Riverstone Credit Opportunities Income Plc

Interim Report and Unaudited Interim Condensed Financial Statements

For the six months ended 30 June 2024

At a General Meeting held on 22 May 2024, Riverstone Credit Opportunities Income Plc ("RCOI" or the "Company") adopted a revised Investment Objective in order to facilitate a managed wind-down of the Company.

The Company aims to realise the Company's assets on a timely basis with the aim of making progressive returns of cash to holders of Ordinary Shares as soon as practicable.

Company number: 11874946

All capitalised terms are defined in the list of defined terms below unless separately defined.

Riverstone Credit Opportunities Income PLC

Riverstone Credit Opportunities Income Plc is an externally managed closed-ended investment company listed on the London Stock Exchange.

The Company's Ordinary Shares were admitted to the Specialist Fund Segment of the London Stock Exchange plc's Main Market and incorporated and registered on 11 March 2019 in England and Wales with an unlimited life.

At the Annual General Meeting ("AGM") held on 22 May 2024, Riverstone Credit Opportunities Income Plc adopted the Wind-Down Investment Policy and entered into a managed wind-down.

The Company's investment objective and investment policy is now to realise the Company's assets on a timely basis with the aim of making progressive returns of cash to holders of Ordinary Shares as soon as practicable.

INVESTMENT MANAGER

The Company's Investment Manager is Riverstone Investment Group LLC, which is controlled by affiliates of Riverstone Holdings LLC ("Riverstone").

On 31 December 2023, Riverstone entered into a sub-management agreement with Breakwall Capital LP ("Breakwall" or "Sub-Manager") for all the credit vehicles managed by Riverstone.

Riverstone was founded in 2000 and is currently one of the world's largest and most experienced investment firms focused on energy, power, infrastructure and decarbonisation. The firm has raised over $45 billion of capital and committed approximately $45 billion to over 200+ investments in North America, South America, Europe, Africa, Asia and Australia. Headquartered in New York, Riverstone has built a global platform with additional offices located in Menlo Park, Houston, London, Amsterdam and Mexico City. Since its founding, the Firm has grown its presence significantly and currently employs over 33 professionals worldwide.

The registered office of the Company is 5th Floor, 20 Fenchurch Street, London, England, EC3M 3BY.

Key Financials

Highlights

·      The NAV at 30 June 2024 was $1.01 per share (31 December 2023: $1.06).

·      Distributions of 2.70 cents per share (30 June 2023: 4.00 cents per share) approved with respect to the period ended 30 June 2024. Given that a significant portion of the Company's previously expected earnings for the second quarter was expected to come from a possible H&W refinancing, the Board is aware of the reduced level of dividend to pay for the second quarter.

·    There was one full realisation of EPIC Propane executed in the period ended 30 June 2024 .

INVESTMENT OBJECTIVE AND POLICY

Following the outcome of the vote held at the AGM on 22 May 2024, the Company adopted a revised investment objective and investment policy in order to facilitate a managed wind-down of the Company. The revised Investment Policy is now "to realise the Company's assets on a timely basis with the aim of making progressive returns of cash to holders of Ordinary Shares as soon as practicable" (the "Wind-down Investment Policy").

The Investment Manager expects generally to realise the loans comprising the Company's portfolio by holding them until they come to term and returning the resulting proceeds to Shareholders. The Investment Manager may also dispose of loans in the secondary market, including through sales to other funds, vehicles or managed accounts advised or managed by the Investment Manager or Breakwall.

The precise mechanism for the return of cash to holders of Ordinary Shares in the managed wind-down is at the discretion of the Board, but includes a combination of capital distributions, tender offers, mandatory share redemptions and share repurchases. The return of proceeds to Shareholders may require further Shareholder approvals, depending on the methods used.

The Company will continue to carry on its investment business during the managed wind-down.

Prior to the 2024 AGM, the Company's investment objective was to lend to companies working to drive change and deliver solutions across the energy sector, spanning renewable as well as conventional sources, with a primary focus on infrastructure assets, by building a portfolio that generated as well as driving an attractive and consistent risk adjusted return for investors, as well as drive a positive action with regard to climate change by structuring loans as Green Loans or Sustainability-Linked Loans.

Further details on the Company's previous investment strategy, investment restrictions and distribution policy are outlined in the Company's Annual Report for the year ended 31 December 2023.

Chairman's Statement

Overview

On behalf of the Board, I would like to thank our shareholders for their ongoing support. On the 22 May 2024, following shareholder approval at the Company's Annual General Meeting, the Company entered a Managed Wind Down. Accordingly, the Company is required to amend its investment policy "To realise the Company's assets on a timely basis with the aim of making progressive returns of cash to holders of Ordinary Shares as soon as practicable." We are very proud of the portfolio of loans built by the Investment Manager to help support the energy transition and we are committed to maximising shareholder value through the Managed Wind Down process.

Overall, we are pleased with the financial performance of the Company and the beneficial impact its loans are having on the journey towards greater environmental sustainability in global energy infrastructure. During the first half of 2024, apart from the unrealised markdown of the position in Harland & Wolff, the Company's performance remained stable from 2023, posting consistent earnings for the period, and remains well positioned in the current environment. The Company has delivered a NAV total return of 40.4% to investors since inception in May 2019 and 36.1 cents of income.

Going forward, the Company will focus on the realisation of the Company's assets and return of capital to shareholders.

Key Developments

RCOI's current NAV per share is $1.01 (31 December 2023: $1.06).

There was one realisation that occurred during the first half of 2024, Epic Propane. Epic Propane was fully realised in April 2024 with a 16.9 per cent gross IRR and a 12.8 per cent net IRR and 1.24x gross MOIC and 1.18x net MOIC respectively. This was an attractive return for our Shareholders.

Performance

The Company reported a profit of $0.2 million for the period ending 30 June 2024, resulting from income received from the investment portfolio and changes in the portfolio's valuations. The Net Asset Value ("NAV") of the Company remained stable and ended the period at $1.01 per share. As of June 30, 2024, 33% of the Company's assets consist of cash and cash equivalents, 85% of which is currently uncommitted, 61% are loans and 7% are equity investments. The Company is paying distributions of 2.70 cents per share to investors within the first half of 2024.

The current unrealised portfolio remains attractive, marked at an average 1.24x gross MOIC and 1.15x net MOIC. Characteristics of RCOI's investment strategy, particularly the focus on a conservative LTV, diversified sub-sectors and end-user base, as well as structured incentives for early repayment, have helped mitigate negative portfolio impact from the broader market fluctuations.

RCOI has executed 25 direct investments and participated in two secondary investments since inception and cumulatively invested $253 million of capital since the IPO in May 2019. The Company has now realised a total of 19 investments, delivering an average gross IRR of 17.2 per cent and net IRR of 12.7 per cent.

As the company has adopted the Wind Down Investment policy, the Company's investment objective and investment policy is to realise the Company's assets on a timely basis with the aim of making progressive returns of cash to holders of Ordinary Shares as soon as practicable.

Outlook

The Investment Manager would expect generally to realise the loans comprising the Company's portfolio by holding them until they come to term and returning the resulting proceeds to Shareholders. The Investment Manager may also dispose of loans in the secondary market, including through sales to other funds, vehicles or managed accounts advised or managed by the Investment Manager or Breakwall.

The precise mechanism for the return of cash to holders of Ordinary Shares in a managed wind-down is at the Board's discretion but may include (subject to compliance with all applicable legal requirements) a combination of capital distributions, tender offers, mandatory share redemptions and share repurchases. The return of proceeds to Shareholders may require further Shareholder approvals, depending on the methods proposed. We look forward to providing further updates on the progress of the Company's Managed Wind Down in due course.

Reuben Jeffery, III

Chairman

7 August 2024

INVESTMENT MANAGER'S REPORT

ABOUT THE INVESTMENT MANAGER

Appointed in May 2019, the Investment Manager, an affiliate of Riverstone, sought to generate consistent shareholder returns predominantly in the form of income distributions principally by making Green and Sustainability-Linked, senior secured loans to energy transition businesses. Loans are classified as Green Loans when they support environmentally sustainable economic activity and Sustainability-Linked Loans when they contain sustainability performance targets or other equivalent metrics to be monitored. RCOI has participated in loans to companies working to drive change and deliver better solutions across the energy sector, spanning renewable as well as conventional energy, with a primary focus on infrastructure assets. The Company's aim was to build a portfolio that generates an attractive and consistent risk-adjusted return for investors, as well as drive positive impact regarding climate change by structuring loans as Green Loans or Sustainability-Linked Loans.

The Company sought to achieve its investment objective predominantly through managing its diversified portfolio of direct and indirect investments in loans, notes, bonds, and other debt instruments, including convertible debt, issued by Borrowers operating in the energy sector. Riverstone's investment professionals have a unique combination of industry knowledge, financial expertise, and operating capabilities. The Company also benefited from the guidance and input provided by non-Riverstone credit team members of Riverstone's credit investment committee who are involved in the Company's investment process. The Company believes that Riverstone's global network of deep relationships with management teams, investment banks and other intermediaries in the energy sector led to enhanced sourcing and deal origination opportunities for the Company.

On November 6, 2023, Riverstone Holdings LLC and their affiliate Riverstone Investment Group (collectively, "Riverstone") announced that they intended to enter into an agreement with Breakwall Capital LP to provide sub-management services (the "Sub-Management Agreement") for all credit vehicles managed by Riverstone, including RCOI (the "Existing Credit Vehicles"). Breakwall is a newly formed independent asset-management firm regulated by the SEC as a Registered Investment Advisor, owned and operated by the former Riverstone Credit Partners team. Services provided by Breakwall commenced on January 2, 2024.

Under the arrangement, Riverstone has remained the manager of RCOI on the terms of RCOI's existing management agreement and all aspects of the ongoing management of the Company, including the day-to-day investment team, have remained consistent with current practices. There was no increase in fees payable by RCOI as a result of the modified arrangements. The Board of RCOI was involved in establishing the Sub-Management Agreement and are confident that the structure of Riverstone as manager and Breakwall as the sub-manager will continue to deliver strong returns for shareholders during this period of Managed Wind-down.

INVESTMENT PORTFOLIO SUMMARY

As of 30 June 2024, the Company holds a diverse portfolio of investments in seven companies across energy infrastructure & infrastructure services and energy transition assets as further discussed below. In addition, RCOI holds the warrants of one investment where the loan was fully realised.

In the descriptions that follow, yield to maturity is inclusive of all upfront fees, original issue discounts, drawn spreads and prepayment penalties through the stated maturity of the loan. Most loans have incentives to be called early. A portion of the loans have a "payment-in-kind" feature for drawn coupons for a limited time period. Similarly, some of the loans have a "delayed-draw" feature that allows the borrower to call capital over time, but always with a hard deadline. Loans that are committed are loans with signed definitive documentation where a structuring fee and/or original issue discount have been earned and the Company earns an undrawn spread. Loans that are invested are signed with definitive documentation and, where a structuring fee and/or original issue discount have been earned, the Company has funded the loan to the Borrower and the Company is earning a drawn coupon.

The Investment Manager expects that every loan it has made will advance the cause of energy transition one way or another. For new green energy infrastructure, or conversion of older assets to a more sustainable use, we typically issue Green Loans. For existing hydrocarbon related businesses, we typically issue Sustainability-Linked Loans that tie loan economics to meeting specific sustainability performance targets. Both structures are based on LSTA guidelines and are subject to third party independent opinion from Sustainable Fitch, a division of Fitch Group focused on ESG.

Harland & Wolff - In March 2022, RCOI participated in a $35.0 million first lien Green Term Loan to Harland & Wolff ("H&W"), an infrastructure operator engaged in the development and operation of strategic maritime assets across the United Kingdom. At the initial closing RCOI committed $11.8 million. As part of the terms of the loan, RCOI has also been granted 5.1 million warrants to purchase stock in H&W. This has subsequently been upsized to $14.6 million. RCOI has not participated in any further financing since 2022.

As of 30 June 2024, $14.6 million remains invested, reflecting 23.5 per cent of RCOI's overall commitments.  

This loan has subsequently been upsized to $115 million and is due December 2024.

As noted in RCOI's London Stock Exchange announcement on 19 July 2024, the most significant move in the Company RCOI's NAV in the second quarter came from a $2.8 million reduction in the value of this position, equivalent to 3.0% of NAV. The reduction in value of this loan in the second quarter was taken in consultation with the Company's external valuation provider and reflects the best estimate of the investment manager as to the fair market value of the position. The principal reason for the reduction in value is that, as announced on 19 July 2024 by H&W, the UK Department for Business and Trade has notified H&W that HM Government will not be proceeding with the provision of export development guarantee or loan facilities that had long been considered for H&W.

On 2 August 2024, H&W announced that it had received a new financing commitment of $25.0 million from credit funds managed by Riverstone. The new capital is being classified as a super priority position to the existing facility in which the RCOI is a Lender. As a condition to the financing, the most recent $15 million upsize of the facility completed in February 2024 (in which RCOI did not participate), is being recharacterised as part of the new super priority facility. As announced by H&W, the increase in debt facilities is accompanied by a change in personnel of H&W's senior management and the insertion of new non-executive directors.

RCOI will not participate in the new super priority facility as it has now entered into managed wind-down (and had previously already reached its concentration limit in H&W). The Q2 NAV does not reflect the impact of this new financing as it had not closed as of 30 June 2024.

The Board will continue to closely monitor developments regarding the Company's investment in H&W, in particular when considering the appropriate timing for cash returns to Shareholders pursuant to its wind-down strategy. In the meantime, the Company's cash balances are invested in a money market and are yielding a healthy risk-free return.

Seawolf Water Resources - In September 2022, RCOI made a secondary investment in a stapled bundle of private securities in Seawolf Water Resources ("Seawolf"), a privately held water infrastructure services company with operations primarily in Loving County, TX and southern New Mexico. The investment includes a Sustainability-Linked first lien term loan along with preferred stock and common equity, collectively purchased at a significant discount to market value. The loan portion of the investment is due in March 2026 and was purchased at an estimated all-in yield to maturity of 10.6 per cent to RCOI.  The preferred stock and common equity are perpetual in nature but benefit from excess cash returned to the shareholders from time to time.

Across the term loan, preferred stock, and common equity, RCOI committed a total of $9.0 million, which has subsequently been reduced to $8.8 million via repurchases of preferred stock by the company.  This reflects 14.3 per cent of RCOI's overall commitments as of 30 June 2024.

Hoover Circular Solutions - In November 2022, RCOI participated in a $160mm Sustainability-Linked first lien term loan to Hoover CS, a leading provider of sustainable packaging and fleet management solutions, that is paving the way for customers across the chemical, refining and general industrial-end markets to move away from single-use containers. Sustainable Fitch provided a Second Party Opinion ("SPO") on the loan. The loan is due in November 2026 and was made at an estimated all-in yield to maturity of 10.6 per cent. 

At closing, RCOI committed $13.7 million. As of 30 June 2024, the full $13.7 million remains invested, reflecting 22.2 per cent of RCOI's overall commitments.

Max Midstream - In December 2022, RCOI participated in a $28.6 million Sustainability-Linked, first lien term loan (the "Term Loan") to a subsidiary of Max Energy Industrial Holdings US LLC ("Max"). Max is developing the first carbon-neutral crude oil export terminal on the Gulf Coast of Texas, which it believes will lead to increased market share as crude consumers globally seek to reduce their overall carbon footprint. The loan is due in December 2024, subject to some mutual extension options that would extend the maturity to December 2025. At the time of close, the term loan was SOFR+650 bps with all in coupon of 11.0 percent.

At close, RCOI committed $5.0 million. As of 30 June 2024, the full $5.0 million remains invested, reflecting 8.1 per cent of RCOI's overall commitments.

Streamline Innovations - In June 2023, RCOI participated in a $55 million Green term loan to Streamline Innovations, a leader in environmentally-advanced treatment solutions for the removal of hydrogen sulfide (H2S) from natural gas, renewable fuels, wastewater, and industrial processes. The facility was structured as a Green Loan with Sustainable Fitch providing a Second Party Opinion.   The loan is due in December 2026 and was made at an estimated all-in yield to maturity of 12.5 per cent.   

As closing, RCOI committed $9.9 million and funded $3.5 million. As of 30 June 2024, RCOI's commitment remains at $9.9 million with the funded amount increasing to $5.4 million, representing 16.0 per cent of RCOI's total commitments.

Blackbuck Resources - In June 2021,RCOI participated in a $50.0 million first lien delayed-draw Sustainability-Linked Term Loan to the BlackBuck Resources, a sponsor-backed water infrastructure company focused on providing E&P operators with a one-stop shop for all things related to water management, including treatment, gathering, recycling, storage and disposal.  Sustainable Fitch provided a Second Party Opinion.  The loan is due in December 2024 and was made at an estimated all-in yield to maturity of 17.0 per cent.

At closing, RCOI committed $9.9 million and funded $8.9 million. As of 30 June 2024, RCOI's commitment has been reduced to $9.2 million, with all $9.2 million now funded, representing 14.8 per cent of RCOI's total commitments.

Imperium3 New York, Inc - In April 2021, RCOI participated in a $63.0 million first lien delayed-draw Green term loan to Imperium 3 New York, Inc, as lithium-ion battery company that will commercialise high performing lithium-ion batteries by developing a large-scale manufacturing facility in Endicott, NY. The loan was fully refinanced In April 2022, the Company fully refinanced this loan with a new source of financing, resulting in a 32.5 per cent realised IRR and 1.25x realised MOIC.

At closing RCOI committed $6.8 million. In addition, as part of the loan terms, RCOI was granted warrants to purchase 0.4 per cent of the Imperium's equity and 0.3 per cent of the equity in one of Imperium's parent company's Charge CCCV. As of 30 June 2024, none of the loan is outstanding but the warrants remain the Company's portfolio.

Caliber Midstream - In July 2019, RCOI participated in a $10.0 million upsize of a $65.0 million first lien holding company term loan to Caliber Midstream (the "HoldCo Term Loan"),a sponsor-backed Bakken focused midstream company that provides crude oil and natural gas gathering and processing, produced water transportation and disposal, and freshwater sourcing and transportation.

At closing $3.4 million was committed by RCOI to the HoldCo Term Loan. Subsequently, in April 2021, an additional $0.6 million was invested on a secondary basis in a senior secured first lien loan made to Caliber (the "Opco Loan"), bringing RCOI's total commitment to Caliber to $4.0 million.

In March 2021, Caliber's largest customer, Nine Point Energy, terminated their midstream contract with Caliber and subsequently filed for Chapter 11 bankruptcy, triggering significant financial distress. In May 2021, RCOI and the other HoldCo Lenders completed a recapitalisation of Caliber resulting in HoldCo Term Loan Lenders receiving substantially all of the equity in HoldCo.   

In March 2022, the Caliber and the OpCo Loan lenders subsequently closed a second restructuring with the OpCo Loan lenders receiving approximately 100% of the equity.

Following the restructuring, new management was hired, a new contract was executed and at 30 June 2024 there remains increased focus on cost cutting initiatives and new revenue opportunities.

As of 30 June 2024, the full $4.0 million commitment remains invested, reflecting 1.1% of RCOI's overall commitments post restructuring.

SUBSEQUENT EVENTS AND OUTLOOK

As discussed in the Chair statement, following careful consideration and consultation with Riverstone Investment Group LLC (the "Investment Manager"), its sub-manager, Breakwall Capital LP, its advisers and certain significant Shareholders, the Company's board of directors (the "Board") has determined that a managed wind-down of the Company's portfolio at this time is in the best interests of Shareholders.

Following shareholder approval at the Company's AGM, the Company's investment objective and investment policy has been changed to now realise the Company's assets on a timely basis with the aim of making progressive returns of cash to holders of Ordinary Shares as soon as practicable. In order to meet this objective, the Company will continue to carry on its investment business during the managed wind-down. We look forward to providing regular updates on our progress to towards this objective.

BUSINESS REVIEW

MANAGED WIND-DOWN

Following the AGM on 22 May 2024 the Company adopted a wind-down investment policy. Details of the adoption of the managed wind-down are as follows:

·      The Company's investment objective and investment policy is now to realise the Company's assets on a timely basis with the aim of making progressive returns of cash without reinvesting any realised cash to holders of Ordinary Shares as soon as practicable.

·      The Investment Manager expects generally to realise the loans comprising the Company's portfolio by holding them until they come to term and returning the resulting proceeds to Shareholders. The Investment Manager will also dispose of loans in the secondary market, including through sales to other funds, vehicles or managed accounts advised or managed by the Investment Manager or Breakwall.

·      The Company will maintain its listing on the Specialist Fund Segment and continue to conduct its affairs (including as regards payment of dividends) so as to qualify as an investment trust for the purposes of section 1158 of the Corporation Tax Act 2010, in each case for as long as the Board believes such status to be practicable and cost-effective for Shareholders.

·      The unaudited net asset value of the Company will continue to be calculated on a quarterly basis in accordance with the Company's accounting policies per the notes to the financial statements and will be published through a Regulatory Information Service, although the Board would keep this net asset value reporting policy under review in light of the diminishing size of the Company's portfolio during the course of the managed wind-down.

·      The precise mechanism for the return of cash to holders of Ordinary Shares in a managed wind-down will be at the discretion of the Board, but will include a combination of capital distributions, tender offers, mandatory share redemptions and share repurchases. The return of proceeds to Shareholders may require further Shareholder approvals, depending on the methods used.

At a Board Meeting held on 18 June 2024, the Board considered a range of options for returning its available cash to Shareholders.

The Company will continue to carry on its investment business during the managed wind-down.

GOING CONCERN

The Directors, as at the date of this report, are required to consider whether they have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Following the AGM held on 22 May 2024 at which shareholders unanimously voted in favour of a change in the Company's Investment Policy to Wind-Down Investment Policy.

The Company's Investment objective and Wind-Down Investment Policy is to "realise the Company's assets on a timely basis with the aim of making progressive returns of cash to holders of Ordinary shares as soon as practicable."  The Company is therefore preparing its financial statements on a basis other than going concern due to the company being in a managed wind-down.

The Company will continue to carry on its investment business during the managed wind-down and with the expectation of realising the Company's assets and returning of capital to its Shareholders.

The Directors consider that the change to the Company's objectives and Investment Policy proposed at the AGM, including the Wind-down Resolutions passed, are in the best interests of Shareholders as a whole.

In conjunction with the Company amending its Investment Policy to Wind-Down Investment Policy, the senior secured revolving credit facility's credit agreement with the Company was also amended. 

The RCF credit agreement was amended to allow aggregate amount of borrowings of up to $500,000 in order to optimise cash flows during the Managed Wind-Down. The amendment also sets forth a Utilisation Fee of one percent per annum due and payable quarterly by the Company to the lender.

As of 30 June 2024, the Condensed Statement of Financial position reflects a negative current net asset value which does not reflect the Company's overall liquidity and its ability to meet its current liabilities. The Company has sufficient cash held in the SPVs reflected in the value of the Company's investments in the SPVs. As of the date of the interim report, the Company and its SPVs have $29.9m cash and cash equivalents available of which $27.3m is short-term money market fix deposits and the remaining $2.6m in cash within the SPV and the Company. The Company's current cash will be able to meet the near-term current liabilities when come due.

The Directors agree that the Company has adequate resources to continue in operation throughout the wind down period and will be able to meet all of its liabilities as they fall due. The Directors considered it to be appropriate to adopt the basis other than going concern in preparing the financial statements given the Company is now in a managed wind down. There were no material changes to accounting policies or the valuation basis resulting from the Company commencing the managed wind-down. All of the balance sheet items have been recognised on a realisation basis. The Directors and the Investment Manager have made the appropriate provisions in order to bring about an orderly wind-down of the Company and its operations.

As of 30 June 2024, the weighted average remaining contractual tenor of the loans in the Company's portfolio is 1.46 years. The Investment Manager would expect generally to realise the loans comprising the Company's portfolio by holding them until they come to term and returning the resulting proceeds to Shareholders. The Investment Manager may also dispose of loans in the secondary market where it considers this to be in the best interests of the Company, including through sales to other funds, vehicles or managed accounts advised or managed by the Investment Manager or Breakwall.

The Directors will make further announcements on the progress of the Managed Wind-Down strategy and the return of cash to Shareholders in due course.

PRINCIPAL RISKS AND UNCERTAINTIES

Under the FCA's Disclosure Guidance and Transparency Rules, the Directors are required to identify those material risks to which the Company is exposed and take appropriate steps to mitigate those risks. Risks relating to the Company are disclosed in the Company's prospectus which is available on the Company's website https://www.riverstonecoi.com.

The Company's assets consist of investments, through SPVs, within the global energy industry, with a particular focus on opportunities in the global E&P and midstream energy sub-sectors. The Company also focuses on energy transition, infrastructure and infrastructure services by structuring deals as either a Green Loan or a Sustainability-Linked Loan. Its principal risks are therefore related to market conditions in the energy sector in general, but also the particular circumstances of the businesses in which it is invested.

The Investment Manager seeks to mitigate these risks through active asset management initiatives.

The Board thoroughly considers the process for identifying, evaluating and managing any significant and emerging risks faced by the Company on an ongoing basis and has performed a robust assessment of those risks, which are reported and discussed at Board meetings.

PRINCIPAL RISKS AND UNCERTAINTIES

The Board ensures that effective controls are in place to mitigate these risks and that a satisfactory compliance regime exists to ensure all applicable local and international laws and regulations are upheld.

For each material risk, the likelihood and consequences are identified, management controls and frequency of monitoring are confirmed and results reported and discussed at the quarterly Board meetings.

The key areas of risk faced by the Company and mitigating factors are summarised below:

1.   The Ordinary Shares may trade at a discount to NAV per Share for reasons including but not limited to market conditions, liquidity concerns and actual or expected Company performance. In its efforts to mitigate this risk, the Investment Manager closely monitors and identifies the reasons for significant fluctuations, and considers the Company's share repurchase program when applicable and in the interests of Shareholders. As such, there can be no guarantee that attempts to mitigate such discount will be successful or that the use of discount control mechanisms will be possible, advisable or adopted by the Company.

2.   Investment decisions of the Investment Manager will depend upon the ability of its employees and agents to gather relevant information. The Company would continue to carry on its investment business during the managed wind-down.

3.   The Company's Investment objective and Wind-Down Investment Policy is to "realise the Company's assets on a timely basis with the aim of making progressive returns of cash to holders of Ordinary shares as soon as practicable." The Investment Manager will manage current investments in accordance with the Investment Policy, market conditions and the economic environment. To mitigate the risk of realising investments not indicative of the fair value, the Company's Investment Policy and investment restrictions enable the Company to realise the loans comprising the Company's portfolio by holding them until they come to term and returning the resulting proceeds to Shareholders, with the precise mechanism for the return of cash to holders of Ordinary Shares in the managed wind-down at the discretion of the Board.

4.   Environmental exposures and existing and proposed environmental legislation and regulation may adversely affect the operations of Borrowers. Delay or failure to satisfy any regulatory conditions or other applicable requirements could prevent the Company from acquiring certain investments or could hinder the operations of certain Borrowers. To mitigate this risk, the Investment Manager has usual and customary inspection rights and affirmative covenants regarding environmental matters contained in credit agreement documentation. The Investment Manager has a clear ESG policy which is implemented and reviewed by the Board.

5.   The valuations used to calculate the NAV on a quarterly basis will be based on the Investment Manager's unaudited estimated fair market values of the Company's investments and may be based on estimates which could be inaccurate. To mitigate this risk, the Investment Manager has an extensive valuation policy and also has engaged the independent valuation services of Houlihan Lokey on a quarterly basis.

6.    In today's global technological environment, the Company, its investments and its engaged service providers are subject to risks associated with cyber security. The effective operation of the Investment Manager and the businesses of Borrowers are likely to be highly dependent on the availability and operation of complex information and technological systems. To mitigate this risk, the Audit and Risk Committee Chairman monitors cyber security risk and best practices. Cyber security due diligence and ongoing monitoring is performed on each potential and current borrower.

7.   The Company may be exposed to fluctuations and volatility in commodity prices through investments it makes, and adverse changes in global supply and demand and prices for such commodities may adversely affect the business, results of operations, and financial

condition of the Company. To mitigate this risk, the Investment Manager intends to create a diversified portfolio across various energy subsectors, commodity exposures, technologies and end-markets to provide natural synergies that aim to enhance the overall stability of the portfolio.

8.   The Company will only lend to Borrowers in the global energy sector and such single industry concentration could affect the Company's ability to generate returns. Adverse market conditions in the energy sector may delay or prevent the Company from making appropriate investments. To mitigate this risk, the Investment Manager intends to create a diversified portfolio across various energy subsectors, commodity exposures, technologies and end-markets to provide natural synergies that aim to enhance the overall stability of the portfolio.

9.   The performance of the Company may be affected by changes to interest rates and credit spreads. To mitigate this risk, the Investment Manager assesses credit risk and interest rate risk on an ongoing basis and closely monitors each investment with the assistance of each respective management team and the engaged service providers.

10.   The Company relies on a third-party provider for the key operational tasks of the Company. The failure of any service provider to carry out their duty may have a detrimental effect on

the operation of the Company. To mitigate these risks the Board will review the internal control reports and consider business continuity arrangements of the Company.

The principal risks outlined above remain the most likely to affect the Company in the second half of the year

Directors' Responsibilities Statement

The Directors are responsible for preparing this Interim Report in accordance with applicable law and regulations.

The Directors confirm that to the best of their knowledge:

·      The unaudited interim condensed financial statements have been prepared in accordance with UK-adopted IAS 34 Interim Financial Reporting; and

·      The Chairman's Statement, Investment Manager's Report and the notes to the condensed financial statements include a fair review of the information required by:

i.    DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the period and their impact on the unaudited interim condensed financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

ii.    DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the period and that have materially affected the financial position and performance of the Company during that period.

·      For the reasons stated in the Business Review and Note 2, the financial statements have not been prepared on a going concern basis.

On behalf of the Board

Reuben Jeffery, III

Chairman

7 August 2024

Condensed Statement of Financial Position

As at 30 June 2024

The interim condensed financial statements were approved and authorised for issue by the Board of Directors on 7 August 2024 and signed on its behalf by:

Reuben Jeffery, III                                       Emma Davies

Chairman                                                         Director

The accompanying notes below form an integral part of these interim condensed financial statements.