Gresham Renew 1 Regulatory News (GV1O)

30 January 2024

Gresham House Renewable Energy VCT 1 PLC

(the "VCT" or the "Company")

Full Year Results

The VCT is pleased to announce its full year results for the year ended 30 September 2023.

The Company's Annual Report and Financial Statements for the year ended 30 September 2023 will be posted to shareholders who have elected to receive hard copies. In accordance with Listing Rule 9.6.1 copies of the document have been submitted to the UK Listing Authority and will shortly be available to view on the Company's corporate website at https://greshamhouse.com/real-assets/new-energy-sustainable-infrastructure/gresham-house-renewable-energy-vct-1-plc/ and have also been submitted to the UK Listing Authority and will be shortly available for inspection from the National Storage Mechanism at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism

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Gresham House Renewable Energy VCT 1 PLC - LEI: 213800IVQHJXUQBAAC06

For further information, please contact:

Chairman's Statement

I am pleased to present the Annual Report of Gresham House Renewable Energy VCT1 plc (VCT) for the year ended 30 September 2023.

Following the results of the continuation vote in July 2021, and therefore the decision to enter a Managed Wind Down, the Board together with the Investment Adviser has continued, throughout the year under review, to work towards realising the Company's portfolio of assets in a manner that achieves a balance between maximising net value received from the sale of assets and making a timely return of capital.

As noted in the Interim Report, it was pleasing to be able to report that, in April 2023, a sale of two ground-mounted solar sites and approximately 1,600 commercial and residential solar installations to Downing Renewables & Infrastructure Trust plc for a cash consideration of £12.6mn was concluded. Since this date, the Board has continued to seek an acquiror for the remaining assets in the portfolio. As part of this process a new Corporate Finance Adviser was appointed to assist with the sale of the remaining solar assets to reinvigorate the sale proposition amongst potential acquirers in the current market.

The technical performance of the portfolio continues to be fair following maintenance and repowering works carried out in previous years, however given the age of the portfolio, further technical maintenance has been necessary during the year which has impacted output generation. Total revenue was also affected by poor irradiation over the spring and summer, resulting in a shortfall of 6.7% to budget. Conversely, high inflation (which benefits the inflation-linked FiT tariffs receivable by the portfolio) has continued to support cash generation.

At the year end, the Company's NAV per 'pair' of shares (one Ordinary share and one 'A' Share) was 55.7p compared to 92.3p at 30 September 2022. This reduction is due to the payment of dividends totalling 18.5p per Ordinary Share mainly generated out of the proceeds from the partial sale in April, and also the consequence of a reduction in value of the remaining portfolio. Consistent with the previous year, the valuation of the portfolio at 30 September 2023 takes into account the Electricity Generator Levy (EGL), the EGL is a temporary (until 2028) 45% charge on exceptional receipts generated from the production of wholesale electricity, where exceptional receipts are defined as amounts from wholesale electricity sold at an average price in excess of a benchmark price of £75/MWh over an accounting period. This benchmark price will be adjusted in line with CPI from April 2024. The EGL is likely to be payable by an acquiror of these assets. Shareholders should take note that if, as in previous years, a portfolio value based purely on the cash flows generated by the assets were to be used, it would result in a value that would be somewhat higher as the Company would not be subject to the EGL. This is because the Company's generation output falls below the threshold for the EGL, and the revenues are within the £10mn allowance.

Despite headline inflation having been high during the financial year, the expectation is that the fall as seen in the last few months of 2023 will continue over the course of 2024. Expectations of these factors are a key consideration in determining a valuation of the Company's assets. In addition, there has been a general marked reduction in pricing in all energy markets leading to lower electricity power prices. At the same time there has been a very material increase since Q3 2022 in the discount rates which buyers will apply to real assets largely driven by higher interest rates, that results in a further reduction in valuations. Another factor to consider as part of portfolio valuation is that the Company's assets have a more limited market compared with newer solar assets which are generally much larger in scale as, given their age they can be challenging to manage whilst also taking into consideration the complex financing arrangements which any buyer must take over.

Investment portfolio

At the year end, the VCT held a portfolio of eleven investments, which were valued at £17.7mn. There have been no follow-on acquisitions. As part of the Managed Wind Down, five investments were disposed of during the financial year.

The portfolio is analysed (by value) between the different types of assets as follows:

The Board has reviewed the investment valuations at the year end and notes that the valuation of the remaining renewables portfolio has decreased by £5.50mn or 23.7%. As indicated earlier, the underlying portfolio has been impacted by the general fall in electricity prices.

The portfolio is still benefiting from having negotiated several PPAs at higher power prices which have been locked into the portfolio and will generate stronger returns over the next year. On the other hand, the discount rates applied are now higher in line with equity investors' requirements compared to other investment opportunities. Further, the UK Government's levy on revenue from the sale of electricity, the EGL, has resulted in the marginal rate of taxation on electricity revenues above £75/MWh being 70% consisting of 25% corporation tax plus 45% EGL.

As referred to previously, there has been an ongoing issue in relation to the connection of the South Marston solar farm to its off taker. This arose from the decision of the off taker (Honda) to cease business at the site South Marston supplies and to sell the site to a third party. It is taking considerable time and effort to resolve the issue. Whilst the new owner of the site, a provider of logistic facilities, says they want to use the power from South Marston they cannot commit until they have full planning permission (provisionally granted but awaiting signature of the Section 106 arrangement which validates the planning permissions) and customers on site. In order to resolve the uncertainty around this situation, a new grid connection offer has been accepted and existing agreements with Honda that will be novated to the new buyer are being improved to give South Marston better protection. This should remove this impediment to the potential sale of the asset and the others within the same loan structure.

In order to maintain VCT status, the Company needs to ensure that it maintains certain percentages of qualifying investments within its portfolio. The Board anticipates that the Company will fall below these percentages as the asset realisation process continues. Therefore, to avoid a breach of VCT status, the Board has been advised that the Company may in due course need to start the process of a members' voluntary liquidation which would involve delisting of the Company's shares. The Board continues to monitor those ratios and to plan to ensure that the Company is not at risk of breach.

Venture Capital investments

The VCT also still holds two investments that are not in renewable energy. However, as reported in the Interim Report, these companies entered administration during the year with no recovery of any value expected.

Further detail on the investment portfolio is provided in the Investment Adviser's Report.

Net asset value and results

At 30 September 2023, the Net Asset Value (NAV) per Ordinary Share stood at 55.6p and the NAV per 'A' Share stood at 0.1p, producing a combined total of 55.7p per 'pair' of shares. The movement in the NAV per share during the year is detailed in the table below:

The NAV Total Return (NAV plus cumulative dividends) has decreased by 12.1% in the last year and at the year end stands at 131.3p excluding the initial 30% VCT tax relief, compared to the cost to investors in the initial fundraising of £1.00 or 70.0p net of income tax relief.

The loss on ordinary activities after taxation for the year was £4.6mn (2022: £0.5mn profit), comprising a revenue profit of £391,000 (2022: £101,000) and a capital loss of £5.0mn (2022: capital profit of £447,000) as shown in the Income Statement.

Dividends

On 28 July 2023, total dividends of 18.5p per Ordinary Share were paid to Shareholders, comprising 2.0p in respect of the year ended 30 September 2022 and 16.5p as a result of the partial sale of assets. The 2.0p per Ordinary Share dividend was originally anticipated for payment in January 2023, however due to the company not having sufficient distributable reserves, payment was therefore delayed until sufficient distributable reserves were deemed available (see cancellation of share premium reserve below).

As outlined in the Interim Report, the Company successfully obtained Court approval to cancel the Company's share premium reserve. This process has the impact of increasing the Company's distributable reserves allowing distributions to be lawfully made. This approval, and subsequent filing of relevant accounts allowed the resumption of dividend payments once again.

After the year end, in addition to dividend payments made during the financial year, the Board was pleased to declare a 7.5p per Ordinary Share interim dividend. The 7.5p interim dividend related to income generation from the portfolio, but part also related to the distribution of the remaining proceeds arising from the part sale of assets in April 2023. This dividend has been paid on 21 December 2023 to Shareholders on the register on 1 December 2023. No amounts were payable to 'A' Shares during the year or after the year end.

Including this most recent 7.5p dividend, the total dividends paid to date for a combined holding of one Ordinary Share and one 'A' Share amounts to 83.1p. At 30 September 2023, dividends of 75.6p per 'pair' of shares were paid (2022: 57.1p).

2023 Annual General Meeting (AGM)

The VCT's twelfth AGM was held on 27 April 2023 at 11:00 a.m. and all resolutions were passed by way of a poll.

2024 Annual General Meeting (AGM)

The VCT's thirteenth AGM will be held at The Scalpel, 52 Lime Street, London EC3M 7AF on 19 March 2024 at 11.30 a.m.

Share Buybacks

As noted in previous Reports, the Board has decided that the VCT will not be buying in shares for the foreseeable future.

Acquisition of Gresham House plc, statement regarding Investment Adviser

Further to the announcement on 17 July 2023 about the acquisition of Gresham House plc by Searchlight Capital Partners L.P., the acquisition has now completed, and Gresham House plc delisted from the London Stock Exchange on 20 December 2023, to become a privately owned company. Gresham House Asset Management Limited, the Company's Investment Adviser, is wholly owned by Gresham House plc. The acquisition is expected to have minimal impact on the Company and business is continuing as usual. For further information please visit the website link: https://greshamhouse.com/about/.

Outlook

As noted in previous reports, the Board has not been able to progress the sale of the Company's remaining assets as quickly as Shareholders may have expected, due to challenging market conditions over the past 18 months and issues on certain assets (notably South Marston) which needed resolving. However it is pleased to report significant progress has been made during the year resulting in material distribution to Shareholders. The Board continues to ensure that every effort is being made to maximise Shareholder returns. Following a change in Corporate Finance Adviser, the Board is optimistic that realisations in respect of the remaining portfolio can be made in 2024.

In the meantime, as evidenced by the most recent dividend payment after the year end, the strong cash flows generated by the remaining portfolio are generating returns for the Company. Despite this, costs throughout the remaining portfolio continue to rise and, with only the Investment Advisers fees linked to the NAV, the Company's costs largely remain at the pre-sale of assets level. So the right course of action remains to find an appropriate and willing purchaser who can achieve economies of scale with the assets the Company is seeking to sell.

Once again, I would like to thank Shareholders for their patience and continued interest and support.

Gill Nott

Chairman29 January 2024

Investment Adviser's Report

Portfolio Highlights

Gresham House Renewable Energy VCT1 plc (VCT) remains invested in the renewable energy projects that the VCT and Gresham House Renewable Energy VCT2 plc (VCT2) have co-owned for a period of between nine to twelve years, depending on the asset. The total generation capacity of assets co-owned by the VCT at the start of the year was 34.4MWp, but this reduced to 21.3MWp following the sale of part of the portfolio during the period. The VCT also owns two venture capital investments. However, these companies entered administration during the year with no recovery expected.

In April 2023, the sales process of some of the solar projects that were owned jointly with VCT2 was concluded with two ground mounted solar sites and approximately 1,600 commercial and residential solar installations (collectively known as Surya) being sold to Downing Renewables & Infrastructure Trust Plc. A total cash consideration by the VCTs of £9.7mn, £4.87mn per VCT, was received in the way of sale proceeds. In addition, a cash consideration in the way of sale proceeds of £2.9mn was received on SPV level. The remaining portfolio capacity at the end of the full year (30 September 2023) was 21.3MWp made up of 20.3MWp from six ground mounted solar FIT projects and 1MWp of micro-wind projects spread across approximately 200 sites.

Work is now underway to sell the remainder of the solar portfolio, with the appointment of Jones Lang LaSalle (JLL) as the new Corporate Finance Adviser who have launched a refreshed sale process to divest the remaining solar assets.

The Investment Adviser continues to manage the assets and deliver the best possible yield from them, whilst also supporting the Boards of the VCTs and JLL in advancing the new sale process.

The Investment Adviser has undertaken a valuation exercise (as of the full year to 30 September 2023) for the purpose of determining the Net Asset Value (NAV) and has provided the Directors with several valuation scenarios based on a range of key assumptions. It is the VCT Directors that have the responsibility of valuing these assets. The valuation presented in this annual report necessarily reflects the Directors' view of the fair value of the assets which incorporates potential costs such as the EGL (detailed in the Chairman's Statement) that an acquirer is likely to incur through holding the assets, as well as their view on the key assumptions that determine future operational and financial performance. Where possible the Directors have checked their assumptions with independent advisers, e.g. discount rates with the JLL and energy yield assessments with the Technical Advisers.

During the year the total revenue from renewable energy generation was £14.7mn (2022: £13.1mn) and of this, £10.0mn was from government incentives and inflation-linked contracts. The total revenue was 6.7% behind budget due to a combination of factors including lower than budgeted irradiation, power prices and output due to some technical issues.

The vast majority of the assets held by the VCT produce solar power. The solar portfolio is older than over 90% of the total installed solar capacity in the UK, but positively this means that the VCT's solar assets have higher government-backed incentives than most other solar installations, which benefits valuations.

The downside of the age of the VCT's solar assets is the additional maintenance required to keep them operating effectively. Maintenance programmes to repair or replace certain components across the three worst performing assets have been successful in improving performance. Performance generally remains good, with increased output and reliability. UK based technical staff are readily available for ongoing repairs and maintenance has also helped improve performance. Successful warranty claims in the previous financial year at Beechgrove Farm and South Marston led to additional remedial works that also improved performance, particularly at Beechgrove Farm. Lake Farm has suffered from faults due to deterioration of some of its modules for which a warranty claim is being explored.

In terms of output, there was reduced solar irradiation during the year which resulted in annual output being 2% below budget and 6.2% below budget for the period March 2023 to August 2023. This poor spring and summer performance significantly impacted total performance as these months are usually the months of highest output. This, combined with some technical issues (described in more detail later) resulted in reduced generation. These issues have either now been addressed or continue to be addressed through warranty claims and repair works.

In terms of the current macroeconomic environment, the effects on the portfolio are summarised below:

Portfolio Composition

Portfolio Composition by Asset Type and Impact on VCT1 Net Asset Value (NAV)

* Feed in Tariff (FiT)

** Renewables Obligation Certificate (ROC)

The above table shows the details of the assets held as at 30 September 2023 and the assets held as at the prior year end 30 September 2022. Some of the ground mounted solar ROC assets and the rooftop solar FiT assets were sold during the year (April 2023), hence do not appear in the latest valuation.

The renewable energy assets in the portfolio of the VCT and VCT2 (including the sold assets which contributed some generation in the first part of the year), generated 23,372MWhs of electricity over the financial year, sufficient to meet the annual electricity consumption of c. 8,657 homes. The Investment Adviser estimates that the carbon dioxide savings achieved by generating this output from renewable energy sources versus gas-fired power stations, are equivalent to 9,909 tonnes of carbon dioxide emissions saved.

Portfolio Summary

Portfolio revenues for the full year 1 October 2022 to 30 September 2023 and prior year (1 October 2021 to 30 September 2022):

The performance against budget is shown below:

* part year from 1 October 2022 to 31 March 2023

The revenue is affected by:

The ground-mounted solar farms benefitted from high power prices and high inflation-linked increases to subsidies, but technical problems and poor climatic conditions offset these increases, such that actual revenue was below budget. The chart below provides a breakdown for the ground mounted solar assets only as these provide c.96% of the revenue:

Ground mounted solar portfolio revenue analysis 1 October 2022 to 30 September 2023:

The replacement of faulty or failing equipment, (panels, inverters, transformers) that previously caused the reduction in output, plus the successful warranty claims against Jinko Solar (who supplied Beechgrove and South Marston) continue to bear fruit with improved performance. However, Lake Farm is suffering from its solar panels degrading further, so the Investment Adviser is exploring a warranty claim against the solar panel manufacturer (Canadian Solar).

In addition, Priory Farm continued to suffer from regular short duration outages that required manual intervention from the Operations & Maintenance (O&M) contractor, who continued to be slow in responding. A new O&M contractor was appointed, but the under-performance of the previous O&M contractor impacted on the overall portfolio performance.

Renewable energy resources

During the year the assets suffered from lower solar irradiance than budgeted, with solar irradiation being 2% behind for the year and most notably 6.2% behind budget during the summer period, March 2023 to August 2023. This significantly impacted overall performance as these summer months are the highest output months.

Technical performance

The table below shows the technical performance for each of the groups of assets during this and prior financial year:

* part year from 1 October 2022 to 26 April 2023

The ground mount solar ROC figure is considerably down on prior year's performance as is the rooftop performance as those assets were sold part way through the year and before the sunnier months.

Micro wind performance:

The micro wind portfolio performed around 27% lower than budget, continuing the poor performance experienced in recent years. Micro wind accounts for only 4.8% of the portfolio in terms of capacity, following the sale of the ROC and rooftop projects.

The entire portfolio is comprised of two hundred R9000 wind turbines, which have the support of an experienced O&M contractor with access to spare parts and maintenance crews.

The Investment Adviser has approached a number of potential buyers for the micro wind portfolio with a view to selling these assets outside of the JLL sales process, as JLL have advised that the immateriality of these small, multi-location assets is such that they may reduce the price bidders are willing to pay for the VCT's complete portfolio.

Sold solar asset's (ground mounted ROC and rooftop FiT) performance:

Between the start of the year in October 2022 and the April 2023 sale, the ground mounted solar (ROC) assets also performed behind budget. Both sites suffered from reduced irradiation at times during the period as well as a drop in the performance of the O&M contractor. This contractor was replaced in March 2023, just ahead of the sale.

In the period up to their sale, generation of the rooftop solar portfolio was 12.4% lower than budget. Irradiation cannot be measured at roof mounted solar installations as it is not cost effective to install pyranometers, but it is fair to assume that the irradiation at these sites was low, in line with the irradiation levels at the ground mounted sites. The Investment Adviser continued to work with the O&M contractors and landlords to get access to the rooftop installations that were underperforming and have these repairs completed in a cost-effective manner. The portfolio's performance was negatively affected in particular by the installations on school rooftops. These experienced technical issues but the O&M contractor's efforts to repair them was hampered by the schools restricting access to the sites to the school holidays.

All in all, despite some of the performance problems mentioned above, as detailed in the Interim Report and the Chairman's Statement, these assets were sold in April 2023 at an uplift to the value at 30 September 2022.

South Marston update

South Marston (4.97MW FiT) has historically sold all its power to the Honda production plant adjacent to the solar site at Swindon. Honda closed down this facility in July 2021 when production stopped and now Honda has agreed to sell the site to a commercial real estate developer called Panattoni. The sale of the freehold land is subject to Panattoni obtaining planning consent from Swindon Borough Council (SBC) to the re-development of the land into multipurpose units, which will be developed over a period of the next 7 years. SBC have approved the application and subject to the Section 106 agreement being signed), this planning consent should become valid in early 2024.

The Investment Adviser is working with Honda and Panattoni and various advisers to ensure the continuity of supply of power from the solar farm, plus ensure the existing contractual arrangements and protections are preserved with the new owners. In addition, South Marston applied for and accepted a new grid connection offer (as an insurance policy) such that the solar farm could export directly to the grid, if necessary.

Panattoni is keen to make the solar power available to its future tenants when they move onto the site and has maintained in its planning submission all the existing infrastructure including the switchgear through which South Marston connects to the electricity grid. Both Honda and Panattoni have been supportive of South Marston during this period of uncertainty, agreeing to some new switching arrangements to allow South Marston to temporarily export directly to the electricity network, whilst consumption on site is limited. The Investment Adviser continues to work with both parties to improve South Marston's contractual rights which might be needed to satisfy any potential buyer of the VCT's assets and expects to shortly sign an amended Cable Easement agreement which gives South Marston the rights it needs. Once these are agreed, the separate grid connection offer will be cancelled.

Revenue per kilowatt hour of renewable energy generated:

The UK Government has used several mechanisms to encourage investment into renewable energy generation, including the FiT and ROC support mechanisms.

The VCT's renewable assets benefit from these schemes which provide revenues predominantly linked to the Retail Price Index (RPI). As the solar asset class has matured and both the costs and perceived risks of building new renewable energy generating capacity have fallen, so have the value of the incentives offered for new installations. For example, an asset that generates electricity from solar power that was commissioned and accredited for the FiT before the end of July 2011 currently receives over 48p for every kilowatt hour (kWh) of electricity it produced (with the added extra of a floor price support to ensure it may also sell this power at a reasonable price).The incentives for new capacity have fallen consistently since the assets owned by the VCT were commissioned, and new solar installations built today receive no such incentives and must rely on selling power at market prices for their income.

Solar portfolio, revenue split for the full year 2022/2023

Revenue split for 2022/23 post sale of rooftop and ground mounted ROC assets:

Ground mounted FiT solar portfolio, revenue split for the year 2022/2023

 Of total revenues generated in the year, c. 67% was earned from government backed incentives for generating renewable electricity.

The high proportion of income that is fixed by the FiT scheme is RPI linked and not exposed to wholesale power prices and is a significant driver of value in this portfolio. This enables the portfolio to be insulated from any significant reductions in the wholesale price of electricity whilst allowing it to benefit from increases such as those experienced earlier in the year.

As fixed price contracts for the export of power expired during the period, new PPA contracts were secured or updated with new prices valid for 1-2 years which allowed the ground mounted solar portfolio to benefit from these new higher wholesale prices.

Total revenues (power price and subsidies) per MWh generated by the solar assets were £631/MWh for the year ended 30 September 2023.

Operating costs

The majority of the cost base is fixed and/or contracted under long-term agreements and includes rent, business rates, and regular O&M costs.

Many of these costs have also risen in line with inflation.

The main variable cost item each year is the repair and maintenance cost. Repair and maintenance expenditure involving solar panels, the key component of a solar project, is covered by cash held in the maintenance reserve account. At the end of the financial year a reserve totalling £693k was in place for the remaining ground mounted solar assets.

Venture Capital investments

As reported in the Interim Report, the Investment Adviser is very disappointed to report that bio-bean and Rezatec, the two venture capital investments the VCT held, both went into administration shortly after the end of the half year and, as a result, their value was marked down to zero. No recovery is expected. See below two paragraphs extracted from the VCT's Interim Report:

bio-bean had high operational leverage. It had used the proceeds of the VCT's and other financial investors' investments to upgrade its plant so that its margins could benefit from economies of scale that would come from a growing supply of waste coffee grounds. The pandemic affected deliveries and its ability to cut costs and further funding rounds were not enough to save the company.

The VCT's other potential growth investment was in Rezatec, an integrator of satellite based geospatial data for use in monitoring agriculture, infrastructure and forestry assets. Rezatec's management managed to achieve steady growth but far below the rate envisaged in the business plan. A trade sale route was pursued last year but this process failed to generate interest and the Directors of the company were forced to take it into administration.

Portfolio valuation

The Investment Adviser is supporting the sale of the remaining VCT's renewable assets and notes that a binding offer to purchase the assets will be the best indication of value. However, consistent with prior year's approach the NAV of the renewable portfolio will be derived from the future projected cash flows generated by the assets, plus the cash held by the companies in the portfolio and the cash held by the VCT. This discounted cash flow valuation of the overall portfolio also includes the nil value of the venture capital investments in bio-bean and Rezatec.

The future discounted cash flow projections for renewable assets are impacted by:

Overall, post adjustment for reverse loans, a value of £14.0mn for the assets remaining in the portfolio at year end was delivered as a result of the various changes in market conditions and assumptions used.

Outlook

The Investment Adviser's continued focus is to ensure that the assets operate at or above budget whilst it supports the Directors' efforts to maximise exit value for Shareholders.

Addressing the contractual status of the grid connection arrangement at South Marston with the new landowners remains a key priority.

The repairs of the underperforming assets that were completed appear, from this year's generation data to have been successful, as have warranty claims for the Beechgrove ground mounted solar asset and these have provided greater visibility and reliability of revenues.

A new O&M contractor has been engaged for four of the ground-mounted solar assets and this is expected to improve reliability for those assets. The generation outlook for the portfolio has improved as a result.

The Investment Adviser remains vigilant for spotting any signs of degradation early so that the impact on availability can be managed and reduced.

The high inflation outlook, whilst of concern from the point of view of the wider UK and global economies, is positive for the owners of subsidised UK renewable assets. Although most costs also rise in line with inflation, as does the cost of servicing the debt facilities, the net benefit of increased inflation is positive since it increases the inflation linked revenues more than it increases the costs.

All ground mounted solar assets had fixed price PPAs during the financial year, which gave some certainty to revenue. The Investment Adviser is pleased to have secured new fixed price PPAs for one to two years to further de-risk near term future cash flows from these assets.

The combined effect of inflation and power prices locked in at high levels should translate into attractive, stable revenue and cash flow over the next two years.

The VCT is fortunate that the EGL introduced by the UK Government with effect from 1 January 2023 does not apply to the VCT, as the total generation of its portfolio falls below the de minimis threshold of 50GWh per year. However, most likely buyers of the VCT's assets already have renewable energy portfolios and would not therefore be able to avoid paying the EGL as a result of the de minimis threshold. Accordingly, a fair value has been determined with the assets valued for the purposes of the NAV as if the EGL would need to be paid.

The outlook for renewable energy in the UK and the rest of the world remains positive. In particular, the fallout from Russia's invasion of Ukraine with high energy prices and concerns about security of supply is expected to add additional impetus to the deployment of renewable energy. COP28 concluded recently with an historic agreement that marks a significant step towards tackling climate change by calling on all nations to transition away from fossil fuels which is encouraging for further renewable energy deployment. For the portfolio as at 30 September 2023, that has had successful upgrades implemented on many of its assets and which has locked in attractive long-term power prices, the outlook remains positive. The Investment Adviser will work with the newly appointed Corporate Finance Adviser to try to ensure this translates into a successful sale in 2024.

Gresham House Asset Management Limited

29 January 2024

Review of Investments

Portfolio of investments

The following investments were held at 30 September 2023:

* Partially qualifying investment

** bio-bean Limited and Rezatec Limited investments were fully impaired during the financial year. The valuation movements in bio-bean Limited (£325,000) and Rezatec Limited (£67,000) have been recognised as a realised loss.

All venture capital investments are incorporated in England and Wales.

Gresham House Renewable Energy VCT2 plc, of which Gresham House is the Investment Adviser, holds the same investments as above.

Investment movements for the year ended 30 September 2023

Disposals

The sale included solar assets held within Tumblewind Limited however the VCT still retains Small Wind assets within Tumblewind Limited.

The transaction costs associated with the sale of the assets amounted to £415,000 per VCT. The net realised gain per VCT for the financial year amounts to £824,000.

The basis of valuation for the largest investments is set out below.

Further details of the remaining investments (by value):

Lunar 2 Limited

Lunar 2 Limited is a holding company of FiT remunerated ground mounted solar farms of 5MW (Wiltshire), 4MW (near Hawkchurch) and 0.6MW (Ilminster, Somerset).

* This information is not publicly available

Lunar 1 Limited

Lunar 1 Limited is a holding company of FiT remunerated ground mounted solar farms of two 5MW (Wiltshire) and one 0.7MW (Oxfordshire).

New Energy Era Limited

New Energy Era Limited owns a FiT remunerated solar farm of 0.7MW near Shipton-under-Wychwood, Oxfordshire.

Tumblewind Limited

Tumblewind Limited owns a portfolio of FiT remunerated wind turbines on largely farmer owned sites located throughout East Anglia. The total capacity of the wind assets owned by Tumblewind Limited is 180kW. Tumblewind sold Priory Farm Solar Farm Limited, which owns a ROC remunerated solar farm of 3.2MW near Lowestoft, in April 2023.

Vicarage Solar Limited

Vicarage Solar Limited is the holding company of a FiT remunerated solar farm of 0.7MW near Ilminster, Somerset.

* This information is not publicly available

HRE Willow Limited

HRE Willow Limited owns a portfolio of FiT remunerated wind turbines on largely farmer-owned sites located throughout East Anglia. The total capacity of the wind assets owned by HRE Willow Limited is 430kW.

Minsmere Power Limited

Minsmere Power Limited owns a portfolio of FiT remunerated wind turbines on largely farmer owned sites located throughout East Anglia. The total capacity of the wind assets owned by Minsmere Power Limited is 230kW.

Small Wind Generation Limited

Small Wind Generation Limited owns a portfolio of FiT remunerated wind turbines on largely farmer owned sites located throughout East Anglia. The total capacity of the wind assets owned by Small Wind Generation Limited is 190kW.

Lunar 3 Limited

Lunar 3 Limited was incorporated at end of 2013 as part of the refinancing of the ground-mounted solar assets owned by Lunar 1 Limited and Lunar 2 Limited. Lunar 3 Limited is a dormant company and does not own any assets.

* This information is not publicly available

Explanatory notes

The summary financial information has been sourced from the statutory accounts of the underlying investee companies. The net asset/liability figures presented therefore do not approximate a valuation.

The proportion of equity held in each investment also represents the level of voting rights held by the VCT in respect of the investment.

Summary of loan stock interest income

Analysis of investments by commercial sector

The split of the investment portfolio by sector (by cost and by value at 30 September 2023) is as follows:

Spread of investment by sector (cost)

Spread of investment by sector (value)

 Strategic Report

The Directors present the Strategic Report for the year ended 30 September 2023. The Board has prepared this report in accordance with the Companies Act 2006.

Business model

The VCT acts as an investment company, investing in a portfolio of businesses within the renewable and clean energy sectors and operating as a VCT to ensure that its Shareholders can benefit from the tax reliefs available.

Business review and developments

The VCT's business review and developments during the year, including updates on the Managed Wind Down process for the VCT and the ongoing sale of the portfolio, are set out in the Chairman's Statement, Investment Adviser's Report, and the Review of Investments.

During the year to 30 September 2023, realisations on sale of investments totalled £824,000. The renewable investments held decreased in value by £5.4mn. As a result of bio-bean and Rezatec entering administration in April 2023 and May 2023 respectively, the non-renewable investments were fully impaired in the half-yearly financial statements decreasing their value by £392,000.

Income over expenditure for the year resulted in a net loss, after accounting for capital expenses, of £4.6mn (2022: £547,000 profit).

Net assets at the year-end were £14.2mn (2022: £23.6mn). An interim dividend of 18.5p per Ordinary Share was announced on 28 June 2023 and was paid on 28 July 2023. Of this dividend, 16.5p per Ordinary Share reflected the distribution of proceeds arising from the completion of sale of certain solar assets in April 2023 and 2.0p per Ordinary Share reflected the reinstatement of the delayed dividend for the year to 30 September 2022 as announced on 25 January 2023. A further interim dividend of 7.5p per Ordinary Share has been declared and was paid on 21 December 2023. The 7.5p interim dividend related to income generation from the portfolio, but also arose from the distribution of the remaining proceeds from the sale of some of the assets in April 2023.

The Directors initially obtained provisional approval for the VCT to act as a Venture Capital Trust from HM Revenue & Customs. The Directors consider that the VCT has continued to conduct its affairs in a manner such that it complies with Part 6 of the Income Tax Act 2007.

Investment advisory and administration fees

Gresham House Asset Management Limited (Gresham House) provides investment advisory services to the VCT, at a fee equivalent to 1.15% of net assets. The agreement is for a minimum term of two years, effective from 7 November 2017, with a nine month notice period on either side thereafter.

The Board has reviewed the services to be provided by Gresham House and has concluded that it is satisfied with the strategy, approach and procedures which are to be implemented in providing investment advisory services to the VCT. The Board is also of the opinion that the allocation of the investment advisory fee between capital and revenue of the VCT, as described in Note 4 to the financial statements, is still appropriate.

JTC (UK) Limited (JTC) acts as Administrator and Company Secretary. JTC provides administration and accounting services to the VCT for a fee of £40,000 (plus VAT, if applicable) per annum. It also provides company secretarial services for a fee of £40,000 (plus VAT, if applicable) per annum. The agreement shall continue in force until determined by either party, with a six month notice period on either side.

Trail commission

Historically the VCT had an agreement to pay trail commission annually to Hazel Capital LLP, in connection with the funds raised under the Offers for subscription. This was calculated at 0.4% of the net assets of the VCT at each year end. Out of these funds Hazel Capital LLP was liable to pay trail commission to financial intermediaries. The trail commission was payable to Hazel Capital LLP until the earlier of (i) the sixth anniversary of the closing of the Offers and (ii) the Investment Advisory Agreement being terminated.

Upon the appointment of Gresham House as Investment Adviser on 7 November 2017, the agreement with Hazel Capital LLP was reissued and the new Investment Adviser agreed to pay further trail commission to Haibun Partners LLP (Haibun) and CH1 Investment Partners LLP (CH1), of which Matthew Evans (Director of Gresham House Renewable Energy VCT2 plc) is a Designated Member, with an agreement in place effective 11 July 2019. The trail commission payable is equal to 0.15% of the net asset value of the shares issued by the VCT and its sister company, VCT2, to Haibun and CH1 clients under each of the 2010, 2012 and 2014 Offers. This trail commission is payable each year provided that applicable Shareholders remain clients of Haibun and CH1, or until Gresham House ceases to act as Investment Adviser to the VCTs. Payment of trail commission under this agreement is not deemed to be a related party transaction and is therefore not disclosed in Note 21 to the financial statements.

The amounts payable to Haibun and CH1 by Gresham House, in aggregate across both the VCT and VCT2, are as follows:

Investment policy

General

At the General Meeting held on 13 July 2021, 89.43% of the Shareholders resolved to approve the New Investment Policy of the Company to reflect a realisation strategy and the Company ceasing to make any new investments. The new Investment Policy replaced the previous Investment Policy in its entirety.

The Directors believed that being prescriptive as regards the timeframe for realising the Company's investments could prove detrimental to the value achieved on realisation. Therefore, it was the Board's view that the strategy for the realisation of the Company's investments would need to be flexible and may need to be altered to reflect changes in the circumstances of a particular investment or in the prevailing market conditions.

Once all, or substantially all, of the Company's investments have been realised and an initial distribution in respect thereof made, the Company will, at an appropriate time, seek Shareholders' approval for it to be placed into members' voluntary liquidation.

Since inception to 13 July 2021

Up to 13 July 2021, the VCT's objectives were to maximise tax free capital gains and income to Shareholders from dividends and capital distributions by investing the VCT's funds in:

13 July 2021 to 30 September 2023

Following shareholder approval at the General Meeting on 13 July 2021, the New Investment Policy of the VCT is that the Company will be managed with the intention of realising all remaining assets in the Portfolio in a prudent manner consistent with the principles of good investment management and with a view to returning cash to Shareholders in an orderly manner, whilst protecting the tax position of Shareholders.

The Company will pursue its investment objective by effecting an orderly realisation of its assets in a manner that seeks to achieve a balance between maximising the value received from those assets and making timely returns of capital to Shareholders. This process might include sales of individual assets or running off the portfolio in accordance with the existing terms of the assets, or a combination of both. Pursuant to its investment objective, the Company successfully completed the sale of a portion of its solar assets in April 2023.

The Company will cease to make any new investments or to undertake capital expenditure except where, in the opinion of both the Board and the Investment Adviser (or, where relevant, the Investment Adviser's successors):

Investment strategy

Investee companies generally reflect the following criteria:

The new Investment Policy was adopted at the General Meeting held on 13 July 2021 to reflect a realisation strategy and the Company ceasing to make any new investments.

Asset allocation

Throughout the year under review and to date, the Company continued to hold 80% of its funds in VCT qualifying investments in order to retain its status as an approved Venture Capital Trust. At 30 September 2023, the VCT had a significant margin over the 80% qualifying holdings requirement as a result of a 12 month disregard in respect of disposals and resultant dividend payments. This margin will narrow in the course of the current financial year and is being monitored closely to ensure compliance is maintained.

It is expected that the VCT shall hold at least eight investments to provide diversification and risk protection. During the Managed Wind Down the number of investments will continue to decrease following the sale of the VCT's assets, with the Company intending to dispose of its remaining investments prior to the appointment of liquidators. In relation to the VCT, no single investment (including most loans to investee companies) will represent more than 15% of the aggregate net asset value of its fund save where such investment is in an investee company which has acquired or is to acquire, whether directly or indirectly, securities in the following companies: AEE Renewables UK 3 Limited, AEE Renewables UK 26 Limited, South Marston Solar Limited, Beechgrove Solar Limited, New Energy Era Limited and Vicarage Solar Limited.

Risk Diversification

During the year, the structure of the VCT's funds, and its investment strategies, have been designed to reduce risk as much as possible.

The main risk management features include:

The VCT has followed the above risk diversification strategy with regard to the Lunar 1 Limited and Lunar 2 Limited investments in AEE Renewables UK 3 Limited, AEE Renewables UK 26 Limited, South Marston Solar Limited, Beechgrove Solar Limited, New Energy Era Limited and Vicarage Solar Limited.

Gearing

It is not intended that the VCT will borrow (other than from investee companies). However, it will have the ability to borrow up to 15% of its net asset value* save that this limit shall not apply to any loan monies used to facilitate the acquisition by the VCT, whether directly or indirectly, of any shares or securities in the operational asset/holding companies.**

The VCT has ensured that Lunar 1 Limited and Lunar 2 Limited have borrowed no more than 90% of their respective net asset values to facilitate the acquisition, whether directly or indirectly, of any shares or securities in the following: AEE Renewables UK 3 Limited, AEE Renewables UK 26 Limited, South Marston Solar Limited, Beechgrove Solar Limited, New Energy Era Limited and Vicarage Solar Limited.

The long-term creditors shown on the Balance Sheet represent amounts owed to investee companies, which the Board expect to be repaid in the future by way of dividends from, or the sale of, these companies.

As at 30 September 2023, the VCT had the ability to borrow £4.5mn in accordance with the articles, and had actual borrowings of £nil.

The VCT has no intention to borrow any funding in the foreseeable future.

Listing rules

In accordance with the Listing Rules:

The Listing Rules have been complied with for the year ended 30 September 2023.

Directors and senior management

The VCT has three Non-Executive Directors. The board comprises one female and two males. The VCT has no employees.

Key performance indicators

At each Board meeting, the Directors consider a number of performance measures to assess the VCT's success in meeting its objectives. The Board has identified the VCT's key performance indicators as NAV Total Return and dividends paid per share, the performance of which during the year are in the table below:

* Dividend paid per Ordinary Share year ended 30 September 2023: 16.5p (July 2023) and 7.5p (December 2023). No dividend was paid in respect of the 'A' Shares.

** Dividend paid per share - year ended 30 September 2022: restated as a result of delayed dividend payment subsequently paid in July 2023.

See the Chairman's Statement for details on the EGL. On the basis of the scope to which this levy applies, there is no impact on the current or future revenues received by the VCT, however the fair value of the portfolio incorporates the potential additional costs a purchaser may incur.

These are defined as follows:

The total net asset position of the VCT as at the reporting date is as per the Balance Sheet, while the total number of shares in issue for both Ordinary and 'A' Shares is disclosed in Note 15.

In addition, the Board considers the VCT's performance in relation to other VCTs.

The position of the VCT's NAV Total Return as at 30 September 2023 and a summary of dividends paid per share are as indicated in the table on this page. The VCTs dividend policy is to distribute surplus funds generated by the underlying investments, subject to maintaining an appropriate cash reserve at SPV level to pay up to the VCT as and when required in order to meet anticipated future requirements. The VCT has an objective of paying dividends of 5p per share per annum. As part of the Managed Wind Down, once the majority of the assets have been sold, the intention is to return all sale proceeds to Shareholders through dividend distributions or, if the VCT has since entered voluntary liquidation, via capital distributions.

* Following the 2018 AGM the articles of the VCT were amended such that amounts borrowed from investee companies are now excluded from the calculation of the 15% borrowing restriction.

** AEE Renewables UK 3 Limited, AEE Renewables UK 26 Limited, South Marston Solar Limited, Beechgrove Solar Limited, New Energy Era Limited and Vicarage Solar Limited.

Principal risks and uncertainties

Schedule of principal and emerging risks

The other principal and emerging risks faced by the VCT, along with the steps taken to mitigate these risks, are shown in the table below. The risks have not materially changed from the previous year, however changes in the factors impacting the risks attributable are discussed below. These principally apply during the period until the underlying assets are sold during the Managed Wind Down process.

Since inception to 13 July 2021

The principal financial risks faced by the VCT, which include interest rate, market price, investment valuation, credit and liquidity risks, are summarised within Note 18 to the financial statements.

Note 18 includes an analysis of the sensitivity of valuation of the portfolio to changes in each of the key inputs to the valuation model.

Other principal risks faced by the VCT have been assessed by the Board and grouped into the key categories outlined below:

13 July 2021 to 30 September 2023

In approving a new Investment Policy for the Company, a number of risks which are material and currently known to the Company have been disclosed. Additional risks and uncertainties not currently known to the Company, or that the Company deems immaterial, may also have an adverse effect on the Company.

The main risks identified as part of the new Investment Policy of the Company are:

Viability statement

In accordance with Provisions 33 and 36 of the 2019 AIC Code of Corporate Governance, the Directors have carried out a robust assessment of the emerging and principal risks facing the VCT that would threaten its business model, future performance, solvency or liquidity, and have assessed the prospects of the VCT over a longer period than the 12 months required by the 'Going Concern' provision.

The Board has conducted this review for a period of three years from the balance sheet date as developments are considered to be reasonably foreseeable over this period. The period of review has been shortened since the financial year ending 30 September 2021 due to the commencement of the Managed Wind Down of the VCT. Following the results of the continuation vote at the 2021 AGM and the Shareholders' subsequent approval of the Managed Wind Down of the Company at the 2021 General Meeting, the Board still considers that the VCT remains viable up until the point at which its assets are fully sold, or the voluntary liquidation completed, and as such the Board are satisfied that a three-year viability assessment remains applicable.

In making the viability assessment, the Board has taken the following factors into consideration:

? the nature and liquidity of the remaining VCT's portfolio (long-term, revenue generating fixed assets);

? the sales process currently underway to realise the VCT's remaining renewable assets;

? the potential impact of the Principal Risks and Uncertainties;

? maintaining VCT approval status up to the VCT entering voluntary liquidation;

? operating expenditure; and

? future dividends.

The Board is satisfied that the underlying assets held by the SPVs have been built to a sufficient quality and there are no current indications that the assets will degrade substantially over the period. It is also considered highly unlikely that the renewable portfolio would suffer from such poor irradiation and severe degradation that it would be unable to generate income over the period. The improvement in power prices and the benefit of higher inflation on the portfolio performance has improved the prospects for returns materially. Asset life, along with the other inputs to the valuation model, are discussed further in Note 2.

The Board also noted that the SPVs have very good debt cover and that there are sufficient cash reserves at the SPV level, available to be paid up to the VCT through dividends, reverse loans or the repayment of existing shareholder loans, to cover debt and running & sale of assets costs over the review period.

The Board has assessed the VCT's ability to cover its annual running costs under several stress scenarios evaluating the impact of receiving up to 20% less funds from the SPV level and the impact of increasing the VCT and SPV level running costs by up to 20%. The Board noted that under none of these scenarios was the VCT unable to cover its costs.

The Directors believe that the VCT is well placed to manage its business risks successfully. Based on the results, the Board confirms that, taking into account the VCT's current position and subject to the principal risks faced by the business, the VCT will be able to meet its liabilities as they fall due for a period of at least three years from the balance sheet date, notwithstanding that the VCT is currently undergoing a Managed Wind Down and may be wound up in this timeframe.

Directors' remuneration

It is a requirement under the Companies Act 2006 for Shareholders to vote on the Directors' remuneration every three years, or sooner if the VCT wants to make changes to the policy. The Directors' remuneration policy for the three-year period from 27 April 2023 is set out in the Directors' Remuneration Report..

Annual running costs cap

The annual running costs for the year are capped at 3.0% of net assets; any excess will either be paid by the Investment Adviser or refunded by way of a reduction of the Investment Adviser's fees. Annual Running Costs for the year to 30 September 2023 were 2.8% (2022: 2.3%) and therefore less than 3.0% of net assets.

Performance Incentive

The structure of the 'A' Shares, whereby Management owns one third of the 'A' Shares in issue (known as the "Management 'A' Shares"), acts as a Performance Incentive mechanism. The allocation to the 'A' Shares of any revenue and/or capital dividends declared by the VCT, will be increased if, at the end of each year, the hurdle is met, which is illustrated below:

i) Shareholders who invested under the offer for subscription receive dividends in excess of 5.0p per Ordinary Share in any one financial period; and

ii) one Ordinary Share and one 'A' Share has a combined net asset value of at least 100.0p.

The Performance Incentive is calculated each year and is not based on cumulative dividends paid.

A summary of how proceeds are allocated between Shareholders and Management, before and after the hurdle is met, and as dividends per Ordinary Share increase is as follows:

As the NAV as at 30 September 2023 was below 100p, the NAV hurdle for the year was not met and no dividend in respect of the 'A' Shares was paid during the year, therefore there was no Performance Incentive paid.

Pursuant to historic financial intermediary arrangements with Hazel Capital LLP and, upon the appointment of Gresham House as Investment Adviser, CH1, of which Matthew Evans (Director of Gresham House Renewable Energy VCT2 plc) is a Designated Member, and Haibun, receive approximately 8.0% of the Performance Incentive payments made to Management in respect of the 'Management 'A' Shares' by the VCT and its sister company, VCT2.

VCT status

The VCT has reappointed Philip Hare & Associates LLP (Philip Hare) to advise it on compliance with VCT requirements, including evaluation of investment opportunities as appropriate and regular review of the portfolio. Although Philip Hare works closely with the Investment Adviser, they report directly to the Board.

Compliance with the VCT regulations for the year under review is summarised as follows:

* As the VCT has negative revenue reserves, the Company's VCT status adviser has confirmed that this requirement is deemed to have been met for VCT compliance purposes.

The Directors, with the help of the Investment Adviser, actively monitor and ensure the investee companies have less than £5mn state backed financing in a 12-month period listed in order to remain compliant with the VCT regulations.

Share Buybacks

The Board has decided that the VCT will not be buying in shares for the foreseeable future as highlighted in the Interim Results, as the VCT needs to conserve such cash as it generates for the Managed Wind Down of the VCT and the payment of dividends.

Future prospects

The Board's assessment of the outlook and future strategy of the VCT are set out in the Chairman's Statement and Investment Adviser's Report.

Sustainable Investing

The Sustainable Investing report forms part of the Strategic Report.

The VCT seeks to conduct its affairs responsibly and Gresham House, the Investment Adviser, the Investment Adviser is encouraged to consider environmental, social and community issues, where appropriate, and the Board will continue to monitor the Investment Adviser's progress in these areas.

The Board is conscious of its potential impact on the environment as well as its social and corporate governance responsibilities. The Investment Adviser has presented its Environmental, Social and Governance (ESG) strategy to the Board.

The VCT, whilst not having an explicit sustainable investment objective, demonstrates clear promotion of environmental characteristics by investing in technologies that contribute to climate change mitigation by supporting a decarbonisation of the energy system in the UK and a net zero economy underpinned by cheap clean electricity.

Sustainable Investing at Gresham House

The Investment Adviser is committed to sustainable investment as an integral part of its business strategy. In 2021, Gresham House further enhanced its approach to sustainability by publishing its first Corporate Sustainability Strategy (CSS) which supports its GH25 ambition to "become a leader in the sustainable investment, including Environmental, Social and Governance (ESG)". The CSS details objectives and actions to ensure its progresses against its ambition to be a leader in sustainable investment and that ESG factors and stewardship responsibilities continue to be integrated into the management of each asset division. More information on Gresham House's sustainability approach and CSS can be found in its Sustainable Investment Report: https://greshamhouse.com/sustainable-investment-report/

Policies and processes

Gresham House publishes a Sustainable Investing Policy along with asset specific policies, including the New Energy Sustainable Investment Policy, which covers Gresham House's sustainable investment commitments, how the investment processes meet these commitments and the application of the Sustainable Investment Framework.

The Sustainable Investment Team assesses adherence to the commitments in the Sustainable Investment Policies on an annual basis and provides updates on the findings of these assessments to the Sustainability Executive Committee and Board Sustainability Committee.

Sustainability Executive Committee

The Investment Adviser's Sustainability Executive Committee (Sustainability ExCo) was established in 2021. The Sustainability ExCo is chaired by the Director of Sustainable Investment and comprises heads of divisions and representation from across the business including Group Management Committee representatives, a Gresham House Ireland representative, investment division heads and heads of operational teams. The ExCo sets and oversees the Gresham House Corporate Sustainability Strategy and ensures priority areas of sustainability related risks and opportunities are proactively identified and debated.

New Energy Sustainable Investment Committee

In 2022, the New Energy division evolved its structures with regards to the ownership and development of Sustainable Investment objectives and actions for the division by creating a New Energy Sustainable Investment Committee (NESIC). The purpose of the New Energy Sustainability Committee's purpose is to provide leadership, strategic direction and implement processes to enhance the integration of sustainability across the New Energy division, supporting the achievement of fund-specific objectives and the CSS.

The core objectives of the NESIC include:

New Energy Sustainability Objectives

The NESIC developed and agreed a set of sustainability objectives for the division applicable to all assets under management. The objectives were determined by identifying the ESG topics deemed most material to the assets. They were also selected to align with the core topics and objectives in the Investment Adviser's 2025 Corporate Sustainability Strategy.

The objectives will focus future sustainability-related activities for the division to 2025 and are detailed below. The funds will provide updates against the objectives in future reporting.

Table 1: New Energy Sustainability Objectives

Risk and Compliance: Embedding ESG factors

As the assets within the VCTs are all well- established, the assessment of ESG is applied as part of our asset management activities. All Operations & Maintenance providers are required to report on various ESG factors, including Health & Safety and Environmental risks or incidents. Any significant incidents must be reported to us within 24 hours. Furthermore, they are also expected to be proactive and to make recommendations for improvements.

The team continues to work to expand the ESG key performance indicators (KPIs) measured, reported, and monitored by the New Energy division for all assets under management, including the VCTs. This reflects increased investor and regulatory demand for ESG data and the Investment Adviser's ambitions to enhance ESG data and transparency. It is anticipated that the expanded ESG data will be used by investment teams and asset management teams to increase their understanding of the operational ESG performance of assets under management and to identify any material ESG risks. It is expected that the asset management team will aim to improve ESG metrics over time, as feasible within the context of the existing fund mandate.

In 2023, this project has been led by the Construction and Asset Management team who have incorporated the request for ESG data into ongoing EPC and supplier contracts and receives or will receive - dependent on the availability - data on a quarterly basis. It is anticipated that fund-level data will be available for reporting purposes from the end of 2023.

Supply Chain Management

The Investment Adviser has had a Supply Chain Policy in place since 2020. The Supply Chain Policy covers material ESG topics and places obligations on suppliers (including contractors) to ensure their own compliance, as well as the compliance of their subcontractors, with the Policy. It also requires suppliers to monitor and report any non-compliance to the Investment Adviser.

Since July 2021, all new supplier contracts have been updated to include clauses specifically mandating suppliers to declare that they have not been involved in any practices linked to modern slavery and that they will permit on-site audits at any time should we have reason to suspect instances of slavery and human trafficking. Any VCT suppliers with contracts due for renewal will be obliged to update clauses relating to modern slavery within their contract terms.

Operators of Gresham House managed renewables projects were asked to complete a modern slavery questionnaire to assess modern slavery related risk to the New Energy division's renewables assets in 2021 and an updated version of this questionnaire was sent in Q1 2023 to determine any material changes regarding the risk profile associated with this topic. There is an ongoing workstream to enhance Gresham House's approach to modern slavery and identify proposed engagement actions for consideration as part of the next steps of this workstream into 2024.

Gresham House recognizes that challenges relating to modern slavery in the solar module supply chain are a system issue that can be hard to influence as a relatively small player in the renewables industry. Therefore, Gresham House became a member of the Solar Energy UK Responsible Sourcing Steering Group in Q2 2023. The Investment Adviser believes this is a key mechanism through which it can better understand risks relating to modern slavery in the supply chain and encourage regulatory and long-term solutions for a more diversified, modern slavery free supply chain.

Climate Change & Pollution

Based on the 23,372,848kWh renewable electricity generated by the VCT wind and solar assets, it is estimated that the fund avoided 9,909 tonnes of CO21 and powered c. 8,657 homes2 during the reporting period.

As a UK quoted company, the VCT is required to report on its Greenhouse Gas (GHG) Emissions. Emissions can be broken down into three categories by the Greenhouse Gas Protocol:

The VCT does not itself produce any Scope 1 or Scope 2 carbon emissions as it does not itself directly or indirectly create carbon emissions by generating or purchasing electricity for its own use. The reporting of Scope 1 and 2 carbon emissions for the fund as 0 tCO2e is in line with industry standards and guidance by an external consultant that supported the Investment Adviser in the carbon footprint measurement for all Gresham House financed emissions. The Investment Adviser continues to consider how best to monitor and measure the Scope 3 emissions relevant to the VCT.

Natural Capital

The Investment Adviser continues to manage all assets in line with the biodiversity commitments and habitat management plans instigated as part of project development and approvals.

Director's Duties

Directors must consider the long-term consequences of any decision they make. They must also consider the interests of the various stakeholders of the VCT, the impact the VCT has on the environment and community and operate in a manner which maintains the VCT's reputation for having high standards of business conduct and fair treatment between Shareholders.

Fulfilling this duty naturally supports the VCT in its Investment Objective to maximise tax-free capital gains and income to Shareholders and helps ensure that all decisions are made in a responsible and sustainable way. In accordance with the requirements of the Companies (Miscellaneous Reporting) Regulations 2018, and the AIC Code, the information overleaf explains how the Directors have individually and collectively discharged their duties under section 172 of the Companies Act 2006.

1 Assuming an "all non-renewable fuels" emissions statistic of 424tCO2/GWh of electricity supplied, BEIS statistics July 2023, Digest of UK Energy Statistics, Table 5.14 ("Estimated carbon dioxide emissions from electricity supplied"). "Carbon avoided" calculated using Renewable UK methodology: Carbon reduction is calculated by multiplying the total amount of electricity generated by solar and wind per year by the number of tonnes of carbon which fossil fuels would have produced to generate the same amount of electricity.

2 Assuming an average annual electricity usage per household of 2.7MWh, as quoted by OFGEM October 2023. "Homes powered" calculated using Renewable UK methodology: MWh divided by average annual domestic electricity consumption. Household power consumption dropped in 2023 due to high power prices.

Section 172

The Section 172 statement forms part of the Strategic Report.

The Directors consider that in conducting the business of the VCT over the course of the year they have complied with Section 172(1) of the Companies Act 2006 (the Act) by fulfilling their duty to promote the success of the VCT and to act in the way they consider, in good faith, would be most likely to promote the success of the VCT for the benefit of its members as a whole, whilst also considering the broad range of stakeholders who interact with and are impacted by the VCT's business, especially with regard to major decisions.

Role of the Board

The Board, which comprised of three independent Non-Executive Directors during the financial year with a broad range of skills and experience, retains responsibility for taking all decisions relating to the VCT's principal objectives, corporate governance and strategy, and for monitoring the performance of the VCT's service providers.

The Board aims to ensure that the VCT operates in a transparent culture where all parties are able to contribute to the decisions made and challenge where necessary with the overall aim of achieving the expectations of Shareholders and other stakeholders alike.

In discharging their Section 172 duties the Directors have regard to the likely consequences of any decisions during the Managed Wind Down process; the need to foster the VCT's business relationships with suppliers, customers and others; the impact of the VCT's operations on the community and environment; the desirability of the VCT maintaining a reputation for high standards of business conduct and the need to act fairly as between members of the VCT.

The Board works very closely with the Investment Adviser and Company Secretary to ensure there is visibility and openness in how the affairs of the VCT are being conducted. The VCT co-owns all its assets with Gresham House Renewable Energy VCT2 plc (VCT2).

The VCT is an investment vehicle, externally managed, has no employees, and is overseen by an independent Non-Executive board of Directors. As such the Board considers its stakeholders to be the Shareholders, the service providers, including the Investment Adviser, and regulatory bodies.

Following the adoption of the new Investment Policy from 13 July 2021, the VCT's principal objective is to manage the Company with the intention of realising all remaining assets in the portfolio in a prudent manner consistent with the principles of good investment management and with a view to returning to Shareholders in an orderly manner.

Key Stakeholders

Shareholders

The Board engages with the VCT's Shareholders in a variety of ways, including annual and half-yearly reports and accounts, an AGM and information provided on the Investment Adviser's website as well as ad hoc communications with Shareholders.

The Registrar is available to help Shareholders to manage their Shareholding.

The VCT welcomes and encourages attendance and participation from Shareholders at the AGM and values any feedback and questions it may receive from Shareholders ahead of and during the AGM.

The Board communicates with its Shareholders through the publication of Annual and Half-Year reports which are available on the VCT's website (https://greshamhouse.com/real-assets/new-energy-sustainable-infrastructure/) and sent to Shareholders.

The Board is also happy to respond to any written queries made by Shareholders during the course of the period, or to meet with major Shareholders if so requested. In addition to the formal business of the AGM, representatives of the Investment Adviser and the Board are available to answer any questions a Shareholder may have. During the period the Board engaged with Shareholders on several matters, including the update on the sale of solar assets, the cancellation of the interim dividend in January 2023 and the cancellation of the Company's share premium account and capital redemption reserve. Details of this is included in the Chairman's Statement.

Investment Adviser

The Board has delegated authority for day-to-day management of the VCT to the Investment Adviser. The Board then engages with the Investment Adviser in setting, approving and overseeing the execution of the business strategy and related policies. The Investment Adviser attends Valuation Forums, Board meetings and Audit Committee meetings to update the Directors on the performance of the portfolio. At every quarterly Board meeting a review of financial and operational performance, as well as legal and regulatory compliance, is undertaken. Since the General Meeting held on 13 July 2021, the Managed Wind Down of the Company has been reviewed at each quarterly Board meeting and at ad hoc board meetings being held as and when required.

The Board also reviews other areas over the course of the financial year including the VCT's business strategy; key risks; stakeholder-related matters; diversity and inclusion; environmental matters; corporate responsibility and governance, compliance and legal matters.

The Investment Adviser's performance is critical for the VCT to successfully deliver its investment strategy and meet its objectives.

Service Providers

The VCT has a limited pool of service providers which include the Investment Adviser, the Administrator, the Registrar, the Legal Advisers, the Auditor, the Tax Adviser and the VCT Status Advisers.

These service providers are fundamental to ensuring that as a business the VCT meets the high standards of conduct that the Board sets. The Board meets at least annually to review the performance of the key service providers and receives reports from them at Board and Committee meetings.

The Board has regular contact with the two main service providers (the Investment Adviser and Administrator) through quarterly board meetings, with the Chairman and Audit Chairman meeting these providers more regularly. The Audit Committee also reviews the controls of the VCT's service providers on an annual basis to ensure that they are performing their responsibilities in line with Board expectations and providing value for money.

Regulators/Government

The Board regularly considers how it meets regulatory and statutory obligations and follows voluntary and best-practice guidance, including how any governance decisions it makes impact its stakeholders both in the shorter and in the longer-term.

The VCT engages an external adviser to report half-yearly on its compliance with the VCT rules and a Company Secretary report is tabled quarterly at board meetings.

ESG

Details on ESG are included in the Sustainable Investing section within the Annual Report.

Key Board decisions and specific examples of Stakeholder consideration during the year

The Board is fully engaged in both oversight and the general strategic direction of the VCT. During the year, the Board's main strategic discussions focused around the below items.

Managed Wind Down process

Following the General Meeting held on 13 July 2021, the Shareholders resolved to approve the Managed Wind Down of the Company and associated amendments to the Company's Investment Policy. Under the Managed Wind Down process, the Company has continued to be managed with the intention of realising all assets in its Portfolio in a prudent manner consistent with the principles of good investment management and with a view achieving fair value for the Company's assets and subsequently returning cash to Shareholders in an orderly manner.

To that effect, the Board's strategic discussions have centred on the sale of the full portfolio of solar assets. Particular oversight and direction from the Board has been provided with regard to the successful completion of the sale of a portion of the Company's solar assets in April 2023 and the resolution of the ongoing grid connection issue at the site in South Marston.

Time has also been spent by the Board in considering the impact of the portfolio sale on compliance with the 80% qualifying holdings requirement that applies to the Company as a VCT. With part of the assets having being sold and the sale of the remaining assets ongoing, the Board with the Investment Adviser and other service providers have commenced the planning of the Company's eventual voluntary liquidation. The Board has approached potential liquidators with a view to an appointment to oversee the process.

Throughout the year, the Board has also considered how to maximise dividend returns to Shareholders whilst taking into account the Company's expected cash requirements and the potential impact of the sale of investment assets in accordance with Shareholder wishes. After obtaining Shareholder approval at the Annual General Meeting held on 27 April 2023, the Company commenced a court-led process to cancel the Company's share premium account and capital redemption reserve. The successful conclusion of this process, along with the receipt of proceeds of sale arising from the disposal of the solar assets, allowed the Company to declare an interim dividend of 18.5p in June 2023 that reinstated the delayed 2.0p dividend that had been initially announced earlier in the year.

The Board takes seriously its responsibilities to uphold the highest standards of corporate governance and is open to constructive dialogue with Shareholders and shareholder bodies.

By order of the Board

Gill Nott

Chairman

29 January 2024

Report of the Directors

The Directors present the thirteenth Annual Report and Accounts of the VCT for the year ended 30 September 2023.

The Corporate Governance Report forms part of this report.

Share capital

At the year end, the VCT had in issue 25,515,242 Ordinary Shares and 38,512,032 'A' Shares. There are no other share classes in issue.

All shares have voting rights; each Ordinary Share has 1,000 votes and each 'A' Share has one vote. Where there is a resolution in respect of a variation of the rights of 'A' Shareholders or a Takeover Offer, the voting rights of the 'A' Shares rank pari-passu with those of Ordinary Shares.

Pursuant to the articles and subject to a special resolution, the VCT is able to make market purchases of its own shares, up to a maximum number of shares equivalent to a set percentage of the total number of each class of issued shares from time to time. No such resolution was passed at the Company's 2023 Annual General Meeting.

Substantial interests

As at 30 September 2023, and the date of this report, the VCT had not been notified of any beneficial interest exceeding 3% of the issued share capital.

Results and dividends

Directors

The Directors of the VCT during the year and their beneficial interests in the issued Ordinary Shares and 'A' Shares at 30 September 2023 and at the date of this report are detailed in the Remuneration Report.

Biographical details of the Directors, all of whom are Non-Executive, can be found within the Annual Report.

It is the Board's policy that Directors do not have service contracts, but each Director is provided with a letter of appointment. The Directors' letters of appointment, are terminable on three months' notice by either side. They are available on request at the Company's registered office during business hours and will be available for 15 minutes prior to and during the forthcoming AGM.

The Articles of Association require that each Director retire from office at the next AGM following their first appointment and that each Director retires by rotation every three years and being eligible, offer themselves for re-election. Giles Clark was appointed as a director on 30 September 2022 and accordingly stood for re-election at the 2023 Annual General Meeting. David Hunter also stood for re-election in 2023 and Gill Nott will be required to stand for election in 2025 in the event that the Company has not entered a members voluntary liquidation.

The Directors' appointment dates and the date of their last election are shown below:

The Directors believe that the Board has an appropriate balance of skills, experience, independence and knowledge of the Company and the sector in which it operates to enable it to provide effective strategic leadership and proper guidance of the Company.

The Board confirms that, following the evaluation exercise set out in the Corporate Governance Statement, the performance of the Directors is, and continues to be, effective and demonstrates commitment to the role.

Each Director is required to devote such time to the affairs of the VCT as the Board reasonably requires.

Annual General Meeting

The VCT's thirteenth Annual General Meeting ("AGM") will be held at The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF at 11:30 a.m. on 19 March 2024. The Notice of the Annual General Meeting and Form of Proxy will be circulated separately following the publication of this Annual Report.

Any change of format will be notified via the Company's website and Regulatory Information Service.

Auditor

The Independent Auditor's Report can be found within the Annual Report. At the 2023 AGM, the Shareholders approved the re-appointment of BDO LLP as the auditor. Separate resolutions will be proposed at the 2024 AGM to re-appoint BDO LLP and to authorise the Directors to determine their remuneration.

Directors' Responsibilities

The Directors are responsible for preparing the Strategic Report, the Report of the Directors, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations. They are also responsible for ensuring that the Annual Report includes information required by the Listing Rules of the Financial Conduct Authority.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom accounting standards and applicable law), including Financial Reporting Standard 102, the financial reporting standard applicable in the UK and Republic of Ireland (FRS 102). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the VCT and of the profit or loss of the VCT for that period.

In preparing these financial statements the Directors are required to:

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the VCT's transactions, to disclose with reasonable accuracy at any time the financial position of the VCT and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the VCT and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In addition, each of the Directors considers that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the VCT's position and performance, business model and strategy.

Directors' Statement pursuant to the Disclosure and Transparency Rules

Each of the Directors, whose names and functions are listed within the Annual Report, confirms that, to the best of each person's knowledge:

? the financial statements, which have been prepared in accordance with UK Generally Accepted Accounting Practice and the 2014 Statement of Recommended Practice (updated in April 2021), 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' give a true and fair view of the assets, liabilities, financial position and profit or loss of the VCT; and

? that the management report, comprising the Chairman's Statement, Investment Adviser's Report, Review of Investments, Strategic Report, and Report of the Directors includes a fair review of the development and performance of the business and the position of the VCT together with a description of the principal risks and uncertainties that it faces.

Insurance Cover

Directors' and Officers' liability insurance cover is held by the VCT in respect of the Directors.

Website Publication

The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial statements are published on the website of the Investment Adviser (https://greshamhouse.com/real-assets/new-energy-sustainable-infrastructure/) in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The Directors' responsibility also extends to the on-going integrity of the financial statements contained therein.

Corporate Governance

The VCT's Corporate Governance statement and compliance with, and departures from the 2019 AIC Code of Corporate Governance which has been endorsed by the Financial Reporting Council (www.frc.org.uk).

Other Matters

The likely future developments in the business of the Company including the Managed Wind Down are set out in the Chairman's Statement and in the Investment Adviser's Report.

Information in respect of risk management and risk diversification has been disclosed within the Strategic Report.

Information in respect of greenhouse emissions which is normally disclosed within the Report of the Directors has been disclosed within the Strategic Report.

During the year, the VCT did not have any employees (2022: nil) and therefore there is no comparison data available for the change in Directors' remuneration to average change in employee remuneration.

Events after the end of the Reporting Period

Following the year end the VCT paid an interim dividend, of 7.5p per Ordinary Share. This dividend was paid on 21 December 2023 to holders of Ordinary Shares on the register at 1 December 2023. No dividend was declared in respect of the 'A' Shares.

Statement as to Disclosure of Information to the Auditor

The Directors in office at the date of the report have confirmed, as far as they are aware, that there is no relevant audit information of which the Auditor is unaware. Each of the Directors has confirmed that they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the Auditor.

For and on behalf of the Board

Gill Nott

Chairman

29 January 2024

Directors' Remuneration Report

Annual statement of the Remuneration Committee

The Remuneration Committee consists of each of the VCT Directors. The Remuneration Committee assists the Board to fulfil its responsibility to Shareholders to ensure that the remuneration policy and practices of the VCT reward the Directors fairly and responsibly, with a clear link to corporate and individual performance and having regard to statutory and regulatory requirements. The Remuneration Committee meets as and when required to review the levels of Directors' remuneration. The Committee is also responsible for considering the need to appoint external remuneration consultants.

During the year, in recognition of increased oversight responsibilities in relation to the completion of the sale of certain solar assets in April 2023, the Remuneration Committee approved an additional special payment of £7,500 to the Chairman. This additional payment was paid on 12 July 2023. The Chairman did not vote upon her own additional special payment.

Following a review of the remuneration during the financial year 2022/2023 by the Remuneration Committee, the Board approved a 6% increase in the Directors' remuneration. These increases took effect from 1 October 2023. The changes to the Directors' remuneration are outlined in this report.

Details of the specific levels of remuneration to each Director as well as the fee increases are outlined in the report.

Report on Remuneration Policy

Below is the VCT's remuneration policy. This policy applies from 27 April 2023. Shareholders must vote on the remuneration policy every three years, or sooner, if the VCT wants to make changes to the policy. The policy was last approved by Shareholders at the 2023 AGM and, if the Managed Wind Down of the Company was still to be completed, will be presented to Shareholders for approval at the 2026 AGM. There are currently no planned changes to the remuneration policy.

The VCT's policy on Directors' remuneration is to seek to remunerate Board members at a level appropriate for the time commitment required and degree of responsibility involved and to ensure that such remuneration is in line with general market rates. Non-Executive Directors will not be entitled to any performance related pay or incentive.

Directors' remuneration is also subject to the VCT's Articles of Association which provide that:

(i) the aggregate fees will not exceed £100,000 per annum (excluding any Performance Incentive fees to which the Directors may be entitled from time to time); and

(ii) the Directors shall be entitled to be repaid all reasonable travelling, hotel and other expenses incurred by them respectively in or about the performance of their duties as Directors.

Agreement for services

Information in respect of the Directors' agreements has been disclosed within the Report of the Directors.

Performance incentive

The structure of 'A' Shares, whereby Management (being staff of the Investment Adviser) owns one third of the 'A' Shares in issue (known as the "Management 'A' Shares"), enables a payment, by way of a distribution of income, of the Performance Incentive to the Management Team. The performance incentive structure of 'A' Shares is detailed in the Strategic Report.

The NAV hurdle was not met for the financial year end 30 September 2023 and no dividend was paid in respect of the 'A' Shares during the year, therefore there was no Performance Incentive.

Annual Report on remuneration

The Board has prepared this report in accordance with the requirements of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI2008/410) and the Companies Act 2006.

Under the requirements of Section 497 of the Companies Act 2006, the VCT's Auditor is required to audit certain disclosures contained within this report. These disclosures have been highlighted and the audit opinion thereon is contained within the Auditor's Report.

Directors' remuneration (audited)

Directors' remuneration for the VCT for the year under review are shown in the table below.

The basic annual fees of the Directors during the year were £27,825 for the Chairman, £25,200 for the Audit Committee Chairman and £22,575 for the other Non-Executive Director. In addition, as reported above, an additional special payment was made to the Chairman in July 2023 for increased oversight responsibilities in relation to the completion of sale of certain solar assets held by the VCT in April 2023.

Effective 30 September 2022, Stuart Knight and Duncan Grierson resigned from the Board and Giles Clark was appointed as a new Non-Executive Director following his resignation from the Board of VCT2. Effective 1 October 2023, an increase of 6% will be applied to director fees. This increase is within the limit set by the Remuneration Policy. Both changes are shown in the table below.

No other emoluments, pension contributions or life assurance contributions were paid by the VCT to, or on behalf of, any Director. The VCT does not have any share options in place.

Annual percentage change in Directors' remuneration

The following table sets out the annual percentage change in Directors' fees for the year up to 30 September 2023:

Directors' Shareholding (Audited)

The Directors of the VCT during the year and their beneficial interests in the issued Ordinary Shares and 'A' Shares at 30 September 2023 and at the date of this report were as follows:

Statement of voting at AGM

Remuneration report

At the AGM on 27 April 2023, the votes in respect of the resolution to approve the Director's Remuneration Report were as follows:

Remuneration policy

At the 2023 AGM, when the remuneration policy was last put to a Shareholder vote, 91.56% voted for the resolution, showing significant shareholder support.

Relative importance of spend on pay

The difference in actual spend between 30 September 2023 and 30 September 2022 on Directors' remuneration in comparison to distributions (dividends and share buybacks) and other significant spending are set out in the chart within the Annual Report..

2023/2024 Remuneration

The remuneration levels for the forthcoming year for the Directors of the VCT are shown in the above table.

Performance graph

The graph below represents the VCT's performance over the reporting periods since the VCT's Ordinary Shares and 'A' Shares were first listed on the London Stock Exchange, and shows share price total return and net asset value total return performance on a dividends reinvested basis. All returns are rebased to 100 at 10 January 2011, being the date the VCT's shares were listed.

The Numis Smaller Companies Index has been chosen as a comparison as it is a publicly available broad equity index which focuses on smaller companies and is therefore more relevant than most other publicly available indices.

Giles Clark

Remuneration Committee Chairman

29 January 2024

Corporate Governance

The Board of Gresham House Renewable Energy VCT1 plc has considered the Principles and Provisions of the 2019 AIC Code of Corporate Governance (the AIC Code). The AIC Code addresses the Principles and Provisions set out in the UK Corporate Governance Code (the UK Code), as well as setting out additional Provisions on issues that are of specific relevance to Gresham House Renewable Energy VCT1 plc.

The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council, provides more relevant information to Shareholders.

Compliance with the Principles and Provisions of the AIC Code by the VCT is detailed within the Annual Report.

The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the Principles and Provisions set out in the UK Code to make them relevant for investment companies.

The Board

The VCT has a Board comprising three Non-Executive Directors, chaired by Gill Nott. Gill Nott, Giles Clark and David Hunter are independent from the Investment Adviser. The VCT has not appointed a Senior Independent Director. Biographical details of all Board members (including significant other commitments of the Chairman) are shown within the Annual Report.

Full Board meetings take place quarterly and the Board meets or communicates more regularly to address specific issues. The Board has a formal schedule of matters specifically reserved for its decision which includes, but is not limited to: considering recommendations from the Investment Adviser; making decisions concerning the acquisition or disposal of investments; and reviewing, annually, the terms of engagement of all third party advisers (including the Investment Adviser and Administrator).

The Board has also established procedures whereby Directors wishing to do so in the furtherance of their duties may take independent professional advice at the VCT's expense.

All Directors have access to the advice and services of the Company Secretary. The Company Secretary facilitates the Board's access to full information on the VCT's assets and liabilities and other relevant information requested by the Chairman in advance of each Board meeting.

The Board has decided that the VCT will not be buying shares for the foreseeable future as the VCT wishes to conserve such cash as it generates for the Managed Wind Down of the VCT and the potential payment of dividends.

The capital structure of the VCT is disclosed in Note 19 to the financial statements.

During the period under review, all the Directors of the VCT were Non-Executive and served on each committee of the Board. The Audit Committee is chaired by David Hunter, the Remuneration and Nomination Committees are chaired by Giles Clark. The Audit Committee normally meets four times yearly, and the Remuneration and Nomination Committees meet as required. The Board has delegated a number of areas of responsibility to its committees and each committee has defined terms of reference and duties.

Audit Committee

The Audit Committee is responsible for reviewing the half- year and annual accounts before they are presented to the Board, the terms of appointment of the Auditor, together with their remuneration, as well as a full review of the effectiveness of the VCT's internal control and risk management systems.

In particular, the Committee reviews, challenges (where appropriate) and agrees the basis for the carrying value of the unquoted investments, as prepared by the Investment Adviser, for presentation within the half-year and annual accounts.

The Committee also takes into consideration comments on matters regarding valuation, revenue recognition and disclosures arising from the Report to the Audit Committee as part of the finalisation process for the annual accounts.

The Committee is also responsible for reviewing the going concern assessment and viability statement including consideration of all reasonably available information about the future financial prospects of the VCT, the possible outcomes of events and changes in conditions and realistic possible responses to such events and conditions.

The Audit Committee met four times during the year. The Committee reviewed the internal financial controls and concluded that they were appropriate.

As the VCT has no staff, other than the Directors, there are no procedures in place in respect of whistle blowing. The Audit Committee understands that the Investment Adviser and Administrator have whistle blowing procedures in place.

External Auditor

The Audit Committee reviews and agrees the audit strategy paper, presented by the Auditor in advance of the audit, which sets out the key risk areas to be covered during the audit and confirms their status on independence.

The Committee also confirms that the main areas of risk for the period under review are the carrying value of investments and, in anticipation of the Company's need to enter voluntary liquidation once the majority of the assets have been sold, liquidity and solvency risks.

The Committee, after taking into consideration the proposed liquidation of the Company in addition to comments from the Investment Adviser and Administrator, regarding the effectiveness of the audit process; immediately before the conclusion of the annual audit, will recommend to the Board either the re?appointment or removal of the Auditor.

Under the Competition and Markets Authority regulations and subject to transitional provisions, there is a requirement that an audit tender process be carried out every ten years and mandatory rotation at least every twenty years. The VCT undertook an audit tender in respect of the audit required for the year ended 30 September 2021 and, following a competitive tender process in early 2021, BDO was re-appointed.

Board and Committee Meetings

The following table sets out the Directors' attendance at the Board and Committee meetings during the year:

In addition, the Directors attended a number of ad hoc board meetings, mainly to discuss the Managed Wind Down of the VCT and the sale of certain solar assets held by the Company that completed in April 2023.

Remuneration Committee

The Committee meets as and when required to review the levels of Directors' remuneration. The Committee is also responsible for considering the need to appoint external remuneration consultants.

Details of the specific levels of remuneration to each Director are set out in the Directors' Remuneration Report.

Recognising the increased oversight responsibilities during the financial year 2022/2023 in relation to the sale of certain solar assets of the Company, the Remuneration Committee resolved to approve an additional special payment of £7,500 to the Chairman. Details of this additional fee can be found in the Directors' Remuneration Report.

Financial Reporting

The Directors' responsibilities statement for preparing the accounts is set out in the Report of the Directors and a statement by the Auditor about their reporting responsibilities is set out in the Independent Auditor's report.

Nomination Committee

The Nomination Committee's primary function is to make recommendations to the Board on all new appointments and also to advise generally on issues relating to Board composition and balance. The Committee meets as and when appropriate. Before any appointment is made by the Board, the Committee shall evaluate the balance of skills, knowledge and experience, and consider candidates on merit, against objective criteria, and with due regard for the benefits of diversity on the Board. Diversity includes and makes good use of differences in knowledge and understanding of relevant diverse geographies, peoples and their backgrounds including race or ethnic origin, sexual orientation, gender, age, disability or religion.

During the period, the Committee carried out a rigorous internal board evaluation during which it assessed the effectiveness of the Board and its committees. The Committee found that the Board was functioning well and that all Directors contributed to the discussions at meetings. A number of topics were raised and discussed and overall the Board and its committees were found to be performing satisfactorily.

Relations with Shareholders

Shareholders have the opportunity to meet the Board at the AGM. The Board is also happy to respond to any written queries made by Shareholders during the course of the period, or to meet with major Shareholders if so requested.

In addition to the formal business of the AGM, representatives of the Investment Adviser and the Board are available to answer any questions a Shareholder may have. The notice of the thirteenth AGM and proxy form will be circulated separately following the publication of this Annual Report.

The terms of reference of the Committees and the conditions of appointment of Non-Executive Directors are available to Shareholders on request.

Internal Control

The Directors are fully informed of the internal control framework established by the Investment Adviser and the Administrator to provide reasonable assurance on the effectiveness of internal financial control.

The Board is responsible for ensuring that the procedures to be followed by the advisers and themselves are in place, and they review the effectiveness of the internal controls, based on the report from the Audit Committee, on an annual basis to ensure that the controls remain relevant and were in operation throughout the year.

The Board also reviews the perceived risks faced by the VCT in line with relevant guidance on an annual basis and implements additional controls as appropriate.

The Board also considered the requirement for an internal audit function and considered that this was not necessary as the internal controls and risk management in place were adequate and effective.

Although the Board is ultimately responsible for safeguarding the assets of the VCT, the Board has delegated, through written agreements, the day-to-day operation of the VCT (including the Financial Reporting Process) to the following advisers:

Investment Adviser

Gresham House Asset Management Limited

Administrator and Company Secretary

JTC (UK) Limited

Anti-bribery policy

In order to ensure compliance with the UK Bribery Act 2010, the Directors confirm that the VCT has zero tolerance towards bribery and a commitment to carry out business openly, honestly and fairly.

Going concern

In assessing the VCT as a going concern, the Directors have considered the forecasts which reflect the proposed strategy for portfolio investments and the results of the continuation votes at the AGM and General Meeting held on 22 March 2021 and 13 July 2021 respectively. At the meeting on 13 July 2021, the proposed special resolution was approved by Shareholders, resulting in the VCTs entering a Managed Wind Down and a new investment policy replacing the existing investment policy. The Board agreed to realise the VCTs' investments in a manner that achieves balance between maximising the net value received from those investments and making timely returns to Shareholders.

Given a formal decision has been made to wind the VCT up, the financial statements have been prepared on a basis other than going concern. The Board notes that the VCT has sufficient liquidity to pay its liabilities as and when they fall due, during the Managed Wind Down, and that the VCT has adequate resources to continue in business until the formal liquidation and wind-up commences.

Share capital

The VCT has two classes of share capital: Ordinary Shares and 'A' Shares. The rights and obligations attached to those shares, including the power of the VCT to buy back shares and details of any significant shareholdings, are set out in the Report of the Directors.

Compliance statement

The Listing Rules require the Board to report on compliance with the AIC Code provisions throughout the accounting period. With the exception of the limited items outlined below, the VCT has complied throughout the accounting year ended 30 September 2023 with the provisions set out in Section 5 to 9 of the AIC Code.

By order of the Board

JTC (UK) Limited

Company Secretary

Company number: 0430176

Registered office:

The Scalpel, 18th Floor

52 Lime Street

London EC3M 7AF

29 January 2024

 Income Statement

For the year ended 30 September 2023

All Revenue and Capital items in the above statement derive from continuing operations. As part of the Managed Wind Down, five investments were disposed of during the financial year. The total column within the Income Statement represents the Statement of Total Comprehensive Income of the VCT prepared in accordance with Financial Reporting Standards (FRS 102). The supplementary revenue and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in November 2014 (updated in July 2022) by the Association of Investment Companies (AIC SORP).

Other than revaluation movements arising on investments held at fair value through the profit or loss, there were no differences between the return/loss as stated above and at historical cost.

The accompanying Notes form an integral part of these financial statements.

Balance Sheet

As at 30 September 2023

The financial statements of Gresham House Renewable Energy VCT1 plc were approved and authorised for issue by the Board of Directors and were signed on its behalf by:

Gill Nott

Chairman

Company number: 07378392

Date: 29 January 2024

The accompanying Notes form an integral part of these financial statements.

Statement of Changes in Equity

For the year ended 30 September 2023

* Previous transfer from revaluation reserve relates to historic losses on Small Wind

The accompanying Notes form an integral part of these financial statements.

Cash Flow Statement

For the year ended 30 September 2023

The accompanying Notes form an integral part of these financial statements.

Notes to the Accounts

For the year ended 30 September 2023

1. General Information

Gresham House Renewable Energy VCT1 plc (VCT) is a Venture Capital Trust established under the legislation introduced in the Finance Act 1995 and is domiciled in the United Kingdom and incorporated in England and Wales under the Companies Act 2006. The Company's principal activity is that of a VCT which invests in renewable energy investments. The registered office of the Company is The Scalpel 18th floor, 52 Lime Street, London, EC3M 7AF. Its share capital is denominated in Pound Sterling (GBP) and consists of Ordinary Shares and 'A' Shares.

At the General Meeting on 13 July 2021 a formal decision was made to wind the VCT up, therefore the VCT financial statements have since been prepared on a non-going concern basis. As a result, the investments held at fair value through profit or loss were transferred from fixed assets to current assets in the 30 September 2021 annual financial statements. No further adjustments were made in the VCT's financial statements relating to the non-going concern basis.

Following the adoption of the New Investment Policy from 13 July 2021 (the "New Investment Policy"), the VCT's principal objective is to manage the VCT with the intention of realising the sale or monetisation otherwise of all remaining assets in the portfolio in a prudent manner consistent with the principles of good investment management and with a view to returning value to Shareholders in an orderly manner, whilst protecting the tax position of Shareholders.

The VCT will pursue its investment objective by effecting an orderly realisation of its assets in a manner that seeks to achieve a balance between maximising the value received from those assets and making timely returns of capital to Shareholders. This process might include sales of individual assets or running of the portfolio in accordance with the existing scope of the assets, or a combination of both.

Investments held at fair value through profit or loss are held as current assets.

2. Accounting policies

Basis of accounting

The VCT has prepared its financial statements under FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and in accordance with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued by the Association of Investment Companies (AIC) in November 2014 and revised in July 2022 (SORP) as well as the Companies Act 2006.

The VCT implements new Financial Reporting Standards (FRS) issued by the Financial Reporting Council when they become effective. No new FRS were implemented during the year.

The financial statements are presented in Sterling (£).

Presentation of income statement

In order to better reflect the activities of a Venture Capital Trust and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The net revenue is the measure the Directors believe appropriate in assessing the VCT's compliance with certain requirements set out in Part 6 of the Income Tax Act 2007.

Investments

All investments are designated as "fair value through profit or loss" assets due to investments being managed and performance evaluated on a fair value basis. A financial asset is designated within this category if it is both acquired and managed on a fair value basis, in accordance with the VCT's documented investment policy. The fair value of an investment upon acquisition is deemed to be cost. Thereafter investments are measured at fair value in accordance with the International Private Equity and Venture Capital Valuation Guidelines (IPEV) together with FRS 102 sections 11 and 12.

For unquoted investments and subsequent to acquisition, fair value is established by using the IPEV guidelines. The valuation methodologies for unquoted entities used by the IPEV to ascertain the fair value of an investment are as follows:

? multiples;

? net assets;

? discounted cash flows or earnings (of underlying business);

? discounted cash flows (from the investment); and

? industry valuation benchmarks.

Of the valuation methodologies above, the multiples and discounted cash flow approaches are applied to the VCT's investments. Effective 1 January 2019, the IPEV guidelines to establish fair value were updated whereby the cost or price of a recent investment are no longer considered valid valuation methodologies for establishing the fair value of an investment. The VCT along with its Investment Adviser may, under orderly market conditions, deem the cost or recent price paid for an investment as an appropriate fair value for an investment at the time of acquisition but subsequent to recognition must reconsider the assigned fair value based on up-to-date market conditions and performance of the underlying investee company in order to assign a fair value in line with the IPEV guidelines.

The methodology applied takes account of the nature, facts and circumstances of the individual investment and uses reasonable data, market inputs, assumptions and estimates in order to ascertain fair value.

Gains and losses arising from changes in fair value are included in the Income Statement for the year as a capital item and transaction costs on acquisition or disposal of the investment are expensed. Where an investee company has gone into receivership or liquidation, or administration (where there is little likelihood of recovery), the loss on the investment, although not physically disposed of, is treated as being realised.

The investee companies held by the VCT are treated as a portfolio of investments and are therefore measured at fair value in accordance with section 9 of FRS 102. The results of these companies are not incorporated into the Income Statement except to the extent of any income accrued. This is in accordance with the SORP and FRS 102 sections 14 and 15 that does not require portfolio investments, where the interest held is greater than 20%, to be accounted for using the equity method of accounting.

Income

Dividend income from investments is recognised when the Shareholders' rights to receive payment have been established, normally the ex-dividend date.

Interest income is accrued on a time apportionment basis, by reference to the principal sum outstanding and at the effective interest rate applicable and only where there is reasonable certainty of collection in the foreseeable future.

Expenses

All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Income Statement, all expenses have been presented as revenue items except as follows:

Taxation

The tax effects on different items in the Income Statement are allocated between capital and revenue on the same basis as the particular item to which they relate, using the VCT's effective rate of tax for the accounting period.

Due to the VCT's status as a Venture Capital Trust and the continued intention to meet the conditions required to comply with Part 6 of the Income Tax Act 2007, no provision for taxation is required in respect of any realised or unrealised appreciation of the VCT's investments which arises.

Deferred taxation, which is not discounted, is provided in full on timing differences that result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the accounts.

Other debtors, other creditors and loan notes

Other debtors (including accrued income), other creditors and loan notes (other than those held as part of the investment portfolio as set out in Note 10) are included within the accounts at amortised cost.

3. Income

4. Investment advisory fees

The investment advisory fees for the year ended 30 September 2023, which were charged quarterly to the VCT, were based on 1.15% of the net assets as at the previous quarter end. In addition, management fees of £44,000 relating to additional costs incurred by the Investment Adviser during the financial year were approved by the Board.

5. Other expenses