## HydrogenOne Capital Growth plc ### Annual Report & Accounts 2021 ## Contents Strategic report 01 Investment objective, highlights and financial information 02 At a glance 04 About Clean Hydrogen 06 Chairman’s Statement 08 Company Objectives 10 Investment Adviser’s Report 22 Environmental, Social and Governance 25 Section 172 Statement 27 Other Information Governance 34 Board of Directors 35 Directors’ Report 39 Corporate Governance 43 Directors’ Remuneration Policy 44 Directors’ Remuneration Implementation Report 46 Report of the Audit and Risk Committee 48 Statement of Directors’ Responsibilities 49 Independent auditor’s report Financial statements 56 Parent and consolidated statement of comprehensive income 57 Parent and consolidated statement of financial position 58 Parent and consolidated statement of changes in equity 59 Parent and consolidated statement of cash flows 60 Notes to the parent and consolidated financial statements Other information 83 Alternative Performance Measures (“APMs”) 84 Glossary 86 Directors and Advisers 87 Report of the Alternative Investment Fund Manager 88 Notice of Annual General Meeting 90 Notes to Notice of Annual General Meeting hydrogenonecapitalgrowthplc.com HydrogenOne Capital Growth plc Annual Report 2021 ## Investment objective, highlights ## and financial information Strategic Report Governance ### Background ## HydrogenOne Capital Growth Plc (“HGEN”, “the Company”) ## was established to provide investors with opportunities in ## clean hydrogen and energy storage for the energy transition. ## As leaders in the hydrogen sector, we have first mover ## advantage in a new green energy technology, addressing ## Net Zero, air quality and energy security. ### Investment objective and policy ### The Company’s investment objective is to deliver an attractive level of capital growth ### by investing, directly or indirectly, in a diversified portfolio of hydrogen and complementary ### hydrogen focussed assets whilst integrating core ESG principles into its decision-making ### and ownership process. ### The Company will seek to achieve this objective through investment in a diversified Financial statements ### portfolio of hydrogen and complementary hydrogen focussed assets, with an expected ### focus in developed markets in Europe, North America and Asia Pacific. The Company ### intends to implement its investment policy through the acquisition of Private Hydrogen ### Assets and Listed Hydrogen Assets. ### Our purpose Other information | • Leadership in a new sector | • A unique offering to investors. | • Ambition to address the | | --- | --- | --- | | from the first London listed | Track record in energy and | complexity and scale in a | | hydrogen fund. Significant | capital markets. We have a | major new energy sector. | | growth potential identified by | pipeline to deliver 10-15% | | | the first mover in a new green | per annum NAV growth. | | energy technology sector, addressing Net Zero, air quality and energy security. ## st | | 1 | 10-15% | >£500m | | | | | --- | --- | --- | --- | --- | --- | --- | | London listed | | Deliver 10-15% per | | Pipeline | | | | hydrogen fund | | annum NAV growth | | | | | | | | | | | FUTURE FUEL. NOW | 11 | HydrogenOne Capital Growth plc Annual Report 2021 ## At a glance Operational highlights • Listed on the London Stock Exchange Premium segment on 30 July 2021, ### raising net proceeds of £105.2 million • During the period from listing to 31 December 2021, the Company successfully ### completed investment in three Private Hydrogen Assets for £39.2 million. A further ### three investments have been completed post period end for total consideration of ### £20.5 million • In addition the Company acquired a portfolio of 19 Listed Hydrogen Assets for ### total consideration of £9.5 million • At 31 December 2021, c. 46% of the equity raised at listing had been deployed. • The Company has deployed material capital into low carbon growth, with portfolio ### companies contributing to avoided greenhouse gas emissions 1 ### • Ongoing Charges for the period to 31 December 2021 amount to 2.06% of the ### Net Asset Value (“NAV”) • The Company’s NAV as at 31 December 2021 was £102.8 million or 95.75 pence ### per Ordinary Share 1 ### • Share price return per share to 31 December 2021 is 19.5% • Green Economy Mark awarded by the London Stock Exchange which ### awards companies that derive more than 50% of their revenues from ### products and services that are contributing to environmental objectives Deployment of funds in the first eight months | £20m | £9m | £3m | | | | --- | --- | --- | --- | --- | | private equity: | private equity: | private equity: | | | | Sunfire | NanoSUN | Gen | 2 Energy | £200m+ | ### near term | £9m | £10m | £10m | | £7m | private e quity | | | --- | --- | --- | --- | --- | --- | --- | | deployed | private equity: | private equity: | | private equity: | | pipeline | | to equities | HiiRoc | Bramble | Cranfield Aerospace | | | | 2 FUTURE FUEL. NOWFUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Company summary as at 31 December 2021 Strategic Report Governance ### Market capitalisation Gross asset value Net asset value (“NAV”) ## £128.3m £103.0m £102.8m ### Net asset value Ordinary Share price 1 ### per Ordinary Share Ordinary Share price premium to NAV ## 95.75p 119.50p 24.8 % Portfolio summary as at 31 December 2021 ### Number of Capital Largest Ongoing 1 ### investments deployed investment charges Financial statements ## 22 46% £20.0m 2.06% | Invested portfolio | | Invested portfolio | | Total portfolio | | | --- | --- | --- | --- | --- | --- | | | 2 | | 2 | | 2 | | by geography | | by theme | | by asset class | | Other information Germany Electrolysers UK Fuel cells France Supply services Scandinavia Stora e Asia North America 1. Alternative Performance Measures (“APMs”): The disclosures above are considered to represent the Company’s APMs. Definitions of these APMs and other performance measures used by the Company, together with how these measures have been calculated, can be found on page 83. 2. The pie charts above show fund portfolio at 31 December 2021. Private Hydrogen Assets are valued at the price of the recent investment. Listed FUTURE FUEL. NOW 3 3 Unlisted Liquidity Reserve g HydrogenOne Capital Growth plc Annual Report 2021 ## About Clean Hydrogen About Clean Hydrogen • Clean hydrogen displaces fossil fuels, reducing CO emissions and improving air quality 2 • Clean hydrogen is an energy carrier that addresses renewables intermittency and energy storage • Clean hydrogen demand could increase by over 200 times between 2019 and 2030 as the energy 1 transition gathers pace, abating some 6 billion tonnes/year of CO emissions by 2050 2 With the adoption of legislated Net Zero targets by governments around the world, the focus has shifted to how exactly these targets can be met. In addition, the growing share of renewables in the energy mix has created an urgent need for energy storage. Clean hydrogen can help us to deal with the intermittency of renewables by converting power to a storable, usable gas to replace hydrocarbons, reduce greenhouse gas emissions and improve air quality. All of this enables the world to deliver its climate change mitigation ambitions. At the same time, hydrogen combined with renewables such as wind and solar provides a domestic energy supply option for many countries, reducing reliance on imported energy. Decarbonising the energy system Clean hydrogen is the only Net Zero energy gas and this has been recognised in the plans adopted to date by the EU and individually by Germany, France, Spain and Portugal – all of which have committed to the use of clean hydrogen to decarbonise industry and to improve air quality. They have backed this commitment with over multi-billion Euro funding to kick-start the process. Similar plans are in place in several Asian countries, and other countries including the United Kingdom are expected to follow suit. …projects This means that markets for clean hydrogen, and its production processes, are growing fast and accelerating. Hydrogen policies ### Energy in 39 countries The potentially enormous market to replace hydrogen produced from hydrocarbons in the current hydrogen ### Transition for Net Zero supply chain is being addressed already by the falling costs of renewable energy and electrolysis as well as by carbon capture and storage pilots. Hydrogen fuel ### Air Norsk e-Fuel in heavy transport ### Quality …supply chains and power 1. Hydrogen Council, McKinsey: Hydrogen for Net-Zero. A critical cost-competitive energy sector. November 2021. Distributed ### Energy renewables 4 FUTURE FUEL. NOW FUTURE FUEL. NOW ### Security and storage Sunfire SOEC HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance Hydrogen Value Chain ### • Clean - up of fossil fuel- derived hydrogen Transport Blue ### • CCUS integration Industrial energy ### • Large scale renewables Green ### • Electrolysis Feedstock ### • Methane pyrolysis re-tools Building heat Turquoise natural gas grids Distributed energy ### • Solid carbon extracted Grid scale storage • Power to gas • Geological storage • Ammonia ## Responsible investment Financial statements At the 2015 United Nations Climate Change Conference 196 countries agreed to reduce their carbon output as soon as possible and to do their best to keep global warming to well below 2 degrees celsius, and pursue efforts to limit the increase to 1.5 degrees celsius. There is broad consensus that this will require emissions to be Net Zero by latest 2050. Clean hydrogen has a vital role to play in this, and it can displace fossil fuels and hence reduce greenhouse gas emissions in transport, power generation, industrial energy, as a feedstock, and in heating. The Company’s investment objective is to deliver an attractive level of returns while integrating core ESG principles into its decision-making and ownership process. We have a powerful environment – social – governance investment case (ESG), closely aligned with seven Other information of the United Nations Sustainable Development Goals. By excluding sectors such as fossil fuels producers, focusing strongly on energy transition themes, and proactively engaging with our investments and other stakeholders more broadly, we aim to deliver attractive returns and a positive societal impact. ### Deliver the Energy Transition Effective Investing in low Sustainable ESG in the Boards carbon growth business practices Company ### Exclusion: • Avoid GHG emissons • Active engagement ### fossil fuel producers • Improve air quality • Public and private investments SDG target: 3.9 7.1, 2, 3 7.1, 2, 3 11.6 12.6 14.3 15.3 ### UN Sustainable Development Goals | Principles for Responsible Investment | Green Economy Mark FUTURE FUEL. NOW 5 5 HydrogenOne Capital Growth plc Annual Report 2021 ## Chairman’s Statement We have delivered what we said we saw the exciting potential when we would when we listed, and done so created the Company and who will be ### “On behalf of the Board, ahead of schedule. Since the formation able to participate in the interesting ### I am delighted to introduce of your company, it has become clear opportunities ahead. ### the first annual report of the macro environment has been moving quickly. Clean energy, and Results ### HydrogenOne Capital hydrogen in particular, has a key role Since listing the Company has begun ### Growth plc for the period to play in achieving the ambitious Net deploying fresh capital into the Zero target. This was emphasised at ### from inception to the end hydrogen sector. At 31 December 2021, COP26 in Glasgow last November ### of our first financial period the Company has made investments where hydrogen was highlighted as an into three Private Hydrogen Assets ### on 31 December 2021. integral part of the energy transition and a portfolio of listed holdings. The with numerous declarations made ### The Company successfully Company has deployed 46% of the supporting the acceleration of demand equity raised and has a strong pipeline ### listed on 30 July 2021, and investment. of investment opportunities. ### raising £105.2 million, post There is wide support and agreement ### costs of the launch, and The Net Asset Value (“NAV”) per share at that clean hydrogen is critical to 31 December 2021 was 95.75 pence, ### since then your company achieving a Net Zero outcome. In public compared with 98.0p at listing on policy terms, Europe has developed a ### has been investing the 30 July 2021. The main driver for the NAV coherent hydrogen strategy, and a total ### equity raised in a diverse of 39 countries have now published per share reduction has been the fall in hydrogen roadmaps. In the UK, the global listed hydrogen focussed stocks ### portfolio of assets in the phase out of diesel in heavy goods in December. We hold these investments ### clean energy space.” for the long term and our expectation is vehicles by 2035-40 is one of many similar policy shifts that further supports that these losses will be recovered once Simon Hogan Chairman the hydrogen sector. Hydrogen energy sentiment in the sector changes. is clearly gaining traction, but there is a long way to go, and the sector is in need The loss after tax for the period was of further investment. £2.4 million resulting in a loss per share of 3.78 pence since listing. This backdrop is enabling us as a business to identify a range of Investment performance opportunities with interested parties and During the period from inception to to invest across the whole energy 31 December 2021, shareholders have transition value chain. At the end of 2021, seen a share price total return of 19.5%, there were at least 500 hydrogen whilst over the same period the NAV projects announced world-wide, an total return per share reduced by 2.3%. increase of over 100% in the year. Full The share price has consistently value chain spending on clean hydrogen traded at a premium to NAV since the 1 could reach $700bn by 2030 . The July 2021 IPO. Company is democratising investment in a large universe, which to date has Dividends predominantly been funded by private investment. The Company’s dividend policy is to only pay dividends in order to satisfy | This also, however, shows how | the ongoing requirements under the | | --- | --- | | underinvested the hydrogen market is | Investment Trust (Approved Company) | | today and highlights that we must pick | (Tax) Regulations 2011. The Company | | up the pace in order for hydrogen to | has paid no dividend during the period, | | play its part in the post-COP26 world. | as the Company continues to focus on | growth investments. For you, our investors, this is a good moment to enter this market and to be Acquisitions patient for the future rewards as we During the period under review, the deploy our capital into our target Company announced the acquisitions of portfolio. We are grateful to those who equity in Sunfire AG, HiiROC Limited and 1. Hydrogen Council, McKinsey: Hydrogen for Net-Zero. A critical cost-competitive energy sector. November 2021. 6 6 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 ### “I am excited by the progress we have made in the last ### eight months, and I believe we are in a unique position to ### benefit from the growing importance of hydrogen both ### in the UK and internationally.” Strategic Report Governance NanoSUN Limited. Further details of ESG Annual general meeting these investments are provided in the From the outset, the Company has been The Annual General Meeting will be held Investments Adviser’s Report on pages determined to combine its funding of on 24 May 2022 at 12.30pm at the 19 to 21. In addition the Company has low carbon growth with wider ESG Company’s registered office, 6th floor, acquired a portfolio of 19 listed stocks. principles. As set out in the IPO 125 London Wall, London EC2Y 5AS. prospectus, particular focus is placed on This will be my first AGM as Chairman Post period end, the Company has engagement to deliver effective Boards and we look forward to welcoming made further investments in Bramble and the encouragement of sustainable shareholders to the event in person. Energy Limited for £10.0 million, Gen2 business practices. These, and other The meeting will consider the formal Energy for £3.5 million and Cranfield issues, are reviewed and integrated prior business of the AGM, as set out in the Aerospace Solutions Ltd for £7.0 million. to any investment decision, and will be Notice of the AGM, and thereafter the This results in total deployment of 66% managed thereafter through close Investment Adviser will provide a of the equity raised as at the date of this relationships with our private company presentation on the Company’s portfolio. statement and the Company remains on investments in particular (including a track for full deployment in Q2 2022. preference for Board representation, Board matters or observer status). In terms of metrics, As announced on 9 February 2022, Valuation the Investment Adviser considers the Caroline Cook is stepping down as The Net Asset Value at 31 December potential for impact through the lens of director on 7 April 2022 due to the 2021 is £102.8 million, comprising £68.8 the fossil emissions that new hydrogen increased responsibilities in sustainable million portfolio valuation, £34.0 million technologies can avoid, and continues investment in her expanding executive of cash held by the Company, together to work on an appropriate methodology role, and to avoid any potential conflict with negative working capital balances for publication. Meanwhile, all of interest with the Company’s future of £0.1 million. investments are mapped to the UN activities. We thank Caroline for her Sustainable Development Goals, and contribution on the Board and are Financial statements The Investment Adviser has prepared checked against frameworks such as pleased that she will join the Investment a fair market valuation of the portfolio the UN Global Compact and the UN Adviser’s Advisory Board later in 2022. as at 31 December 2021. This valuation Principles of Responsible Investment. We welcome Abigail Rotheroe, as is based on the price of recent The Company was very pleased to be Non-Executive Director of the Company, investments for the Private Hydrogen awarded the London Stock Exchange’s and look forward to benefitting from Assets held and has been calibrated Green Economy Mark in 2021. her expertise. with a discounted cash flow analysis of the future expected equity cash flows Risks and uncertainties As Chair of the Company, I would also like accruing to the Company from each While it is the Investment Adviser to thank all the Directors of the Company, portfolio investment. that manages the risks facing the the Investment Adviser and our other Company on a day-to-day basis, it is advisers for their support and guidance This valuation uses key assumptions in our coming to market and the the Board of the Company which Other information which are recommended by the execution of our strategy going forward. retains ultimate responsibility. Investment Adviser using its experience and judgement, having taken into I am excited by the progress we have The Company’s Audit and Risk account available comparable market made in the last eight months, and Committee, which report to the Board, transactions and financial market data in I believe we are in a unique position regularly reviews the effectiveness of the order to arrive at a fair market value. to benefit from the growing importance Company’s (and that of the Investment Adviser, Alternative Investment Fund of hydrogen both in the UK and Listed Hydrogen Assets are valued at internationally. The Company continues Manager (“AIFM”), Administrator and fair value, which is the bid market price, to consider options for fundraising other third-party service providers as it or, if bid price is unavailable, last traded over the course of 2022 in order to deems fit) internal control policies and price on the relevant exchange. fund its significant and growing pipeline procedures for the identification, assessment and reporting of risks. of opportunities. The Directors have satisfied themselves as to the methodology used and the The Board considers that the principal assumptions adopted and have risks and uncertainties for the Company approved the valuation of the portfolio of Simon Hogan have not materially altered from those 22 investments as at 31 December 2021. Chairman set out in the last published Prospectus in July 2021. The Prospectus is available Share capital 31 March 2022 on the Company’s website, and a | In July 2021, the Company successfully | summary of the principal risks and | | --- | --- | | listed on the LSE and raised £105.2m | uncertainties is included on pages 30 | | million post costs. | and 31 of the Strategic Report. | FUTURE FUEL. NOW 7 7 HydrogenOne Capital Growth plc Annual Report 2021 ## Company Objectives Investment objective The Company’s investment objective is to deliver an attractive level of capital growth by investing, directly or indirectly, in a diversified portfolio of hydrogen and complementary hydrogen focussed assets whilst integrating core ESG principles into its decision making and ownership process. ### KPIs Objectives Principal risks • Changes in the legislative and regulatory framework ## 1 ### that affect the hydrogen sector ### To deliver an attractive level • Operational risks in the portfolio ### of capital growth • Valuation risks (energy prices/inflation/ The Company is targeting a Net Asset Value total ### return of 10 per cent to 15 per cent per annum over the operational performance) medium to long-term with further upside potential. • Investment process fails to identify new opportunities • Lack of future pipeline and/or funding • Increased competition for assets • Lack of future pipeline and/or funding ## 2 ### A diversified portfolio of • Increased competition for assets ### hydrogen and complementary • Changes in the legislative and regulatory framework ### hydrogen focussed assets ### that affect the hydrogen sector • Investment performance ## 3 • Changes in the legislative and regulatory framework ### Maintenance of a reasonable ### that affect the hydrogen sector ### level of premium or discount ### of share price to NAV • Lack of future pipeline and/or funding • Costs are inadequately controlled ## 4 ### Maintenance of a reasonable • Failed investment processes leads to high level ### of abort costs ### level of ongoing charges • ESG is managed in four categories: | 5 | – Allocating capital to low carbon growth | | --- | --- | | Environmental, Social and | – Engagement to deliver effective boards | | Governance principles embedded | – Encourage sustainable business practices | | in investment approach | – ESG in the Company | 8 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance KPIs Re vie w NAV NAV Total return per share per annum ## * The Board monitors both the NAV and share price ## 95.75p -2.3% performance. A review of performance is undertaken at each quarterly Board meeting and the reasons for Share price return Index relative under and over performance against various comparators is discussed. ## * ## 19.5% -13.2% Return relative to Solactive Hydrogen Economy Index from date of listing to 31 Dec 2021 Number of Number of Financial statements investments geographies The Board monitors the portfolio at each quarterly Board meeting and the reasons for relative under and ## 22 6 over performance of sectors and geographies invested Invested portfolio split by value (Private: Listed) in, and performance of listed vs. private. ## 83%:17% Premium or discount The Company’s Broker monitors the premium or of share price to NAV Other information discount on an ongoing basis and keeps the Board updated as and when appropriate. At quarterly Board ## * ## 24.8% meetings the Board reviews the premium or discount in the quarter since the previous meeting. Ongoing charges ratio The Board receives management accounts which contain an analysis of expenditure which are reviewed ## * at their quarterly Board meetings. The Board reviews ## 2.06% the ongoing charges on a quarterly basis and considers these to be reasonable in comparison to peers. Capital deployed in low carbon growth The Board reviews compliance with the ESG policy ahead of each investment decision, and in the ## ** | £48.6m | Company on an on-going basis. The Board | | --- | --- | | Avoided GHG emissions: methodology under | additionally monitors developments in the ESG | | development. Board representation in invested | landscape more broadly. | Private Hydrogen Assets: 100% * The figures above are considered to represent the Company’s APMs. Definitions of these APMs and other performance measures used by the Company, together with how these measures have been calculated, can be found on page 83. ** Capital deployed is comprised of the aquisition costs of Listed Hydrogen Assets (£9.4 million) and Private Hydrogen Assets acquired by the Limited Partnership (£39.2 million). FUTURE FUEL. NOW 9 HydrogenOne Capital Growth plc Annual Report 2021 ## Investment Adviser’s Report Background The Principals of the Advisory Board of the Investment Adviser Investment Adviser The Company’s Alternative Investment | Fund Manager (“AIFM”), Sanne Fund | The Principals of the Investment Adviser | The Principals of the Investment Adviser | | --- | --- | --- | | Management (Guernsey) Limited, (part | have in excess of 60 years of combined | are supported by an experienced team | | of Sanne Group), has appointed | experience and a track record of | which comprises the Advisory Board. | | HydrogenOne Capital LLP as the | success in the energy industry and | The Advisory Board has been carefully | | Investment Adviser to the AIFM in | capital markets which are directly | selected to provide expert advice to the | | respect of the Company. Its key | applicable to the hydrogen industry, | Investment Adviser on the hydrogen | | responsibilities are to originate, analyse, | including acquisitions, mergers and | sector, project finance and capital | | assess and recommend suitable | divestments, development of growth | markets. The Investment Adviser has | | investments within the hydrogen sector, | energy projects, supervision of profitable | appointed the members of the Advisory | | and advise the AIFM accordingly. | energy production, ESG track record, | Board to provide it with advice from time | | Additionally, the Investment Adviser | investments in both listed and private | to time. No members of the Advisory | | performs asset management services | companies and board advisory. Their | Board are directors, officers, employees | | in relation to the investments in the | biographies are included on page 34 of | or consultants of the Company, the | | portfolio or, to the extent asset | the annual report. | AIFM or the Investment Adviser. It is | | management is delegated to third | | envisaged that the Advisory Board will | | parties, oversees and monitors such | | expand over time, with additional | The Investment Adviser's team asset management. experts being added or substituted as The Principals have assembled an and when required. experienced team to support the HydrogenOne Capital LLP was founded Company. This group brings a mixture in 2020 by JJ Traynor and Richard Hulf of finance, technical and sector skills to as an alternative investment firm support the Investment Adviser in its day focussed specifically on investing in to day activity. The Investment Adviser hydrogen assets and their role in the has established a team which is energy transition. As a responsible responsible for financial modelling, investor, HydrogenOne Capital LLP is corporate and asset valuation analysis, committed to contributing to the energy and opportunity assessment for the transition through the financing of Company. The Principals anticipate a sustainable investments and by further increase in headcount as the providing investment solutions that Company continues to grow its activities. reduce carbon emissions. HydrogenOne Capital LLP employs a fully integrated investment and asset management approach and integrates ## “HydrogenOne Capital LLP was founded its focus on ESG criteria throughout the ## entire investment process. in 2020 by JJ Traynor and Richard Hulf ## as an alternative investment firm focussed ## specifically on investing in hydrogen assets ## and their role in the energy transition.” 10 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 ## Strategy ### A highly differentiated strategy, 100% focussed on clean hydrogen Clean hydrogen has emerged as a key element of decarbonisation, as governments, companies and society come together to address the climate change underway today caused by human activities, particularly the burning of fossil fuels. The 2015 Paris Agreement set out a pathway for the world to address these challenges, and this, combined with further government commitments on emissions, is driving an energy transition to a low carbon economy. Further momentum at the 2021 COP26 meeting adds to the imperative for clean hydrogen. The 'Breakthrough Agenda', launched at COP26, includes a 'hydrogen breakthrough' goal, which is to ensure affordable low-carbon hydrogen is globally available by 2030. Hydrogen has a vital role to play in the energy transition, in air quality and in energy security. Recent EU announcements on energy security ('REPowerEU'), triggered by the Russia-Ukraine war, include plans for a substantially increased role for clean hydrogen – now expected to reach 20 million tonnes per year in 2030, compared to 5.6 million tonnes projected earlier in the 'Fit for 55' plan. The scale of the challenge, and the impetus to move faster, cannot be understated. The Company was established to provide investors with opportunities in clean hydrogen and energy storage for the energy transition. The Company offers distinctive access to private investments, across the full hydrogen value chain, and across the OECD. The investment objective is to deliver an attractive level of capital growth by investing, directly or indirectly, in a diversified portfolio of hydrogen and complementary hydrogen focussed assets whilst integrating core ESG principles into our decision making and ownership process. As the first UK listed investment company specialising in this sector, the Company has a clear competitive advantage as an early mover into a complex sector, and offers its investors a unique window into the private hydrogen asset market. With its emphasis on Private Hydrogen Assets, the Company, gives investors an opportunity to be exposed to liquidity and portfolio diversity in hydrogen companies and projects, hard to access elsewhere, with strong growth potential. A focus on material ESG factors, and especially the deployment of capital to deliver the energy transition to a low carbon economy, is at the heart of what the Investment Adviser does, running hand in hand with a strategy to deliver the target 10-15% per annum NAV growth for the investors. With a pipeline of potential investments in excess of £500 million in hand today, the Company is well positioned to address the scale and complexity of a substantial new energy industry. The Investment Adviser is a specialist investor in this complex and rapidly-developing growth sector. The Company believes that this specialised approach is a competitive advantage that will only grow over time. An investment in the Company offers exposure to the broader hydrogen sector whilst, at the same time, diversifying risk for an investor in the sector. By targeting a diversified portfolio of listed and private investments across different jurisdictions and different technologies, the Company seeks to spread some of the key underlying risks relating to clean hydrogen. The UK and Europe are currently seeing a high level of political and societal support for Net Zero and the role of hydrogen in delivering that goal. The Company currently intends to focus its investments in these jurisdictions as a priority. By excluding companies or projects that generate revenues from the extraction or production of fossil fuels (mining, drilling or other such extraction of thermal coal, oil or gas deposits) from the portfolio and taking on further ESG screens, the portfolio is expected to be an early mover to Net Zero in the energy transition, and will not be encumbered by the legacy greenhouse gas emissions inherent in other players in the hydrogen sector. The Investment Adviser expects the hydrogen market to grow substantially in the coming years, and for the production scale of individual hydrogen projects to increase over time. The Company is well positioned to take advantage of this growth, by deploying capital in the best quality companies and assets, and adopting a long term investment approach. The clean hydrogen industry in the short term is dominated by bespoke sources of supply, financed by specialised offtakers, typically at 5MW to 100MW scale. In the period from 2025 to 2030 the Investment Adviser expects these facilities to be up-scaled to 100MW to 500MW scale, and ultimately to 1GW to 5GW. The Investment Adviser also believes that energy storage and Carbon Capture and Storage ('CCS') projects will also increase in scale in this timeframe, with the development of compressed air energy storage followed by hydrogen storage and long-distance transport through pipelines, as liquid hydrogen or as ammonia on ships. "With a pipeline of potential investments in excess of £500 million in hand today, the Company is well positioned to address the scale and complexity of a substantial new energy industry." Strategic Report Governance Financial statements Other information FUTURE FUEL NOW 11 HydrogenOne Capital Growth plc Annual Report 2021 ## Investment Adviser’s Report ## Hydrogen market and investment opportunities ### Policy makers and industry are converging on clean hydrogen as a core technology ### to deliver Net Zero and improved air quality. The Paris Agreement has led 39 countries ### to set out hydrogen policies and $70 billion of funding as part of Net Zero targets to ### deliver the Energy Transition to a low carbon economy. As an example, Denmark announced to reduce poisonous emissions from Water vapour is the only by-product of a ’Hydrogen and Power-to-X’ strategy diesel in urban environments. using hydrogen as a fuel. in March 2022, calling for 4-6GW of | installed hydrogen electrolysis by | According to the World Health | Hydrogen can store and transport | | --- | --- | --- | | 2030, using wind and solar power, | Organisation (“WHO”), some 4.2 million | intermittent renewable power at a grid | | putting DKK 1.25 billion of subsidy | deaths per year are caused by poor | scale. As wind and solar become a large | | funding in place, and the policy and | ambient air quality, and 91% of the | percentage of electricity supply over | | regulatory frameworks that are | | time, the electric grid will need large | world’s population live in places required for this. scale electricity storage to offset periods exceeding the WHO’s air quality of low wind and low light. By converting guidelines. Much of this pollution is as As a further example, in 2019 the electricity to hydrogen, the energy can a result of emissions from internal Netherlands set targets for 3-4GW of be stored over long periods of time combustion engines and fossil fuel electrolysis by 2030 with multi-billion either in pipelines and tanks, or in power plants. Euro funding support announced by underground salt caverns. the Netherlands government. The Access to clean hydrogen is a priority 2 government is providing EUR750m of The hydrogen sector has $1 trillion for refiners and steel and ammonia funding support for a ‘hydrogen market potential by 2040. A 200x producers as they address GHG | backbone’, retrofitting existing natural | | increase in clean hydrogen supply is | | | --- | --- | --- | --- | | | emissions. These heavy industries are | | 3 | | gas pipelines to transport hydrogen | | anticipated from 2019 to 2030 | in order | under tremendous pressure to reduce between five industrial clusters in the to achieve Net Zero, as the scale-up or eliminate grey hydrogen from Netherlands, and at cross-border of renewable power alongside the connection points. processes, to reduce the GHG emissions phase-out of fossil fuels, improves the | | that result from this. Much of today’s | economics of established hydrogen | | --- | --- | --- | | Burning fossil fuels for energy releases | demand for clean hydrogen is basically | technologies. Clean hydrogen could | | green-house gas and poisonous | a clean-up of grey hydrogen. | be 20% of the energy mix by 2050. | particulates. More than 20 countries | have announced sales bans on internal | In the future, clean hydrogen can | A series of technology developments in | | --- | --- | --- | | combustion engine vehicles before | displace fossil fuels in hard to | recent decades are rapidly reaching the | | 2035, and over 25 cities have pledged | decarbonise sectors, either by burning | stage where they can be deployed | | to buy only zero-emission buses from | it in power plants to replace natural | commercially, and at scale, to clean up | | 2025 onwards. This is driven by | gas, coal and oil, or by converting it to | today's hydrogen feedstock sector and | | Net Zero agendas, plus the imperative | electricity through hydrogen fuel cells. | to use hydrogen as a low emission fuel. | What is driving the hydrogen economy? Paris Agreement and Net Zero + urban air quality agenda • 75 countries announced Net Zero strategies • 4.2 million deaths per year from air pollution • c. 39 countries have hydrogen strategies • 91% of population live in places exceeding WHO air quality guidelines • California: all new passenger vehicles zero-emission by 2035 2020 EU 2020 The Netherlands Source: WWF 2016 2019 UK 2020 South Germany | | | | | Korea | 2017 | | | --- | --- | --- | --- | --- | --- | --- | | | 2013 | | | | | • Battery electric vehicles (“BEV”) and fuel cell vehicles | | | | 2020 | | | Japan | | | California | | Spain | 2018 | | | | (“FCV”) are zero-emission ‘tailpipe’ | | | China | 2016 | | | --- | --- | --- | --- | --- | | | 2020 | | Taiwan | | | | Saudi | | | • FCV advantages over BEV in heavy and long distance | | • 120+ membership of the Hydrogen Council | Arabia | | | applications: trucks, buses, trains, forklift | 2019 Singapore 2/3. Hydrogen Council, McKinsey: Hydrogen for Net Zero. A critical cost-competitive energy sector. November 2021. 2020 Chile 12 FUTURE FUEL. NOW 2017 Australia HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance Accelerating demand outlook for hydrogen to deliver Net Zero Sources of hydrogen Financial statements A combination of factors is driving strong Green hydrogen: in order to manufacture Turquoise hydrogen: methane pyrolysis growth in the uptake of green hydrogen hydrogen without the use of fossil fuels as (or ‘turquoise’ hydrogen) which uses for the future, including upscaling and a feedstock, the ‘green’ hydrogen process pyrolysis of natural gas to make consequent lower unit costs in takes electricity sourced from renewables hydrogen with a solid carbon by-product. renewable electricity and electrolysers, such as wind and solar, and uses increased penalties and regulatory Grey hydrogen: over 95% of today’s electrolysis to split water into oxygen and barriers to further growth in fossil fuels industrial hydrogen is manufactured by hydrogen. These technologies are well and the potential to use green hydrogen reforming of fossil fuels – coal, oil and, established and the Investment Adviser as a storage medium for intermittent particularly, natural gas. This source of believes that the industry is on the cusp renewable power and as a long distance hydrogen is generally termed ‘grey’ of a significant phase of growth. energy carrier. hydrogen, and is made in large scale industrial sites using techniques such Emerging clean hydrogen Blue hydrogen: capturing the GHG Other information as Steam Methane Reforming (“SMR”). technologies: there are a number of emissions derived from SMR and other With GHG emissions unabated, grey emerging technologies that could result manufacturing processes and storing hydrogen is not an investment target in low-cost clean hydrogen supplies in them geologically using CCS results in for the Company. the future. These include, atmospheric a cleaner form of hydrogen, known as distillation, SMR with CCS facilities, ‘blue’ hydrogen. gasification or plasma processes applied to city and agricultural waste to Hydrogen supply sources produce methane and hydrogen. Surplus electricity from nuclear power | | Grey hydrogen | Turquoise hydrogen | | Blue hydrogen | Green hydrogen | Emerging | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Steam methane | | Methane pyrolysis | SMR with carbon | Water electrolysis | technologies | plants can be converted to hydrogen | | Clean hydrogen end-use demand in 2023, | reforming (SMR) of | | c.$2-3/kg | capture and storage | Announced and required direct investments (AEM/PEM/SOEC) | | | Eg. Waste-to-H/PEC cells 1 natural gas $1-2/kg (CCS) $2-3/kg c.$6/kg via electrolysis (‘yellow’ hydrogen). The MT hydrogen p.a. into hydrogen USD billion until 2030 Investment Adviser intends to monitor Green | | | | Hydrogen + | | | electricity | Hydrogen | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | 75 | | | | ~540 | these developments for potential | ~ 700 | | | | CH4+ | solid | | | | | | | | | Fossil fuel | Hydrogen | electricity | carbon | Natural gas | Hydrogen | Water | Oxygen | | | | investment by the Company in the 1 GT Underground Production longer term. CO CO 2 2 storage Cumulative Clean hydrogen is made at industrial Today Transmission abatement & distribution sites with access to low-cost green 2021-30 New demandConversion until 2030 electricity (‘green’) or natural gas and 2030+ End use 160 geological CO storage sites (‘blue’). 2 | | • Multiple potential sources of hydrogen | | | | The hydrogen is shipped or stored in | | --- | --- | --- | --- | --- | --- | | Ammonia Methanol Refining | Conventional | | Steel Transport Heating 2030 | Power | | | | | steel | | generation | | | | • Innovation to extend traditional portfolio asset lives: oil & gas facilities, | | | | pipelines and tanks to customers. | Gap Grey conversion by 2030 of: 50% (EU), 40% (Japan, Korea), 30% (North America) and 20% (China, Middle East, RoW) pipeline networks Announced direct investments Total need For industries such as oil refining, • Potential for blending and premium markets for clean hydrogen hydrogen is used in the desulphurisation • Significant step-up in clean hydrogen demand to deliver >$500 billion | Net Zero targets | capital markets | | | | --- | --- | --- | --- | | • Clean-up of industrial ‘grey’ hydrogen | opportunity | | | | | | FUTURE FUEL. NOW | 13 | • Hydrogen roll-out into transport, heat, power Source: Hydrogen Council, McKinsey: Hydrogen for Net Zero. A critical cost-competitive energy sector. November 2021 HydrogenOne Capital Growth plc Annual Report 2021 ## Investment Adviser’s Report ## Hydrogen market and investment opportunities Hydrogen sector value chains of crude oil, amongst other processes. (v) assets involved in hydrogen supply largest industrial corporations and Alternatively, fuel cells are used to chains, such as electrolysers and investors. The Investment Adviser's convert the hydrogen to electricity or fuel cells; and clear investment and ESG policies heat – this can take place in trucks, trains underpin and guide everything that it (vi) businesses that utilise hydrogen and buses via hydrogen tanks, or in large does. The Investment Adviser, the applications such as transport, buildings such as hotels and offices, Advisory Board, the technical advisors, power generation, feedstock and using combined heat and power units. regulatory and legal counsel all heat, which may be operational combine to deliver the optimal deal companies or hydrogen projects Investment objectives structures for the shareholders. (completed or under construction). and policy Investment portfolio The Company intends to implement As previously set out on page 8 of this its investment policy through the and valuation report, the Company’s investment acquisition of Private Hydrogen Assets During 2021, the Company has invested objective is to deliver an attractive level and Listed Hydrogen Assets. Over time, a total of £48.6 million in hydrogen sector of capital growth by investing, directly or the Company will overwhelmingly invest companies, which are the foundation indirectly, in a diversified portfolio of in Private Hydrogen Assets, with 10% or of a diversified, multi-asset portfolio hydrogen and complementary Distribution less in Listed Hydrogen Assets . for investors in clean hydrogen and hydrogen focussed assets whilst integrating core ESG principles into its related technologies. The large majority • H2 / NH3 decision making and ownership process. No investments will be made in of this investment is into Private • Pipelines companies or projects that generate Hydrogen Assets. • Tankers revenues from the extraction or The Company seeks to achieve its • HRS production of fossil fuels. The investment £39.2 million has been invested in investment objective through investment policy is detailed on pages 27 and 28. three Private Hydrogen Assets; Sunfire in a portfolio, primarily in developed Hydrogen supply markets in Europe, North America, the Energy storage Supply chain Hydrogen applications GmbH, HiiROC Limited and NanoSUN GCC and Asia Pacific, comprising: Investment process Limited. A further £9.4 million has been • Transport • Pipes & tanks invested in a portfolio of 19 Listed (i) assets that produce and supply The Company follows a proven and • Electrolysers • Buildings CHP • Green in focus Compressed Air Hydrogen Assets . clean hydrogen; successful process in order to access • Fuel cells • Portable generators • Monitor emerging Energy Storage technologies and execute its distinctive deal flow. • Power plants (ii) large scale energy storage asset; • Geological • Infrastructure Uninvested funds of £34.0 million are The Investment Adviser has specialist • Feedstock (iii) carbon capture, use and currently held in cash and cash insights and strong industry and market storage assets; equivalents in the Company’s Liquidity networks to access potential investment Reserve, ahead of investment. (iv) hydrogen distribution opportunities. The Company typically infrastructure assets; Carbon capture invests alongside some of the world’s • Geological 14 FUTURE FUEL. NOW • Direct Air Capture • CO2 transport HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance Well established investment process and access to deal flow Financial statements | Private Hydrogen Assets | HiiROC | NanoSun | | --- | --- | --- | | acquisitions | In November 2021, the Company | In December 2021, the Company | | | invested £10 million in UK- based HiiROC | invested £9 million in UK- based | Sunfire | | Limited (“HiiROC”), a private company, | | NanoSUN Limited (“NanoSUN”). | | | --- | --- | --- | --- | --- | | In October 2021, the Company | which has patented technology that | | | | | invested £20 million (€24 million) in | manufactures clean hydrogen from | | NanoSUN develops hydrogen | | | Sunfire GmbH’s equity share capital, | natural gas. | | distribution and mobile refuelling | | | and has a board observer seat. The | | | equipment. Based in Lancaster, its vision | | | Company’s investment in Sunfire | HiiROC’s proven technology converts | | is for hydrogen to become the major | | | formed part of a €109 million | biomethane or natural gas into clean | | energy vector in a decarbonised world. | Other information | | fundraising round, introducing other | hydrogen and solid carbon, through a | | In order to achieve this, NanoSUN’s | | | new investors including Planet First | proprietary electrolysis process using | | founders aim to accelerate hydrogen | | | Partners, Lightrock and Carbon Direct | thermal plasma. This results in zero | | use with their innovative technologies | | | Capital Management, alongside | CO | hydrogen production, known as | by bridging the gap between the | | 2 existing strategic investors. ‘turquoise hydrogen’, at a cost hydrogen supply industry and the comparable to the predominant, but needs of hydrogen users for convenient, Germany-based Sunfire is, a private high emission, steam methane reforming low-cost, simple-to-use and safe fuelling 1. Unique insights into deal flow company specialising in the production process, and using only one fifth of the systems. NanoSUN’s novel mobile • Investment Adviser networks and track record of electrolysers. Sunfire has recently energy required by water electrolysis. Pioneer Hydrogen Refuelling Stations • Building out opportunities via the investments announced plans for the rapid The solid carbon by-product, known as provide a flexible and low-cost • First mover… “see everything” deployment of its pressurised alkaline carbon black, has applications ranging connection between hydrogen electrolysis technology, building a from tyres, building materials and as a customers such as truck stops, and large-scale electrolyser production soil enhancer. HiiROC has shown growth concentrated hydrogen supply sources. 2. Investment Policy site in Germany with an annual potential in a number of hydrogen NanoSUN has identified substantial • Clean Hydrogen and related growth assets manufacturing capacity of 500 MW by sectors including grid injection and demand for its products, and will • OECD mandate 2023. Sunfire intends to significantly electricity generation. increase its manufacturing capability, • Fossil fuels production excluded | expand its electrolyser manufacturing | | and develop larger units. | | --- | --- | --- | | capacity to multi-gigawatt scale in the | The Company’s investment in HiiROC’s | | | coming years. In addition, Sunfire is | 3. ESG Policy equity share capital forms part of a | The Company has invested in NanoSun’s | ### Investment pioneering the use of its proprietary solid • Investing in low carbon growth c. £26 million fundraising round, equity share capital as part of a £12 million ### Process • Effective boards introducing other new investors equity round that included Westfalen, oxide technologies to the manufacture of clean ‘e-fuels’, which can be used in • Sustainable business practices including Melrose Industries, Centrica, and has a right to a board seat. jet aviation, through ownership in • ESG in the Company Hyundai and Kia, alongside existing industry joint ventures. strategic investors Wintershall Dea and VNG. The Company has a board seat. 4. Transaction • Autonomy in investment selection and allocation FUTURE FUEL. NOW 15 • Detailed DD including Advisory Board, Arup and other 3rd parties • Board / AIFM review ahead of completion HydrogenOne Capital Growth plc Annual Report 2021 ## Investment Adviser’s Report Listed Hydrogen Assets portfolio Gen2 Energy’s electrolysers could themselves as to the methodology operate virtually 24/7, with lower unit used, the discount rates and key The Company has invested in 19 global costs of hydrogen as an outcome. assumptions applied, and the valuation. hydrogen sector listed equities with an By converting this electricity to green All Private Hydrogen Assets at 31 average market capitalisation of £1.5 billion hydrogen, and shipping the hydrogen to December 2021 have been valued with minimum market capitalisation of industrial customers, the company aims using the Price of Recent Investment £200 million. The aggregate investment to become a regional supplier of low methodology as described by the in these listed companies was £9.5 million cost clean fuel and feedstock. Gen2 International Private Equity and Venture at the time of investment, in the second Energy Limited has a series of projects in Capital Valuation 2018 (“IPEV”) half of 2021. These companies are key its pipeline, totalling an estimated initial Guidelines, and have been calibrated players in the electrolysis, fuel cell and 700MW, in Norway to begin with, which with a discounted cash flow analysis clean hydrogen projects sectors. could commence production in of the future expected cash flows 2024-2026. accruing to the Company from each These are long term strategic holdings portfolio investment. in companies that the Investment The Company invested c. £3.5 million Adviser expects will be the eventual Listed Hydrogen Assets are valued at leaders in the listed hydrogen market. investment in Gen2 Energy alongside fair value, which is the bid market price, existing industrial backers Vitol, Höegh or, if bid price is unavailable, last traded LNG, HyCap and the Knutsen Group. Post year end acquisitions price on the relevant exchange. The Company has a board seat. Since 1 January 2022, the Company has made three further investments in Private Analysis of financial results Cranfield Aerospace Hydrogen Assets, in Bramble Energy The financial statements of the Company Limited, Gen2 Energy Limited and UK-based Cranfield Aerospace for the period ended 31 December 2021 Cranfield Aerospace Solutions Limited. Solutions Ltd (“CAeS”) is an aerospace are set out on pages 56 to 81 . market leader in the design and Bramble Energy manufacture of new aircraft design Net assets concepts, complex modifications to UK-based Bramble Energy is pioneering existing aircraft and integration of Net assets decreased from £105.2 million revolutionary fuel cell design and cutting-edge technologies to meet the at listing on 30 July 2021 to £102.8 million manufacturing techniques, and has most challenging issues facing the at 31 December 2021, primarily driven by developed the unique Printed Circuit aerospace industry today. CAeS has the fall in global stocks generally and the Board (“PCB”) fuel cell – the PCBFC™. refocused the company on Project hydrogen sector more specifically. This patent protected fuel cell can be Fresson, in order to unlock commercial manufactured in almost all PCB The net assets of £102.8 million turboprop flight using clean hydrogen factories worldwide. Bramble Energy comprise £68.8 million portfolio value fuel. In the early stages, CAeS will have launched a portable power of investments, including the holding focus on CAA certification of the product range and are developing their in the HydrogenOne Capital Growth Britten-Norman Islander passenger high-power density, liquid-cooled fuel Investments (1) LP (“Limited Partnership”), aircraft using hydrogen fuel cell cell systems under the same scalable and the Company’s cash balances of power. Over time, CAeS intends to low-cost technology platform. £34.0 million, and other net liabilities of take these learnings into larger £0.1 million. airframes, pioneering the way in the The Company’s £10 million investment in decarbonisation of flight. Bramble Energy’s equity share capital The Limited Partnership’s net assets of formed part of a £35 million fundraising £60.6 million comprise £39.2 million HydrogenOne has invested £7 million in round, including existing Bramble portfolio value of investments, cash CAeS alongside Safran, a world leader investors IP Group, BGF, Parkwalk and balances of £21.5 million, and other net in aviation technology. In parallel with UCL Technology Fund. The Company liabilities of £0.1 million. its investment, Safran has signed an has a board seat. MOU with CAeS spanning the area of Cash hydrogen fuel cell powered, electric Gen2 Energy At 31 December 2021, the Group had propulsion for aviation. The Company Norway-based Gen2 Energy has the a total cash balance of £55.5 million, has a board seat. ambition to manufacture green including £34.0 million in the Company’s hydrogen, at scale, by connecting to balance sheet and £21.5 million in the Valuation | the abundant and low cost renewable | | Limited Partnership, which is included in | | --- | --- | --- | | power which is being generated in | As set out in note 3 of the financial | the Company’s balance sheet within | | excess of market demand in the region. | statements, the Investment Adviser | ‘investments held at fair value through | | Hydroelectric power, the key constituent | has carried out fair market valuations | profit or loss’. | | in the power mix in Norway, has the | of the Private Hydrogen Assets at | | | additional advantage of very high | 31 December 2021, which have been | | | uptimes compared to green electricity | reviewed by the Valuation Committee, | | | from wind and solar sources, meaning | and the Directors have satisfied | | 16 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance Loss for period ### Portfolio Summary The Company’s total loss before tax Details of individual holdings for the period ended 31 December as at 31 December 2021 2021 is £2.4 million, generating losses Country of Market value % of of 3.8 pence per Ordinary Share. Company main listing £’000 net assets In the period to 31 December 2021, Listed Hydrogen investments the losses on fair value of investments Aker Horizons AS Norway 593 0.6 was £1.6 million. Doosan Fuel Cell Co Ltd South Korea 566 0.6 Powercell Sweden AB Sweden 559 0.6 The expenses included in the income statement for the year were £0.8 million, NEL ASA Norway 531 0.5 in line with expectations. These AFC Energy plc United Kingdom 524 0.5 comprise £0.3 million Investment SFC Energy AG-BR France 507 0.5 Adviser fees and £0.5 million operating expenses. The details on how the McPhy Energy SA France 500 0.5 Investment Adviser fees are charged Hydrogen-Refueling-Solutions SA Germany 454 0.4 are as set out in note 5 to the financial Plug Power Inc United States 446 0.4 statements. Green Hydrogen Systems A/S Denmark 444 0.4 | Ongoing charges | Bloom Energy Corp United States 427 0.4 | | --- | --- | | The ‘ongoing charges’ ratio is an indicator | Ceres Power Holdings plc United Kingdom 418 0.4 | | of the costs incurred in the day-to-day | ITM Power plc United Kingdom 411 0.4 | management of the Company. Hexagon Purus ASA Norway 391 0.4 Financial statements S-Fuelcell Co Ltd South Korea 391 0.4 The ongoing charges percentage for the period to 31 December 2021 was 2.06%. Cell Impact AB Sweden 378 0.4 The ongoing charges have been Fuelcell Energy Inc United States 348 0.3 calculated, in accordance with AIC Ballard Power Eystems Inc Canada 320 0.3 guidance, as annualised ongoing Enapter AG Germany 25 0.0 charges (i.e. excluding acquisition costs and other non-recurring items) divided Total listed investments 8,233 8.0 by the average published undiluted Net Asset Value in the period. The calculation Private Assets investment is provided on page 83 of the annual HydrogenOne Capital Growth report. The ongoing charges percentage Investments (1) LP United Kingdom 60,597 59.0 Other information has been calculated on the consolidated basis and therefore takes into Total investments 68,830 – consideration the expenses of Limited Cash 34,019 33.1 Partnership as well as the Company. HydrogenOne Capital LLP believes this Other net assets (63) (0.1) to be competitive for the market in which Total net assets 102,786 100.0 the Company operates and the stage of development and size of the Company. All investment is in equity securities unless otherwise stated. Private hydrogen assets held by the HydrogenOne Capital Growth Investments (1) LP Value of Country investment Company of incorporation £’000 Sunfire GmbH Germany 20,180 HiiROC Limited United Kingdom 10,001 NanoSUN Limited United Kingdom 9,050 Total 39,231 FUTURE FUEL. NOW 17 HydrogenOne Capital Growth plc Annual Report 2021 ## Investment Adviser’s Report Portfolio strategy not available for institutions elsewhere Investment pipeline The Company today has an active Invested across the value chain £17bn investible universe > £500m private Pipeline Pipeline of over £500 million of private At the end of 2021, the Investment opportunities for potential investment Adviser had identified an Investible • Diversified portfolio across companies and projects including a near term pipeline in excess Universe of over £17 billion in Private Hydrogen supply of £200 million of potential transactions Hydrogen Assets, in operational • Clean hydrogen supply projects under NDA. This is a strong and companies and hydrogen projects. • Supply chain and developer companies distinctive opportunity set for investors This large and distinctive opportunity and underscores the Company’s strong set has only continued to grow, with • c. 10% allocation to strategic listed companies in £42bn sector growth potential. Energy storage over 200 Private Hydrogen Assets opportunities now identified, compared to 120 at the time of the 2021 IPO, and Private Private companies projects the sizes of potential investments has also increased. The Investment Distribution Adviser believes that the Investible Universe represents less than 25% of the total worldwide hydrogen Potential ## investment > £200m > £300m > £500m opportunities, and represents a ‘long Supply chain Pipeline list' of potential investments for the No. of ## Company that have been reviewed 17 4 positions by the Investment Adviser. Carbon capture Allocation ## 90% Hydrogen | applications | | | | | > £17bn | | --- | --- | --- | --- | --- | --- | | 18 | FUTURE FUEL. NOW | | | | | | | | Investible | | | Investible | | | | Universe | £8bn | £9bn | | Universe HydrogenOne Capital Growth plc Annual Report 2021 ## Company perspectives – ## our Private Hydrogen Assets Strategic Report Governance Strategic Report Governance ### NanoSUN develops and manufactures hydrogen refuelling stations, providing the ### infrastructure needed to accelerate the adoption of hydrogen-powered vehicles ### and facilitate hydrogen mobility. Key technologies NanoSUN’s flagship Pioneer Hydrogen Refuelling Station is a portable hydrogen refuelling station, delivering renewable hydrogen for use in a wide range of applications, including buses, vans, trucks, material handling, construction and backup solutions. By providing access to an efficient refuelling method, Pioneer encourages the development of hydrogen-powered fleets and industrial processes, displacing the use of fossil fuels and supporting decarbonisation in hard-to-abate industries. Financial statements Financial statements Project spotlight – Double-decker Hydrogen Bus Pioneer is a fully mobile, self-contained, automated refuelling solution Other information Other information that offers an affordable way of delivering transportation-grade hydrogen directly to the point of use, where it is dispensed into hydrogen powered vehicles efficiently and safely. Pioneer relies on innovative cascade fuelling technology to ensure more vehicle tanks are refuelled at higher fill pressures, providing faster refuel times and better hydrogen gas utilisation. Pioneer has already travelled across Europe. In October 2021, Pioneer delivered hydrogen refuelling to the world’s first hydrogen double-deck bus developed by Wrightbus. As it made its UK Hydrogen Roadshow journey from London to Glasgow for COP26, the bus undertook two hydrogen refuelling stops, facilitated by Pioneer. Word from the top ### “NanoSUN’s mission is to accelerate the adoption of hydrogen fuel as ### key element of the transition to clean energy. Our strategy is to bridge ### the gap between low-cost, green sources of hydrogen and hydrogen ### vehicles by providing operators with safe, low-cost and convenient ### refuelling products and services.” Dean O’Connor, CEO FUTURE FUEL. NOW 19 HydrogenOne Capital Growth plc Annual Report 2021 ## Company perspectives – ## our Private Hydrogen Assets ### Sunfire is a global leader in the development and production of industrial ### electrolyser, the technology that transforms renewable electricity into renewable ### hydrogen or syngas for industrial applications. Key technologies Sunfire-HyLink for Renewable Hydrogen Production: Sunfire’s HyLink electrolysers utilise pressurised alkaline and solid oxide technologies to produce renewable hydrogen at scale. With applications as both an energy carrier and feedstock, this clean hydrogen is deployed to decarbonise industrial processes, such as refining, steelmaking and chemical production. Renewable Water Renewable electricit HyLink Alkaline HyLink SOEC h drogen Sunfire-SynLink for Syngas Production: Sunfire’s SynLink solid oxide electrolyser processes water steam and captured CO to produce syngas – a mixture of hydrogen and carbon monoxide. As a renewable feed 2 gas, syngas displaces fossil fuels and decarbonises industrial supply chains – particularly within the fuels and chemical industry. Syngas can be further processed into synthetic crude, a sustainable substitute for crude oil. This renewable fuel can then be refined into different blends of e-fuels – used as an alternative fuel in aviation, maritime and road transport – supporting net-zero mobility. Renewable Water Captured Renewable electricity CO SynLink SOEC syngas 2 Project spotlight – Salzgitter In the European steel industry, hydrogen has the potential to reduce today’s process-related CO emissions by more than 95%. Sunfire 2 realises a flagship hydrogen project with the steel producer Salzgitter. The project marks the implementation of the world’s largest solid oxide electrolyser in an industrial environment to date. Until the end of 2022, the electrolyser will produce 100 tons of renewable, high- purity hydrogen that will be used for annealing processes in Salzgitter’s integrated steelwork as a replacement for hydrogen produced from natural gas. Word from the top ### “We aim for replacing fossil fuels with renewables in all areas of life ### – creating a sustainable future for generations to come. We deliver ### on our purpose through developing, manufacturing and servicing ### high-quality electrolysis solutions. By providing renewable ### hydrogen and syngas as substitutes for fossil energy sources, ### we enable the transformation of carbon-intensive sectors ### towards net zero.” Nils Andag, CEO 20 20 FUTURE FUEL. NOW FUTURE FUEL. NOW y y HydrogenOne Capital Growth plc Annual Report 2021 ## Company perspectives – ## our Private Hydrogen Assets Strategic Report Governance ### HiiROC is focused on developing and commercialising its thermal plasma electrolysis ### technology, which significantly lowers the cost of zero-emission hydrogen, by ### ‘breaking down’ other hydrocarbons like methane and biomethane. Key technologies HiiROC’s proprietary technology converts biomethane, flare gas or natural gas into clean hydrogen and carbon black, through an innovative electrolysis process using thermal plasma. This results in zero CO ‘turquoise 2 hydrogen’ at a comparable cost to steam methane reforming but without the emissions and using only one fifth of the energy required by water electrolysis. The zero-carbon hydrogen can be integrated into grid networks for clean electricity generation or used to decarbonise industrial activities, and the carbon black also has a range of applications including tires, building materials and as a soil enhancer. HiiROC’s modular technology can be placed at the point of demand, enabling the use of existing infrastructure and avoiding hydrogen transportation and storage costs. Financial statements Project spotlights HiiROC is pursuing deployment of pilot units into a range of key customer segments, including: • blending hydrogen in the natural gas grid, with Northern Gas Networks and its partners as part of its hydrogen programme; • decarbonising industry, including power generation and the manufacture of steel and cement, alongside developing specific use cases for carbon black; Other information • mitigating gas flaring, working with Boeing, with a pilot to be deployed onto an existing onshore flare; • mobility, working with Hyundai, supplying to fuel cells for vehicle, rail freight and passenger transport; and • production of low carbon synthetic fuels, including from biomethane, working with EPi in Chelmsford. By working in close partnership with its pilot unit customers, HiiROC aims to position the technology for future roll-out. Word from the top ### “HiiROC’s technology brings a truly differentiated proposition to ### the hydrogen story. We will produce low cost, zero emission ### hydrogen, delivered to customers on a modular, scalable basis ### at the point of demand, avoiding transportation and storage costs. ### We’re building the infrastructure and working with our strategic ### partners to allow deployment of the initial pilot units in selected ### industry segments. The recent funding ensures we’re well ### positioned to move forward with both the technical and ### commercial development of the business.” Tim Davies, CEO FUTURE FUEL. NOW 21 HydrogenOne Capital Growth plc Annual Report 2021 ## Environmental, Social and Governance (“ESG”) ### ESG Policy: The Company has set out that when it invests, that ESG criteria will be fully considered ### in its investment and divestment decisions, and in its asset monitoring. The Board has oversight ### of and monitors the compliance of the AIFM, and the Investment Adviser and any undertaking ### advised by the Investment Adviser in which it invests, with the Company’s ESG policy, and ensures ### that the ESG policy is kept up-to-date with developments in industry and society. Our ESG principles: The Company has embedded four ESG principles into its policy: Objectives Principal risks 2021 progress The Company is focused on investing for a climate-positive HGEN has invested £48.6 million in low-carbon growth in ## 1 environmental impact, accelerating the energy transition and 22 companies across its private and listed portfolios Allocating the drive for cleaner air. The Directors will prioritise this in 2021. capital to long-term goal over short-term maximisation of Shareholder returns or corporate profits. The Company will enable investors low-carbon to back innovators in low carbon industries by supporting the growth access of such companies to the capital markets. The Company prioritises positive and proactive engagement The Investment Adviser is represented on all of the three ## 2 with the boards of its Private Hydrogen Assets. The Directors Boards of its Private Hydrogen Assets, either as a Engagement recognise that structure and composition cannot be uniform, Director or a Board Observer, and is actively engaged but must be aligned with long term investors while supporting in ESG matters in these businesses. The Company and to deliver managements to innovate and grow. The presence of effective the Investment Adviser support the UK Stewardship effective and diverse independent directors is important to the Company, code issued by the Financial Reporting Council and boards as are simple and transparent pay structures that reward the Investment Adviser on behalf of the Company votes superior outcomes. at all meetings where they are able to exercise the Company’s vote. The Company expects its Hydrogen Assets to be transparent The Investment Adviser is actively and constructively ## 3 and accountable and to uphold strong ethical standards. This engaged with the invested companies in Encourage includes a demonstrated awareness of the interests of material implementation of sustainable business practices. stakeholders and engagement to deliver positive impacts on sustainable the environment and society. Hydrogen Assets should support business the letter, and spirit, of regional laws and regulations. The practices Company and the Investment Adviser will encourage adoption of initiatives such as the Task Force on Climate-related Financial Disclosures and the EU Sustainable Finance Taxonomy, and will encourage transparency and alignment of lobbying activities. Given the nature of its investments, the Company intends to The Investment Adviser has implemented ESG ## 4 disclose key performance metrics (“KPIs”) that describe the screening on key metrics and UN SDGs, spanning ESG in the environmental impact of its portfolio. The Company is 22 assessments within the Company’s four ESG particularly focused on the greenhouse gas emissions from principals. This results in an aggregate scoring of ESG Company investments and the emissions that have been avoided performance, which frames engagement with invested (“avoided emissions”) as a result of the investments, and intends companies to drive continuous improvement, and in to actively engage with portfolio companies to be able to adopt some cases may mean the Company decides not an appropriate reporting framework in this area. The Company invest in the relevant company. frames its investments around positive contributions to UN The estimation of the emissions that might be avoided Sustainable Development Goals (“UN SDGs”), and works within through the deployment of new hydrogen and related responsible frameworks such as those promoted by the UN technologies forms an important part of the investment Global Compact (“UN GC”), the London Stock Exchange’s Green assessments made by the Investment Adviser. Economy Mark, and the UN Principles for Responsible These estimates complement perspectives on total Investment (“UN PRI”). The Company manages its own direct addressable markets in revenue terms. Work continues carbon footprint. on an avoided emissions framework that is broad and The Company has no employees, physical assets, property or robust enough for useful publication and comparison operations of its own, does not provide goods or services and across assets. does not have its own customers. It follows that the Company The Company has elected to comply with article 8 of has little to no direct environmental impact. Consequently, the the Sustainable Finance Disclosure Regulation (“SFDR”) Company is exempt from the disclosures required under the and relevant SFDR disclosures will be included in Streamlined Energy and Carbon Reporting criteria. any annual / periodic reports published on or after As an investment trust the fundamental environmental impact 1 January 2022. the Company makes is indirectly through the investments in its portfolio. 22 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance ESG screens applied to Each investment is scored against these criteria in the initial investment review, invested assets and investments which do not meet As part of the investment process, the the expected level of the Board and Investment Adviser scores each Investment Adviser are not progressed. proposed investment against the criteria After investment, each investee set out below, which align with the four company is regularly reviewed against ESG principles into its policy. These criteria these criteria to ensure the company is have been established by the Investment meeting expectations in accordance Adviser and approved by the Board. with the ESG principles. ### k ESG screens for the investments Allocating capital • Significant revenue from hydrogen and • Avoided GHG emissions (annual/life cycle) to carbon growth related technologies • Excludes fossil fuels extraction or production Engagement for • Effective board • Independence of Audit Committee effective Boards • Alignment with long term minorities • Board qualifications (skills, tenure, diversity) • Alignment of Executive pay with long Financial statements term shareholders Encourage • Board oversight of HSSE process • Company policy and disclosure of supply sustainable and reporting chain practices business practices • Transparency incl. Task Force on Climate- • UN GC Related Financial Disclosures (“TCFD”) Mapping • 3.9 Reduce deaths from pollution • 9.5 Increase R&D in industrial technologies vs. UN SDGs Other information | • 7.1 Increase access to electricity | • 11.6 Reduce environmental impact of cities | | --- | --- | | • 7.2 Increase renewables in the energy mix | • 12.6 Adopt sustainable practices and reporting | | • 7.3 Increase energy efficiency | • 14.3 Reduce acidification (water) | | • 9.4 Upgrade industries for sustainability | • 15.3 Desertification and land degradation | FUTURE FUEL. NOW 23 HydrogenOne Capital Growth plc Annual Report 2021 ## Environmental, Social and Governance (“ESG”) Goal UN SDG target The Company’s focus | • Reduce deaths from | Fuel cell vehicles to displace | | --- | --- | | pollution | diesel and fuel oil. Direct use in | | (3.9) | industrial activities to displace | Green Economy Mark fuel oil and coal. The Company has been awarded the London Stock Exchange’s Green Economy Mark, which recognises companies that derive 50% or more of their total annual revenues from products • Increase renewable energy Enable the expansion of and services that contribute to the in the global energy mix renewable energy through direct global green economy. The underlying (7.2) use of clean hydrogen and as a methodology incorporates the Green • Increase access to electricity form of energy storage. Exclude Revenues data model developed by (7.1) those involved in the production FTSE Russell, which helps investors • Increase energy efficiency of fossil fuels. understand the global industrial (7.3) transition to a green and low carbon economy with consistent, transparent data and indexes. | | • Upgrade industries for | Enabling the decarbonisation of | | --- | --- | --- | | | sustainability | processes in heavy industry and | | UN Principles for | (9.4) | enhancing innovation for a more | | Responsible Investment | • Increase R&D in industrial | circular economy, | technologies The UN Principles for Responsible (9.5) Investment is a United Nations- supported international network of investors working together to implement its six aspirational principles. The goal • Reduce the environmental Enabling the adoption of cleaner of the UN PRI is to understand the | | impacts of cities | fuels for transportation and in | | --- | --- | --- | | implications of sustainability for investors, | (11.6) | heavy industry to reduce pollution | | and to facilitate incorporating these | | and advance a more sustainable | | issues into their investment decision- | | economy, | making and ownership practices. United Nations Sustainable Development Goals | | • Adopt sustainable practices | Engagement for good | | --- | --- | --- | | In 2015, the member states of the United | and reporting | governance and transparency | | Nations adopted Agenda 2030. A key | (12.6) | across the portfolio, | component of the Agenda 2030 are the seventeen UN SDGs. These long-term goals are designed to end poverty, improve health and education, reduce inequality, create sustainable economic growth and combat climate change. | They are intended to create incentives to | • Reduce acidification | Enabling the replacement | | | --- | --- | --- | --- | | implement measures in the interests of | (14.3) | of fossil fuels, to reduce | | | people, the planet and prosperity, and | | CO | 2 emissions and the | | therefore contribute to changing the | | corresponding negative | | | world significantly by 2030. | | impacts on ocean chemistry, | | The Company's investment objective and investment policy is closely aligned with seven of these goals, namely Good • Combatting desertification Enabling the replacement of Health and Wellbeing (Goal 3), Affordable and land degradation fossil fuels to reduce GHG and Clean Energy (Goal 7), Industry, (15.3) emissions and the associated Innovation and Infrastructure (Goal 9), acceleration of global warming, Sustainable cities and communities (Goal 11), Responsible Production and Consumption (Goal 12) Life Below Water (Goal 14), and Life on Land (Goal 15). 24 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 ## Section 172 Statement: Company ## Sustainability and Stakeholders Strategic Report Governance The Directors have a statutory duty to promote the success of the Company, whilst also having regard to certain broader matters, including the need to engage with employees, suppliers, customers, and others, and to have regard to their interests. However, the Company has no employees and no customers in the traditional sense. In accordance with the Company’s nature as an investment trust the Board’s principal concern is the interests of the Company’s shareholders taken as a whole. In doing so, it has due regard to the impact of its actions on shareholders, the environment and the wider community. The Company’s engagement with key stakeholders and the key decisions that were made by the Board during the period are set out below. Stakeholder group Methods of engagement Benefits of engagement | Shareholders | The significant shareholders of | The Company engages with its shareholders through | Shareholder engagement was | | --- | --- | --- | --- | | | the Company are set out on | the issue of regular portfolio updates in the form of | rewarded by support for the | | | page 38. | RNS announcements, quarterly factsheets, daily | Company’s growth and | | | | NAVs and as well as other useful information posted | diversification strategy through | A well-informed and on its website. the successful listing of the supportive shareholder base Company in July 2021. is crucial to the long-term The Company provides in-depth commentary on the sustainability of the business. investment portfolio, corporate governance and Understanding the views and corporate outlook in its annual and interim reports. priorities of shareholders is, In addition, the Company, through its broker and therefore, fundamental to Investment Adviser undertake regular meetings to retaining their continued meet with existing and prospective investors to solicit support and to have the their feedback, understand any areas of concern, potential to access equity and share forward looking investment commentary. capital in order to continue to The Chairman may also meet with major expand the Company’s shareholders in conjunction with its broker. portfolio over time in order to further diversify the The Company holds its Annual General Meeting in investment portfolio and London which provides shareholders with the create economies of scale. opportunity to listen to a presentation by the Investment Adviser and meet with the Directors Financial statements and representatives of the AIFM. The Board receives semi-annual feedback from its broker in respect of their investor engagement and investor sentiment. Service The Company does not have The Company has identified its key service providers The feedback given by the providers any direct employees; and will undertake on an annual basis a review of service providers is used to however, it works closely with performance based on a questionnaire through review the Company’s policies a number of service providers which it also seeks feedback. and procedures to ensure open (the Investment Adviser, lines of communication, and Furthermore, the Board and its committees engage Administrator, Company operational efficiency. regularly with its service providers on a formal and Secretary, auditor, broker and informal basis. The Company is able to identify other professional advisers). and resolve problems with The independence, quality The Company will also regularly review all material service provider relationships Other information and timeliness of their service contracts for service quality and value. via this process. provision is critical to the success of the Company. | Portfolio | The Company held an | The Board reviews the financial and operating | The feedback given by the | | --- | --- | --- | --- | | companies | operational portfolio of 19 | performance of its portfolio companies on a regular | Investment Adviser is used to | | | Listed Hydrogen Assets listed | basis. In many cases, investments in Private | review the Company’s policies | | | investments and three Private | Hydrogen Assets are linked to operational and | and procedures to ensure open | | | Hydrogen Assets with the | financial targets, which the Board monitors. | lines of communication, and | | | portfolio displaying strong | | operational efficiency regarding | A quarterly update on performance of portfolio geographical diversity. its Portfolio Companies. companies is provided in the Investment Adviser’s Report within the Board Packs. | Community | The Company does not | The Company aims to maximise its positive | The Investment Adviser and | | --- | --- | --- | --- | | and | have any direct employees. | environmental impact. See ESG section on | other clean energy providers | | environment | | pages 22 to 24. | are doing their part to reduce | However, ensuing the the carbon emissions, however Company’s investment there are already damaging creates a positive social long term effects which may impact is core to the impact the Investment Adviser sustainability approach. during its life. The control of such an outcome is largely out of the Investment Adviser’s control. The Company and the Directors are minimising air travel by making maximum use of video conferencing for Company related matters. FUTURE FUEL. NOW 25 HydrogenOne Capital Growth plc Annual Report 2021 ## Section 172 Statement: Company ## Sustainability and Stakeholders Other Matters Anti-bribery and corruption Modern slavery disclosure In accordance with the UK Bribery Act 2010, the Company has developed The Company is committed to appropriate anti-bribery policies and maintaining the highest standards of procedures. The Company has a ethical behaviour and expects the zero-tolerance policy towards bribery same of its business partners. The use and is committed to carrying out its of slavery and human trafficking is business fairly, honestly and openly. unacceptable and entirely incompatible The anti-bribery policies and procedures with its ethics as a business. The Company apply to all its officers and to those believes that all efforts should be made who represent the Company (including to eliminate it from its supply chains. its business partners). The Company expects those providing services to it, The majority of services supplied to or on its behalf, to undertake their or on behalf of the Company are from business without bribery. the financial services, energy and construction industries and other Prevention of the services associated with those facilitation of tax evasion industries. Given what the Company | understands to be a low risk profile | The Criminal Finances Act | | --- | --- | | of anyone supplying it with services | (Commencement No. 1) Regulations | | being involved in slavery and/or | 2017 (SI 2017/739) brought Part 3 of the | | human trafficking, it believes its current | Criminal Finances Act 2017, the | | procedures and ability to rely on | corporate offences of failure to prevent | | regulatory oversight in relation to | facilitation of tax evasion, into force on | | professional services are sufficient in | 30 September 2017. The Company | | this regard. | does not tolerate tax evasion in any of | its forms in its business. The Company Social, community complies with the relevant UK law and and human rights issues regulation in relation to the prevention of facilitation of tax evasion and The Investment Adviser screens the supports efforts to eliminate the Company’s investable universe as facilitation of tax evasion worldwide, part of the Environmental Social and works to make sure its business and Governance analysis for any partners share this commitment. breaches of the principles of the UN Global Compact, including human rights, labour rights, environmental breaches and corruption. Any non‑compliant companies are excluded from investment. 26 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 ## Other Information Strategic Report Governance Investment policy, results The General Partner of the Limited The Board reviews the performance Partnership is HydrogenOne Capital of the AIFM, the Investment Adviser and and other information Growth (GP) Limited (the “General other key service providers on an Company information | | Partner”), a wholly owned subsidiary | ongoing basis. Further details of the | | --- | --- | --- | | HydrogenOne Capital Growth plc (the | of the Company. Details of the | material contracts of the Company are | | “Company” or “Parent”) was incorporated | Company and Group structure are given | given in note 13 to the Financial | | in England and Wales on 16 April 2021 | in note 1 to the Financial Statements. | Statements. | | with registered number 13340859 as a | Other than where specified, references | | | public company limited by shares and is | to the Company in this document refer | Investment objective | | an investment company within the terms | to the Company together with its | | and policy of Section 833 of the Companies Act wholly-owned subsidiary and Investment objective 2006 (the “Act”). The Company is listed investment as sole limited partner in the Limited Partnership. The Company’s investment objective and began trading on the Main Market detailed in the Strategic Report on page 1. of the London Stock Exchange and was The Company is governed by a Board admitted to the premium segment of the of Directors (the “Board”), all of whom Investment policy Official List on 30 July 2021 (the “IPO”). are non-executive, and it has no The Company seeks to achieve its The Company is an approved employees. The business model investment objective through investment trust under sections 1158 adopted by the Board to achieve the investment in a diversified portfolio of and 1159 of the Corporation Tax Act Company’s objective has been to hydrogen and complementary hydrogen 2010 and Part 2 Chapter 1 of Statutory contract the services of Sanne Fund focussed assets, primarily in developed Instrument 2011/2999. Management (Guernsey) Limited markets in Europe, North America, the (formerly International Fund GCC and Asia Pacific, comprising: Business model Management Limited) as the alternative (i) assets that supply clean hydrogen; The Company is an investment investment fund manager of the Financial statements company and its purpose, strategy, Company, pursuant to the AIFM (ii) large scale energy storage assets; investment objective and policy are set Agreement (the “AIFM”). The AIFM has (iii) carbon capture, use and out on pages 27 to 29. Any material appointed HydrogenOne Capital LLP storage assets; change to the investment policy to provide investment advisory services in respect of the Company (the (iv) hydrogen distribution infrastructure requires shareholder approval. “Investment Adviser”). The Investment assets; The Company is the first UK listed Adviser will advise on the portfolio in (v) assets involved in hydrogen supply accordance with the Board’s strategy investment company with a mandate chains, such as electrolysers and and under its and the AIFM’s oversight. to invest in a diversified portfolio of fuel cells; and The Principals of the Investment Adviser hydrogen and complementary (vi) businesses that utilise hydrogen responsible for the day-to-day hydrogen focussed assets principally in applications such as transport, monitoring of the portfolio are Dr John Other information developed markets in Europe, North power generation, feedstock and Joseph “JJ” Traynor and Richard Hulf. America, the GCC and Asia Pacific. heat (together “Hydrogen Assets”). The Board and the AIFM monitor The Company’s differentiated strategy adherence to the Company’s provides exposure to the broader investment policy and regularly reviews The Company intends to implement hydrogen sector whilst, at the same the Company’s performance in meeting its investment policy through the time, diversifying risk for an investor, acquisition of hydrogen and its investment objective. through a diversified portfolio of listed complementary hydrogen focussed and private investments across different assets. No investments will be made in All administrative support is provided jurisdictions and different technologies. companies or projects that generate by third parties under the oversight of revenues from the extraction or the Board. Company secretarial and The Company makes its investment in production of fossil fuels. administration services have been unquoted Hydrogen Assets (“Private delegated to Sanne Fund Services Hydrogen Assets”) through (UK) Limited (formerly PraxisIFM Fund Private Hydrogen Assets HydrogenOne Capital Growth Services (UK) Limited (“Sanne” or the The Company will invest in unquoted | Investments (1) LP (the “HydrogenOne | “Administrator”); custody services to | Hydrogen Assets, which may be | | --- | --- | --- | | Partnership” or the “Limited Partnership”), | Northern Trust Company (“Northern | operational companies or hydrogen | | in which the Company is the sole limited | Trust”); registrar services to | projects (completed or under | | partner. The Company may also acquire | Computershare Investor Services plc | construction). Investments are expected | | Private Hydrogen Assets directly or by | (“Computershare”); and the Company’s | to be mainly in the form of equity, | | way of holdings in special purpose | broker is Panmure Gordon (UK) Limited | although investments may be made by | | vehicles or intermediate holding entities. | (“Panmure Gordon” or the “Broker”). | way of debt and/or convertible | FUTURE FUEL. NOW 27 HydrogenOne Capital Growth plc Annual Report 2021 ## Other Information securities. The Company may acquire a Company’s consent. In due course, the Liquidity reserve mix of controlling and non-controlling Company may acquire Private The Company intends to allocate the interests in Private Hydrogen Assets, Hydrogen Assets directly or by way of relevant net proceeds of any capital however the Company intends to invest holdings in special purpose vehicles or raise/realisation of Private Hydrogen principally in non-controlling positions intermediate holding entities (including Assets to cash (in accordance with the (with suitable minority protection rights successor limited partnerships Company’s cash management policy to, inter alia, ensure that the Private established on substantially the same set out below) and/or to additional Hydrogen Assets are operated and terms as the HydrogenOne Partnership) Listed Hydrogen Assets and related managed in a manner that is consistent or, if the Company is considered a businesses pending subsequent with the Company’s investment policy). ‘feeder fund’ under the Listing Rules, investment in Private Hydrogen Assets other undertakings advised by the (the Liquidity Reserve). The Company Investment Adviser and, in such Given the time frame required to fully anticipates holding cash to cover the circumstances, the investment policy maximise the value of an investment, near-term capital requirements of the and restrictions will also be applied on the Company expects that investments pipeline of Private Hydrogen Assets and a look-through basis and such in Private Hydrogen Assets will be held in periods of high market volatility. undertaking(s) will also be managed in for the medium to long term, although accordance with the Company’s short term disposals of assets cannot be It is anticipated that, once the Initial investment policy. ruled out in exceptional or opportunistic Net Proceeds are fully invested (with circumstances. The Company intends the Liquidity Reserve having been Listed Hydrogen Assets | to re-invest the proceeds of disposals | | subsequently invested in Private | | --- | --- | --- | | in accordance with the Company’s | The Company will also invest in quoted | Hydrogen Assets), at least 70% of the | | investment policy. The Company will | or traded Hydrogen Assets, which will | Company’s assets will be invested in | | observe the following investment | predominantly be equity securities but | Private Hydrogen Assets with the | | restrictions, assessed at the time of an | may also be corporate debt and/or | balance invested in Listed Hydrogen | | investment, when making investments | other financial instruments (Listed | Assets. Over the medium term, it is | | in Private Hydrogen Assets: | Hydrogen Assets). The Company will be | expected that the weighting to Listed | | | free to invest in Listed Hydrogen Assets | Hydrogen Assets will reduce further, to | • no single Private Hydrogen Asset in any market or country with a market approximately 10% of the Company’s will account for more than 20 per cent capitalisation (at the time of investment) assets, as the allocation to Private of Gross Asset Value; | | of at least US$200 million. The | Hydrogen Assets grows, with Listed | | --- | --- | --- | | • Private Hydrogen Assets located | Company’s approach is to be a | Hydrogen Assets primarily focussed on | | outside developed markets in Europe, | long-term investor and will not ordinarily | strategic equity holdings derived from | | North America, the GCC and Asia | adopt short-term trading strategies. | the listing of operational companies | | Pacific will account for no more than | | within the Private Hydrogen Assets | | 20 per cent of Gross Asset Value; and | The Company will observe the following | portfolio over time. | investment restrictions, assessed at the • at the time of an investment, the time of an investment, when making Investment restrictions aggregate value of the Company’s investments in Listed Hydrogen Assets: The Company, in addition to the investments in Private Hydrogen • no single Listed Hydrogen Asset will investment restrictions set out above, Assets under contract to any single account for more than 3 per cent of comply with the following investment offtaker will not exceed 40 per cent the Gross Asset Value, with a targeted restrictions when investing in of Gross Asset Value. average stock weighting of 1.5 per Hydrogen Assets: cent of the Gross Asset Value; | The Company will initially acquire Private | | • the Company will not conduct any | | --- | --- | --- | | Hydrogen Assets via the HydrogenOne | • the portfolio of Listed Hydrogen | trading activity which is significant | | Partnership, a wholly owned subsidiary | Assets will comprise no fewer than | in the context of the Company as | | undertaking of the Company structured | 15 Listed Hydrogen Assets at times | a whole; | | as an English limited partnership which | when the Company is substantially | | • the Company will, at all times, invest is controlled by the Company and invested; and and manage its assets advised by the Investment Adviser. The • each Listed Hydrogen Asset must (i) in a way which is consistent with HydrogenOne Partnership’s investment derive at least 50 per cent of its object of spreading investment policy and restrictions are the same as revenues from hydrogen and/or risk; and the Company’s investment policy and related technologies. restrictions for Private Hydrogen Assets (ii) in accordance with its published and cannot be changed without the investment policy; 28 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance • the Company will not invest in other Gearing of one or more Hydrogen (i) Dividend policy UK listed closed-ended investment Assets in which the Company has a The Company is targeting a Net Asset companies; and non-controlling interest will not count Value total return of 10 to 15% per annum towards these borrowing restrictions. • no investments will be made in over the medium to long-term with However, in such circumstances, the companies or projects that generate further upside potential. The Company matter will be brought to the attention revenues from the extraction or intends to invest in Hydrogen Assets of the Board who will determine the production of fossil fuels (mining, with cash flow typically re-invested for appropriate course of action. drilling or other such extraction of further accretive growth. thermal coal, oil or gas deposits). Currency and hedging policy The Company only intends to pay | Compliance with the above restrictions | The Company has the ability to enter | dividends in order to satisfy the ongoing | | --- | --- | --- | | will be measured at the time of | into hedging transactions for the | requirements under the Investment | | investment and non-compliance | purpose of efficient portfolio | Trust (Approved Company) (Tax) | | resulting from changes in the price | management. In particular, the | Regulations 2011 for it to be approved | | or value of Hydrogen Assets following | Company may engage in currency, | by HMRC as an investment trust save | | investment will not be considered as | inflation, interest rates, energy prices | that, in the medium term, the | | a breach of the investment policy | and commodity prices hedging. Any | Company’s Hydrogen Assets may also | | or restrictions. | such hedging transactions will not be | generate free cash flow which the | | | undertaken for speculative purposes. | Company may decide not to re-invest | | Borrowing policy | | and, in such case(s), the Company | | | Cash management | currently intends to distribute these | The Company may take on debt for amounts to Shareholders. general working capital purposes or to The Company may hold cash on deposit finance investments and/or acquisitions, and may invest in cash equivalent The Company’s revenue return after tax provided that at the time of drawing investments, which may include Financial statements for the period amounted to a loss of down (or acquiring) any debt (including short-term investments in money £805,000. The Company made a capital limited recourse debt), total debt will not market type funds (“Cash and Cash loss after tax of £1,612,000. Therefore exceed 25% of the prevailing Gross Asset Equivalents”). There is no restriction on the total return after tax for the Company Value at the time of drawing down (or the amount of Cash and Cash was a loss of £2,417,000. No dividends acquiring) such debt. For the avoidance Equivalents that the Company may hold have been paid or are proposed for the of doubt, in calculating gearing, no and there may be times when it is period to 31 December 2021. account will be taken of any investments appropriate for the Company to have a in Hydrogen Assets that are made by the significant Cash and Cash Equivalents Company by way of a debt investment. position. For the avoidance of doubt, the restrictions set out above in relation to Gearing may be employed at the level investing in UK listed closed-ended of an SPV or any intermediate subsidiary investment companies do not apply to Other information undertaking of the Company (such as money market type funds. the HydrogenOne Partnership) or, if the Company is considered a ‘feeder fund’ Asset allocation at period end under the Listing Rules, other The breakdown of the structure of the undertakings advised by the Investment portfolio at the Company’s period end is Adviser in which the Company has shown on page 17. invested or the Company itself. The limits on debt shall apply on a Dividends and dividend policy consolidated and look-through basis The Ordinary Shares carry a right to across the Company, the SPVs or any receive dividends. Interim dividends are such intermediate holding entities (such determined by the Board and a final as the Limited Partnership) or, if the dividend is subject to shareholder Company is considered a ‘feeder fund’ approval at the AGM. under the Listing Rules, other undertakings advised by the Investment Adviser in which the Company has invested but intra-group debt will not be counted. FUTURE FUEL. NOW 29 HydrogenOne Capital Growth plc Annual Report 2021 ## Other Information Principal risks and uncertainties The Board, through delegation to the Audit and Risk Committee, has carried out a robust assessment of the emerging and principal risks facing the Company. These include those that would threaten its business model, future performance, solvency and liquidity (see Audit and Risk Committee Report on pages 46 and 47). The Audit and Risk Committee reviews ongoing monitoring of both risks and controls. This ensures heightened and emerging risks are identified outside of the normal cycle of Board and Audit and Risk Committee meetings. The Audit and Risk Committee undertook a comprehensive review of the Company’s risk management framework and controls during the period. The risks are documented on a risk register and each risk is rated by impact and probability with the assessed risk given a risk score and a residual rating. The risk register is reviewed on an ongoing basis in an attempt to capture all risks and put appropriate mitigation in place. The review takes into account changing factors including, but not restricted to, changes to markets (both macro and micro), stakeholders, operations, regulation and emerging risks. The top risks identified by this process are set out in the table below together with the mitigated approach, and the Board considers these to be the principal risks of the Company. Principal Risks and Uncertainties Mitigation Regulatory The Board and Investment Adviser has significant experience in the energy sector and is familiar with its volatile political and regulatory Changes in political or environmental conditions in the hydrogen sector environment. Extensive contacts across the sector inform its ongoing (for example, changes in government policy or support) could affect the monitoring of these risks, which are reported to the Board at least Company’s prospects. quarterly. More specific due diligence occurs prior to any investments and during the lifetime of their ownership. The Administrator has a strong track record in administering listed companies and the various rules and regulation required to be adhered to. Policy support As noted under ‘regulatory’, the Investment Adviser has longstanding experience in the energy sector and monitors the policy environment The technologies required to produce and use green hydrogen need closely. Such experience and awareness is also present among the policy support to underpin the scale needed to drive stand-alone cost Company’s Non-Executive Directors. It is the intent of the Investment competitiveness. Governments worldwide are showing such support Adviser to access a range of hydrogen projects in different countries and today, but that may be volatile over the investment time horizon of at different points in the emerging value chain, to further mitigate the risk the Company. of policy volatility. Power price The Investment Adviser monitors the outlook for electricity and hydrogen prices. The Company may hedge the exposure to fluctuating electricity The income and value of the Company's investments may be affected and hydrogen prices in respect of its investments. by changes in the market prices of electricity and hydrogen, both current and expected. As a result, the Investment Adviser oversee power revenues and monitor regularly against expectations. Risks include refinancing risk, exposure to interest rate risk due to fluctuations in the prevailing market rates, covenant breaches and Portfolio allocations are monitored on an ongoing basis by both the possible enhanced loss on poor performing assets. Investment Adviser and AIFM, to ensure compliance with investment limits. Reporting by the Investment Adviser and AIFM are provided to the Board at least quarterly. Operational The Investment Adviser conducts a vigorous due diligence process and works very closely with external and technically skilled consultancy firms Initial pre-deal due diligence may not uncover all risks associated to a to review all potential transactions, with an aim to provide a fully scoped transaction. and informed recommendation. Investments are subject to operating and technical risks. While the The portfolio is constantly monitored by the Investment Adviser and the Company will seek investments with creditworthy and appropriately AIFM to address risks as they are identified. insured counterparties who bear the majority of these risks, there can be no assurance that all risks can be mitigated. Diversification in counterparties and service providers ensures any impact is limited. Furthermore, the Company invests in a diversified portfolio. In addition, the long-term profitability of hydrogen investments will be partly dependent upon the efficient operation and maintenance of the assets. Inefficiency, or limitations in the skills, experience or resources of operating companies, may reduce revenue. As a result, profitability of the Company may be impaired leading to reduced returns for Shareholders. Performance The Board reviews at least quarterly, the portfolio performance as well as underlying key asset risks identified as part of the Company’s risk Underperforming investment or investment strategy can lead to register and how those risks are actively being mitigated which include underperformance to the Company’s target return and ultimate but is not limited to: investment objective. • Non Controlling interest risk • Market risk • Interest rate risk • Inflation risk At each Board meeting a report on risks, portfolio performance and any macro and micro considerations is provided by the Investment Adviser and the AIFM, and reviewed accordingly with the aim to mitigate such risks. New investment recommendations are reviewed and approved in line with the investment policy agreed with the Company and key parties. 30 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance Principal Risks and Uncertainties Mitigation Future acquisitions and capital raises The Board and AIFM oversee the investment pipeline and monitor its progress in relation to Company targets. Ongoing capital raises are intended. Should there be a deterioration of the intended investment pipeline and the capital unable to be deployed Certain assets will be identified in advance by the Investment Adviser as into suitable opportunities in the expected time frame, this will result in being potentially available for acquisition by the Company. ‘cash drag’. The pipeline is managed by the Investment Adviser and monitored by Cash drag will have the potential to impact on the ongoing dividend target the AIFM, with onward reporting to the Board. and investment objective. The Board is unlikely to agree to capital raises without a strong pipeline. Refinancing The Investment Adviser closely monitors the liquidity in the market. The operational risks of the company including market, counterparty, Should new credit not be forthcoming, liquidity may be gained through credit and liquidity risk. a capital raise, or liquidation of an asset. Extreme market volatility can disrupt capital raising process and ability to raise monies to repay a debt demand in full. Service providers All counterparties to the Company are reviewed as part of the risk register. A material credit risk is that of banks holding un-invested cash, Disruption to, or failure of the Company’s Administrator or the credit rating and credit worthiness of these are considered. A review other parties to complete their role efficiently, on time and in line with of operational counterparties such as the Administrator for operational expectation procedures, disaster recovery and system security is undertaken. Counterparties of Company’s Special Purpose Vehicles (“SPV”) and underlying assets are carried out as part of the investment due diligence process. Portfolio valuation The Investment Adviser has significant experience in valuation of these assets. Risk that portfolio asset valuations published do not represent the Fair Financial statements Market Values in accordance with the accounting requirements. The valuation polices will be considered by the Valuation Committee on a quarterly basis, together with signing off on the Private Hydrogen Investment valuations are based on modelling / financial projections for Asset values. the relevant investments. Projections will primarily be based on the Investment Adviser’s assessment and are only estimates of future results based on assumptions made at the time of the projection. Actual results may vary significantly from the projections, which may reduce the profitability of the Company leading to reduced returns to Shareholders. Key person The Investment Adviser is committed to expand its business / staffing levels in order to diversify knowledge across the expanding team. The Investment Adviser is a newly formed Company, with minimum employees. As such, there are significant Key Person risks at this time This risk is covered in the risk register and reported on at each Board and should they become unavailable, this could have a negative impact meeting. on the Company’s ability to achieve its investment objective. Tax The corporate structure of the Company is reviewed periodically by the Other information Company and its advisors. Breaches of Section 1158 of the Corporation Tax Act could result in loss of investment trust status. All investments receive professional structural advice prior to investment. Changes in tax legislation such as BEPS, WHT rules and structural requirements result in increased tax and resulting Political and associated economic risk The Board and Investment Adviser have reviewed the portfolio for exposure and will continue to keep this under review. Exposure to Russia and/or Ukraine within the investment portfolio could lead to losses on investments. The impact on the global equity markets, and hydrogen stocks in particular, of a prolonged downturn caused by the situation, could lead to reduced valuations of the Company FUTURE FUEL. NOW 31 HydrogenOne Capital Growth plc Annual Report 2021 ## Other Information Viability statement The level of the ongoing charges is Employees dependent to a large extent on the level The Directors have assessed the viability The Company has no employees. As at of net assets, the most significant of the Group for the period to 31 the date of this report, the Company had contributor being the Investment Adviser December 2026 (the “Viability Period”). five Directors, of whom two are male fee. The Group’s cash realisable from the The Board believes that the Viability and three are female. sale of its investments and expected Period, being approximately five years, is dividend income from investments an appropriate time horizon over which Outlook provide substantial cover to the Group’s to assess the viability of the Group, operating expenses, and any other costs The outlook for the Company is particularly when taking into account the likely to be faced by the Group over the described in the Chairman’s Statement long-term nature of the Group’s Viability Period of their assessment. and the Investment Adviser's Report. investment strategy, the principal risks outlined on pages 30 and 31 and the Since admission to the London Stock Strategic report next continuation vote. Exchange on 30 July 2021 (“Admission”), The Strategic Report set out on pages the Company’s shares have traded at In accordance with the Articles, the 1 to 32 of this Annual Report was a premium to NAV. continuation of the Company is subject approved by the Board of Directors on to the approval of shareholders every 31 March 2022. The Directors' assessment also five years, with the first vote to be considered the market and operational proposed as an ordinary resolution at For and on behalf of the Board risks associated with the COVID-19 the Company's AGM in 2026. If passed, pandemic and subsequent lifting of the Articles provide that the Directors restrictions. The ongoing economic propose an ordinary resolution that the impact of measures introduced to Company continue its business as combat its spread were discussed and presently constituted at each fifth annual monitored by the Board throughout the general meeting thereafter. Simon Hogan period. The Investment Adviser and Chairman other key service providers have In its assessment of the prospects of the provided regular updates on operational Group, the Board carried out a robust 31 March 2022 resilience in light of the pandemic. The assessment of the emerging and Board is satisfied that the key service principal risks and considered each of providers have the ability to continue the uncertainties set out on pages 30 their operations efficiently in a remote and 31 which included consideration of or hybrid working environment. severe but plausible downside scenarios (such as a market downturn The Director’s assessment considered and the liquidity and solvency of the the market risks associated with the Group). The Board also considered the Russian invasion of Ukraine in February Group’s income and expenditure 2022. The ongoing market volatility and projections and cash projections. These uncertainty this has caused, has been metrics were subjected to stress testing discussed and will continue to be of the assumptions to evaluate the monitored. The Investment Adviser has potential impact on the Group, including reviewed the investment portfolio for long term downturn of the listed equity exposure and while limited exposure markets, longer investment hold periods has been identified the Board will keep and increased inflation. Portfolio the situation under continued review. changes, market developments, level of premium / discount to NAV and share Based on this assessment, the Directors buybacks / share issues are discussed have a reasonable expectation that the at quarterly Board meetings. The internal Group will be able to continue to control framework of the Group is operate and to meet its liabilities as they subject to a formal review on at least fall due over the Viability Period. an annual basis. 32 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance ## Governance 34 Board of Directors 35 Directors’ Report 39 Corporate Governance 43 Directors’ Remuneration Policy 44 Directors’ Remuneration Implementation Report 46 Report of the Audit and Risk Committee 48 Statement of Directors’ Responsibilities Financial statements Other information FUTURE FUEL. NOW 33 HydrogenOne Capital Growth plc Annual Report 2021 4 ## Board of Directors | | 1,2,3 | | 2,3 | | | --- | --- | --- | --- | --- | | Simon Hogan | | Roger Bell | | The Principals of the | | (Chairman of the Board) | | (Non-Executive Director) | | | Investment Adviser Appointed 20 May 2021 Appointed 1 October 2021 Dr JJ Traynor Mr Hogan has significant capital Mr Bell is currently Chief Financial Officer markets, legal and management of the INEOS Oil and Gas group of Dr John Joseph “JJ” Traynor has experience. He was previously a companies and has been nominated as extensive experience in energy, capital Managing Director of Morgan Stanley the Board representative of INEOS UK markets, project management, and and Chief Operating Officer across their E&P Holdings Limited (“INEOS Energy”) M&A. He has held a series of senior Commodities, Fixed Income and Equity pursuant to the relationship and energy and banking sector positions, divisions. Mr Hogan has held multiple co-investment agreement entered into including Executive Vice President at board positions and was a member of between, inter alia, INEOS Energy and Royal Dutch Shell, where he led investor the FCA Practitioners committee. the Company at launch. relations and established the company’s ESG programme; Managing Director at Mr Hogan’s contribution is invaluable to Mr Bell brings a wealth of accounting and the Company in formulating its Deutsche Bank, where he was the commercial experience through his role short-term and long-term strategic number one ranked analyst in European held at INEOS Energy for over 20 years. direction as well as managing a newly and Global oil & gas; Geologist at BP, in established Board and Company. 1,2,3 the North Sea, West Africa and Asia Abigail Rotheroe Pacific. He has a Geology BSc from (Non-Executive Director) 1,2,3 Imperial College, a PhD from Cambridge Caroline Cook Appointed 8 February 2022 | (Chairman of the Audit and Risk | | University. He attended the INSEAD | | --- | --- | --- | | Committee and the Valuation Committee) | Ms Rotheroe has over twenty years of | Advanced Management Programme, | | Appointed 20 May 2021 | investment experience and is currently | and is a Fellow of the Geological | | | Investment Director at Snowball Impact | Society of London. | Mrs Cook has over 30 years of Management, a sustainable and impact experience in energy and sustainable focussed asset manager. Ms Rotheroe Richard Hulf investing, and currently leads on climate was a Director of Threadneedle change and environment at a large UK Richard Hulf is a fund manager with Investment, following positions at asset manager. Caroline was previously corporate finance and engineering HSBC Asset Management and the co-head of Deutsche Bank’s number background. Richard has 30 years of Schroders and has experience of one rated global and European oils equity experience in the Utilities and Energy institutional and retail investment. | research team and an independent | | sectors and is a Chartered Engineer, | | --- | --- | --- | | consultant. In 2016 Caroline initiated and | Ms Rotheroe also brings knowledge of | originally from Babcock Power and | | then led Deutsche Bank’s integrated, | fund governance, manager selection | latterly Exxon. In addition, his financial | | cross-sector equity coverage of the | and impact measurement. | experience spans stock broking, | | accelerating energy transition. | | corporate finance and fund | management with Henderson Mrs Cook will retire as a Non-Executive Crosthwaite, Ernst & Young and Artemis Director effective 7 April 2022. 1. Member of the Audit and Risk, Valuation, Investment Management, where he Management Engagement, Nomination and 1,2,3 invested into renewables companies. Afkenel Schipstra Remuneration Committees. He has an MSc in Petroleum (Chairman of the Management 2. Mr Bell is not a member of the committees of Engineering from Imperial College. Engagement Committee, the Board but attends by invitation. Considered Nomination Committee and the independent by the Board. Refer to page 39 for Remuneration Committee) an assessment of independence for Roger Bell. Appointed 20 May 2021 3. Each Director has also been appointed as a Mrs Schipstra has over 18 years Director of HydrogenOne Capital Growth (GP) experience in Energy in Europe and Limited (a wholly owned subsidiary of the Company which has been appointed as the Sub-Sahara Africa. She is Senior Vice general partner of the Limited Partnership) in President in Hydrogen Business order to ensure that the Board are in a position Development at ENGIE where she is to effectively monitor and manage the | responsible for ENGIE’s large scale | performance of the service providers of the | | --- | --- | | green hydrogen developments in | HydrogenOne Partnership in accordance | | the Netherlands including the | with the Listing Rules. | | HyNetherlands Project: a large-scale, | 4. Mr Giles Morland, Mr Richard Hulf and | | green hydrogen value chain (1.85 GW) in | Dr JJ Traynor were appointed as Directors on | | the Northern Netherlands. Afkenel has | incorporation of the Company on 16 April 2021 | | previously held senior positions at | and resigned on 20 May 2021. Mr Giles Morland | was appointed as a Director on 20 May 2021 Gasunie, Shell and NAM. and resigned on 15 June 2021. Mrs Schipstra’s extensive knowledge of hydrogen projects strengthens the Board’s commercial knowledge of the sector. 34 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 ## Directors’ Report Strategic Report Governance ### The Directors present their report and accounts for the Company and Group for ### the period ended 31 December 2021. | Strategic report | Retail distribution promotion | Special business of the AGM | | --- | --- | --- | | The Directors’ Report should be read in | As a result of the Financial Conduct | Authority to issue and | | conjunction with the Strategic Report on | Authority (“FCA”) rules determining which | purchase own shares | | pages 1 to 32. | investment products can be promoted | The Board recommends that the | | | to retail investors, certain investment | Company be granted a new authority to | | Corporate governance | products are classified as | allot up to a maximum of 10,735,000 | | | ‘non-mainstream pooled investment’ | Ordinary Shares (representing | The Corporate Governance Statement on products and face restrictions on their approximately 10% of the Ordinary Shares pages 39 to 42 forms part of this report. promotion to retail investors. in issue at the date of this document) and to dis-apply pre-emption rights when Legal and taxation status The Company has concluded that the allotting those Ordinary Shares and/or The Company is an investment distribution of its shares, being shares in selling Ordinary Shares from treasury. company within the meaning of Section an investment trust, is not restricted as a Ordinary resolution 10 and special 833 of the Companies Act 2006. The result of the FCA rules described above. resolution 11 will be put to shareholders at Company conducts its affairs in order to the AGM. Ordinary Shares will be issued meet the requirements for approval as The Company currently conducts its under this authority only at the Board’s an investment trust under section 1158 of affairs so that the shares issued by the discretion and when it is deemed to be in the Corporation Tax Act 2010. The Company can be recommended by the best interests of shareholders as a Company has received approval as an financial advisers to retail investors and whole to do so. The advantages are to investment trust and the Company must intends to continue to do so for the lower the Company’s ongoing charges as meet eligibility conditions and ongoing Financial statements foreseeable future. expenses are diluted and, in the short requirements in order for investment term, to address volatility in the share trust status to be maintained. In the Shareholder relations and price. Unless otherwise authorised by opinion of the Directors, the Company Annual General Meeting (AGM) shareholders, new Ordinary Shares will has met the conditions and not be issued at less than NAV and The Board encourages all shareholders requirements for approval as an Ordinary Shares held in treasury will not to attend the AGM and generally seeks investment trust for the period ended be sold at less than NAV. to provide twenty one clear days’ notice 31 December 2021. of that meeting. The maximum number of Ordinary Risk and risk management Shares which can be admitted to trading The Notice of AGM sets out the business The Principal Risks and Uncertainties for on the London Stock Exchange without of the AGM and any special business is the Company and their mitigation on the publication of a prospectus is 20% of explained in the Directors’ Report on Other information pages 30 to 31 forms part of this report. the Ordinary Shares on a rolling previous pages 35 and 36. Separate resolutions are 12-month basis at the time of admission proposed for each substantive issue. The Viability statement of the Ordinary Shares. Investment Adviser has a programme of The Viability Statement is on page 32. meetings with shareholders and reports The Directors recommend that a new back to the Board on its findings. The authority to purchase up to 16,091,765 Market information Board also welcomes direct feedback Ordinary Shares (subject to the condition from shareholders. The Chairman is The Company’s Ordinary Shares are that not more than 14.99% of the Ordinary available to meet shareholders and may premium listed on the London Stock Shares in issue at the date of the AGM are be contacted by email via the Company Exchange (“LSE”). The NAV per Ordinary purchased) be granted and special Secretary at hydro1cosec@praxisifm.com. Share is calculated in Pound Sterling for resolution 12 to that effect will be put to each business day that the LSE is open the AGM. Any Ordinary Shares purchased The Company’s AGM will be held at for business based upon the quarterly will either be cancelled or, if the Directors 12.30pm on 24 May 2022 and the valuation of the Private Hydrogen Assets so determine, held in treasury. Ordinary Chairman’s Statement on page 7 sets and daily valuation of Listed Hydrogen Shares are purchased at the discretion of out the arrangements for the meeting. Assets. The daily NAV per Ordinary the Board and when it is deemed to be in Details of how shareholders can cast Share is published through a regulatory the best interests of shareholders. their votes can be found in the Notes to information service. Ordinary Shares will be purchased for the Notice of Meeting on pages 90 to cancellation or for treasury only when the 92. Shareholders will also have the Ordinary Shares are trading at a discount opportunity to hear a presentation from to the Net Asset Value. the Investment Adviser, and ask questions of the Board and the Investment Adviser. FUTURE FUEL. NOW 35 HydrogenOne Capital Growth plc Annual Report 2021 ## Directors’ Report The Companies Act 2006 allows Articles of association The AIFM Agreement shall continue in companies to hold shares acquired by force until terminated by either the AIFM Amendments to the Company’s Articles way of market purchases as treasury or the Company by giving to the other of Association require an Ordinary shares, rather than having to cancel no less than six months’ prior written Resolution to be passed by Shareholders. them. This gives the Company the ability notice, provided that such notice may to sell Ordinary Shares quickly and cost not be served earlier than the date being Management | effectively, thereby improving liquidity | | twelve months from the date of the | | --- | --- | --- | | and providing the Company with | The Board | AIFM Agreement. The AIFM Agreement | | additional flexibility in the management | The independent Board is responsible | may be terminated earlier by either party | | of its capital base. At the period end and | to Shareholders for the overall | with immediate effect in certain | | at the date of this report, no Ordinary | management of the Company. The | circumstances, including, if the other | | Shares were held in treasury. | Board has adopted a Schedule of | party shall go into liquidation or an order | | | Matters Reserved for the Board which | shall be made or a resolution shall be | | Notice of General Meetings | sets out the division of responsibilities | passed to put the other party into | | Special resolution 13 in the notice to the | between the Board and its various | liquidation or the other party has | | AGM is required to reflect the | committees, the Chairman and the | committed a material breach of any | | requirements of the Shareholder Rights | Chairman of the various committees, | obligation the AIFM Agreement, and in | | Directive. The Company is currently able | together with the duties of the Board, | the case of a breach which is capable of | | to call General Meetings, other than an | further details can be found on | remedy fails to remedy it within 30 days. | | AGM, on 14 clear days’ notice and would | pages 39 and 40. | Details of the fee the AIFM is entitled to | | like to preserve this ability. In order to be | | receive are given in note 13 to the | | able to do so, shareholders must have | Through the Committees and the use | Financial Statements. | | given their prior approval. | of external independent advisers, the | | | | Board manages risk and governance | The AIFM shall maintain, at its cost, | | Special resolution 13 seeks such | of the Company. | professional indemnity insurance to | | approval, which would be effective until | | cover any professional liability which it | | the Company’s next AGM, when it is | Appointment of Board Members | may incur under the AIFM Agreement, | | intended that a similar resolution will be | The rules concerning the appointment | with a limit not less than £5,000,000. | | proposed. The Company will ensure that | of Directors are contained in the | The Company has granted to the AIFM | | it offers the facility for shareholders to | Company’s Articles of Association which | and certain other indemnified parties, | | vote by electronic means, and that this | require that a Director shall be subject | a customary indemnity against losses | | facility is accessible to all shareholders, | to election at the first AGM after | which may arise in relation to the AIFM’s | | if it is to call General Meetings on 14 days’ | appointment and annual re-election | performance of its duties under the | | notice. Short notice of this kind will be | thereafter. Further details of the Board’s | AIFM Agreement. | | used by the Board only under | process for the appointment of Board | | | appropriate circumstances. | members can be found on page 40. | The Board confirms that it has reviewed | whether to retain Sanne Fund Alternative Investment Fund Management (Guernsey) Limited as the Continuation vote Manager (“AIFM”) AIFM of the Company. It has been The Articles of Association require that concluded that it is in the best interests Sanne Fund Management (Guernsey) an ordinary resolution be proposed at of shareholders as a whole to continue Limited, formerly known as International every fifth AGM of the Company that the with the AIFM’s engagement. Fund Management Limited, has been Company should continue as an appointed as the Company’s and investment trust for a further five-year Limited Partnership’s AIFM. The AIFM period. In accordance with the Articles of has delegated the provision of portfolio Association, the initial vote for the management services to the Investment continuation of the Company will be Adviser pursuant to the Investment proposed at the AGM to be held in Adviser Agreement. 2026. In the event that such a resolution is not passed, the Directors are required to draw up proposals for shareholders’ approval for the voluntary liquidation or unitisation or other reorganisation of the Company, which would require a special resolution of shareholders. 36 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance Investment Adviser The Company and the Limited Custodian The AIFM has appointed HydrogenOne Partnership have given an indemnity in The Northern Trust Company has been Capital Growth LLP as the Investment favour of the Investment Adviser (subject appointed as the Company’s custodian Adviser. The Investment Adviser has to customary exceptions) in respect of for the Listed Hydrogen Assets. been given responsibility for investment the Investment Adviser’s potential losses advisory services in respect of any Private in carrying on its responsibilities under Registrar Hydrogen Assets the Company invests the Investment Adviser Agreement. Computershare Investor Services plc in directly or indirectly through holding has been appointed as the Company’s entities and the Listed Hydrogen Assets The Board confirms that it has reviewed registrar. (including Listed Hydrogen Assets whether to retain HydrogenOne Capital forming part of the Liquidity Reserve and Growth LLP as the Investment Adviser of Continuing appointment uninvested cash) in accordance with the the Company and the Limited of service providers Company’s investment policy, subject to Partnership. It has been concluded that, The Board has committed to undertake the overall control and supervision of the given the Investment Adviser’s depth of a detailed review of the continued AIFM. Details of the Investment Advisory knowledge in the sector and the recent appointment of these service providers fees are given in note 5 to the Financial growth and performance record of the on an annual basis to ensure these are Statements. As at 31 December 2021, Company, it is in the best interests of in the best long term interests of the Dr JJ Traynor held 100,000 Ordinary shareholders as a whole to continue Company’s Shareholders and will Shares and Mr Richard Hulf held with the Investment Adviser’s undertake a comprehensive service 100,000 Ordinary Shares in the engagement. provider review during the year ending Company. 31 December 2022. Alternative Investment Fund Portfolio The Limited Partnership has entered Managers’ Directive (“AIFMD”) Capital structure and into a Limited Partnership Investment In accordance with the AIFMD, the AIFM voting rights Adviser Agreement dated 5 July 2021 must ensure that an annual report Financial statements containing certain information on the At the period end and to the date of this and as amended on 26 November 2021 Company is made available to investors report, the Company’s issued share (the “Limited Partnership Investment for each financial year. The investment capital comprised 107,350,000 Ordinary Adviser Agreement”) between the funds sourcebook of the FCA (the Shares, with no Ordinary Shares held in General Partner (in its capacity as “Sourcebook”) details the requirements treasury. Each Ordinary Share held general partner of the Limited of the annual report. All the information entitles the holder to one vote. All Partnership), the AIFM and the required by those rules are included in Ordinary Shares carry equal voting rights Investment Adviser, pursuant to which this Annual Report or will be made and there are no restrictions on those the Investment Adviser has been given available on the Company’s website. voting rights. Voting deadlines are stated responsibility for investment advisory in the Notice of Meeting and Form of services in respect of the Private Company Secretary Proxy and are in accordance with the Hydrogen Assets in accordance with and Administrator Companies Act 2006. There are no the investment policy of the Limited Other information restrictions on the transfer of Ordinary Partnership, subject to the overall Sanne Fund Services (UK) Limited, Shares, nor are there any limitations or control and supervision of the AIFM. formerly known as PraxisIFM Fund special rights associated with the Services (UK) Limited, has been Ordinary Shares. The Investment Adviser Agreements are appointed to provide company for an initial term of four years from the secretarial and administration services date of Admission and thereafter subject to the Company. to termination on not less than twelve months’ written notice by any party. The Investment Adviser Agreements can be terminated at any time in the event of, inter alia, the insolvency of the Company, the AIFM or the Investment Adviser or if certain key members of the Investment Adviser’s team cease to be involved in the provision of services to the Company and are not replaced by individuals satisfactory to the Company (acting reasonably). FUTURE FUEL. NOW 37 HydrogenOne Capital Growth plc Annual Report 2021 ## Directors’ Report Notifiable interest As at 31 December 2021 and 31 March 2022, the Directors have been formally notified of the following shareholdings comprising 3% or more of the issued share capital of the Company. Holding of Holding of Ordinary % Holding – Ordinary % Holding – Shares – As at As at Shares – As at As at 31 December 31 December 31 March 31 March Company 2021 2021 2022 2022 INEOS UK E&P Holdings Limited 25,000,000 23.3 25,000,000 23.3 Rathbone Investment Management International Ltd 7,990,757 7.4 7,990,757 7.4 Investec Wealth & Investment Limited 5,376,857 5.0 5,296,197 4.9 City of Bradford - West Yorkshire Pension Fund 5,000,000 4.7 5,000,000 4.7 Stichting Juridisch Eigendom Privium Sustainable Impact Fund 4,280,000 4.0 4,280,000 4.0 FS Wealth Management Limited 3,670,000 3.4 3,670,000 3.4 Political donations Director may suffer or incur arising out of (ii) the Director has taken all steps that or in connection with any claim made or he or she ought to have taken as There were no political donations proceedings taken against them, or any Director to make himself or herself made during the financial period to application made under sections 661(3), aware of any relevant information 31 December 2021. 661(4) or 1157 of the Companies Act and to establish that the Company’s 2006 by them, on the grounds of their auditor is aware of that information. Disclosure required by negligence, default, breach of duty or listing rule 9.8.4 | | breach of trust, in relation to the | This confirmation is given and should | | --- | --- | --- | | The above rule requires listed | Company or any associated company. | be interpreted in accordance with the | | companies to report certain information | The indemnities would provide financial | provisions of Section 418 of the | | in a single identifiable section of their | support from the Company after the | Companies Act 2006. | | annual financial reports. The Company | level of cover provided by the | | | confirms that, other than the allotment | Company’s Directors’ and Officers’ | Appointment of auditor | | of equity securities for cash (LR 9.8.4(7)) | insurance policy has been fully utilised. | | In accordance with Section 489 of the which is detailed in note 10 to the Companies Act 2006, the Board financial statements, all such reporting Going concern appointed KPMG Channel Islands applied only to non-applicable events The Directors consider that it is Limited (“KPMG”) as the Company’s for the period ended 31 December 2021. appropriate to adopt the going concern auditor effective 15 June 2021. A basis in preparing the Financial resolution will be put forward at the Future trends | | Statements. Details of the Directors’ | forthcoming AGM on 24 May 2022 | | --- | --- | --- | | Details of the main trends and factors | assessment of the going concern status | to re-appoint KPMG as auditor. | | likely to affect the future development, | of the Company and Group, which | | | performance and position of the | considered the adequacy of the | By order of the Board | | Company’s business can be found in the | Company and Group’s resources and | | | Investment Adviser’s Report section of this | the impacts of the COVID-19 pandemic | | | Strategic Report. Further details as to the | and the recent Russian invasion of | | | risks affecting the Company are set out in | Ukraine, are given in note 2 to the | Brian Smith | | the ‘Principal Risks and Uncertainties’ on | Financial Statements. | For and on behalf of | | pages 30 to 31. | | Sanne Fund Services (UK) Limited | | | Auditor information | Company Secretary | Directors’ indemnities Each of the Directors at the date of the 31 March 2022 Subject to the provisions of the approval of this report confirms that: Companies Act 2006 and certain (i) so far as the Director is aware, there provisions contained in the deeds of is no relevant audit information of indemnity issued by the Company, the which the Company’s auditor is Company has indemnified each of the unaware; and Directors against all liabilities which each 38 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 ## Corporate Governance Strategic Report Governance Introduction The Board considers these provisions to discharge their responsibilities are not relevant to the Company, being effectively. In accordance with the This Corporate Governance statement an externally managed investment Co-Investment Agreement between forms part of the Directors’ Report. company with no employees. The INEOS Energy and the Company, Company has therefore not reported Mr Bell will recuse himself from any The Listing Rules and the Disclosure further in respect of these provisions, decision relating to a transaction by the Guidance and Transparency Rules of the other than the need for an internal audit Company or any member of the Group UK Listing Authority require listed function specific to the Company, which with INEOS Energy or any of its companies to disclose how they have has been addressed on page 47. Associates. The Board has noted the applied the principles and complied inference of the provisions in the AIC with the provisions of The UK Corporate The Board Code that Non-Executive Directors who Governance Code 2018 (the “UK Code”), represent a significant shareholder as issued by the Financial Reporting Composition should be presumed not to be Council (“FRC”). The UK Code can be At the date of this report the Board independent. However, it is the Board’s viewed on the FRC’s website. consists of five Non-Executive Directors. assessment that the provisions in place The Chairman is Simon Hogan, and the to manage actual or potential situational The Board has considered the principles Directors are Caroline Cook, Afkenel conflicts of interest are sufficiently robust and provisions of the AIC Code of Schipstra, Roger Bell and Abigail and always promote the success of the Corporate Governance 2019 (the “AIC Rotheroe. Mrs Cook is the Chairman of Company. The Board has concluded Code”) which addresses those set out in the Audit and Risk Committee and the that Mr Bell continues to demonstrate the UK Code, as well as setting out Valuation Committee and Mrs Schipstra independence of character and additional provisions on issues that are of is the Chairman of the Management judgement. His skills and experience specific relevance to the Company, as Engagement Committee, the have added significantly to the strength an investment trust. Nomination Committee and the of the Board and his continued service is Remuneration Committee. With effect invaluable to the long-term success of Financial statements The Board considers that reporting from 7 April 2022, Mrs Schipstra will the Company. The Directors have a against the AIC Code, which has been assume the role of Chairman of the broad range of relevant experience to endorsed by the Financial Reporting Audit and Risk Committee and the meet the Company’s requirements and Council, provides more relevant Valuation Committee, Ms Rotheroe will their biographies are given on page 34. information to shareholders. assume the role of Chairman of the Management Engagement Committee, In line with the AIC Code and the Articles The AIC Code is available on the AIC and the Remuneration Committee and of Association, each Director is subject to website (www. theaic.co.uk). It includes Mr Hogan will assume the role of election at its first AGM and annual an explanation of how the AIC Code Chairman of the Nomination Committee re-election thereafter by shareholders. adapts the Principles and Provisions set when Mrs Cook steps down from the The Board recommends all the out in the UK Code to make them Board and its Committees. Due to the Directors for election except for Caroline relevant for investment companies. size and nature of the Company’s Cook who will be stepping down from Other information business, the Board has not deemed the Board on 7 April 2022. The Company has complied with the it necessary to appoint a Senior AIC Code and the relevant provisions of Independent Director as the role can be The Directors have appointment letters the UK Code, except as set out below. performed by the Board as a whole. which do not provide for any specific term. Copies of the Directors’ The UK Code includes provisions Mr Hogan, Mrs Cook and Mrs Schipstra appointment letters are available on relating to: were appointed as Non-Executive request from the Company Secretary. Directors 22 May 2021. Mr Bell was • the role of the chief executive Upon joining the Board, any new appointed 1 October 2021 and Ms (provision 14); Director will receive an induction and Rotheroe 8 February 2022.The Board relevant training is available to Directors • the need for an internal audit function believes that during the period ended 31 on an ongoing basis. (provision 25); and December 2021 its composition was appropriate for an investment company • executive Directors’ remuneration A policy of insurance against Directors’ of the Company’s nature and size. All of (provision 33). and Officers’ liabilities is maintained by the Directors are independent of the the Company. Investment Adviser and are able to allocate sufficient time to the Company FUTURE FUEL. NOW 39 HydrogenOne Capital Growth plc Annual Report 2021 ## Corporate Governance | The Directors, in the furtherance of their | Management Engagement | questionnaires on the operation of the | | --- | --- | --- | | duties, may take independent | Committee (“MEC”) | Board, its committees and the individual | | professional advice at the expense of | All of the Directors, except Mr Bell, are | contribution of Directors as well as the | | the Company. | members of the MEC, and Mrs Schipstra | performance of the Chairman will take | | | is the Chairman. The MEC has been | place before the year ending 31 | | Board Committees | established to conduct a formal annual | December 2022. The Board succession | | | review of the AIFM and the Investment | plan is reviewed and maintained | The Board decides upon the Adviser, assessing investment and other through the Nomination Committee to membership and chairmanship of its performance, the level and method of promote regular refreshment and committees. Each Committee has their remuneration and the continued diversity, whilst maintaining stability and adopted formal terms of reference, appointment of them as AIFM and continuity of skills and knowledge on which are reviewed at least annually, Investment Adviser to the Company. The the Board. and copies of these are available on the Company’s website or on request from MEC met and reviewed the AIFM and Investment Adviser’s performance and While no new appointments were made the Company Secretary. remuneration structure. In conclusion during the year, subsequent to the the Committee’s recommendation to the year-end it was agreed that Ms Abigail Audit and Risk Committee Board was that it was in the best Rotheroe should join the Board. Ms A report on pages 46 and 47 provides interests of shareholders as a whole to Rotheroe’s appointment was made details of the role and composition of continue with their engagements and following a review by the Board of its the Audit and Risk Committee together that the current management fee composition, diversity, efficacy and with a description of the work of the structure remained appropriate. (See length of service. Audit and Risk Committee in discharging page 37 for further details). its responsibilities. Having regard to the Company’s Articles The MEC will conduct a detailed service of Association and the Board’s succession Remuneration Committee review of the main service providers to plan, the Board drew up a list of desirable All of the Directors, except Mr Bell, are the Company in 2022 once they have skills and industry experience for a new members of this Committee, and Mrs been operational for at least a year. Director. Ms Rotheroe’s appointment was Schipstra is the Chairman. The made following an extensive interview Remuneration Committee has been Nomination Committee process where it was determined that established to meet formally on at least she was the best candidate for the role. All of the Directors, except Mr Bell, are an annual basis to review the No external search agency was used in members of this Committee and Mrs remuneration policy of the Company this process. Schipstra is the Chairman. The and consider the fees of the Nomination Committee has been Non-Executive Directors. The Valuation Committee established for the purpose of Company’s remuneration policy will be identifying and putting forward All of the Directors, except Mr Bell, are put forward for approval at the AGM and candidates for the office of Director of members of this Committee, and Mrs details of the fees of Non-Executive the Company. The Nomination Cook is the Chairman. The Valuation Directors is given on pages 44 and 45. Committee considers job specifications Committee has been established to and assesses whether candidates have meet formally on at least a quarterly The Directors’ Remuneration the necessary skills and time available to basis to formulate valuation policies for Implementation Report is included devote to the job. It also undertakes an investments of the Company, consider on pages 44 and 45. | annual performance evaluation of the | whether independent valuation of the | | --- | --- | | Board. Due to the fact the Company | portfolio is required and approve the | | launched in July 2021, a performance | valuations or valuation methodology of | | evaluation of the Board, its committees | the Private and Listed Hydrogen Assets. | | and the individual Directors has not | A summary of the valuation of the | | taken place. An evaluation requiring the | Company’s investment portfolio is | | Directors to complete detailed | given on page 17. | 40 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance Meeting attendance Management Audit and Risk Remuneration Engagement Nomination Valuation Board Committee Committee Committee Committee Committee Number of meetings held 1 1 1 1 1 – Simon Hogan 1 1 1 1 1 – Caroline Cook 1 1 1 1 1 – Afkenel Schipstra 1 1 1 1 1 – 1 Roger Bell 1 1 1 1 1 – 1. Mr Bell is not a member of the committees of the Board but attends by invitation. In addition, a number of ad hoc Board and committee meetings were held to deal with administrative matters and the formal approval of documents. Board diversity Hampton-Alexander reviews as well as than eliminate the risk of failure to the Parker review, it does not consider it achieve business objectives. It can Appointments are based on merit with appropriate to establish targets or provide only reasonable assurance due regard to the benefits of diversity. quotas in these regards. The Company against material misstatement or loss. The Board considers many factors, has no employees. The Board, through the Audit and Risk including the balance of skills, Committee, regularly reviews the Financial statements knowledge, experience, gender, Tenure policy effectiveness of the internal control ethnicity, cognitive and personal systems to identify, evaluate and strengths when reviewing its It is the Board’s policy that all Directors, manage the Company’s significant risks. composition and appointing new including the Chairman, shall normally If any significant failings or weaknesses Directors. The aim of the policy is to have tenure limited to nine years from are identified the Board, and where identify those with the best range of their appointment to the Board, except required the Investment Adviser, ensure skills and experience to complement that the Board may determine otherwise that necessary action is taken to remedy existing Directors in order to provide if it is considered that the continued the failings. Taking into account the effective oversight of the Company and participation on the Board of an principal risks and uncertainties section constructive support and challenge to individual Director is in the best interests on pages 30 and 31, during the period, the Investment Adviser. Summary of the Company and its shareholders. the Board – through the Audit and Risk biographical details of the Directors, This is also subject to the Director’s Committee – established the Other information including their relevant experience, re-election annually by shareholders. Company’s risk management are set out on page 34. The Board considers that this policy framework and controls. This identified encourages regular refreshment and is a detailed number of risks facing the The Board currently comprises five conducive to fostering diversity. Company and resulted in enhanced risk Non-Executive Directors of which three documentation and reporting to the are female thereby constituting 60% Internal control Board and Audit and Risk Committee. female representation and complies The Board is responsible for establishing Following its review, the Board is not with the Hampton Alexander target of the Company’s system of internal aware of any significant failings or 33% female membership. However, controls and for monitoring their weaknesses arising in the period although the Board has considered the effectiveness. The system of internal under review. recommendations of the Davies and controls is designed to manage rather FUTURE FUEL. NOW 41 HydrogenOne Capital Growth plc Annual Report 2021 ## Corporate Governance The Board believes that the existing The contact with the Investment Adviser, arrangements, including those set out the AIFM and the Administrator enable below, represent an appropriate the Board to monitor the Company’s framework to meet the internal control progress towards its objectives and requirements. By these procedures the encompass an analysis of the risks Directors have kept under review the involved. The effectiveness of the effectiveness of the internal control Company’s risk management and internal system throughout the period and up controls systems is monitored regularly to the date of this report. and a formal review, utilising a detailed risk assessment programme, takes place Financial aspects of at least annually. This includes review of internal control the internal controls reports of the Administrator, the AIFM and the Registrar. These are detailed in the Report of the Audit and Risk Committee. Principal risks Other aspects of internal control The Directors confirm that they have carried out a robust assessment of the The Board holds at least four regular Company’s emerging and principal risks, meetings each year, plus additional including those that would threaten its meetings as required. Between these business model, future performance, meetings there is regular contact with solvency or liquidity. The principal risks the Investment Adviser and the and how they are being managed are Company’s Administrator and set out in the Strategic Report on Company Secretary. pages 30 and 31. The Administrator, Sanne Fund Services (UK) Limited, reports separately in writing to the Board concerning risks and internal control matters within its remit, including internal financial control procedures and company secretarial matters. Additional ad hoc reports are received as required and Directors have access at all times to the advice and services of the Company Secretary, which is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. 42 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 ## Directors’ Remuneration Policy Strategic Report Governance | The remuneration policy (the “Policy”) | effectively. In setting fees, the Board also | agencies to assist the Board in the | | --- | --- | --- | | must be put forward for shareholder | has regard to the need to recruit and | search and selection of Directors or in | | approval at its first AGM and thereafter at | retain Directors with appropriate | reviewing remuneration. Where a | | a maximum interval of three years. | knowledge and experience, the fees | consultant is appointed, the consultant | | Accordingly, the Policy of the Company | paid to Directors of the Company’s peers | shall be identified in the Annual Report | | will be put forward for approval by | and industry practice. Directors’ fees are | alongside a statement about any other | | shareholders at the forthcoming AGM to | also subject to the aggregate annual | connection it has with the Company or | | be held on 24 May 2022 and will | limit set out in the Company’s Articles of | individual Directors. No consultants | | continue in force until the Annual | Association (the “Articles”), which is | were appointed during the period. | | General Meeting to be held in May 2025. | currently £300,000. The aggregate | Independent judgement will be | | The provisions set out in the Policy apply | limit of Directors’ fees in the Articles can | exercised when evaluating the advice | | until they are next submitted for | only be amended by an ordinary | of external third parties. | | shareholder approval. In the event of any | resolution put to shareholders at a | | | proposed material variation to the Policy, | general meeting. | Statement of consideration | | shareholder approval will be sought for | | of conditions elsewhere | | the proposed new policy prior to its | Directors are not eligible for bonuses, | | in the Company implementation. The Policy sets out the pension benefits, share benefits, share As stated above, the Company has no principles the Company follows in options, long-term incentive schemes employees. Therefore, the process of remunerating Directors and the result of or other benefits. consulting with employees on the the shareholder vote on the Policy is setting of the Remuneration Policy is binding on the Company. The Directors’ fees are paid at fixed annual not applicable. Remuneration Committee will take rates and do not have any variable account of any views expressed by elements. Directors are also entitled to Review of the Policy shareholders in formulating this policy. be reimbursed for all reasonable out-of-pocket expenses incurred in This Policy will be reviewed on an annual Financial statements All the Directors are Non-Executive performance of their duties. These basis by the Remuneration Committee Directors and the Company has no expenses are unlikely to be of a and any changes approved by the other employees. significant amount. Board. As part of the review, the Remuneration Committee will consider Service contracts Fees are payable from the date of whether the Policy supports the appointment as a Director of the long-term success of the Company and The Directors do not have service Company and cease on the date of takes into consideration all relevant contracts with the Company. The termination of appointment. Any new regulatory requirements. Any material Directors have appointment letters and, Directors will be paid at the same rate change to the Policy must be approved following initial election by shareholders, as existing Directors. Directors are not by shareholders. are subject to annual re-election. entitled to compensation for loss of office, and there is no notice period Effective date Fees Other information upon early termination of appointment. The Policy is effective from the date of Directors’ fees are determined by the approval by shareholders. Board according to their duties and No incentive fees will be paid to any responsibilities and by reference to the person to encourage them to become a time commitment required by each Director of the Company. The Company Director to carry out their roles may, however, pay fees to external Current and future policy Component Director Purpose of reward Operation Annual fee Chairman of the Board For services as Determined by the Board Chairman of a plc Annual fee Other Directors For services as Non-Executive Determined by the Board Directors of a plc Additional fee Chairman of the For additional responsibility Determined by the Board Audit Committee and time commitment Expenses All Directors Reimbursement of expenses Submission of appropriate incurred in the performance supporting documentation of duties FUTURE FUEL. NOW 43 HydrogenOne Capital Growth plc Annual Report 2021 ## Directors’ Remuneration ## Implementation Report This Directors’ Remuneration The Remuneration Committee Performance Implementation Report (“the Report”) believes that the level of fees The following chart shows the has been prepared in accordance appropriately reflects prevailing market performance of the Company’s share with Schedule 8 of the Large and rates for an investment trust of the price by comparison to the Solactive Medium-sized Companies and Groups Company’s complexity and size, the Hydrogen Economy Index on a total (Accounts and Reports) (Amendment) increasing complexity of regulation return basis. The Company does not have Regulation 2013. An ordinary resolution and resultant time spent by the a specific benchmark but has deemed for the approval of this Report will be put Directors on matters, and will also the Solactive Hydrogen Economy Index forward at the forthcoming AGM. enable the Company to attract to be the most appropriate as at least appropriately experienced additional 60% of the companies included in the The Report is put forward for approval Directors in the future. index generate 100% of their revenue by shareholders on an annual basis. from clean Hydrogen. The result of the shareholder resolution The Remuneration Committee on the Report is non-binding on the comprises the whole Board. Directors’ emoluments for Company, although it gives Further detail on the duties of the the period (Audited) shareholders an opportunity to express Remuneration Committee can be The Directors who served during the their views, which will be taken into found in the Corporate Governance 1 period received the following account by the Board and the statement on page 40. remuneration for qualifying services. Remuneration Committee. The maximum level of fees payable, 2021 | The law requires the Company’s auditor | in aggregate, to the Directors of the | | | --- | --- | --- | | to audit certain of the disclosures | Company is currently £300,000 per | Taxable | | provided. Where disclosures are audited | annum as set out in the Company’s | Fees benefits Total | £ £ £ they are indicated as such. The auditor’s Articles of Association. opinion is shown on pages 49 to 54. Simon Hogan 39,917 – 39,917 Directors’ appointment letters Remuneration Committee Caroline Cook 33,776 – 33,776 and shareholding rights | The Company currently has five | The Directors have appointment letters | Afkenel | | | --- | --- | --- | --- | | Non-Executive Directors. | which do not provide for any specific | Schipstra 27,634 – 27,634 | | | | term. The Directors are not entitled to | | 2 | | | | Roger Bell | – – – | | In accordance with clause 5 of the | compensation on loss of office. There | | | | Relationship and Co-Investment | are no restrictions on transfers of the | Total 101,327 – 101,327 | | | Agreement, INEOS Energy is entitled to | Company’s Ordinary Shares held by | | | 1. Abigail Rotheroe was appointed as a nominate one Non-Executive Director the Directors or any special rights Non-Executive Director on 8 February 2022. for appointment to the Board. Roger Bell attached to such shares. 2. Appointed as a Non-Executive Director on has been nominated for this purpose, 1 October 2021 and is not remunerated for and as set out in his appointment letter, his services. is not remunerated for his role as a Non-Executive Director. Total return performance HGEN Share Price vs NAV from date of listing to 31 December 2021 The current annual fees of the Directors are as follows: 130 Name Role Fee 120 Simon Hogan Chairman £65,000 110 Caroline Cook Audit Chair £55,000 100 Afkenel Schipstra* Director £45,000 90 Abigail Rotheroe Director £45,000 Roger Bell Director – 80 *Upon Mrs Cook’s retirement from the Board on 70 7 April 2022, Mrs Schipstra will become Audit Chair with an annual fee of £55,000. 60 30/7/21 30/8/21 30/9/21 31/10/21 30/11/21 31/12/21 HGEN Share Price HGEN NAV SOLGHYD Index 44 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance There are no other taxable benefits Statement payable by the Company other than On behalf of the Board and in certain expenses which may be accordance with Part 2 of Schedule 8 deemed to be taxable such as travel of the Large and Medium-sized expenses. None of the above fees were Companies and Groups (Accounts and paid to third parties. Reports) (Amendment) Regulations 2013, I confirm that the above The following table sets out the total level Remuneration Report and of Directors’ remuneration compared to Remuneration Policy summarises, the distributions to shareholders by way as applicable, for the period to of dividends and share buybacks, and 31 December 2021: the management fees and other expenses incurred by the Company. (a) the major decisions on Directors’ remuneration; 2021 (b) any substantial changes relating £’000 to Directors’ remuneration made | Spend on Directors’ fees 101,326 | | during the period; and | | --- | --- | --- | | Management fees and | (c) the context in which the changes | | | other expenses 807,000 | | occurred and decisions have | been taken. Dividends paid to shareholders 0 The disclosure of the information in the Afkenel Schipstra Financial statements table above is required under The Large Chairman of the and Medium-sized Companies and Remuneration Committee Groups (Accounts and Reports) (Amendment) Regulations 2013 with the 31 March 2022 exception of management fees and other expenses which have been included to show the total operating expenses of the Company. Directors’ holdings (Audited) At 31 December 2021 and at the date of this report the Directors had the Other information following holdings in the Company. All holdings were beneficially owned. Ordinary Ordinary Shares at Shares at 31 Dec 31 Mar 2021 2022 Simon Hogan 40,000 40,000 Caroline Cook 20,100 20,100 Afkenel Schipstra 10,100 10,100 Roger Bell – – 1 Abigail Rotheroe – – 1. Abigail Rotheroe was appointed as a Non-Executive Director on 8 February 2022. FUTURE FUEL. NOW 45 HydrogenOne Capital Growth plc Annual Report 2021 ## Report of the Audit and Risk Committee ### As Chairman of the Audit and Risk Committee (the “Committee”), I am pleased to present ### the Committee’s report to shareholders for the period ended 31 December 2021. The Audit and Risk Committee and reviews the Investment Adviser’s For Private Hydrogen Assets, as the whistleblowing arrangements. The Company typically invests in early stage, Composition provision of non-audit services by the pre or early revenue investments, a All of the Directors, except Roger Bell, auditor are reviewed against the number of valuation methodologies in are members of the Committee. In Committee’s policy described below. line with IPEV Guidelines have been accordance with the UK Code, the considered and/or employed to value Chairman of the Board should not be a Meetings the investments including Price of member. However, the AIC Code There was one Committee meeting Recent Investment and Discounted permits the Chairman of the Board to be during the period ended 31 December Cash Flow. The Valuation Committee a member of, but not chair the 2021. In addition, the Committee met reviewed and approved the Committee if they were independent on the auditor, without any other party appropriateness of the valuation appointment – which the Chairman was present, for a private discussion and the methodology employed and the and continues to be. In view of the size Chairman of the Committee met with assumptions and made in the of the Board, the Directors feel it is the auditor prior to the Audit Committee calculation of the fair value of each of appropriate for him to continue as a meeting in March 2022. the Private Hydrogen Assets. Details of member, so that the Committee can the valuation methodology and continue to benefit from his experience assumptions used for each of the Financial statements and and knowledge. As noted earlier in the Private Hydrogen Assets are given in Annual Report, I will be stepping down significant accounting matters note 3 to the Financial Statements. from the Audit and Risk Committee and The Committee reviewed the financial the Board on 7 April 2022 and Afkenel statements and considered the The Audit and Risk Committee Schipstra will succeed me as Chairman following significant accounting matters reviewed, along with the Valuation of this Committee. in relation to the Company’s financial Committee, the procedures in place for statements for the period ended ensuring the appropriate valuation of The members of the Committee 31 December 2021. investments and approved the valuation consider that they have the requisite of the Company’s Private Hydrogen skills and experience to fulfil the Valuation of Private Hydrogen Assets at the period end with the responsibilities of the Committee. The Assets investments Investment Adviser and AIFM. Committee considers that at least one of The Company’s investment through the its members has recent and relevant Limited Partnership at 31 December Emerging risks financial experience and competence 2021 was £60,597,000 representing a relevant to the sector in which the The Committee considered the risks from substantial portion of the Company’s net Company operates. the COVID-19 pandemic and the Russian assets and as such is the biggest factor invasion of Ukraine on the Company’s in relation to the accuracy of the Role and responsibilities ability to continue in operation due to the Financial Statements. The valuation of impact on the Company’s portfolio, and The main role and responsibilities of the Company’s Private Hydrogen Assets on the operational resilience of the the Committee are set out in the held through the Limited Partnership is Company’s key service providers, and Committee’s terms of reference. The the most material matter in the concluded that the pandemic or invasion terms are updated annually and are production of the financial statements. had not resulted in any significant issue available on the Company’s website or to the financial statements. on request from the Company Secretary. The Board has appointed a Valuation Committee which sets out the valuation As part of the annual report review, The Committee meets formally at least policies and process. The Committee the Committee: | twice a year for the purpose, amongst | met once in February 2022 to review | | | --- | --- | --- | | other things, of advising the Board on | the valuations as at 31 December 2021. | • obtained assurances from the | | the appointment, effectiveness, | The process includes considering and | Investment Adviser and the | | independence, objectivity and | approving valuations or valuation | Administrator that the financial | | remuneration of the external auditor. The | methodology made by the Investment | statements had been prepared | | Committee monitors the integrity of the | Adviser and provided to the AIFM, using | appropriately; | | Financial Statements of the Company | fair market valuations of the Listed | | • reviewed the consistency of, and any and any formal announcements relating and Private Hydrogen Assets on a changes to, accounting policies; | to the Company’s financial performance, | quarterly basis as at 31 March, 30 June, | | | --- | --- | --- | | reviewing significant financial reporting | 30 September and 31 December | • reviewed the tax compliance of the | | judgements contained in them. The | each year. The valuation principles | Company during the period with the | | Committee also reviews the Company’s | used to calculate the fair value of the | eligibility conditions and ongoing | | risk management, internal financial | Private Hydrogen Assets are based | requirements in order for investment | | controls and internal control systems | on IPEV Guidelines. | trust status to be maintained; | 46 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance | • reviewed the Company’s financial | Effectiveness of audit | KPMG LLP UK provided reporting | | --- | --- | --- | | resources and concluded that it is | The Committee reviewed the audit | accountant services in respect of the | | appropriate for the Company’s | planning and the standing, skills and | Company’s Initial Public Offering (“IPO”). | | financial statements to be prepared | experience of the firm and the audit | The reporting accounting services are | | on a going concern basis as | team. The Committee also considered | considered a non-recurring service and | | described in the Directors’ Report | the independence of KPMG and the | KPMG LLP UK are a separate team | | on page 38; | objectivity of the audit process. KPMG | independent of the audit team and the | | | has confirmed that it is independent of | audit team place no reliance on the | • considered the risk to the Company the Company and has complied with output of the reporting accountant and market volatility from the Russian relevant auditing standards. No services provided. invasion of Ukraine. The Board and modifications were required to the the Investment Adviser have reviewed external audit approach. The Audit Plan The Audit and Risk Committee does not the investment portfolio and have was presented to the Audit and Risk believe that the provision of these identified limited direct impact on Committee at its November 2021 services affect the independence of the portfolio but continue to monitor Committee meeting, ahead of the KPMG. The auditor has provided any impact to the Company, the commencement of the Company’s assurance that they complied with the Group, its investee companies period end audit. The Audit Plan set out relevant UK professional and regulatory and overall valuations; and | | the audit process, materiality scope and | requirements. Details of the fees paid | | | --- | --- | --- | --- | | • concluded that the Annual Report for | significant risks. A presentation of the | in respect of reporting accountant | | | the period ended 31 December 2021, | results of the audit following completion | services in the period to 31 December | | | taken as a whole, is fair, balanced and | of the main audit testing was provided at | 2021 are given in note 6 to the | | | understandable and provides the | the March 2022 meeting. Additionally, | Financial Statements. | | | information necessary for | the Committee received feedback from | | | | shareholders to assess the Company’s | the Investment Adviser and Administrator | Internal audit | | | position and performance, business | regarding the effectiveness of the | | Financial statements | The Audit and Risk Committee has model and strategy. The Committee external audit process. considered the need for an internal audit reached this conclusion through a function and considers that this is not process of review of the document The Committee is satisfied that KPMG appropriate given the nature and and enquiries to the various parties has provided effective independent circumstances of the Company as an involved in the production of the challenge in carrying out its externally managed investment Annual Report, and the external responsibilities. After due consideration, company with external service providers. auditor’s report thereon. the Committee recommended the The Audit and Risk Committee keeps re-appointment of KPMG and a the needs for an internal audit function The Committee reported the results of resolution will be put forward to the under periodic review. this work, including its assessment that Company’s shareholders at the the Annual Report is fair, balanced and 2022 AGM. understandable, to the Board. Other information Provision of non-audit services Caroline Cook External auditor The Committee has put in place a policy Audit and Risk Committee Chairman | KPMG Channel Islands Limited (“KPMG”) | on the supply of any non-audit services | | | --- | --- | --- | | were selected as the Company’s auditor | provided by the external auditor. During | 31 March 2022 | | at the Company’s launch following a | the period, the Company’s policy was | | | competitive process and review of the | reviewed and aligned with the FRC’s | | | auditor’s credentials. The current audit | Revised Ethical Standard 2019. | | | Director, David Alexander, has held the | Non-audit services are considered on a | | | role since that date. The auditor was | case-by-case basis and may only be | | | formally appointed on 15 June 2021. | provided to the Company if such | | | The appointment of the auditor is | services meet the requirements of the | | | reviewed annually by the Audit and Risk | Standard, including: at a reasonable and | | | Committee and the Board and is subject | competitive cost; do not constitute a | | | to approval by Shareholders. In | conflict of interest for the auditor; and | | | accordance with the FRC guidance, the | all non-audit services must be | | | audit will be put out to tender within ten | approved in advance. | | years of the initial appointment of KPMG. Additionally, the audit Director must be rotated every five years and is next eligible for rotation in 2026. FUTURE FUEL. NOW 47 HydrogenOne Capital Growth plc Annual Report 2021 ## Statement of Directors’ Responsibilities The Directors are responsible for The Directors are responsible for Responsibility statement of preparing the Annual Report and the keeping adequate accounting records the Directors in respect of Group and Parent Company Financial that are sufficient to show and explain the annual report Statements in accordance with the Company’s transactions and which The Directors each confirm to the best applicable laws and regulations. disclose with reasonable accuracy at of their knowledge that: any time the financial position of the | Company law requires the Directors to | Company and enable them to ensure | • the Financial Statements, prepared in | | --- | --- | --- | | prepare Group and Parent Company | that its financial statements comply | accordance with the applicable set of | | financial statements for each financial | with the Companies Act 2006. | accounting standards, give a true and | | year. Under that law the Directors they are | They are responsible for such internal | fair view of the assets, liabilities, | | required to prepare the Group Financial | control as they determine is necessary | financial position and profit or loss of | | Statements in accordance with | to enable the preparation of financial | the Company and the undertakings | | UK-adopted international accounting | statements that are free from material | included in the consolidation taken | | standards and applicable law and have | misstatement, whether due to | as a whole; and | | elected to prepare the parent Company | fraud or error, and have general | | • the Strategic Report includes a fair financial statements on the same basis. responsibility for taking such steps review of the development and as are reasonably open to them to performance of the business and Under company law the Directors must safeguard the assets of the Group the position of the issuer and the not approve the Financial Statements and to prevent and detect fraud and undertakings included in the unless they are satisfied that they give a other irregularities. consolidation taken as a whole, true and fair view of the state of affairs of together with a description of the the Group and Parent Company and of Under applicable law and regulations, principal risks and uncertainties the Group’s profit or loss for that period. the Directors are also responsible for that they face. In preparing each of the Group and preparing a Strategic Report, Directors’ Parent Company Financial Statements, Report, Directors’ Remuneration The Directors consider the annual report the Directors are required to: Report and Corporate Governance and accounts, taken as a whole, is fair, Statement that complies with that • select suitable accounting policies balanced and understandable and law and those regulations. and then apply them consistently; provides the information necessary for shareholders to assess the Group’s • make judgements and estimates The Directors are responsible for position and performance, business which are reasonable relevant the maintenance and integrity of model and strategy. and reliable; the corporate and financial information included on the • state whether they have been For and on behalf of the Board company’s website. Legislation in prepared in accordance with the UK governing the preparation UK-adopted international and dissemination of financial accounting standards; statements may differ from Simon Hogan • assess the Group and Parent legislation in other jurisdictions. Chairman Company’s ability to continue as a going concern, disclosing, as 31 March 2022 applicable, matters related to going concern; and • use the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so. 48 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 ## Independent auditor’s report to the members of HydrogenOne Capital Growth plc (the “Company”) Strategic Report Governance Our opinion is unmodified We have audited the parent and consolidated financial statements of HydrogenOne Capital Growth plc (the “Company” or “Parent”) and its subsidiary (together, the “Group”), which comprise the parent and consolidated statement of financial position as at 31 December 2021, the parent and consolidated statements of comprehensive income, changes in equity and cash flows for the period from 16 April 2021 (date of incorporation) to 31 December 2021, and notes, comprising significant accounting policies and other explanatory information. In our opinion, the accompanying parent and consolidated financial statements: • give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31 December 2021 and of the Group’s and of the Company’s loss for the period from 16 April 2021 (date of incorporation) to 31 December 2021; • are properly prepared in accordance with UK-adopted international accounting standards; and • have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the Audit and Risk Committee. We were first appointed as auditor by the Directors on 15 June 2021. The period of total uninterrupted engagement is for the financial period ended 31 December 2021. We have fulfilled our ethical responsibilities under, and we remain independent of the Company and Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to public interest Financial statements entities. No non-audit services prohibited by that standard were provided. Key audit matters: our assessment of the risks of material misstatement Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the parent and consolidated financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matters, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the parent and consolidated financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters. Other information FUTURE FUEL. NOW 49 HydrogenOne Capital Growth plc Annual Report 2021 ## Independent auditor’s report Key audit matter The risk Our response Valuation of Private Basis: Our audit procedures included: Hydrogen Assets held The Group and Company’s investment in the Control evaluation through HydrogenOne Limited Partnership is carried at fair value through We tested the design and implementation of the profit or loss and represents a significant Capital Growth Valuation Committee’s review control in relation to proportion of the Group and Company’s net assets. Investments (1) LP (the the valuation of Private Hydrogen Assets. The fair value of the Limited Partnership has been “Limited Partnership”) determined as its net asset value, the most Challenging management’s valuation approach £39,231,000 significant component of which is its underlying For each of the Private Hydrogen Assets, with the portfolio of non-controlling positions in unquoted support of our KPMG valuation specialist, we: Refer to the Report of the Audit hydrogen assets valued at £39,231,000 (“Private and Risk Committee (page 46), • held discussions with the Investment Adviser to Hydrogen Assets”). note 3 (significant accounting understand the valuation approach; and policies), note 4(c) (investments As Private Hydrogen Assets are unquoted and • assessed and challenged the reasonableness held at fair value through profit illiquid, their fair values are determined through of the valuation approach and methodology or loss) and note 14 (financial the application of valuation techniques. The applied. instruments and capital application of valuation techniques requires the disclosures). exercise of judgement in relation to the selection Assessing fair value of the valuation technique employed and the For each of the Private Hydrogen Assets, we: assumptions and data used in their application. • corroborated the acquisition price used in the valuation to supporting acquisition For the period ended 31 December 2021, Private documents; and Hydrogen Assets are valued, in accordance with | the International Private Equity and Venture Capital | • with the support of our KPMG valuation | | --- | --- | | Valuation 2018 (“IPEV”) Guidelines, using the | specialist, challenged whether the approach | | approach laid out in the valuation of Limited | and application of the methodology | | Partnership policy on pages 65 and 66. | represented fair value. | | Risk: | Income approach model integrity, | | The valuation of Private Hydrogen Assets may not | inputs and assumptions | | be representative of their fair value due to the | For each of the Private Hydrogen Assets, we: | nature of the transaction and/ or changes in the • tested the model for mathematical accuracy market or their performance since the date of the including but not limited to material transaction. The calibration of this valuation against formula errors; an income approach may not provide a reasonable fair value comparison due to the application of • corroborated material inputs used in the model unreasonable inputs and assumptions. to supporting documentation; and • with the support of our KPMG valuation Further, the judgements inherent in the valuation specialist, benchmarked the discount rate and approach may expose the valuation of Private key macro-economic assumptions applied in Hydrogen Assets to management bias. the model to observable market data and our Therefore, there is a risk of material misstatement KPMG valuation specialist’s experience in through error as well as a potential for fraud valuing similar investments. through possible management bias. Assessing disclosures We considered the appropriateness of the Group and Company’s investment valuation policies and the adequacy of the Group and Company’s disclosures in relation to the use of estimates and judgements in arriving at fair value. We assessed whether the disclosures around the sensitivities to changes in key assumptions reflect the risks inherent in the valuation of the Private Hydrogen Assets. Our results As a result of our procedures, we found the valuation of Private Hydrogen Assets and related disclosures to be acceptable. 50 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance Our application of materiality and an overview of the scope of our audit Materiality for the parent and consolidated financial statements as a whole was set at £2,055,000, determined with reference to a benchmark of net assets of £102,786,000, of which it represents approximately 2%. In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the parent and consolidated financial statements as a whole. Performance materiality for the Group and Company was set at 75% of materiality for the parent and consolidated financial statements as a whole, which equates to £1,541,000. We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an elevated level of risk. We reported to the Audit and Risk Committee any corrected or uncorrected identified misstatements exceeding £102,000, in addition to other identified misstatements that warranted reporting on qualitative grounds. Our audit of the Group and Company was undertaken to the materiality level specified above, which has informed our identification of significant risks of material misstatement and the associated audit procedures performed in those areas as detailed above. Going concern The Directors have prepared the parent and consolidated financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group and the Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the parent and consolidated financial statements (the “going concern period”). Financial statements In our evaluation of the Directors’ conclusions, we considered the inherent risks to the Group and the Company’s business model and analysed how those risks might affect the Group and the Company’s financial resources or ability to continue operations over the going concern period. The risk that we considered most likely to affect the Group and the Company’s financial resources or ability to continue operations over this period was availability of capital to meet operating costs and other financial commitments. We considered whether this risk could plausibly affect the liquidity in the going concern period by comparing severe, but plausible downside scenarios that could arise from this risk against the level of available financial resources indicated by the Company’s financial forecasts. We considered whether the going concern disclosure in note 2 to the financial statements gives a full and accurate description of the Directors’ assessment of going concern. Other information Our conclusions based on this work: • we consider that the Directors’ use of the going concern basis of accounting in the preparation of the parent and consolidated financial statements is appropriate; • we have not identified, and concur with the Directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group and the Company’s ability to continue as a going concern for the going concern period; • we have nothing material to add or draw attention to in relation to the Directors’ statement in the notes to the parent and consolidated financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and the Company’s use of that basis for the going concern period, and that statement is materially consistent with the parent and consolidated financial statements and our audit knowledge, and • the related statement under the Listing Rules set out on page 38 is materially consistent with the parent and consolidated financial statements and our audit knowledge. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group and the Company will continue in operation. FUTURE FUEL. NOW 51 HydrogenOne Capital Growth plc Annual Report 2021 ## Independent auditor’s report Fraud and breaches of laws and regulations – ability to detect Identifying and responding to risks of material misstatement due to fraud To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: • enquiring of management as to the Group’s policies and procedures to prevent and detect fraud as well as enquiring whether management have knowledge of any actual, suspected or alleged fraud; • reading minutes of meetings of those charged with governance; and • using analytical procedures to identify any unusual or unexpected relationships. As required by auditing standards, and taking into account possible incentives or pressures to misstate performance and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls, in particular the risk that management may be in a position to make inappropriate accounting entries, and the risk of bias in accounting estimates such as valuation of Private Hydrogen Assets. On this audit we do not believe there is a fraud risk related to revenue recognition because the Group’s and Company’s revenue streams are simple in nature with respect to accounting policy choice, and are easily verifiable to external data sources or agreements with little or no requirement for estimation from management. We did not identify any additional fraud risks. We performed procedures including: • identifying journal entries and other adjustments to test based on risk criteria and comparing any identified entries to supporting documentation; • incorporating an element of unpredictability in our audit procedures; and • assessing significant accounting estimates for bias. Further detail in respect of valuation of Private Hydrogen Assets is set out in the key audit matter section of in this report. Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations We identified areas of laws and regulations that could reasonably be expected to have a material effect on the parent and consolidated financial statements from our sector experience and through discussion with management (as required by auditing standards), and from inspection of the Group’s regulatory and legal correspondence, if any, and discussed with management the policies and procedures regarding compliance with laws and regulations. As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity’s procedures for complying with regulatory requirements. The Group is subject to laws and regulations that directly affect the parent and consolidated financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. The Group is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the parent and consolidated financial statements, for instance through the imposition of fines or litigation or impacts on the Group and the Company’s ability to operate. We identified financial services regulation as being the area most likely to have such an effect, recognising the regulated nature of the Group’s activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the parent and consolidated financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the parent and consolidated financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations. 52 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance Other information The Directors are responsible for the other information, which comprises the strategic report, the Directors’ report and the other information included in the annual report, but does not include the parent and consolidated financial statements and our auditor’s report thereon. Our opinion on the parent and consolidated financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our parent and consolidated financial statements audit work, the information therein is materially misstated or inconsistent with the parent and consolidated financial statements or our audit knowledge. Based solely on that work: • we have not identified material misstatements in the other information; • in our opinion the information given in the strategic report and the Directors’ report for the financial period is consistent with the parent and consolidated financial statements; and • in our opinion those reports have been prepared in accordance with the Companies Act 2006. Directors’ remuneration report In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006. Disclosures of emerging and principal risks and longer term viability We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ disclosures in respect of emerging and principal risks and the viability statement, and the parent and consolidated financial statements and our audit knowledge. We have nothing material to add or draw attention to in relation to: Financial statements • the Directors’ confirmation within the Viability Statement (page 32) that they have carried out a robust assessment of the emerging and principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; • the emerging and principal risks disclosures describing these risks and explaining how they are being managed or mitigated; • the Directors’ explanation in the Viability Statement (page 32) as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. We are also required to review the Viability Statement, set out on page 32 under the Listing Rules. Based on the above procedures, we have concluded that the above disclosures are materially consistent with the parent and consolidated financial statements and Other information our audit knowledge. Corporate governance disclosures We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ corporate governance disclosures and the parent and consolidated financial statements and our audit knowledge. Based on those procedures, we have concluded that each of the following is materially consistent with the parent and consolidated financial statements and our audit knowledge: • the Directors’ statement that they consider that the annual report and parent and consolidated financial statements taken as a whole is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Group’s and the Company’s position and performance, business model and strategy; • the section of the annual report describing the work of the Audit and Risk Committee, including the significant issues that the Audit and Risk Committee considered in relation to the financial statements, and how these issues were addressed; and • the section of the annual report that describes the review of the effectiveness of the Group’s and the Company’s risk management and internal control systems. We are required to review the part of Corporate Governance Statement relating to the Group’s and the Company’s compliance with the provisions of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in this respect. FUTURE FUEL. NOW 53 HydrogenOne Capital Growth plc Annual Report 2021 ## Independent auditor’s report We have nothing to report on other matters on which we are required to report by exception Under the Companies Act 2006, we are required to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or • the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of Directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. We have nothing to report in these respects. Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 48, the Directors are responsible for: the preparation of the parent and consolidated financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of parent and consolidated financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the parent and consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the parent and consolidated financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities. The purpose of this report and restrictions on its use by persons other than the Company’s members as a body This report is made solely to the Company’s members, as a body, in accordance with chapter 3 of part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and its members, as a body, for our audit work, for this report, or for the opinions we have formed. David Alexander (Senior Statutory Auditor) For and on behalf of KPMG Channel Islands Limited (Statutory Auditor) Chartered Accountants Guernsey 31 March 2022 54 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Strategic Report Governance ## Financial ## statements 56 Parent and consolidated statement of comprehensive income 57 Parent and consolidated statement of financial position 58 Parent and consolidated statement of changes in equity 59 Parent and consolidated statement of cash flows 60 Notes to the parent and consolidated financial statements Financial statements Other information FUTURE FUEL. NOW 55 HydrogenOne Capital Growth plc Annual Report 2021 # Parent and consolidated statement of comprehensive income For the period from incorporation on 16 April 2021 to 31 December 2021 | | Note | Period ended 31 December 2021 | | | | --- | --- | --- | --- | --- | | | | Revenue £'000 | Capital £'000 | Total £'000 | | Losses on investments | 4 | – | (1,608) | (1,608) | | Gains on currency movements | | – | 1 | 1 | | **Gross investment losses** | | – | (1,607) | (1,607) | | Income | | – | – | – | | **Total loss** | | – | (1,607) | (1,607) | | Investment Adviser fee | 5 | (265) | – | (265) | | Other expenses | 6 | (540) | (5) | (545) | | **Loss before finance costs and taxation** | | (805) | (1,612) | (2,417) | | Finance costs | | – | – | – | | **Operating loss before taxation** | | (805) | (1,612) | (2,417) | | Taxation | 7 | – | – | – | | **Loss for the period** | | (805) | (1,612) | (2,417) | | **Return per Ordinary Share (basic and diluted)** | 11 | (1.26)p | (2.52)p | (3.78)p | There is no other comprehensive income and therefore the 'Loss for the period' is the total comprehensive income for the period. The total column of the above statement is the Parent and Consolidated Statement of Comprehensive Income, including the return per Ordinary Share, which has been prepared in accordance with IFRS. The supplementary revenue and capital columns, including the return per Ordinary Share, are prepared under guidance from the Association of Investment Companies. All revenue and capital items in the above statement derive from continuing operations. The following notes on pages 60 to 81 form an integral part of these Financial Statements. 56 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 # Parent and consolidated statement of financial position At 31 December 2021 | | Note | 31 December 2021 £'000 | | --- | --- | --- | | **Assets** | | | | **Non-current assets** | | | | Investments held at fair value through profit or loss | 4 | 68,830 | | **Current assets** | | | | Cash and cash equivalents | | 34,019 | | Trade and other receivables | 8 | 183 | | **Total current assets** | | **34,202** | | **Total assets** | | **103,032** | | **Current liabilities** | | | | Trade and other payables | 9 | (246) | | **Total liabilities** | | **(246)** | | **Net assets** | | **102,786** | | **Equity** | | | | Share capital | 10 | 1,074 | | Share premium account | | 104,129 | | Capital reserve | | (1,612) | | Revenue reserve | | (805) | | **Total equity** | | **102,786** | | **Net asset value per Ordinary Share** | 12 | **95.75p** | Approved by the Board of Directors on and authorised for issue on 31 March 2022 and signed on their behalf by: **Simon Hogan** Director HydrogenOne Capital Growth plc is incorporated in England and Wales with registration number 13340859. The following notes pages 60 to 81 form an integral part of these Financial Statements. Strategic Report Governance Financial statements Other information FUTURE FUEL NOW 57 HydrogenOne Capital Growth plc Annual Report 2021 # Parent and consolidated statement of changes in equity For the period from incorporation on 16 April 2021 to 31 December 2021 | | Notes | Share Capital £'000 | Share premium account £'000 | Capital reserve £'000 | Revenue reserve £'000 | Total £'000 | | --- | --- | --- | --- | --- | --- | --- | | Opening balance as at 16 April 2021 | | – | – | – | – | – | | Issue of Ordinary Shares | 10 | 1,074 | 106,276 | – | – | 107,350 | | Ordinary Share issue costs | | – | (2,147) | – | – | (2,147) | | Loss for the period | | – | – | (1,612) | (805) | (2,417) | | **Closing balance as at 31 December 2021** | | **1,074** | **104,129** | **(1,612)** | **(805)** | **102,786** | The following notes pages 60 to 81 form an integral part of these Financial Statements. 58 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 ## Parent and consolidated ## statement of cash flows For the period from incorporation on 16 April 2021 to 31 December 2021 Strategic Report Period ended 31 December 2021 £’000 Cash flows from operating activities Management expenses (810) Foreign exchange gains 1 Increase in trade and other receivables (183) Increase in trade and other payables 246 Net cash flow used in operating activities (7 46) Governance Cash flows from investing activities Purchase of investments (70,438) Net cash flow used in investing activities (70,438) Cash flows from financing activities Proceeds from issue of Ordinary Shares 10 7 ,350 Ordinary Share issue costs (2,147) Financial statements Other information Net cash flow from financing activities 105,203 Increase in cash and cash equivalents 34,019 Cash and cash equivalents at start of period – Cash and cash equivalents at end of period 34,019 The following notes pages 60 to 81 form an integral part of these Financial Statements. FUTURE FUEL. NOW 59 HydrogenOne Capital Growth plc Annual Report 2021 # Notes to the financial statements ## 1. General information ### Company information HydrogenOne Capital Growth plc (the "Company" or "Parent") was incorporated in England and Wales on 16 April 2021 with registered number 13340859 as a public company limited by shares and is an investment company within the terms of Section 833 of the Companies Act 2006 (the "Act"). The Company is listed and began trading on the Main Market of the London Stock Exchange and was admitted to the premium segment of the Official List on 30 July 2021 (the "IPO"). The Company has applied for and been accepted as an approved investment trust under sections 1158 and 1159 of the Corporation Tax Act 2010 and Part 2 Chapter 1 of Statutory Instrument 2011/2999. Sanne Fund Management (Guernsey) Limited acts as the Company's Alternative Investment Fund Manager ("AIFM"). Sanne Fund Services (UK) Limited (the "Company Secretary and Administrator") provides administrative and company secretarial services to the Company. The Company's Investment Adviser is HydrogenOne Capital LLP. The Company's registered office is 6th Floor, 125 London Wall, London, EC2Y 5AS. ### Investment objective The Company's investment objective is to deliver an attractive level of capital growth by investing, directly or indirectly, in a diversified portfolio of hydrogen and complementary hydrogen focussed assets whilst integrating core environmental, social and governance ("ESG") principles into its decision making and ownership process. ### Company structure The Company makes its investment in unquoted Hydrogen Assets ("Private Hydrogen Assets") through HydrogenOne Capital Growth Investments (I) LP (the "Limited Partnership"), in which the Company is the sole Limited Partner. The Limited Partnership registered as a private fund limited partnership in England and Wales under the Limited Partnerships Act 1907 with registered number LP021814. The Limited Partnership has been established pursuant to the Limited Partnership Agreement dated 5 July 2021 as amended and restated on 26 November 2021 (the "Limited Partnership Agreement") in order to make investments pursuant to the investment policy of the Limited Partnership. The Limited Partnership's investment policy and restrictions are consistent with the Company's investment policy and restrictions for Private Hydrogen Assets. The General Partner of the Limited Partnership is HydrogenOne Capital Growth (GP) Limited (the "General Partner"), a wholly owned subsidiary of the Company. The General Partner was incorporated in England and Wales on 19 May 2021 with company registered number 13407844. The General Partner undertakes the responsibility for the management, operation and administration of the business and affairs of the Limited Partnership. The General Partner's Profit Share for each accounting period shall be an amount equal to 1.5% per annum of the prevailing NAV of the Limited Partnership, which shall be allocated to the General Partner as a first charge on the profits of the Limited Partnership. For so long as the Company is the sole Limited Partner, the General Partner's Profit Share shall be allocated and distributed to the Company rather than the General Partner. The carried interest partner of the Limited Partnership is HydrogenOne Capital Growth (Carried Interest) LP (the "Carried Interest Partner") which, in certain circumstances, will receive carried interest on the realisation of Private Hydrogen Assets by the Limited Partnership. The Carried Interest Partner has been set up for the benefit of the principals of the Investment Adviser. ### Private Hydrogen Assets The Company invests via the Limited Partnership in Private Hydrogen Assets, which may be operational companies or hydrogen projects. Investments are mainly in the form of equity, although investments may be made by way of debt and/or convertible securities. The Company may acquire a mix of controlling and non-controlling interests in Private Hydrogen Assets, however the Company invests principally in non-controlling positions (with suitable minority protection rights to, inter alia, ensure that the Private Hydrogen Assets are operated and managed in a manner that is consistent with the Company's investment policy). The Company will initially acquire Private Hydrogen Assets via the Limited Partnership. In due course, the Company may acquire Private Hydrogen Assets directly or by way of holdings in special purpose vehicles or intermediate holding entities (including successor limited partnerships established on substantially the same terms as the Limited Partnership) or, if the Company is considered a 'feeder fund' under the Listing Rules, other undertakings advised by the Investment Adviser and, in such circumstances, the investment policy and restrictions will also be applied on a look-through basis and such undertaking(s) will also be managed in accordance with the Company's investment policy. 60 FUTURE FUEL NOW HydrogenOne Capital Growth plc Annual Report 2021 Listed Hydrogen Assets Strategic Report The Company also invests directly in quoted or traded Hydrogen Assets, which are predominantly equity securities but may also be corporate debt and/or other financial instruments (“Listed Hydrogen Assets”). The Company has the ability to invest in Listed Hydrogen Assets in any market or country with a market capitalisation (at the time of investment) of at least US$200 million. The Company’s approach is to be a long-term investor and will not ordinarily adopt short-term trading strategies. Liquidity reserve During the initial Private Hydrogen Asset investment period after a capital raise (currently anticipated to be up to 18 months in respect of the IPO) and/or a realisation of a Private Hydrogen Asset, the Company intends to allocate the relevant net proceeds of such capital raise/realisation to cash (in accordance with the Company’s cash management policy) and/or to additional Listed Hydrogen Assets and related businesses pending subsequent investment in Private Hydrogen Assets (the “Liquidity Reserve”). The Company anticipates holding cash to cover the near-term capital requirements of the pipeline of Private Hydrogen Assets and Governance in periods of high market volatility. The Investment Adviser anticipates that the Liquidity Reserve will be allocated to cash for the foreseeable future. 2. Basis of preparation The principal accounting policies are set out below: Reporting entity These Parent and Consolidated Financial Statements (the “Financial Statements”) present the results of both the Parent; and the Parent and the General Partner (together referred to as the “Group”). As at 31 December 2021, the statement of financial position of the General Partner consisted of issued share capital and corresponding Financial statements Other information share capital receivable in the amount of £1. The General Partner had no income, expenditure or cash flows for the period. Due to the immaterial balances of the General Partner there is no material difference between the results of the Parent and the results of the Group. As a result, the Financial Statements as presented represent both the Parent’s and the Group’s financial position, performance and cash flows. Basis of accounting The Financial Statements have been prepared in accordance with UK-adopted international accounting standards (“IFRS”) and the applicable legal requirements of the Companies Act 2006. The Financial Statements have also been prepared as far as is relevant and applicable to the Company and Group 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 financial instruments measured at fair value through profit or loss. Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or liability, the Company and Group take into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these Financial Statements is determined on such a basis. The Financial Statements are presented in Pounds Sterling because that is the currency of the primary economic environment in which the Company and Group operate. The principal accounting policies adopted are set out below. These policies are consistently applied. FUTURE FUEL. NOW 61 HydrogenOne Capital Growth plc Annual Report 2021 ## Notes to the financial statements Accounting for subsidiaries The Board of Directors has determined that the Company has all the elements of control as prescribed by IFRS 10 in relation to: (1) the Limited Partnership; as the Company is the sole limited partner in the Limited Partnership (100% of the Limited Partnership’s commitments are held by the Company), is exposed to and has rights to the returns of the Limited Partnership, and has the ability through its control of the General Partner to affect the amount of its returns from the Limited Partnership; and (2) the General Partner; as the Company wholly owns the General Partner, is exposed to and has rights to the returns of the General Partner, and has the ability through its control of the General Partner’s activities to affect the amount of its returns from the General Partner. The Investment entities exemption requires that an investment entity that has determined that it is a parent under IFRS 10 shall not consolidate certain of its subsidiaries; instead, it is required to measure its investment in these subsidiaries at fair value through profit or loss in accordance with IFRS 9. The criteria which define an investment entity are as follows: (i) the company obtains funds from one or more investors for the purpose of providing those investors with investment management services; (ii) the company commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and (iii) the company measures and evaluates the performance of substantially all of its investments on a fair value basis. The Company is an investment company, providing investors exposure to a diversified portfolio of hydrogen and complementary hydrogen focussed assets that are managed for investment purposes. The investments were made in line with the stated objective of the Company to deliver an attractive level of capital growth in accordance with the strategy that has been set by the Directors. The Directors assessed each new investment carefully to determine whether the Company as a whole still meets the definition of an investment entity. 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 with shares issued publicly on the London Stock Exchange and obtains funds from a diverse group of shareholders who would otherwise not have access individually to investing in hydrogen focussed assets; (ii) the Company’s purpose is to invest funds for capital appreciation but with potential for some investment income. The Limited Partnership has a ten-year life however the underlying assets have minimal residual value because they do not have unlimited lives, are not to be held indefinitely and have appropriate exit strategies in place; 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. The Directors use fair value information as a primary measurement to evaluate the performance of all of the investments and in decision making. The Board of Directors has determined that the Company meets all the typical characteristics of an investment entity and therefore meets the definition set out in IFRS 10. Accounting for the Limited Partnership The Limited Partnership serves as an asset holding entity and does not provide investment-related services. Therefore, when the Limited Partnership is assessed based on the overall structure as a means of carrying out the Company’s activities, the Board of Directors has determined that the Limited Partnership meets the definition of an investment entity. Accordingly, the Company is required under IFRS 10 to hold its investment in the Limited Partnership at fair value through the Statement of Comprehensive Income rather than consolidate them. The Company has determined that the fair value of the Limited Partnership is its net asset value and has concluded that it meets the definition of an unconsolidated subsidiary under IFRS 12 and has made the necessary disclosures in these Financial Statements. Accounting for the General Partner The General Partner provides investment related services to the Limited Partnership on behalf of the Company. IFRS 10 requires subsidiaries that provide services that relate to the investment entity’s investment activities to be consolidated. Accordingly, the Company is required under IFRS 10 to consolidate the results of the General Partner. The Directors agree that the investment entity accounting treatment outlined above appropriately reflects the Company’s activities as an investment trust and provides the most relevant information to investors. 62 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 ## Going concern The Directors consider that it is appropriate to adopt the going concern basis in preparing the Financial Statements. In forming this opinion, the Directors have considered the ongoing impact of the COVID-19 pandemic and impact as restrictions begin to be lifted in the UK and other jurisdictions, on the going concern and viability of the Company and Group. In making their assessment, the Directors have reviewed income and expense projections and the liquidity of the investment portfolio, and considered the mitigation measures which key service providers, including the Investment Adviser, have in place to maintain operational resilience particularly in light of COVID-19. The Company and Group continue to meet day-to-day liquidity needs through its cash resources. The Company and Group had unrestricted cash of £34.0 million as well as £8.2 million in Listed Hydrogen Assets at 31 December 2021. The Company and Group's net assets at 31 December 2021 were £102.8 million and total expenses for the period ended 31 December 2021 were £0.8 million, which represented approximately 0.8% of the average net assets value of the Company in the period from the Company's IPO on 22 June 2021 to the 31 December 2021 (£104,565,796). At the date of approval of these financial statements, the Company and Group had cash resources of £33.4 million and annual expenses are estimated to be £1.7 million. The Directors also recognise that the continuation of the Company is subject to the approval of shareholders at the Annual General Meeting ("AGM") in 2026, and every fifth AGM thereafter. Since the Company's IPO, the shares have traded at a premium to NAV, reflecting strong shareholder support for the Company and market demand for its shares. Since the period end date, the Russian invasion of Ukraine has resulted in considerable market volatility and uncertainty. However the Board and the Investment Adviser have reviewed the investment portfolio and have identified limited direct impact on the portfolio, but continues to monitor situation and impact on the Company's investment portfolio. Based on the foregoing, the Directors have adopted the going concern basis in preparing the Financial Statements. The Directors have a reasonable expectation that the Company and Group have adequate operational resources to continue in operational existence for at least twelve months from the date of approval of these Financial Statements. ### *Critical accounting judgements, estimates and assumptions* The preparation of Financial Statements in accordance with IFRS requires the Directors to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of income and expense during the period. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision only affects that period or in the period and future periods if the revision affects both current and future periods. ## Judgements ### *Investment entity* In accordance with the Investment Entities exemption contained in IFRS 10, the Board has determined that the Company satisfies the criteria to be regarded as an investment entity and that the Company provides investment related services and, as a result, measures its investment in the Limited Partnership at fair value. The Limited Partnership serves as an asset holding entity and does not provide investment-related services. Therefore, when the Limited Partnership is assessed based on the overall structure as a means of carrying out the Company's activities, the Board of Directors has determined that the Limited Partnership meets the definition of an investment entity. Accordingly, the Company is required under IFRS 10 to hold its investment in the Limited Partnership at fair value through the Statement of Comprehensive Income rather than consolidate them. The General Partner provides investment related services to the Limited Partnership on behalf of the Company. IFRS 10 requires subsidiaries that provide services that relate to the investment entity's investment activities to be consolidated. Accordingly, the Board of Directors have determined that the Company is required under IFRS 10 to consolidate the results of the General Partner. As described in the Reporting Entity section, the Financial Statements as presented represent both the Parent's and the Group's financial position, performance and cash flows. These conclusions involved a degree of judgement and assessment as to whether the Company, the Limited Partnership and the General Partner met the criteria outlined in the accounting standards. Strategic Report Governance Financial statements Other information FUTURE FUEL NOW 63 HydrogenOne Capital Growth plc Annual Report 2021 # Notes to the financial statements ## Estimates ### *Investment valuations* The key estimate in the Financial Statements is the determination of the fair value of the Private Hydrogen Assets, held by the Limited Partnership, by the Investment Adviser for consideration by the Directors. This estimate is key as it significantly impacts the valuation of the Limited Partnership at the period end. The fair valuation process involves estimation using subjective inputs that are unobservable (for which market data is unavailable). The key inputs considered in the valuation are described in note 14. ## Comparatives There are no comparatives as this is the first accounting period. ## New standards, interpretations and amendments adopted from 1 January 2021 A number of new standards, amendments to standards are effective for the annual periods beginning after 1 January 2021. None of these have had a significant effect on the measurement of the amounts recognised in the Financial Statements. ## New standards and amendments issued but not yet effective The relevant new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Financial Statements are disclosed below. These standards are not expected to have a material impact on the entity in 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 ### (a) Financial instruments #### *Financial assets – Classification, recognition, derecognition and measurement* The Company and Group's financial assets principally comprise of: investments held at fair value through profit or loss (Listed Hydrogen Assets and the Limited Partnership); and trade and other receivables, which are initially recognised at fair value and subsequently measured at amortised cost. Financial assets are recognised in the Statement of Financial Position when the Company or Group become a party to the contractual provisions of the instrument. Transaction costs that are directly attributable to the acquisition or issue of financial assets (other than financial assets at fair value through profit or loss) are added to or deducted from the fair value of the financial assets, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets at fair value through profit or loss are recognised immediately in profit or loss. 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 recognised in the Statement of Comprehensive Income at each valuation point within 'gains/losses' on investments. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Company or Group have transferred substantially all risks and rewards of ownership. 64 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Financial liabilities – Classification, recognition, derecognition and measurement Strategic Report The Company and Group’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. Financial liabilities are recognised in the Statement of Financial Position when the Company or Group become a party to the contractual provisions of the instrument. Transaction costs that are directly attributable to the acquisition or issue of financial liabilities (other than financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial liabilities at fair value through profit or loss are recognised immediately in profit or loss. Financial liabilities are subsequently measured at amortised cost. A financial liability (in whole or in part) is derecognised when the Company or Group have extinguished the contractual obligations, it expires or is cancelled. Governance Valuation of Listed Hydrogen Assets Upon initial recognition Listed Hydrogen Assets are classified by the Company and Group ‘at fair value through profit or loss’. They are accounted for on the date they are traded and are included initially at fair value which is taken to be their cost. Subsequently they are valued at fair value, which is the bid market price, or if bid price is unavailable, last traded price on the relevant exchange. Valuation of the Limited Partnership The Company and Group has determined that the fair value of the Limited Partnership is the Limited Partnership’s Net Asset Value (“NAV”). The NAV of the Limited Partnership is prepared in accordance with accounting policies that are consistent with IFRS and consists of the fair value of its Private Hydrogen Assets, and the carrying value of its assets and liabilities. The Investment Adviser values the Private Hydrogen Assets according to IPEV Guidelines. Financial statements Other information The techniques applied are predominantly market based approaches and/or discounted cash flows (“DCF”) where appropriate forecasts can be done. The market-based approaches available under IPEV Guidelines are set out below and are followed by an explanation of how they are applied to the Private Hydrogen Assets: • Multiples; • Industry Valuation Benchmarks; and • Available Market Prices. The nature of the Private Hydrogen Assets will influence the valuation technique applied. The valuation approach recognises that, as stated in the IPEV Guidelines, the price of a recent investment, if resulting from an orderly transaction, generally represents fair value as at the transaction date and may be an appropriate starting point for estimating fair value at subsequent measurement dates. However, consideration is given to the facts and circumstances as at the subsequent measurement date, including changes in the market or performance of the investee company. Milestone analysis is used where appropriate to incorporate the operational progress of the investee company into the valuation. Additionally, the background to the transaction must be considered. As a result, various multiples-based techniques are employed to assess the valuations particularly in those Private Hydrogen Assets with established revenues and/or earnings. An absence of relevant industry peers may preclude the application of the industry valuation benchmarks technique and an absence of observable prices may preclude the available market prices approach. All valuations are cross-checked for reasonableness by employing relevant alternative techniques. Fair values for operational Private Hydrogen Assets may be derived from a DCF methodology and the results benchmarked against appropriate multiples and key performance indicators (“KPIs”), where available for the relevant sector/industry. In a DCF valuation, the fair value represents the present value of the investment’s expected future cash flows, based on appropriate assumptions for revenues and costs, and suitable cost of capital assumptions. Judgement is applied in arriving at appropriate discount rates, based on the knowledge of the market, taking into account market intelligence gained from bidding activities, discussions with financial advisers, consultants, accountants and lawyers and publicly available information. FUTURE FUEL. NOW 65 HydrogenOne Capital Growth plc Annual Report 2021 ## Notes to the financial statements A range of sources are reviewed in determining the underlying assumptions to apply in a DCF valuation used in calculating the fair value of a Private Hydrogen Asset. These sources include but are not limited to: • macroeconomic projections adopted by the market as disclosed in publicly available resources; • macroeconomic forecasts provided by expert third party economic advisers; • discount rates publicly disclosed in the global renewables sector; • discount rates applicable to comparable infrastructure asset classes, which may be procured from public sources or independent third-party expert advisers; • discount rates publicly disclosed for comparable market transactions of similar assets; and • capital asset pricing model outputs and implied risk premia over relevant risk free rates. Where available, assumptions are based on observable market and technical data. The Private Hydrogen Assets have been valued at 31 December 2021 using the price of recent investment which was calibrated/ cross-checked using a DCF valuation. The Company may make investments in Private Hydrogen Assets directly, via the Limited Partnership and/or by way of holdings in special purpose vehicles or intermediate holding entities. These vehicles will be measured at fair value through profit or loss based on their NAV at the period end, which is principally derived from the valuation of their Private Hydrogen Assets. (b) Foreign currency Functional and presentation currency Items included in the Financial Statements are measured using the currency of the primary economic environment in which the entity operates, the functional currency. The Financial Statements are presented in Pounds Sterling which is the Company and Group’s functional and presentation currency. Transactions and balances Foreign currency transactions are translated into Pounds Sterling using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income. (c) Income Investment income has been accounted for on an ex-dividend basis or when the right to the income is established. Special dividends are credited to capital or revenue in the Statement of Comprehensive Income, according to the circumstances surrounding the payment of the dividend. Overseas dividends are included gross of withholding tax recoverable. (d) Dividend payable Interim dividends are recognised when the Company pays the dividend. Final dividends are recognised in the period in which they are approved by the shareholders. (e) Expenses All expenses are accounted for on an accruals basis. Expenses directly related to the acquisition or disposal of an investment (transaction costs) are taken to the Statement of Comprehensive Income as a capital item. All other expenses, including Investment Adviser fees, are taken to the Statement of Comprehensive Income as a revenue item. (f) Taxation The tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on the taxable profit for the period. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that were applicable at the financial reporting date. Where expenses are allocated between capital and revenue any tax relief in respect of the expenses is allocated between capital and revenue returns on the marginal basis using the Company’s effective rate of corporation taxation for the relevant accounting period. 66 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the financial reporting Strategic Report date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the financial reporting date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the timing differences can be deducted. Deferred tax assets and liabilities are measured at the rates applicable to the legal jurisdictions in which they arise. Since the General Partner does not have any income or expenditure in the period, the Group tax position is the same as the Company tax position. (g) Segmental reporting The Board has considered the requirements of IFRS 8 – ‘Operating Segments’. The Company has entered into an Investment Advisory Agreement with the Investment Adviser under which the Investment Adviser is responsible for the management of the Company’s investment portfolio, subject to the overall supervision of the Board of Directors. Subject to its terms and conditions, the Governance Investment Advisory Agreement requires the Investment Adviser to manage the Company’s investment portfolio in accordance with the Company’s investment guidelines as in effect from time to time, including the authority to purchase and sell investments and to carry out other actions as appropriate to give effect thereto. However, the Board retains full responsibility to ensure that the Investment Adviser adheres to its mandate. Moreover, the Board is fully responsible for the appointment and/or removal of the Investment Adviser. Accordingly, the Board is deemed to be the ‘Chief Operating Decision Maker’ of the Company. The Directors are of the opinion that the Company is engaged in a single segment of business being investment into the hydrogen focussed investments. Segment information is measured on the same basis as that used in the preparation of the Company’s Financial Statements. (i) Cash and cash equivalents Cash comprises cash and demand deposits. Cash equivalents, include bank overdrafts, and short-term, highly liquid investments Financial statements Other information that are readily convertible to known amounts of cash, are subject to insignificant risks of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. (j) Nature and purpose of equity and reserves: Share capital represents the 1p nominal value of the issued share capital. The share premium account arose from the net proceeds of new shares issued. Costs directly attributable to the issue of new shares are charged against the value of the ordinary share premium. The capital reserve reflects any: • gains or losses on the disposal of investments; • exchange movements of a capital nature; • the increases and decreases in the fair value of investments which have been recognised in the capital column of the Statement of Comprehensive Income; and • expenses which are capital in nature. The revenue reserve reflects all income and expenditure recognised in the revenue column of the Statement of Comprehensive Income and is distributable by way of dividend. The Company’s distributable reserves consist of the revenue reserve and the capital reserve. However any gains in the fair value of investments that are not readily convertible to cash are treated as unrealised gains in the capital reserve and are non-distributable. Ordinary Shares are classified as equity. FUTURE FUEL. NOW 67 HydrogenOne Capital Growth plc Annual Report 2021 # Notes to the financial statements ## 4. Investments held at fair value through profit or loss ### (a) Summary of valuation | | As at 31 December 2021 £'000 | | --- | --- | | Investments held at fair value through profit or loss | | | Listed Hydrogen Assets | 8,233 | | Limited Partnership | 60,597 | | Closing valuation of financial assets at fair value through profit or loss | 68,830 | ### (b) Movements in valuation | | £'000 | | --- | --- | | Opening valuation of financial assets at fair value through profit or loss | – | | Opening unrealised gains on investments | – | | Opening cost of financial assets at fair value through profit or loss | – | | Additions, at cost – Listed Hydrogen Assets | 9,461 | | Additions, at cost – Limited Partnership | 60,977 | | Cost of financial assets at fair value through profit or loss at the end of the period | 70,438 | | Loss on investments – Listed Hydrogen Assets | (1,228) | | Loss on investments – Limited Partnership | (380) | | Closing valuation of financial assets at fair value through profit or loss | 68,830 | ### (c) Loss on investments | | £'000 | | --- | --- | | Movement in unrealised loss – Listed Hydrogen Assets | (1,228) | | Movement in unrealised loss – Limited Partnership | (380) | | Total loss on investments | (1,608) | Under IFRS 13 'Fair Value Measurement', an entity is required to classify investments using a fair value hierarchy that reflects the significance of the inputs used in making the measurement decision. The following shows the analysis of financial assets recognised at fair value based on: #### 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. Transfers between levels of the fair value hierarchy are recognised as at the end of the reporting period during which the change has occurred. There have been no transfers between levels during the period ended 31 December 2021. 68 FUTURE FUEL NOW HydrogenOne Capital Growth plc Annual Report 2021 The classification of the Company and Group's investments held at fair value through profit or loss is detailed in the table below: | | 31 December 2021 | | | | | --- | --- | --- | --- | --- | | | Level 1 £'000 | Level 2 £'000 | Level 3 £'000 | Total £'000 | | Listed Hydrogen Assets | 8,233 | – | – | 8,233 | | Limited Partnership | – | – | 60,597 | 60,597 | | | 8,233 | – | 60,597 | 68,830 | The Company and Group's Level 3 investment is the investment in the Limited Partnership. The NAV of the Limited Partnership as of 31 December 2021 is £60,597,000. The movement on the Level 3 investments during the period is shown below: | | 31 December 2021 £'000 | | --- | --- | | Opening balance | – | | Investment in Limited Partnership | 60,977 | | Unrealised loss on investment in Limited Partnership | (380) | | Closing balance | 60,597 | #### Look-through financial information The NAV of the Limited Partnership consists of the fair value of its Private Hydrogen Assets and the carrying value of its assets and liabilities. As at the period end, the Limited Partnership held three Private Hydrogen Assets. The following table reconciles the fair value of the Private Hydrogen Assets and the NAV of the Limited Partnership. | | 31 December 2021 £'000 | | --- | --- | | Investment in Private Hydrogen Assets | 39,231 | | Plus: net current assets | 21,366 | | NAV of the Limited Partnership | 60,597 | The Level 3 Private Hydrogen Assets are valued by the Investment Adviser in accordance with IPEV Guidelines, as outlined in note 3. The key inputs considered in the valuation are described in note 14. At 31 December 2021, the valuation of the Limited Partnership's underlying investment in Private Hydrogen Assets was determined as follows: | Name | Country of Incorporation | Value of Investment £'000 | Primary valuation technique | Significant unobservable inputs | Range input | | --- | --- | --- | --- | --- | --- | | Sunfire GmbH | Germany | 20,180 | Price of recent Investment | Third-party pricing (without adjustment) | n/a | | HiiROC Limited | United Kingdom | 10,001 | Price of recent Investment | Third-party pricing (without adjustment) | n/a | | NanoSUN Limited | United Kingdom | 9,050 | Price of recent Investment | Third-party pricing (without adjustment) | n/a | The investments have been fair valued using the price of a recent investment based on unadjusted third-party pricing information. Therefore, the Company is not required to disclose any quantitative information regarding the unobservable inputs as they have not been developed by the Company and are not reasonably available to the Company. Strategic Report Governance Financial statements Other information FUTURE FUEL NOW 69 HydrogenOne Capital Growth plc Annual Report 2021 # Notes to the financial statements ## 5. Investment Adviser fee | | Period ended 31 December 2021 | | | | --- | --- | --- | --- | | | Revenue £'000 | Capital £'000 | Total £'000 | | Investment Adviser fee | 265 | – | 265 | At 31 December 2021 an amount of £48,349 was payable to the Investment Adviser in respect of the Investment Adviser fee. Additionally, the Company has agreed with the Investment Adviser that the costs and expenses of the IPO would be capped at 2% of the gross proceeds received, with any cost above this amount to be paid by the Investment Adviser by way of rebate of its adviser fee. At 31 December 2021, £141,493 in respect of excess issue costs is due to be received from the Investment Adviser. ### Investment Adviser fee The Company has entered into an Investment Adviser Agreement dated 5 July 2021 between the Company, the AIFM and the Investment Adviser (the "Investment Adviser Agreement"), pursuant to which the Investment Adviser has been given responsibility for investment advisory services in respect of any Private Hydrogen Assets the Company invests in directly and the Listed Hydrogen Assets (including Listed Hydrogen Assets forming part of the Liquidity Reserve and uninvested cash) in accordance with the Company's investment policy, subject to the overall control and supervision of the AIFM. Under the Investment Adviser Agreement, the Investment Adviser receives from the Company, quarterly in advance, an advisory fee equal to: - (i) 1.0% of the Net Asset Value per annum of the Listed Hydrogen Assets up to £100 million; - (ii) 0.8% of the Net Asset Value per annum of the Listed Hydrogen Assets from £100 million (save that the Investment Adviser has agreed to reduce this fee to 0.5% in respect of the Liquidity Reserve pending their investment in Private Hydrogen Assets for 18 months following Admission to 30 January 2023); - (iii) 1.5% of the Net Asset Value per annum of any Private Hydrogen Assets held by the Company directly (i.e. not held by the Limited Partnership or any other undertaking advised by the Investment Adviser where the Investment Adviser is receiving a separate advisory fee); and - (iv) for so long as the Company is not considered a 'feeder fund' for the purposes of the Listing Rules, 1.5% per annum of the Net Asset Value of the Private Hydrogen Assets held by the Limited Partnership. The Limited Partnership has entered into a Limited Partnership Investment Adviser Agreement dated 5 July 2021 (the "Limited Partnership Investment Adviser Agreement") between the General Partner (in its capacity as general partner of the Limited Partnership), the AIFM and the Investment Adviser, pursuant to which the Investment Adviser has been given responsibility for investment advisory services in respect of the Private Hydrogen Assets in accordance with the investment policy of the Limited Partnership, subject to the overall control and supervision of the AIFM. Under the Limited Partnership Investment Adviser Agreement, the Investment Adviser, if the Company was considered a 'feeder fund' for the purposes of the Listing Rules by virtue of additional investors co-investing via the Limited Partnership in the future, shall receive from the Limited Partnership an advisory fee equal to 1.5% per annum of the Net Asset Value of the Private Hydrogen Assets held by the Limited Partnership, payable quarterly in advance. Advisory fees paid or payable by the Limited Partnership are reflected through the NAV of the Limited Partnership. No performance fee is paid or payable to the Investment Adviser under either the Investment Adviser Agreement or the Limited Partnership Investment Adviser Agreement but the principals of the Investment Adviser are, subject to certain performance conditions being met, entitled to carried interest fees from the Limited Partnership. Refer to 'Carried Interest Partner Fees' section below. ### Carried Interest Partner Fees Pursuant to the terms of the Limited Partnership Agreement dated 5 July 2021 as amended and restated on 26 November 2021 (the "Limited Partnership Agreement"), the Carried Interest Partner is, subject to the limited partners of the Limited Partnership receiving an aggregate annualised 8% realised return (i.e. the Company and, in due course, any additional co-investors), entitled to a carried interest fee in respect of the performance of the Private Hydrogen Assets. 70 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Subject to certain exceptions, the Carried Interest Partner will receive, in aggregate, 15% of the net realised cash profits from the Strategic Report Private Hydrogen Assets held by the Limited Partnership once the limited partners of the Limited Partnership (i.e. the Company and, in due course, any additional co-investors) have received an aggregate annualised 8% realised return. This return is subject to a ‘catch-up’ provision in Carried Interest Partner’s favour. Any realised or unrealised carried interest fee paid or payable to the Carried Interest Partner is reflected through the NAV of the Limited Partnership. During the period there was no realised or unrealised carried interest fee paid or payable. 20% of any carried interest received (net of tax) will be used by the principals of the Investment Adviser to acquire Ordinary Shares in the market. Any such acquired shares will be subject to a 12-month lock-up from the date of purchase. General Partner’s priority profit share Under the Limited Partnership Agreement, the General Partner of the Limited Partnership shall be entitled to a General Partner’s Profit Share (“GPS”). The GPS for each accounting period shall be an amount equal to 1.5% of the prevailing NAV of the Limited Governance Partnership. For so long as the Company is the sole limited partner of the Limited Partnership, the GPS shall be distributed to the Company rather than the General Partner. The Company is currently the sole limited partner of the Limited Partnership. Therefore, under the Investment Adviser Agreement, the investment adviser fee in relation to the Private Hydrogen Assets held by the Limited Partnership is settled by the Company which for the period totalled £71,558. During the period the Limited Partnership did not call any GPS from the Company as the net effect of the calling and distributing GPS from/to the Company is £nil. 6. Other expenses For the period ended 31 December 2021 Financial statements Other information £’000 Administration & Secretarial Fees 94 AIFM Fees 45 Directors’ Fees 101 Custodian Charges 21 Brokers Fees 24 Registrar’s Fees 9 Legal Fees 8 Audit Fees 135 D & O Insurances 21 PR & Marketing 36 Other expenses 46 Total revenue expenses 540 Expenses charged to capital: Capital transaction costs 5 Total expenses 545 Prior to appointment as the Company and Group’s Auditor, the auditors received £138,000 (including VAT of £23,000) for non-audit initial public offering-related services, which have been treated as a capital expense and included in ‘share issue costs’ disclosed in the Statement of Changes in Equity. This service is required by law or regulation and is therefore a permissible non-audit service under the FRC Ethical Standard. FUTURE FUEL. NOW 71 HydrogenOne Capital Growth plc Annual Report 2021 # Notes to the financial statements ## 7. Taxation ### (a) Analysis of charge in the period | | For the period ended 31 December 2021 | | | | --- | --- | --- | --- | | | Revenue £'000 | Capital £'000 | Total £'000 | | Withholding tax expense | – | – | – | | Total tax charge for the period | – | – | – | ### (b) Factors affecting total tax charge for the period | | For the period ended 31 December 2021 | | | | --- | --- | --- | --- | | | Revenue £'000 | Capital £'000 | Total £'000 | | Loss on ordinary activities before taxation | (805) | (1,612) | (2,417) | | Corporation tax at 19% | (153) | (306) | (459) | | Effects of: | | | | | Deferred tax asset not recognised | 153 | – | 153 | | Loss on investments held at fair value not taxable | – | 306 | 306 | | | – | – | – | The Company is not liable to tax on capital gains due to its status as an investment trust. The Company and Group has an unrecognised deferred tax asset of £201,000 based on the long term prospective corporation tax rate of 25%. The March 2021 Budget announced an increase to the main rate of corporation tax to 25% from 1st April 2023. This increase in the standard rate of corporation tax was substantively enacted on 24th May 2021. This asset has accumulated because deductible expenses exceeded taxable income for the period ended 31 December 2021. No asset has been recognised in the Financial Statements because, given the composition of the Company and Group's portfolio, it is not likely that this asset will be utilised in the foreseeable future. ## 8. Trade and other receivables | | As at 31 December 2021 £'000 | | --- | --- | | Prepayments | 24 | | Other receivables | 159 | | | 183 | ## 9. Trade and other payables | | As at 31 December 2021 £'000 | | --- | --- | | Amounts falling due within one year: | | | Accrued expenses | 246 | | | 246 | 72 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 ## 10. Share capital | | As at 31 December 2021 | | | --- | --- | --- | | | No. of shares | Nominal value of shares (£) | | **Allotted, issued and fully paid:** | | | | Allotted upon incorporation | | | | Ordinary Shares of 1p each | 1 | 0.01 | | Management Shares of £1.00 each | 50,000 | 50,000.00 | | Allotted/redeemed following admission to LSE | | | | Ordinary Shares issued | 107,349,999 | 1,073,499.99 | | Management Shares redeemed | (50,000) | (50,000.00) | | **Closing balance as at 31 December 2021** | **107,350,000** | **1,073,500.00** | The Company is permitted to hold Ordinary Shares acquired by way of market purchase in treasury, rather than having to cancel them. Such Ordinary Shares may be subsequently cancelled or sold for cash. No Ordinary Shares have been repurchased during the period therefore there were no Treasury shares at the end of the period. Each Ordinary Share held entitles the holder to one vote. All shares carry equal voting rights and there are no restrictions on those voting rights. ## 11. Return per ordinary share Return per share is based on the weighted average number of Ordinary Shares in issue during the period ended 31 December 2021 of 63,997,115. | | For the period ended 31 December 2021 | | | | --- | --- | --- | --- | | | Revenue £'000 | Capital £'000 | Total £'000 | | Loss for the period (£'000) | (805) | (1,612) | (2,417) | | Return per Ordinary Share | (1.26)p | (2.52)p | (3.78)p | There is no dilution to return per share as the Company has only Ordinary Shares in issue. ## 12. Net asset value per ordinary share | | As at 31 December 2021 £'000 | | --- | --- | | Net Asset Value (£'000) | 102,786 | | Ordinary Shares in issue | 107,350,000 | | **NAV per Ordinary Share** | **95.75p** | There is no diluted Net Asset Value per share as the Company has only Ordinary Shares in issue. Strategic Report Governance Financial statements Other information FUTURE FUEL NOW 73 HydrogenOne Capital Growth plc Annual Report 2021 # Notes to the financial statements ## 13. Related party transactions and material contracts ### Directors Fees are payable to the Directors at an annual rate of £65,000 to the Chairman, £55,000 to the Chairman of the Audit and Risk Committee and £45,000 to the other Directors with the exception of Mr Bell who is not remunerated for his role as a Non-Executive Director. These fees were effective from the date of appointment of each Director being 20 May 2021 for each Board member with the exception of Mr Bell who was appointed 1 October 2021 and Mrs Rotheroe who was appointed 8 February 2022. Details of the Directors remuneration paid during the period is given in note 6. At the period end, the Directors had the following holdings in the Company: | | Ordinary Shares at 31 December 2021 | | --- | --- | | Simon Hogan | 40,000 | | Caroline Cook | 20,100 | | Afkenel Schipstra | 10,100 | | Roger Bell | – | | Abigail Rotheroe^{1} | – | 1. Abigail Rotheroe was appointed as a Non-Executive Director on 8 February 2022. ### Investment Adviser Fees payable to the Investment Adviser are shown in the Statement of Comprehensive Income. Fees details of the Investment Adviser are shown in note 5. At 31 December 2021, the principals of the Investment Adviser, Dr JJ Traynor and Mr R Hulf, each held 100,000 Ordinary Shares of the Company. Transactions between the Company and the Investment Adviser during the period are disclosed in note 5. ### INEOS Energy The Relationship and Co-Investment Agreement dated 19 June 2021 between INEOS UK E&P Holdings Limited ("INEOS Energy"), the Investment Adviser, the Company and the General Partner (acting in its capacity as the general partner of the Limited Partnership), pursuant to which the parties agreed that: (i) INEOS Energy would subscribe for and/or shall procure that its associates shall subscribe for at least 25 million Ordinary Shares in the IPO; (ii) such Ordinary Shares subscribed by INEOS Energy would be subject to a 12 month lock-up from the date of purchase pursuant to which INEOS Energy agreed that it will not sell, grant options over or otherwise dispose of any interest in any such Ordinary Shares purchased by them (subject to the usual carve-outs); (iii) INEOS Energy was entitled to nominate one Non-Executive Director for appointment to the Board; (iv) prior to making any co-investment opportunity in relation to a Private Hydrogen Assets that is a project to any limited partner of the Limited Partnership, the Company and the Investment Adviser will give INEOS Energy a right of first refusal to acquire up to 100% of such co-investment opportunity (provided that the 'related party transaction' requirements set out in the Listing Rules are complied with); (v) INEOS Energy are provided with certain information rights relating to Private Hydrogen Assets and co-investment opportunities; and (vi) INEOS Energy shall be entitled to second one or more employees to the Investment Adviser from time-to-time. INEOS Energy has agreed that all transactions between INEOS Energy and its associates and any member of the Company and Group and/or the Investment Adviser are conducted at arm's length on normal commercial terms. At the IPO, INEOS Energy subscribed for and received 25 million Ordinary Shares of the Company. At 31 December 2021, INEOS Energy held 25 million Ordinary Shares of the Company. Roger Bell is currently Chief Financial Officer of the INEOS Oil and Gas group of companies and was appointed as the Board representative of INEOS Energy on 1 October 2021 pursuant to the Relationship and Co-Investment Agreement entered into between, inter alia, INEOS Energy and the Company at the Company's launch. 74 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 ### Alternative Investment Fund Manager Sanne Fund Management (Guernsey) Limited is appointed to act as the Company's and the Limited Partnership's alternative investment fund manager (the "AIFM") for the purposes of the UK AIFM Rules. The AIFM has delegated the provision of portfolio management services to the Investment Adviser. The AIFM, Company Secretary and Administrator are part of the same Sanne Group plc. Under the AIFM Agreement between the AIFM and the Company dated 5 July 2021, and with effect from Admission, the AIFM shall be entitled to receive from the Company a fee of 0.05% of Net Asset Value per annum up to £250 million, 0.03% of Net Asset Value per annum from £250 million up to £500 million and 0.015% of Net Asset Value per annum from £500 million, in each case adjusted to exclude any Net Asset Value attributable to any Private Hydrogen Assets held through the Limited Partnership and subject to a minimum annual fee of £85,000. Under the AIFM Agreement between the AIFM and the Limited Partnership dated 5 July 2021, the AIFM receives from the Limited Partnership a fee of 0.05% of the net asset value of the Limited Partnership per annum up to £250 million, 0.03% of the net asset value of the Limited Partnership per annum from £250 million up to £500 million and 0.015% of the net asset value of the Limited Partnership per annum from £500 million, subject to a minimum annual fee of £25,000. AIFM fees paid or payable by the Limited Partnership are reflected through the NAV of the Limited Partnership. The AIFM is also entitled to reimbursement of reasonable expenses incurred by it in the performance of its duties. ### Administration and Company Secretarial services fee The Company has entered into an Administration and Company Secretarial Services Agreement dated 5 July 2021 (the "Administrator and Company Secretary Agreement") between the Company and Sanne Fund Services (UK) Limited (the "Company Secretary and Administrator") pursuant to which the Company Secretary and Administrator has agreed to act as Company secretary and administrator to the Company. Under the terms of the Administration and Company Secretarial Services Agreement, the Company Secretary and Administrator receives a fee from the Company of 0.06% of Net Asset Value per annum up to £250 million, 0.05% of Net Asset Value per annum from £250 million up to £500 million and 0.025% of Net Asset Value per annum from £500 million and subject to a minimum annual fee of £135,000 plus a further £10,000 per annum to operate the Company's Liquidity Reserve. Under the terms of the Limited Partnership Administration Agreement 5 July 2021, pursuant to which the Company Secretary and Administrator has agreed to act as administrator to the Limited Partnership, the Company Secretary and Administrator receives an annual fee from the Limited Partnership of £62,500 and of £15,000 in respect of the General Partner. Administration fees paid or payable by the Limited Partnership are reflected through the NAV of the Limited Partnership. For so long as the Company is the sole Limited Partner, the administration fee in respect of the General Partner shall be allocated settled by the Company rather than the General Partner. ### Custodian fee The Company has entered into a Custodian Agreement between the Company and The Northern Trust Company (the "Custodian") dated 23 June 2021 (the "Custodian Agreement"), pursuant to which the Custodian has agreed to act as custodian to the Company. The Custodian is entitled to a minimum annual fee of £50,000 (exclusive of VAT) per annum. The Custodian is also entitled to a fee per transaction taken on behalf of the Company. ### Registrar fee The Company utilises the services of Computershare Investor Services plc (the "Registrar") as registrar to the transfer and settlement of Ordinary Shares. Under the terms of the Registrar Agreement dated 5 July 2021, the Registrar is entitled to a fee calculated based on the number of shareholders, the number of transfers processed and any Common Reporting Standard on-boarding, filings or changes. The annual minimum fee is £4,800 (exclusive of VAT). In addition, the Registrar is entitled to certain other fees for ad hoc services rendered from time to time. Strategic Report Governance Financial statements Other information FUTURE FUEL NOW 75 HydrogenOne Capital Growth plc Annual Report 2021 # Notes to the financial statements ## 14. Financial instruments and capital disclosures ### Risk Management Policies and Procedures The Board of Directors has overall responsibility for the establishment and oversight of the Company and Group's risk management framework. The risk management policies are established to identify and analyse the risks faced by the Company and Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies are reviewed regularly to reflect changes in market conditions and the Company and Group's activities. 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 and Group's activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk, liquidity risk and operational risk. These risks are monitored by the AIFM. Below is a non-exhaustive summary of the risks that the Company and Group are exposed to as a result of its use of financial instruments: The objectives, policies and processes for managing the risks, and the methods used to measure the risks, are set out below. ### Market Risks #### (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 financial assets and liabilities are predominantly denominated in Pounds Sterling and substantially all revenues and expenses are in Pounds Sterling. As at the 31 December 2021, the Company and Group had the following currency exposures, all of which are included in the Statement of Financial Position at fair value based on the exchanges rates at the period end. | | Investments £'000 | Cash £'000 | Other assets & liabilities £'000 | Total £'000 | | --- | --- | --- | --- | --- | | **Currency** | | | | | | Danish Krone | 444 | – | – | 444 | | Euro | 1,485 | – | – | 1,485 | | Korean Won | 957 | – | – | 957 | | Norwegian Krone | 1,515 | – | – | 1,515 | | Swedish Krone | 937 | – | – | 937 | | US Dollar | 1,541 | – | – | 1,541 | | | 6,879 | – | – | 6,879 | The Company and Group mitigate the risk of loss due to exposure to a single currency by way of diversification of the portfolio. At 31 December 2021, an exchange rate movement of +/-5% against Pounds Sterling, which is a reasonable approximation of possible changes based on observed volatility during the period, would have increased or decreased net assets and total return by £344,000. #### (ii) Interest rate risk The Company and Group's interest rate risk on interest bearing financial assets is limited to interest earned on cash balances. At the period end, the Company had cash balances of £34,019,000. An increase in interest rates of 0.5% would impact the profit or loss and net assets of the Company positively by £170,095, with a decrease of 0.5% having an equal and opposite effect. 76 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 The Company and Group's interest and non-interest bearing assets and liabilities as at 31 December 2021 are summarised below: | | Interest bearing £'000 | Non-interest bearing £'000 | Total £'000 | | --- | --- | --- | --- | | **Assets** | | | | | Cash and cash equivalents | 34,019 | – | 34,019 | | Trade and other receivables | – | 183 | 183 | | Investments held at fair value through profit or loss – Listed Hydrogen Assets | – | 8,233 | 8,233 | | Investments held at fair value through profit or loss – Limited Partnership | – | 60,597 | 60,597 | | **Total assets** | **34,019** | **69,013** | **103,032** | | **Liabilities** | | | | | Trade and other payables | – | (246) | (246) | | **Total liabilities** | **–** | **(246)** | **(246)** | #### (iii) Price risk ##### Listed Hydrogen Assets Price risk is defined as the risk that the fair value of a financial instrument held by the Company or Group will fluctuate. Listed Hydrogen Assets are measured at fair value through profit or loss. As of 31 December 2021, the Company and Group held Listed Hydrogen Assets with an aggregate fair value of £8,233,000. All other things being equal, the effect of a 10% increase or decrease in the value of the investments held at the period end would have been an increase or decrease of £823,300 in the Company and Group's loss after taxation for the period ended 31 December 2021 and the Company and Group's net assets at 31 December 2021. At 31 December 2021, the sensitivity rate of 10% is regarded as reasonable due to the actual market price volatility experienced as a result of the economic impact on the Listed Hydrogen Assets. ##### Private Hydrogen Assets The Limited Partnership's portfolio of Private Hydrogen Assets is not necessarily affected by market performance, however the valuations may be affected by the performance of the underlying investments in line with the valuation criteria in note 3. The Private Hydrogen Assets sensitivity analysis recognises that the valuation methodologies employed involve different levels of subjectivity in their inputs primarily driven by recent transactions and expenses accrued. #### Key variable inputs of Private Hydrogen Assets The variable inputs applicable to each broad category of valuation basis will vary depending on the particular circumstances of each Private Hydrogen Asset valuation. An explanation of each of the key variable inputs is provided below and includes an indication of the range in value for each input, where relevant. ##### Selection of appropriate discount rates The selection of an appropriate discount rate is assessed individually for each Private Hydrogen Asset. Publicly disclosed discount rates in the relevant sector, comparable asset classes, which may be procured from public sources or independent third-party expert advisers or for comparable market transactions of similar assets are used where available. Strategic Report Governance Financial statements Other information FUTURE FUEL NOW 77 HydrogenOne Capital Growth plc Annual Report 2021 ## Notes to the financial statements Selection of appropriate benchmarks The selection of appropriate benchmarks is assessed individually for each Private Hydrogen Asset. The industry and geography of each Private Hydrogen Asset are key inputs to the benchmark selection, with either one or two key indices or benchmarks being used for comparison. Selection of comparable companies The selection of comparable companies is assessed individually for each Private Hydrogen Asset at the point of investment, and the relevance of the comparable companies is continually evaluated at each valuation point. The key criteria used in selecting appropriate comparable companies are the industry sector in which they operate and the geography of the Private Hydrogen Asset’s operations. Application of valuation basis Each Private Hydrogen Asset is assessed, and the valuation basis applied will vary depending on the circumstances of each Private Hydrogen Asset. For those Private Hydrogen Assets where a trading multiples approach can be taken, the methodology will factor in revenue, earnings or net assets as appropriate for the Private Hydrogen Asset. Discounted cash flows will be considered where appropriate forecasts are available. The valuation will also consider any recent transactions, where appropriate. Estimated sustainable earnings and cash flows The selection of sustainable revenue or earnings and cash flows will depend on whether the Private Hydrogen Asset is sustainably profitable or not, and where it is not then sustainable revenues will be used in the valuation. The valuation approach will typically assess Private Hydrogen Assets based on the last twelve months of revenue or earnings, as they are the most recent available and therefore viewed as the most reliable. Where a Private Hydrogen Asset has reliably forecasted earnings previously or there is a change in circumstance at the business which will impact earnings going forward, then forward estimated revenue or earnings may be used instead. Application of liquidity discount A liquidity discount may be applied either through the calibration of a valuation against the most recent transaction, or by application of a specific discount. Credit risk The Company and Group are exposed to credit risk in respect of Listed Hydrogen Assets, Private Hydrogen Assets, trade and other receivables and cash at bank. For risk management reporting purposes, the Company and Group considers and aggregates all elements of credit risk exposure (such as individual obligation default risk, country risk and sector risk). As at 31 December 2021 £’000 Investments at fair value through profit or loss – Listed Hydrogen Assets 8,233 Investments at fair value through profit or loss – Limited Partnership 60,597 Trade and other receivables 183 Cash and cash equivalents 34,019 Total 103,032 At 31 December 2021 the Listed Hydrogen Assets of the Company and Group, excluding their investment into the Limited Partnership, are held by Northern Trust Bank (the “Custodian”). Bankruptcy or insolvency of the Custodian may cause the Company and Group’s rights with respect to securities held by the Custodian to be delayed or limited. This risk is managed by monitoring the credit quality and financial positions of the Custodian. 78 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Credit risk of the Private Hydrogen Assets held by the Limited Partnership is assessed from time to time by the Investment Adviser on a look-through basis. The Company and Group's policy on credit risk mirrors that of the Limited Partnership, which is to minimise its exposure to counterparties with perceived higher risk of default by dealing only with counterparties that meet the credit standards set out in the Company's prospectus. The Investment Adviser seeks to manage this risk by providing diversification in terms of underlying investments, issuer section, geography and maturity profile. As of the 31 December 2021, three Private Hydrogen Assets are held by the Limited Partnership as shown in note 15. The cash and cash equivalents are held with Northern Trust Bank, EFG International Bank, Royal Bank of Scotland and through the Goldman Sachs- Liquid reserve fund. The Fitch Rating credit rating of Northern Trust Bank is AA, EFG international Bank is A, Royal Bank of Scotland A+ and the Goldman Sachs Liquid reserve fund is AAA. At the period end there were no trade and receivables past due. The credit risk exposure is minimised by dealing with financial institutions with investment grade credit ratings. ### Liquidity risks Liquidity risk is the risk that the Company or Group may not be able to meet a demand for cash or fund an obligation when due. The Investment Adviser, AIFM and the Board continuously monitor forecast and actual cashflows from operating, financing and investing activities to consider payment of dividends, or further investing activities. Financial assets and liabilities by maturity at the period end are shown below: | | Less than 1 year £'000 | 1-5 years £'000 | Total £'000 | | --- | --- | --- | --- | | **Assets** | | | | | Investments at fair value through profit or loss – Listed Hydrogen Assets | 8,233 | – | 8,233 | | Investments at fair value through profit or loss – Limited Partnership | – | 60,597 | 60,597 | | Trade and other receivables | 183 | – | 183 | | Cash and cash equivalents | 34,019 | – | 34,019 | | **Total assets** | **42,435** | **60,597** | **103,032** | | **Liabilities** | | | | | Trade and other payables | (246) | – | (246) | | **Total liabilities** | **(246)** | **–** | **(246)** | ### Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the processes, technology and infrastructure supporting the activities relating to financial instruments, either internally or on the part of service providers, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of investment management behaviour. Operational risk is managed so as to balance the limiting of financial losses and reputational damage with achieving the investment objective of generating returns to investors. The AIFM works with the Board to identify the risks facing the Company and the Limited Partnership. The key risks are documented and updated in the Risk Matrix by the AIFM. The primary responsibility for the development and implementation of controls over operational risk rests with the Board. Strategic Report Governance Financial statements Other information FUTURE FUEL NOW 79 HydrogenOne Capital Growth plc Annual Report 2021 # Notes to the financial statements This responsibility is supported by the development of overall standards for the management of operational risk, which encompasses the controls and processes at the service providers and the establishment of service levels with the service providers. The Directors' assessment of the adequacy of the controls and processes in place at service providers with respect to operational risk is carried out through having discussions with and reviewing reports, including those on their internal controls, from the service providers. ## Capital Management Policies and Procedures The Company and Group's capital management objectives are to ensure that the Company and Group will be able to continue as a going concern while maximising the return to equity shareholders. In accordance with the investment objective, the principal use of cash (including the proceeds of the IPO and placings) is investing in hydrogen focussed assets, as well as expenses related to the share issue when they occur, ongoing operational expenses and payment of dividends and other distributions to shareholders in accordance with the Company's dividend policy. The Company and Group considers their capital to comprise share capital, distributable reserves and retained earnings. The Company and Group are not subject to any externally imposed capital requirements. The Company and Group's share capital, distributable reserves and retained earnings are shown in the Statement of Financial Position at a total £102,786,000. ## 15. Subsidiary and related entities ### Subsidiary The Company owns 100% HydrogenOne Capital Growth (GP) Limited. | Subsidiary name | Effective ownership | Country of ownership | Principal activity | Issued share capital | Registered address | | --- | --- | --- | --- | --- | --- | | HydrogenOne Capital Growth (GP) Limited | 100% | United Kingdom | General partner of HydrogenOne Capital Growth Investments (1) LP | £1 | 6th Floor, 125 London Wall, London, EC2Y 5AS | ### Related entities The Company holds Private Hydrogen Assets through its investment in the Limited Partnership, which has not been consolidated as a result of the adoption of IFRS 10: Investment entities exemption to consolidation. There are no cross guarantees amongst related entities. Below are details of the unconsolidated Private Hydrogen Assets held through the Limited Partnership. | Name | Effective ownership by the Limited Partnership | Purpose of the entity | Country of Incorporation | Value of Investment £'000 | Total assets as at 31 December 2021 (unaudited) £'000 | Registered address | | --- | --- | --- | --- | --- | --- | --- | | Sunfire GmbH | 4.92% | Electrolyser producer | Germany | 20,180 | 141,674 | Gasanstaltstraße 2 01237 Dresden, Germany | | HiiROC Limited | 5.91% | Supplier of clean hydrogen production technology | United Kingdom | 10,001 | 27,137 | 22 Mount Ephraim, Tunbridge Wells, Kent, TN4 8AS | | NanoSUN Limited | 22.91% | Supplier of mobile hydrogen storage and refuelling systems | United Kingdom | 9,050 | 14,454 | Abraham Heights Farm, Westbourne Road, Lancaster, LA1 5EF | The maximum exposure to loss from the unconsolidated entities is the carrying amount of the financial assets held. During the period the Company did not provide financial support and has no intention of providing financial or other support to the subsidiary and the unconsolidated Private Hydrogen Assets held through the Limited Partnership. 80 FUTURE FUEL NOW HydrogenOne Capital Growth plc Annual Report 2021 ## 16. Post balance sheet events On 20 December 2021, investment of £10,015,000 was made through the Limited Partnership in respect of Bramble Energy Limited, an unlisted fuel cell innovation company. This was purchased by the Limited partnership for £10,000,000 on 14 February 2022. On 2 March 2022, the Limited Partnership signed definitive agreements for an investment of NOK 40,000,000 (£3,500,000) in Gen2 Energy AS, a Norwegian green hydrogen development company. On 21 March 2022, a commitment of £7,000,000 was made through the Limited Partnership in respect of Cranfield Aerospace Solutions Ltd ("CAeS"), an unlisted fuel cell innovation company. UK-based CAeS is an aerospace market leader in the design and manufacture of new aircraft design concepts. The first £4.2 million was invested by the Limited Partnership in March 2022. Abigail Rotheroe was appointed as a Non-Executive Director on 8 February 2022 and Caroline Cook will retire as a Non-Executive Director effective 7 April 2022. Since the period end date, the Russian invasion of Ukraine has resulted in market volatility. The Board and the Investment Adviser have reviewed the investment portfolio and have identified limited direct impact on the portfolio but continue to monitor any impact to the Company and Group and its investee companies and the valuation. Strategic Report Governance Financial statements Other information FUTURE FUEL NOW 81 HydrogenOne Capital Growth plc Annual Report 2021 ## Other ## information 83 Alternative Performance Measures 84 Glossary 86 Directors and advisers 87 Report of the Alternative Investment Fund Manager 88 Notice of Annual General Meeting 90 Notes to the notice of Annual General Meeting 82 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 # Alternative Performance Measures (“APM”) APMs are often used to describe the performance of investment companies although they are not specifically defined under IFRS. APM calculations for the Company are shown below. ## Premium The amount, expressed as a percentage, by which the share price is more than the Net Asset Value per Ordinary Share. ### As at 31 December 2021 | | | Page | | | --- | --- | --- | --- | | NAV per Ordinary Share (pence) | a | 3 | 95.75 | | Share price (pence) | b | 3 | 119.50 | | **Premium** | **(b+a)-1** | | **24.8%** | There is no calculation of discount shown as the shares were trading at a premium of 24.8% at the period end. ## Ongoing charges A measure, expressed as a percentage of average net assets during the period, of the regular, recurring annual costs of running an investment company. ### Period ended 31 December 2021 | | | Page | | | --- | --- | --- | --- | | Average NAV | a | n/a | 104,565,796 | | Annualised expenses | b | n/a | 2,155,500 | | **Ongoing charges** | **(b+a)** | | **2.06%** | The ongoing charges percentage is on a consolidated basis and therefore takes into consideration the expenses of the Limited Partnership as well as the Company and is calculated in accordance with the methodology set out by the AIC. The recurring expenses of the Company charged in the period from the Company’s IPO on 30 July 2021 to 31 December 2021 and of the Limited Partnership charged in the period from its date of registration to 31 December 2021 have been annualised for the ongoing charges calculation. ## 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. ### Period ended 31 December 2021 | | | Page | Share price^{1} | NAV^{2} | | --- | --- | --- | --- | --- | | Opening at 30 July 2021 (p) | a | n/a | 100.00 | 98.00 | | Closing at 31 December 2021 (p) | b | 3 | 119.50 | 95.75 | | **Total return** | **(b+a)-1** | | **19.5%** | **(2.3)%** | $^{1}$ Share price total return is based on an opening share price of 100p. $^{2}$ NAV total return is based on an opening NAV after launch expenses of 98.0p per Ordinary Share. n/a = not applicable Strategic Report Governance Financial statements Other information FUTURE FUEL NOW 83 HydrogenOne Capital Growth plc Annual Report 2021 ## Glossary Admission First admission of the Company’s Ordinary Shares to the London Stock Exchange on 30 July 2021. AIC Association of Investment Companies. Alternative Investment Fund An investment vehicle under AIFMD. Under AIFMD (see below) HydrogenOne Capital or “AIF” Growth plc is classified as an AIF. Alternative Investment Fund A European Union directive which came into force on 22 July 2013 and has been Managers Directive or “AIFMD” implemented in the UK. Annual General Meeting or “AGM” A meeting held once a year which shareholders can attend and where they can vote on resolutions to be put forward at the meeting and ask the Directors questions about the company in which they are invested. the Company HydrogenOne Capital Growth plc (“HGEN”). Custodian An entity that is appointed to safeguard a company’s assets. Discount/premium The amount, expressed as a percentage, by which the share price is less/more than the net asset value per share. Dividend Income receivable from an investment in shares. Ex-dividend date The date from which you are not entitled to receive a dividend which has been declared and is due to be paid to shareholders. ESG Environmental, Social and Governance (“ESG”) criteria are a set of standards for a company’s operations that socially conscious investors use to screen potential investments. Environmental criteria consider how a company performs as a steward of nature. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. Financial Conduct Authority The independent body that regulates the financial services industry in the UK. or “FCA” GCC The Cooperation Council for the Arab States of the Gulf, also known as the Gulf Cooperation Council. Gross Asset Value or GAV The aggregate value of the total assets of the Company, including the gross asset value of any investments held in the HydrogenOne Partnership attributable to the Company’s interest in the HydrogenOne Partnership on a look-through basis from time-to-time, calculated in accordance with the Company’s valuation policy. Index A basket of stocks which is considered to replicate a particular stock market or sector. Investment company A company formed to invest in a diversified portfolio of assets. Investment Trust An investment company which is based in the UK and which meets certain tax conditions which enables it to be exempt from UK corporation tax on its capital gains. The Company is an investment trust. Liquidity The extent to which investments can be sold at short notice. Listed Hydrogen Assets Investments in quoted or traded Hydrogen Assets, which will predominantly be equity securities but may also be corporate debt and/or other financial instruments. Net assets or net asset value (“NAV”) An investment company’s assets less its liabilities. NAV per Ordinary Share Net assets divided by the number of Ordinary Shares in issue (excluding any shares held in treasury). 84 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 Offtaker A purchaser of electricity and/or renewable obligation Strategic Report Ordinary Shares The Company’s ordinary shares in issue. Portfolio A collection of different investments held in order to deliver returns to shareholders and to spread risk. Private Hydrogen Assets Investments in unquoted Hydrogen Assets, which may be operational companies or hydrogen projects (completed or under construction). Relative performance Measurement of returns relative to an index. Share buyback A purchase of a company’s own shares. Shares can either be bought back for cancellation or held in treasury. Share price The price of a share as determined by a relevant stock market. Governance Treasury shares A company’s own shares which are available to be sold by a company to raise funds. Volatility A measure of how much a share moves up and down in price over a period of time. Financial statements Other information FUTURE FUEL. NOW 85 HydrogenOne Capital Growth plc Annual Report 2021 ## Directors and advisers | Directors (all Non-Executive) | Investment Adviser | | --- | --- | | Simon Hogan (Chairman) | HydrogenOne Capital LLP | | Caroline Cook (to retire 7 April 2022) | 5 Margaret Street | | Afkenel Schipstra | London | | Roger Bell | W1W 8RG | Abigail Rotheroe Custodian Administrator and Company Secretary The Northern Trust Company | Sanne Fund Services (UK) Limited | 50 Bank Street | | --- | --- | | 6th Floor | Canary Wharf | | 125 London Wall | London | | London | E14 5NT | EC2Y 5AS Registrar Alternative Investment Fund Manager (AIFM) Computershare Investor Services PLC | Sanne Fund Management | The Pavilions | | --- | --- | | (Guernsey) Limited | Bridgwater Road | | Sarnia House | Bristol | | Le Truchot | BS13 8AE | St Peter Port Guernsey Independent Auditor GY1 1GR KPMG Channel Islands Limited Glategny Court Broker Glategny Esplanade Panmure Gordon (UK) Limited Guernsey One New Change GY1 1WR London EC4M 9AF Solicitors to the Company Gowling WLG (UK) LLP 4 More London Riverside London SE1 2AU Registered office* 6th Floor 125 London Wall London EC2Y 5AS *Registered in England and Wales – No 13340859 86 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 ## Report of the Alternative Investment ## Fund Manager Strategic Report Material change Sanne Fund Management (Guernsey) Limited as AIFM must disclose in the Annual Report, details of material changes to the information set out under AIFMD. For these purposes, there are no material changes effective during the period to be noted to the information set out in the Prospectus. Remuneration disclosures The Company is categorised as an EU Alternative Investment Fund (“AIF”). The AIFMD seeks to regulate managers of AIFs, such as the Company. It imposes obligations on AIFMs who manage AIFs in a member state of the European Economic Area (“EEA state”), or who market shares in AIFs to investors who are domiciled, or with a registered office, in an EEA state. Under the AIFMD, an AIFM must be appointed and must comply with various organisational, operational and transparency requirements. On 5 July 2021, the Company appointed Sanne Fund Management (Guernsey) Limited to act as AIFM to the Company. Sanne Fund Governance Management (Guernsey) Limited is responsible for fulfilling the role of the AIFM and ensuring the Company complies with the AIFMD requirements. Details of the total amount of remuneration for the financial year, split into fixed and variable remuneration, paid by the AIFM to its staff, and the number of beneficiaries, are made available to Shareholders on request. Financial statements Other information FUTURE FUEL. NOW 87 HydrogenOne Capital Growth plc Annual Report 2021 # Notice of Annual General Meeting ## Annual General Meeting In line with the requirements of the Companies Act 2006, the Company will hold an Annual General Meeting of shareholders to consider the resolutions laid out in the Notice of Meeting below. ## Notice of Meeting Notice is hereby given that the Annual General Meeting of HydrogenOne Capital Growth plc will be held at 6th Floor, 125 London Wall, London EC2Y 5AS on 24 May 2022 at 12:30pm for the following purposes: To consider and if thought fit pass the following resolutions of which resolutions 1 to 10 will be proposed as ordinary resolutions and resolutions 11 to 13 will be proposed as special resolutions. 1. To receive the Company's annual accounts for the period ended 31 December 2021. 2. To approve the Directors' Remuneration Policy included in the Annual Report for the period ended 31 December 2021. 3. To approve the Directors' Remuneration Report included in the Annual Report for the period ended 31 December 2021. 4. To elect Simon Hogan as a Director of the Company. 5. To elect Afkenel Schipstra as a Director of the Company. 6. To elect Roger Bell as a Director of the Company. 7. To elect Abigail Rotheroe as a Director of the Company. 8. To appoint KPMG Channel Islands Limited as auditor to the Company. 9. To authorise the Directors to fix the remuneration of the auditor until the conclusion of the next Annual General Meeting of the Company. 10. That (a) the Directors be generally and unconditionally authorised pursuant to section 551 of the Companies Act 2006 (the "Act") to allot shares in the Company, or to grant rights to subscribe for or convert any security into shares in the Company, up to a maximum nominal amount of £10,735,000 or, if less, the amount that represents 10% of the nominal value of the Company's issued share capital (excluding treasury shares) on the date on which this resolution is passed; and (b) the authority given by this resolution: (i) shall be in addition to all pre-existing authorities under section 551 of the Act; and (ii) unless renewed, revoked or varied in accordance with the Act, shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2023 or, if earlier, on the expiry of 15 months from the date of passing of this resolution save that the Company may, before such expiry, make any offer or enter into an agreement which would or might require the allotment of shares in the Company, or the grant of rights to subscribe for or to convert any security into shares in the Company, after such expiry and the Directors may allot shares in the Company or grant rights to subscribe for or to convert any security into shares in the Company in pursuance of such an offer or agreement as if such authority had not expired. 88 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 11. That, subject to the passing of resolution 10 set out in this Notice of Annual General Meeting (the "Allotment Authority"), the Directors be given power pursuant to sections 570 and 573 of the Companies Act 2006 (the "Act") to allot equity securities (within the meaning of section 560(1) of the Act) for cash pursuant to the Allotment Authority, and to sell treasury shares for cash, as if section 561(1) of the Act did not apply to such allotment or sale, provided that such power: (a) shall be limited to the allotment of equity securities or the sale of treasury shares up to an aggregate nominal amount of £10,735,000 or, if less, the amount that represents 10% of the nominal value of the Company's issued share capital (excluding treasury shares) on the date on which this resolution is passed; (b) shall be in addition to all pre-existing powers under sections 570 and 573 of the Act; and (c) shall expire at the same time as the Allotment Authority, save that the Company may, before expiry of the power conferred on the Directors by this resolution, make an offer or agreement which would or might require equity securities to be allotted or treasury shares to be sold after such expiry and the Directors may allot equity securities or sell treasury shares in pursuance of such an offer or agreement as if such power had not expired. 12. That the Company be and is hereby generally and unconditionally authorised in accordance with section 701 of the Companies Act 2006 (the "Act") to make market purchases (within the meaning of section 693(4) of the Act) of its Ordinary Shares of 1p each, provided that: (a) the maximum number of Ordinary Shares hereby authorised to be purchased shall be 16,091,765 (representing 14.99% of the Company's issued Ordinary Share capital (excluding shares held in treasury) at the date of the notice of this meeting); (b) the minimum price (exclusive of any expenses) which may be paid for an Ordinary Share is 1p; (c) the maximum price (excluding expenses) which may be paid for an Ordinary Share is not more than the higher of (i) 5% above the average of the middle market quotations for the Ordinary Shares for the five business days immediately before the day on which it purchases that share and (ii) the higher of the price of the last independent trade and the highest current independent bid for the Ordinary Shares; (d) the authority hereby conferred shall expire at the conclusion of the Annual General Meeting of the Company in 2023 or, if earlier, on the expiry of 15 months from the passing of this resolution, unless such authority is renewed prior to such time; and (e) the Company may make a contract to purchase Ordinary Shares under the authority hereby conferred prior to the expiry of such authority, which will or may be executed wholly or partly after the expiration of such authority and may make a purchase of Ordinary Shares pursuant to any such contract. 13. That a general meeting of the Company other than an Annual General Meeting may be called on not less than 14 clear days' notice, provided that this authority shall expire at the conclusion of the Company's next Annual General Meeting after the date of the passing of this resolution. **By order of the Board** Brian Smith For and on behalf of Sanne Fund Services (UK) Limited Company Secretary 31 March 2022 **Registered office:** 6th Floor 125 London Wall London EC2Y 5AS Strategic Report Governance Financial statements Other information FUTURE FUEL NOW 89 HydrogenOne Capital Growth plc Annual Report 2021 ## Notes to the notice of ## Annual General Meeting Website address 1. Information regarding the meeting, including the information required by section 311A of the Companies Act 2006, is available from www. hydrogenonecapitalgrowthplc.com. Entitlement to attend and vote 2. Only those holders of Ordinary Shares registered on the Company’s register of members at 12.30pm on 22 May 2022 or, if this meeting is adjourned, at 12.30pm on the day two days prior to the adjourned meeting, shall be entitled to vote at the meeting. Shareholders will not be permitted to attend the meeting in person and therefore should vote by proxy. Appointment of Proxies 3. Members entitled to vote at the meeting (in accordance with Note 2 above) are entitled to appoint a proxy to vote in their place. However, in view of the format of the meeting, shareholders should appoint the ‘Chairman of the Meeting’ as their proxy rather than another person who will not be permitted to attend. If you wish to appoint a proxy, please follow the instructions at note 6 below if you wish to appoint a proxy through the CREST electronic proxy appointment service. In the case of joint members, only one need sign the Form of Proxy. The vote of the senior joint member will be accepted to the exclusion of the votes of the other joint members. For this purpose, seniority will be determined by the order in which the names of the members appear in the register of members in respect of the joint shareholding. 4. You can appoint the Chairman of the Meeting as your proxy using the voting methods in notes 6 and 7. 5. You can instruct your proxy how to vote on each resolution by marking the resolutions For and Against using the voting methods stated in notes 6 and 7. If you wish to abstain from voting on any resolution, please mark these resolutions withheld. It should be noted that a vote withheld is not a vote in law and will not be counted in the calculation of the proportion of votes ‘For’ and ‘Against’ a resolution. If you do not indicate how your proxy should vote, he/she can exercise his/her discretion as to whether, and if how so how, he/she votes on each resolution, as he/she will do in respect of any other business (including amendments to resolutions) which may properly be conducted at the meeting. Appointment of proxy 6. You can vote either: • by logging on to www.investorcentre.co.uk/eproxy and following the instructions; • by completing a hard copy form of proxy that accompanies this annual report; or • in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures set out below. In order for a proxy appointment to be valid a form of proxy must be completed. In each case the form of proxy must be received by Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY by no later than 12.30pm on 12 May 2022. Appointment of Proxy through CREST 7. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the meeting to be held on the above date and any adjournment(s) thereof by using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by the Company’s agent (ID: 3RA50) by the latest time(s) for receipt of proxy appointments specified in the Notice of Meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the Company’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to a proxy’s appointee through CREST should be communicated to the appointee through other means. 90 FUTURE FUEL. NOW HydrogenOne Capital Growth plc Annual Report 2021 CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & Strategic Report Ireland Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that this CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. All messages relating to the appointment of a proxy or an instruction to a previously appointed proxy, which are to be Governance transmitted through CREST, must be lodged by 12.30pm on 12 May 2022 in respect of the meeting. Any such messages received before such time will be deemed to have been received at such time. In the case of an adjournment, all messages must be lodged with Link Group no later than 48 hours before the rescheduled meeting. Appointment of a proxy through Proxymity 8. If you are an institutional investor you may be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged no later than 48 hours before the time of the Annual General Meeting, in order to be considered valid. Before you can appoint a proxy via this process you will need to have agreed to Proxymity’s associated terms and conditions. It is important that you read these carefully as you will be bound by them and they will govern the electronic appointment of your proxy. Proxymity will then contract with your underlying institutional account holder directly to accept their vote instructions through the platform. Financial statements Other information Termination of proxy appointments 9. In order to revoke a proxy instruction, you will need to inform the Company. Please send a signed hard copy notice clearly stating your intention to revoke your proxy appointment to by Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY. In the case of a member which is a company, the revocation notice must be executed under its common seal or otherwise in accordance with section 44 of the Companies Act 2006 or by signature on its behalf by an officer or attorney whose power of attorney or other authority should be included with the revocation notice. If you attempt to revoke your proxy appointment but the revocation is received after the time specified in note 2 above then, subject to the paragraph directly below, your proxy will remain valid. If you submit more than one valid proxy appointment in respect of the same Ordinary Shares, the appointment received last before the latest time for receipt of proxies will take precedence. Nominated persons 10. If you are a person who has been nominated under section 146 of the Companies Act 2006 to enjoy information rights: • You may have a right under an agreement between you and the member of the Company who has nominated you to have information rights (Relevant Member) to be appointed or to have someone else appointed as a proxy for the meeting. • If you either do not have such a right or if you have such a right but do not wish to exercise it, you may have a right under an agreement between you and the Relevant Member to give instructions to the Relevant Member as to the exercise of voting rights. • Your main point of contact in terms of your investment in the Company remains the Relevant Member (or, perhaps, your custodian or broker) and you should continue to contact them (and not the Company) regarding any changes or queries relating to your personal details and your interest in the Company (including any administrative matters). The only exception to this is where the Company expressly requests a response from you. If you are not a member of the Company but you have been nominated by a member of the Company to enjoy information rights, you do not have a right to appoint any proxies under the procedures set out in the notes to the form of proxy. FUTURE FUEL. NOW 91 HydrogenOne Capital Growth plc Annual Report 2021 # Notes to the notice of Annual General Meeting ## Questions at the meeting 11. Under section 319A of the Companies Act 2006, the Company must answer any question you ask relating to the business being dealt with at the meeting unless: - answering the question would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information; - the answer has already been given on a website in the form of an answer to a question; or - it is undesirable in the interests of the Company or the good order of the meeting that the question be answered. ## Issued Shares and total voting rights 12. The total number of shares in issue in the Company is 107,350,000 Ordinary Shares of 1p each. Therefore, the total number of Ordinary Shares with voting rights is 107,350,000. On a vote by a show of hands, every holder of Ordinary Shares who (being an individual) is present by a person, by proxy or (being a corporation) is present by a duly authorised representative, not being himself a member, shall have one vote. On a poll every holder of Ordinary Shares who is present in person or by proxy shall have one vote for every Ordinary Share held by him. ## Communication 13. Except as provided above, members who have general queries about the meeting should use the following means of communication (no other methods of communication will be accepted): - Computershare's helpline on 0370 707 1346 (or +44 370 707 1346 from outside the UK). Lines are open 8.30am to 5.30pm Monday to Friday (excluding public holidays in England and Wales. Charges for '03' numbers are determined by the caller's service provider. Calls may be recorded and monitored randomly for security and training purposes); - in writing to Computershare. You may not use any electronic address provided either in this Notice of Meeting or in any related documents (including the Form of Proxy for this meeting) to communicate with the Company for any purposes other than those expressly stated. 92 FUTURE FUEL. NOW ## Contents Strategic report 01 Investment objective, highlights and financial information 02 At a glance 04 About Clean Hydrogen 06 Chairman’s Statement 08 Company Objectives 10 Investment Adviser’s Report 22 Environmental, Social and Governance 25 Section 172 Statement 27 Other Information Governance 34 Board of Directors 35 Directors’ Report 39 Corporate Governance 43 Directors’ Remuneration Policy 44 Directors’ Remuneration Implementation Peport 46 Report of the Audit and Risk Committee 48 Statement of Directors’ Responsibilities Financials 50 Independent auditor’s report 56 Parent and consolidated statement of comprehensive income 57 Parent and consolidated statement of financial position 58 Parent and consolidated statement of changes in equity 59 Parent and consolidated statement of cash flows 60 Notes to the parent and consolidated financial statements Other information 83 Alternative Performance Measures (“APMs”) 84 Glossary 86 Directors and Advisers 87 Report of the Alternative Investment Fund Manager Printed sustainably in the UK 88 Notice of Annual General Meeting by Pureprint, a CarbonNeutral® company with FSC® chain 90 Notes to Notice of Annual General Meeting of custody and an ISO 14001- hydrogenonecapitalgrowthplc.com certified environmental management system recycling Designed and produced by over 99% of alldry waste. ## HydrogenOne Capital Growth plc ### Annual Report & Accounts 2021 ### hydrogenonecapitalgrowthplc.com