Aquila Energy Efficiency Trust PLC Annual Financial Report (0335Q)

TIDMAEET

RNS Number : 0335Q

Aquila Energy Efficiency Trust PLC

24 June 2022

LEI: 213800AJ3TY3OJCQQC53

AQUILA ENERGY EFFICIENCY TRUST PLC

Final Results

for the period from incorporation on 9 April 2021 to 31 December 2021

The Board of Aquila Energy Efficiency Trust plc ("AEET" or the "Company") is pleased to announce its audited results for the period from incorporation on 9 April 2021 to 31 December 2021 ("Period").

Investment Objective

The company seeks to generate attractive returns, principally in the form of income distributions by investing in a diversified portfolio of energy efficiency investments.

Financial Highlights

 
 Financial information 
                                                   As at 31 December 
                                                                2021 
 NAV per Ordinary Share (pence) (1)                            97.38 
 Ordinary Share price (pence)                                  95.75 
 Ordinary Share price discount to NAV(1)                        1.7% 
 Net assets in GBP million                                     97.38 
 Ongoing charges(1)                                             0.9% 
------------------------------------------------  ------------------ 
 
 Performance summary 
                                                            % change 
------------------------------------------------  ------------------ 
 NAV total return per Ordinary Share(1)                       (0.6%) 
 Share price total return per Ordinary Share(1)               (4.3%) 
 
 

(1) - These are Alternative Performance Measures for the period from commencement of operations on 9 April 2021 to 31 December 2021. Share price total return is based on an opening share price of GBP 1.00 and NAV total return is based on an opening NAV after launch expenses of GBP 0.98 per Ordinary Share.

Period End Highlights

-- NAV per Ordinary Share of 97.38 pence as at 31 December 2021 and NAV total return per Ordinary Share of (0.6%) for the Period

-- Ordinary Share price at Period end of 95.75 pence versus 100 pence at IPO, representing an Ordinary Share price total return of (4.3%)

-- Pipeline of near - and medium-term investment opportunities diversified in terms of geography across Europe, technology, ESCO partners and counterparties

-- During the Period, the Company entered into commitments to invest GBP14.1 million of which total investments were GBP12.3 million.

Post Period End Highlights

-- Result of investment strategy review published in April 2022, which included a number of positive measures for Shareholders, including an adjustment to the advisory fees payable under the Investment Advisory Agreement

-- In April 2022 the Company appointed an additional non-executive Director and Chair of the Audit and Risk Committee to the Board, David Fletcher, and a search for a fourth member of the Board is well advanced

-- When the Company last updated on investment, on 21 April 2022, it had made total commitments of approximately GBP19.1m, and, deployed approximately GBP15.1m. As at 31 May 2022, the Company has total commitments of approximately GBP19.7m, and, has deployed approximately GBP15.7m.

-- The Investment Adviser expects an acceleration in the pace of deployment during July 2022 based on current contractual negotiations. The Board remains actively engaged with the Investment Adviser to support them reaching their target of full deployment of the remaining IPO proceeds, and, the Investment Adviser is targeting this by the end of December 2022 or early 2023.

Chair's Statement

Introduction

I am pleased to present my first Chair's statement for Aquila Energy Efficiency Trust Plc which covers the period from 9 April 2021 (the date of incorporation) to 31 December 2021 (the "Period"). It has been a very busy period for your Board for the reasons discussed below.

Strategic review

Despite the optimism at the time of flotation in June last year, deployment of monies raised proved to be very disappointing over the period and on 31 January 2022, we announced that given the slower investment deployment than originally anticipated, the Board was undertaking a comprehensive review of the Company's investment strategy with a view to ascertaining how best to accelerate deployment, whilst maintaining the Company's prudent credit criteria and return objectives.

The Board appointed Complete Strategy Ltd, a consultancy firm experienced in the energy sector, to conduct this review. The review concluded that whilst certain changes are required to enable the Investment Adviser to execute on the Company's investment strategy, the market opportunity for Energy Efficiency Investments located in Europe remains attractive, particularly in the context of high energy prices. The Board consulted extensively with Shareholders before undertaking the review and following its conclusion. Shareholders as a whole were supportive of the continuation of the Company with the certain changes announced on 21 April 2022 and which are outlined below.

Changes following the Strategic review

The Initial Continuation Resolution originally intended for 2025 will now be brought forward and is expected to be voted on by Shareholders during February 2023. Should the Directors determine that the rate of deployment has not improved in the period from conclusion of the review to the end of July 2022, they will consider bringing that date forward.

The Investment Adviser has agreed to amend the current Investment Advisory Agreement such that any advisory fees payable are charged only on committed capital (being the sum of funds actually invested and funds committed for investment in Energy Efficiency Investments), this amendment will be applied retrospectively from the time of the Company's IPO in June 2021. The original Agreement entitled the Investment Adviser to charge fees on the Company's NAV which would have included uninvested cash. This resulted to a reduction of the Investment Adviser fee from GBP537,331 to GBP76,698.

In addition, the Investment Adviser has increased the resources allocated to the investment team to help them meet the full deployment target by the end of December 2022 or early 2023.

The Board has also engaged Complete Strategy Ltd for an initial period of six months from April 2022 to provide it with a detailed analysis of monthly deployment performance against agreed performance milestones with the costs of this borne by the Investment Adviser.

The Board are of the view that these actions, together with a focus by the Investment Adviser on larger transactions, partnering arrangements with repeat introducers of transactions and a smaller number of geographies, should provide a basis to enable the Investment Adviser to meet its deployment targets.

Update on deployment & dividends

At the last published update on 21 April 2022, the Company had agreed to invest a total of approximately GBP19.1 million, of which it had deployed a total of approximately GBP15.1 million.

As at 31 May 2022, the Company has committed a further GBP0.5 million and deployed GBP0.6 million, taking total commitments to GBP19.7 million and deployment approximately GBP15.7 million.

In light of slower than anticipated deployment and the current expectation that the IPO proceeds will not be significantly deployed within twelve months of Admission, the Company does not expect that its stated dividend target of 3.5 pence per Ordinary Share for the financial year ending 31 December 2022 will be covered by earnings. The Board will review the position in respect of any dividend which may be declared for the financial year ending 31 December 2022 in light of the deployment of the IPO proceeds as the year progresses. Due to the delay in receiving income for distribution and that the financial statements are yet to be filed, at the date of this report the Board is not recommending payment of a dividend for the first quarter of 2022.

Board changes

Following the resignations of two Directors, we have appointed David Fletcher a highly experienced non-executive Director and Chair of the Audit Committee, as our new Chair of the Audit and Risk Committee ("ARC") and as Chair of the Remuneration Committee. I would like to thank my fellow Director Nick Bliss for standing in as interim Chair of the ARC. We are well advanced in our recruitment process to appoint our fourth Board member.

Green Economy Mark

We are pleased to report that the Company was awarded with London Stock Exchange's Green Economy Mark, which recognises companies that derive 50 per cent or more of their total annual revenues from products and services that contribute to the global green economy. We are committed towards reducing CO (2) emissions and improving air quality, while achieving strong returns for our investors and allowing them to contribute to the European Union ("EU") goal of a climate neutral economy .

The need for Energy Efficiency

We believe that energy efficiency is the natural partner to renewable energy if we are to achieve the European goal of net zero by 2050. The more efficient use of energy is one of the main pillars of the energy transition. The reduction of daily energy consumption is Europe's greatest energy resource. We need to make energy efficiency part of our everyday lives, to consume less and consume it better. It protects business and consumers against increases in energy prices, is better for the environment and it improves the competitiveness of our economies. Increasing energy efficiency also ensures reduced dependence on energy imports, thereby improving energy security and reduces conflicts in distribution .

AEET was launched in recognition of the opportunities, both economic and social, that are available in monetising energy efficiency. In terms of implementation, energy efficiency lags the focus and attention that renewables have received and is an area with significant growth potential and opportunities, both currently and for the foreseeable future .

Foreseeable Future

We understand that the actual scope of energy efficiency remains uncertain to many investors. However, our definition includes all processes and measures that optimise energy consumption to save energy. Energy utilisation is increased, and energy losses resulting from the transport, conversion and storage of energy are reduced. We distinguish energy efficiency by its aim of reducing primary energy consumption differentiating from other areas of efficiency in the power sector, such as generation efficiency from renewables and from enablers of distribution efficiency, such as grid-scale batteries .

Being energy efficient means using and paying for less energy, even as value creation increases, producing more competitively and sustainably. In simple terms: the economies across Europe are more competitive and sustainable the more energy-efficient they are. Energy efficiency drives modernisation and innovation processes in all sectors and opens up new markets for export opportunities. It also has the potential to boost employment as it can stimulate local value creation (e.g., through energy-efficient building renovation). Most importantly, energy efficiency is critical in achieving the EU climate targets .

It is widely recognised that there is a financing gap with energy efficiency investments in both the public and private sectors, often because of scale and complexity, thus capital should be directed to focus where it is not currently invested. AEET aims to be among the important private market conduits to facilitate additional energy efficiency investment on a pan-European basis.

Annual General Meeting

We look forward to welcoming Shareholders to the Company's Annual General Meeting ("AGM") to be held on 28 June 2022 at Cannon Place, 78 Cannon Street, London EC4N 6AF. The Company will also hold a General Meeting on 25 July 2022 at 10:00 AM, where this Annual Report will be laid before Shareholders. The reasons for holding two general meetings are explained in detail in the Chair's Letter accompanying the Notice of Meeting published on 1(st) June 2022.

Outlook

The Board and the Investment Adviser, have considered the risks posed by the war in Ukraine in the context of the Company and are of the view that these risks are counter-balanced by the recent increase in energy prices which brings with it renewed government focus on energy efficiency. We are, of course, very mindful of the terrible tragedy that conflict produces .

We firmly believe that AEET has a differentiated pan-European investment strategy that offers attractive opportunities now, and, in the future, and has the potential to provide Shareholders with an attractive risk-return profile while achieving a positive environmental impact for the real economy and society. Whilst risks around deployment remain, your Board will be actively engaged with the Investment Adviser to support them to reach deployment targets and grow the Company .

Miriam Greenwood OBE DL

Chair of the Board

23 June 2022

Sustainable Development Goals and the importance of Additionality

What does "additionality" mean and why is it important? To qualify as additional, capital investments must generate an activity (e.g. related to a UN sustainable development goal (UN SDG), such as Goal 7: Affordable Energy, Goal 9: Industries, Innovation and Infrastructure, or Goal: 11 Sustainable Cities and Communities) that would not have occurred without that capital, i.e. they must be "in addition to" a baseline scenario that would have occurred anyway or, in other words, be made knowing that they will make a real, positive difference. The concept of additionality originated in carbon offset markets but, more recently, the term additionality has increasingly appeared in the context of investment, particularly in the case of sustainable finance (for example, as green bonds) or impact investing.

As with many concepts in the impact investing world, there is no consensus on additionality as yet. Moreover, measuring additionality remains challenging because of the need to quantify both the impact of investment and its longer-term benefits. Nonetheless, we believe that it can facilitate funding for otherwise lower priority initiatives; help to integrate increased risk management; encourage more comprehensive project designs; lead to improved outcomes; and align projects with environmental, social, and governance standards.

In the AEET context , we believe that investments which financially support new, expanding, or developing sources of energy efficiency, as opposed to purchasing those already available , should be able to claim additionality. The chosen projects will have a significant impact on displacing emissions by reducing primary energy consumption. Additionality, we would suggest, is new capital provided to address specific problems or underinvested areas highlighted by the UN SDGs.

By definition, additionality puts the focus on more innovative financial arrangements, transactions that tend to be smaller, often more complex, as well as time intensive. We recognise that additionality can never be determined with certainty, as it involves a prediction of future outcomes; it will always require analysis and judgments.

The inclusion of additionality is an important consideration for AEET, as our investment strategy seeks to provide funding for a high percentage of new energy efficiency projects, rather than investing in operations and, thus, existing energy efficiency assets. Therefore, the relevant additionality test for us is whether a project creates an "incremental" reduction in emissions which would not have been possible within the same time frame and/or investment value, without the availability of this funding.

Investment Adviser's Report

Investment Adviser's Background

The Company's AIFM, International Fund Management Limited (part of Sanne Group), has appointed Aquila Capital Investmentgesellschaft mbH as the Investment Adviser to the AIFM in respect of the Company.

The Investment Adviser offers advice on potential energy efficiency investments in line with the Company's Investment Policy. Aquila Capital Investmentgesellschaft mbH is part of Aquila Group, an experienced and long-term investor in real asset investments. Founded in 2001 by Dieter Rentsch and Roman Rosslenbroich, Aquila Group currently manages and/or advises assets worth around EUR13.9 billion on behalf of institutional investors worldwide (as at 31 December 2021). Daiwa, one of Asia's largest investors, is a minority shareholder in the Group.

By investing in clean energy and sustainable infrastructure, Aquila Capital contributes to the global energy transition and strengthens the world's infrastructure backbone. The company initiates, develops, and manages these essential assets along their entire value chain and lifetime. Aquila Capital's primary objective is to generate performance for its clients by managing the complexity of essential assets.

Currently, Aquila Capital manages wind energy, solar PV and hydropower assets with a generating capacity of more than 15 GW. Additionally, 1.9 million square metres of real estate and green logistics projects have been completed or are under development. Aquila Capital also invests in energy efficiency, carbon forestry, and data centres. Aquila Capital has been carbon neutral since 2006. Sustainability has always been part of the company's value system and is an integral part of its investment strategies, processes and the general management of its assets. The company has more than 600 employees from 48 nations, operating in 16 offices in 15 countries worldwide.

Aquila Capital believes in stringent corporate governance. It is licensed as an alternative investment fund manager (for the avoidance of doubt, it is not acting as AIFM to the Company) in Germany and is, therefore, subject to high European regulatory standards.

Investment Activity and Pipeline

Investment activity in the period

Since its IPO in June 2021, the Company has begun executing on its strategy to invest in energy efficiency projects which are characterised by projects with (i) a low technology risk through the use of proven technologies; (ii) medium to long term contracts providing for highly predictable cash flows; and (iii) counterparties with good creditworthiness. As at the period end, the Company had entered into commitments to invests GBP14.1 million of its IPO proceeds of which total investments were GBP12.3 million. In the period between 1 January 2022 and 31 May 2022, the Company made additional commitments accounting to GBP5.5 million bringing the total income generating capital deployed since IPO GBP15.7 million. The Investment Adviser expects the remaining proceeds of the IPO to be deployed by the end of December 2022 or early 2023.

GBP14.0 million investment in Italian "Superbonus" projects

In December 2021, the Company entered into commitments to finance two clusters of "Superbonus" energy efficiency projects for apartments and other residential buildings in Italy amounting to GBP14.0 million. "Superbonus" is an incentive measure introduced by the Italian government through Decree "Rilancio Nr. 34" on 19 May 2020, which aims to make residential buildings (condominiums and single houses) more energy efficient through improvements to thermal insulation and heating systems. When qualifying measures are completed, the energy services company ("ESCO") delivering the measures is awarded a tax credit equal to 110% of the cost of the measures. These tax credits can then be sold to banks and, thus, projects can be financed without the need for a financial contribution from landlords.

The projects which the Company has committed to finance are being managed by two ESCOs - Enerstreet and Enerqos Energy Solutions and entail commitments of GBP8.94 million and GBP5.15 million respectively. The projects involve a range of energy efficiency measures including insulation, the replacement of heating systems with more efficient solutions, and energy efficient windows.

As at 31 December 2021, GBP11.9 million had been committed to these projects and was earning a contractual rate of return. Of this, GBP0.2 million had been deployed in cash. The balance of the commitments is forecast to be deployed before the end of October this year. These projects, which are being delivered in a series of stages, generate tax credits which exceed the cost of the Company's investments. Two Italian banks have agreed to purchase these tax credits, and the proceeds from this will redeem the investments within a period of up to 15 months from December 2021. The investments are structured to deliver a contractual return of 8% p.a. from the expected project start dates. This means that the investment commitments become income generating from the dates set out in the investment documentation and not from the date of cash deployment. The two Italian banks have credit ratings of A and B, respectively with the lower rated bank majority owned by the Italian state.

GBP0.4 million investments in Acetificio Galletti & Enofrigo Projects with project developer, Noleggio Energia

The Company has completed two rooftop solar PV investments developed by Noleggio Energia, for two Italian industrial businesses, enabling these companies to reduce their energy expenses and CO2 emissions and avoid grid losses through the self-consumption of the electricity produced. Noleggio Energia was established in 2017 and is an Italian company that specialises in providing operating leases for energy efficiency and renewable energy projects for commercial and industrial clients in Italy.

The first investment of GBP0.29 million was completed at the end of June to finance a rooftop solar PV project located in Lombardy for the Italian food product manufacturer Galletti di Galletti Aurelio e C. snc ("Acetificio Galletti"). The project, which is operational, is structured as an operating lease for Acetificio Galletti, which has agreed to make fixed monthly payments for a contractual period of seven years. The investment is expected to deliver a contractual return of 7.2% p.a. Acetificio Galletti is a family-owned business founded in 1871 and is a renowned producer of vinegars, dressings, pickles and other food products. It has an investment grade credit rating (B1.2/BBB) from credit ratings agency Cerved.

The second investment of GBP0.11 million was completed at the end of December 2021 to finance a rooftop solar PV project in Veneto for Enofrigo SpA. The project, which is also operational, has the same seven-year operating lease structure and contracts similar to those used in the Acetificio Galletti investment. The investment is expected to deliver a contractual return of 9.4% p.a. Enofrigo SpA, founded in 1978, is an Italian designer and manufacturer of wine cabinets and both hot and cold food display units for bars, restaurants, small supermarkets and larger retail chain stores. The company nowadays serves more than 5,000 clients in more than 100 countries. Its Cerved rating is B2.1/BB+.

GBP0.3 million investment in lighting as a service project developed by Lumenstream

In December 2021 the Company, through its wholly owned subsidiary, Attika Holdings Limited (Attika), invested GBP0.3 million in a group of four operational lighting projects developed by a Northern Ireland based lighting services company, Lumenstream Limited. The Company has purchased receivables under existing five-year contracts with industrial companies and a leisure business. The investment is forecast to generate a contractual return of 9.6% p.a. over the five years. The industrial companies have investment grade ratings of A1.1-A1.3/ AAA-AA- from Cerved. The leisure business is not rated but all payments due under its lighting as a service agreement in the two and a half years up to the time of the investment have been paid. The investment agreement with Lumenstream Limited also included a framework agreement under which the Company has an option to finance future projects developed by Lumenstream, on agreed terms, and under which the Company expects to make additional investments.

Investments completed after 31 December 2021

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

GBP0.7 million investment for the refinancing of the acquisition of an existing rooftop solar PV plant, with project developer CO-VER Power Technologies .

In January 2022, the Company refinanced the acquisition of an existing rooftop solar PV plant in Ascoli Piceno (Central Italy) with a generating capacity of 901.6 kWp (kilowatts peak). The investment is based on the purchase of receivables generated by an energy service contract between the leading Italian engineering firm CO-VER Power Technologies (CO-VER) and its subsidiary Futura APV srl ("Futura"). The contract governs the management of an operating roof-mounted solar PV plant until April 2028. Thereafter, the investment is based on a feed-in-tariff for an additional six years, aggregating to a 12-year tenor. The investment is forecast to generate a return ranging of between 7.0% and 7.3% p.a.

CO-VER has a successful 20-year history in developing industrial projects in the areas of energy storage systems, co/tri-generation plants and renewable energies. Futura, which was established in 1981, specialises in the design and construction of overhead and floor conveyors and is the owner of the PV plant which is backed by the payments of Gestore dei dervizi energetici (GSE). GSE is a joint stock company managed by the Italian government which is responsible for promoting and developing the growth of renewable assets in Italy. GSE has a credit rating of BBB+ from the Italian government.

GBP1.2 million investment in rooftop solar PV plant, developed by Noleggio Energia .

In April 2022, the Company invested GBP1.2 million in a rooftop solar PV plant in self consumption, including the refurbishment of the roof, in Lombardy (Northern Italy). The plant has a capacity of 1 MWp (Megawatt peak) and is for the engineering company Tecnocryo s.p.a (Tecnocryo). The investment is based on the purchase of receivables generated by a 10-year operating lease contract between Tecnocryo and Noleggio Energia. The investment is forecast to generate a contractual return of 7.8% p.a. over a 10-year period. Tecnocryo has been operational since 1992 and focuses on the design and realisation of machines for handling cryogenic fluids. The company has a Cerved credit rating of B2.1, equivalent to BB+, which is just below investment grade.

GBP1.7 million investment in Comgy GmbH & Co KG (Comgy)

In April 2022 the Company, through Attika, purchased a note for GBP1.7 million with a tenor of 10 years issued by Comgy. The note provides for a fixed interest rate of 6.5% p.a. and a variable component and is forecast to generate a total return in excess of 10% p.a. Comgy is a wholly owned subsidiary of Comgy GmbH, active in the German sub-metering market. Comgy provides metering equipment, billing and O&M services mainly to housing companies with an average rating comparable to S&P BBB+/BBB. The note purchased by Attika is secured by sub-metering contracts, including equipment rental and billing as well O&M services with tenors of between five and ten years. The structure for the investment in Comgy (transfer of assets and issuing of a note) can be viewed as a framework under which Attika has the opportunity to purchase a series of notes from Comgy secured by additional sub-metering contracts.

GBP0.1 million additional projects with Lumenstream

In January and April 2022 Attika committed to invest GBP0.1 million in additional lighting projects developed by Lumenstream for a UK subsidiary of Siemens, which has an investment grade credit rating of AAA/AA- from Cerved and Bearmach Limited, respectively. The projects use the same five-year lighting as a service agreement as the other projects financed by Attika. The total Lumenstream portfolio of projects is forecast to generate a return of in excess of 10.0% p.a. over the contractual period of five years.

GBP1.5 million additional investment in Italian "Superbonus" projects

In April 2022, the Company committed a further GBP1.5 million to additional Superbonus projects in Italy. These investments are structured in a very similar way to the first Superbonus investments, using almost identical documentation, to provide for a contractual return of 8% p.a. These projects are being managed by Sol Lucet S.r.l., an energy services company which, since 2013, has successfully installed renewable energy plants with a generating capacity of 17.0 MWp as well as combined heat and power (CHP) plants producing 3.2 MWe (Megawatts electric). Sol Lucet is currently managing solar PV plants with a generating capacity of 14.0 MWp. The tax credits, which these projects are expected to generate by the end of 2022, will be acquired by Credit Agricole, which has a short-term rating of A+ from S&P.

Investment Structures

All the investments in Italy have been made by the Company through directly purchasing notes issued by an Italian special purpose vehicle (SPV) established under securitisation laws in Italy. This SPV has made the capital investments in return for which receivables have been transferred to it. The receivables are the payments due from the purchase of tax credits in the case of the Superbonus investments and from operating leases in the case of the investments developed by Noleggio Energia and EES. The notes issued by the SPV, entitle the Company to the economic return from the receivables and are structured to provide a fixed interest rate amounting to a 3% p.a. return on capital and variable interest to capture the return above 3% p.a.

As with its investments in Italy, the structure of the Company's UK investments is also based on the purchasing of receivables. In this instance, Attika has purchased the receivables due under Lumenstream's five-year lighting as a service contract. Lumenstream has established a special purpose subsidiary to own the lighting installations financed by Attika and subsidiary has contracted with Lumenstream's clients to provide energy saving services through the provision of energy efficient lighting. The receivables from these contracts have been transferred to Attika.

The structure for the Comgy investment in Germany has elements of both the Italian investment structure and the Lumenstream investment structure with Attika, purchasing a note issued by Comgy. This entitles Attika to the economic return from receivables and is structured to provide a fixed interest rate amounting to a 6.5% p.a. return of capital and variable interest to capture the return above 6.5% p.a. As with the Lumenstream structure, Comgy's parent company has transferred a portfolio of sub-metering and other services contracts to Comgy, the receivables from which are payable to Attika, the noteholder.

Investment Pipeline

At the time of the IPO, the Company had access to an advanced pipeline with a value of GBP180 million spread across 60 potential projects. As at 31 May 2022, the Company's pipeline of investment opportunities had increased to an amount in excess of GBP282 million across 135 potential projects, many of which were in the advanced pipeline and remain available to the Company. The pipeline is well diversified in terms of (i) geography across Europe; (ii) technologies; (iii) ESCO partners; and (iv) counterparties. Projects with a value of GBP34 million are in exclusivity and are expected to be completed within five months of the date of this report.

Some projects in the advanced pipeline have been lost for a combination of reasons including (i) the projects did not meet the criteria of the Company, for example, from a return or credit risk perspective; (ii) the projects are no longer being pursued by either the ESCO or the underlying client; and (iii) the projects were lost to competing financiers or ESCOs. However, the main factor affecting planned levels of capital deployment has been delay to completing new projects. We have found that the Company's focus on investing in new or newly completed energy efficiency projects that deliver incremental environmental benefits has led to delays in the expected levels of capital deployment.

Nevertheless, the Company has been able to complete investments developed by ESCOs that are expected to develop numerous projects in the future which the Company is well placed to invest in. Furthermore, the Investment Adviser believes that capital deployment achieved in the period since end December 2021 is encouraging.

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

 
 
                                           Noleggio       Acetificio 
                                            Energia        Galletti 
 Galetti        Solar PV        Italy       s.r.l.         SNC          BBB+/BBB-     28/06/2021     293    7       7.2% 
-------------  --------------  ---------  -------------  ------------  -----------  ------------  ------  ---  --------- 
                                           Noleggio 
                                            Energia       Enofrigo 
 Enofrigo       Solar PV        Italy       s.r.l.         s.p.a.         BB+-BB      12/10/2021     116    7       9.4% 
-------------  --------------  ---------  -------------  ------------  -----------  ------------  ------  ---  --------- 
                                                          4 Northern 
 Lumenstream                                               Ireland 
  1+2           LED Lighting    UK         Lumenstream     Corporates      AAA        12/10/2021     267    5       9.6% 
-------------  --------------  ---------  -------------  ------------  -----------  ------------  ------  ---  --------- 
                                                          Banca Monte 
                                                           Paschi 
                                           Enerqos         di Siena 
                Energy                      Energy         or 
 Superbonus      efficient                  Solution       MedioBanca 
  ENERQOS        Renovation     Italy       s.r.l.         Factoring    BBB+/BBB-     29/10/2021   5,154    1       8.0% 
-------------  --------------  ---------  -------------  ------------  -----------  ------------  ------  ---  --------- 
                                                          BNL Paribas 
                Energy                                     or 
 Superbonus      efficient                 Enerstreet      Banca 
  ENERSTREET     Renovation     Italy       s.r.l.         Intesa        A+/A/A-      29/10/2021   8,940    1       8.0% 
-------------  --------------  ---------  -------------  ------------  -----------  ------------  ------  ---  --------- 
                                           Noleggio 
                                            Energia       Tecnocryo 
 Tecnocryo      Solar PV        Italy       s.r.l.         s.p.a          BB+-BB      06/01/2022   1,247   10       7.8% 
-------------  --------------  ---------  -------------  ------------  -----------  ------------  ------  ---  --------- 
                                                          Futura APV 
 COVER          Solar PV        Italy      CO-VER          srl              A-        28/12/2021     690   12   7.0-7.3% 
-------------  --------------  ---------  -------------  ------------  -----------  ------------  ------  ---  --------- 
                                                                           Not 
 Comgy          Sub-Metering    Germany    Comgy KG       Comgy GmbH       rated      02/02/2022   1,730    9      10.8% 
-------------  --------------  ---------  -------------  ------------  -----------  ------------  ------  ---  --------- 
 Lumenstream                                              5 UK 
  3             LED Lighting    UK         Lumenstream     Corporates    AAA/AA-      23/02/2022     121    5       >10% 
-------------  --------------  ---------  -------------  ------------  -----------  ------------  ------  ---  --------- 
                Energy 
 Superbonus      efficient                                Credit 
  - Sol Lucet    Renovation     Italy      Sol Lucet       Agricole        AA-        14/03/2022   1,526    1       8.0% 
               -------------- 
 

Market Trends

Electricity prices for industrial and residential customers across Europe have increased significantly since the completion of the Company's IPO. Given this strong upward pressure on energy prices, we have seen a noticeable increase in investment opportunities in recent months. From our discussions with ESCOs and other market participants, it is clear that marked increases in power prices are accelerating investments in energy efficiency projects and the Company is well positioned to benefit from this increased demand for funding such projects.

Market Commentary: Energy Efficiency

1. An introduction to energy efficiency

By definition, energy efficiency aims to reduce primary energy demand. Primary energy demand is understood to mean the use of energy carriers which, in the field of conventional energy production, are fuels such as coal and gas.

Energy efficiency refers to measures whose implementation results in the same or a better performance with less energy consumption. According to the laws of economics, scarcity of energy makes it necessary to relate the input to the output to maximise the benefit. This means that, for a fixed energy input, the aim is to achieve maximum output or, for a fixed output, the energy input is minimised. An illustrative example of this is the use of energy-saving lamps, which are now mandatory within the EU. Whereas conventional incandescent lamps convert electrical energy into desired lighting and undesired heat, the energy requirement for efficient light sources is reduced due to lower heat losses for the same amount of lighting. However, this simple, obvious and at the same time economically sensible change had to be brought about through legislation. The principle of voluntariness would not have worked here because energy-saving lamps consume less energy but are more expensive to buy.

This contradiction is often encountered when it comes to energy efficiency, but the focus should rather be on the "win-win" situation. The savings potential specific to lighting is up to 70%, which ensures short payback times. By contracting, i.e. outsourcing financing and installation, immediate savings can be achieved, as the measures pay for themselves through part of the savings. Under current conditions, Europe offers a cost-efficient savings potential of 20% to 40% of primary energy. [1]

Energy efficiency is a cornerstone of the energy system transformation. In addition to the savings needed to achieve climate targets, synergy effects with renewable energies offer further great potential for the decarbonisation of the economy. For this reason, the speed of implementation and the visibility of energy efficiency must be accelerated and increased. Only in this way can the limitation of global warming to below 1.5degC be achieved. To achieve this goal, the International Energy Agency ("IEA") estimates that, from 2035 onwards, almost half of the world's energy investments will have to be committed to energy efficiency.

2. Energy Efficiency improvements are crucial to make the energy transition a reality

"The cleanest energy is that which is not consumed at all"

On the path towards a climate-neutral economy and society, a reorganisation of the energy system is vital. Systems of conventional energy production and supply are characterised by high inefficiencies. Up to two thirds of the primary energy used is wasted in the process. The potential for making efficiency improvements along the value and supply chains is correspondingly large.

Final energy consumption only covers two thirds of the energy generated in the EU and the UK, as it does not account for losses during energy production and transportation. The relationship can be illustrated using the example of a coal-fired power plant, which has an efficiency of only 30%-40% based on the primary energy used in the form of coal. This means that, when the thermal energy is converted into electricity, around 60%-70% of the energy is not available to the consumer due to heat loss .

Despite the efficiency gains which can be attributed, in particular, to the use of renewable energies and the use of more efficient gas-fired power plants (using CCGTs - combined cycle gas turbines), significant energy losses remain within this process. Not included in this context are grid-related curtailments of renewable energies, which are caused by the high inflexibility of thermal power plants.

In addition, the use of energy-efficient technologies in cross-sectional applications, i.e. applications used across sectors such as IT systems and lighting, open up a further savings potential of up to 70%.

Synergies between Energy Efficiency and Renewable Energy

There are considerable interactions between renewable energies and energy efficiency that reinforce each other. On the one hand, renewables are an energy-efficient measure per se. For example, since wind power and solar PV do not require the use of fuels, they are 100% efficient from a primary energy perspective. On the other hand, energy-saving measures on the consumption side increase the share of renewable energies in the national energy mix.

This correlation can be illustrated by comparing 2019 with 2020, the latter being characterised by the ramifications of the pandemic.In 2020, the importance of renewable energies in the energy mix increased significantly as demand fell. In particular, countries with already high shares of renewable energies (e.g. Spain, Germany) showed a significant inverse correlation between demand and the share of renewables.

In view of the EU's goals to increase very significantly the share of renewable energy, the central importance of establishing energy efficiency as a quasi independent energy source (first fuel) becomes clear.

3. Energy Efficient measures in Generation, Transmission and Distribution

Efficiency through decentralised in-house energy generation

Based on the advantages of increased decentralised power generation, renewable energy systems, energy efficiency and small power generators are becoming more important. System efficiency is increasingly becoming the focus of debate. Photovoltaic systems can contribute significantly to the decentralised approach. Existing surfaces, such as roofs, can be used to generate electricity. This means that there are no additional costs for the area and additional land consumption is limited. The technological progress achieved in the recent past and associated cost reductions promise short payback periods and, thus, favourable access to renewable energy. Any excess capacity that results can be fed into the grid, which can generate additional income. From the point of view of efficiency, an additional burden on the grid is avoided because savings of electricity downstream of the meter compared to the direct consumption of locally generated, clean energy have the same effect from the perspective of the public power supply as neither requires grid capacity. Avoiding transport-related energy losses also contributes to the efficiency of energy produced and consumed in-house. Corresponding implementations offer cost-efficient possibilities to increase energy efficiency.

Energy efficiency investments can generate cost savings and income for end users; for example, through the fitting of solar PV systems to already built-up areas, such as the roofs of factories, end users can reduce their energy costs and also generate income through the sale of surplus capacity. The decisive factor in this orientation is the prevailing level of energy prices.

Excursus on combined heat and power ("CHP")

Initial situation - separate decentralised heat generation and centralised supply of electricity

Many EU member states (e.g. Germany) continue to pursue the construction of flexible gas-fired power plants (gas peakers) in order to close future electricity gaps or to ensure energy security in hours with low renewable energy generation. As a result, further inefficiencies in electricity generation are to be expected (efficiency around 50%). In addition, there are sometimes loads on the grids that even result in renewable energy curtailments.

In contrast, CHP plants offer the possibility of companies supplying themselves with energy while covering their heating needs with otherwise unused waste heat. This is particularly advantageous for companies that require process heat, while benefiting overall from lower costs, fewer emissions and the more effective use of renewable energies.

Smart meter rollout

In addition to the energy transition, we are also in the midst of a digital transformation. But instead of seeing this as an additional challenge, the focus should be on synergising both transitions. An accelerated expansion of smart meters makes it possible to use potential lying in the grid. Smart meters offer a digital exchange of consumption data and storage capacities in real time and bring benefits for utilities and consumers. For example, the bidirectional charging and discharging of batteries of an increasing number of electric vehicles ('EVs') would increase flexibility on the demand side. While consumers could benefit from lower prices, there would be additional benefits in terms of the loads on grids and efficient use of renewable energy.

Effects of decentralisation

The decentralisation of energy generation plus digitalisation could make the energy supply much more efficient. Increasing demand flexibility in the context of electrification would significantly improve the integration of renewable energies. In combination with renewable self-production, such as through rooftop solar systems, inefficient and emission-heavy fossil fuel generation would decrease significantly. In addition, excessive grid loads would be avoided, minimising transport losses and curtailments of renewable energy sources.

In addition to the positive effects on system efficiency, these effects can realise competitive cost savings, especially for companies.

4. Consumption side - Spotlight building sector

The building sector is by far the largest energy consumer within the EU. Accounting for 40% of total energy consumption, buildings are responsible for more than one third of energy-related greenhouse gas emissions (36%) and are thus at the centre of the European "efficiency first" approach.

Recent efficiency improvements have made it possible for new buildings to have an approximately 50% lower energy demand compared to 20 year old buildings. However, since 220 million buildings - about 80% of the EU's building stock - were built before 2001, most buildings are not energy efficient. Many of them are heated with fossil fuels and have technologies and appliances with high energy consumption.

As 85%-95% of today's buildings are expected to still be in use in 2050, extensive energy retrofits of buildings are a prerequisite for achieving the EU's climate targets. The goal of reducing emissions by 55% by 2030 requires reducing the emissions from buildings by 60%, energy consumption by 14%, and energy consumption for heating and cooling by 18%. Currently, however, the annual rate of energy retrofits is only running at about 1%, while comprehensive renovations, which have the potential to meet the targets, apply to only 0.2% of the EU's building stock annually.

To achieve the EU's goals, the annual rate of energy renovations must at least double to 2%. By 2030, about 35 million buildings would have to undergo energy-efficient refurbishment, which corresponds to an annual investment requirement of about EUR275 billion.

Energy efficient measures range from insulation to the electrification of heating and cooling, which can be supplied by renewable energies in the future, to digitalisation via smart applications. The EU is pursuing a strategy that it calls the renovation wave. In view of the ramifications of the pandemic, this is a "win-win" situation. On the one hand, this approach contributes to achieving ambitious goals, in particular, the realisation of electrification via renewable energies; on the other, up to 160,000 additional green jobs could be created. For these reasons, member states are free to use the EU's recovery fund, which prescribes a fixed quota of green investments, to create additional incentives for private investments.

According to plans that recipient states had to submit to the European Commission for review, there is a strong focus on buildings. Apart from Italy, which tops the list of the eight largest beneficiary countries in absolute terms (around EUR15 billion) an average of 12% of the EU funds are to be used to boost the renovation wave.

Example Italy: Superbonus 110

With the so-called Superbonus 110, the Italian government creates incentives for the energy-efficient refurbishment of buildings. Costs incurred for measures that increase the energy efficiency of buildings can be claimed for at a rate of 110% against tax. When qualifying measures are completed, the ESCO - that carried out the technical installation - is awarded a tax credit equal to 110% of the costs of the measures. These tax credits can be sold to banks and, thus, the projects can be financed without the need for a financial contribution from landlords.

The Superbonus scheme is expected to lead to investments in excess of EUR 8.75bn, with a net positive contribution for the Italian government of approximately EUR 800m. As of 1 July 2021, more than 24,500 projects for a total investment of EUR 3.5bn have been submitted, of which 11% are related to condominiums, 43% of the total investment volume. The expectation is that the Superbonus arrangements will be extended for a number of years past the current end date of 31 December 2023, thereby creating attractive and sustainable opportunities for institutional investors in the residential sector. To achieve its climate targets, the EU aims to ensure that targeted renovation rates are incorporated into the national legislation of member countries. The guiding principle in relation to the financing of the renovation wave strategy is:

Ensuring accessible and well-targeted funding, including through the 'Renovate' and 'Power Up' Flagships in the Recovery and Resilience Facility under NextGenerationEU, simplified rules for combining different funding streams, and multiple incentives for private financing"[2]

In accordance with EU targets, the already allocated EU funds and the economic stimulus that is expected to result courtesy of the construction sector, further incentive programmes for European member states are to be expected, analogous to the example set by Italy (Superbonus 110). In this context, we expect a further expansion of sustainable investment opportunities in the area of energy efficiency within the EU.

In addition to financial incentives, ESCOs, which are responsible for technical implementation, will also play a key role. Within the EU, however, the development of this sector is very heterogeneous and requires a correspondingly selective approach in conjunction with the perspective development of partnerships.

In Western Europe in particular, structures are already in place that offer the essential prerequisites for energy-efficient renovations. However, Italy offers the best overall conditions currently. The triad of EU funding (EUR 15bn), a national incentives programme (Superbonus 110) and a mature and institutionalised ESCO market offers an ideal environment for private sector investors.

Future efforts will primarily be directed towards improvements in thermal insulation, to reduce energy consumption, and the heating of buildings.

The heating in buildings is responsible for around two thirds of total energy consumption. As more than 50% of this consumption is based on fossil fuels, the need for energy renovations is of particular importance. The EU's ambitious plans, as well as the urgently needed and time-critical reorganisation of the building sector, will lead to high capital requirements in the future. In the short to medium term, a steadily improving environment for private sector investors in search of sustainable impact investments can therefore be expected. Within the EU, investment opportunities in the field of energy efficiency will show significant growth.

5. Policy Update

Energy efficiency is a main pillar of the energy transition. In this context, the European Commission's increased target of reducing GHG emissions by 55% by 2030 has significantly increased the efficiency targets. With the strategy paper "Fit for 55", the EU Commission published guidelines that must be anchored in national law by the member states.

However, in view of the current situation and the urgent need for independence from Russian energy imports, it is clear that even this increase in targets is not enough. There is an urgent need in particular to substitute the supply of Russian natural gas or, ideally, to reduce gas demand altogether. Since energy-efficient measures have the potential to reduce demand in the short term, they are at the centre of the politically, socially and economically necessary effort.

With the "REPowerEU" package, the aim of which is to end dependence on Russian gas supplies as quickly as possible, the EU Commission once again adapted the goals to the changed, explosive framework conditions.

With the focus on electrification in the areas of buildings, energy supply and industry, the targets are almost double the already ambitious approach of the "Fit for 55" package. Energy efficiency has the power to drastically accelerate the energy transition in accordance with the new requirements. It is an ongoing responsibility of governments to create efficient and intelligent framework conditions to optimise the market conditions for energy efficiency and simultaneously enable sufficient renewable energy capacities.

In this environment, the use of synergies between the private sector and government subsidy programmes is of central importance. One example is the Italian "Superbonus 110", which has already given a strong boost to the implementation of efficiency measures in the residential segment in Italy in recent years

6. Conclusion and Outlook

Energy efficiency is a cornerstone of energy system transformation. In addition to the savings needed to achieve climate targets, synergy effects with renewable energies offer further great potential for the decarbonisation of the economy. For this reason, the speed of implementation and the visibility of energy efficiency must be accelerated and increased. Only in this way can we achieve the goal of keeping global warming below 1.5degC. The IEA estimates that, from 2035 onwards, almost half of the world's energy investments will have to be committed to energy efficiency if we are to reach this target.

Furthermore, it must be emphasised that adaptations and the implementation of efficiency measures usually create monetary benefits for the consumer. The negative investment costs of many efficiency measures are significantly lower than the savings that can be made over time, while the entire supply system benefits from higher efficiency both through the avoidance of grid related curtailments and the implementation of smart solutions.

Additional support comes from the governments in Europe. In particular, the public focus is on the building sector which, on the one hand, is the largest consuming sector in Europe and, on the other, is a potential source of enormous economic stimulus that could provide a sustainable and efficient way out of the recent crisis.

Environmental, Social and Governance ("ESG")

Introduction

AEET's goal is to generate attractive returns for investors by reducing Primary Energy Consumption ("PEC"). AEET seeks to achieve this through investing principally in a diversified portfolio of energy efficiency projects with high-quality counterparties. AEET's investments positively impact the environment by reducing the amount of carbon dioxide produced, by decreasing PEC and by increasing the amount of renewable energy used. The synergies generated by the reduction of PEC and simultaneously using renewable energy sources further decrease CO 2 emissions.

This is reflected across the investment philosophy and approach, including the Company's investment adviser, Aquila Capital Investmentgesellschaft mbH ("Investment Adviser" or "Aquila"), who is dedicated to the green energy transition. The Company is committed to be a responsible investor, ensuring that environmental, social and governance criteria are incorporated into day-to-day investment decisions as well as generating a positive impact for society. By reducing PEC, the Company often improve life standards for end users, for example, better lights, easier maintenance, reduced danger, security of supply and very importantly, the reduction of emissions like Nitrogen Oxides (NOX).

Investment Approach and ESG Approach

AEET's investment approach is focused on investments in energy efficiency projects located primarily in Europe. These assets are predominantly proven operational projects that deliver energy savings for commercial, industrial, and public sector buildings. AEET seeks to invest in projects for the long term with a focus on optimising and improving the assets' PEC.

Technologies typically include:

-- LED Lighting System: significant reduction of consumed energy (up to 70%) and other positive outcomes: reduced heat emission and therefore less need for ventilation and cooling; better light for workplaces; less maintenance work; reduction in the use of glass (particularly beneficial in food production).

-- LED Street Light Systems: significant reduction of consumed energy, increased safety (better light, light where needed, choice of light color); integration of other technologies such as sensing (traffic control), mobile communication systems etc.

-- Solar PV: increases the level of efficient and locally produced renewable energy. Lower transportation costs, free energy source.

-- Biomass Boilers: locally consumed; generate energy (heat, cooling and electricity) from renewable sources, very often contributing to local job creation. The exhaust for dust needs to be managed and fulfil strict environmental regulations.

-- Combined Heat and Power plants (CHP): Highly efficient generation of combined energy outputs like electricity and heat or cooling.

-- Electrification of transportation vehicles (batteries) such as trains, trams, buses, ferries, boats etc; replacement or hybridization of large fossil fuel engines; significant reduction of fossil fuel consumption, other emissions (NOX) and Sulphur oxides (SOX); often create a greener and healthier local environment e.g. by electrification of inner-city buses.

-- HVAC/buildings: Highly efficient heating, ventilation and air conditioning systems. Often a combination of more efficient use of energy while simultaneously increasing wellbeing, effectiveness, and controllability of system, e.g., avoid over-heating/cooling of workspace by taking weather conditions into consideration.

-- Smart Metering/Submetering: Often providing real-time or timely information about personal consumption volume, patterns and costs of energy (heating, electricity, water or gas) in order to enable energy consumers to manage usage and costs. Pre-requisite to change consumer behaviour which in itself could reduce energy consumption by up to 20% (e.g. avoiding standby electricity consumption).

Environmental Impact

The Company's investment approach is focused on reducing PEC, which should lead to significant reductions in carbon dioxide emissions. In addition, local production of energy (CHP, Biomass Boilers, Solar PV) reduces transportation energy losses and grid over-utilisation. Smart Meters and other control technologies enable a better visibility and management of energy and therefore represent a basis for energy savings.

All projects are managed within the guidelines of local, regional, and national environmental laws in order to adhere to the DNSH (do no significant harm) principals. Aquila Capital will ensure all required regulations and corresponding approvals are completed prior to the acquisition of the assets (planning permission).

Social Impact

Energy efficiency measures not only reduce PEC but typically also increase the life quality and health aspects for different stakeholder, like employees, users of public facilities and/or private individuals. This is mainly achieved through advanced solutions for lighting, heating, cooling and ventilation and the associated control units.

All project developers are required to adhere to local, regional, and national health & safety laws, to train and educate employees accordingly in order to make sure casualties and injuries are voided.

We incorporate Aquila Capital's ESG policy, which excludes suppliers and manufacturers that do not meet Aquila Capital's criteria (exclusion of sectors/subsectors, companies that use unfavourable labour conditions etc).

For all counterparties a rating is performed (in collaboration with a third-party rating agency) assessing creditworthiness of the client as well as a Know Your Client check will be done for the relevant parties involved to increase transparency of the company's activities.

Governmental Impact

All our business partners are required to adhere to the requirements of the national social security and tax authorities.

Where required by local, regional and/or national authorities our business partner need to provide evidence that they adhere to anti bribery and corruption laws.

Due Diligence

The Investment Advisor performs detailed ESG due diligence for each asset prior to investment. The investment management team follows a structured screening, due diligence and investment process which is designed to ensure that investments are reviewed and compared on a consistent basis. Execution of this process is facilitated by the team's deep experience in energy efficiency project investing. As part of this process, the Investment Adviser will, as relevant for each investment, consider:

   --      total PEC reduction, and implied greenhouse gas emissions reduced and/or avoided; and/or 
   --      total energy production from renewable and non-renewable sources. 

As part of this due diligence, various risks are assessed and documented including risk of climate change, risk of harm to local biodiversity and other environmental risks. These risks are evaluated as part of the technical, legal, and insurance due diligence as applicable. The independent risk management team evaluates the initial evaluation of the investment management team in assessing each asset for acquisition. The Investment Adviser considers the ability for the acquisition to contribute to the UN Sustainable Development Goals and whether it fits within the Principles for Responsible Investment ("PRI").

Governance Framework

AEET benefits from an independent Board of Directors, as well as International Fund Management Limited (part of Sanne Group) functioning as the Alternative Investment Fund Manager ("AIFM"). The Board of Directors supervise the AIFM, which is responsible for making recommendations in relation to any investment proposals put forward by the Investment Adviser. The Investment Adviser is fully regulated and supervised by BaFin in Germany.

The Company has established procedures to deal with any potential conflicts of interest in circumstances where Aquila Capital (or any affiliate) is advising both the AIFM (for the Company) and other Aquila Capital managed funds who are counterparties to the Company. In the context of an investment decision, these procedures may include a fairness opinion in relation to the valuation of an investment, which is obtained from an independent expert.

Monitoring of Environmental, Social & Governance Characteristics

After an investment has been made, continuous ongoing monitoring commences at both the portfolio and asset levels by the Investment Adviser. The aim of this ongoing monitoring is to monitor and calculate the energy consumption/reduction and derive the CO 2 reduction from that.

The environmental characteristics of the Company are moni-tored on a continuous basis throughout the lifecycle of investments, including:

-- ongoing monitoring of the PEC based on the energy consumption and derive from that the CO 2 savings, where appropriate, monitoring additional environ-ment and ESG relevant developments both at the portfolio and asset level;

-- annual reporting, including ESG aspects, to relevant stakeholders including ad-hoc reporting of any material and urgent issues identified in the monitoring process;

   --      semi-annual ESG risk reporting to the Board. 

AEET has been awarded the Green Economy Mark from the London Stock Exchange. The Green Economy Mark identifies London-listed companies and funds that generate between 50% and 100% of total annual revenues from products and services that contribute to the global green economy.

The Company's investment policy (including defined terms) can be found below as set out in its IPO prospectus dated 10 May 2021.

Investment policy

The Company will seek to achieve its investment objective through investment in a diversified portfolio of Energy Efficiency Investments (as defined below) located in Europe, with private and public sector counterparties. The Company will predominantly invest in (i) energy efficiency investments including the installation, in the built environment, transportation industry and other sectors of the economy, of proven technologies and solutions such as energy efficient lighting, smart building and metering services, cogeneration plants, heating, ventilation and air conditioning (HVAC) systems, efficient boilers, solar photo voltaic plants, batteries, other energy storage solutions, electric vehicles and associated charging infrastructure as well as (ii) in the acquisition of majority or minority shareholdings in companies with a strategy that aligns with the Company's investment objective, such as developers, operators or managers of energy efficiency projects ("Equity Investments") ("Energy Efficiency Investments"). These investments seek to reduce primary energy consumption, reduce CO(2) emissions and in many cases deliver economic savings and other benefits to the counterparties including improved air quality. The Company will not invest in fossil fuel extraction or mineral extraction projects. The capital value of the investment portfolio will be supplemented and supported through reinvestment of excess cash flows, asset management initiatives and the use of leverage.

The Energy Efficiency Investments will typically include long term contracts, which entitle the Company or its subsidiaries to receive stable, predictable cash flows payable by the counterparties, who will benefit from the use of the installed equipment during a contractual period typically ranging from five to fifteen years.

The Company will make Energy Efficiency Investments in operational, ready-to-build or under construction assets. The Company may, when making Equity Investments, through such investments, indirectly hold investments that are in the development phase.

In respect of each type of investment, the Company will seek to diversify its commercial exposure by contracting, where practicable, with a range of different equipment manufacturers, project developers and other service providers, as well as off-takers.

Whilst the Company will seek to diversify its commercial exposure by investing in a diversified mix of technologies, the assets of the Company may be predominantly concentrated in a small number of proven technologies.

Investments may be acquired from a single or a range of vendors and the Company may also enter into joint venture or co-investment arrangements alongside one or more co-investors, including Aquila Managed Funds.

The Company will acquire controlling and, opportunistically, non-controlling interests in Energy Efficiency Investments and may use a range of investment instruments in the pursuit of its investment objective, including but not limited to equity, mezzanine or debt investments.

In circumstances where the Company does not hold a controlling interest in the relevant investments, the Company will secure its rights through contractual and other arrangements, to, inter alia, ensure that the Energy Efficiency Investment is operated and managed in a manner that is consistent with the Company's Investment Policy.

Investment restrictions

The Company aims to achieve diversification principally through investing in a range of portfolio assets across a number of distinct geographies and a mix of technologies. The Company will observe the following investment restrictions when making investments:

-- no more than 20 per cent. of its Gross Asset Value will be invested in any single asset;

-- no more than 20 per cent. of its Gross Asset Value will be invested in Energy Efficiency Investments with the same Counterparty;

-- following full investment of the Net Issue Proceeds, the Company's portfolio will comprise no fewer than ten Energy Efficiency Investments;

-- no investments will be made outside of Europe; and

-- no more than 7.5 per cent. of its Gross Asset Value, in aggregate, will be invested in Equity Investments, and at all times such investments will only be made with appropriate shareholder protections in place.

The Company will hold its investments directly or through one or more SPVs and the investment restrictions will be applied on a look-through basis.

The Company complies with the investment restrictions set out below and will continue to do so for so long as they remain a requirement of the FCA:

-- neither the Company nor any of its subsidiaries will conduct any trading activity which is significant in

the context of the Group as a whole;

-- the Company must at all times, invest and manage its assets in a way which is consistent with its object of spreading investment risk and in accordance with the published investment policy; and

-- not more than 15 per cent. of the Gross Asset Value at the time an investment is made will be invested in other closed-ended investment funds which are listed on the Official List.

The Directors do not currently intend to propose any material changes to the Company's Investment Policy. As required by the Listing Rules, any material changes to the Investment Policy of the Company will be made only with the approval of Shareholders by way of ordinary resolution.

Currency and hedging

The Company does not intend to use hedging or derivatives for investment purposes but may use derivative instruments such as forwards, options, futures contracts and swaps to hedge currency, inflation, interest rates, commodity prices and/or electricity prices.

Borrowing policy

The Company may make use of long-term debt on both a limited recourse and full recourse basis to finance the acquisition or construction of Energy Efficiency Investments and for working capital purposes. Gearing will be employed at the level of the Company, at the level of any intermediate wholly owned subsidiary of the Company or at the level of the relevant SPV, and any limits set out in this document shall apply on a look-through basis. In addition, the Company may make use of short-term debt, such as a revolving credit facility, to assist with the acquisition of or investment in suitable opportunities as and when they become available. Aggregate gearing, whether via long-term or short-term debt, will not exceed 50 per cent. of Gross Asset Value, calculated at the time of drawdown. The Company will target aggregate gearing, whether via long term or short term debt, of 35 between 40 per cent. of Gross Asset Value, but in any event will not exceed 50 per cent. of Gross Asset Value, in each case calculated at the time of drawdown.

Debt may be secured with or without a charge over some or all of the Group's assets depending on the optimal structure for the Group and having consideration to key metrics including lender diversity, cost of debt, debt type and maturity profiles. Intra-group debt between the Company and subsidiaries will not be included in the definition of borrowings for these purposes.

In circumstances where the above limits are exceeded as a result of gearing of one or more Energy Efficiency Investments in which the Company has a non-controlling interest, the borrowing restrictions will not be deemed to be breached. However, in such circumstances, the matter will be brought to the attention of the Board who will determine the appropriate course of action.

Cash management

Cash held pending investment in Energy Efficiency Investments or for working capital purposes will either be held in cash or invested in cash, cash equivalents, near cash instruments, bearer bonds and/or money market instruments ("Cash and Cash Equivalents"). There is no restriction on the amount of Cash and Cash Equivalents that the Company may hold and there may be times when it is appropriate for the Company to have a significant Cash and Cash Equivalents position. For the avoidance of doubt, the restrictions set out above in relation to investing in UK listed closed-ended investment companies do not apply to money market type funds.

Changes to and compliance with the Investment Policy

The Directors do not currently intend to propose any material changes to the Company's investment policy. As required by the Listing Rules any material changes to the Company's investment policy set will require the approval of Shareholders by way of an ordinary resolution at a general meeting and the approval of the FCA.

Compliance with the above restrictions will be measured at the time of investment and non-compliance resulting from changes in the price or value of assets following investment will not be considered as a breach of the investment restrictions.

In the event of a breach of the investment guidelines and the investment restrictions set out above, the AIFM shall inform the Board upon becoming aware of the same and if the Board considers the breach to be material, notification will be made to a Regulatory Information Service.

Key Performance Indicators

The Board measures the Company's success in achieving its investment objective by reference to the following Key Performance Indicators ('KPIs'):

   --    Deployment of IPO proceeds 

In the Company's prospectus published on 10 May 2021, it was stated that the proceeds would be significantly deployed or committed to acquire suitable assets within twelve months from IPO (2 June 2022). As announced on 21 April 2022, the Investment Adviser revised this target to the end of December 2022. As at 31 December 2021 and as at 31 May 2022, GBP14.1 million and GBP19.6 million of the total IPO proceeds of GBP100 million have been deployed, respectively.

The Board has engaged an independent adviser, Complete Strategy Ltd for an initial period of six months from the date of the above announcement in April 2022. Complete Strategy will assist the Board in monitoring the deployment of the IPO proceeds by providing the Board with a detailed analysis of monthly deployment performance during the period and its costs will be borne by the Investment Adviser.

   --    To meet its target total dividend in each financial year 

As disclosed in the Company's prospectus published on 10 May 2021, the Company is targeting a dividend of a minimum of 3.5 pence per Ordinary Share in relation to the financial year ending 31 December 2022, and a minimum of 5 pence per Ordinary Share in relation to the financial year ending 31 December 2023, with the aim of increasing this dividend progressively over the medium term. The Company did not intend to pay a dividend in the first financial period to 31 December 2021, whilst it was deploying the IPO Proceeds.

However as announced on 21 April 2022, in light of slower than anticipated deployment to date and the current expectation that the IPO proceeds will not be significantly deployed within twelve months of Admission, the Company does not expect that its stated dividend target of 3.5 pence per Ordinary Share for the financial year ending 31 December 2022 will be covered by earnings. The Board will review the position in respect of any dividend which may be declared for the financial year ending 31 December 2022 in light of the deployment of the IPO proceeds as the year progresses. The Board recognises that over the medium to long term dividends form a key component of the total return to shareholders.

   --    Premium or discount of share price to NAV 

The Board monitors the price of the Company's shares in relation to their NAV and the premium or discount at which they trade. As at period end, the share price has closed at a (1.7%) discount to the NAV as at 31 December 2021.

   --    Green credentials 

The Investment Adviser for every project, considers the potential energy savings and energy production respectively as well as CO(2) emission savings. Since the beginning of commercial operations of the first project (solar plant) in mid-October 2021 and as at 31 December 2022, energy savings of 54.5 MWh were estimated and 25.1 tonnes of reduced CO emissions were calculated. The CO(2) avoidance achieved by all the Aquila Capital Funds is in excess of eight million tonnes, which is equivalent to emissions of 0.5 million European households ( https://www.aquila-capital.de/en/ ).

   --    Quality of investments 

Investment opportunities are initially analysed by the Investment Adviser. The goal of this analysis is to determine the key characteristics and value drivers of the investment opportunity, including: (i) counterparty creditworthiness; (ii) volume and size of the investment; (iii) duration and price level of remuneration schemes; (iv) expected life of investment; (v) stability of regulatory and tax framework; (vi) visibility into future performance; (vii) other barriers to entry; (viii) correlation of cash flows to inflation; (ix) resilience within the economic environment; (x) expected returns; and (xi) the ability to close successfully on the investment. A portfolio analysis can be found at the Investment Adviser's report .

   --    Maintenance of a reasonable level of ongoing charges 

The expenses of managing the Company are carefully monitored by the Board. The Board receives and reviews management accounts which contain an analysis of expenditure which are reviewed at their quarterly Board meetings. The Board reviews the ongoing charges on a quarterly basis and considers these to be reasonable in comparison to peers.

Based on the Company's average net assets during the period ended 31 December 2021, the Company's ongoing charges figure calculated in accordance with the AIC methodology was 0.94%.

Risk Management

Principal risks and uncertainties

During the period the Company has carried out a robust assessment of its principal and emerging risks and the procedures in place to identify any emerging risks are described below.

Procedures to identify principal or emerging risks :

The Board regularly reviews the Company's risk matrix, with a focus on ensuring that the appropriate controls are in place to mitigate each risk. The experience and knowledge of the Board is important, as is advice received from the Board's service providers, specifically the AIFM, who is responsible for the risk and portfolio management services and outsources the portfolio management to the Investment Adviser.

1. Investment Adviser: the Investment Adviser provides a report to the Board on a quarterly basis or such other period as required on industry trends, insight into future challenges in the energy efficiency sector including the regulatory, political and economic changes likely to impact the sector;

2. Alternative Investment Fund Manager ("AIFM"): following advice from the Investment Adviser and other service providers, the AIFM maintains a register of identified risks including emerging risks likely to impact the Company;

3. Broker: provides advice periodically specific to the Company on the Company's sector, competitors and the investment company market whilst working with the Board and Investment Adviser to communicate with shareholders;

4. Company secretary: briefs the Board on forthcoming legislation/regulatory change that might impact on the Company; and

5. AIC: The Company is a member of the Association of Investment Companies ("AIC"), which provides regular technical updates as well as drawing members' attention to forthcoming industry and regulatory issues.

Procedure for oversight

Audit and Risk Committee: Undertakes a review at least twice a year of the Company's risk matrix and a formal review of the risk procedures and controls in place at the AIFM and other key service providers to ensure that emerging (as well as known) risks are adequately identified and, so far as practicable, mitigated.

Principal risks

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

 
 Principal Risks                  Potential Impact/Description       Mitigation 
 Portfolio Risk 
                                 ---------------------------------  -------------------------------------- 
 Counterparty / Credit            The Company allocates              Continued monitoring 
                                   funds to a Counterparty            of the investments 
                                   that defaults on its               and the counterparties/service 
                                   obligations.                       providers, including 
                                                                      the use of credit 
                                   This would impact                  rating data providers, 
                                   the Company's ability              allows the Investment 
                                   to meet dividends                  Adviser to identify 
                                   and achieve its intended           and address risks 
                                   goals and returns                  early. The Investment 
                                   for its investors.                 Adviser seeks to mitigate 
                                                                      credit risks, for 
                                                                      example, in the case 
                                                                      of Solar PV investments, 
                                                                      by the counterparty 
                                                                      having the opportunity 
                                                                      to sell electricity 
                                                                      to the grid or other 
                                                                      customers. The Investment 
                                                                      Adviser also seeks 
                                                                      to structure investments 
                                                                      whereby contracts 
                                                                      can be adapted/extended 
                                                                      to accommodate periods 
                                                                      of payment defaults. 
                                                                      Diversification of 
                                                                      counterparties and 
                                                                      service providers 
                                                                      ensures any impact 
                                                                      is limited. In addition, 
                                                                      a diversified portfolio 
                                                                      provides further mitigation. 
                                 ---------------------------------  -------------------------------------- 
 Concentration Risk               Concentration of exposure          The Investment Adviser 
                                   to investments in                  and AIFM constantly 
                                   a limited number of                monitor existing and 
                                   countries, counterparties,         proposed investments/portfolio 
                                   geographical markets,              on a pre trade basis, 
                                   tenure and currencies              enabling the effective 
                                   can lead to default                observation of portfolio 
                                   on loans or other                  concentrations and 
                                   obligations resulting              prospectus limits. 
                                   in Company underperformance 
                                   and inability to meet 
                                   targets. 
                                 ---------------------------------  -------------------------------------- 
 Environmental / Social           Not integrating ESG                The Investment Adviser 
  / Governance (ESG)               adequately into the                performs detailed 
                                   investment and monitoring          due diligence on ESG 
                                   processes can lead                 for each asset prior 
                                   to r eputational risk              to recommendation. 
                                   and exposure to greenwashing 
                                   claims.                            General standards 
                                                                      including IFS Performance 
                                                                      Standards, IFC Environmental 
                                                                      Health and Safety 
                                                                      Guidelines ("EHS") 
                                                                      and Equator Principles 
                                                                      as well as local health 
                                                                      and safety and social 
                                                                      laws are reviewed 
                                                                      on a regular basis 
                                                                      for all assets depending 
                                                                      on the location and 
                                                                      development status 
                                                                      of each asset. 
                                 ---------------------------------  -------------------------------------- 
 Economic and Markets 
  Risks 
                                 ---------------------------------  -------------------------------------- 
 Premium/Discount Management      Market sentiment moves             The Company's Broker 
                                   share price to a discount          monitors the market 
                                   which may it more                  for the Company's 
                                   difficult for the                  shares and report 
                                   Company to issue new               at quarterly Board 
                                   equity.                            meetings. The Company 
                                                                      has the authority 
                                   The Ordinary Shares                if appropriate, to 
                                   may trade at a discount            purchase Ordinary 
                                   to Net Asset Value                 Shares in the market 
                                   and not be liquid                  with the result of, 
                                   making Shareholders                amongst other things, 
                                   unable to realise                  enhancing the Net 
                                   their investments                  Asset Value per Ordinary 
                                   through the secondary              Share. 
                                   market at Net Asset 
                                   Value or at market                 The Company seeks 
                                   price.                             to maintain engagement 

                                                                      with shareholders. 
                                   Loss of market confidence 
                                   in the Board / Investment 
                                   Manager. 
                                 ---------------------------------  -------------------------------------- 
 Interest Rates/Inflation         Changes to interest                The Company may use 
                                   rates may impact discount          derivative instruments 
                                   rates applied to the               such as futures, options 
                                   portfolio valuations               and swaps to protect 
                                   and attractiveness                 the Company from fluctuations 
                                   of returns.                        of interest rates. 
 
                                   Can affect the spread 
                                   between, amongst other 
                                   things, the income 
                                   on the Company's assets 
                                   and the expense of                 Aquila's Asset Management 
                                   its interest-bearing               team regularly monitor 
                                   liabilities, the value             effectiveness of hedging 
                                   of its interest-earning            together with Risk 
                                   assets and its ability             Management. 
                                   to realise gains from 
                                   the sale of assets                 Investment Advisor 
                                   (should this be desirable).        will manage correlation 
                                                                      of cash flows to inflation 
                                                                      and resilience to 
                                                                      the economic environment. 
 
                                                                      Investment Advisor 
                                                                      seeks to incorporate 
                                                                      RPI adjustments in 
                                                                      investment documentation 
                                                                      where possible. 
 
                                                                      In addition, Renewable 
                                                                      energies represent 
                                                                      an effective protection 
                                                                      against inflation, 
                                                                      as renewable energies 
                                                                      benefit from rising 
                                                                      electricity prices 
                                                                      with no burden on 
                                                                      the cost side in relation 
                                                                      to the use of resources. 
                                 ---------------------------------  -------------------------------------- 
 Exchange Rates                   The Company holds                  The Company maintains 
                                   investments in currencies          the majority of uninvested 
                                   other than British                 cash in base currency 
                                   Pounds. Changes in                 (GBP). 
                                   foreign currency rates 
                                   may therefore impact               For any non-base currency 
                                   the value in sterling              assets, the Investment 
                                   between periods of                 Advisor can use forward 
                                   investments and of                 foreign exchange contracts 
                                   the income received.               to seek to hedge up 
                                                                      to 100% of non-GBP 
                                                                      exposure. 
                                 ---------------------------------  -------------------------------------- 
 Pandemic-(COVID-19)            COVID-19 and the response          The Company's response 
                                 by Governments, has                is focused on dealing 
                                 had a significant                  with the economic 
                                 impact on economies                impact of COVID-19. 
                                 across the world over              All parties to the 
                                 the last two years                 Company operate effective 
                                 resulting in market                work from home policies 
                                 volatility, uncertainty,           and these are assessed 
                                 supply chain issue                 annually. 
                                 and speed of decision 
                                 making. 
                               ---------------------------------  -------------------------------------- 
 Equity Market Volatility         The Company's ability              The Company's adviser 
                                   to raise equity from               and broker monitors 
                                   investors to repay                 market conditions 
                                   debt or to support                 and reports regularly 
                                   further investments                to the Board. In the 
                                   could be impacted                  event that the Company 
                                   by stock market volatility         is unable to raise 
                                   and pricing.                       new equity or debt 
                                                                      capital, the Company 
                                                                      could hold back from 
                                                                      making new investments 
                                                                      until the stock market 
                                                                      recovered and, in 
                                                                      extremis, investments 
                                                                      could be sold to raise 
                                                                      liquidity. 
                                 ---------------------------------  -------------------------------------- 
 Portfolio Management 
                                 ---------------------------------  -------------------------------------- 
 Investment Performance           With investment concentration      The Investment Advisor 
                                   in energy efficiency               has a well-defined 
                                   space, unquoted investments,       investment strategy 
                                   changes to regulatory              and process in place 
                                   framework or poor                  which is regularly 
                                   investment decisions,              reviewed and monitored 
                                   there is a risk that               by the AIFM and the 
                                   the portfolio underperforms        independent Board 
                                   and as a result, the               of Directors. 
                                   target returns are 
                                   not met over the longer            There is limited regulatory 
                                   term. This could lead              risk exposure due 
                                   to the dividend not                to focus on projects 
                                   being covered and/or               with authorisation 
                                   an inability to pay                and project business 
                                   the target dividend.               plans with limited 
                                                                      or no exposure to 
                                                                      government subsidies. 
 
                                                                      The Investment Advisor 
                                                                      has good experience 
                                                                      in renewable sustainability/energy 
                                                                      transition and understands 
                                                                      and manages the risks 
                                                                      closely. 
                                 ---------------------------------  -------------------------------------- 
 Pipeline, Investment             An important part                  As announced on 31 
  Deployment and Cash              of the Investment                  January 2022 and 21 
  Drag                             Adviser's role is                  April 2022, the Board 
                                   its ability to source              undertook a comprehensive 

                                   high quality potential             review of the Company's 
                                   investment opportunities           investment strategy, 
                                   in line with the Company's         due to slower investment 
                                   investment strategy.               deployment than originally 
                                                                      anticipated. The Board 
                                   Should suitable opportunities      appointed Complete 
                                   not be forthcoming                 Strategy Ltd, a consultancy 
                                   and cash remains uninvested        firm experienced in 
                                   the portfolio returns              the energy sector, 
                                   could be lower than                to conduct this review. 
                                   that required meet                 The Board with the 
                                   the dividend targets.              assistance of Complete 
                                   Slow deployment of                 Strategy Ltd and the 
                                   investments and excess             AIFM monitor the investment 
                                   cash on deposit.                   pipeline received 
                                                                      from the Investment 
                                   Cash drag can lead                 Adviser. 
                                   to reduced portfolio               The Investment Adviser 
                                   income and inability               has a track record 
                                   to pay dividends out               in originating potential 
                                   of income.                         investments. 
                                                                      The Investment Adviser 
                                   Reputational risk                  continues to build 
                                   of not meeting prospectus          a diversified pipeline 
                                   targets.                           of investment opportunities 
                                                                      for possible acquisition 
                                                                      by the Company. In 
                                                                      addition, it is developing 
                                                                      relationships with 
                                                                      energy services companies, 
                                                                      project developers 
                                                                      and technology providers 
                                                                      which bring multiple 
                                                                      investment opportunities 
                                                                      to the Investment 
                                                                      Adviser. 
                                                                      The Investment Adviser 
                                                                      continues to originate 
                                                                      potential investments 
                                                                      and is actively increasing 
                                                                      the value of its pipeline. 
                                                                      As of 30 April, the 
                                                                      total investment value 
                                                                      of the pipeline has 
                                                                      increased from GBP178.5 
                                                                      million to GBP233 
                                                                      million since the 
                                                                      time of IPO. 
                                                                      The team has expanded 
                                                                      to help the origination 
                                                                      activity. 
                                                                      Further, an emphasis 
                                                                      on repeat business 
                                                                      with existing partners 
                                                                      has been effective 
                                                                      in closing transactions 
                                                                      and deploying capital. 
                                 ---------------------------------  -------------------------------------- 
 Competition for Assets           With increasing numbers            The Board and AIFM 
                                   of investors seeking               oversee the investment 
                                   exposure to energy                 pipeline and monitor 
                                   efficiency assets,                 its progress in relation 
                                   it is possible that                to Company targets. 
                                   new competitors will 
                                   enter the market in                The Investment Adviser 
                                   which the Company                  continues to build 
                                   operates. This could               a diversified pipeline 
                                   lead to increased                  of investment opportunities 
                                   pricing for the Company's          for possible acquisition 
                                   target investments                 by the Company. In 
                                   with corresponding                 addition, it is developing 
                                   lower returns and                  relationships with 
                                   slower deployment                  energy services companies, 
                                   of uninvested cash.                project developers 
                                                                      and technology providers 
                                                                      which bring multiple 
                                                                      investment opportunities 
                                                                      to the Investment 
                                                                      Manager. 
                                 ---------------------------------  -------------------------------------- 
 Changes to subsidies             The value of the Company's         Diversification of 
  or other support mechanisms      investments may be                 investments by technology 
  for the Company's                adversely affected                 and geography mitigates 
  investments                      if subsidies or other              the impact of any 
                                   support mechanisms,                such risks. Many of 
                                   on which such investments          the investments which 
                                   may depend, are changed            the Investment Adviser 
                                   negatively.                        seeks do not rely 
                                                                      on subsidies or other 
                                                                      support mechanisms. 
                                 ---------------------------------  -------------------------------------- 
 Inappropriate Investment         Lack of resource,                  The Investment Adviser 
  Advice                           experience or depth                has substantial resources 
                                   in the team to source              and is not required 
                                   and vet appropriate                to commit all of its 
                                   investments.                       resources to the Company. 
 
                                   Possible conflicts                 The Company and AIFM 
                                   with other private                 are made aware of 
                                   Aquila clients and                 and review potential 
                                   private investing                  conflicts of interest 
                                   vehicles of which                  at the time of each 
                                   Aquila cannot disclose             investment being made. 
                                   to Board or AIFM.                  Conflicts of interest 
                                                                      and investment allocation 
                                   The Investment Adviser             policies are in place 
                                   is dependent on key                agreed with the Board. 
                                   people to identify, 
                                   acquire and manage 
                                   the Company's investments.         The strength and depth 
                                                                      of the Investment 

                                                                      Adviser's resources 
                                                                      mitigate the risk 
                                                                      of a key person departure 
                                                                      and provides ability 
                                                                      to draw skills from 
                                                                      other areas if need 
                                                                      be. 
 
                                                                      Investment focus on 
                                                                      proven technologies 
                                                                      and standardized technical 
                                                                      and financial suppliers' 
                                                                      DD, including an assessment 
                                                                      of supplier's reference 
                                                                      projects, reduce the 
                                                                      acquisition risks. 
                                 ---------------------------------  -------------------------------------- 
 Operational Risk 
                                 ---------------------------------  -------------------------------------- 
 IT Security                      A hacker or third                  Service providers 
                                   party could obtain                 have been carefully 
                                   access to the Investment           selected for their 
                                   Adviser or any other               expertise and reputation 
                                   service provider and               in the sector. Each 
                                   destroy data or use                service provider has 
                                   it for malicious purposes          provided assurances 
                                   resulting in reputational          to the AIFM and Company 
                                   damage and possible                on their cyber policies 
                                   GDPR concern.                      and business continuity 
                                   Data records could                 plans along with external 
                                   be destroyed resulting             audit reviews of their 
                                   in an inability to                 procedures where applicable. 
                                   make investment decisions          The AIFM, Administrator 
                                   and/or monitor investments.        and Board include 
                                                                      Cyber Risk in their 
                                                                      reviews of counter 
                                                                      parties. 
                                 ---------------------------------  -------------------------------------- 
 Financial Risk 
                                 ---------------------------------  -------------------------------------- 
 Portfolio Valuation              The principal component            The Investment Adviser 
                                   of the Company's balance           has experience in 
                                   sheet is its portfolio             undertaking valuations 
                                   of energy efficiency               of renewable sustainability/energy 
                                   assets. The Investment             transition assets. 
                                   Adviser is responsible 
                                   for preparing a fair               The AIFM and the Board 
                                   market value of the                review and interrogate 
                                   investments which                  the valuations and 
                                   rely on projections                underlying assumptions 
                                   and cashflows.                     provided by the Investment 
                                                                      Adviser. 
                                   There is a risk that 
                                   these valuations and 
                                   underlying assumptions 
                                   such as discount rates 
                                   being applied are 
                                   not a fair reflection 
                                   of the market meaning 
                                   that the investment 
                                   portfolio could be 
                                   over or under valued. 
                                 ---------------------------------  -------------------------------------- 
 
 Regulatory Risks 
                                 ---------------------------------  -------------------------------------- 
 Regulatory Risk                  The Company is required            All service providers 
                                   to comply with Section             including the Broker, 
                                   1158 of the Corporation            Administrator, Investment 
                                   Tax Act to ensure                  Adviser and AIFM are 
                                   maintenance of investment          experienced in these 
                                   trust status, UK Listing           areas and provide 
                                   Authority regulations              comprehensive reporting 
                                   including Listing                  to the Board and on 
                                   rules, Foreign Account             the compliance of 
                                   Tax Compliance Act                 these regulations. 
                                   and Alternative Investment 
                                   Fund Managers Directive 
                                   ("AIFMD").                         The Company complies 
                                                                      with article 8 of 
                                   The Company looks                  the SFDR and as noted 
                                   to comply with relevant            under "ESG" looks 
                                   ESG rules and regulations          to comply with local 
                                   and continue to monitor            requirements in order 
                                   those such as the                  to mitigate potential 
                                   Sustainable Finance                risks. 
                                   Disclosure Regulation 
                                   ("SFDR").                          Mitigation measures 
                                                                      for post Brexit impact 
                                   Failure to comply                  includes inflation 
                                   with the relevant                  and interest rate 
                                   rules and obligations              management, currency 
                                   may result in reputational         and cash management, 
                                   damage to the Company              tax and legal advice 
                                   or have a negative                 as appropriate, and 
                                   financial impact.                  Fund marketing through 
                                   Impact of post Brexit              approved channels 
                                   on the Company and                 and AIFM oversees 
                                   the portfolio. The                 this reporting accordingly. 
                                   Board continues to 
                                   review the impact 
                                   of Brexit in terms 
                                   of the new trading 
                                   deal and general business 
                                   environment, including 
                                   possible tax and other 
                                   issues. 
                                 ---------------------------------  -------------------------------------- 
 
 

The Board are of the opinion that these are the principal risks, but mindful of their obligations under the changes made to the AIC Code of Corporate Governance, the Board has also considered below emerging risks.

Emerging Risk

 
 Act of War / Sanctions   As evidenced with                   The invasion of Russia 
                           the ensuing war in                  to Ukraine brings 
                           Ukraine and the various             uncertainty to the 
                           sanctions and restrictions          commodities market 
                           imposed, there is                   and how price levels 
                           a possibility there                 of modules and other 
                           could be supply delays              hardware will be impacted 
                           for O&M, sanction                   directly or indirectly. 
                           considerations, volatile            The Company does not 
                           markets and general                 have any direct exposure 
                           uncertainty. More                   in Ukraine or Russia, 
                           difficult energy markets            there are also no 

                           expected along with                 direct business relations 
                           inflationary pressures              with counterparties 
                           on inputs.                          from these countries; 
                                                               therefore, preliminary 
                           It has also led to                  assessments lead us 
                           short term price increases          to the conclusion 
                           and more focus on                   that our investments 
                           renewable energy infrastructure.    in Europe are not 
                                                               impacted directly 
                           Possible change to                  at this time. 
                           the world order and 
                           globalisation. 
 

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with UK adopted international financial reporting standards in conformity with the requirements of the Companies Act 2006.

Under company law, Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing the financial statements, the Directors are required to:

   --              select suitable accounting policies and then apply them consistently; 

-- state whether applicable UK adopted international financial reporting standards in conformity with the requirements of the Companies Act 2006 have been followed, subject to any material departures disclosed and explained in the financial statements;

   --              make judgements and accounting estimates that are reasonable and prudent; and 

-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006.

The Directors have delegated responsibility to the Investment Adviser for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.

Directors' confirmations

The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Corporate Governance section confirm that, to the best of their knowledge:

-- the Company's financial statements, which have been prepared in accordance with international financial reporting standards in conformity with UK adopted international financial reporting standards in conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and loss of the Company; and

-- the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

In the case of each Director in office at the date the Directors' report is approved:

-- so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and

-- they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

For and on behalf of the Board,

Miriam Greenwood

Chair of the Board

23 June 2022

Financial Statements

 
 AQUILA ENERGY EFFICIENCY TRUST 
  PLC 
 STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME 
  For the period from 9 April 2021 (date of incorporation) 
  to 31 December 2021 
 
                                                         Revenue                Capital             Total 
                                     Notes               GBP'000                GBP'000           GBP'000 
----------------------------------  ------  --------------------  ---------------------  ---------------- 
 Unrealised losses on investments      4                       -                   (17)              (17) 
 Net foreign exchange losses                                   -                   (29)              (29) 
 Investment Income                     5                      91                      -                91 
 Investment Advisory fees              6                    (77)                      -              (77) 
 Other expenses                        7                   (587)                      -             (587) 
 Loss on ordinary activities 
  before taxation                                          (573)                   (46)             (619) 
----------------------------------  ------  --------------------  ---------------------  ---------------- 
 Taxation                              8                       -                      -                 - 
 Loss on ordinary activities 
  after taxation                                           (573)                   (46)             (619) 
----------------------------------  ------  --------------------  ---------------------  ---------------- 
 Return per Ordinary Share             9                 (0.01p)                (0.00p)           (0.01p) 
----------------------------------  ------  --------------------  ---------------------  ---------------- 
 
 The total column of the Income Statement is the profit and 
  loss account of the Company. 
 
 All revenue and capital items in the above statement derive 
  from continuing operations. No operations were acquired 
  or discontinued during the period 
 
 Return on ordinary activities after taxation is also the 
  "Total comprehensive income/(expense) for the period". 
 
 
 
 STATEMENT OF FINANCIAL POSITION 
  As at 31 December 2021 
 
 
                                                                                                               2021 
                                             Notes                                                          GBP'000 
------------------------------------------  -------  -------------------------------------------------------------- 
 Fixed assets 
 Investments at fair value through profit 
  or loss                                      4                                                             12,307 
------------------------------------------  -------  -------------------------------------------------------------- 
 
 Current assets 
------------------------------------------  -------  -------------------------------------------------------------- 
 Trade and other receivables                   10                                                             5,274 
 Cash and cash equivalents                                                                             80,129 
                                                     -------------------------------------------------------------- 
                                                                                                             85,403 
 --------------------------------------------------  -------------------------------------------------------------- 
 Creditors: amounts falling due within 
  one year                                     11                                                             (329) 
 Net current assets                                                                                          85,074 
---------------------------------------------------  -------------------------------------------------------------- 
 Net assets                                                                                                  97,381 
---------------------------------------------------  -------------------------------------------------------------- 
 
 Capital and reserves: equity 
 Share capital                                 12                                                             1,000 
 Share premium                                                                                                    - 
 Special reserve                               13                                                            97,000 
 Capital reserve                                                                                               (46) 
 Revenue reserve                                                                                              (573) 
 Shareholders' funds                                                                                         97,381 
---------------------------------------------------  -------------------------------------------------------------- 
 
 Net assets per Ordinary Share                 14                                                            97.38p 

------------------------------------------  -------  -------------------------------------------------------------- 
 No. of ordinary shares in issue                                                                        100,000,000 
---------------------------------------------------  -------------------------------------------------------------- 
 
 
 Approved by the Board of Directors and authorised for issue on 23 June 
  2022. 
 
 
  Signed on behalf of the Board of Directors 
 
  Miriam Greenwood OBE DL 
  Chair of the Board 
 
 
 
 STATEMENT OF CHANGES IN EQUITY 
 
 
 
                                                     Share 
                                 Share             premium             Special             Capital             Revenue 
                               capital             account             reserve             reserve             reserve               Total 
             Notes             GBP'000             GBP'000             GBP'000             GBP'000             GBP'000             GBP'000 
----------  ------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 Opening 
 equity as 
 at 
 9 April 
 2021                                -                   -                                       -                   -                   - 
 Shares 
  issued 
  in 
  period      12                 1,000              99,000                   -                   -                   -             100,000 
 Share 
  issue 
  costs                              -             (2,000)                   -                   -                   -             (2,000) 
 Transfer 
  to 
  special 
  reserve     13                     -            (97,000)              97,000                   -                   -                   - 
 Loss for 
  the 
  period                             -                   -                   -                (46)               (573)               (619) 
 Closing 
  equity 
  as at 
  31 
  December 
  2021                           1,000                   -              97,000                (46)               (573)              97,381 
----------  ------  ------------------  ------------------  ------------------  ------------------  ------------------  ------------------ 
 
 
 
 
 STATEMENT OF CASH FLOWS 
                          For the period from 9 April 2021 (date of incorporation) to 
                                                31 December 2021 
 
                                                                                                         2021 
                                                    Notes                                             GBP'000 
-------------------------------------------------  -------  ------------------------------------------------- 
 Operating activities 
 Loss on ordinary activities before taxation                                                            (619) 
 Adjustment for unrealised losses on investments                                                           17 
 Increase in trade and other receivables                                                              (5,274) 
 Increase in creditors                                                                                    329 
 Net cash flow used in operating activities                                                           (5,547) 
----------------------------------------------------------  ------------------------------------------------- 
 
 Investing activities 
 Purchase of investments                              4                                              (12,324) 
 Net cash flow used in investing activities                                                          (12,324) 
----------------------------------------------------------  ------------------------------------------------- 
 
 Financing activities 
 Proceeds of share issues                             12                                              100,000 
 Share issue costs                                                                                    (2,000) 
 Net cash flow generated from financing 
  activities                                                                                           98,000 
----------------------------------------------------------  ------------------------------------------------- 
 Increase in cash                                                                                      80,129 
----------------------------------------------------------  ------------------------------------------------- 
 Cash and cash equivalents at start of 
  period                                                                                                    - 
-------------------------------------------------  -------  ------------------------------------------------- 
 Cash and Cash equivalents at end of period                                                            80,129 
----------------------------------------------------------  ------------------------------------------------- 
 
 

NOTES TO THE FINANCIAL STATEMENTS

For the period from 9 April 2021 (date of incorporation) to 31 December 2021

   1.    GENERAL INFORMATION 

Aquila Energy Efficiency Trust Plc (the "Company") is a public Company limited by shares incorporated in England and Wales on 9 April 2021 with registered number 13324616. The Company is domiciled in England and Wales . The Company is a closed-ended investment company with an indefinite life. The Company commenced its operations on 2 June 2021 when the Company's Ordinary Shares were admitted to trading on the London Stock Exchange. The Directors intend, at all times, to conduct the affairs of the Company as to enable it to qualify as an investment trust for the purposes of section 1158 of the Corporation Tax Act 2010, as amended.

The registered office address of the Company is 6th Floor, 125 London Wall, London, EC2Y 5AS.

The Company's investment objective is to generate attractive returns, principally in the form of income distributions, by investing in a diversified portfolio of Energy Efficiency Investments.

Sanne Fund Management (Guernsey) Limited acts as the Company's Alternative Investment Fund Manager (the "AIFM") for the purposes of Directive 2011/61/EU on alternative investment fund managers ("AIFMD").

The Company's Investment Adviser is Aquila Capital Investmentgesellschaft mbH authorised and regulated by the German Federal Financial Supervisory Authority.

Sanne Fund Services (UK) Limited (the "Administrator") provides administrative and company secretarial services to the Company under the terms of an administration agreement between the Company and the Administrator.

   2.    BASIS OF PREPARATION 

The financial statements have been prepared in accordance with the UK adopted international accounting standards in conformity with the requirements of the Companies Act 2006.

The financial statements have also been prepared as far as is relevant and applicable to the Company in accordance with the Statement of Recommended Practice ("SORP") issued by the Association of Investment Companies ("AIC") in April 2021.

The financial statements are prepared on the historical cost basis, except for the revaluation of certain financial instruments at fair value through profit or loss. The principal accounting policies adopted are set out below. These policies are consistently applied.

The functional currency of the Company is Sterling. Accordingly, the financial statements are presented in Sterling rounded to the nearest thousand. They have been prepared on the basis of the accounting policies, significant judgements, key assumptions and estimates as set out below. However, fluctuations in foreign exchange differences are considered in the sensitivity analysis, see note 4.

Accounting for Subsidiary

The Company owns 100% of its subsidiary Attika Holdings Limited ("HoldCo"), the registered office address of the HoldCo is 6th Floor, 125 London Wall, London, EC2Y 5AS. The Company has acquired Energy Efficiency Investments through its investment in the HoldCo. The Company will finance the HoldCo through a mix of SPV investments, equity and direct investments. The Company meets the definition of an investment entity as described by IFRS 10. Under IFRS 10 an investment entity is required to hold subsidiaries at fair value through profit or loss and therefore does not consolidate the subsidiary .

The HoldCo is an investment entity and as described under IFRS 10 Values its SPVs investments at fair value through profit or loss.

Characteristics of an investment entity

Under the definition of an investment entity, the Company should satisfy all three of the following tests:

I. Company obtains funds from one or more investors for the purpose of providing those investors with investment management services;

II. Company commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and

III. Company measures and evaluates the performance of substantially all of its investments on a fair value basis.

In assessing whether the Company meets the definition of an investment entity set out in IFRS 10 the Directors note that:

I. the Company has multiple investors and obtains funds from a diverse group of shareholders who would otherwise not have access individually to investing in Energy Efficiency Investments due to high barriers to entry and capital requirements;

II. the Company intends to hold these Energy Efficiency Investments over the contractual period of the asset for the purpose of capital appreciation and investment income. Thereby, the exit strategy for AEET refers to the end point of the contractual period for all Energy Efficiency investments. The existing Energy Efficiency Investments that have committed capital are expected to generate renewable energy output between 1 and 7 years from their relevant commercial operation date (this has the potential to be longer depending on the tenor of future investments), the Directors believe the Company is able to generate returns to the investors during that period; and

III. the Company measures and evaluates the performance of all of its investments on a fair value basis which is the most relevant for investors in the Company. Management use fair value information as a primary measurement to evaluate the performance of all of the investments and in decision making.

The Directors are of the opinion that the Company meets all the typical characteristics of an investment entity and therefore meets the definition set out in IFRS 10. The Directors agree that investment entity accounting treatment appropriately reflects the Company's activities as an investment trust.

The Directors have also satisfied themselves that Attika Holdings Limited meets the characteristic of an

investment entity. Attika Holdings Limited has one investor, Aquila Energy Efficiency Trust Plc, however, in substance Attika Holdings Limited is investing the funds of the investors of Aquila Energy Efficiency Trust Plc on its behalf and is effectively performing investment management services on behalf of many unrelated beneficiary investors.

The Directors believe the treatment outlined above provides the most relevant information to investors.

Going concern

The Directors have adopted the going concern basis in preparing the financial statements. The following is a summary of the Directors' assessment of the going concern status of the Company.

The Company continues to meet day-to-day liquidity needs through its cash resources. The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for at least twelve months from the date of this document. In reaching this conclusion, the Directors have considered the

Company's cash position, income and expense flows. The Company's net assets at 31 December 2021 were GBP 97.4million. As at 31 December 2021, the Company held GBP 80million in cash. The total expenses for the period ended 31 December 2021 was GBP 0.6 million, which represented approximately 0.6% of average net assets during the period. At the date of approval of this document, based on the aggregate of investments and cash held,

the Company has substantial operating expenses cover.

The major cash outflows of the Company are the payment of dividends and costs relating to the acquisition of new investments. The Directors are confident that the Company has sufficient cash balances to fund commitments to acquisitions should they become payable.

In light of the continuing COVID-19 pandemic and the war in Ukraine, the Directors have considered each of the Company's investments. The Directors do not foresee any immediate material risk to the Company's investment portfolio and income from underlying SPVs. A prolonged and deep market decline could lead to falling values to the underlying business or interruptions to cashflow, however the Company currently has more than sufficient liquidity available to meet any future obligations.

Following the slower than anticipated investment deployment and the consequential appointment of an independent consultant to review the Company's investment strategy, the results of this review were announced on 21 April 2022. The review concluded that the market opportunity for the Company remains attractive and that the actions to be taken in relation to the execution of the investment strategy and other changes provided an improved

basis for the Company to execute its investment objective, with full deployment targeted by the end of December 2022 or early 2023. In reaching this conclusion, the Directors consulted with shareholders who, overall, were supportive of the continuation of the Company with these changes. An element of the consultation process was the Directors' proposal to bring forward the Initial Continuation Resolution to February 2023, or earlier if appropriate. A further resolution will be put at the February 2023 General Meeting, conditionally upon the Continuation resolution being passed, to amend the Articles of Association of the Company so that a Continuation vote will be put at the AGM of the Company to be held in 2026 and every four years thereafter, as envisaged in the May 2021 IPO Prospectus. If any Continuation resolution put to shareholders is not passed, then the Directors shall, within six months of such Continuation resolution not being passed, put proposals to shareholders for the reconstruction, reorganisation or liquidation of the Company. Taking into account the factors above, the Directors have assessed that the Initial Continuation Resolution will pass, however, the Directors recognise that the outcome of this is not yet known and therefore creates material uncertainty around going concern, due to the event falling within 12-month period from the approval of this Annual Report. The Directors note that these conditions indicate the existence of material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern.

Based on the assessment and considerations above, the Directors have concluded that the financial statements of the Company should be prepared on a going concern basis.

Critical accounting judgements, estimates and assumptions

The preparation of the financial statements requires the application of estimates and assumptions which may affect the results reported in the financial statements. Estimates, by their nature, are based on judgement and available information.

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value of assets and liabilities are those used to determine the fair value of the investments as disclosed in note 4 to the financial statements.

As disclosed above, the Directors have concluded that the Company meets the definition of an investment entity as defined in IFRS 10. This conclusion involved a degree of judgement and assessment as to whether the Company met the criteria outlined in the accounting standards.

The key assumptions that have a significant impact on the carrying value of the Company's underlying investments in SPVs are contractual period of the assets, the discount factors, the rate of inflation, the price at which the power and associated benefits can be sold and the amount of electricity the assets are expected to produce.

The discount factors are subjective and therefore it is feasible that a reasonable alternative assumption may be used resulting in a different value. The discount factors applied to the cashflows are reviewed annually by the Investment Adviser to ensure they are at the appropriate level. The Investment Adviser will take into consideration market transactions, where of similar nature, when considering changes to the discount factors used.

The operating costs of the operating companies are frequently partly or wholly subject to indexation and an assumption is made that inflation will increase at a long-term rate.

Energy Efficiency investments are not sensitive to fluctuations in future revenues if a fixed indexation clause is applied to its cashflow schedule.

Adoption of new IFRS standards from 1 January 2022

A number of new standards, amendments to standards and interpretations are effective for the annual periods beginning after 1 January 2022. None of these are expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company.

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2021 reporting periods and have not been early adopted by the Company. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

Amendments to IAS 1: Classification of Liabilities as Current or Non-current

In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments are effective for annual reporting periods beginning on or after 1 January 2023.

Reference to the Conceptual Framework - Amendments to IFRS 3

In May 2020, the IASB issued Amendments to IFRS 3 Business Combinations - Reference to the Conceptual Framework. The amendments are effective for annual reporting periods beginning on or after 1 January 2022.

Definition of Accounting Estimates - Amendments to IAS 8

In February 2021, the IASB issued amendments to IAS 8, in which it introduces a definition of 'accounting estimates'. The amendments are effective for annual reporting periods beginning on or after 1 January 2023.

Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice Statement 2

In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements. The amendments to IAS 1 are applicable for annual periods beginning on or after 1 January 2023.

   3.    SIGNIFICANT ACCOUNTING POLICIES 

Financial Instruments

Financial assets

The Company's financial assets principally comprise of cash and cash equivalents, investments held at fair value through profit and loss, and trade and other receivables.

The Company's investment in HoldCo is held at fair value through profit or loss. Gains or losses resulting from the movements in fair value are recognised in the Company's Statement of Profit or Loss and Comprehensive Income at each valuation point.

Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.

SPV investments and equity investments in HoldCo are designated at fair value through profit or loss. Gains or losses resulting from the movements in the fair value are recognized in the Company's Statement of Profit or Loss and Comprehensive income at each valuation point.

Financial liabilities

The Company's financial liabilities include trade and other payables and other short term monetary liabilities which are initially recognised at fair value and subsequently measured at amortised cost using the effective interest rate method.

Recognition, derecognition and measurement

Financial assets and financial liabilities are recognised in the Company's Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

A Financial liability (in whole or in part) is derecognised when the Company has extinguished its contractual obligations, it expires or is cancelled. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Gains and losses resulting from the movement in fair value are recognized in the Statement of Profit or Loss and Comprehensive Income. Financial liabilities are subsequently measured at amortised cost using the effective interest rate method.

Taxation

Investment trusts which have approval under Section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains. Shortly after listing the Company received approval as an Investment Trust by HMRC. Current tax is the expected tax payable on the taxable income for the period, using tax rates that have been enacted or substantively enacted at the date of the Statement of Financial Position.

Deferred taxation

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the statement of financial position liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the Statement of Profit or Loss and Comprehensive Income except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Segmental reporting

The Chief Operating Decision Maker ("CODM"), which is the Board, is of the opinion that the Company is engaged in a single segment of business, being investment in energy efficiency assets to generate investment returns whilst preserving capital. The financial information used by the CODM to manage the Company presents the business as a single segment.

Income

Income includes investment income from financial assets at fair value through profit or loss..

Investment income from financial assets at fair value through profit or loss is recognised in the Statement of Profit or Loss and Comprehensive Income within investment income when the Company's right to receive income is established.

Dividend income is recognised when the right to receive it is established and is reflected in the Statement of Profit or Loss and Comprehensive Income as Investment Income.

Expenses

All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Statement of Profit or Loss and Comprehensive Income, all expenses are presented as revenue as it is directly attributable to the operations of the Company.

Payment of Investment Advisory fees in shares

The Company issues shares to the Investment Adviser in exchange for receiving investment advisory services. The fair value of the investment advisory services received in exchange for shares is recognised as an expense at the time at which the investment advisory fees are earned, with a corresponding increase in equity. The fair value of the investment advisory services is calculated by reference to the definition of investment advisory fees in the Investment Advisory Agreement.

Foreign currency

Transactions denominated in foreign currencies are translated into Sterling at actual exchange rates as at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the period end are reported at the rates of exchange prevailing at the period end. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss to capital or revenue in the Statement of Profit or Loss and Comprehensive Income as appropriate. Foreign exchange movements on investments are included in the Capital account of the Statement of Profit or Loss and Comprehensive Income.

Cash and cash equivalents

Cash and cash equivalents includes deposits held at call with banks and other short-term deposits with original maturities of three months or less.

Trade and other payables

Trade and other payables are initially recognised at fair value, and subsequently re-measured at amortised cost using the effective interest method where necessary.

Share capital and share premium

Ordinary Shares are classified as equity. Costs directly attributable to the issue of new shares (that would have been avoided if there had not been a new issue of new shares) are recognised against the value of the ordinary share premium account.

Repurchase of the Company's own shares are recognised and deducted directly in equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company's own equity instruments.

 
 4 Investments 
 
                                                                                                   Equity 
                                                            SPV investments                   Investments                         Total 
 (a) Summary 
 of valuation                                                       GBP'000                       GBP'000                       GBP'000 
--------------  -----------------------------  ----------------------------  ----------------------------  ---------------------------- 
 
 Investments at fair value through 
  profit or loss                                                     12,154                           153                        12,307 
                                               ----------------------------  ----------------------------  ---------------------------- 
                                                                     12,154                           153                        12,307 
 --------------------------------------------  ----------------------------  ----------------------------  ---------------------------- 
 
 (b) Movements 
 during the 
 period: 
--------------  -----------------------------  ----------------------------  ----------------------------  ---------------------------- 
 Opening 
 balance of 
 investments, 
 at cost                                                                  -                             -                             - 
 Additions, at cost                                                  12,324                             -                        12,324 
                                               ----------------------------  ----------------------------  ---------------------------- 
 Cost of investments at 31 December 
  2021                                                               12,324                             -                        12,324 
---------------------------------------------  ----------------------------  ----------------------------  ---------------------------- 
 Revaluation 
 of 
 investments 
 to 
 fair value: 
 Unrealised movement in fair 
  value of investments                                                (170)                           153                          (17) 
                                               ----------------------------  ----------------------------  ---------------------------- 
 Balance of capital reserve - investments 
  held at 31 December 2021                                            (170)                           153                          (17) 
---------------------------------------------  ----------------------------  ----------------------------  ---------------------------- 
 Fair value of investments at 
  31 December 2021                                                   12,154                           153                        12,307 

---------------------------------------------  ----------------------------  ----------------------------  ---------------------------- 
 
 (c) Loss on investments in period (per 
 Statement of Profit or Loss and 
 Comprehensive 
 Income) 
---------------------------------------------  ----------------------------  ----------------------------  ---------------------------- 
 
 Movement on unrealised valuation of 
  investments 
  held                                                                (170)                           153                          (17) 
---------------------------------------------  ----------------------------  ----------------------------  ---------------------------- 
 Loss on investments                                                  (170)                           153                          (17) 
---------------------------------------------  ----------------------------  ----------------------------  ---------------------------- 
 
 Fair value 
 measurements 
 IFRS 13 requires disclosure of fair value measurement by level. The level 
  of fair value hierarchy within the financial assets or financial liabilities 
  is determined on the basis of the lowest level input that is significant 
  to the fair value measurement. Financial assets and financial liabilities 
  are classified in their entirety into only one of the following 3 levels: 
 
 Level 1 
 The unadjusted quoted price in an active market for identical assets 
  or liabilities that the entity can access at the measurement date. 
 
 Level 2 
 Inputs other than quoted prices included within Level 1 that are observable 
  (i.e. developed using market data) for the asset or liability, either 
  directly or indirectly. 
 
 Level 3 
 Inputs are unobservable (i.e. for which market data is unavailable) for 
  the asset or liability. 
 
 The classification of the Company's investments held at fair value is 
  detailed in the table below: 
--------------------------------------------------------------------------------------------------------------------------------------- 
                                                                    31 December 2021 
--------------  ----------------------------------------------------------------------------------------------------------------------- 
                                      Level 1                       Level 2                       Level 3                         Total 
                                      GBP'000                       GBP'000                       GBP'000                       GBP'000 
                -----------------------------  ----------------------------  ----------------------------  ---------------------------- 
 Investments 
  at fair 
  value 
  through 
  profit or 
  loss                                      -                             -                        12,307                        12,307 
                                            -                             -                        12,307                        12,307 
 --------------------------------------------  ----------------------------  ----------------------------  ---------------------------- 
 
 Due to the nature of the investments, they are always expected to be 
  classified as level 3. There have been no transfers between levels during 
  the period ended 31 December 2021. 
 
 The movement on the Level 3 unquoted investments during the period is 
  shown below: 
--------------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                            31 December 
                                                                                                                                   2021 
                                                                                                                                GBP'000 
--------------  -----------------------------  ----------------------------  ----------------------------  ---------------------------- 
 Opening 
 balance                                                                                                                              - 
 Additions during the period                                                                                                     12,324 
 Unrealised loss on investments 
  adjustments                                                                                                                      (17) 
 Closing balance                                                                                                                 12,307 
---------------------------------------------  ----------------------------  ----------------------------  ---------------------------- 
 

Valuation Methodology

SPV investments

The Company acquired SPV investments during the period. The SPV investments have been made by the Company through directly purchasing notes issued by an Italian SPV established under securitisation laws in Italy. The Investment Adviser has determined that the fair value as at 31 December 2021 is the purchase cost, adjusted by any foreign exchange differences. The purchase cost is deemed to be appropriate basis of fair value due to the timing of investment acquisition (i.e. close to period end date). The Directors have satisfied themselves as to the fair value of the SPV investments as at 31 December 2021.

Equity investments

The Company owns 100% of its subsidiary Attika Holdings Limited ("HoldCo"). The Company meets the definition of an investment entity as described by IFRS 10, as such the Company's investment in the HoldCo is valued at fair value. HoldCo's working capital balances and fair value of investments are included in calculating fair value of the HoldCo.

Valuation Assumptions

 
                                          31 December 
                                                 2021 
------------------------  -----------    ------------ 
 Foreign exchange rates     GBP / EUR            0.84 
------------------------  -------------  ------------ 
 

Foreign Exchange Rate Sensitivity

This sensitivity considers a 10% movement in relevant non-GBP currencies, which in the case of the Portfolio Valuation at 31 December 2021 is EUR. A 10% increase in foreign exchange rates would result in a NAV per share reduction of 1.22p based on the Portfolio Valuation as at 31 December 2021.

A 10% decrease in foreign exchange rates would result in a NAV per share increase of 1.22p based on the Portfolio Valuation as at 31 December 2021.

 
 5 Investment Income 
 
                                                                                    For the period ended 31 December 
                                                                                                                2021 
                                                                                                             GBP'000 
--------------------  ---------------------------------------------------------------------------------------------- 
 Investment income                                                                                                36 
 Bank interest 
  income                                                                                                          55 
--------------------  ---------------------------------------------------------------------------------------------- 
 Total Investment 
  Income                                                                                                          91 
--------------------  ---------------------------------------------------------------------------------------------- 
 
 
 
 6 Investment Advisory 
 fees 
 
                                                      For the period ended 31 December 
                                                                     2021 
------------------------  ---------------------------------------------------------------------------------------- 
                                               Revenue                       Capital                         Total 
                                               GBP'000                       GBP'000                       GBP'000 
------------------------  ----------------------------  ----------------------------  ---------------------------- 
 Investment Advisory 
  fees                                              77                             -                            77 
------------------------  ----------------------------  ----------------------------  ---------------------------- 
 
 Under the Investment Advisory Agreement, the following fee is payable 
  to the Investment Adviser: 
 
 (i) 0.95 per cent. per annum of Committed Capital of the Company up to 
  and including GBP500 million; and 
  (ii) 0.75 per cent. per annum of Committed Capital of the Company above 
  GBP500 million. 
 
 
 
 7 Other expenses 
 
                                                     For the period ended 31 December 
                                                                    2021 
                        ------------------------------------------------------------------------------------------ 
                                             Revenue                        Capital                          Total 
                                             GBP'000                        GBP'000                        GBP'000 
----------------------  ----------------------------  -----------------------------  ----------------------------- 
 Secretary and 
  administrator fees                             108                             -                             108 
 Tax compliance                                   13                             -                              13 
 Directors' fees                                 111                             -                             111 
 Broker fees                                      30                             -                              30 

 Auditor's fees                                  119                             -                             119 
 AIFM fees                                        51                             -                              51 
 Registrar's fees                                 13                             -                              13 
 Marketing fees                                   58                             -                              58 
 FCA and listing fees                             12                             -                              12 
 Other expenses                                   72                             -                              72 
----------------------                                -----------------------------  ----------------------------- 
 Total expenses                                  587                             -                             587 
----------------------  ----------------------------  -----------------------------  ----------------------------- 
 
 
   Prior to appointment as the Company's Auditor, the auditors received 
   a fee of GBP109,200 (including VAT of GBP18,200) for non-audit reporting 
   accountant services, which have been treated as a capital expense and 
   included in 'share issue costs' disclosed in the Statement of Changes 
   in Equity. 
 8 Taxation 
 (a) Analysis of 
 charge in the period 
---------------------- 
                                                     For the period ended 31 December 
                                                                    2021 
                        ------------------------------------------------------------------------------------------ 
                                             Revenue                        Capital                          Total 
                                             GBP'000                        GBP'000                        GBP'000 
                        ----------------------------  -----------------------------  ----------------------------- 
 Corporation tax                                   -                             -                              - 
 Taxation                                          -                             -                              - 
----------------------  ----------------------------  -----------------------------  ----------------------------- 
 
 (b) Factors affecting 
 total tax charge 
 for the period: 
 
 The effective UK corporation tax rate applicable to the Company for the 
  period is 19.00%. The tax charge differs from the charge resulting from 
  applying the standard rate of UK corporation tax for an investment trust 
  company. 
 
 The differences are 
 explained below: 
                        ----------------------------  -----------------------------  ----------------------------- 
                                             Revenue                        Capital                          Total 
                                             GBP'000                        GBP'000                        GBP'000 
----------------------  ----------------------------  -----------------------------  ----------------------------- 
 Loss on ordinary 
  activities before 
  taxation                                     (573)                           (46)                          (619) 
----------------------  ----------------------------  -----------------------------  ----------------------------- 
 Corporation tax at 
  19%                                          (109)                            (9)                          (118) 
 Effects of: 
 Utilised management 
  expenses                                       109                              -                            109 
 Losses on investments 
  not taxable                                      -                              9                              9 
 Total tax charge for 
  the period                                       -                              -                              - 
----------------------  ----------------------------  -----------------------------  ----------------------------- 
 
 Investment companies which have been approved by the HM Revenue & Customs 
  under section 1158 of the Corporation Tax Act 2010 are exempt from tax 
  on capital gains. Due to the Company's status as an Investment Trust, 
  and the intention to continue meeting the conditions required to obtain 
  approval in the foreseeable future, the Company has not provided for 
  deferred tax on any capital gains or losses arising on the revaluation 
  of investments. 
 
 
 9. Return per Ordinary Share 
 Return per share is based on the loss for the period of GBP619,000 attributable 
  to the weighted average number of Ordinary Shares in issue 79,699,248 in 
  the period to 31 December 2021. Revenue loss and capital losses are GBP573,000 
  and GBP46,000 respectively. 
 
   10. Trade and other receivables 
 
                                      As at 31 December 2021 
                                                     GBP'000 
  ---------------------------------  ----------------------- 
 
   Intercompany receivable                             5,170 
   Interest income receivable                             36 
   Prepaid Expenses                                       68 
  --------------------------------- 
   Total                                               5,274 
  ---------------------------------  ----------------------- 
 
 
 
 
 
 11. Trade and other payables 
 
                                                                                                                        As at 31 December 2021 
                                                                                                                                       GBP'000 
-------------------------------------------  ------------------------------------------------------------------------------------------------- 
 Accrued expenses                                                                                                                          329 
 Total                                                                                                                                     329 
-------------------------------------------  ------------------------------------------------------------------------------------------------- 
 
 
 
 
 12. Share 
 capital 
 
                                                                       As at 31 December 
                                                                              2021 
                                                                                    No. of shares                                     GBP'000 
------------  ----------------------------------------------  -----------------------------------  ------------------------------------------ 
 Allotted, 
 issued and 
 fully paid: 
 Ordinary Shares of 1p each ('Ordinary 
  Shares')                                                                            100,000,000                                       1,000 
 Total 
------------  ----------------------------------------------  -----------------------------------  ------------------------------------------ 
 
 
 On incorporation, the issued share capital of the Company 
  was 1 ordinary share of GBP0.01 issued to the subscriber to 
  the Company's memorandum. The Company's issued share capital 
  was increased by GBP50,000 represented by 50,000 Management 
  Shares of nominal value GBP1.00 each, which were subscribed 
  for by the Investment Adviser. Following admission, the Management 
  Shares were redeemed by the holder. 
 On admission 2 June 2021, 99,999,999 Ordinary Shares were 
  allotted and issued to shareholders as part of the placing 
  and offer for subscription in accordance with the Company's 
  prospectus dated 10 May 2021. 
 
 For the 
 period from 
 9 April 
 2021 to 31    Shares is issue                                                                      Shares in issue 
 December       at the beginning                                                                     at the end of 
 2021           of the period                                  Shares subscribed                     the period 
------------  ----------------------------------------------  -----------------------------------  ------------------------------------------ 
 
 Management 
 shares                                                   - 
 Ordinary 
  shares                                                  -                           100,000,000                             100,000,000 
 
 
 13. Special Reserve 
 
 As indicated in the Company's prospectus dated 10 May 2021, following 
  admission of the Company's Ordinary Shares to trading on the London Stock 
  Exchange, the Directors applied to the Court and obtained a judgement 
  on 12 August 2021 to cancel the amount standing to the credit of the share 
  premium account of the Company. The amount of the share premium account 
  cancelled and credited to a special reserve was GBP97,000,000. 
 
 
 14. Net assets per Ordinary Share 
 
 Net assets per ordinary share as at 31 December 2021 is based on 
  GBP97,381,000 of net assets of the Company attributable to the 
  100,000,000 Ordinary Shares in issue as at 31 December 2021. 
 
 
 
 
 15. Financial risk 
 management 
 
 The Investment Adviser, AIFM and the Administrator report to the Board on a quarterly basis 
  and provide information to the Board which allows it to monitor and manage financial risks 
  relating to its operations. The Company's activities expose it to a variety of financial risks: 
  market risk (including price risk, interest rate risk and foreign currency risk), credit risk 
  and liquidity risk. These risks are monitored by the AIFM. Each risk and its management is 
  summarised below. 
 
 (i) Currency risk 
 Foreign currency risk is defined as the risk that the fair values of future cashflows will 
  fluctuate because of changes in foreign exchange rates. The Company's financial assets and 

  liabilities are denominated in GBP and substantially all of its revenues and expenses are 
  in GBP. The Company is not considered to be materially exposed to foreign currency risk. 
 
 (ii) Interest rate risk 
 The Company's interest rate risk on interest bearing financial assets is limited to interest 
  earned on cash and investments. 
 
 The Company's interest and non-interest bearing assets and liabilities as at 31 December 2021 
  are summarised below: 
                                         Interest bearing                  Non-interest                           Total 
                                                                                bearing 
 Assets                                           GBP'000                       GBP'000                         GBP'000 
 Cash and cash equivalents                         38,055                        42,074                          80,129 
 Trade and other 
  receivables                                           -                         5,274                           5,274 
 Investments at fair value 
  through profit or loss                           12,154                           153                          12,307 
 Total assets                                      50,209                        47,502                          97,710 
 Liabilities 
 Creditors                                              -                         (329)                           (329) 
 Total liabilities                                      -                         (329)                           (329) 
 
 (iii) Price risk 
 Price risk is defined as the risk that the fair value of a financial instrument held by the 
  Company will fluctuate. Investments are measured at fair value through profit or loss. As 
  at 31 December 2021 the Company held investments with an aggregate fair value of GBP12,307,000. 
  All other things being equal, the effect of a 10% increase or decrease in the share prices 
  of the investments held at the period end would have been an increase or decrease of GBP1,231,000 
  in the loss after taxation for the period ended 31 December 2021 and the Company's net assets 
  at 31 December 2021. 
 
  The Investment Adviser has determined that the fair value of the investments as at 31 December 
  2021 is the purchase cost, adjusted by any foreign exchange differences. The purchase cost 
  is deemed to be appropriate basis of fair value due to the timing of investment acquisition 
  (i.e. close to period end date). The Directors have satisfied themselves as to the fair value 
  of the investments as at 31 December 2021. 
 
 Credit risks 
 Credit risk is the risk of loss due to the failure of a borrower or counterparty to fulfil 
  its contractual obligations. The Company is exposed to credit risk in respect of Trade and 
  other receivables and cash at bank. The Company's credit risk exposure is minimised by dealing 
  with financial institutions with investment grade credit ratings. The Company has advanced 
  share holder loans to Holdco, however it does not consider these loans a risk as they are 
  intra-Group. No balances are past due or impaired. 
                                                                                                 As at 31 December 2021 
                                                                                                                GBP'000 
 
 Investments at fair value through profit or loss                                                                12,154 
 Trade and other 
  receivables                                                                                                    5, 274 
 Cash and cash equivalents                                                                                       80,129 
 Total                                                                                                           97,557 
 
 
   The table below shows the cash balances of the Company and the credit rating for each counterparty: 
                                 Rating                                                          As at 31 December 2021 
                                                                                                              (GBP'000) 
 Goldman Sachs-Liquid 
  reserve fund                AAA-S&P Rating                                                      25,000 
 EFG Deposit account          A / F1-Fitch Rating                                                 38,055 
 Royal Bank of Scotland 
  International               A - 2 / BBB-S&P Rating                                              17,074 
                                                                                                  80,129 
 Liquidity risks 
 Liquidity risk is the risk that the Company may not be able to meet a demand for cash or fund 
  an obligation when due. The Investment Adviser, AIFM and the Board continuously monitor forecast 
  and actual cashflows from operating, financing and investing activities to consider payment 
  of dividends or further investing activities. 
 
 Financial assets and liabilities by maturity at the period end are shown below: 
 
                                         Less than 1 year                     1-2 years                       2-5 years                           Total 
                                                  GBP'000                       GBP'000                         GBP'000                         GBP'000 
 Assets 
 Investments at fair value 
  through profit or loss                                -                             -                          12,307                          12,307 
 Trade and other 
  receivables                                       5,274                             -                               -                           5,274 
 Cash and cash equivalents                         80,129                             -                               -                          80,129 
 Liabilities 
 Other creditors                                    (329)                             -                               -                           (329) 
                                                   85,074                             -                          12,307                          97,381 
 
 Capital management 
 The Company considers its capital to comprise ordinary share capital, distributable reserves 
  and retained earnings. The Company is not subject to any externally imposed capital requirements. 
 The Company's primary capital management objectives are to ensure the sustainability of its 
  capital to support continuing operations, meet its financial obligations and allow for growth 
  opportunities. Generally, acquisitions are anticipated to be funded with a combination of 
  current cash and equity. 
 
 
 
 16. Related party transactions 
 
 Fees payable to the Investment Advisor are shown in the Income Statement. 
  As at 31 December 2021, the fee outstanding to the Adviser was GBP77,000. 
  The Company owns 100% of Attika Holdings Limited, as disclosed in 
  note 2. As at 31 December 2021, the Company has a receivable balance 
  of GBP5.17 million against Attika Holdings Limited. 
 Fees are payable to the directors at an annual rate of GBP55,000 
  to the Chairman, GBP42,000 to the Chairman of the Audit and Risk 
  Committee and GBP37,000 to the other directors. These fees were 
  effective from the date of appointment of each director being 9 
  April 2021 for each Board member except Miriam Greenwood who was 
  appointed on 19 April 2021. 
 
  During the period, GBP36,000 was paid to the Chairman; GBP27,000 
  was paid to the Chairman of the Audit and Risk Committee; and GBP24,000 
  was paid to the other directors. Total payment made during the period 
  is GBP87,000. 
 The directors had the following shareholdings in the Company, all 
  of which were beneficially owned. 
 
                                                                      Ordinary 
                                                                        shares 
                                                                At 31 December 
                                                                          2021 
 Miriam Greenwood OBE DL                                                24,000 
 Nicholas Bliss                                                         20,000 
 
 
 
 17. Subsequent events note 
 
 The Company entered into GBP5,476,000 amount of investments post 
  31 December 2021 through 23 June 2022. 
 

OTHER INFORMATION

In reporting financial information, the Company presents alternative performance measures, "APMs", which are not defined or specified under the requirements of IFRS. The Company believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the Company. The APMs presented in this report are shown below:

 
 ALTERNATIVE PERFORMANCE 
  MEASURES 
 
 (Discount)/Premium 
 The amount, expressed as a percentage, by which the share price 
  is more than the Net Asset Value per Ordinary Share. 
 
 NAV per Ordinary Share 
  (pence)                     a                                          97.38 
 Share price (pence)          b                                          95.75 
 (Discount)/Premium           (b÷a)-1                               -1.7% 
===========================  ==============  ================================= 
 
 Ongoing charges 
 A measure, expressed as a percentage of average net assets, of 
  the regular, recurring annual costs of running an investment company. 
 
 Period end NAV                     a                                   97,381 
 Annualised expenses ( 
  prorated 
  based on the total number 
  of days per year over the 
  number of days from date 
  of incorporation: 
  GBP664,000 
  x 365 days/ 266 days )            b                                      911 
 Ongoing charges               (b÷a)                                 0.9% 

===========================  ==============  ================================= 
 
 Total return 
 A measure of performance that includes both income and capital 
  returns. This takes into account capital gains and reinvestment 
  of dividends paid out by the Company into the Ordinary Shares of 
  the Company on the ex-dividend date. 
 
 Opening at 2 June 2021 
  (pence)                           a                                   100.00                              98.00 
 Closing at 31 December 
  2021 
  (pence)                           b                                    95.75                              97.38 
 Total return                 (b÷a)-1                               -4.3%                              -0.6% 
===========================  --------------  =================================  ================================= 
 
 n/a = not applicable. 
 
 

Note: There were no dividends paid during the period ended 31 December 2021.

FINANCIAL INFORMATION

This announcement does not constitute the Company's statutory accounts. The financial information for the period to 31 December 2021 is derived from the statutory accounts for the Period, which will be delivered to the Registrar of Companies.

The Annual Report for the period ended 31 December 2021 was approved on 23 June 2022. The full Annual Report can be accessed via the Company's website at https://www.aquila-energy-efficiency-trust.com .

The Annual Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism

This announcement contains regulated information under the Disclosure Guidance and Transparency Rules of the FCA.

ANNUAL GENERAL MEETING ("AGM") and GENERAL MEETING ("GM")

The AGM of the Company will be held at the offices of CMS Law, Cannon Place, 78 Cannon St, London EC4N 6AF ON 28 June 2022 at 2.00 p.m.

The GM of the Company will be held at the offices of Sanne Group, 6th Floor, 125 London Wall, London, EC2Y 5AS on 25 July 2022 at 10.00 a.m. The GM will be held in order to: receive the Company's Annual report and Accounts for the period ended 31 December 2021, with the reports of the Directors and auditors thereon; to approve the Directors' remuneration policy report included in the Annual Report and Accounts for the period ended 31 December 2021; to approve the Directors' remuneration report included in the Annual Report and Accounts for the period ended 31 December 2021; to appoint the PricewaterhouseCoopers ("PwC") as auditors to the Company; to authorise the Audit and Risk Committee to fix the remuneration of the auditors until the conclusion of the next AGM of the Company; and, to authorise the Directors to declare and pay all dividends of the Company as interim dividends..

The reasons for holding two general meetings are explained in detail in the Chair's Letter accompanying the Notice of Meeting published on 1st June 2022.

Even if shareholders intend to attend the above meetings, all shareholders are encouraged to cast their vote by proxy and to appoint the "Chair of the Meeting" as their proxy. Details of how to vote, either electronically, by proxy form or through CREST, can be found in the Notes to the respective Notices of Meeting.

Shareholders are invited to send any questions for the Board or the Investment Adviser in advance by email to [e-mail].

23 June 2022

For further information please contact:

Sanne Fund Services (UK) Limited [phone]

Company Secretary

LEI: 213800AJ3TY3OJCQQC53

END

[1] IEA (2020)

[2] EU Commission (2022)

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June 24, 2022 02:00 ET (06:00 GMT)