located in Great Britain. As at 31 October 2022, the Company

had six 2-hour duration BESS projects under construction with a total

capacity of 312.5 MW / 625 MWh, all targeted to be operating by end

2023. The highlights for the period covered by this report include:

HIGHLIGHTS AND STATISTICS

*The C Shares were converted to Ordinary Shares on 31 January 2023 and are no longer in issue.



Under IAS 32 the proceeds raised from the C Share issue are classied as liabilities rather than equity until converted. The Adjusted

Net Asset Value shows the NAV of the Company with these proceeds shown as equity rather than as a liability in the nancial statements,

as is the presentation following conversion of the C Shares on 31 January 2023.

As at the close of business on 22 February 2023, the latest practicable date prior to the publication of this document, the Ordinary

Share price was 123.00p. As at 31 January 2023 the NAV was 125.50p per Ordinary Share.

At 31/10/22

122.77p

At 31/10/22

111.75p / 102.00p

NAV PER ORDINARY SHARE ORDINARY SHARE PRICE / C SHARE PRICE

At 31/10/22

£272.4m



At 31/10/22

£257.8m

ADJUSTED NET ASSET VALUE NET ASSET VALUE ORDINARY SHARES

From IPO to 31/10/22

24.43p / 24.84%

Financial year 2023 onwards

NAV GROWTH ORDINARY SHARES TARGET DIVIDEND PER ORDINARY SHARE

Farnham

(20 MW / 40 MWh)

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

3 9

UNDER CONSTRUCTION ASSETS 297.4 MW / 594 MWH

OPERATIONAL/ENERGISED ASSETS 98 MW/196 MWH

SHOVEL READY ASSETS 99 MW / 198 MWH

PILLSWOOD

98 MW / 196 MWH

STATUS: OPERATIONAL

WORMALD GREEN*

33 MW / 66 MWH

TARGET COD: Q1 2024

STATUS: UNDER CONSTRUCTION

BROADDITCH

11 MW / 22 MWH

TARGET COD: Q1 2023

STATUS: UNDER CONSTRUCTION

HAWTHORN PIT*

49.9 MW / 99.8 MWH

TARGET COD: Q2 2024

STATUS: UNDER CONSTRUCTION

FARNHAM

20 MW / 40 MWH

TARGET COD: Q2 2023

STATUS: UNDER CONSTRUCTION

RYE COMMON*

99 MW / 198 MWH

TARGET COD: Q4 2024

STATUS: SHOVEL READY

RUSHOLME

35 MW / 70 MWH

TARGET COD: Q3 2023

STATUS: UNDER CONSTRUCTION

BUMPERS

99 MW / 198 MWH

TARGET COD: Q3 2023

STATUS: UNDER CONSTRUCTION

LITTLE RAITH

49.5 MW / 99 MWH

TARGET COD: Q4 2023

STATUS: UNDER CONSTRUCTION

PORTFOLIO COMPOSITION

“COD” COMMERCIAL OPERATIONS DATE

AS AT THE DATE OF THIS REPORT

* Acquired by the Company post-reporting period.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

PROJECT PROGRESS

PILLSWOOD

98 MW / 196 MWh OPERATIONAL

RUSHOLME

35 MW / 70 MWh TARGET COD: Q3 2023

BUMPERS

99 MW / 198 MWh TARGET COD: Q3 2023

BROADDITCH

11 MW / 22 MWh TARGET COD: Q1 2023

FARNHAM

20 MW / 40 MWh TARGET COD: Q2 2023

LITTLE RAITH

49.5 MW / 99 MWh TARGET COD: Q4 2023

“COD” Commercial Operations Date.

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

CHAIR’S STATEMENT

It gives me great pleasure to present, on behalf of the board of

directors (the “Board”), the annual report for Harmony Energy

Income Trust plc (“HEIT” or the “Company”) relating to our rst

nancial period ending 31 October 2022.

The Company has had a productive rst full year as a listed company,

with multipleBESS project acquisitions and strong NAV growth.

The £210 million gross proceeds successfully raised at Initial Public

Offering (“IPO”) in November 2021 were immediately committed

to the acquisition and construction of the Company’s rst ve BESS

projects, and a £60 million debt facility secured (and hedged) with

NatWest in June 2022 allowed the Company to acquire and begin

construction of a sixth BESS project. Total capacity of the portfolio

acquired and under construction as at the end of the reporting

period was therefore 312.5 MW / 625 MWh.

Progress in the rst nancial period was achieved despite the

volatility and uncertainty caused by the war in Ukraine. This

aggression by Russia led to huge increases in gas prices, electricity

bills in the UK increasing by a multiple of their previous levels

and unprecedented volatility in electricity pricing. The Company

also had to navigate the consequences of the UK Government’s

“mini budget” in September which caused market turmoil and

negatively impacted our capital raise launched in that period.

However, the capital raise via a C Share issue in October 2022

was supported by a number of our Shareholders which meant

that the Company was still able, post-reporting period, to acquire

the project rights to a further three BESS projects, taking the

total capacity of the portfolio to 494.4MW / 988.8 MWh. This

support was vital in continuing the growth plans of the Company,

increasing diversication of suppliers and improving liquidity for all

Shareholders. Board members have supported the Company by

purchasing shares at IPO, during the market turmoil following the

UK Government’s “mini-budget” and as part of the C Share issue.

The GB BESS market has enjoyed record-breaking levels of

revenues during the reporting period, driven by high gas pricing

and volatility in electricity wholesale markets. The Company’s

model of building 2-hour duration projects means it is well placed

to take advantage of this strong revenue earning environment,

whilst also providing National Grid ESO with additional tools to

manage network stability and to avoid blackouts.

Despite the high revenue environment, supply chain issues and

grid connection delays have contributed to a lower-than-expected

number of new GB BESS projects being commissioned in GB

during 2022, and the total GB eet size remains below National

Grid’s Net Zero targets. It was therefore pleasing that, in relation

to the Company’s portfolio, the Pillswood project – the Company’s

rst project and largest (by MWh) in Europe – was energised in

November ahead of schedule.

The Company’s exclusive rights to an identied large pipeline of

BESS projects means we are well placed to continue growing the

portfolio at pace over the near-term.

The success of our acquisition activity so far was made possible

by our Shareholders who supported us at IPO and then again

with the C Share issue. We thank Shareholders for recognising

the strong underlying business case for HEIT despite the recent

challenging environment in the wider equity and bond markets.

NAV AND OPERATING RESULTS

During the reporting period, NAV per Ordinary Share increased from

98.34p to 122.77p, representing 24.8 per cent. growth. The valuation

of the C Shares, having only commenced dealing two weeks prior to

the end of the reporting period, was static at 98.45p per C Share.

The C Shares have since converted into Ordinary Shares, which were

admitted to trading on 31 January 2023.

Since IPO the market price for the Ordinary Shares has traded

positively. It reached a high of 121.00p per share before the

UK Government’s “mini-budget”. Although it closed at 111.75p

per share at the end of the reporting period following the

“mini-budget”, this was up 11.75 per cent. from the IPO price. The

Board was pleased that the Ordinary Shares enjoyed prolonged

periods of trading at a premium to NAV, showing strong support

from its Shareholders. As more of our assets begin commercial

operations during 2023, we look forward to reporting on operating

performance and continuing our open dialogue with Shareholders

in relation to the portfolio.

Since the period end the NAV per Ordinary Share has increased

further to 125.50p as at 31 January 2023, the latest valuation date

prior to the publication of this document.

NORMAN CRIGHTON

CHAIR

AFTER AN ACTIVE FIRST YEAR OF PROJECT ACQUISITIONS AND

NAV GROWTH, THE COMPANY IS NOW PROGRESSING THE

PORTFOLIO THROUGH CONSTRUCTION AND INTO OPERATIONS,

WITH 312 MW/625 MWH DUE TO ENERGISE BY THE END OF 2023.

WE LOOK FORWARD TO CONTINUING TO DELIVER ON TARGET

SHAREHOLDER RETURNS AS WELL AS OUR ENVIRONMENTAL,

SOCIAL AND GOVERNANCE AMBITIONS.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

DIVIDEND

The Board declared and paid dividends totalling 2p per share

in relation to the reporting period, with 1p per Ordinary Share

paid in July 2022 and a further 1p per Ordinary Share paid

in December 2022. This was in line with the dividend policy

announced at IPO, which also states that the Company intends

to declare and pay 8p per Ordinary Share per annum for the

next nancial year onwards, with2pper Ordinary Share targeted

to be paid in each of March, June, September and December.

With projects moving into operations against a backdrop of strong

market fundamentals and an ongoing high revenue environment

during which the majority of our initial portfolio is due to complete

construction, the Board has additional condence that such

dividend payments will be well covered.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE

BESS projects are essential to underpin the transition to a low-

carbon, secure and affordable GB energy system. This crucial

infrastructure class also provides critical stability services which

enable National Grid ESO to efciently manage a greater

proportion of renewable Wind and Solar generation on the

GB network. As such, the Net Zero transition is a core theme

underpinning the Company’s investment policy. In addition to this,

the Board has ambitions to meet and even exceed the highest

standards of sustainable business practices. Consideration of ESG

risks and opportunities sits at the heart of the Company’s (and

the Investment Adviser’s) decision making both at project-and

corporate level.

During the Company’s initial reporting period, the Company

has been proactive in understanding and designing appropriate

monitoring and reporting frameworks and processes. We are

proud to have qualied for the LSE’s Green Economy Mark as

well as become a signatory to the United Nations Principles for

Responsible Investing (“UN PRI”). The Board and Investment

Adviser have jointly undertaken a materiality assessment,

identifying relevant ESG-related issues with support from

independent ESG advisors. We have drafted and adopted a

supplier code of conduct; engaged with suppliers, investors and

other stakeholders to conduct gap analysis against the TCFD and

TNFD frameworks, and with this report, have started to disclose

in line with these frameworks on a voluntary basis. In relation

to UN PRI specically, the Company intends to participate in

its rst voluntary reporting period in 2023 and publish the rst

transparency report in the 2024 reporting cycle. Please see the

dedicated ESG section of this report for more details.

In addition to the varied and multiple ESG activities and initiatives

which have been and/or will be undertaken as part of our reporting

framework described above, the Board pledged to create an “ESG

Fund” once the assets of the Company exceeded £250m. The

ESG Fund is designed to support various environmental and social

initiatives. The increase in Company NAV during the reporting period

means that the qualifying threshold for accruals in relation to the

ESG Fund has now passed, and the Board look forward to deciding

how best to deploy the ESG Fund in upcoming ESG Committee

meetings.

OTHER ISSUES

The Directors rmly believe that greater diversity in the board

room leads to better decision making and therefore higher returns

for our Shareholders. Fortunately, your Board meets the various

recommendations issued by the FTSE Women Leaders Review

and the Parker Review for gender and ethnic diversity. However,

the Board has even greater and, I would argue more important,

diversity within its ranks: the diversity of social background; of

education; of skills; of work experience, and of lived experience.

The diversity of gender and ethnicity is a happy coincidence of

constructing a Board with these broader attributes. Ultimately, I

believe that corporate boards should comprise the best people for

the job and can conrm to Shareholders that for your Board these

people are in place.

Investment trusts are different from operating companies.

We do not have CEOs or CFOs which the FCA mentions in

their recommendation for positive diversity on boards. In our

Prospectus, we laid out the reasons why the Board chose not to

appoint a Senior Independent Director (“SID”), one of the roles

that the FCA believes should count towards diversity targets. If a

board is functioning correctly then there should be no need for a

SID. The Directors of HEIT are strong, knowledgeable, professional

individuals who would not hesitate to provide challenge. It is

the Chairman’s role to foster a culture where independence of

directors helps them serve as effective stewards of Shareholder

wealth. This is how all boards should operate.

CHAIR’S STATEMENT CONTINUED

STRATEGIC REPORT

Pillswood (98 MW / 196 MWh)

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

STRATEGIC REPORT

We believe that for investment trusts a much more important

role than SID is lled by the Chair of the Audit Committee and

strongly believe that the FCA should recognise the unusual

position of investment trusts and include the Chair of Audit role

when looking at diversity issues. Your Board’s Chair of Audit role is

held by a capable female Director.

The role of proxy advisors has increased over the past few years.

This, I believe, is to the detriment of the investment trust industry

as a whole. Proxy advisors seem to have little understanding of

how investment trusts and their boards operate, and unfortunately

their decision-making at project and at corporate level remains

opaque and nal.

The use of a proxy advisor is understandable for an index fund

charging minimal fees, but those shareholders are in a minority,

or non-existent, in most investment trusts which are actively

managed and where investment manager decisions are scrutinised

by active boards. While there are good reasons why a board and

an investment manager may make certain decisions, there is

no forum or opportunity for boards to explain the rationale and

circumstances for particular decisions to proxy advisors, who may

then advise a vote against particular resolutions.

The Investment Adviser, your Board and I are respectful of the

workload of our institutional investors. But we remain available to

all our Shareholders – institutional and retail – who may wish to

discuss an issue or ask a question.

In the coming weeks I shall be meeting any institutional investors

who would like to see me and I encourage as many Shareholders

as possible to attend our rst AGM.

OUTLOOK

As already mentioned, post-reporting period the Company

completed construction and commenced commercial operations

on our Pillswood project, which (at 98 MW / 196 MWh) constitutes

a signicant proportion of the Company’s portfolio. In addition,

the Company has successfully extended its debt facility and has

also commenced construction in relation to two of the three

projects acquired in December 2022.

The balance of the Company’s projects under construction

continue to progress well despite some minor supply chain

disruption and grid connection delays, and we continue to target

312.5 MW being fully operational by the end of 2023. These events

set the theme for 2023, being a focus on portfolio construction

and supplier diversication as we move into revenue generation

and performance reporting.

The Company plans to host its inaugural AGM on 22 March 2023.

Further details will be provided in the Notice of AGM.

NORMAN CRIGHTON

Chair

22 February 2023

CHAIR’S STATEMENT CONTINUED

HARMONY ENERGY ADVISORS LIMITED “HEAL” OR “THE INVESTMENT ADVISER”, IS PROUD

TO DELIVER ITS INAUGURAL INVESTMENT ADVISER’S REPORT IN RELATION TO THE

COMPANY.

INVESTMENT ADVISER’S REPORT

IPO in November 2021 – initial market capitalisation of £210m

£210m initial market

capitalisation

IPO funds fully committed immediately following IPO

100% IPO funds committed

At 31 October 2022, the Company had six 2-hour duration BESS

projects totalling 312.5 MW / 625 MWh. All projects were “under

construction” during the reporting period

312.5 MW / 625 MWH

portfolio

Ordinary Share NAV increased 24.8% since IPO due to

strong market fundamentals and revaluation of assets through

construction lifecycle

+24.8% NAV increase

£60m debt facility

Debt facility of £60m secured from NatWest (fully committed and

hedged but not yet drawn)

At 31 October 2022, Company had a right of rst refusal (“ROFR”)

over Harmony Energy Limited’s pipeline of near-term projects

687.5 MW pipeline

Company raised an additional £14.7m in October 2022 by way of

the issue of 14.7m C Shares. Proceeds committed against identied

pipeline projects

£14.7m C Share issue

PAUL MASON

MANAGING DIRECTOR

PETER KAVANAGH

INVESTMENT DIRECTOR

MAX SLADE

COMMERCIAL DIRECTOR

JAMES RITCHIEBLAND

INVESTMENT DIRECTOR

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

STRATEGIC REPORT

INVESTMENT ADVISER’S REPORT CONTINUED

PORTFOLIO OVERVIEW

The initial ve BESS projects, namely Pillswood, Broadditch,

Farnham, Rusholme and Little Raith, were acquired from Harmony

Energy Limited upon IPO, with a total capacity of 213.5 MW / 427

MWh. At the time of acquisition, Pillswood was categorised as

“under construction” and the other four were “shovel ready” (as

dened in the Prospectus).

During the reporting period, the Company successfully progressed

the projects to “under construction”. In addition, the Company

acquired a sixth project (known as “Bumpers”) from Harmony

Energy Limited which was categorised as “under construction”,

taking the total portfolio to 312.5 MW / 625 MWh. Key project

information is depicted in the map graphic on page 2.

All projects owned by the Company during the reporting period

are contracted with Tesla under an engineering, procurement

and construction contract (“EPC”), to supply and install 2-hour

duration BESS. These projects also benet from operation and

maintenance (“O&M”) and revenue optimisation contracts with

Tesla, using Tesla’s Autobidder software platform.

Post-reporting period:

The Company’s Pillswood project was energised ahead of schedule

in November 2022, as Europe’s largest BESS project (by MWh),

and is divided into two operational phases. Phase1 commenced

operations in November 2022, with Phase 2 commencing shortly

after in December 2022. As at the date of publication of this

report, both phases are fully active across wholesale markets and

also participating in ancillary services and is performing in line with

expectations.

Phase 2 of this project was originally planned to commence

commercial operations in March 2023. The Investment Adviser

is therefore very pleased to have delivered this project ahead of

schedule for the benet of the Company, enabling a signicant

portion of the Company’s portfolio to commence operations as

early as possible and in time for winter 2022/23.

The construction of the balance of the portfolio has progressed

well and Tesla Megapack battery modules are already on site at

the Broadditch, Farnham and Rusholme projects.

On 14 December 2022, the Company completed the acquisition

of the three “pipeline” projects from Harmony Energy Limited

(totalling 181.9 MW) depicted in the map on page 2, and the

Company has moved quickly to execute BESS supply and

installation contracts in relation to the Wormald Green and

Hawthorn Pit projects (as described further below). This takes the

total portfolio of the Company as at the date of publication of this

report to 494.4 MW / 988.8 MWh, broken down as:

– 98 MW / 196 MWh operational / energised;

– 297.4 MW / 594.8 MWh under construction; and

– 99 MW / 198 MWh “shovel ready”.*

*As previously disclosed, 49.5 MW of this project is held within a

single project SPV and is awaiting nal planning consent.

PORTFOLIO UPDATE

Pillswood (98 MW / 196 MWh)

“PILLSWOOD OPERATING AHEAD OF

SCHEDULE.”

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

CAPACITY MARKET

The Capacity Market auctions which took place in February 2022

saw record prices in both the T-1 and T-4 auction. Due to an

undersupply of qualifying generation plant, the T-1 auction cleared

at its maximum amount of £75/kW/yr. The T-4 auction cleared at a

record high level of £30.59/kW/yr as some of the older generation

plant (coal and nuclear) failed to take contracts.

The Company’s Pillswood, Rusholme and Little Raith projects each

secured 15-year index-linked contracts (commencing in October

2025) at £30.59 /kW/yr in the T-4auction (commencing in October

2025). The Company’s Farnham and Broadditch projects secured

similar length contracts in the T-4 auction 2021 (commencing in

October 2024) at a clearing price of £18 /kW/yr. No Company

projects participated in the T-1 auction in February 2022.

Post-reporting period, each of the Pillswood, Broadditch, Farnham

and Rusholme projects secured T-1 Capacity Market contracts

on 14 February 2023 (for delivery from October 2023) at the

price of £60/kW/yr, the second highest T-1 price on record.

The combined contracts represent a total of £3.65 million of

revenue in exchange for services to be delivered between October

2023 and September 2024. TheBumpers project as well as the

Company’s recently acquired Wormald Green and Hawthorn

Pit projects, have each pre-qualied for the T-4 auction at the

time of writing expected to take place on 21/22February 2023

(for delivery from October 2026). The Company’s Rye Common

project is anticipated to pre-qualify for the 2024 auctions, once

nal planning for Phase 2 has been obtained.

Capacity Market revenue can be earned simultaneously with

normal daily BESS operating strategies without disruption. This is

known as “stacking” revenues.

SUPPLIER DIVERSIFICATION

Tesla are currently engaged (as BESS supplier, contractor,

maintenance provider revenue optimiser) on six of the Company’s

projects. The Board and the Investment Adviser continue to

value Tesla’s technology and expertise, as well as the commercial

relationship between them and the Company. However, in order

to reduce supplier concentration risk (and retain competitive

tension amongst suppliers for future tenders), the Investment

Adviser ran a full tender and contracting process during Q4 2022

to source an additional BESS supplier and maintenance provider.

On 17 February 2023, the Company procured (via relevant

Project SPV’s) the engagement of Envision Energy International

Trading Limited and Envision Energy International UK Limited

(on a joint and several basis) (“Envision”) to supply and install its

ENS-L7300-3300 battery energy storage system in relation to

the Wormald Green and Hawthorn Pit projects. Envision Energy

International UK Limited is also contracted under long term

maintenance and services agreements in relation to these two

projects.

Key factors which inuenced the Company’s choice include:

1) Envision’s ability to commit to required BESS delivery dates

which maintains project energisation timetables;

2) Envision have their own cell manufacturing facilities, located

in multiple jurisdictions (including UK). This diversies key

component supply chain risk;

3) Envision’s track record in installing 2-hour duration BESS in

various jurisdictions; and

4) Envision’s sustainability initiatives, including its plans for

its manufacturing facilities at Ordos, China (which will

manufacture the BESS for the Company) to be powered by

100% renewable energy.

The Investment Adviser has also appointed a balance-of-plant

contractor to proceed with the construction of the Wormald

Green and Hawthorn Pit projects.

In addition, the Investment Adviser is in the nal stages of

procuring revenue optimisation services for these projects and

expects to nalise that appointment shortly. Going forward, the

Investment Adviser (on behalf of the Company) will continue

dialogue with existing and potential suppliers to ensure enduring

quality of service and cost competitiveness.

INVESTMENT ADVISER’S REPORT CONTINUED

T-4 Contracts

2024-25

2025-26

2026-27

2027-28

2028-29

2029-30

2030-31

2031-32

2032-33

2033-34

2034-35

2035-36

2036-37

2037-38

2038-39

2039-40

2040-41

Pillswood 15 year (index-linked) contract worth £906,688 per year

Broadditch 15 year (index-linked) contract worth £96,264 per year

Farnham 15 year (index-linked) contract worth £175,032 per year

Rusholme 15 year (index-linked) contract worth £320,553 per year

Little Raith 15 year (index-linked) contract worth £453,344 per year

Bumpers Prequalied for Auction

Hawthorn Pit Prequalied for Auction

Wormald Green Prequalied for Auction

Rye Common Prequalied for Auction

Chart 1: Summary of T-4 CM contracts awarded

Source: Harmony Energy Advisors Limited

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

PIPELINE

The need for substantial amounts of energy storage on the GB

network is widely understood. The ROFR enables the Company

to have an exclusive right of rst refusal over Harmony Energy

Limited’s substantial and well-developed pipeline of projects.

The ROFR granted the Company an exclusive right to acquire up

to 1 GW of BESS projects from Harmony Energy Limited. The

Company has, as at the date of publication of this report, exercised

this right in relation to 494.4 MW, leaving at least 505.6 MW still to

be acquired. The Investment Adviser has identied more than 400

MW of BESS projects (subject to the ROFR) located in GB which

have the potential to be acquired over the next 12months, and

could commence operations over the next 36 months.

As demonstrated through the delivery of the Company’s Pillswood

project, a strong track record of delivering sites on time will allow

the Company to grow its portfolio fast and establish one of the

largest portfolios in the sector.

The Company is not restricted to only acquiring BESS projects

from Harmony Energy Limited, and will continue to monitor the

wider market for third party opportunities.

DEBT FINANCE SECURED

During the reporting period, on 21 June 2022, the Company

completed the contracting of a debt nance facility of up to

£60million from NatWest plc (the “Initial Facility”) with an

accordion for an additional £50 million. It is a ve-year facility

with an initial margin of 300bps over SONIA, rising over time

to a maximum of 375bps by year 5. The SONIA element is fully

hedged and the Company is therefore not exposed to interest rate

movements in relation to this facility. The facility is “interest-only”

for the rst three years.

Post-reporting period, on 17 February 2023, the Company

successfully negotiated an amendment and restatement of the

Initial Facility with NatWest (together with its syndicate partner,

Coöperatieve Rabobank U.A. (“Rabobank”)) to give effect to the

previously agreed accordion. This amendment and restatement

gives the Company access to an additional £50 million of debt,

taking the total facility to £110 million (the “Enlarged Facility”).

The Enlarged Facility is on the same terms as the Initial Facility

concerning margin and term, and is expected to be fully hedged.

In addition, the Company, NatWest and Rabobank have agreed a

revolving credit facility of up to £20 million which will be a 3-year

facility with a margin of 325bps over SONIA (“RCF”).

The debt facilities described above provide the Company with

funding certainty to complete construction of the Bumpers,

Wormald Green and Hawthorn Pit projects. The Company

only expects to draw down on the Enlarged Facility over time

upon meeting certain construction milestones and does not

expect to be fully drawn until at least mid-2024, if at all, at which

point the Company expects to have eight projects in operation

with total capacity of ca.400MW / 800MWh. Once drawn the

Enlarged Facility can be repaid at any time with limited cost to the

Company.

ASSET MANAGEMENT AND OPTIMISATION

OF ENERGY STORAGE

During the reporting period, and in preparation for the Company

having operational assets from 2023, the Investment Adviser has

expanded its experienced asset management team. This team

will further enhance the technical and nancial performance of

each BESS project by working closely with the Company revenue

optimisation supplier(s). By internally benchmarking portfolio and

market performance, the asset management team will scrutinise

and query performance data to ensure the best strategies are

taken. Warranty, asset availability and state of health metrics

are carefully monitored on the Investment Adviser’s proprietary

“Harmonise” platform to ensure the Company’s portfolio remain

at peak performance while also establishing an evidence-based risk

management system.

The Investment Adviser (via its asset management team)

also oversees the maintenance of each BESS project by our

contractor(s), ensuring all scheduled maintenance (including

capacity tests) is adhered to and that any reactive issues are dealt

with as quickly as possible.

INVESTMENT ADVISER’S REPORT CONTINUED

“IDENTIFIED PIPELINE OF AT LEAST

400MW SUBJECT TO EXCLUSIVE

RIGHTOF FIRST REFUSAL”

“DEBT FACILITIES PROVIDE FUNDING

CERTAINTY FOR THE CONSTRUCTION

OF THREE BESS PROJECTS”

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

Source: National Grid ESO’s Future Energy Scenarios (July 2022)

Chart 2: FES 2022 - Battery Deployment Scenarios Chart 3: FES 2022 - Solar + Wind Deployment Scenarios

OVERVIEW

The UK has a legally binding target to achieve “net zero” by 2050

and has enshrined in law a target to reduce emissions by 78 per

cent. by 2035 compared to 1990 levels. UK renewable generation,

primarily wind and solar, has more than quadrupled over the past

10 years, with wind farms contributing a record 26.8 per cent. of

the country’s electricity in 2022. This growth has been supported

by government subsidies, such as the Feed-In Tariff, the Contracts

for Difference (CfD) scheme and the Renewable Obligation

but has also been driven by rapid reductions in cost that have

allowed some renewable energy projects to start competing in

a subsidy-free environment. National Grid ESO predicts that by

2038 we will have a minimum of 150 GW of renewables (Falling

Short Scenario) and a possible maximum of 249 GW (Consumer

Transformation Scenario).

Wind and solar are known as “intermittent” generation assets

as their output relies on prevailing weather conditions and can

therefore be difcult to forecast accurately ahead of delivery.

Supply and demand of electricity must be balanced and matched in

real-time in order to maintain the stability of the electricity system.

Responsibility for this balancing lies with National Grid ESO as the

system operator. This role has become more challenging and costly,

with a key contributing factor being the proportion of intermittent

generation being used to meet electricity demand.

Energy storage is an essential tool to balance supply and demand

of electricity efciently. National Grid ESO predicts that, in order

to enable the growth of renewables, between 22 GW (Falling Short

Scenario) and 50 GW+ (Leading the Way Scenario) of energy

storage is required by 2050. As at the date of this report, there is

currently c.4.8 GW of storage in GB, of which c.2 GW constitutes

utility-scale BESS. Therefore, there continues to be a large growth

opportunity for BESS in GB.

Despite this opportunity, storage and renewable projects are facing

long waits of “15 years plus” for new grid connections, and this

is contributing to slower-than-forecast deployment of BESS. The

Company is well placed to navigate this challenge, benetting from

a large and exclusive pipeline of 2-hour duration BESS projects

which already benet from grid connection offers capable of

energisation over the next 36 months.

INVESTMENT ADVISER’S REPORT CONTINUED

MARKET COMMENTARY

Leading The Way Consumer Transformation System Transformation Falling Short

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

2041

2042

2043

2044

2045

2046

2047

2048

2049

2050

Installed Capacity (GW)

100

150

200

250

300

350

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037

2038

2039

2040

2041

2042

2043

2044

2045

2046

2047

2048

2049

2050

Installed Capacity (GW)

“ENERGY STORAGE IS AN ESSENTIAL

TOOL TO BALANCE SUPPLY AND

DEMAND OF ELECTRICITY EFFICIENTLY”

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

INVESTMENT ADVISER’S REPORT CONTINUED

The chart above shows relative performance of 2-hour duration BESS relative to shorter duration BESS during 2022.

The principal revenue strategies employed by 2-hour duration BESS during this time were Ancillary Services and trading power on the

day-ahead wholesale markets, often employing both strategies during the same day.

2022 saw record prices achieved in some Ancillary Services. Dynamic Containment (“DC”) pricing was strong until September and April

saw the launch of a new Ancillary Service, Dynamic Regulation (“DR”), which is more suited to longer duration batteries. 2-hour BESS

was therefore able to benet most from this new service.

Chart 4: Average BESS Revenues During 2022 – 2-Hour Duration Outperforms

Average 2-hour duration BESS performance Average 1-1.49 hour duration BESS performance

Volume Weighted Average Revenue (£/MW/hr)

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

2-hour duration revenues were

increasingly weighted towards arbitrage

in Q4, enabling greater outperformance

Source: Harmony Energy Advisors Limited (using data from Modo Energy)

Chart 5: 2022 Ancillary Service Pricing (selected markets)

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

Weighted Average Clearing Price (£/MW/hr)

Dynamic Containment Dynamic Moderation Dynamic Regulation

Decline in Ancillary Service

pricing in Q4 had greater impact

on shorter duration BESS

Source: Harmony Energy Advisors Limited (using data from Modo Energy)

The chart above indicates that such pricing has reduced as these relatively shallow markets have become saturated as more batteries came online.

2HOUR DURATION BESS OUTPERFORMED SHORTER DURATION BESS ON A £/MW

BASIS IN EVERY MONTH OF 2022

BESS REVENUES DURING 2022

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

INVESTMENT ADVISER’S REPORT CONTINUED

It is therefore expected that BESS revenues in 2023 will be more

weighted towards wholesale trading – a trend which stands to

benet 2-hour duration BESS, in contrast to shorter-duration

BESS which are less able to complement ancillary services with

wholesale trading.

BALANCING MECHANISM

Whilst potential spreads in the BM often exceed those available in

wholesale markets, the value available to BESS has to date been

limited by relatively high “skip rates” – instances where National

Grid ESO ignores BESS in favour of larger, more expensive power

stations. Recent months have seen an increase in BESS BM

activity and revenues. The Investment Adviser expects this to be

an increasingly important revenue stream in 2023 and beyond.

FUTURE MARKET OUTLOOK

The next year will see the Ancillary Service markets (which has

primarily driven BESS revenue in 2022) become increasingly

saturated, which should in turn translate to downward pressure

on clearing prices. Flexibility and agility in optimisation strategies

will continue to be key. Constantly assessing and comparing

opportunities across markets will drive long-term value. Having

strong forecasting capabilities and knowing when to operate in

the wholesale or balancing service markets will allow revenue

optimisers to differentiate themselves.

As Ancillary Service markets are expected to remain saturated,

BESS revenues will become increasingly dominated by wholesale

markets and BM.

The Company goes into 2023 with the largest portfolio of 2-hour

batteries in the UK listed market (by MWh) and is therefore well

placed to capitalise on this trend.

Chart 6: Average 2hr duration BESS Revenue Stack (£/MW Annualised)

Annualised Figures

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

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

Ancillary Services Arbitrage Capacity Market Average GB Fleet (all durations)

Source: Harmony Energy Advisors Limited (using data from Modo Energy)

The chart below shows how 2-hour duration BESS revenues were increasingly weighted towards arbitrage (being wholesale trading and/or

balancing mechanism (“BM”)) towards the end of 2022 coinciding with the decline in Ancillary Service pricing.

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

ALTERNATIVE INVESTMENT FUND MANAGER’S REPORT

BACKGROUND

The Alternative Investment Fund Manager’s Directive (the

“AIFMD”) came into force on 22 July 2013. The objective of the

AIFMD was to ensure a common regulatory regime for funds

marketed in or into the EU which are not regulated under the

UCITS regime. This was primarily for investors’ protection and

also to enable European regulators to obtain adequate information

in relation to funds being marketed in or into the EU to assist their

monitoring and control of systemic risk issues.

JTC Global AIFM Solutions Limited (the “AIFM”) is a non-EU

Alternative Investment Fund Manager (a “Non-EU AIFM”), the

Company is a non-EU Alternative Investment Fund (a “Non-EU AIF”)

and the Company is currently marketed only into the UK. Although

the AIFM is a non-EU AIFM, so the depositary rules in Article 21 of

the AIFMD do not apply, the transparency requirements of Articles

22 (Annual report) and 23 (Disclosure to investors) of the AIFMD do

apply to the AIFM and therefore to the Company. In compliance with

those articles, the following information is provided to the Company’s

shareholders by the AIFM.

1. Material Changes in the Disclosures to Investors

During the nancial period under review, there were no material

changes to the information required to be made available to

investors before they invest in the Company under Article 23

of the AIFMD from that information set out in the Company’s

prospectus dated 15October, 2021, save as disclosed below and

in certain sections of the annual nancial report, those being

the Chair’s Statement, Investment Adviser’s Report, the sections

headed “Environmental, Social and Governance”, “Principal

Risks and Uncertainties”, “Section 172 Statement” and “Viability

and Going Concern”, the Directors’ Report and Corporate

Governance Report and note 25 to the nancial statements.

2. Risks and Risk Management Policy

The current principal risks facing the Company and the main

features of the risk management systems employed by AIFM and

the Company to manage those risks are set out in the section

headed “Principal Risks and Uncertainties”, the Directors’ Report,

the Report of the Audit and Risk Committee and in note 16 to the

nancial statements.

3. Leverage and borrowing

The Company is entitled to employ leverage in accordance with

its investment policy and as set out in the Company’s prospectus.

However, as at the balance sheet date and the date of this report,

the Company had not drawn down any debt. There were no

changes in the Company’s borrowing powers and policies.

4. Environmental, Social and Governance (“ESG”) Issues

Because the AIFM is a non-EU AIFM and the Company is not

marketed into the EEA, the AIFM is not required to comply with

Regulation (EU) 2019/2099 on Sustainability-Related Disclosures in

the Financial Services Sector (the “SFDR”). However, details of the

Company’s and its advisers’ ESG objectives and actions taken are

reported on in the section of this annual nancial report entitled

“Environmental, Social and Governance.”

As a member of the JTC group of Companies, the AIFM’s ultimate

benecial owner and controlling party is JTC Plc, a Jersey-

incorporated company whose shares have been admitted to the

Ofcial List of the UK’s Financial Conduct Authority and to trading

on the London Stock Exchange’s Main Market for Listed Securities

(mnemonic JTC LN, LEI 213800DVUG4KLF2ASK33). In the

conduct of its own affairs, the AIFM is committed to best practice

in relation to ESG matters and has therefore adopted JTC Plc’s

ESG framework (the “ESG Framework”) and a copy of the ESG

Framework can be viewed on the AIFM’s website at

https://www.jtcgroup.com/wp-content/themes/jtcgroup/dist/img/

review-2019/pdfs/esg.pdf. During 2021 JTC achieved its goal of

becoming carbon neutral through a partnership with Carbon

Footprint Limited, a leading independent accreditation rm.

Working with Carbon Footprint, JTC makes a demonstrable

difference through a series of carbon offsetting projects, including

helping to fund projects that offset carbon emissions, including a

UK tree planting scheme which also supports emission reductions

in the Brazilian rainforest by helping preserve parts of the forest and

supporting local communities there, the installation and operation

of a solar power project in two villages in India, which feeds in to the

power generated to the state grid in India and native tree planting

in the Great Rift Valley In Kenya, which is also linked to further

support for emission reductions in the Brazilian rainforest. In 2022

JTC extended UN PRI signatory status to the whole group, covering

over 1,400 people in 30 ofces spanning 20 jurisdictions. JTC also

reports under TCFD and under the SASB framework.

The AIFM and Harmony Energy Advisors Limited (“HEAL”) as the

Company’s alternative investment fund manager and investment

adviser respectively do consider ESG matters in their respective

capacities, as explained in the Company’s prospectus dated

15October 2021, a copy of which can be found at

https://www.jtcgroup.com/services/funds/aifmd/harmony-energy-

income-trust-plc/.

Since the publication of those documents, the AIFM, HEAL

and the Company have continued to enhance their collective

approach to ESG matters and detailed reporting on (a)

enhancements made to each party’s policies, procedures and

operational practices and (b) our collective future intentions and

aspirations is included in the Investment Adviser’s Report, the

section headed “Environmental, Social and Governance” and the

Section 172 Statement.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

ALTERNATIVE INVESTMENT FUND MANAGERS REPORT CONTINUED

The AIFM also has a comprehensive risk matrix (the “Matrix”),

which is used to identify, monitor and manage material risks to

which the Company is exposed, including ESG and sustainability

risks, the latter being an environmental, social or governance

event or condition that, if it occurred, could cause an actual or a

potential material negative impact on the value of an investment.

We also consider sustainability factors, those being environmental,

social and employee matters, respect for human rights,

anti-corruption and anti-bribery matters.

The AIFM is also cognisant of the announcement published by

H.M. Treasury in the UK of its intention to make mandatory

by 2025 disclosures aligned with the recommendations of the

Task Force on Climate-Related Financial Disclosures, with a

signicant proportion of disclosures mandatory by 2023. The

AIFM also notes the roadmap and interim report of the UK’s

Joint Government-Regulator TCFD Taskforce published by H.M.

Treasury on 9 November, 2020. The AIFM continues to monitor

developments and intends to comply with the UK’s regime to the

extent either mandatory or desirable as a matter of best practice.

5. Remuneration of the AIFM’s Directors and Employees

During the period under review, no separate remuneration was

paid by the AIFM to its executive directors, Graham Taylor,

Gregory Kok, James Tracey and Kobus Cronje, because they

were all employees of the JTC group of companies, of which the

AIFM forms part. During the period under review, Messrs Kok and

Tracey resigned as directors of the AIFM and Mr Kobus Cronje

was appointed as a director. Matthew Tostevin is a non-executive

director and is paid a xed fee of £10,000 for acting as a director,

attendance at all quarterly Board meetings and work performed

as a director of the Company in the ordinary course of business.

Subject to the prior approval of the Board of directors on each

occasion, Mr Tostevin is paid additional remuneration on a time

spent basis for services rendered to the Company which are not

in the ordinary course of business. Other than the directors, the

AIFM has no employees. The Company has no agreement to pay

any carried interest to the AIFM. During the period under review,

the AIFM paid £10,000 in xed fees and £42,936.25 in variable

remuneration to its directors.

6. Remuneration of the AIFM Payable by the Company

The AIFM was during the period under review paid a fee of 0.03%

per annum of the equity capital raised by the Company, subject

to a minimum of £30,000 per annum, such fee being payable

quarterly in arrears. Subsequent secondary issues of shares of the

Company in the primary market are supported on a time spent

basis, subject to a cap of £10,000 per each such issue. Other

signicant non-routine work may be agreed between the AIFM and

the Company from time to time and charged for on a time spent

basis. The total fees paid to the AIFM during the period under

review were £61,573.37.

JTC Global AIFM Solutions Limited

Alternative Investment Fund Manager

22 February, 2023

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

INVESTMENT ADVISER’S REPORT CONTINUED

INVESTMENT OBJECTIVE

The Company’s investment objective is to provide an attractive

and sustainable level of income returns, with the potential for

capital growth, by investing in commercial scale energy storage

and renewable energy generation projects, with an initial focus on a

diversied portfolio of BESS located in Great Britain.

INVESTMENT POLICY

The Company seeks to achieve its investment objective through

investment in energy storage and complementary renewable

energy generation assets, with an initial focus on commercial scale

BESS located in diverse locations across Great Britain.

The Company may invest in operational, under construction

or “shovel ready” projects, and may also provide development

nance to pipeline projects.

Projects which are “shovel ready” will have in place:

• a completed lease, lease option or agreement for lease in

relation to the land upon which that project is situated;

• planning permission enabling the construction of a suitable

project on that land (subject to any amendments to reect nal

technical specications);

• an industry standard grid connection offer from a DNO or

TSO; and

• a BESS supply & installation contract with material terms

agreed with a reputable counterparty.

Projects which are “under construction” will in addition, have in place:

• an agreed lease on satisfactory terms;

• an accepted industry standard grid connection offer from

a DNO or TSO, and having made at least one milestone

payment; and

• a fully executed BESS supply & installation contract with a

reputable counterparty.

Projects which are “operational” will, in addition, have in place:

•

completed lease on satisfactory terms in relation to the land

upon which that project is situated;

• an executed grid connection agreement with a DNO; and

• satisfactory completion of relevant commissioning tests.

The investment restrictions as set out in the Company’s

Prospectus remain applicable, with the Company prohibited (inter

alia) from making investments in fossil fuel assets.

BUSINESS MODEL

The Company expects to invest predominantly in projects at the

“shovel ready” stage since these are likely to provide the most

attractive returns. The Company may also invest in projects at the

“operational” and “under construction” stage where such projects are

available for acquisition in line with the Company’s investment policy.

The Company seeks to further enhance the efcacy of its portfolio

by targeting 2-hour duration storage technologies.

The Company has the unfettered ability to purchase qualifying

assets from any seller. The Investment Adviser is experienced

in sourcing and advising on BESS transactions and continues to

evaluate potential opportunities on the open market. However,

at least over the near-term, it is anticipated that the Company

will continue to take advantage of its exclusive arrangements

described below.

The Company benets from exclusive access to a well-developed

pipeline of BESS projects at various stages of development in

Great Britain. Each project within this pipeline is controlled by

Harmony Energy Limited either solely or in conjunction with its

joint venture partner, Ritchie-Bland Energy (number 2) Ltd (“RBE”)

(the “Sellers”). This exclusivity is in the form of:

a) a right of rst refusal (“ROFR”) to acquire up to 1 GW of BESS

projects from the Sellers. The Company has, as at the date

of publication of this report, exercised this right in relation

to 494.4 MW, leaving at least 505.6 MW still capable of

acquisition under the ROFR; and

b) a right of rst offer (“ROFO”) in relation to (i) BESS projects

once the 1 GW ROFR threshold has been reached; (ii) BESS

projects co-located with solar photovoltaics (“PV”); or (iii)

stand-alone solar PV projects.

The processes under which these rights are exercised is set out

in a pipeline agreement dated 14 October 2021 and entered into

between the Company and the Sellers (the “Pipeline Agreement”).

The Sellers have an obligation to keep the Company informed as to

the development progress of potential projects. This provides the

Company with an element of transparency which, in turn, allows the

Company a reasonable level of certainty around funding timetable

and portfolio growth planning.

The terms of the Pipeline Agreement provide that the Sellers shall

be prohibited from selling any qualifying projects to any other

party during the term of the agreement without rst offering them

to the Company. Upon any projects becoming “shovel ready”, the

Sellers shall give notice of such status to the Company.

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

LITTLE RAITH (49.5 MW / 99 MWh)

The Company will then be entitled to

either (i) if the ROFR applies, acquire the

relevant project pursuant to the terms of

the pro forma share purchase agreement

(and subject to a valuation calculated using

a minimum discount rate); or (ii) if the

ROFO applies, make an offer to the Sellers

pursuant to the Pro Forma Share Purchase

Agreement.

All acquisitions are subject to satisfactory

external due diligence, independent

valuation and Board approval.

The Company will continue to target

BESS projects with 2-hour duration

capability. As demonstrated in the

“Market Commentary” section, the

Investment Adviser believes that 2-hour

duration BESS offers potential for revenue

outperformance relative to a shorter-

duration BESS across a range of market

conditions.

DIVIDEND POLICY

On the basis of factors including market

conditions and nancial performance,

following the end of the reporting period

ended 31 October 2022, the Company

is targeting a dividend yield, by reference

to the issue price at IPO of 100p per

Ordinary Share, of 8 per cent. per

annum payable quarterly in March, June,

September and December of each year.

All dividends will be in the form of interim

dividends. The target dividend yield of

8 per cent. applies only to the Ordinary

Shares and not to any tranche of C Shares

prior to conversion into Ordinary Shares.

The Board reserves the right to retain

within a revenue reserve a proportion of

the Company’s net income in any nancial

year, such reserve then being available

at the Board’s absolute discretion for

subsequent distribution to Shareholders,

subject to the requirements of any

applicable regulations.

The dividend policy will be subject to

Shareholder vote at the 2023 Annual

General Meeting.

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

THE COMPANY’S ASSETS SIT AT THE HEART OF THE

TRANSITION TO NET ZERO.

The BESS projects the Company invests in provide critical balancing services to the GB

electricity grid network, underpinning energy security and enabling the replacement of

coal and gas power stations with renewable power sources as society transitions to a Net

Zero future. The more renewable energy that is connected, the more important it is to

develop energy storage solutions to manage the intermittent nature of many sources of

renewable power. The contribution made by the Company’s investments in storing clean

energy will facilitate the creation of a sustainable energy system, helping to decarbonise

the UK’s energy networks and economy.

Consideration of ESG risks and opportunities sits at the heart of the Company’s and the

Investment Adviser’s decision making – at the initial investment stage as well as in the

development and execution of asset management strategies. For example, opportunities

are taken to restore nature on site, to ensure the benets of investing in sites are not

diminished by negative environmental or biodiversity impacts.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE

INTRODUCTION AND CONTEXT

“BATTERY STORAGE

TECHNOLOGY HAS A

KEY PART TO PLAY IN

ENSURING HOMES AND

BUSINESSES CAN BE

ENERGY, EVEN WHEN

THE SUN ISN’T SHINING

OR THE WIND HAS

STOPPEDBLOWING.”

What is battery storage? –

National Grid Group

Strategic Priorities

Climate and Emissions

Biodiversity

Communities

Secondary Priorities

Waste

Health, Safety and Wellbeing

Labour and Human Rights Communities

Diversity and inclusion

Wealth Creation and Employment

Figure 1 – UN Sustainable Development Goal (“SDG”) Contributions

“FLEXIBLE TECHNOLOGIES

LIKE BATTERIES WILL

FORM PART OF THE UK’S

SMARTER ELECTRICITY

GRID, SUPPORTING THE

INTEGRATION OF MORE

LOWCARBON POWER,

HEAT AND TRANSPORT

TECHNOLOGIES, WHICH

IT IS ESTIMATED COULD

SAVE THE UK ENERGY

SYSTEM UP TO £40

BILLION BY 2050.”

Battery storage boost to power greener

electricity grid – GOV.UK (www.gov.uk)

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE AND ESG COMMITTEE

THE BOARD SETS THE COMPANY’S ESG STRATEGY AND HAS OVERSIGHT OF

ESG RELATED MATTERS, WHICH ARE DISCUSSED AT EACH QUARTERLY BOARD

MEETING. WRITTEN UPDATES ARE PROVIDED AS PART OF THE INVESTMENT

ADVISER’S REPORTING TO THE BOARD.

The Company has an ESG policy, adopted at IPO. Climate and

nature-related risks and opportunities are addressed at Board,

Committee and management level. Nature and climate-related

risks are integrated into the Company’s risk register, which is

reviewed quarterly by the Board. Risks are assigned owners within

the Investment Adviser to ensure accountability.

A dedicated ESG Committee of the Board met twice in the period

to consider ESG topics in greater detail. The ESG Committee makes

recommendations to the Board in dening the Company’s ESG

strategy and reviews the practices and initiatives of the Company

relating to ESG matters, ensuring they remain effective and up to date.

The Audit and Risk Committee meets at least three times a year

and its duties include ongoing robust assessment of the risk

management and internal controls of the Company, including ESG

and climate-related risks. Further information on the Company’s

risk management process is set out in the Principal Risks and

Uncertainties section and the Report of the Audit and Risk

Committee.

The Company’s Management Engagement Committee is

responsible for monitoring and reviewing the performance of the

Company’s key service providers and meets at least annually to

conduct a review. That review includes monitoring of ESG policy

status and achievement of policy goals by service providers.

The Investment Adviser appointed a Head of Corporate Governance

in February 2022, with responsibility for putting into practice the ESG

strategy dened by the Board of the Company. During the period,

the Investment Adviser introduced an ESG Committee within its

organisation, which regularly considers ESG-related matters and

has allocated resources to a number of initiatives during the year,

including a fund for sponsorship of community events.

MEMBERSHIPS

On admission to the London Stock Exchange, the Company

was awarded the LSE’s Green Economy Mark, recognising it as a

signicant contributor to the transition to a zero-carbon economy.

Since IPO, the Company has become a signatory to the UN PRI

and is working to integrate these principles into its investment

decision-making and ownership practices. The Board received

training from the PRI team during the year and appointed external

consultants to undertake a gap analysis and identify improvement

recommendations. The Company intends to participate in its

rst voluntary reporting period in 2023 and publish the rst

transparency report in the 2024 reporting cycle. All Directors

are members of Chapter Zero, a community of non-executive

directors leading climate action in the boardroom.

The Investment Adviser is a supporter of the Task Force on

Climate-related Financial Disclosures (“TCFD”) and a member

of the Forum for the Task Force on Nature-related Financial

Disclosures (“TNFD”). The Company conducted a gap analysis

against the TCFD and TNFD frameworks during the reporting

period and with this report has started to disclose in line with

these frameworks on a voluntary basis. The Investment Adviser

is also a member of Solar Energy UK and the Renewable Energy

Association, enabling easier collaboration with peers on issues

affecting the renewable energy industry.

LOOKING AHEAD

Alongside implementation of our ESG strategy we will expand and

evolve our reporting, working towards full reporting against the TCFD

and TNFD frameworks. In 2023, we will complete climate scenario

analysis and work with our suppliers to improve data for our climate

and nature reporting, as well as making our rst submission under

UN PRI. We will also consider the adoption of climate and nature-

related targets with both long-term ambitions and interim targets.

We will continue to enhance our approach to responsible

investment, integrating ESG deeper into all our processes as we

further our knowledge of our supply chain. The Investment Adviser

currently incorporates ESG questionnaires into the procurement

process, and intends to implement ESG requirements for

contractors and service providers to the project SPVs. This will

allow the Company to begin to tackle Scope 3 emissions and other

supply chain sustainability and governance factors.

The Investment Adviser has plans to further enhance its own ESG

capabilities and expand its in-house ESG team. This Team will continue

the work already started with the development, delivery and asset

management teams of the Investment Adviser, to implement the ESG

strategy and develop data collection and reporting protocols.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED

MEMBERSHIPS IN 2022

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUEDENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED

ESG STRATEGY

THE COMPANY SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE PRIMARILY

THROUGH INVESTMENT IN ENERGY STORAGE, WITH A PROHIBITION ON ANY

INVESTMENTS IN FOSSIL FUEL ASSETS AS STATED IN ITS INVESTMENT POLICY.

In line with the Company’s commitments as a signatory to the UN PRI, consideration of ESG risks and opportunities are embedded into

the investment cycle, as demonstrated below. We will continue to enhance the integration of sustainability factors within the investment

process through 2023 as we implement our ESG strategy.

INVESTMENT POLICY

AND RESTRICTIONS

Responsible investment

embedded in Investment Policy

INVESTMENT SCREENING

Invests in energy storage and

renewable generation assets, with a

prohibition on investments in fossil

fuel assets

PROJECT DUE

DILIGENCE

ESG risks and opportunities

assessed as part of the project

due diligence process

END OF INVESTMENT LIFE

Recycling of assets maximised at

decommissioning stage

SUPPLIER VETTING AND

MONITORING

ESG due diligence conductedas part

of supplier tender processes

PROJECT INVESTMENT

APPROVAL

ESG issues identied in Investment Adviser

recommendations for project investment

approvals by the Board.

MANAGING AND REPORTING

Data collected on key ESG metrics and

reported to investors and publicly through

the annual and interim reports and the UN

PRI submission. Continuous improvement

of process and reporting. Impact on

habitats and supply chain factors managed.

Figure 2 - Approach to responsible investment:

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED

The Company and the Investment Adviser have made signicant

progress on sustainability during the period, setting the framework

for and building on the ESG commitments in the Prospectus.

Following IPO we completed a materiality assessment, identifying

the most relevant priority areas amongst ESG-related issues. With

support from independent sustainability advisors, we engaged with

suppliers, investors and other stakeholders and conducted an in-

depth market analysis. Our identied priorities, and the related UN

Sustainable Development Goals (“SDGs”), are set out in gure 1.

Following completion of the materiality assessment, we worked to

develop our ESG strategy, identifying areas of potential inuence

and ways in which we can maximise positive benets and minimise

adverse impacts of our business across our identied priority areas

of climate, nature, communities, waste and resources, and human

rights and labour. Figure 3 sets out the activities we have identied

as offering us the most opportunity for impact across our priority

areas. The table highlights the direct inuence the Company can

have on addressing ESG issues on sites and in ofces, as well as

the role of the wider supply chain.

Figure 3 – ESG Inuence Potential

Ofces Sites Value Chain

Maximise benets Minimise impact Maximise benets Minimise impact Maximise benets Minimise impact

Climate Set a good example Reduce emissions

of buildings,

purchased goods

and travel

Accelerate the UK’s

energy transition

through BESS

Offset emissions

(neutralisation or

compensation)

Contribute to

the sustainability

transition through

suppliers’ product

portfolio (EV)

Minimise supply

chain emissions,

focusing on key

impact categories

(e.g. battery packs)

Nature N/A N/A Improve

biodiversity

potential on site

(hedge rows,

owers)

Minimise land use

change by selecting

degraded land

Contribute to

nature restoration

through suppliers’

operations &

community

projects

Minimise chemical

pollution, in

particular for raw

material extraction

(mining)

Communities Set a good example

and create a

healthy and

sustainable working

environment

N/A Create local jobs

and educate

students through

on-site visits (higher

education)

Engage with local

communities

to minimise

disturbance

Contribute to

social development

goals e.g. wealth

creation, minority

rights

Drive for more

positive impacts on

local populations

affected by supply

chain operations

e.g. relocation,

health impacts of

pollution

Waste and

Resources

Set a good example Reduce, reuse and

recycle waste

Set a good example Ensure recycling of

BESS components

at the end of their

life

Encourage

suppliers to

reduce waste

impact across their

customer base

Minimise waste

creation and use

of virgin materials,

through product

efciencies and

circularity

Societal

impacts and

employee

wellbeing

Create attractive

jobs; promote

wellbeing &

inclusion in

workplace

Mitigate risks

(mental health,

accidents,

discrimination,

etc.)

Create

construction phase

jobs and work with

contractors to

promote safety and

wellbeing on sites

Mitigate the risk of

on-site accidents

during construction

& lifetime

Contribute to

reduced poverty by

creating

well-paid jobs

in developing

countries

Minimise exposure

to the risk of

abusive practices

in upstream

supplychain

Key: The Company’s ESG inuence potential (i.e. any benet or negative impact that the Company can have on its external environment):

High Low

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

For each of the three inuence areas (ofces, BESS sites and

supply chain) we have developed a workstream with actions

designed to minimise adverse impacts and maximise benets of

our operations and value chain. The Investment Adviser has been

tasked with the implementation of the strategy.

We have identied that our supply chain provides our greatest

opportunity for inuence on ESG issues. Embedding sustainability

in our supply chain may increase the resilience of our business

and mitigate risks. Sustainable procurement can also reduce costs

through increased efciency, increased labour productivity and

reduced costs of material inputs, energy and transportation.

During the period, we adopted a supplier code of conduct (the

“Code”) which focuses on priority areas identied in materiality

assessment. The Code was drafted by reference to key guidance

and frameworks such as the UN Global Compact, the OECD Due

Diligence Guidance for Responsible Supply Chains of Minerals

from Conict-Affected and High Risk Areas, the Responsible

Business Alliance Code of Conduct, the Universal Declaration

on Human Rights and the UK Government Buying Standards, to

ensure best practice supply chain requirements were taken into

account. Suppliers will be asked to conrm their agreement to

the Code in writing and to maintain records of compliance. The

Investment Adviser will seek to include contractual rights to audit

suppliers to the project SPVs to conrm compliance and the

Management Engagement Committee will monitor compliance

for key service providers. Supplier commitment to the Code and

the number of audits conducted to monitor compliance with the

Code will be monitored and reported as ESG metrics.

In 2023, work will be undertaken by the Investment Adviser to

map and better understand our supply chain and sourcing of

components and to identify particular areas of risk. This work

began in 2022 with a number of workshops with Tesla’s ESG

and Responsible Sourcing Teams to discuss the work they are

conducting on supply chain mapping and initiatives.

Longer term, we intend to dene supply chain targets with

objectives for sustainability. Supplier audits will begin to

be conducted, to monitor compliance with the Code. The

Management Engagement Committee will assess questions of

service providers’ progress against ESG goals through the annual

questionnaires and evaluation process.

Whilst the supply chain offers the greatest opportunities for

driving positive impacts on ESG, the Company has also identied

the importance of taking action at company owned sites. This

means on BESS sites and in ofces used by the Investment

Adviser. We have identied below the actions taken during the

reporting period in each of our priority areas across ofces, sites

and the supply chain.

CLIMATE

The Investment Adviser has implemented initiatives to reduce

its environmental impact, including travel policies to restrict the

use of ights and encourage rail use. Senior management lead

by example, limiting travel by air and driving electric vehicles. An

electric vehicle salary sacrice scheme incentivises use of low-

carbon transport modes for all employees and exible working

arrangements reduce the impact of employee commuting. The

Investment Adviser’s ofces use fossil-free heating and electricity

for the London ofce comes from renewable sources.

During the reporting period, the Investment Adviser engaged

with Tesla, as a key service provider, to build transparency and

discuss what sustainability initiatives are implemented by Tesla

to reduce supply chain climate impacts. The Investment Adviser

will continue to engage with our contractors to understand how

the environmental impact of the construction phase could be

reduced, through changes to energy and water usage and waste

management practices during construction.

As detailed in the ESG metrics section, we worked with a

sustainability consultant to calculate our Scope 1, 2 and 3

emissions for the reporting period, providing a baseline. With no

employees or physical ofces and no operating projects during the

period, the Company had zero Scope 1 and Scope 2 emissions.

Scope 3 emissions of 1,879 tCOe reected that the construction

and materials emissions for a project will be recognised only

once that project is completed and paid for. As there were no

operational projects during the period, the emissions were much

lower than can be expected in future reporting periods.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED

GUIDANCE AND FRAMEWORKS USED IN DRAFTING SUPPLIER CODE OF CONDUCT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

NATURE

We view the potential opportunity to enhance biodiversity at

our project sites as a key nature-related opportunity. To reduce

the negative biodiversity impacts of site construction, the

Company considers and employs methods to provide the highest

possible positive biodiversity impact. Each project has a detailed

landscaping plan to ensure creation of a positive biodiversity

benet following completion of the construction phase. Specialist

independent ecologists are appointed to measure biodiversity net

gain at each of our sites, and we target a positive benet of over

10 per cent. across the portfolio.

We recognise the nature-related risks in our supply chain,

including those relating to the mining of minerals used in batteries.

We intend to work with our suppliers to ensure they have a plan

for addressing nature-related risks, and that progress is made

against their plans. During the reporting period, we engaged with

the responsible sourcing team at Tesla, as the battery supplier

for our projects under construction, to understand their work

on areas including protection of forests, biodiversity, water levels

and water quality at mine sites. Tesla’s approach of direct sourcing

from mining companies allows direct engagement with those

suppliers and their local communities.

COMMUNITIES

The Company’s Board has agreed the creation of a community

fund for each project, which will be calculated on the basis of

£100/MW/year, from the start of commercial operations for

each project with a minimum value of £5,000 per site per year.

Applications for the rst fund, for our Pillswood project, will be

welcomed from February 2023. We have partnered with BizGive,

a platform which links funders with community groups and third

sector organisations seeking funding, to administer these funds.

Funds will be allocated to initiatives benetting the local area

around each project and aligned with the priority SDGs identied

from our materiality assessment. We will report on number of

initiatives supported and amounts invested from 2023.

The Company’s NAV at 31 October 2022 exceeded £250 million

therefore, in line with the commitment in the Prospectus, an

additional ESG Fund will be established to support environmental

and social initiatives within the wider investment trust and battery

storage industries. This fund will have a budget of up to £250,000

per annum, funded from the difference between Board fees

and 0.1 per cent. of the Company’s NAV, based on the audited

accounts for the nancial year. In 2023, we will prepare a draft

framework for allocation of the funds.

The Investment Adviser engages with the local community from

the planning stage of each project, holding public exhibitions and

engaging closely with landowners. Following construction, the

Investment Adviser intends to facilitate visits from local schools

to sites, providing opportunities for children to learn about

renewable energy and biodiversity initiatives.

WASTE AND RESOURCES

Waste from the Investment Adviser’s London ofce is collected by

a provider with a zero waste to landll commitment.

All of the Company’s current portfolio employs (or will employ

once constructed) lithium iron phosphate (“LFP”) battery

technology instead of nickel manganese cobalt (”NMC”)

technology. NMC is the prevalent chemistry amongst older BESS

projects. Use of LFP batteries increases the lifespan of projects,

since LFP batteries deliver more charge cycles and suffer less

degradation than NMC batteries.

We will work with our suppliers to encourage reduction of waste

and recycling of batteries at the end of life (expected to be 15

years). The Code contains our expectations and requirements for

suppliers to minimise waste and conserve resources. For projects

where batteries are supplied by Tesla, it is anticipated that Tesla

will fully recycle the battery parts / modules which can then be

repurposed into new battery or alternative uses. Tesla’s 2021

impact report states that from each 1 MWh of end of life batteries,

0.92 MWh worth of raw materials can be recovered.

SOCIETAL IMPACTS AND EMPLOYEE WELLBEING

As an investment trust, the Company has no executive management

or employees. The Board seeks to deliver success through good

decision making underpinned by robust debate. The varied

professional, educational, socio-economic and cultural backgrounds

of the members of your Board ensure there is rich diversity of

knowledge, perspectives, and challenge in such debate. Gender and

ethnic diversity is achieved through the inclusion of three men and

two women including one from a minoritised community, but we

consider the real value of diversity comes from ensuring inclusion of

different views arising from lived experiences and skills.

The Investment Adviser strengthened its team during the

reporting period, creating new jobs as a result of the Company’s

activities. Jobs in the construction industry have also been

supported through the construction of the Company’s sites, and

additional jobs created in the Company’s supply chain and at the

Company’s service providers. We aim to report on indirect job

creation in future reporting periods.

The Investment Adviser is committed to creating a culture and

working environment which encourages equality, diversity and

inclusion and recognises the benets brought by a diverse group

of employees. During the reporting period, an externally-facilitated

training session on equality, diversity and inclusion was offered

to all Investment Adviser employees. At the end of the reporting

period, 30 per cent. of the Investment Adviser’s employees

were female. This proportion has increased since the reporting

period and initiatives are planned to ensure inclusive recruitment

practices continue to be developed.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

The Investment Adviser regularly engages with its 26 employees

(23 at the end of the reporting period), seeking feedback through

employee surveys. In its summer 2022 survey, the Investment

Adviser achieved an employee net promoter score of 88 (on a

range from -100 to +100), based on the likelihood employees

would recommend the organisation to others as a place to

work. Employee wellbeing is an area of focus, with a number of

initiatives launched in 2022 including improvements to internal

communications, access to wellbeing services and free access

to Yorkshire Wildlife Trust sites. Learning is promoted through

internal knowledge-share sessions and externally facilitated training

sessions, as well as employer-funded access to external training

programmes.

The Company promotes respect for human rights in its supply

chain through the requirements set out in the Code. We recognise

the human rights-related risks in our value chain, particularly

in the upstream areas of mineral extraction, rening and parts

manufacturing. We are working with our suppliers to better identify

risks and mitigations, particularly in respect of battery manufacture

and supply. The absence of cobalt in the LFP batteries employed in

the Company’s portfolio reduces exposure to environmental and

human rights risks relating to cobalt extraction in the Democratic

Republic of Congo, where the majority of the world’s supply is

sourced.

Health, safety and wellbeing is one of our ESG priority areas

and we have introduced robust health and safety standards

and transparent reporting. Suppliers are evaluated and scored

on health and safety performance, capabilities, policies and

management as part of our procurement processes for our

development sites. During the year, our EPC contractor (Tesla)

held the role of Client under the Construction, Design and

Management Regulations 2017 and appointed the principal

contractor and principal designer. Notwithstanding limited legal

responsibilities for health and safety management on our sites,

we appoint specialist health and safety consultants to carry out

audits on all construction sites and project managers employed

by the Investment Adviser carry out additional monthly audits.

Our Investment Adviser works closely with contractors to monitor

incidents, safety observations and toolbox talks, and key learnings

are shared between contractors across our sites. Health and

safety statistics are reviewed at all Board meetings and the Board

receives presentations from the specialist health and safety

consultants working with the Investment Adviser.

We are pleased to report zero major Health and Safety incidents

at the Company’s sites during the reporting period. One minor

environmental incident occurred at the Pillswood site during the

reporting period, with prompt action taken to investigate and

rectify the issue and positive feedback received from Yorkshire

Water regarding the response to the incident.

We committed to transparency in ESG reporting in the

Prospectus and, as part of this, will ensure that any health and

safety incidents attributable to activities and that impact on local

communities, but that occur outside our project sites, will be

reported, investigated and the ndings acted upon. During the

reporting period, an incident occurred on the public highway

outside the Company’s Little Raith site, which was reported by

the Company’s contractor under RIDDOR (Reporting of Injuries,

Diseases and Dangerous Occurrences Regulations). There were no

injuries and the contractor took immediate action to investigate

the incident and implement mitigants. Although the incident

did not occur on the Company’s site, representatives of the

Investment Adviser interviewed the contractor and consulted an

independent health and safety adviser, working with the contractor

to ensure all appropriate actions were taken and improvements

made. The Investment Adviser’s project management team then

took the learnings from this incident and created an education

campaign to share with contractors across the Company’s sites.

We take a zero tolerance approach to bribery, fraud and

corruption and are committed to acting professionally, fairly,

transparently, ethically and with integrity in all of our business

dealings and relationships. The Supplier Code of Conduct

requires suppliers to adhere to anti-bribery and corruption

policies no less stringent than those of the Company and the

Company monitors key service providers’ policies and approach

through the Management Engagement Committee service

provider review process. For suppliers to the project SPVs,

the Investment Adviser seeks to ensure service providers have

appropriate policies in place and due diligence is conducted as

part of the procurement process.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED

Climate and nature-related risks, as well as risks relating to the

social priority areas, are assessed during the planning, pre-

acquisition and development phases of projects. Mitigation

measures are put in place to manage and minimise the impact of

these risks and action plans are put into place with contractors.

The Investment Adviser oversees implementation of any mitigation

measures, including biodiversity, land management, health and

safety and community engagement. These risks and mitigations

are recorded and monitored in site level risk registers and

reected in the Company level risk registers where appropriate.

In 2023, we will start to identify supply chain areas with the most

signicant risk of adverse impact, considering factors including

country risk, supplier reputation and ownership, degree of

leverage, category and tier of supplier and nature of relationship.

The Investment Adviser will then implement processes to

monitor risks, concentrating on higher risk areas. We recognise

the concentration of risk in the upstream supply chain and our

currently limited inuence in this area, but will continue to work

with our suppliers (both existing and potential future suppliers

through the procurement process) to gather information and

make improvements where possible.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

CASE STUDIES

Health and Safety – sponsorship of safety

observations initiatives atsites

In line with the proactive approach to health and

safety reporting and continuous improvement, the

Company has sponsored an initiative across its

sites to encourage contractor reporting of safety

observations and near misses. A monthly prize draw

is carried out for each site and a

voucher awarded for near miss and

safety observations, with the aim of

improving site safety.

Biodiversity – newt trapping and relocation at

Bumpers

Work was carried out by independent ecologists at the

Company’s Bumpers site to trap and safely relocate

great crested newts, following identication of a pond

within 100m of the site which may have been a newt

habitat. A total of 25 days of trapping was carried out

by an ecologist appointed by the Company and 3 great

crested newts were relocated offsite.

CLIMATE, NATURE AND SOCIAL RISKS MANAGEMENT

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

IN LINE WITH OUR COMMITMENT TO TRANSPARENCY ON ESG REPORTING, WE

HAVE WORKED WITH EXTERNAL SUSTAINABILITY CONSULTANTS TO DEVELOP

A FRAMEWORK FOR PROPOSED ESG METRIC REPORTING, ALIGNED WITH THE

STRATEGIC PRIORITIES IDENTIFIED IN THE MATERIALITY ASSESSMENT.

Figure 4 provides baseline metrics for the reporting period from

incorporation to 31 October 2022, for those metrics where data

is available. In addition to the metrics reported in gure 4, we will

report against additional metrics once projects reach operation

and data is available. For climate, we will report storage capacity

(MWh & MW per site), average battery efciency (%), energy use

(kWh) and benets-in-use/ avoided emissions (CO

e). For nature,

we intend to report biodiversity net gain (%habitat loss/gain) and

number of on site biodiversity projects. For communities, we will

report on the number of community projects supported and the

amount invested in community projects. For waste and resources,

we will report on-site waste (kg), by type and destination, average

operating lifetime of batteries, share of BESS that is recyclable,

and weight of end-of-life materials (kg) and actual recycling rate.

For societal wellbeing, we will report the number and percentage

of suppliers committed to the Code and the percentage of

suppliers monitored annually for compliance with the Code.

The Investment Adviser is establishing data collection and

reporting protocols to enable full reporting on the above metrics

in future reports, including trend reporting, once assets are

operational. This will include working with asset level suppliers to

establish reporting of data such as on site waste.

Figure 4 –ESG Metrics

Strategic ESG Priorities Metrics

Reported metrics for period ended

31 October 2022

Climate Scope 1, 2, 3 emissions (CO

e) –

GHG Protocol & PCAF

Scope 1: 0

Scope 2: 0

Scope 3: 1,879 tCOe

Nature Number of reportable environmental incidents (#) 0

Secondary ESG Priorities Metrics

Reported metrics for period ended

31 October 2022

Societal impacts and employee

wellbeing: Health, safety and

wellbeing

Total Incident Frequency Rate (#) 0

Site safety audits (#) 22

Investment Adviser employee Net Promoter Score 88

Societal impacts and employee

wellbeing: Diversity & Inclusion

Representation in HEIT Board (%) 40% women

20% minority ethnic groups

Societal impacts and employee

wellbeing: Wealth creation &

Employment

Number of direct full time jobs created at the

Investment Adviser (#)

12.5

Number of hours of training provided to Investment

Adviser employees

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED

ESG METRICS

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

ENVIRONMENTAL, SOCIAL AND GOVERNANCE CONTINUED

We appointed a sustainability consultant to calculate the carbon

footprint for the reporting period, providing a baseline for setting

targets and future measurement. As the reporting period was

the rst year of the Company’s existence, the carbon footprint

is not reective of how future footprints will be. No site was

fully completed during this reporting period and the protocol

developed for calculating emissions provides that the carbon

footprint for the construction period of a site will be reported

once that site becomes operational.

The carbon footprint was calculated in line with the World

Resource Institute (WRI)’s internationally recognised reporting

standard the Greenhouse Gas (GHG) Protocol - A Corporate

Accounting and Reporting Standard, with reference to the

additional guidance provided in the GHG Protocol Corporate

Value Chain (Scope 3) Accounting and Reporting Standard

(Scope 3 Standard) and GHG Protocol Technical Guidance for

Calculating Scope 3 Emissions (Scope 3 Guidance).

An equity share approach was used. Under the equity share

approach, a company accounts for GHG emissions from

operations according to its share of equity in the operation. The

equity share reects economic interest, which is the extent of

rights a company has to the risks and rewards owing from an

operation. Typically, the share of economic risks and rewards in an

operation is aligned with the company’s percentage ownership of

that operation, and equity share will normally be the same as the

ownership percentage.

Under this approach, all project SPVs are within HEIT’s

organisational boundary, as they are wholly owned subsidiaries.

All other entities, in which the Company does not have an equity

share, such as the Investment Adviser and other service providers

are included in scope 3 emissions along with all other indirect

emissions. A process-based approach was used to calculate

emissions associated with the services provided by the Investment

Adviser. The Investment Adviser’s total carbon footprint was

calculated, and a business rule applied to allocate an appropriate

proportion of these emissions to the Company.

A range of methodologies was used to calculate GHG emissions

for different activities and entities. Data types were prioritised

using a specic data quality hierarchy:

1) Primary data: actual consumption data, e.g. litres of fuel or

kWh consumed

2) Secondary data: data one step removed from actual

consumption data, e.g. car mileage

3) Tertiary data: data two or more steps removed from actual

consumption values, e.g. spend data

Where only spend data was available, Extended Environmental

Input-Output (EEIO) modelling was used to estimate emissions

associated with spend in a given sector of the economy in a

given geography. This method is the least preferred as it does not

reect the specicities of HEIT’s operations and supply chain, and

therefore limits the ability to demonstrate emission reductions

over time. However, it is a useful tool to help achieve boundary

completeness in the absence of primary or secondary data. We

intend to work with suppliers to obtain primary and secondary

data where possible for future carbon footprint analyses.

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

PRINCIPAL RISKS AND UNCERTAINTIES

The Board recognises the importance of effective risk

management in enabling the Company to deliver its strategic

objectives. The Investment Policy, as set out in the Prospectus,

details the limits on risk that the Board will take.

WHAT WE MONITOR

The Company’s risk register was prepared based on the risks

stated in the Prospectus, and is regularly reviewed by the

Investment Adviser, the AIFM and the Board and updated to

reect any emerging risks or changes to the identied risks. Day to

day ownership of risk sits with named individuals at the Investment

Adviser, who monitor and assess both current and emerging

risks. Risks are categorised and assessed to determine likelihood

and impact. Ratings are applied to the risks before any mitigating

action and again following consideration of the adequacy of

mitigating actions. Mitigating actions are summarised in the risk

HOW WE MONITOR RISK

The Board retains ultimate responsibility for the Company’s

activities and Board meetings are held at least four times a year, at

which the risk register of the Company is reviewed and updates are

reported by the AIFM on any changes to the risks or their ratings.

The Audit and Risk Committee meets at least three times each

year. The Committee reviews the adequacy and effectiveness of

the Company’s internal controls and risk management systems

and every six months it carries out a reassessment of the principal

risks facing the Company.

The AIFM provides risk management services to the Company,

including implementation of risk management policies to identify,

measure, manage and monitor the risks that the Company is or might

be exposed to and ensuring that the Company’s risk management

policy and implementation comply with applicable regulations.

Representatives of the AIFM meet with Investment Adviser

representatives at least quarterly to review the risk register and discuss

any changes proposed. The proposed updates to the Company’s risk

Committee in advance of circulation to the Board.

The identied risk owners within the Investment Adviser are

responsible for formal quarterly reporting of current and

emerging risks and issues to the Investment Adviser’s leadership.

A formal quarterly review of the risk register is carried out by

the Investment Adviser and any recommendations for updates

are made to the AIFM. Any major emerging risks and issues are

escalated outside of the quarterly review framework.

TABLE OF PRINCIPAL RISKS AND

UNCERTAINTIES

The Board considers the following to be the principal risks and

uncertainties facing the Company as at the date of approval of the

accounts. The risks are presented in order of signicance based

on net residual risk, following mitigations.

The Directors have assessed climate change risk and have

concluded that the risk of climate change on the Company’s

business model and investment valuation is not considered

signicant. This is primarily due to the fact the Company’s

business model is energy storage which makes low carbon

electricity systems more effective, and is a facilitator of growth in

use of renewable energy. The local impacts of climate change risk

on projects have been considered under environmental risk.

FARNHAM (20 MW / 40 MWh)

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

Risk Description Possible Consequences Mitigating Actions

Project supplier delivery delays

delays in delivery under

existing supply contracts;

adverse changes to estimated

costs and delivery timetable

from key suppliers; battery

installation delays.

• Increased costs

• Delay to income

generation

• Reduced NAV

• Contingencies are built into the modelled project timelines.

• Tender processes for future contracts are only conducted with suppliers

with a strong track record.

• EPC (or BESS supply) contracts contain robust obligations regarding price

and delivery timetables.

• Contingency is included in project budgets for unexpected cost increases

or loss of income caused by project delays.

Project development and construction risk

risk of failure to deliver

Pipeline Projects and

incurrence of costs,

including planning delays,

grid connection delays, land

disputes

• Increased costs

• Reduced returns

• Delays to deployment

of capital and/or

income generation

• Non-compliance with

investment policy

• Harmony Energy Limited has an extensive track record in development

and delivery of renewable energy projects and its project managers

oversee the delivery of each site.

• The Company’s investment policy prohibits the Company from acquiring

projects which are not “shovel ready” meaning the project has, planning

permission, binding grid offers and options over land in place as well as

a BESS supply & installation contract with material terms agreed with

a reputable counterparty. These qualications are corroborated by

independent due diligence during the investment process.

• The Investment Adviser monitors appropriate factors and reports to the

Board any relevant information as soon as practicable.

• Portfolio diversication and budget contingency provide mitigation.

• The investment process allows the pipeline to be controlled and acquired

with full visibility of the capital deployment timetable.

Cyber risk

risk of data loss; risk of cyber

attack.

• Increased costs

• Reputational damage

• Non-compliance with

relevant laws and

regulations

• The Company reviews all third party service providers’ and suppliers’ IT

security policies, including the Investment Adviser, revenue optimiser and

key hardware suppliers.

• Reports will be required from suppliers on ISO compliance, penetration

testing and attempted attacks.

• Operational level equipment complies with Energy Networks Association

Cyber Security Connection Guidance and the Investment Adviser has

multi-factor authentication for its internal data platform.

• The Investment Adviser appoints external IT specialists who assess the

adequacy of its cybersecurity measures and suggest updates to address

new cyber threats and reect best practice.

Reliance on third parties

risk that key personnel in

the Investment Adviser and

other third party service

providers are not properly

incentivised or managed to

deliver the Company goals.

• Delayed deployment

of capital

• Reduced returns

• Non-compliance with

relevant laws and

regulations

• Performance of service providers is regularly monitored by the Investment

Adviser and the Management Engagement Committee against agreed KPIs

• Termination periods for key service providers are negotiated to ensure

sufcient time for tendering and onboarding.

• The Management Engagement Committee ensures service providers,

including the Investment Adviser, are paid sufcient fees to attract and

retain staff.

• Independent power price forecasts and other industry intelligence

subscriptions are used to support NAV calculations.

• Valuations are carried out by an independent provider.

• Engagement of a revenue optimiser ensures revenue is maximised. The

revenue optimiser is engaged on a rolling short term contract to enable

replacement in the event of poor performance, and the fee is structured

to incentivise performance.

PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

Risk Description Possible Consequences Mitigating Actions

Environmental risk

risk of unexpected

environment-related costs

and liabilities.

• Unsafe working

conditions

• Reputational damage

• Increased costs

• Non-compliance with

relevant laws and

regulations

• Full due diligence is undertaken on proposed investments, including

environmental due diligence.

• This includes consideration of future climate change related risks such as

severe weather events or ooding.

• Due diligence recommendations to mitigate environmental risks are

factored into investment proposal costs and implemented on the projects.

• Construction contracts ensure that the third party contractor is liable for

any environmental hazards discovered during construction which would

not have been discovered by a reasonable investigation performed by a

competent third party specialist.

• Projects are insured to cover delays to commencement of operations and

other environmental risks, including damage to assets from severe weather.

Market risk

reduced growth of

renewables sector;

uctuations in pricing of

natural gas and carbon taxes.

• Reduced revenue

• Reduced NAV

• Subscriptions to market intelligence services ensure the Investment Adviser

is aware of industry outlook and developments at the earliest stage.

• The Investment Adviser and Board regularly engage with industry

stakeholders and policymakers.

• Any changes to the market outlook are factored into revenue forecasts and

investment proposals.

Regulatory risk

reduced returns from

changes to applicable law;

unfavourable energy or

power network policies; non-

compliance with legal and

regulatory requirements for

investmenttrusts

• Non-compliance with

relevant laws and

regulations

• Reduced returns

• Reputational damage

• The Company is well positioned to monitor and react to the energy policy

and political landscape, and inputs to relevant energy industry consultations.

• Attendance at energy policy and regulatory seminars and engagement with

industry stakeholders and policymakers ensure up to date insights.

• A monitoring programme put in place by the Company Secretary monitors

compliance with all applicable legal and nancial legislation and regulatory

requirements.

• An experienced AIFM has been appointed, with an independent compliance

ofcer.

• Across the Board, Investment Adviser and AIFM there is an in-depth

knowledge of the relevant laws and regulations relating to NAV and revenue.

• A tax advisor is appointed to monitor tax law changes.

• The Company Secretary, AIFM and Board monitor regulatory requirements

and compliance in order to always retain investment trust status.

Safety risk

risks to health and safety

during construction or

operation.

• Unsafe working

conditions

• Workplace injuries

• Reputational damage

• For project SPVs,

non-compliance with

relevant laws and

regulations

• The Investment Adviser appoints health and safety advisors to undertake

audits of all sites and provide support to the Investment Adviser’s project

management team.

• The Investment Adviser and Board monitor health and safety compliance

and performance.

• For projects under construction during the reporting period, the EPC

contracts with Tesla contain obligations in respect of health and safety

on sites and Tesla has the role and responsibilities of Client under the

Construction (Design & Management) Regulations.

• Procurement due diligence includes an assessment of contractor health and

safety track record and compliance framework.

• Insurance policies are in place to provide cover against certain losses.

PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

Risk Description Possible Consequences Mitigating Actions

Conicts of interest

risk of acquiring projects

other than at fair market

price; risk of over valuing

assets to increase share

price; conicts of interest in

acquisition of projects from

a related party, Harmony

Energy Limited.

• Increased costs

• Reduced returns

• Reputational damage

• Mitigants of potential conicts of interest are built into the contractual

structure, including a signicant portion of consideration for projects being

paid to Harmony Energy Limited in the Company shares rather than cash,

more comprehensive warranties than would be expected in a usual arms

length transaction with more limited disclosure and clawback provisions

to allow the Company to recover consideration from Harmony Energy

Limited in certain circumstances.

• In addition, the Company has built mitigants into its governance processes

and commercial arrangements, including the separation of the Investment

Adviser’s investment committee from the Harmony Energy Limited

development team and the requirement to procure an independent

valuation and external due diligence prior to acquisition, and all acquisitions

are subject to approval of the Board, all of whom are independent.

Changing macro economic conditions

changing economic

conditions may lead to

increased costs or lower

returns and could result in

shares trading at a discount

to NAV.

• Increased investor

return requirement

leading to reduced

NAV

• Reduced returns

• Increased costs

• Reduced NAV

• Macro economic factors are monitored and reported to the Board.

• Changes to the economic outlook are factored into revenue forecasts,

valuations and investment proposals for future investments.

• As a relatively new asset class, BESS asset valuations are less directly linked

to interest rate movements than other renewable assets. Discount rates

have been coming down despite increasing interest rates as investors

become more comfortable with the track record demonstrated by the

sector.

• The Company has taken appropriate hedging actions to address the risk

of interest rate uctuations. Hedging strategies will be evaluated on an

ongoing basis in relation to any additional borrowing.

• Supply of certain items of key equipment is priced in USD, EUR or RMB. In

these cases the FX risk has been passed to suppliers through the relevant

supply and installation contracts. In future the Company may consider

nancial hedging instruments if deemed appropriate. The Company

benets from a natural FX hedge in that revenues are linked to gas prices

which are priced in USD.

STRATEGIC REPORT

PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

EMERGING RISKS

The Investment Adviser, the AIFM and the Board monitor

emerging risks and assess their potential to adversely impact

operations on a quarterly basis. Following a comprehensive

review of risks and probabilities, the Board discussed the potential

existence of any new emerging risks which were not yet reected

on its risk register. Whilst no such new thematic emerging

risks were identied, the Board wish to highlight the ongoing

regulatory risk posed by the ongoing Review of Electricity Market

Arrangements (“REMA”).

REMA was launched in July 2022 by the Department for Business,

Energy & Industrial Strategy (“BEIS”). The scope of the review is

comprehensive and covers the entire British electricity market

design, with the goal of ensuring that it is t for the purpose of

maintaining energy security and affordability for consumers as the

electricity sector decarbonises. BEIS has set out ve key future

system challenges out to 2035, which are: investment; exibility;

location and networks; operability; and whole system exibility.

The Company sees opportunity creation for BESS given how

exible the technology is and the clear operability benets this

brings to National Grid ESO.

The consultation closed on 10 October 2022. The Company

participated by submitting comprehensive responses.

The Company also took the opportunity to highlight that BESS

does not benet from any taxpayer support or subsidy, so a stable

and supportive regulatory landscape is especially important to

ensure that the growth of this vital enabling technology keeps

pace with system demands.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

PILLSWOOD (98 MW / 196 MWh)

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

SECTION 172 STATEMENT

Under s172 of the Companies Act 2006, the Directors have a

duty to promote the success of the Company for the benet of its

members as a whole, and in doing so to have regard to a number of

matters including:

• the likely consequences of any decision in the long term;

• the need to foster the Company’s business relationships with

suppliers, customers and others;

• the impact of the Company’s operations on the community and

the environment;

• the desirability of the Company maintaining a reputation for high

standards of business conduct;

• the need to act fairly as between members of the Company; and

• the interests of the Company’s employees;

The Strategic Report details the policies and strategy which

are developed to promote the success of the Company. As an

externally managed investment company with no employees, the

Board considers its key stakeholders to be its Shareholders, the

Investment Adviser and other service providers. The Company also

takes into consideration the wider environment in which it operates.

This statement summarises how the Directors have engaged with

the Company’s key stakeholders and how the interests of those

stakeholders were taken into account in key decisions made during

the year.

SHAREHOLDERS

Engagement with Shareholders and potential investors is key to

the success of the Company. Regular communication is made with

Shareholders through nancial statements, RIS announcements,

and quarterly factsheets and publication of the Company’s NAV.

Information is also provided on the Company’s website.

The Company’s corporate brokers attend the scheduled quarterly

board meetings and provide regular updates to the Board on

dialogue with investors and potential investors. The Investment

Adviser has held regular meetings with current and potential

investors, providing updates on the status of the portfolio as well as

the BESS market more generally. Aside from one-on-one investor

meetings, the Investment Adviser has held analyst calls following

key announcements and spoken on relevant panels hosted by

brokers and analysts. In addition to direct investor engagement the

Investment Adviser has actively sought to create strong relationships

with analysts in order to raise the prole of the Company and reach

a wider investor base.

The Chair has met with any Shareholder who requested a meeting

during the year and will continue to do so.

THE INVESTMENT ADVISER

The Board regularly reviews the Company’s performance against

its investment objectives, and the relationship with the Investment

Adviser is a key business relationship. The Investment Adviser

attends all scheduled quarterly Board meetings, provides regular

detailed reporting on the Company’s portfolio to the Board

and regularly interacts with the Directors, both individually and

collectively as a Board.

The Chair also has frequent and regular contact with the

Investment Adviser and the Broker.

The Board, through its Management Engagement Committee, is

responsible for reviewing performance of the Investment Adviser

annually.

OTHER SERVICE PROVIDERS

The Company recognises the important role played by its suppliers

in running its business. The Management Engagement Committee

is responsible for the annual review of the performance of service

providers and reports on its ndings to the Board.

Since the reporting period, the Chair has visited two of the

BESS sites and both the Chair and the Chair of the Management

Engagement Committee have visited the Pillswood site. In each

case, this enabled Directors to engage with suppliers to the

Company’s subsidiaries.

THE COMMUNITY AND ENVIRONMENT

Engagement with the community begins before the sites are

acquired by the Company, and will continue through the life of the

projects. The Environmental, Social and Governance section on

pages 18 to 27 provides further details on engagement with local

communities and the actions taken in respect of environmental

matters. The Board receives quarterly updates on ESG-related

matters from the Investment Adviser and the ESG Committee of

the Investment Adviser, including community and environmental

initiatives and issues. These are discussed in more detail elsewhere

in the Annual Report.

KEY DECISIONS AND ACTIONS TAKEN

DURING THE YEAR

Key decisions and actions during the year which have required the

Directors to have regard to applicable section 172 factors include:

• The Company became a signatory of the UN PRI. This is

noteworthy as for most investment trusts it is the investment

advisor or fund manager that becomes a signatory. The Board

felt that the issue was important enough that the Company

itself should become a signatory, rather than delegated

responsibility. Board members received training on the

requirements associated with becoming a UN PRI signatory and

a representative of the UN PRI was invited to attend a Board

STRATEGIC REPORT

SECTION 172 STATEMENT CONTINUED

meeting to provide a further presentation on the UN PRI and

the reporting process.

• The Company agreed a debt facility of £60m from NatWest

Bank plc to support the acquisition and construction of its rst

pipeline project. This was carried out following advice from the

AIFM, and support from the Investment Adviser, and enabled

the Company to expand its portfolio in line with investment

objective.

• In July 2022, the Company paid a dividend totalling 1p per

Ordinary share to Shareholders, demonstrating the Board’s

commitment to sustainable levels of income returns for

Shareholders. The Board worked with the Investment Adviser

to ensure delivery of the dividend in line with the target set in

the Prospectus. Post year end, the Company paid a further

dividend of 1p per Ordinary share to Shareholders, fullling the

undertaking made at the launch of the Company.

• The Company acquired the Bumpers project from Harmony

Energy Limited, following a recommendation from the AIFM

based on a proposal from the Investment Adviser. Engagement

with Tesla and key sub-contractors ensured an EPC contract

could be executed immediately following acquisition to deliver

the project.

• The Company adopted an ESG strategy, based on the

outcome of a materiality assessment carried out with

support from external sustainability consultants. Stakeholder

engagement for the materiality assessment included workshops

with representatives from the Investment Adviser, investors and

key suppliers.

• Following discussions with the Investment Adviser and the

Broker, the Company launched a capital raise via the placing

of new C Shares to fund the acquisition of BESS projects

under the ROFR and which were ready for acquisition i.e.

shovel ready. This provided an opportunity for existing and

new Shareholders to invest in the Company and allowed

the Company to further its investment objective to provide

investors with an attractive and sustainable level of income

returns with the potential for capital growth. The placing

took place at the time of the Government’s ”mini-budget” in

September 2022 into what was a very difcult environment.

Despite several issues in the market at the same time being

pulled, the Company did raise £14.7 million and is grateful to

those Shareholders who supported the capital raise allowing

the Company to secure the rights to three more projects.

BUMPERS (99 MW / 198 MWh)

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

VIABILITY AND GOING CONCERN

SHARE BUYBACKS

The Company is authorised to make market purchases of up to

14.99 per cent. of the issued Ordinary Shares immediately following

IPO and expiring at the conclusion of the Company’s 2023 Annual

General Meeting. The Board intends to seek Shareholder approval

to renew its authority to make market purchases of its own issued

Ordinary Shares at the 2023 Annual General Meeting. Purchases

of shares will be made within guidelines established from time to

time by the Board and only in accordance with the Statutes and the

Disclosure Guidance and Transparency Rules. At the date of this

Annual Report, the Company does not hold any shares in treasury

and has no intention to buy back shares at the present time.

GOING CONCERN

As at 31 October 2022, the Company had net current assets

and net cash balances of £127 million. In addition, the Company,

through its wholly owned subsidiary HEIT Holdings Ltd had access

to an undrawn £60 million senior debt facility with NatWest.

The combination of cash balances and undrawn debt facility

was sufcient to meet commitments made under construction

contracts signed by subsidiaries.

HEIT Holdings Ltd’s debt facility was extended in February

2023, to £110 million and a £20 million RCF was also agreed.

The additional funds are expected to be used in relation to the

construction of the Hawthorn Pit and Wormald Green projects

which were acquired by the Company in December 2022. All debt

facilities remain undrawn as at the date of publication and will be

drawn down over time subject to certain construction milestones.

As at 31 October 2022, the Company was a guarantor to its

wholly owned subsidiary, HEIT Holdings Ltd in respect of the

£60million debt facility. Post reporting period, this guarantee

has been increased to cover the new £110 million debt facility

and the ancillary revolving credit facility of up to £20 million.

The Company also provides parent company guarantees to

subsidiaries in relation to certain construction and/or battery

supply contracts. As at 31October 2022, total committed funding

to subsidiaries was £161 million. As at the date of publication,

the aggregate outstanding funding commitment stands at £148

million, recognising both expenditure incurred post reporting

period as well as new commitments made in relation to the

Hawthorn Pit and Wormald Green projects. These commitments

are covered by the Company’s cash reserves and debt facilities.

In December 2022, the Company acquired the 99MW Rye Common

project and has made key grid connection milestone payments in

line with its construction schedule in order to maintain the project

timetable and protect project value but is not contractually obligated

to make any payments. Construction of this project remains subject

to putting in place funding arrangements. The Investment Adviser

and the Board continue to evaluate options in relation to this project

which could include, inter alia, extension of debt facilities, further

capital raises, vendor nancing or sale of the project.

The Directors have reviewed the results of nancial models

analysing the expected position of the Company under base

case as well as two downside scenarios. Under all scenarios

the nancial model shows that sufcient cash is expected to be

available to meet the Company’s obligations and commitments

(including but not limited to construction contracts, working

capital requirements and debt service).

The Directors have adopted the going concern basis in preparing

the Annual Report and Financial Statements and have concluded

that the Company’s available funding and expected income are

sufcient for the Company to continue its operations for at least

12 months from the date of signing these nancial statements.

VIABILITY STATEMENT

The Directors have considered the period to January 2026 for the

purposes of assessing the Company’s viability. The assessment takes

into account the availability of cash reserves and committed debt

funding whilst assuming that all projects except Rye Common are

brought into operations during the assessment period.

The base case nancial model prepared to assess viability utilises

the same prudent revenue and other key assumptions which are

used to value the Company’s investments. Revenue assumptions

are based on forecasts from three independent providers, have

been agreed with Mazars as independent valuers and are in line

with or lower than the revenue generated by operating 2-hour

duration batteries in 2022. Key costs such as operations and

maintenance costs, revenue optimisation fees, lease costs etc

are modelled in line with executed contracts which have been

reviewed by Mazars (as independent valuer).

In addition, the Directors have considered a downside scenario

which inter-alia, assumes base case EBITDA performance of

underlying subsidiaries is reduced by c.25 per cent. on average

over the assessment period. This downside scenario is based

on a low-commodity price environment in which gas prices and

carbon prices in particular are at signicantly reduced levels. This

environment in turn impacts the revenue opportunities for battery

storage. In addition the Directors have considered the impact of

delays to construction.

Given the current commodity pricing environment, as well as the

observed performance of 2-hour duration batteries in 2022, the

downside cases are considered unlikely.

The Directors note that the Company is not reliant on revenues

from operating projects in order to meet its commitments in

relation to the funding of project construction costs. Having

considered the results of the nancial models, the Directors have

a reasonable expectation that the Company is able to meet its

working capital and debt service commitments over the assessment

period and that key risks have been considered in this assessment.

The Board therefore consider that there are no signicant doubts

about the Company’s ability to continue as a going concern and the

Company remains viable under a reasonable worst-case scenario.

STRATEGIC REPORT

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

JANINE FREEMAN

CHAIR OF THE AUDIT AND RISK

COMMITTEE AND INDEPENDENT

NONEXECUTIVE DIRECTOR

BOARD OF DIRECTORS

DR HUGH MCNEAL

CHAIR OF THE MANAGEMENT

ENGAGEMENT COMMITTEE AND

INDEPENDENT NONEXECUTIVE

DIRECTOR

Date of Appointment:

12 October 2021

Norman is an experienced public

company Chair with extensive fund

experience. He is Non-Executive

Chairman at Weiss Korea Opportunity

Fund Limited, RM Infrastructure Income

plc, AVI Japan Opportunity Trust plc and

is also a director of Universal Umvelt Ltd.

Committee membership:









Date of Appointment:

12 October 2021

Hugh has extensive industry experience

in the renewable energy sector and is a

Non-executive Director of Proserv UK

and of the Offshore Renewable Energy

Catapult (since 2016). He previously held

the positions of CEO of Renewable UK

from 2016-2021; and Chief Executive

for the Ofce for Renewable Energy

Deployment at DECC from 2010-2014.

Committee membership:









Date of Appointment:

12 October 2021

Janine is a qualied Chartered

Accountant, qualifying at Deloitte &

Touche, and an experienced senior

energy industry executive with over

20years’ experience in the sector, 16 of

which were spent at NationalGridplc.

She is an independent non-executive

director of Aquila Energy Efciency

Trust plc and a member of their Audit

andRisk, Nomination, Remuneration and

Management Engagement Committees;

and Non-Executive Chair at Public Power

Solutions Limited.

Committee membership:









Committee Key:



Audit and Risk Committee



Remuneration and Nomination Committee



ESG Committee



Management Engagement Committee

NORMAN CRIGHTON

CHAIR AND INDEPENDENT

NONEXECUTIVE DIRECTOR

GOVERNANCE

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE

DR SHEFALY YOGENDRA

CHAIR OF THE ESG COMMITTEE

AND INDEPENDENT NONEXECUTIVE

DIRECTOR

WILLIAM RICKETT, CB

CHAIR OF THE REMUNERATION AND

NOMINATION COMMITTEE AND

INDEPENDENT NONEXECUTIVE

DIRECTOR

Date of Appointment:

12 October 2021

Shefaly is an experienced risk and

decision-making specialist with a career

working in the technology industry

including startups and investors. She is

an independent non-executive director at

Witan Investment Trust plc; JP Morgan

US Smaller Companies Trust plc, where

she chairs the Remuneration Committee;

and Temple Bar Investment Trust plc

where she chairs the Nomination and

Management Engagement Committees.

Shefaly is also an independent Governor

of London Metropolitan University where

she chairs the Audit and Risk Committee.

Committee membership:









Date of Appointment:

12 October 2021

Willy is an experienced industry

professional and Chairman of Cambridge

Economic Policy Associates Ltd. He

was previously a civil servant working

at board level in various government

departments, including energy, transport

and the Cabinet Ofce, nishing as

Director General, Energy from 2006

to 2009. Since then he has worked as

a non-executive director on the boards

of a number of companies, including

Greencoat UK Wind plc, Eggborough

Power Ltd, Helius Energy plc and Impax

Environmental Markets plc.

Committee membership:









BOARD OF DIRECTORS CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

DIRECTORS’ REPORT

THE DIRECTORS ARE PLEASED TO PRESENT THEIR ANNUAL REPORT INCLUDING THE

COMPANY’S AUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31OCTOBER 2022.

The Corporate Governance Report on pages 41 to 44 forms part

of this Directors’ Report.

PRINCIPAL ACTIVITY AND STATUS

Harmony Energy Income Trust Plc is a public limited company

registered and incorporated in England and Wales under the

Companies Act 2006 (the “Act”) on 1 October 2021 with registered

number company no. 13656587. The Company is registered as an

investment company under section 833 of the Act. The Company’s

principal activity is to invest in commercial scale battery energy

storage and renewable energy generation projects, with an initial

focus on a portfolio of utility scale battery energy storage systems,

located in diverse locations across Great Britain.

DIRECTORS

The Company has a Board comprising of ve independent non-

executive Directors. The Directors of the Company during the

period under review and at the date of this report are Norman

Crighton (Chair), Janine Freeman, Hugh McNeal, William Rickett

and Shefaly Yogendra, all of whom were appointed on 12October

2021. James Ritchie-Bland, Peter Kavanagh and Pete Grogan were

appointed as directors from 1 October 2021 to 12October 2021.

Brief biographical details of the current Directors are given on

pages 37 and 38. The Company has no employees.

The Board of Directors manages the Company’s business and

may exercise all of the Company’s powers, subject to the Articles

of Association, the Companies Act and any directions given

by special resolution. Amendments to the Company’s Articles

of Association require a special resolution to be passed by

Shareholders.

DIRECTORS’ INSURANCE AND INDEMNITY

Directors’ and Ofcers’ Liability Insurance cover is held by

the Company in respect of the Directors. The Company has

also granted indemnities to each of its Directors to the extent

permitted by law in respect of costs of defending claims against

them and third party liabilities.

SUBSTANTIAL SHAREHOLDINGS

As at 31 October 2022 the Company is aware of the following

substantial Shareholders who were directly or indirectly interested

in 3% or more of the total votes in the Company’s issued capital:

At 31 October 2022

Shareholder

Number of Ordinary/

C Shares held

Percentage of Issued

Share Capital

Schroders plc 29,498,981 13.12

Harmony Energy Limited 23,483,695 11.18

Handelsbanken Wealth and Asset Management Limited 16,040,402 7. 64

Close Asset Management Limited* 15,458,353 6.89

EQ Investors Limited 12,414,053 5.91

Newton Investment Management Limited 10,478,534 4.99

Walker Crips Group 10,450,102 4.98

Waverton Investment Management Limited 7,376,423 3.28

* Holds 11,312,853 Ordinary Shares and 4,145,500 C Shares

On 31 January 2023 the C Shares were converted into new Ordinary Shares on a conversion ratio of 0.786735 new Ordinary Share for

every 1 C Share held. At the date of this report the Company has been notied of the following changes in holding of voting rights in the

Company:

• Schroders plc changed to 33,818,981 Ordinary Shares (14.59%)

• Harmony Energy Limited changed to 28,383,695 Ordinary Shares (12.25%)

• Close Asset Management Limited 20,818,728 Ordinary Shares (9.17%)

SHARE CAPITAL

At 31 October 2022, the Company’s issued share capital comprised 210,000,000 Ordinary Shares with a nominal value of £0.01 each and

14,771,364 C Shares with a nominal value of £0.10 representing 100% of the total issued share capital. Each Ordinary Share and CShare

entitles the holder to one vote and there are no restrictions on those voting rights. Details of the movement in the Company’s share capital

can be found in note 19 on page81. C Shares in issue are convertible and as required under IAS 32, are presented as nancial liabilities at

amortised cost in the Statement of Financial Position. Details can be found in note 15 on page 74.

GOVERNANCE

DIRECTORS’ REPORT CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE

The Company has entered into a Lock-up and Orderly Market

Deed with Joh. Berenberg, Gossler & Co. KG, London Branch, as

broker, and certain shareholders, whereby each shareholder that

is party to the Deed has agreed, with exceptions, that:

they will not dispose of their shareholding in the Company

for a period of 5 years commencing on the date of Initial

Admission; and

2. for a period of 12 months after the end of the ve year period

they will not dispose of any interest in their shareholding other

than through the Company’s broker.

As at the end of the period 26,083,680 Ordinary Shares and

990,000 C Shares were subject to the terms of the Lock-up

and Orderly Market Deed. There are no other restrictions on

the transfer of shares other than as set out in the Articles of

Association.

DIVIDENDS

All Ordinary Shares are entitled to receive dividends and interim

dividends have been paid by the Company as shown in the table

below. No nal dividend has been or will be declared, but the

Company’s dividend policy of paying four interim dividends will be

tabled for approval at each AGM.

Dividends are not recognised in the nancial statements of the

company until paid. An initial dividend yield target of 2p for the

calendar year ended 31 December 2022 was set by the Board and

has been met, per the below table. Further the Board conrmed

its commitment to targeting a 8p per Ordinary Share dividend per

annum, payable quarterly in March, June, September and December.

Dividend Date

Amount paid per

Ordinary Share

29 July 2022 1p

2 December 2022 1p

RELATED PARTY TRANSACTIONS

Any related party transactions during the period to 31 October

2022 can be found in Note 24 to the Accounts on page 83.

FINANCIAL INSTRUMENTS

The Company’s nancial instruments and principal risks are

disclosed in Notes 16 and 17 to the Accounts on page 75.

INVESTMENT OBJECTIVE AND INVESTMENT POLICY

The Company’s investment objective and investment policy is

detailed in the Strategic Report on page 16.

SUBSIDIARY COMPANIES

The Company has the following subsidiaries, all of which are held

100%. Details on the subsidiaries can be found in Note 10 on page 72.

• Harmony (PW) Limited

• Harmony (PW) 2 Limited

• Harmony BD Limited

• Harmony FM Limited

• Harmony RH Ltd

• Daisy No. 2 Limited

• HEIT Holdings Ltd

• Harmony BF Limited

FUTURE DEVELOPMENTS

Consideration of future developments are detailed in the Chair’s

Statement on page 4.

POST BALANCE SHEET EVENTS

Post balance sheet events are disclosed in Note 26 of the nancial

statements on page 85.

ENVIRONMENTAL SOCIAL AND

GOVERNANCE CONSIDERATIONS

The Board seeks to maintain high standards of conduct with

respect to environmental, social and governance issues and to

conduct the Company’s affairs responsibly. The Company does

not have any employees or ofcers and so the Board does not

maintain specic policies regarding employee issues but has

adopted an ESG Policy and ESG strategy, further details of which

are set out in the Environmental, Social and Governance section

on pages 18to 27. The Company also expects the Investment

Adviser and its service providers to consider these issues when

fullling their roles and supplier performance in this area is

monitored by the Management Engagement Committee.

The Company has calculated and reported on its carbon

emissions under Scopes 1, 2 and 3 of the GHG Protocol in

our ESG metrics. Details of the approach used and the carbon

footprint are set out in the Strategic Report on pages 26 to 27.

CHANGE OF CONTROL

There are no signicant agreements that the Company is a party

to that might be affected by a change of control of the Company

following a takeover bid.

ANNUAL GENERAL MEETING

The Annual General Meeting (“AGM”) of the Company will be

held on Wednesday, 22 March 2023 at 10.00 a.m. and the AGM

Notice and Form of Proxy will be circulated to all shareholders in

advance of themeeting.

INDEPENDENT AUDITOR

The Company’s auditors, Ernst & Young LLP, has expressed its

willingness to continue as auditor for the nancial year ended

31October 2023 and a resolution proposing their re-appointment

will be submitted at the 2023 AGM.

Signed on behalf of the Board by

Norman Crighton

Chair

22 February 2023

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

CORPORATE GOVERNANCE

The Board of Harmony Energy Income Trust plc has considered the

Principles and Provisions of the AIC Code of Corporate Governance

(“AIC Code”). The AIC Code addresses the Principles and Provisions

set out in the UK Corporate Governance Code (the “UK Code”), as

well as setting out additional Provisions on issues that are of specic

relevance to Harmony Energy Income Trust plc. The Board considers

that reporting against the Principles and Provisions of 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).

It includes an explanation of how the AIC Code adapts the

Principles and Provisions set out in the UK Code to make them

relevant for investment companies.

The Board believes that the Company has complied with the

Principles and Provisions of the AIC Code with the exception of

the items outlined below:

1. The Company does not have a senior independent director.

After considering the Company’s particular characteristics,

objectives and Board structure, the Board has determined

that the appointment of a senior independent director is

not necessary or desirable to promote the open, equal and

shareholder-facing board dynamic that the Board believes it

can achieve as a wholly non-executive Board.

2. The Company does not have an internal audit function.

Given the nature and circumstances of the Company as an

investment company with external service providers, all of

whom have their own control systems in place, the Company

does not consider it necessary to have in internal audit function.

Further details on the Audit Committee’s assessment of the

need for an internal audit function can be found in the report

of the Audit and Risk Committee on page 47.

BOARD LEADERSHIP, CULTURE AND PURPOSE

The Chair, Norman Crighton, is responsible for leadership of the

Board and leads the Board in the determination of its strategy and

in the achievement of its objectives. The Board views its purpose

as being to set and execute its investment objective by working in

partnership with the Investment Adviser to invest in energy storage

and complementary renewable energy generation assets with an

initial focus on a diversied portfolio of utility scale battery energy

storage systems located in diverse locations across Great Britain.

The Chair has responsibility for the organisation of the business

of the Board, ensuring its effectiveness and setting its agenda. The

Company’s investment objectives are detailed in the Investment

Adviser’s report on page 16.

The Board encourages a culture of openness, independence,

engagement and mutual respect of each member’s experience and

professionalism. The Board continually monitors its own culture,

practices and behaviour and the Chair encourages each Board

member to question, debate and challenge recommendations not

only from the Company’s key suppliers (including the Investment

Adviser) but also from each other. Issues raised are considered by

the Board and any actions required are monitored.

DIVISION OF RESPONSIBILITIES

Matters reserved for the Board

The Directors have adopted a formal schedule of matters reserved

for the Board which sets out the responsibilities of the Board.

These matters include:

• Overall leadership of the Company and setting of its purpose,

values and standards.

• Investment/business strategy, including the ongoing review of

the Company’s investment objective and investment policy.

Approving any and all changes to the Company’s investment

objective and investment policy and recommending to

Shareholders the approval of any material alterations thereto.

• Approval of risk management policies including, but not limited

to, insurance, hedging, borrowing limits and corporate security

(following recommendation from the Audit and Risk Committee).

• Ensuring the maintenance of a system of internal controls

and risk management, reviewing at appropriate intervals the

Company’s overall internal control arrangements (following review

and recommendation from the Audit and Risk Committee).

• Receipt and review of regular reports on internal controls

processes and management from the Audit and Risk Committee.

• Annual assessment of signicant risks and effectiveness of

internal controls.

• Each instance of delegation of any portfolio management

function or risk management functions.

• Approval of the raising of new capital and major nancing facilities.

• Appointment or removal as required of the Company’s

principal advisers, including the Company’s AIFM, the

investment adviser, reporting accountants, auditor

(following appropriate recommendation by the Audit and

Risk Committee), tax advisers, the company secretary/

administrator, the registrar, receiving agent, valuer, the

sponsor/nancial adviser, the broker/bookrunner, PR rm and/

or legal counsel (following appropriate recommendation by

the Management Engagement Committee).

• Approval of acquisitions.

The provision of administration and governance services has

been delegated to JTC (UK) Limited. The Board has delegated

responsibility for day to day operational decisions relating to the

Company’s projects to the Investment Adviser.

RELATIONSHIP WITH THE AIFM

The AIFM provides certain services in relation to the Company

and its portfolio, which include risk management and portfolio

management, based on advice from the Investment Adviser, in

accordance with the Company’s investment policy. The AIFM’s

duties under the AIFM Agreement dated 14 October 2021 include

complying with the Company’s investment policy and analysing the

performance of the Company’s investments.

GOVERNANCE

CORPORATE GOVERNANCE REPORT CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE

The AIFM is required to provide all risk management services to

the Company as required by the EU AIFM Directive and the UK

AIFM Regime including (i) the implementation of adequate risk

management systems to identify, measure, manage and monitor

appropriately all risks relevant to the Company’s investment

strategy and to which the Company is or may be exposed, (ii)

ensuring that the risks associated with each investment position

of the Company and their overall effect upon the Company’s

portfolio can be properly identied, measured, managed and

monitored on an ongoing basis, including through the use of

appropriate stress testing procedures, (iii) advising the Board on

the establishment and adjustment of quantitative and qualitative

risk limits for the Company, taking into account all relevant

risks and (iv) reviewing the risk management systems at least

annually and adapting them where necessary. The AIFM also

provides guidance to the Company on its compliance with the

requirements of the EU AIFM Directive and the UK AIFM Regime

that apply in respect of marketing of the Shares of the Company

in the UK and the EEA, as applicable.

For the period under review the Management Engagement

Committee evaluated the performance of the AIFM. The

Board accepted the Management Engagement Committee’s

recommendation that the continuing appointment of the AIFM

was in the best interests of the Company and its Shareholders.

RELATIONSHIP WITH THE INVESTMENT ADVISER

The Investment Adviser provides investment advisory services

(and certain other services related to the Company’s investments)

and acts within the strategic guidelines set out in the Company’s

investment policy. These services are dened in more detail below.

The Investment Adviser reports to the AIFM and the Company.

There is a clear division of responsibilities between the Board and

the Investment Adviser and theAIFM.

The Investment Advisory Agreement dated 14 October 2021

between (1) the Investment Adviser, (2) the Company and (3) the

AIFM details the responsibilities of the Investment Adviser which

include, providing certain investment advisory services to the

AIFM copied tothe Company, and certain other services to the

Company which are unrelated to investment advice, including

development and day-to-day operation of the Projects.

The Investment Adviser must (a) advise the AIFM on the Company’s

investments in accordance with the Company’s investment

objective, investment policy and investment restrictions and ESG

policy, including making recommendations based on its expert

opinion to the AIFM in respect of the purchase, sale or disposal of

the Company’s investments and arranging the purchase and sale

of such investments in accordance with the AIFM’s directions; (b)

assist in the preparation of periodic NAV calculations as provided

for in the Prospectus and (c) prepare quarterly reports to be

provided to the AIFM and the Board, including pursuant to the

Company’s ESG policy and any applicable KPIs pursuant to the

Company’s ESG policy from time to time and assisting the AIFM in

respect of quarterly reporting to the Company’s board of directors.

Investment Advisory services provided by the Investment Adviser

also include (a) making recommendations regarding the manner in

which monies should be retained or realised and advise on the use

of borrowing in accordance with the investment policy, (b) monitor

the performance of the revenue optimiser(s) appointed in respect

of the Company’s assets and the revenue performance of the same

and advise the Company and/or the AIFM on behalf of the Company

in respect of revenue optimisation strategy, (c) providing assistance

in respect of the Company’s marketing endeavours, including

attending investor and other marketing meetings and assisting with

production of marketing materials for distribution to investors and

prospective investors, (d) assisting with implementation of appropriate

risk measurement and management standards and procedures, (e)

providing material for inclusion in annual and other reports of the

Company, and (f) monitoring investment limits and restrictions and

giving instructions for operation of bank accounts.

Regarding the other services, the Investment Adviser will (a) advise

and facilitate the engagement by one or more project companies of

independent third party suppliers and contractors to provide services

to the construction, commissioning and ongoing management of the

Projects; (b) provide certain project management and supervision

services; (c) provide certain community and stakeholder services;

(d) certain services regarding permits, approvals and compliance;

(e) certain occupational health and safety and ESG services; and

(f)certain technical and monitoring services.

For the period under review the Management Engagement

Committee evaluated the performance of the Investment Adviser.

The Board accepted the Management Engagement Committee’s

recommendation that the continuing appointment of the

Investment Adviser was in the best interests of the Company and

its Shareholders.

RELATIONSHIP WITH THE ADMINISTRATOR

JTC (UK) Limited has been appointed as Secretary and

Administrator to provide company secretarial, fund accounting and

administration services. During the period ended 31 October 2022,

as Administrator, JTC (UK) Limited, on behalf of the Directors,

was responsible for the maintenance of the books and records,

the management of nancial records, all cash movements of the

Company and the calculation, in conjunction with the Investment

Adviser, of the Net Asset Value of the Company. As Company

Secretary, JTC (UK) Limited are responsible for regulatory

compliance and providing support to the Board’s corporate

governance process and its continuing obligations as well as general

secretarial functions required by the Companies Act 2006.

BOARD COMMITTEES

The Company has established four committees: the Audit and

Risk Committee, the Remuneration and Nomination Committee,

the ESG Committee and the Management Engagement

Committee. The terms of the references of these committees are

available on the Company’s website. During the nancial period

under review all of the Directors served on all of the committees

as independent non-executive Directors.

CORPORATE GOVERNANCE REPORT CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

BOARD AND COMMITTEE MEETINGS

The Board has a schedule of quarterly meetings with additional meetings as required. The table below sets out the number of scheduled

Board and committee meetings held during the year and the number of meetings attended by each Director.

Quarterly Board

Meetings

Audit and Risk

Committee

ESG

Committee

Remuneration

and Nomination

Committee

Management

Engagement

Committee

No. of Meetings Held 4 3 1 1 1

Norman Crighton 4 3 1 1 1

Janine Freeman 4 3 1 1 1

Hugh McNeal 4 3 1 1 1

William Rickett 4 3 1 1 1

Shefaly Yogendra 4 3 1 1 1

The Board also held a number of ad-hoc Board meetings outside

of the scheduled meeting cycle. Matters discussed included

fundraising, renancing and acquisitions and meetings were

normally attended by all Board members.

The primary focus at Board meetings has been on delivering the

strategy, monitoring performance against strategic objectives,

investor relations and asset allocation. This included:

• Approving the deployment of capital raised and progress of

construction of the portfolio;

• Finalising the EPC contract for the Company’s fth project at

its Little Raith site;

• Agreeing a debt facility of £60m from NatWest to support the

acquisition and construction of the rst pipeline project;

• Acquisition of the 99 MW/198 MWh Bumpers project in

July 2022;

• Raising an additional £14.7 million through a placing in

October 2022 by way of the issue of 14.7 million C shares,

with proceeds committed against identied pipeline projects;

• Adopting the ESG strategy, following completion of a

materiality assessment;

• Reviewing updates from the Investment Adviser, which

included health and safety, risk management and ESG; and

• Reviewing updates from other key stakeholders including the

broker, Company Secretary, and AIFM.

The Company maintains a register of Directors’ conicts of

interest which is considered at all Board meetings, and no

signicant conicts of interests were identied during the period.

The Board is required to disclose changes or potential new

conicts. The Company Secretary attends all Board meetings

and ensures that the Directors have access to all relevant

information. In line with the Board’s commitment to reducing

adverse environmental impacts from its business, wherever

possible it makes efcient use of technology. To date all the

ad-hoc meetings were held virtually and all Board papers are

distributedelectronically.

COMPOSITION, SUCCESSION AND

EVALUATION

The Board comprises ve Directors and their biographies are on

pages 37 and 38 demonstrating the wide range of complementary

skills and experience they each bring to the Board. All the

Directors are non-executive and, for the purpose of provision 12

of the AIC Code, all are considered to be independent with the

Chair being independent on appointment.

The Remuneration and Nomination Committee is responsible for

leading the process on appointments, ensuring there are plans

in place for orderly succession to the Board and overseeing any

other related matters as they arise. This includes ensuring that

any appointments and succession plans are based on merit and

objective criteria, and within this context, promote diversity of

gender, social and ethnic backgrounds, cognitive and personal

strengths. Given that the Company was incorporated in 2021, the

Board did not consider any changes to the composition of the

Board were necessary during the reporting period.

The Remuneration and Nomination Committee carried out an

evaluation of the Board and Committees for the period under

review which concluded that the Board has the right mix of skills

and that the Chair and the Directors are suitability qualied to

undertake their responsibilities and perform their duties in respect

of managing the Company. It was recognised that it had been a

busy year for the Board; that the Board’s stringent performance

monitoring would need to be extended as the Company’s assets

become operational; and that the Board should continue to

have in depth examinations of developments in energy storage

technology and its markets. Given that the Company was

incorporated in 2021, the Board did not consider it appropriate

to have an externally facilitated Board evaluation for the reporting

period nor has there been a focus on succession planning. This

will be kept under review.

GOVERNANCE

CORPORATE GOVERNANCE REPORT CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE

BOARD DIVERSITY

The Board comprises ve independent non-executive directors

of whom 40 per cent. are female. The Board is committed to

diversity, which includes diversity of experience, background and

perspective, and meeting the recommendations of the Hampton

Alexander Review of female representation and gender imbalance

on FTSE 350 boards (now called the FTSE Women Leaders

Review) and the Parker Review into the ethnic diversity of UK

boards. The Board will always appoint the best person for the job.

It will not discriminate on the grounds of gender, race, ethnicity,

religion, sexual orientation, age or physical ability. The Board

considers the real value of diversity comes from ensuring inclusion

of different views arising from lived experiences and skills.

INTERNAL CONTROL AND RISK

MANAGEMENT

The Board acknowledges that it is responsible for establishing

and maintaining the Company’s system of risk management

and internal controls, which is reviewed fully for effectiveness

on an annual basis, and has delegated this to the Audit and Risk

Committee. The Board has identied and assessed the principal

and emerging risks faced by the Company and how they are

being mitigated. These are set out in the Principal Risks and

Uncertainties section on pages 28 to 32. The Investment Adviser

regularly reports to the Board on risk. During the period, the

Audit and Risk Committee reviewed and provided feedback to the

Investment Adviser on the full risk register.

The Board has delegated certain of its day-to-day activities to the

AIFM, the Investment Adviser and the Administrator, and has

clearly dened their roles, responsibilities and authorities. The

actions of these service providers are monitored at quarterly and

ad-hoc Board meetings and their performance reviewed annually

by the Management Engagement Committee.

At each scheduled quarterly meeting the Board receives reports

from the AIFM, the Administrator and Company Secretary and the

Investment Adviser to provide it with assurance that appropriate

oversight is in place. The Board is satised with the controls and

risk management systems currently in place for assessing, managing

and monitoring risks applicable to such service providers, including

policies covering whistleblowing and helping to prevent bribery,

corruption and fraud. The Board has also received reports to

provide it with assurance that appropriate and reasonable oversight

of controls is in place at its key third party providers to manage

risks. The Chair of the Board has also visited the Company’s

Pillswood, Farnham and Broadditch sites where he saw rst-hand

the controls in place for the Company’s contractors.

GOING CONCERN

Under the AIC Code, the Board needs to consider whether it is

appropriate to adopt the going concern basis of accounting in

preparing these Financial Statements. The Board continues to

adopt the going concern basis and the detailed consideration is

contained on page35.

VIABILITY STATEMENT

The viability statement, under which the Directors assess the

prospects of the Group over a longer period, is contained on

page 35.

RELATIONS WITH SHAREHOLDERS

The Board values interactions with Shareholders and welcomes

the views of Shareholders, who may contact the Board through

the Company’s broker at: Berenberg_Harmony@berenberg.com

or the Company Secretary at HarmonyEnergyIncomeTrustplc@

jtcgroup.com. The Investment Adviser regularly engages with

principal Shareholders and key sector analysts and is available to

meet with Shareholders if requested. The Chair has met with any

Shareholder who requested a meeting during the year and will

continue to do so.

The Board receives comprehensive Shareholder reports quarterly

from the Company’s advisor and regularly monitors the views of

Shareholders and the Shareholder prole of the Company.

The rst annual general meeting of the Company will be held

on 22 March 2023 and Shareholders will have the opportunity

to engage with the Board. In addition to the formal business

of the AGM, representatives of the Investment Manager will

also be available to answer any questions a Shareholder may

have. If shareholders are not able to attend the AGM in person,

Shareholders will be given the opportunity to ask questions in

advance of the AGM, with answers to any questions received

published on the Company’s website.

Separate resolutions are proposed at the AGM on each

substantially separate issue. All voting at the AGM will be on a poll

with the results being announced as soon as practical following the

AGM via RIS announcement

RELATIONS WITH OTHER STAKEHOLDERS

Examples of stakeholder engagement and the effect on

stakeholders of principal decisions taken by the Company during

the year can be found in the s172 Statement on pages 33 and 34.

ADDITIONAL DISCLOSURES

Additional disclosures required by Schedule 7 of the Large and

Medium sized Companies and Groups (Accounts and Reports)

Regulations 2008 (as amended) are contained in the Directors’

Report on pages 39 to 40.

Approved on behalf of the Board By:

Norman Crighton

Chair

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

DIRECTORS’ RESPONSIBILITY STATEMENT

THE DIRECTORS ARE RESPONSIBLE FOR PREPARING THE ANNUAL REPORT

AND FINANCIAL STATEMENTS IN ACCORDANCE WITH APPLICABLE LAW AND

REGULATIONS.

As a company traded on the London Stock Exchange, Harmony

Energy Income Trust Plc is subject to the FCA’s Listing Rules and

Disclosure Guidance and Transparency Rules, as well as to all

applicable laws and regulations in England and Wales where it is

registered.

The Annual Report and Financial Statements have been prepared

in accordance with UK adopted international accounting

standards. Under company law, the Directors must not approve

the Financial Statements unless they are satised they give a

true and fair view of the state of affairs of the Company and of

the prot or loss for the period. In preparing these Financial

Statements, the Directors should:

• select suitable accounting policies in accordance with IAS8

and then apply them consistently;

• make judgements and estimates that are reasonable and

prudent;

• specify which generally accepted accounting principles have

been adopted in their preparation;

• prepare the Financial Statements on the going concern basis,

unless it is inappropriate to presume that the Company will

continue in business; and

• prepare a directors’ report, a strategic report and directors’

remuneration report which comply with the requirements of

the Companies Act 2006.

The Directors are responsible for keeping proper accounting

records which are sufcient to show and explain the Company’s

transactions and disclose, with reasonable accuracy at any time,

the nancial position of the Company and enable them to ensure

that the Financial Statements comply with the requirements of the

Companies Act 2006. They are also responsible for safeguarding

the assets of the Company and hence for taking reasonable

steps for the prevention and detection of fraud and other

irregularities. The Directors are responsible for ensuring that the

annual report and accounts, taken as a whole, are fair, balanced

and understandable, and provide the information necessary for

Shareholders to assess the Company’s position and performance,

business model and strategy.

WEBSITE PUBLICATION

The Directors are responsible for ensuring the Annual Report and

the Financial Statements are made available on the Company’s

website. Financial statements are published on the Company’s

website in accordance with legislation in the UK governing the

preparation and dissemination of nancial statements, which may

vary from legislation in other jurisdictions. The maintenance and

integrity of the Company’s website is the responsibility of the

Directors. The Directors’ responsibility also extends to the ongoing

integrity of the nancial statements contained therein.

DIRECTORS’ RESPONSIBILITY STATEMENT

PURSUANT TO DISCLOSURE GUIDANCE AND

TRANSPARENCY RULES 4

The Directors conrm to the best of their knowledge that:

• the nancial statements have been prepared in accordance

with UK adopted international accounting standards and give a

true and fair view of the assets, liabilities, nancial position and

prot and loss of the Company; and

• the annual report includes a fair review of the development

and performance of the business and the nancial position of

the Company, together with a description of the principal risks

and uncertainties that it faces.

DISCLOSURE OF INFORMATION TO THE

AUDITOR

The Directors conrm that:

• so far as each Director is aware, there is no relevant audit

information of which the Company’s auditor is unaware; and

• the Directors have taken all the steps that they ought to have

taken as Directors in order to make themselves aware of any

relevant audit information and to establish that the Company’s

auditor is aware of that information.

Signed by order of the Board,

Norman Crighton

Chair

22 February 2023

GOVERNANCE

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE

REPORT OF THE AUDIT AND RISK COMMITTEE

1. ROLE OF THE AUDIT AND RISK COMMITTEE

The AIC Code recommends that the Board should establish

an Audit and Risk Committee comprising at least three, or in

the case of smaller companies, two independent non-executive

Directors. The Audit and Risk Committee comprises all the

independent non-executive Directors.

The Audit and Risk Committee examines the effectiveness of

the Company’s risk management and internal control systems.

It reviews the interim and annual reports and also receives

information from the AIFM and the Investment Adviser. It also

reviews the scope, results, cost effectiveness, independence and

objectivity of the external auditor. The Audit and Risk Committee

reports formally to the Board after any meeting held. The Audit

and Risk Committee reviews its terms of reference at every

meeting and any changes are approved by the Board. The

terms of reference are available on the Company’s website at:

https://www.heitp.co.uk/investors/shareholder-documents/.

2. MEMBERSHIP

The Chair of the Audit and Risk Committee, Janine Freeman, is a

Chartered Accountant, qualifying at Deloitte & Touche. She is an

experienced senior energy industry executive and non-executive

director. The Board is satised that Janine has recent and relevant

nancial experience as required under the AIC Code. The other

members of the Audit and Risk Committee are Norman Crighton,

Hugh McNeal, William Rickett and Shefaly Yogendra, all of whom

have extensive recent and relevant competence in the sector

in which the Company operates. The Board considers that the

appointment of Norman Crighton as a member of the Audit and

Risk Committee, notwithstanding his appointment as Chair of the

Board, is appropriate, given that he was independent on his initial

appointment and has continued to be throughout his tenure.

The biographies of the Audit and Risk Committee members are

outlined on pages 37 and 38 of this Annual Report.

As part of the annual Board evaluation the Audit and Risk

Committee and the Chair respectively were reviewed and found

to beeffective.

3. MEETINGS

The Audit and Risk Committee met 3 times during the period

under review and meetings were attended by all committee

members, as well as representatives of the Investment Adviser, the

AIFM, the Company Secretary and the Auditor.

The Audit and Risk Chair had regular meetings with the Auditor.

Additional meetings are convened by the Company Secretary at

the request of the Audit & Risk Chair as necessary.

4. EXTERNAL AUDITOR

Ernst & Young (“EY”) were appointed as the Company’s auditor on

27 June 2022. Mike Gaylor has been the lead audit partner since.

The appointment of the auditor is reviewed annually by the Audit

and Risk 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. Additionally, the audit

partner must be rotated every ve years and is next eligible for

rotation in 2026.

The audit plan was presented to the Audit and Risk Committee

at its September 2022 meeting, ahead of the commencement of

the Company’s period end audit. The audit plan sets out the audit

process, materiality scope and signicant risks. In respect of the

period under review, the Audit and Risk Committee considered

the appointment, performance and compensation of EY.

During the period the Audit and Risk Committee met with key

members of the audit team before the interim and annual results

were prepared to plan and discuss the scope or review and ensure

its robustness. Meetings were held with the auditor to discuss the

details of the external audit and interim review and to consider

and evaluate any ndings in depth.

As part of the annual reporting process, EY have formally

conrmed their independence. The Audit and Risk Committee

discussed the effectiveness of the auditor and is of the opinion

that the audit team assigned by EY to the Company has a good

understanding of the Company’s business, and the Audit and Risk

Committee has recommended to the Board that a resolution to

appoint EY is proposed to Shareholders at the forthcoming Annual

General Meeting.

5. NONAUDIT WORK

The Audit and Risk Committee has implemented a policy for the

supply of non-audit services provided by the external auditor,

which is consistent with the FRC Revised Ethical Standards,

published in 2019, to ensure there are no circumstances where a

service provided could constitute a conict or potential conict

of interest that would impair the objectivity and independence

of the auditor. The policy sets out the specic activities that may

be provided by the auditor which are closely related to the audit

and/or required by law or regulation, with all other activities being

disallowed. During the reporting period the policy was reviewed by

the Committee.

During the reporting period the auditor was not engaged to carry

out any non-audit work for the Company.

CORPORATE GOVERNANCE REPORT CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

6. FINANCIAL REPORTING AND SIGNIFICANT

ACCOUNTING MATTERS

The Audit and Risk Committee is responsible for reviewing

nancial reporting and advising the Board on whether the

Annual Report and Financial Statements are fair, balanced, and

understandable, as required by the AIC Code. It introduced a

formal annual report governance process which includes bi weekly

meetings attended by the Investment Adviser, Administrator,

Auditor and Audit and Risk Committee Chair. Atthese meetings,

updates were given on the process in place to produce the

annual report, which included thorough assessment by all parties.

Comprehensive and transparent discussions were held on the

contents of the annual report and drafts were reviewed.

Separately, the Chair held meetings with the Board on progress as

well as with individual stakeholders.

The Audit and Risk Committee also met with the Investment

Adviser, the Administrator and the Auditor to talk through the

process and query their ndings and all parties conrmed they

were not aware of any material misstatements to the annual

report.

Additionally, the Audit and Risk Committee assesses the signicant

nancial reporting issues and judgments made when preparing

the Annual Report and evaluates the appropriateness of the

accounting policies adopted.

As a result of the comprehensive reviews, feedback and

recommendation from the Audit and Risk Committee, the

Board has concluded that the Annual Report for the period

ended 31 October 2022, taken as a whole is fair, balanced and

understandable and provides the information necessary for

Shareholders to assess the Company’s position, performance,

business model and strategy.

Due to the materiality of related party transactions, the Board

considers them to be a signicant accounting matter and has

carefully considered the adequacy of their disclosure in the annual

report.

7. KEY ACCOUNTING JUDGEMENTS AND

ESTIMATES

Entities that meet the denition of an investment entity within

IFRS 10 are required to measure their subsidiaries at fair value

through prot or loss rather than consolidate them unless their

main purpose and activities are providing services related to the

Company’s investment activities. The Committee has evaluated

whether the Company is an investment entity and has concluded

that it meets the denition set out in IFRS 10.

Investments are designated at fair value in accordance with the

Company’s accounting policy. As a result, the Audit and Risk

Committee examined the procedures and application of valuation

policies. The valuation of these investments is the most inuential

area of judgement in the annual report. The income projections,

the discount rates used, the rate of ination, and the project

costs make up the main estimates and assumptions. The Audit

and Risk Committee specically questioned the appropriateness

of the discount rate used and carefully considered the impact

of macroeconomic and industry-related factors on income

recognition and associated assumptions in relation to the valuation

of the assets that have been included in the 31 October 2022

valuation.

In the Company’s annual report, the uncertainty associated in

determining the fair value of investment valuations represents a

signicant risk. The Investment Adviser’s fee is calculated based

on the NAV and this presents an inherent risk of management

override.

The Investment Adviser, with assistance from the Administrator,

is responsible for calculating the NAV prior to approval by the

Board. On a quarterly basis, the Investment Adviser provides a

detailed NAV analysis highlighting any movements and assumption

alterations to the prior quarter NAV. This is considered, and

challenged by the Chair of the Audit and Risk Committee prior to

a recommendation for approval being made to the Board.

At period end Mazars were engaged as the independent valuer to

support the Audit and Risk Committee in forming a view on the

reasonableness of the valuations. The Audit and Risk Committee

is satised that the key estimates and assumptions used within the

valuation model are appropriate and that the investments have

been fairly valued.

Service fee income is recognised via fees recharged to each

subsidiary regarding the Company’s resources used for project

related matters. The recharge rate was considered by the Board

and is a signicant estimate.

8. INTERNAL AUDIT

The Audit and Risk 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

investment company with external service providers. The internal

controls framework for the Company has been developed and

is delivered primarily through the risk management process.

This process is described in detail in the Principal Risks and

Uncertainties section on pages 28 to 32 and ensures that

appropriate measures, controls, checks and balances are

implemented to manage and monitor all risks, including internal

and nancial controls. In addition, the external period end audit

has a strong focus on nancial controls and recommendations

following any testing carried out by the Auditors are followed up

by the Audit and Risk Committee. Finally, reports on the internal

controls of the Company’s key service providers are reviewed by

the Board at each Board meeting.

GOVERNANCE

9. WHISTLEBLOWING

The Audit and Risk Committee has arrangements by which staff

of the Investment Adviser and Administrator and other service

providers as the Committee sees t may, in condence, raise

concerns about possible improprieties in matters of nancial

reporting or other matters and satisfy itself that arrangements

are in place for the proportionate and independent investigation

of such mattes and for appropriate follow up action. These

arrangements are embedded into the Investment Adviser and

Administrator’s internal policies.

There were no instances of whistleblowing during the period.

Janine Freeman

Chair of the Audit and Risk Committee

22 February 2023

REPORT OF THE AUDIT AND RISK COMMITTEE CONTINUED

REPORT OF THE REMUNERATION AND NOMINATION

COMMITTEE

The Company has set up a Remuneration and Nomination

Committee which consists of all of the Directors and is chaired by

WilliamRickett. The Remuneration and Nomination Committee

meets at least once a year and more often when required.

The Remuneration and Nomination Committee’s main functions

include:

• agreeing the policy for the remuneration of the Directors and

reviewing any proposed changes to the policy;

• considering and, if necessary, appointing independent

professional remuneration advice;

• making recommendations to the Board on Board tenure and

succession planning, taking into account the existing balance

of skills, knowledge and experience on the Board and the

advantages of diversity; and

• agreeing the arrangements for evaluating the performance of

the Board, its Committees and the Directors.

During the period under review the Committee met once and

all members were present. The Committee discussed Board

composition, tenure and succession, its approach to promoting

diversity, and the policy to be adopted on remuneration. The

Committee also agreed the arrangements for evaluating Board

performance. As part of the overall Board evaluation, it was

concluded that there was a good balance of skills between the

Directors on the Remuneration Committee.

The Committee reports formally to the Board after any meeting

held. The Committee reviews its terms of reference at every

meeting and any changes are approved by the Board. The

terms of reference are available on the Company’s website at:

https://www.heitp.co.uk/investors/shareholder-documents/

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE

DIRECTORS’ REMUNERATION REPORT

ANNUAL STATEMENT

This report sets out the Company’s remuneration policy and

explains how it has been implemented by the Board. It also

provides Shareholders with details of the Directors’ remuneration.

For the Company’s rst year of operation, no change in the

Board’s remuneration was proposed by the Remuneration and

Nomination Committee and it remained at the levels disclosed

at the IPO. An increase in Directors’ remuneration below the

current level of ination is proposed for the nancial year ending

31 October 2023.

The Board has applied, and continues to apply, Principles 9.1 of

the AIC Code 2019 when considering Directors’ remuneration.

This requires the Board to set a formal and transparent procedure

for developing its remuneration policy with no director being

involved in deciding their own remuneration outcome; to design

remuneration policies and practices that support the Company’s

strategy and promote its long-term sustainable success; and

to ensure Directors to exercise independent judgement and

discretion when authorising remuneration outcomes, taking

account of Company and individual performance, and wider

circumstances. For the purposes of recruitment, the same

remuneration policy will be applied.

DIRECTORS’ REMUNERATION POLICY

The Company’s policy is to set Directors’ fees at a level which

will enable the Board to recruit and retain the skills required to

run the Company in the best interests of its Shareholders. In

judging the level of fees required to achieve this, the Company will

take account of the time commitment required of Directors and

the need to be competitive with the fees paid to non-executive

directors of similar companies. The Company may periodically

choose to benchmark Directors’ fees with an independent review,

to ensure they remain fair and reasonable.

The aggregate remuneration of the Directors for their services

shall not exceed £400,000 per annum or such higher gure as

the Company may by ordinary resolution determine and such

remuneration shall be divided amongst the Directors as they shall

agree, or in default of agreement, equally. Such remuneration shall

be deemed to accrue from day to day. The Directors may also be

paid by way of additional remuneration such further sums as the

Board may from time to time determine and any such additional

remuneration shall be divided among the Directors as they shall

agree or, in default of agreement, equally.

The Directors are entitled only to their annual fee and their

reasonable expenses. No element of the Directors’ remuneration

is performance related, nor does any Director have any

entitlement to pensions, share options or any long-term incentive

plans from the Company.

The Directors hold their ofce in accordance with the Articles

of Association and their appointment letters. No Director has a

service contract with the Company, nor are any such contracts

proposed. The Directors’ appointments can be terminated in

accordance with the Articles and without compensation.

Under the Company’s Articles of Association, all Directors are

entitled to remuneration determined from time to time by the

Board.

DIRECTORS’ REMUNERATION AUDITED

In accordance with the terms of their appointment each

Director was entitled to an annual fee of £40,000 per annum.

The Chair and Audit and Risk Committee Chair were paid an

additional sum of £10,000 and £5,000 respectively for the

additional responsibility attached to their respective roles. In

the light of current ination rates, the Board has agreed, on

the recommendation of the Remuneration and Nomination

Committee, that Directors’ fees should be increased by 5 per

cent. for the year starting 1 November 2022. From that date each

Director will receive an annual fee of £42,000 with the Chair

receiving an additional £10,500 and the Audit and Risk Committee

Chair receiving an additional £5,250. In determining the Directors’

remuneration, neither the Company nor the Remuneration

and Nomination Committee has oversight of the remuneration

arrangements of its subsidiaries.

The total emoluments of each person who served as a Director

during the year are set out in the table on the following page.

There are no performance-related elements to Directors’ fees

and the Company does not operate any type of incentive, share

scheme, award or hold options to acquire shares in the Company.

There were no other remuneration fees or taxable benets paid

to any Director during the period. The table also shows the fees

proposed for the period ending 31 October 2023.

DIRECTORS’ REMUNERATION REPORT CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

For the Period ended 31 October 2022*

Director

Fees

Taxable Expenses

Tot a l

Expected Fees for the

year ended October

2023**

Norman Crighton (Chair) 52,692 – 52,692 52,500

Janine Freeman 4 7, 42 3 – 4 7, 42 3 47,250

Hugh McNeal 42,154 – 42,154 42,000

William Rickett 42,154 – 42,154 42,000

Shefaly Yogendra 42,154 – 42,154 42,000

Total 226,577 – 226,577 225,750

*From 1 October 2021 to 31 October 2022

**From 1 November 2022 to 31 October 2023

RELATIVE IMPORTANCE OF SPEND ON PAY

The table below compares the total level of Directors’ remuneration compared to shareholder distributions by way of dividends and

share buybacks in respect of the nancial period ended 31 October 2022.

Payments made

during the period

ended 31October

2022

Directors’ fees as a

percentage of:

Directors’ Remuneration 226,577

Dividends paid 2,100,000 10.78

Buyback of Ordinary Shares – –

Management fee and expenses 1,848,845 12.25

The management fee and expenses which have been included give Shareholders a greater understanding of the relative importance of

spend on pay Distributions to Shareholders by way of dividend provide a comparison of the Shareholders’ returns against Directors’

remuneration.

DIRECTORS’ SHAREHOLDINGS AUDITED

The Directors’ benecial interests (including those of connected persons) at the period end and at the date of this report in the issued

share capital of the Company are outlined below. There is no minimum holding requirement that the Directors need to adhere to.

At 31 October 2022 As at the date of this report

Director

Ordinary Shares C Shares

Percentage of issued

share capital Ordinary Shares

Percentage of issued

share capital

Norman Crighton 10,000 5,000 0.00% 13,933 0.01%

Janine Freeman 10,000 5,000 0.00% 13,933 0.01%

Hugh McNeal 10,000 5,000 0.00% 13,933 0.01%

William Rickett 10,000 5,000 0.00% 13,933 0.01%

Shefaly Yogendra 5,000 5,000 0.00% 8,933 0.00%

On 31 January 2023 the C Shares were converted into new Ordinary Shares on a conversion ratio of 0.786735 new Ordinary Share for

every 1 C Share held.

GOVERNANCE

DIRECTORS’ REMUNERATION REPORT CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE

DIRECTORS’ SERVICE CONTRACTS

None of the Directors has a service contract with the Company.

Each of the Directors is engaged under a letter of appointment

with the Company. The terms of the appointment provide that

each Director is appointed for a period commencing 12 October

2021 until the conclusion of the Company’s rst Annual General

Meeting.

Those terms also provide that a Director may be removed without

notice and that compensation will not be due on leaving ofce.

Each Director is also subject to the rotation of Directors provisions

set out in the Articles which provide that a Director appointed by

the Board during the year is required to retire and seek election by

Shareholders at the next AGM following their appointment.

At the Company’s AGM on 22 March 2023, each of the

Directors shall be submitting themselves for election. Thereafter,

in accordance with the provision of the AIC Code, the

Directors intend to offer themselves for re-election annually,

notwithstanding that under the Articles they are only required to

submit themselves for re-election at least once every three years.

The Board believe, following a formal performance and Board

evaluation, as detailed on page 49, all the Directors continue to be

effective, providing considerable experience and demonstrating

commitment to their roles.

TOTAL SHAREHOLDER RETURN

In setting the Directors’ remuneration, consideration is given to

the size and performance of the Company. The graph below shows

the total shareholder return of the Company’s Ordinary Shares

since IPO against the FTSE All Share index, which the Board has

deemed to be the most appropriate comparator for the Company’s

performance, since it includes smaller companies.

-10%

-5%

10%

15%

20%

Jan 2022

Mar 2022

May 2022

Date

Total shareholder return

Jul 2022

Sep 2022

HEIT.L ^FTAS

Relative growth of stock prices for 09 November 2021 - 31 October 2022

CONSIDERATION OF SHAREHOLDER VIEWS

The fees proposed for Directors were fully disclosed at the

Company’s IPO. No views on the level of fees were expressed by

Shareholders either then or in subsequent contact. The AGM to

be held on 22 March 2023 will give Shareholders an opportunity

to vote on remuneration.

COMMITTEE MEMBERSHIP

The membership, activities and role of the Committee are discussed

in the Remuneration and Nomination Committee Report on page 49.

STATEMENT OF VOTING AT GENERAL MEETING

Under s439 of the Companies Act 2006, companies are required

to ask shareholders to approve the annual remuneration paid

to directors every year and to formally approve the directors’

remuneration policy on an annual or on a three yearly basis.

Any change to the Directors’ remuneration policy will require

Shareholder approval.

As the AGM to be held in March 2023 will be the rst opportunity

for Shareholders to vote on remuneration, there is no voting

disclosure in this report. Accordingly, ordinary resolutions will be

put to Shareholders at the forthcoming AGM to be held on 22

March 2023, to receive and adopt the Directors’ Remuneration

Report and to receive and approve the Directors’ Remuneration

Policy. If approved, the Remuneration Policy will be effective from

that date.

Signed on behalf of the Board

William Rickett

Chair of the Remuneration and Nomination Committee

22 February 2023

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

REPORT OF THE MANAGEMENT ENGAGEMENT

COMMITTEE

The Company has set up a Management Engagement Committee

which consists of all of the Directors and is chaired by Hugh

McNeal. The Management Engagement Committee meets at least

once a year and more often when required.

The three principal duties of the Management Engagement

Committee are to:

• consider the terms of appointment of the AIFM, the Investment

Adviser and other service providers;

• annually review those appointments and the terms of

engagement, including ensuring fees paid are sufcient to

attract and retain staff; and

• monitor, evaluate and hold to account the performance of the

AIFM, the Investment Adviser, the other service providers and

their key personnel against set criteria.

During the period under review the Management Engagement

Committee met once and all members were present.

Representatives of the Company Secretary were also present.

The Management Engagement Committee reports formally to the

Board after any meeting held.

During the period under review the Company adopted a supplier

code of conduct (the “Code”), the purpose being to ensure

best practice supply chain requirements are taken into account

by all key service providers, who will be asked to conrm their

agreement to the Code. Requirements of the Code include

adherence to anti-bribery and corruption policies that align with

those of the Company. Longer term, the intention is to dene

supply chain targets with objectives for sustainability with supplier

audits being carried out to monitor compliance with the Code.

The Management Engagement Committee will be responsible

for monitoring compliance with the Code and assessing service

providers’ progress against ESG goals.

The Management Engagement Committee reviews its terms of

reference at every meeting and any changes are approved by the

Board. The terms of reference are available on the Company’s

website at: https://www.heitp.co.uk/investors/shareholder-

documents/.

THE INVESTMENT ADVISER

Harmony Energy Advisors Limited has been appointed as

Investment Adviser under the terms of an Investment Advisory

Agreement with the Company. The Investment Adviser is a wholly

owned subsidiary of Harmony Energy Limited, a leading UK battery

energy storage project developer with an established track record

in developing, funding and supervising the construction of such

projects and other renewable generation projects in Great Britain.

The management team of the Investment Adviser have been

exclusively focussed on the energy storage sector (across multiple

projects) in Great Britain for over six years, both from the point

of view of asset owner/developer and in a third party advisory

capacity. The management team has relevant experience in revenue

optimisation software development specic to battery energy

storage in Great Britain. This allows the Investment Adviser a high

degree of understanding of relevant revenues available to battery

energy storage, how a battery energy storage project can maximise

its revenues, including through revenue optimisation services, as

well as knowledge of the most effective providers of those services

available in the market in Great Britain.

A summary of the services provided by the Investment Adviser to

the Company are set out in the Corporate Governance statement

on pages 41 to 44.

EVALUATION OF THE INVESTMENT ADVISER

The Management Engagement Committee evaluated the

performance of the Investment Adviser during the year. This

included reviewing the skills matrix of the Investment Adviser’s key

personnel and the Investment Adviser’s internal control nancial

framework. The Management Engagement Committee was

impressed with the level of detail provided by the Investment Adviser

to the questions asked.

The Management Engagement Committee also reviewed the

Investment Adviser’s investment performance, its compliance with

the Investment Advisory Agreement as well as value for money.

During the period, the Company agreed a debt facility of £60million

from NatWest to support the acquisition and construction of the rst

pipeline project, acquired an additional 99 MW/198 MWh project,

raised an additional £14.7 million through a placing in October

2022 by way of the issue of 14.7 million C Shares, with proceeds

committed against identied pipeline projects and adopted an ESG

strategy, following completion of a materiality assessment;

Since the reporting period, working closely with the Investment

Adviser, the Company completed construction and commenced

commercial operations on the Pillswood project, which

(at98MW/196 MWh) constitutes a signicant proportion of the

Company's portfolio. In addition, the Company has successfully

extended its debt facility and executed construction contracts

in relation to two of three projects acquired in December 2022.

Following completion of the review the Management Engagement

Committee was satised with the service provided, that the

remuneration paid was reasonable and recommended to the Board

that the continued engagement of the Investment Adviser was in

the best interests of Shareholders.

EVALUATION OF THE ALTERNATIVE INVESTMENT

FUND MANAGER

In accordance with the terms of a Management Agreement, JTC

Global AIFM Solutions Limited has been appointed to act as

alternative investment fund manager, providing risk management

and portfolio services to the Company. The AIFM is licensed and

regulated by the Guernsey Financial Services Commission. The

Management Engagement Committee reviewed the performance

of the AIFM during the year, which included reviewing value for

money and the quality of service provided. The Management

GOVERNANCE

REPORT OF THE MANAGEMENT ENGAGEMENT COMMITTEE CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE

Engagement Committee was satised with the service provided,

that the AIFM had complied with the relevant laws and regulations

and the level of remuneration paid, and recommended to the

Board that the AIFM’s continued appointment was in the best

interests of Shareholders.

EVALUATION OF KEY SERVICE PROVIDERS

JTC (UK) Limited is appointed as Company Secretary and

Administrator and attends all Management Engagement

Committee meetings, but is not present in discussions

regarding its own performance. The Management Engagement

Committee reviewed the performance of the Administrator

and Company Secretary and concluded it was satisfactory. The

Board are responsible for the appointment or removal of the

CompanySecretary.

The Management Engagement Committee carried out an

evaluation of the Company’s wider service providers, including

the registrars, broker, legal rms and consultants providing

specialist advice and support on ESG and sustainability issues. The

evaluation included value for money, governance, cyber security

and data protection, all legal requirements, operating and internal

controls as well as ESG policies and achievement of policy goals.

There are no issues to report and the Management Engagement

Committee highlighted to the Board the high level of ESG and

sustainability policies and activity of some of the Company’s

service providers.

SELFEVALUATION

The Management Engagement Committee carried out a self-

evaluation and was satised that it was operating effectively. As this

was the Company’s rst year of operation it was agreed that an

external valuation was not considered necessary, but this would be

kept under review.

Hugh McNeal

Chair of the Management Engagement Committee

22 February 2023

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

INDEPENDENT AUDITOR’S REPORT

OPINION

We have audited the nancial statements of Harmony Energy

Income Trust Plc for the period ended 31 October 2022

which comprise the Statement of Comprehensive Income, the

Statement of Financial Position, the Statement of Changes in

Equity, the Statement of Cash Flows, and the related notes 1

to 25, including a summary of signicant accounting policies.

The nancial reporting framework that has been applied in their

preparation is applicable law and UK adopted international

accounting standards.

In our opinion, the nancial statements:

• give a true and fair view of the Company’s affairs as at 31

October 2022 and of its prot for the period then ended;

• 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.

BASIS FOR OPINION

We conducted our audit in accordance with International

Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our

responsibilities under those standards are further described in the

Auditor’s responsibilities for the audit of the nancial statements

section of our report. We believe that the audit evidence we have

obtained is sufcient and appropriate to provide a basis for our

opinion.

INDEPENDENCE

We are independent of the Company in accordance with the

ethical requirements that are relevant to our audit of the nancial

statements in the UK, including the FRC’s Ethical Standard as

applied to listed public interest entities, and we have fullled

our other ethical responsibilities in accordance with these

requirements.

The non-audit services prohibited by the FRC’s Ethical Standard

were not provided to the Company and we remain independent

of the Company in conducting the audit.

CONCLUSIONS RELATING TO GOING

CONCERN

In auditing the nancial statements, we have concluded that

the directors’ use of the going concern basis of accounting in

the preparation of the nancial 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:

• Conrmation of our understanding of the Company’s going

concern assessment process and engaged with the Directors

and the Company Secretary to determine if all key factors

were considered in their assessment. We considered whether

the factors taken account of in the directors’ assessment

addressed those matters which we considered important.

• Inspection of the Directors’ assessment of going concern,

including the cash ow forecast, for the period to 30 June

2024 which is at least twelve months from the date these

nancial statements were authorised for issue. In preparing the

revenue forecast, the Company has concluded that it is able

to continue to meet its ongoing costs as they fall due.

• Review of the factors and assumptions, including the impact

of the current economic environment and other signicant

events that could give rise to market volatility, as applied to

the cash ow forecast. We considered the appropriateness

of the methods used to calculate the cash ow forecast

and determined, through testing of the methodology and

calculations, that the methods, inputs and assumptions utilised

were appropriate to be able to make an assessment for the

Company. We also reviewed the Company’s assessment of the

investment portfolio under stressed market conditions and

determined the impact of sensitivities in net asset value from

the reverse stress testing performed.

• Consideration of the commitments that have been made with

respect to the purchase of unquoted investments and made

sure that these have been appropriately taken account of

when preparing the cash ow forecast.

• We conrmed through discussion with the Investment

Manager and the directors that there was no utilisation of debt

facilities. We corroborated these statements during our audit

procedures by reviewing bank statements for unrecorded

liabilities and review of contracts and agreements and noted

that there were no material commitments for the Company as

at 31 October 2022.

• Review of the Company’s going concern disclosures included

in the annual report in order to assess whether the disclosures

were appropriate and in conformity with the reporting

standards.

GOVERNANCE

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE

Based on the work we have performed, we have not identied

any material uncertainties relating to events or conditions that,

individually or collectively, may cast signicant doubt on the

Company’s ability to continue as a going concern for a period

assessed by the directors, being the period to 30 June 2024,

which is at least 12 months from when the nancial statements are

authorised for issue.

In relation to the Company’s reporting on how they have applied

the UK Corporate Governance Code, we have nothing material to

add or draw attention to in relation to the directors’ statement in

the nancial statements about whether the directors considered it

appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the directors with

respect to going concern are described in the relevant sections of

this report. However, because not all future events or conditions

can be predicted, this statement is not a guarantee as to the

Company’s ability to continue as a going concern.

OVERVIEW OF OUR AUDIT APPROACH

Key audit matters • Risk of inaccurate valuation of

investments and the resulting impact

on the unrealised gains/(losses) in the

Statement of Comprehensive Income

• Risk of inaccurate revenue recognition,

including service fee income

Materiality

• Overall materiality of £2.72m which

represents 1% of net assets, adjusted for

the C Class Shares classied as a liability

under IFRS.

AN OVERVIEW OF THE SCOPE OF OUR AUDIT

Tailoring the scope

Our assessment of audit risk, our evaluation of materiality and

our allocation of performance materiality determine our audit

scope for the Company. This enables us to form an opinion on

the nancial statements. We take into account size, risk prole,

the organisation of the Company and effectiveness of controls,

including controls and changes in the business environment when

assessing the level of work to be performed. All audit work was

performed directly by the audit engagement team.

Climate change

There has been increasing interest from stakeholders as to

how climate change will impact companies. The Company has

assessed the impact climate change could have on its operations

and investments. This is explained in the ESG section on pages

18-27, which form part of the “Other information,” rather than

the audited nancial statements. Our procedures on these

disclosures therefore consisted solely of considering whether they

are materially inconsistent with the nancial statements or our

knowledge obtained in the course of the audit or otherwise appear

to be materially misstated.

Our audit effort in considering climate change was focused

on the adequacy of the Company’s disclosures in the nancial

statements as set out in note 2 and conclusion that climate risk

does not materially impact the estimates and assumptions used in

determining the fair value of the investments. We also challenged

the directors’ considerations of climate change in their assessment

of going concern and viability and associated disclosures.

Key audit matters

Key audit matters are those matters that, in our professional

judgment, were of most signicance in our audit of the nancial

statements of the current period and include the most signicant

assessed risks of material misstatement (whether or not due to

fraud) that we identied. These matters included 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 were addressed in the context of our audit

of the nancial statements as a whole, and in our opinion thereon,

and we do not provide a separate opinion on these matters.

INDEPENDENT AUDITOR’S REPORT CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

Risk Our response to the risk

Key observations communicated

to the Audit and Risk Committee

Risk of inaccurate valuation of investments

and the resulting impact on the unrealised

gains/(losses) in the Statement of

Comprehensive Income

Refer to the Audit and Risk Committee Report

(page 46); Accounting policies (page67); and

note 18 of the Financial Statements (page 78)

The valuation of the investment portfolio as at

31 October 2022 was £145.69m consisting of

the Company’s investments in battery storage

assets through its subsidiaries. The Company

meets the denition of an ‘investment entity’

in accordance with IFRS 10, thus it values its

investment in its subsidiaries at fair value through

prot or loss.

The accurate valuation of investments is

fundamental to the Company’s nancial

performance. The return generated by the

investment portfolio is a key driver of the

Company’s returns.

Due to the nature of the investment portfolio,

being unlisted investments with no directly

comparable listed investments, the underlying

assumptions that drive the value of the asset

are subjective. As a result, the valuation of

the portfolio and the resulting impact on the

unrealised gains/(losses) in the Statement

of Comprehensive Income is susceptible

to misstatement. The investment valuation

approach requires sufcient rigour to eliminate

the susceptibility of the investment valuations to

bias.

The valuation principles used are based on

International Valuation Standards Council

(“IVSC”) valuation guidelines, using a discounted

cash ow (“DCF”) methodology.

We performed the following procedures:

• Gained an understanding of the Investment

Manager and directors’ processes and

controls surrounding investment valuations,

by performing a walkthrough to evaluate the

design and implementation of controls.

• Obtained and reviewed the valuation models

of each asset held via the Company’s

investments in its subsidiaries to validate

that the valuation methodology adopted is

consistent with the requirements of IFRS and

IVSC guidelines.

• Corroborated key revenue streams and

other valuation model inputs to supporting

contracts and external pricing forecasts, as

applicable.

• Held discussions with the Investment

Manager to understand the key drivers

to the cash ow projections included in

the valuation models and assessed their

appropriateness based on the nature of the

asset and our understanding of the relevant

markets.

• For all investments, given this is the rst

period under audit, engaged EY valuation

specialists to assist in challenging the

appropriateness of the discount rate used

and to assess the impact of macro-economic

and industry related factors used in

calculating the net present value of the future

cash ows.

• Checked the clerical accuracy of the

valuation models.

• We recalculated the unrealised gain/loss in

the nancial statements based on changes in

investment values, purchases and realisations.

Our audit procedures did

not identify any material

misstatements regarding the

risk of incorrect valuation of

investments.

INDEPENDENT AUDITOR’S REPORT CONTINUED

GOVERNANCE

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE

Risk Our response to the risk

Key observations communicated

to the Audit and Risk Committee

Risk of inaccurate revenue recognition,

including service fee income

Refer to the Audit and Risk Committee Report

(page 46); Accounting policies (page 67); and

note 6 of the Financial Statements (page 70)

As at 31 October 2022, the total revenue was

£3.93m, comprising of the service fee income

amounting to £1.85m and investment income

amounting to £2.08m.

Service fee income represents fees charged by

the Company to its subsidiaries in relation to

project related matters. This is calculated as a

percentage of the total operating expenditure

based on the proportion of time spent on

such matters. Investment income is calculated

by multiplying the interest rates with the loan

investments.

As the Company meets the denition of an

‘investment entity’ in accordance with IFRS 10

and values its subsidiaries at fair value through

prot and loss these fees are shown as income

in the Statement of Comprehensive Income.

Due to the judgement involved in assessing the

proportion of the Companies resources spent

on project matters, we consider these fees to be

susceptible to misstatement.

We performed the following procedures:

• Obtained an understanding of how service

fee income and investment income is

recognised by performing walkthrough

procedures to evaluate the design and

implementation of controls.

• Obtained the Company’s assessment of the

proportion of resources spent on project

related matters.

• Reviewed the inputs and assumptions in

calculating the service fee income

• Recalculated the service fee income based on

the intercompany services agreement.

• Recalculated the investment income relating

to loan interest attributable to the Company

from the SPVs, with reference to the

contractual agreements.

Our audit procedures did

not identify any material

misstatements regarding the

risk of incorrect revenue

recognition, including service

fee income.

OUR APPLICATION OF MATERIALITY

We apply the concept of materiality in planning and performing

the audit, in evaluating the effect of identied misstatements on

the audit and in forming our audit opinion.

Materiality

The magnitude of an omission or misstatement that, individually

or in the aggregate, could reasonably be expected to inuence

the economic decisions of the users of the nancial statements.

Materiality provides a basis for determining the nature and extent

of our audit procedures.

We determined materiality for the Company to be £2.72m,

which is 1% of net assets, adjusted for the C Class Shares which

are classied as a liability under IFRS. We believe that the net

asset value provides us with the most important nancial metric

on which shareholders would judge the performance of the

Company.

Performance materiality

The application of materiality at the individual account or balance

level. It is set at an amount to reduce to an appropriately low level

the probability that the aggregate of uncorrected and undetected

misstatements exceeds materiality.

On the basis of our risk assessments, together with our

assessment of the Company’s overall control environment, our

judgement was that performance materiality was 50% of our

planning materiality, namely £1.36m. We have set performance

materiality at this percentage due to this being the rst period of

operations for the Company and therefore our rst audit.

Reporting threshold

An amount below which identied misstatements are considered

as being clearly trivial.

We agreed with the Audit and Risk Committee that we would

report to them all uncorrected audit differences in excess of

£0.14m, which is set at 5% of planning materiality, as well as

differences below that threshold that, in our view, warranted

reporting on qualitative grounds.

We evaluate any uncorrected misstatements against both the

quantitative measures of materiality discussed above and in light of

other relevant qualitative considerations in forming our opinion.

INDEPENDENT AUDITOR’S REPORT CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

OTHER INFORMATION

The other information comprises the information included in the

annual report other than the nancial statements and our auditor’s

report thereon. The directors are responsible for the other

information contained within the annual report.

Our opinion on the nancial statements does not cover the other

information and, except to the extent otherwise explicitly stated in this

report, we do not express any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in

doing so, consider whether the other information is materially

inconsistent with the nancial statements or our knowledge

obtained in the course of the audit or otherwise appears to be

materially misstated. If we identify such material inconsistencies

or apparent material misstatements, we are required to determine

whether this gives rise to a material misstatement in the nancial

statements themselves. If, based on the work we have performed,

we conclude that there is a material misstatement of the other

information, we are required to report that fact.

We have nothing to report in this regard.

OPINIONS ON OTHER MATTERS PRESCRIBED

BY THE COMPANIES ACT 2006

In our opinion the part of the directors’ remuneration report to

be audited has been properly prepared in accordance with the

Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the strategic report and the directors’

report for the nancial period for which the nancial

statements are prepared is consistent with the nancial

statements; and

• the strategic report and directors’ report have been prepared

in accordance with applicable legal requirements.

MATTERS ON WHICH WE ARE REQUIRED TO

REPORT BY EXCEPTION

In the light of the knowledge and understanding of the Company

and its environment obtained in the course of the audit, we have

not identied material misstatements in the strategic report or

directors’ report.

We have nothing to report in respect of the following matters in

relation to which the Companies Act 2006 requires us to report

to you if, in our opinion:

• adequate accounting records have not been kept, or returns

adequate for our audit have not been received from branches

not visited by us; or

• the nancial statements and the part of the Directors’

Remuneration Report to be audited are not in agreement with

the accounting records and returns; or

• certain disclosures of directors’ remuneration specied by law

are not made; or

• we have not received all the information and explanations we

require for our audit

CORPORATE GOVERNANCE STATEMENT

We have reviewed the directors’ statement 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

specied for our review by the Listing Rules

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 nancial

statements or our knowledge obtained during the audit:

• Directors’ statement with regards to the appropriateness

of adopting the going concern basis of accounting and any

material uncertainties identied set out on page 35;

• Directors’ explanation as to its assessment of the Company’s

prospects, the period this assessment covers and why the

period is appropriate set out on page 35;

• Directors' statement on whether it has a reasonable

expectation that the group will be able to continue in

operation and meets its liabilities set out on page 35;

• Directors’ statement on fair, balanced and understandable set

out on page 45;

• Board’s conrmation that it has carried out a robust assessment

of the emerging and principal risks set out on page 28;

• The section of the annual report that describes the review of

effectiveness of risk management and internal control systems

set out on page 45; and;

• The section describing the work of the Audit and Risk

Committee set out on page 46.

RESPONSIBILITIES OF DIRECTORS

As explained more fully in the directors’ responsibilities statement

set out on page 45, the directors are responsible for the

preparation of the nancial statements and for being satised

that they give a true and fair view, and for such internal control

as the directors determine is necessary to enable the preparation

of nancial statements that are free from material misstatement,

whether due to fraud or error.

In preparing the nancial 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.

INDEPENDENT AUDITOR’S REPORT CONTINUED

GOVERNANCE

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

GOVERNANCE

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT

OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether

the nancial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue an

auditor’s 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 inuence the

economic decisions of users taken on the basis of these nancial

statements.

Explanation as to what extent the audit was considered

capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance

with laws and regulations. We design procedures in line with our

responsibilities, outlined above, to detect irregularities, including

fraud. 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. The extent to which our procedures are capable of

detecting irregularities, including fraud is detailed below.

However, the primary responsibility for the prevention and

detection of fraud rests with both those charged with governance

of the Company and management.

• We obtained an understanding of the legal and regulatory

frameworks that are applicable to the Company and

determined that the most signicant are those that relate to

the reporting framework (UK adopted international accounting

standards, the Companies Act 2006, UK Corporate

Governance Code, AIC Code of Corporate Governance

and The Companies (Miscellaneous Reporting) Regulations

2018) and Section 1158 of the Corporation Tax Act 2010. In

addition, we concluded that there are certain signicant laws

and regulations which may inuence the determination of the

amounts and disclosures in the nancial statements including

the Listing Rules of the UK Listing Authority.

• We understood how the Company is complying with those

frameworks by making enquiries of the Investment Manager,

Company Secretary, and also the directors including the

Chair of the Audit and Risk Committee. We corroborated

our understanding through our review of board minutes,

papers provided to the Audit and Risk Committee and

correspondence received from regulatory bodies.

• We assessed the susceptibility of the Company’s nancial

statements to material misstatement, including how fraud

might occur by considering the key risks impacting the

nancial statement. We identied fraud and management

override risks in relation to estimation uncertainty relating to

the valuation of investments. Our audit procedures stated

above in the ‘Key audit matters section’ of this Auditor’s report

were performed to address the fraud risk.

• Based on this understanding we designed our audit

procedures to identify non-compliance with such laws and

regulations. Our procedures involved review of the Company

Secretary's reporting to the Directors with respect to the

application of the documented policies and procedures and

review of the nancial statements to ensure compliance with

the reporting requirements of the Company.

A further description of our responsibilities for the audit of the

nancial statements is located on the Financial Reporting Council’s

website at https://www.frc.org.uk/auditorsresponsibilities. This

description forms part of our auditor’s report.

OTHER MATTERS WE ARE REQUIRED TO

ADDRESS

• Following the recommendation from the Audit and Risk

Committee, we were appointed by the Company on 27 June

2022 to audit the nancial statements for the period ended 31

October 2022 and subsequent nancial periods.

The period of total uninterrupted engagement including

previous renewals and reappointments is 1 year, covering the

period ended 31 October 2022.

• The audit opinion is consistent with the additional report to

the Audit and Risk Committee.

USE OF OUR REPORT

This report is made solely to the Company’s members, as a body,

in accordance with Chapter 3 of Part 16 of the Companies Act

2006. Our audit work has been undertaken so that we might

state to the Company’s members those matters we are required

to state to them in an auditor’s report and for no other purpose.

To the fullest extent permitted by law, we do not accept or

assume responsibility to anyone other than the Company and the

Company’s members as a body, for our audit work, for this report,

or for the opinions we have formed.

Signature

Mike Gaylor (Senior statutory auditor)

for and on behalf of Ernst & Young LLP, Statutory Auditor

London

22 February 2023

INDEPENDENT AUDITOR’S REPORT CONTINUED

FINANCIAL

STATEMENTS

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME

Notes

Revenue

Capital

1 October 2021 to

31 October 2022

Tot a l

Net gain on investments at fair value through prot

and loss 10 – 53,080,091 53,080,091

Service fee income 6 1,853,151 – 1,853,151

Investment income 6 2,083,035 – 2,083,035

3,936,186 53,080,091 57,016,277

Expenditure

Administrative and other expenses 7 (3,999,189) – (3,999,189)

Prot/(loss) before taxation (63,003) 53,080,091 53,017,088

Taxation 8 – – –

Prot/(loss) after tax and Total Comprehensive

Income for the period (63,003) 53,080,091 53,017,088

Earnings per share (basic and diluted):

Ordinary Share 9 0.25

All Revenue and Capital items in the above statement are derived from continuing operations.

The Total column of this statement represents Company’s Income Statement prepared in accordance with UK adopted international

accounting standards ("IAS"). The return on ordinary activities after taxation is the total comprehensive income and therefore no

additional statement of other comprehensive income is presented.

The supplementary revenue and capital columns are presented for information purposes in accordance with the Statement of

Recommended Practice issue by the Association of Investment Companies ("AIC SORP").

The notes on pages 66 to 85 form an integral part of these Financial Statements.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

STATEMENT OF FINANCIAL POSITION

Notes

31 October 2022

Non-current assets

Investments held at fair value 10 145,685,845

145,685,845

Current assets

Trade and other receivables 11 1,381,693

Loan to Shareholder 12 1,443,506

Cash and cash equivalents 13 124,571,626

127,396,825

Total assets 273,082,670

Current liabilities

Trade and other payables 14 730,364

Financial Liability at fair value 15 14,542,172

15,272,536

Net current assets 112,124,289

Total net assets 257,810,134

Shareholders equity

Share capital 19 2,100,000

Capital reduction reserve 19 202,693,046

Revenue reserve (63,003)

Capital reserve 53,080,091

Total Shareholders’ equity 257,810,134

Net asset value per Ordinary share (pence) 21 122.77

The Financial Statements of Harmony Energy Income Trust Plc (registered number 13656587) were approved by the Board of Directors

and authorised for issue on 22 February 2023. They were signed on its behalf by:

Norman Crighton

Chairman

22 February 2023

The notes on pages 66 to 85 form an integral part of these Financial Statements.

FINANCIAL STATEMENTS

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

FINANCIAL STATEMENTS

STATEMENT OF CHANGES IN EQUITY

Notes

Ordinary

capital

premium:

Ordinary

Capital

reduction

reserve

Revenue

reserve

Capital

reserve

Tot a l

Shareholders’

equity

Balance at 1 October 2021 – – – – – –

Transactions with owners:

Issue of share capital 19 2,100,000 207,900,000 – – – 210,000,000

Equity issue costs 19 – (3,106,954) – – – (3,106,954)

Transfer to capital reduction reserve 19 – (204,793,046) 204,793,046 – – –

Dividends paid 19 – – (2,100,000) – – (2,100,000)

Total comprehensive income for the period:

Prot/(loss) for the period – – – (63,003) 53,080,091 53,017,088

Balance at 31 October 2022 2,100,000 – 202,693,046 (63,003) 53,080,091 257,810,134

The notes on pages 66 to 85 form an integral part of these Financial Statements.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

STATEMENT OF CASH FLOWS

Notes

1 October 2021 to

31 October 2022

Cash ows from operating activities

Prot for the period 53,017,088

Adjustments for non-cash items:

Net gain on investments at fair value through prot and loss 10 (53,080,091)

Investment Income 6 (2,083,035)

Service fee income 6 (1,853,151)

Operating cash ows before movements in working capital (3,999,189)

Increase in trade and other receivables 11 (1,381,693)

Increase in trade and other payables 14 730,364

Net cash outow from operating activities (4,650,518)

Cash ows used in investing activities

Loan to Shareholder 12 (1,443,506)

Purchases of Investments (65,185,873)

Net cash outow from investing activities (66,629,379)

Cash ows used in nancing activities

Proceeds from issue of Ordinary Shares 186,516,305

Proceeds from borrowings 14,542,172

Share issue costs (3,106,954)

Dividend paid (2,100,000)

Net cash inow from nancing activities 195,851,523

Net increase in cash and cash equivalents for the period 124,571,626

Cash and cash equivalents at the beginning of the period –

Cash and cash equivalents at the end of the period 13 124,571,626

The notes on pages 66 to 85 form an integral part of these Financial Statements.

FINANCIAL STATEMENTS

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS

FOR THE PERIOD FROM 1 OCTOBER 2021 INCORPORATION DATE TO 31 OCTOBER 2022

1. GENERAL INFORMATION

Harmony Energy Income Trust Plc was incorporated as a Public Company, limited by shares, in England and Wales on 1 October 2021 with

registered number 13656587. The registered ofce of the Company is The Scalpel 18th Floor, 52 Lime Street, London, England EC3M 7AF.

The Company’s principal activity is to invest in commercial scale battery energy storage and renewable energy generation projects, with an

initial focus on a portfolio of utility scale battery energy storage systems (“BESS”), located in diverse locations across Great Britain.

2. BASIS OF PREPARATION

The audited Annual Report and Financial Statements has been prepared in accordance with UK adopted IAS and in conformity with

the requirements of the Companies Act 2006 and also considers the Statement of Recommended Practice “Financial Statements of

Investment Trust Companies and Venture Capital Trusts”, issued by the AIC SORP in April 2021. The Financial Statements are prepared on

a historical cost basis, except where balances are recognised at fair value. The principal accounting policies are set out in Note 5.

In terms of the AIC SORP, the Company presents an Income Statement which shows amounts split between those which are revenue and

capital in nature. The determination of the revenue or capital nature of a transaction is determined by giving consideration to the underlying

elements of the transaction. Capital transactions are considered to be those arising as a result of the appreciation or depreciation in the value

of assets due to the fair value movements on investments held at fair value through prot and loss. Revenue transactions are all transactions,

other than those which have been identied as capital in nature.

The Company is an investment entity in accordance with IFRS 10 which holds all its subsidiaries at fair value and therefore only prepares

separate accounts. The Financial Statements are also prepared on the assumption that approval as an investment trust will continue to

begranted.

FUNCTIONAL AND PRESENTATION CURRENCY

The currency of the primary economic environment in which the Company operates (the functional currency) is British Pounds Sterling

which is also the presentation currency.

GOING CONCERN

In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting

Council. Bearing in mind the nature of the Company’s business and assets, the Directors consider the Company to have adequate

resources to continue in operational existence.

The going-concern analysis takes into account expected increases to Investment Adviser’s fee in line with the Company’s NAV and

assumes operating costs continues at the current rate. It is assumed that discretionary dividend payments to shareholders are made at

the target annual rate of 8 pence per ordinary share. On this basis the Company will continue to be operational and will have excess

cash after payment of its liabilities.

As at 31 October 2022, the Company had net current assets of £112,124,289 and had cash balances of £124,571,626 (excluding cash

balances within investee companies), which are sufcient to meet current obligations as they fall due.

The major cash outows of the Company are the payment of dividends and costs relating to the acquisition of new assets, both of

which are discretionary. The Company had no outstanding debt as at 31 October 2022. The nancial position of the Company, its cash

ows, and liquidity position are described in the Financial Statements and related notes. In addition, note 16 to the Financial Statements

includes the policies and processes for managing its capital, its nancial risk management, details of its nancial instruments and its

exposure to credit risk and liquidity risk.

As at 31 October 2022, the Company was a guarantor to its wholly owned subsidiary, HEIT Holdings Ltd in respect of the £60 million

debt facility. Post reporting period, this guarantee has been increased to cover the new £110 million debt facility and ancillary revolving

credit facility of up to £20 million. Subject to Directors approval, the Company also provides parent company guarantees to subsidiaries

in relation to certain construction and/or battery supply contracts. As at 31 October 2022, total committed funding to subsidiaries was

£161 million. As at the date of publication, the aggregate outstanding funding commitment stands at £148 million, recognising both

expenditure incurred post reporting period as well as new commitments made in relation to the Hawthorn Pit and Wormald Green

projects. These commitments are covered by the Company’s cash reserves and debt facilities.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

As at period end, total committed capital expenditure of subsidiaries was £166 million. As at the date of publication, the aggregate

outstanding capital expenditure stands at £148 million, recognising both expenditure incurred post reporting period as well as new

commitments made in relation to the Hawthorn Pit and Wormald Green projects. These commitments are covered by the Company’s

cash reserves and debt facilities.

The Company has no direct exposure to either Ukraine or Russia and therefore does not consider the conict to have an impact on the

going concern operations of the Company.

The Directors considered the impact of climate change on the investments included in Company’s nancial statements and have

assessed that it does not materially impact the estimates and assumptions used in determining the fair value of the investments.

The Directors acknowledge their responsibilities in relation to the nancial statements for the year ended 31 October 2022 and the

preparation of the nancial statements on a going concern basis remains appropriate. The Company expects to meet its obligations as

and when they fall due for at least the next twelve months after the date of approval of the nancial statements.

As such, they have adopted the going concern basis in preparing the Annual Report and Financial Statements.

3. NEW AND REVISED STANDARDS AND INTERPRETATIONS

NEW AND REVISED IFRS IN ISSUE BUT NOT YET EFFECTIVE

The following standards have been issued but are not effective for this accounting period and have not been adopted early:

• IAS 1 (amended) – Amendments regarding classications of liabilities, and disclosure of accounting policies – effective from 1 January 2023.

• IAS 8 (amended) – Amendments regarding the denition of accounting estimates – effective from 1 January 2023.

Adoption of the new and revised standards and relevant interpretations in future periods is not expected to have a material impact on

the Financial Statements of the Company.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies used in the preparation of the Financial Statements have been consistently applied during the period ended

31October 2022.

The principal accounting policies applied in the preparation of the Financial Statements are set out below:

SEGMENTAL INFORMATION:

The Board is of the opinion that the Group is engaged in a single segment business, being the investment in energy storage and

complementary renewable energy generation assets, with an initial focus in a diversied portfolio of utility scale battery energy storage

systems (BESS), located in diverse locations across Great Britain.

INCOME

Income comprises Investment income and Service fee income. Investment income arising from interest on the portfolio assets loan

investments is recognised on an accrual basis in the Revenue account of the Statement of Comprehensive Income. Service fee income

is recognised from fees charged to each portfolio company regarding the Company’s resources used for project related matters. The

Service fee income is recognised in the Revenue account of the Statement of Comprehensive Income.

EXPENSES

Operating expenses are the Company’s costs incurred in connection with the on-going management of the Company’s investments

and administrative costs. Operating expenses are accounted for on an accruals basis and charged to the Statement of Comprehensive

Income. Expenses are charged through the Revenue account except those which are capital in nature, these include those which are

incidental to the acquisition, disposal or enhancement of an investment, which are accounted for through the Capital account. In terms

of the AIC SORP the Company applies the general accounting basis and charges the full Investment Adviser fees to revenue (“the non-

allocation approach”). Costs directly relating to the issue of Ordinary Shares are charged to share premium.

FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

FINANCIAL STATEMENTS

TAXATION

The Company is approved as an Investment Trust Company (“ITC”) under sections 1158 and 1159 of the Corporation Taxes Act 2010

and Part 2 Chapter 1 of Statutory Instrument 2011/2999 for accounting periods commencing on or after 25 May 2018. The approval is

subject to the Company continuing to meet the eligibility conditions of the Corporations Tax Act 2010 and the Statutory Instrument

2011/2999. The Company intends to ensure that it complies with the ITC regulations on an ongoing basis and regularly monitors the

conditions required to maintain ITC status.

Current tax is the expected tax payable on any taxable income for the period, using tax rates enacted or substantively enacted at the

end of the relevant period. The current tax rate is 19% but this will increase to 25% with effect from 1 April 2023 as announced by the

UK Government. This is not expected to have a material impact on the Company.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash at bank and call deposit held with the bank on a 32 day notice which can be readily converted

to cash. The xed deposit account held with the bank is used for cash management purposes.

TRADE AND OTHER RECEIVABLES

Trade and other receivables are recognised initially at fair value and subsequently stated at amortised cost less loss allowance which is

determined using the simplied approach to measuring expected credit losses, the effect of which is considered immaterial.

TRADE AND OTHER PAYABLES

Trade and other payables are recognised initially at fair value and subsequently stated at amortised cost.

EQUITY

Equity instruments issued by the Company are recorded as the amount of the proceeds received, net of directly attributable issue costs.

Costs not directly attributable to the issue are immediately expensed in the Statement of Comprehensive Income.

FINANCIAL INSTRUMENTS

In accordance with IFRS 9, the Company classies its nancial assets and nancial liabilities at initial recognition into the categories of

amortised cost or fair value through prot or loss. Derivative instruments are measured at fair value through prot and loss.

FINANCIAL ASSETS

The Company’s nancial assets, other than cash and cash equivalents and trade and other receivables, are measured at fair value

through prot or loss as they are held in the business model whose performance is evaluated and assessed on a fair value basis.

FINANCIAL LIABILITIES MEASURED AT AMORTISED COST

The Company classies all nancial liabilities as nancial liabilities at amortised cost expect the C Share Liability which is measured at fair

value through prot or loss.

RECOGNITION AND DERECOGNITION

Financial assets are recognised on trade date, the date on which the Company commits to purchase or sell an asset. A nancial asset is

derecognised where the rights to receive cash ows from the asset have expired, or the Company has transferred its rights to receive

cash ows from the asset. The Company derecognises a nancial liability when the obligation under the liability is discharged, cancelled

or expired.

IMPAIRMENT OF FINANCIAL ASSETS

The Company holds trade receivables with no nancing component and which have maturities of less than 12 months at amortised cost

and, as such has chosen to apply the simplied approach to measuring expected credit losses, as permitted by IFRS 9, which uses a

lifetime expected loss allowance for all trade receivables.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

DIVIDENDS PAYABLE

Dividends are recognised when they become legally payable, as a reduction in equity in the Financial Statements. Interim equity

dividends are recognised when paid. Dividends on the shares will be payable quarterly from 2023 onwards, all in the form of interim

dividends (the Company does not intend to pay any nal dividends).

5. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of the Financial Statements requires management to make judgements, estimates and assumptions that affect the

application of accounting policies and the reported amount of assets, liabilities, income and expenses. Estimates and underlying

assumptions are reviewed on an ongoing basis. Revisions to the accounting estimates are recognised in the period in which the estimates

are revised and in any future periods affected.

During the period the Directors considered the following signicant judgements, estimates and assumptions:

ASSESSMENT AS AN INVESTMENT ENTITY

Entities that meet the denition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair value through

prot or loss rather than consolidate them unless their main purpose and activities are providing services related to the Company’s

investment activities. To determine that the Company continues to meet the denition of an investment entity, the Company is required

to satisfy the following three criteria:

a) the Company obtains funds from one or more investors for the purpose of providing those investors with investment management

services;

b) the Company commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation,

investment income, or both; and

c) the Company measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Company meets the criteria as follows:

• The Company’s investment objective is to provide investors with an attractive and sustainable level of income returns, with the

potential for capital growth, by investing in commercial scale energy storage and renewable energy generation projects, with an

initial focus on a diversied portfolio of battery energy storage systems located in Great Britain (“Projects”);

• the Company provides investment management services and has several investors who pool their funds to gain access to

infrastructure related investment opportunities that they might not have had access to individually; and

• the Company has elected to measure and evaluate the performance of all of its investments on a fair value basis. The fair value

method is used to represent the Company’s performance in its communication to the market, including investor presentations.

In addition, the Company reports fair value information internally to Directors, who use fair value as the primary measurement

attribute to evaluate performance.

As at 31 October 2022, the Company had the following subsidiaries;

• Harmony (PW) Limited,

• Harmony (PW) 2 Limited,

• Harmony BD Limited,

• Harmony FM Limited,

• Harmony RH Ltd,

• Daisy No. 2 Limited,

• HEIT Holdings Ltd,

• Harmony BF Limited

In respect of the second criterion, Projects may also be disposed of, or otherwise realised, where the AIFM recommends (acting upon

advice given by the Investment Adviser) that such realisation is in the interests of the Company. Such circumstances may include

(without limitation) disposals for the purposes of realising or preserving value, or of realising cash resources for reinvestment or

otherwise.

FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

FINANCIAL STATEMENTS

The Directors are responsible for the determination of the Company’s investment policy and strategy and has overall responsibility for

the Company’s activities including the review of investment activity and performance. The Board will also make the decision to acquire

or dispose of Projects, based on recommendations made by the AIFM acting upon advice given by the Investment Adviser.

The Directors have evaluated whether the Company is an investment entity and concluded that it meets the denition set out in

IFRS 10. The Directors are also of the opinion that the Company meets the essential criteria of an Investment Entity. Therefore, its

subsidiaries are measured at fair value through prot or loss, in accordance with IFRS 9 ‘Financial Instruments’.

VALUATION OF INVESTMENTS

Signicant estimates in the Company’s Financial Statements include the amounts recorded for the fair value of the investments. These

estimates and assumptions are subject to measurement uncertainty by their nature. The impact on the Company’s Financial Statements

of changes in future periods may be signicant. These estimates are further discussed in note 17.

6. INCOME

31 October 2022

Service fee income 1,853,151

Investment Income 1,614,060

Bank interest income 453,973

Interest income on loan to Shareholder 15,002

3,936,186

Refer to note 10 for further detail on interest on loans to subsidiaries recognised in Investment income.

7. ADMINISTRATIVE AND OTHER EXPENSES

31 October 2022

Administrative fees 48,000

AIFM Fees 61,573

Director & ofcer insurance 44,917

Directors’ fees 226,577

Fees payable to the auditor for the audit of the Company’s Financial Statements 140,000

Fees payable to the auditor for the audit of the Company’s Initial accounts 100,000

Legal and Professional fees 791,052

Listing fees expensed 377,035

Investment Adviser fees 1,848,845

Secretarial Fees 45,000

Sundry expenses 316,190

3,999,189

The Company has no employees and therefore no employee related costs have been incurred.

ADMINISTRATIVE AND SECRETARIAL FEES

JTC (UK) Limited has been appointed to act as administrator and secretary for the Company through the Administration and Company

Secretarial Agreement with effect from 14 October 2021. JTC (UK) Limited is entitled to a minimum fee of £48,000 per annum for accounting

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

and administration services to the Company as well as a minimum fee of £45,000 per annum for the provision of Governance and Company

Secretarial services.

During the year, fees incurred with JTC (UK) Limited amounted to £123,000 including set up fees and £93,000 remained payable as at

31 October 2022.

AIFM

JTC Global AIFM Solutions Limited (“the AIFM”) has been appointed to act as the AIFM for the Company through the AIFM

Agreement with effect from 14 October 2021. The AIFM is entitled to charge an annual rate of 0.03% of the Company’s equity raised

subject to a minimum annual fee of £30,000.

During the year, fees incurred with the AIFM amounted to £61,573 and £21,000 remained payable as at 31 October 2022.

INVESTMENT ADVISER

Investment Adviser fees are payable monthly in arrears. Details on how the fees are charged are disclosed in note 24.

8. TAXATION

The Company is recognised as an ITC for accounting periods beginning on or after 1 October 2021 and is taxed at the main rate of

19%. An ITC may claim a tax deduction for the distribution of income that arises from interest receipts on the loan notes. Therefore, no

corporation tax charge has been recognised for the Company for the period to 31 October 2022.

Revenue

Capital

31 October 2022

Tot a l

a) Tax charge in prot or loss

UK corporation tax – – –

b) Reconciliation of the tax charge for the period

Prot before tax (63,003) 53,080,091 53,017,088

Tax at UK main rate of 19% (11,971) 10,085,217 10,073,247

Tax effect of:

Non-taxable investment gains on investments – (10,085,217) (10,085,217)

Non-deductible expenses 71,637 – 71,637

Tax deductible interest distributions (59,667) – (59,667)

Tax charge for the period – – –

ITCs which have been approved by HM Revenue & Customs are exempt from UK corporation tax on their capital gains. Due to the

Company’s status as an approved ITC, and the intention to continue meeting the conditions required to maintain that approval for

the foreseeable future, the Company has not provided for deferred tax in respect of any gains or losses arising on the revaluation of

its investments. Taxes are based on the UK Corporate tax rates which existed as of the balance sheet date which was 19%. The UK

Government conrmed their intention to increase the main rate of corporation tax from 19% to 25% from 1 April 2023 for companies

with prots over £250,000.

As at 31 October 2022 the Company had not provided deferred tax assets or liabilities. At that date, based on current estimates and

including the accumulation of net allowable losses, the Company had no unrelieved losses.

FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

FINANCIAL STATEMENTS

9. EARNINGS PER SHARE

Earnings per share amounts are calculated by dividing the prot or loss for the period attributable to ordinary equity holders of the Company

by the weighted average number of Ordinary Shares in issue during the period. As there are no dilutive instruments outstanding, basic and

diluted earnings per share are identical.

Weighted

average number

of Ordinary

Net prot

attributable to

Shareholders

31 October 2022

Ordinary Shares 210,000,000 53,017,088 0.25

10. INVESTMENTS AT FAIR VALUE

Subsidiaries Place of business Percentage ownership

Harmony (PW) Limited Cottingham, East Yorkshire 100%

Harmony (PW) 2 Limited Cottingham, East Yorkshire 100%

Harmony BD Limited Broadditch, Kent 100%

Harmony FM Limited Farnham, Surrey 100%

Harmony RH Ltd Drax, North Yorkshire 100%

Daisy No. 2 Limited Lochgelly, Fife 100%

HEIT Holdings Ltd Knaresborough, North Yorkshire 100%

Harmony BF Limited Ilmer, Buckinghamshire 100%

Subsidiaries

Equity

acquisitions

during the

period

Loans:

principal

advanced

Loans:

Interest

charged

Cost at 31

October 2022

Net Fair value

movement

Closing

balance:

equity and

loans

Harmony (PW) Limited 8,224,633 4,075,047 175,023 12,474,703 12,058,246 24,532,949

Harmony (PW) 2 Limited 8,931,692 1,631,222 51,287 10,614,201 11,723,982 22,338,183

Harmony BD Limited 592,489 2,451,079 157,786 3,201,354 2,956,881 6,158,235

Harmony FM Limited 2,821,324 5,777,562 250,916 8,849,802 3,531,263 12,381,065

Harmony RH Ltd 5,039,989 8,144,129 313,329 13,497,447 (383,339) 13,114,108

Daisy No. 2 Limited 7,912,631 10,565,352 301,390 18,779,373 (263,988) 18,515,385

HEIT Holdings Ltd 1 1,379,402 32,703 1,412,106 2,399,840 3,811,946

Harmony BF Limited – 23,445,142 331,626 23,776,768 21,057,206 44,833,974

TOTAL 33,522,759 57,468,935 1,614,060 92,605,754 53,080,091 145,685,845

On 9 November 2021 the Company acquired issued share capital of each of the companies above (excluding Harmony BF Limited and

HEIT Holdings Ltd) (the “Seed Portfolio Companies”) from Harmony Energy Limited. The investments were purchased at an aggregate

purchase price of £38,455,614 plus acquisition costs of £427,255 less the aggregate amount of the Harmony Energy Limited shareholder

loans of £1,820,240 and deferred consideration of £3,690,591. As part of the purchase price, shares to the value of £23,483,695 were

issued by the Company to Harmony Energy Limited, and are credited as fully paid.

On 9 November 2021, the Company entered into an Intercompany Services Agreement (“ISA”) with its subsidiaries. The Company

earned service fee income of £1,853,151 during the period some of which has been settled using the loan to the subsidiaries.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

On 12 November 2021, the Company granted Sterling term loan facilities to its subsidiaries totalling £113,000,000. The intra-group

loans are payable on the longstop date being 12 November 2036. The loans bear interest at a rate of 8% compounded monthly, payable

monthly in arrears after the date of substantial completion. The interest on the intra group loans is recognised as Investment income.

On 4 February 2022, HEIT Holdings Ltd was incorporated as a wholly owned subsidiary of the Company.

On 29 July 2022, the Company acquired the issued share capital of Harmony BF Limited from Harmony Energy Limited. The

investment was purchased at an aggregate purchase price of £0. The purchase price was determined by a formula agreed on 9

November 2021 to mirror the acquisition mechanics of the Seed Portfolio Companies. Cost increases between 9 November 2021 and

the date of acquisition resulted in a purchase price of £0, a discount to fair market value of £17.3m (as supported by the independent

valuation performed by Mazars at the date of purchase). The commitment to purchase was legally binding on 9 November 2021 hence

the forward contract was recognised from that date and fair valued through prot or loss. Of the fair value gain recognised through

prot and loss recorded regarding Harmony BF limited, £15,688,215 is in respect of that forward contract.

The Company meets the denition of an investment entity. Therefore, it does not consolidate its subsidiaries but, rather, recognises

them as investments at fair value through prot or loss.

The Company has current intentions to provide nancial or other support to the subsidiaries, including intentions to assist its

subsidiaries in obtaining nancial support.

The Fair value measurements and sensitivities used to measure these investments are disclosed in note 17.

11. TRADE AND OTHER RECEIVABLES

31 October 2022

Prepayments 35,172

VAT receivable 482,555

Intercompany loans receivable 482,925

Amounts due from related parties 381,041

1,381,693

12. LOAN TO SHAREHOLDER

31 October 2022

Loan to Shareholder 1,443,506

1,443,506

On 1 July 2022, the Company granted a £5,000,000 revolving credit facility to Harmony Energy Limited (“the Facility”). Interest is

charged on the Facility at margin rate of 3% plus 1 year SONIA (sterling overnight index average).

The purpose of the Facility is to fund next stage grid connection payments in order to maintain energisation dates, in relation to near-

term pipeline projects, over which the Company has an exclusive right of rst refusal.

The loan is due to be received at the earlier of:

(a) the Repayment Date of 30 June 2023; or

(b) within 10 Business Days of demand by the Lender, provided that the Lender shall not serve such demand prior to 31 December 2022.

As the Facility was repaid within 12 months of the reporting date on 14 December 2022 the loan has been classied as current.

FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

FINANCIAL STATEMENTS

13. CASH AND CASH EQUIVALENTS

31 October 2022

Cash at bank 105,471,626

Fixed Deposit account 19,100,000

124,571,626

14. TRADE AND OTHER PAYABLES

31 October 2022

Creditors and Operating Accruals 301,013

Administrator fees 48,000

AIFM Fees 21,000

Audit fees 140,000

Investment Adviser Fee Accrual 220,351

730,364

15. FINANCIAL LIABILITY AT FAIR VALUE

31 October 2022

Balance at 1 October 2021 –

Convertible C Shares 14,771,364

Less equity costs (229,192)

14,542,172

On 12 October 2022, the Company issued 14,771,364 C Shares of £0.10 each at a price of £1.00 per C Share. The C Shares so issued

have equal voting rights with Ordinary Shares. The total number of Ordinary and C Shares with voting rights in issue immediately

following admission was 224,771,364. The assets representing the net proceeds of the C Share issue will be accounted for and managed

as a distinct pool of assets until the C Shares are converted into Ordinary Shares.

The conversion of the C Shares took place following the acquisition of the pipeline projects as described in note 26.

The C Shares are converted into Ordinary Shares on the basis of a conversion ratio. The Conversion Ratio is the ratio of the net asset

value per C Share to the net asset value per Ordinary Share as at the Conversion Calculation Date. On conversion, the new Ordinary

Shares issued as a result of the conversion of C Shares will rank pari passu with the existing Ordinary Shares in issue on the date of

conversion.

C Class shares in issue are convertible and as required under IAS 32, are presented as nancial liabilities at fair value in the Statement of

Financial Position. No prot or loss on the pool of assets related to the C Shares has occurred during the period.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

16. CATEGORIES OF FINANCIAL INSTRUMENTS

31 October 2022

Financial assets

Financial assets at fair value through prot and loss:

Investments 145,685,845

Financial assets at amortised cost:

Trade and other receivables 1,381,693

Loan to Shareholder 1,443,506

Cash and Cash Equivalents 124,571,626

Total nancial assets 273,082,670

Financial liabilities

Financial liabilities at fair value through prot and loss:

Financial liability at fair value 14,542,172

Financial liabilities at amortised cost:

Trade and other payables 730,364

Total nancial liabilities 15,272,536

At the balance sheet date, all nancial assets and liabilities were measured at amortised cost except for the nancial liability and

investment in subsidiaries which are measured at fair value as further explained in note 15 and 18 respectively. The carrying amount for

the nancial assets and liabilities measured at amortised costs approximates fair value.

17. FINANCIAL RISK MANAGEMENT

The Company is exposed to certain risks through the ordinary course of business and the Company’s nancial risk management

objective is to minimise the effect of these risks. The management of risks is performed by the Directors of the Company and

the exposure to each nancial risk considered potentially material to the Company, how it arises and the policy for managing it is

summarised below:

CREDIT RISK

The Company is exposed to third-party credit risk in several instances and the possibility that counterparties with which the Company

and its subsidiaries, together the “Group”, contracts may fail to perform their obligations in the manner anticipated by the Group.

Counterparty credit risk exposure limits are determined based on the credit rating of the counterparty. Counterparties are assessed and

monitored on the basis of their ratings from Standard & Poor’s and/or Moody’s. No nancial transactions are permitted with counterparties

with a credit rating of less than BBB- from Standard & Poor’s or Baa3 from Moody’s unless specically approved by the Board.

Cash and other assets that are required to be held in custody will be held at bank. Cash and other assets may not be treated as

segregated assets and will therefore not be segregated from the bank’s own assets in the event of the insolvency of a custodian. Cash

held with the bank will not be treated as client money subject to the rules of the FCA and may be used by the bank in the ordinary

course of its own business. The Company will therefore be subject to the creditworthiness of the bank. In the event of the insolvency of

the bank, the Company will rank as a general creditor in relation thereto and may not be able to recover such cash in full, or at all.

Credit risk is mainly at subsidiary level where the capital commitments are being made and is managed by diversifying exposures among

a portfolio of counterparties and through applying credit limits to those counterparties with lower credit standing.

Cash and bank deposits are held with major international nancial institutions who each hold a Moody’s credit rating of A2 or higher.

FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

FINANCIAL STATEMENTS

CURRENCY RISK

The Company is not exposed to currency risk as all its assets, liabilities and transactions during the current period were denominated in

British Pound Sterling.

LIQUIDITY RISK

The objective of liquidity management is to ensure that all commitments which are required to be funded can be met out of readily

available and secure sources of funding. The Company’s only nancial liabilities are trade and other payables. The Company intends to

hold sufcient cash across the Company and subsidiaries’ operating accounts to meet the working capital needs.

As at 31 October 2022, the Company held cash at bank of £124,571,626 and had trade and other payables totalling £730,363.

The following table reects the maturity analysis of nancial assets and liabilities.

As at 31 October 2022

<1 year

1 to 2 years

2 to 5 years

>5 years

Tot a l

Financial assets

Financial assets at fair value through prot

and loss:

Loan investment to subsidiaries*

– – –

59,082,995 59,082,995

Financial assets at amortised cost:

Cash at bank 124,571,626

– – –

124,571,626

Total nancial assets 124,571,626

– –

59,082,995 183,654,621

As at 31 October 2022

<1 year

1 to 2 years

2 to 5 years

>5 years

Tot a l

Financial liabilities

Financial liabilities at fair value through

prot and loss:

Financial liability at fair value 14,542,172

– – –

14,542,172

Financial liabilities at amortised cost:

Trade and other payables 730,364

– – –

730,364

Total nancial liabilities 15,272,536

– – –

15,272,536

*Includes the interest on loans advanced and excludes the equity portion of the investment.

MARKET RISK

Market risk is the risk that the fair value or cash ows of a nancial instrument will uctuate due to changes in market prices. Market risk

reects: (i) other price risks, and (ii) interest rate risk. The objective is to minimise market risk through managing and controlling these

risks to acceptable parameters, while optimising returns. The Company uses nancial instruments in the ordinary course of business

in order to manage market risks. Further commentary on nancial and market risks is provided in the Principal Risks and Uncertainties

section, including ination.

(i) PRICE RISK

The Company’s investments are susceptible to market price risk arising from uncertainties about future values of the instruments.

The Company’s Investment Adviser provides the Company with investment recommendations. The Company’s Investment Adviser’s

recommendations are reviewed and approved by the Board before the investment decisions are implemented. To manage the market

price risk, the Company’s Investment Adviser reviews the performance of the investments on a regular basis and is in regular contact

with the management of the non-current investments for business and operational matters.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

Price risk is the risk that the fair value or cash ows of a nancial instrument will uctuate due to changes in market prices. At 31October

2022, if the valuation of investments had been 10% higher with all other variables held constant, the increase in net assets attributable to

Shareholders for the period would have been £14,568,585 higher, arising due to the increase in the fair value of nancial instruments. A

10% decrease would have the equal and opposite effect.

The impact of changes in unobservable inputs to the underlying investments is considered in note 17.

(ii) INTEREST RATE RISK

Interest rate risk arises from the possibility that changes in interest rates will affect future cash ows or the fair values of nancial instruments.

The Company is exposed to interest rate risk on its cash balances held with counterparties, bank deposits, and through loans to related

parties. Bank deposits advance carry a xed rate of interest for a denite period and loans to subsidiaries carry a xed rate of interest. The

Company is not exposed to changes in variable market rates of interest and has therefore not considered any sensitivity to interest rates.

The Company does not have any borrowings as at 31 October 2022 however the Company has access to a £60,000,000 loan facility

through its subsidiary HEIT Holdings Ltd. As at 31 October 2022, there has been no drawdown on this loan. It is a ve-year facility with

an initial margin of 300bps over SONIA, rising over time to a maximum of 375bps by year 5. HEIT Holdings Ltd entered into an interest

rate swap in relation to this facility. The swap hedges the risk of uctuation in the SONIA rate, and xes the underlying interest rate at

2.508% to provide stability in interest costs over the term of the loan. The fair value of the swap uctuates in line with interest rates and

the risk of the movement in swap value is not considered material. The Company is required to enter into similar hedging agreements

on the extended loan facility completed in February 2023.

Where not a requirement of the underlying loan facilities, the Company will consider the costs and benets of hedging on a case by

case basis.

At 31 October 2022, the Company is indirectly exposed to interest rate risk through its investments in the subsidiaries. The Company

may be exposed to changes in variable market rates of interest and this could impact the discount rate and therefore the valuation of

the projects. The sensitivity of the valuation of the investment projects due to discount rates are disclosed in note 17.

CAPITAL RISK MANAGEMENT

The capital structure of the Company at period end consists of equity attributable to equity holders of the Company of £272,352,306,

comprising issued capital, reserves and accumulated loss. The Board continues to monitor the balance of the overall capital structure so

as to maintain investor and market condence. The Company is not subject to any external capital requirements.

FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

FINANCIAL STATEMENTS

18. FAIR VALUE MEASUREMENT

FAIR VALUE MEASUREMENT AND HIERARCHY

Fair value is the price that would be received on the sale of an asset, or paid to transfer a liability, in an orderly transaction between

market participants at the measurement date. If a fair value measurement uses observable inputs that require signiﬁcant adjustment

based on unobservable inputs or any other signiﬁcant unobservable inputs, that measurement is a Level 3 measurement.

The following table analyses within the fair value hierarchy the Company’s assets measured at fair value at 31 October 2022:

Level 1

Level 2

Level 3

Investment in subsidiary – – 145,685,845

The Company only invests in assets at fair value through prot or loss that are Level 3 in the fair value hierarchy and the reconciliation in

the movement of this Level 3 investment is presented below. No transfers between levels took place during the period.

31 October 2022

Opening balance –

Add: purchases during the period 92,605,754

Total fair value movement through the prot or loss 53,080,091

Closing balance 145,685,845

The Company’s policy is to recognise transfers into and transfers out of fair value hierarchy levels as of the date of the event or change

in circumstances that caused the transfer.

VALUATION METHODOLOGY

There are three traditional valuation approaches that are generally accepted and typically used to establish the value of a business: the

income approach; the market approach; and the net assets (or cost based) approach. Within these three approaches, several methods

are generally accepted and typically used to estimate the value of a business.

The valuation of all the Company’s investments (excluding the investment in HEIT Holdings Ltd), is based primarily on a discounted

cash ow methodology (“DCF”), “Income Approach”, which indicates value based on the sum of the economic income that an asset,

or group of assets, is anticipated to produce in the future. Free cash ow to total invested capital is typically the appropriate measure

of economic income. The method discounts free cash ows using an estimated discount rate Weighted Average Cost of Capital

(“WACC”). The selected discount rate is supported by the benchmarking of discount rates for assets in the same, or analogous sectors

as the portfolio.

The valuation at 31 October 2022, reecting the status of the investments to date, was determined using the DCF method whereby

the value of an asset is based on the projected cash ows adjusted for time value of money and inherent risk of the cash ows using an

appropriate discount rate.

Included in the fair value of the investments is £9,623,045 in cash at project level.

The fair value of the investment in HEIT Holdings Ltd represents the net assets of the company as determined (presented by the

Investment Adviser and reviewed) by the Company’s administrator and further presented to and reviewed by the Company’s Board of

Directors. As at 31 October 2022, HEIT Holdings Ltd held an investment in an interest rate swap measured at fair value but no projects.

The interest rate swap is valued on a mark to market basis using a mid-market price at the close of business as at valuation date.

There has been no change in the valuation methodology during the period.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

VALUATION PROCESS

Valuations are the responsibility of the Board of Directors. The Investment Adviser is responsible for submitting fair market valuations

of the Company’s assets to the Directors. The Directors review and approve these valuations following appropriate challenge and

examination. Valuations are carried out quarterly, with Mazars acting as independent valuer providing a valuation report semi-annually.

The current portfolio consists of non-market traded investments and valuations are based on a DCF methodology.

The Investment Adviser’s assessment of fair value of investments is determined in accordance with the International Private Equity and

Venture Capital 2018 (“IPEVC”) Valuation Guidelines, using levered and unlevered DCF principles.

In the period, the Company acquired battery storage projects from Harmony Energy Limited, which is a leading developer of utility scale

battery storage projects, alongside developing, owning, and operating wind and solar projects.

As at 31 October 2022 (“Valuation Date”), the Company had live investments in the following seven battery energy storage systems

projects in the UK – Pillswood 1, Pillswood 2, Broadditch, Farnham, Rusholme, Little Raith, and Bumpers. These projects, taken together,

have a combined rated power capacity of 312.5MW and an energy storage capacity of c.625MWh.

All the projects in the portfolio are under construction (as at 31 October 2022) with an expected construction period of c. 9-15 months

for each site. The Projects are expected to have an operational life of 30 years with a repowering or cell replacement assumed after 15

years.

The Projects attract four different streams of revenues: trading revenue (wholesale, Balancing Mechanism and churn), Ancillary Services

(Frequency Response Revenue, Dynamic Containment and Dynamic Regulation), Capacity Market revenue and embedded benets

(via the Embedded Export Tariff). Given the difculty in accurately forecasting revenues over the long-term, the Company purchases

independent forecasts from three well respected providers. By blending three forecasts, the Company is able to take account for

differing views of long-term drivers of value. Two of these providers focus on long-term fundamental-based forecasts whereas one is

focused on shorter-term battery specic performance.

The Board, supported by the Audit and Risk Committee, reviews the operating and nancial assumptions, including the discount rates,

used in the valuation of the Company’s underlying portfolio and approves them based on the recommendation of the Investment

Adviser.

As at 31 October 2022, the fair value of all the investments held within the portfolio, with the exception of the investment in HEIT

Holdings Ltd, have been determined (presented by the Investment Adviser and reviewed) by Mazars LLP and further presented to and

reviewed by the Company’s Board of Directors.

FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

FINANCIAL STATEMENTS

SENSITIVITY ANALYSIS

The following tables reect the range of sensitivities in respect of the fair value movements. The individual project valuations are

disclosed in note 10.

The Directors consider the changes in inputs to be within a reasonable expected range based on their understanding of market

transactions. This is not intended to imply that the likelihood of change or that possible changes in value would be restricted to this

range.

Investment Project

Investment fair

value

Valuation

technique

Signicant input

description Sensitivity

Estimated effect

on fair value

Harmony (PW) Limited Pillswood 1 24,532,949 DCF Discount rate

Revenue

+1%

-1%

+10%

-10%

(2,755,218)

3,152,484

5,166,096

(5,218,460)

Harmony (PW) 2 Limited Pillswood 2 22,338,183 DCF Discount rate

Revenue

+1%

-1%

+10%

-10%

(2,753,742)

3,150,947

5,166,553

(5,219,204)

Harmony BD Limited Broadditch 6,158,235 DCF Discount rate

Revenue

+1%

-1%

+10%

-10%

(627,886)

718,932

1,140,544

(1,147,759)

Harmony FM Limited Farnham 12,381,065 DCF Discount rate

Revenue

+1%

-1%

+10%

-10%

(1,242,714)

1,425,694

2,057,807

(2,079,858)

Harmony RH Ltd Rusholme 13,114,108 DCF Discount rate

Revenue

+1%

-1%

+10%

-10%

(1,937,654)

2,226,456

3,226,431

(3,243,603)

Daisy No. 2 Limited Little Raith 18,515,385 DCF Discount rate

Revenue

+1%

-1%

+10%

-10%

(2,516,173)

2,905,779

4,190,210

(4,186,939)

Harmony BF Limited Bumpers 1&2 44,833,974 DCF Discount rate

Revenue

+1%

-1%

+10%

-10%

(5,778,738)

6,668,644

8,679,227

(8,674,979)

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

Portfolio Sensitivity

The below table reects a range of sensitivities which the Directors consider to have a signicant impact on the portfolio of investments

held by the Company:

Investment Sensitivity

Estimated

effect on fair

value

Ination +0.5%

-0.5%

13,322,583

(12,444,295)

Construction Costs +15%

-15%

(24,862,381)

24,573,989

Operating costs +15%

-15%

(7,803,622)

7,789,333

Cell replacement costs +15%

-15%

(1,290,494)

1,327,324

19. SHARE CAPITAL

Number of

Share capital

Share premium

Capital

reduction

reserve

Total

Shareholders’

equity

As at 1 October 2021 – – – – –

Issue of fully paid Ordinary

Shares at £1 210,000,000 2,100,000 207,900,000 – 210,000,000

Ordinary Shares Equity issue

costs – – (3,106,954) – (3,106,954)

Transfer to capital reduction

reserve – – (204,793,046) 204,793,046 –

Dividends paid

– – – (2,100,000) (2,100,000)

As at 31 October 2022 210,000,000 2,100,000 – 202,693,046 204,793,046

SHARE CAPITAL, SHARE PREMIUM ACCOUNT AND CAPITAL REDUCTION RESERVE

On 12 October 2021, the Board approved the proposed placing and offer for subscription (together the “Placing”) of Ordinary Shares

of £0.01 nominal value each in the capital of the Company at a price of £1.00 per Ordinary Share. The Board also approved the

acquisition of the Seed Portfolio Companies (refer note 10), consideration for which included the issue of 23,483,695 Ordinary Shares at

a price of £1.00 per Ordinary Share to Harmony Energy Limited. The Placing raised gross proceeds of £186,516,305, and therefore the

number of Ordinary Shares of £0.01 each issued by the Company and admitted to trading was 210,000,000 in aggregate.

Following a successful application to the High Court and lodgement of the Company’s statement of capital with the Registrar of

Companies, the Company was permitted to cancel its share premium account. This was effected on 15 December 2021 by a transfer of

the balance of £204,793,046 from the share premium account to the capital reduction reserve. The capital reduction reserve is classed

as a distributable reserve and dividends to be paid by the Company are to be offset against this reserve.

FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

FINANCIAL STATEMENTS

20. RESERVES

The nature and purpose of each of the reserves included within equity at 31 October 2022 are as follows:

• Share premium reserve: represents the surplus of the gross proceeds of share issues over the nominal value of the shares, net of the

direct costs of equity issues and net of conversion amount.

• Capital reduction reserve: represents a distributable reserve created following a Court approved reduction in capital. This reserve

is distributable and maybe used, where the Board considers it appropriate, by the Company for the purpose of paying dividends to

Shareholders.

• Revenue reserve: represents a distributable reserve of cumulative net gains and losses recognised in the Revenue account of the

Statement of Comprehensive Income.

• Capital Reserves: represents a non-distributable reserve of cumulative net capital gains and losses recognised in the Statement of

Comprehensive Income.

• The only movements in these reserves during the period are disclosed in the statement of changes in equity.

21. NET ASSET VALUE PER SHARE

Basic NAV per share is calculated by dividing the Company’s net assets as shown in the statement of nancial position that are

attributable to the ordinary equity holders of the Company by the number of Ordinary Shares outstanding at the end of the period. As

there are no dilutive instruments outstanding, basic and diluted NAV per share are identical.

31 October 2022

Shares in issue Assets Liabilities Prot Pence per Share Net Asset Value £

Ordinary Shares 210,000,000 273,082,670 15,272,536 53,017,088 122.77 257,810,134

22. DIVIDENDS

Dividend per share

Estimated effect

on fair value £

For the 6 month period ended 30 April 2022

1 pence 2,100,000

The dividends paid during the year were paid out of capital reduction reserve.

On 23 November 2022 the Company declared a dividend of 1 pence per Ordinary Share in relation to the period 1 May 2022 to 31October

2022 which was paid on the 16 December 2022 to Shareholders on the register as at the close of business on 2 December 2022.

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

23. DEFERRED CONSIDERATION

On 14 October 2021 the Company acquired issued share capital of each of the Seed Portfolio Companies from Harmony Energy

Limited. The investment was purchased at an aggregate purchase price of £38,455,614 with acquisition costs of £427,255 less the

aggregate amount of the Harmony Energy Limited shareholder loans of £1,820,240 and deferred consideration of £3,690,591.

The share purchase agreement in relation to this acquisition set out an amount of £3,690,591 to be deferred until the signing of EPC

contracts on each project within the Seed Portfolio. The projects were acquired at a xed price per megawatt including construction

costs basis, with part of the consideration deferred. To the extent certain actual contract costs had increased above the anticipated

costs, such cost increases were deducted from the deferred consideration.

As at 31 October 2022 all Seed Portfolio Companies (as well as Harmony BF Limited) have signed EPC contracts, with the latest

being executed in June 2022. No deferred consideration was payable due to increases in the contract costs and the Company

has no outstanding obligations or liabilities in this respect. As such, the deferred consideration has not been recognised in the

FinancialStatements as none was ultimately payable.

24. TRANSACTIONS WITH RELATED PARTIES

Following admission of the Ordinary Shares (refer to note 18), the Company and the Directors are not aware of any person who, directly

or indirectly, jointly or severally, exercises or could exercise control over the Company. The Company does not have an ultimate

controlling party.

Details of related parties are set out below:

NONEXECUTIVE DIRECTORS

Details of the fees paid to Directors in the period are set out in the Directors’ Report.

Total Directors’ fees of £226,577 were incurred in respect of the period with none being outstanding and payable at the end of the period.

SUBSIDIARIES

On 9 November 2021 the Company acquired issued share capital of each of the Seed Portfolio Companies at an aggregate purchase

price of £38,455,614 from Harmony Energy Limited as disclosed below.

During the period the Company granted Sterling term loan facilities to its subsidiaries totalling £194,000,000.

Refer to note 10 for further detail.

As described in the going concern note on page 66, the Company was a guarantor to its wholly owned subsidiary, HEIT Holdings Ltd

in respect of the £60 million debt facility. Post reporting period, this guarantee has been increased to cover the new £110 million

debt facility and an ancillary revolving credit facility of up to £20 million. The Company also provides parent company guarantees to

subsidiaries in relation to certain construction and/or battery supply contracts. As at 31 October 2022, total committed funding to

subsidiaries was £161 million. As at the date of publication, the aggregate outstanding funding commitment stands at £148 million,

recognising both expenditure incurred post reporting period as well as new commitments made in relation to the Hawthorn Pit and

Wormald Green projects. These commitments are covered by the Company’s cash reserves and debt facilities.

FINANCIAL STATEMENTS

NOTES TO THE FINANCIAL STATEMENTS CONTINUED

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

FINANCIAL STATEMENTS

INVESTMENT ADVISER

The Investment Adviser is entitled to advisory fees under the terms of an investment advisory agreement dated 14 October 2021.

The Company shall pay to the Investment Adviser an annual fee (exclusive of value added tax, which shall be added where applicable)

payable monthly in arrears calculated at the rate of:

• One twelfth of 0.9% per calendar month of the lesser of the (i) NAV or (ii) Average Market Capitalisation of the Company up to the

threshold of £250,000,000; and

• One twelfth of 0.8% per calendar month of the lesser of the (i) NAV or (ii) Average Market Capitalisation of the Company in excess

of £250,000,000

An advisory fee of £1,848,845 was incurred during the period and £220,351 remained payable as at 31 October 2022.

Harmony Energy Limited is the parent of the Investment Adviser and therefore an entity with signicant control over the Investment

Adviser. Harmony Energy Limited is also a signicant shareholder of the Company.

The table below details the transactions between Harmony Energy Limited and the Company:

Investment Purchases

Fair value of

investment at

purchase date

Purchase

price

Harmony (PW) Limited

8,224,633 8,224,633

Harmony (PW) 2 Limited

8,931,692 8,931,692

Harmony BD Limited

592,489 592,489

Harmony FM Limited

2,821,324 2,821,324

Harmony RH Ltd

5,039,989 5,039,989

Daisy No.2 Limited

7,912,631 7,912,631

Harmony BF Limited

17,300,000 -

All purchases were independently fair valued by Mazars at the time of acquisition and were considered to be at arm’s length.

Harmony BF Limited was purchased at a discount of £17.3m as a result of the derivative contract entered into as described in note 10.

After period end the Company purchased further investments from Harmony Energy Limited as disclosed in note 26.

Other transactions

Amount

Loan to Shareholder

1,443,506

Details of the Loan to Shareholder is disclosed in note 12.

OTHER RELATED PARTIES

James Ritchie-Bland is a director of Harmony Energy Limited as well as an indirect shareholder of Harmony Energy Limited through

Ritchie-Bland Energy (Number 1) Limited. He is also a director of the Investment Adviser and a shareholder in the Company.

Ritchie-Bland Energy (Number 2) Limited, of which James Ritchie-Bland is also a director and an indirect shareholder (through

Renewable Environmental Investments Limited) is party to a joint venture agreement with Harmony Energy Limited in regards to the

three projects purchased by the Company after period end as disclosed in note 26

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

25. CAPITAL COMMITMENTS

The Company had no contingencies and no other signicant capital commitments at the reporting date.

26. POST BALANCE SHEET EVENTS

On 23 November 2022, the Board approved a dividend of one pence per Ordinary Share for the period ending 31 October 2022,

bringing the total dividend approved for the period to £4,200,000.

On 15 December 2022 the Company announced the acquisition of three ‘shovel ready’ pipeline projects totalling 181.9 MW / 363.8 MWh,

increasing the Company’s portfolio to nine battery energy storage system (“BESS”) projects with a total capacity of c.500MW / 1GWh.

The Company has acquired the projects pursuant to a Pipeline Agreement entered into on IPO which granted the Company a right of

rst refusal of up to 1GW of BESS projects, from Harmony Energy Limited (“HEL”) and Ritchie Bland Energy No. 2 Ltd (together the

“Developers”). The total consideration for the three projects is c. £21.5 million (supported by the independent valuation performed by

Mazars) being satised through the net proceeds of the recent C Share issue in conjunction with the issue of 7 million new C Shares to

the Developers.

The three projects, known as Wormald Green, Hawthorn Pit and Rye Common (Phases I and II), are expected to be energised in

Q12024, Q2 2024 and Q3 2024 respectively, with grid offers secured. In February 2023, Envision (as dened in the Investment Adviser’s

Report) were engaged to supply and install BESS for the Wormald Green and Hawthorn Pit projects, and contracted to provide long

term maintenance and services to those projects. The Company provided parent company guarantees in relation to the BESS supply

agreements.

The Company has also agreed terms to increase borrowing under its existing loan facility to enable it to draw down on the previously

agreed accordion, alongside drawdown of funds pursuant to a new revolving credit facility. The funds available to the Company, through

this borrowing and its cash resources, will fund the construction of the Wormald Green and Hawthorn Pit projects as well as the

remaining grid connection payments for Rye Common, which are essential to maintain that project’s timeline. The combined facility will

increase the total debt available to £130 million, subject to fullment of conditions precedent to drawdown.

On 26 January 2023, the Company announced that it would be converting C Shares into new Ordinary Shares at a ratio of

0.786735new Ordinary Shares for every 1 C Share held, resulting in (after aggregating fractional entitlements) additional issued share

capital of 17,128,295 Ordinary Shares of £0.01.

There were no further events after the reporting date which require disclosure.

FINANCIAL STATEMENTS

HARMONY ENERGY INCOME TRUST PLC | ANNUAL REPORT 2022

FINANCIAL STATEMENTS

DIRECTORS

Appointed: 12 October 2021

Norman Crighton

Janine Freeman

Hugh McNeal

William Rickett

Shefaly Yogendra

REGISTERED OFFICE

The Scalpel 18th Floor

52 Lime Street

London

EC3M 7AF

INVESTMENT ADVISER

Harmony Energy Advisors Limited

Conyngham Hall, Bond End

Knaresborough

North Yorkshire

HG5 9AY

Harmony Energy Advisors Limited is an appointed representative

of Laven Advisors LLP, which is authorised and regulated by the

Financial Conduct Authority.

INDEPENDENT AUDITOR

Ernst & Young LLP

25 Churchill Place

Canary Wharf

London

E14 5EY

REGISTRAR

Computershare Investor Services PLC

The Pavilions,

Bridgwater Road,

Bristol

BS99 6ZY

TAX ADVISERS

Grant Thornton

30 Finsbury Square,

London,

EC2A 1AG

ADMINISTRATOR AND SECRETARY

JTC (UK) Limited

The Scalpel 18th Floor

52 Lime Street

London

EC3M 7AF

CORPORATE BROKER

Joh. Berenberg, Gossler & Co. KG, London Branch

60 Threadneedle Street,

London

EC2R 8HP

ALTERNATIVE INVESTMENT FUND MANAGER

JTC Global AIFM Solutions Limited

Ground Floor, Dorey Court

Admiral Park

St Peter Port

Guernsey

GY1 2HT

INDEPENDENT VALUER

Mazars LLP

5th Floor 3 Wellington Place,

Leeds

LS1 4AP

LEGAL ADVISERS

Fasken Martineau LLP

6th Floor

100 Liverpool Street

London

EC2M 2AT

Gowling WLG (UK) LLP

4 More London

Riverside

London

SE1 2AU