Foresight Sust Regulatory News (FSF)

14 December 2022

Foresight Sustainable Forestry Company Plc

Full Year Results from incorporation to 30 September 2022

Foresight Sustainable Forestry Company Plc ("FSF" or "the Company"), an investment company that invests in UK forestry and afforestation assets, is pleased to announce the publication of its inaugural audited Full Year Results (the "Annual Results") for the period from FSF's incorporation on 31 August 2021 to 30 September 2022.

Performance highlights

Key metrics

Results presentation

The Company will host a virtual SparkLive presentation at 9:00 a.m. (UK time) on Mondday, 19 December 2022. To register your interest in attending the presentation, please register at:

https://www.lsegissuerservices.com/spark/FORESIGHTSUSTAINABLEFORESTRYCOMPANY/events/b6793ad3-27a1-498e-9859-4e2282c53d6b

Commenting on the Company's results, Richard Davidson, Chair of Foresight Sustainable Forestry Company Plc, said:

"Foresight Sustainable Forestry has had a very successful first 15 months and these are a strong set of inaugural annual results. We have successfully delivered on our IPO objectives, are steadily growing the afforestation part of our portfolio, and have a large and exciting pipeline of further UK afforestation opportunities. We have now planted well over half a million trees, and we were proud to report the completion of the first Foresight Sustainable Forestry Skills Training Programme, an initiative we intend to repeat annually. 

"More recently, becoming the first ever company to be awarded the LSE's Voluntary Carbon Market designation is a potentially game-changing development for FSF, connecting us with many investors and companies focused on mitigating their impact on the climate by looking to invest in projects creating high integrity voluntary carbon credits. Foresight Sustainable Forestry is looking forward to 2023 with considerable confidence."

For further information, please contact:

About the Company

Foresight Sustainable Forestry Company Plc ("the Company") is an externally managed investment company investing in a diversified portfolio of UK forestry and afforestation assets. Targeting a net total return of more than CPI +5%, the Company provides investors with the opportunity for real returns and capital appreciation driven by the prevailing global imbalance between supply and demand for timber; the inflation-protection qualities of UK land freeholds; and biological tree growth of 3% to 4% not correlated to financial markets. It also offers outstanding sustainability and ESG attributes and access to carbon units related to carbon sequestration from new afforestation planting. The Company targets value creation as the afforestation projects successfully achieve development milestones in the process of converting open ground into established commercial forest and woodland areas. The Company is seeking to make a direct contribution in the fight against climate change through forestry and afforestation carbon sequestration initiatives and to preserve and proactively enhance natural capital and biodiversity across its portfolio. It is managed by Foresight Group LLP. https://fsfc.foresightgroup.eu/

This announcement does not constitute, and may not be construed as, an offer to sell or an invitation to purchase investments of any description, or the provision of investment advice by any party. No information set out in this announcement is intended to form the basis of any contract of sale, investment decision or any decision to purchase securities in the Company.

This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will", "targeting" or "should" or, in each case, their negative or other variations or comparable terminology. All statements other than statements of historical facts included in this announcement, including, without limitation, those regarding the Company's financial position, strategy, plans, proposed acquisitions and objectives, are forward-looking statements.

About Us

Foresight Sustainable Forestry Company Plc ("FSF",the "Fund" or the "Company") is the first and only UK listed investment trust focused on UK forestry, afforestation and natural capital.

The Company raised £130 million at IPO on 24 November 2021. Following a further £45 million equity raise in June 2022 the Company has now raised a total of £175 million1.

The Company has 172,056,075 Ordinary Shares in issue, all of which are listed on the Premium Segment of the Official List and traded on the London Stock Exchange ("LSE") Main Market. FSF is managed by Foresight Group LLP (the "Investment Manager" or "Foresight").

[The first fund to be accredited with the Voluntary Carbon Market designation]

OUR PURPOSE

Investing into the commercial aspects of UK forestry with the added benefits of access to voluntary carbon credits, fighting climate change and preventing biodiversity loss.

INVESTMENT OBJECTIVES

Highlights

AS AT 30 SEPTEMBER 2022

Key Performance Indicators ("KPIs")

£180.6m

NET ASSET VALUE ("NAV")

5.0%

TOTAL NAV RETURN SINCE IPO

105.0p

NAV PER SHARE

9,618 hectares

IN THE PORTFOLIO

c.26,000 tonnes

TIMBER IN 2022 HARVESTING PROGRAMME

3,917 hectares

TOTAL LAND IN AFFORESTATION DEVELOPMENT

c.514,000

TREES PLANTED IN 2022

£0.6m

VALUE ASCRIBED TO PROGRESS TOWARDS CREATION OF CARBON CREDITS

Investment case

The Company is targeting sustainable impact through investment in sustainably managed commercial forestry and afforestation assets.

The Company creates natural capital alpha through its proprietary sustainable forestry management practices. The impact combines sustainable financial returns with natural capital services output, including carbon sequestration, biodiversity enhancements and local socio-ecological benefits. This is the focus of the Company, supported by its business model (read more below). With this approach, the Company is making a direct contribution to mitigating climate change and UK biodiversity loss, which are at the core of the Company's values.

Fight against climate change and biodiversity loss

The Company will make a direct contribution to the twin fights of climate change and biodiversity loss

Strong pipeline

Identification of and access to a proprietary pipeline of directly originated on and off-market forestry opportunities

Portfolio diversification

UK forestry has negative correlations to traditional and alternative assets (including UK power prices) underpinned by biological tree growth which occurs regardless of economic cycle

First UK-listed Investment Trust focused on natural capital

Attractive asset class

UK commercial forestry has historically outperformed the Consumer Price Index ("CPI") on a long-term basis. Until now, it has had high barriers to entry

Inflation protection

UK commercial forestry has strong inflation-beating characteristics for both expected and unexpected inflation

Statistics as at 30 September 2022

GEOGRAPHIC FOOTPRINT

A diversified portfolio of UK forestry and afforestation assets

27 Mountmill Burn

Located in the Scottish Borders, the 119-hectare property is an afforestation asset. In July 2022, the planting of approximately 260,000 trees was completed.

40 Chatto Craigs

Located near Galashiels in the Scottish Borders, the 98-hectare property is an afforestation asset. Acquired in July 2022, the property contains a mix of existing forest and woodland and land well suited for the establishment of a productive woodland creation scheme. The property is well located in relation to sawmills and timber processors and expands the Company's growing Scottish Borders portfolio.

41 Pilanton Wood

Located in Dumfries & Galloway, Scotland, the 79-hectare property is an afforestation asset. Acquired in July 2022, the property has a small proportion of existing forestry, including native broadleaves, and a high proportion of the land area is expected to be suitable for inclusion in a woodland creation scheme. The acquisition extends the Company's presence in the region.

53 properties1

Chair's statement

As Shareholders have recognised, FSF offers a unique proposition amongst UK listed vehicles.

Richard Davidson

Chair

On behalf of the Board, I am pleased to present the first Annual Report of Foresight Sustainable Forestry Company Plc for the period to 30 September 2022, a period which covers our IPO, follow-on fundraising and multiple forest and land acquisitions.

As Shareholders have recognised, FSF offers a unique proposition amongst UK listed vehicles - an investment into the commercial aspects of UK forestry with the added benefits of fighting climate change and biodiversity loss through new forestry planting. This combination of attributes has helped our share price move to and retain a premium to NAV despite the challenging stock market conditions of 2022.

The first period of trading has been busy on many fronts. Here are the highlights:

Capital raising

Following the £130 million equity raise which culminated in the Company's successful IPO on 24 November 2021, a subsequent issue raised £45 million at a price of 107.0 pence per Share on 24 June 20221. In market conditions which have been and remain challenging for the whole sector, the Board and I are delighted with our fundraising achieved to date and have ambitions to raise more equity when market conditions allow and existing capital is substantially deployed. After an initial dip to below 90 pence in post-IPO trading, our share price followed a steady upwards trend to May 2022 and at its peak reached 116 pence. Pleasingly, despite discounts widening across the investment trust sector, FSF shares traded at a premium to NAV from 14 April 2022 to period-end.

In August 2022, the Company finalised the arrangement of a Revolving Credit Facility ("RCF"). At the time of writing, no funds have been drawn under the RCF and therefore FSF currently has no direct exposure to rising interest rates. Whilst the RCF provides FSF with access to flexible capital to grow the portfolio, a prudent and opportunistic approach will be taken to its use.

Acquisitions

FSF soon established itself in the UK forestry market through acquisitions from the seed asset portfolio. The two seed asset transactions occurred through the purchase of Blackmead Forestry Limited ("BFL") and Blackmead Forestry II Limited ("BFL II") from Foresight Inheritance Tax Fund. Concluding in March 2022, the transactions added 36 properties to the portfolio and utilised 87% of IPO proceeds.

The additional 14 properties acquired were mainly transacted through the Investment Manager's successful direct origination campaign. This is an off-market and proprietary process covering the sourcing and negotiation of properties that meet our afforestation criteria. This approach has proved highly valuable to the Company and we continue to seek afforestation opportunities using this method.

At 30 September 2022, the total portfolio covered 9,618 hectares across 50 properties. The Investment Manager continues to source an attractive pipeline of investments for the Company.

One of our IPO objectives was to invest between 40-50% of the portfolio by value in afforestation (new forestry planting) properties. Afforestation assets by value now stand at 40% of the portfolio, a 1,175 hectare increase from 31 March 2022. In addition to the climate and biodiversity benefits of new forestry planting, afforestation investments can also boost NAV as woodland creation schemes reach key development milestones.

Forest operations

Having the correct tree species mix and forest designs is a core part of our investment strategy. We believe it allows the Company to successfully deliver a blend of cash flows. Throughout the period, approximately 514,000 trees have been planted across two properties. An estimated 6.4 million trees are currently planned to be planted over 2023 and 2024 at 28 properties; which is expected to create additional value for Shareholders through land appreciation and creation of voluntary carbon credits.

Due to their nature, commercial timber assets allow the owner to make an informed decision about when to harvest. Timber is not a perishable asset that has to be cut in any one season and can be left to grow in periods of price or demand weakness.

Over the course of 2022, we have seen a softening of timber prices due to additional supply caused by extreme weather events, such as Storm Arwen, and sawmill destocking driven by economic caution. As a result, we have delayed harvesting plans at a number of properties to ensure we maximise value by bringing the Company's timber to market when prices are more favourable in the future. Despite these partial delays, FSF harvested approximately 26,000 tonnes of sustainable timber in the period and, over the next five years, we expect to have in the region of 213,000 tonnes of fully FSC and PEFC certified timber available for harvest.

Key financials

In the period to 30 September 2022, the NAV per Ordinary Share increased to 105.0 pence (31 March 2022: 104.2 pence). Over the period since IPO, our NAV total return has been 5.0%. The key driver of this gain was a 16.9% upwards revaluation of our afforestation sites, driven by rising prices for land suitable for afforestation development, securing of grants and planting permissions, and the completion of planting. Valuations for established forest properties have remained relatively muted during the period, reflecting relative softness in the timber market. The second half of the period has seen substantial investment into the afforestation assets as well as getting new debt and equity capital in place, and the related costs of that. We are very encouraged that the two afforestation properties that were planted during the period achieved a 42% valuation increase (contributing strongly to the overall uplift for afforestation assets) before any consideration of the value of voluntary carbon units.

With up to 25 further assets in the afforestation development pipeline due to reach the planted milestone in the next two financial years, we expect to see the hard work and capital investment continue to deliver development returns going forward. Recognition of the value of voluntary carbon credits in the Company's NAV is also an exciting development.

Sustainability and Environmental, Social and Governance

In the sustainability and ESG section of this report you will find the environmental and natural capital highlights that the Company has achieved. We create natural capital alpha through our proprietary sustainable forestry management practices. We balance UK timber production, carbon sequestration, biodiversity and positive social impacts, amongst other considerations, for each of our afforestation sites. As well as commercial trees, this will include the planting of significant hectarage of native broadleaf trees and reinstating wetlands and reducing grazing levels on large areas of open ground, which increases positive carbon impacts and creates additional biodiverse ecosystems.

Particular achievements during the reporting period include 28,873 tCO2e of arboreal carbon sequestration achieved and material progress with the data collection for establishing the ecology and biodiversity baseline of the portfolio.

The launch of FSF's Forestry Skills Training Programme in Wales has been a particularly notable development. All four candidates on the pilot scheme graduated from the course and we look forward to the scale-up and roll-out of the training programme as part of a UK-wide expansion plan to add valuable skills in the rural communities where we operate.

Awards

Recently we were delighted to be awarded the Most Innovative Sustainable Fund Launch at the Investment Week Sustainable Investment Awards. This was followed by the award of Infrastructure Finance Initiative of the Year at the National Sustainability Awards. These awards recognise the mix of our commercial model with sustainability goals, which lies at the heart of our investment approach.

Market outlook

Shareholders will know only too well the backdrop of the last year, featuring rising interest rates, falling stock markets, global political instability, an energy crisis and currency volatility. Despite these significant headwinds, UK forest property prices have exhibited their historic low correlation to other assets and have held up well. This resilience may not always be the case, particularly if other assets were to continue to deflate in the face of rising interest rates. However, we would highlight the following potential factors that may serve to offset this risk:

FSF is well placed to benefit from a future increase in timber and voluntary carbon credit prices and remains focused on a significant amount of new forestry planting. We will continue to deploy our capital advantageously.

Voluntary Carbon Market designation

On 5 December 2022, the Company announced that it had become the first company to officially receive the LSE's Voluntary Carbon Market ("VCM") designation. I would like to take this opportunity to reflect on what is a material post-period announcement, and that we believe is a milestone for capital markets and the Company.

The VCM was launched by the LSE on 10 October 2022 and has been created to facilitate financing at scale into projects that mitigate climate change. The VCM designation will be applied to funds or operating companies that are admitted to

the LSE's Main Market or AIM and which are intent on investing into climate change mitigation projects that are expected to yield voluntary carbon credits.

Annual General Meeting

We look forward to meeting Shareholders at the Company's Annual General Meeting ("AGM") on 23 February 2023 at 1:00pm. Details of how Shareholders may participate are set out in the Notice of Annual General Meeting published in this report.

Summary

I would like to thank the Fund Managers, advisers, Shareholders and other members of the Board for contributing to what has been a very busy and successful period. We are proud of what we have achieved so far and very much look forward to continuing the growth of the Company.

Richard Davidson

Chair

14 December 2022

Investment Manager's Report

Executive Review

We are proud to have delivered our business plan and financial performance targets for the Company in the reported period.

Robert Guest

Managing Director, Foresight Group Co-Lead, Foresight Sustainable Forestry Company

Richard Kelly

Managing Director, Foresight Group Co-Lead, Foresight Sustainable Forestry Company

Executive summary

In its first period, FSF, the London Stock Exchange's first listed natural capital investment company, delivered a particularly positive performance during a year of such significant political and financial market volatility. During the period, the Company demonstrated the success of its business model. This was clearly shown by valuation uplifts, increase of NAV per share and a total NAV return since IPO of 5.0%.

In aggregate, the Company's NAV increased by £50.6 million between IPO on 24 November 2021 and 30 September 2022.

This was predominantly due to FSF's successful £45 million equity raise in June 2022 but also aided by a £11.5 million (up to 9.1%) valuation gain of fixed assets in the period.

The NAV per share increase in the period to 30 September 2022 has been impacted by transaction costs from the high volume of afforestation acquisitions, the commencement of development activities on multiple afforestation properties, and costs related to securing new equity and debt capital. The benefits of investing in development projects and increasing the Company's available capital base for deployment are becoming apparent in the very strong valuation uplifts delivered by the first two afforestation assets where planting has been completed.

Successful afforestation development and the securing of the related voluntary carbon credits is a core part of the Company's business model and the value recognition received on the first two afforestation properties validates this strategy.

Overall, we are proud to have delivered on our business plan and financial performance targets for the Company in our first year. Alongside this, the measurable sustainability and ESG impacts of FSF are increasing whilst the regulatory risk management frameworks and end markets for voluntary carbon units, nature positive units and other methods for quantified provision of natural capital services are rapidly emerging and taking shape.

We are excited to keep progressing our afforestation development programme and project pipeline and to deliver continued "natural capital alpha" (the combination of outperforming sustainable financial returns with sustainable timber production, carbon sequestration, biodiversity and positive social impacts, through sustainable forestry management practices) for our Shareholders

in the Company's financial year.

Looking to the next year, we are particularly excited to continue to increase the Company's exposure to afforestation via new acquisitions and to commence and complete tree planting activities on the pipeline of afforestation schemes within the existing portfolio that are currently in development.

Portfolio

Acquisitions

The pace of deployment has been strong throughout the period. Since inception, FSF has deployed £133.3 million into a portfolio of 50 forestry and afforestation properties across the UK. In the first six months since FSF's IPO, the investment focus was on negotiating and completing the acquisition of seed assets portfolio to ensure IPO proceeds were rapidly deployed to minimise the impact of cash drag.

Looking forward to the next year, the Investment Manager will be looking to further enhance FSF's exposure to afforestation assets and maintaining investment discipline as we continue to search for high quality assets to add to the portfolio.

Foresight sources deals and acquisition opportunities via selling agents, on-market bids, bilateral deals and direct origination for both established forestry and afforestation assets. Approximately 4,500 specific properties, extending over c.860,000 hectares, have been identified as highly suitable for afforestation and are specifically targeted with our direct origination system. The Company has full priority rights over any acquisition opportunities sourced from the direct origination system and other Foresight forestry opportunities that are within the Company's mandate in accordance with the Prospectus.

In the next year, we expect to increasingly deploy capital into attractive forestry properties as we approach FSF's maximum 50% afforestation allocation. Whilst forestry properties generally offer lower returns than afforestation, they play an important cash generation role within the Fund. Given how resilient FSF's share price has been during recent market volatility, we expect to come back to equity markets, conditions and pipeline allowing, in 2023 to expand FSF's capital base.

Portfolio by area

Scotland - 82%

England - 6%

Wales - 12%

Afforestation - 45%

Established forestry - 55%

Portfolio by value

Scotland - 82%

England - 7%

Wales - 11%

Afforestation - 40%

Established forestry - 56%

Non-forestry assets - 4%

In the build-up to that we will remain focused on securing an attractive and well-developed pipeline that the proceeds can be deployed into.

Portfolio

The primary acquisition strategy in the latter part of the period was to increase FSF's allocation to afforestation opportunities. In our IPO objectives, we stated that afforestation properties would make up (by value) between 40-50% of the portfolio. We were delighted to report in August 2022 that FSF had achieved this objective.

As at 30 September 2022, the Company's portfolio comprised 50 assets covering a total area of 9,618 hectares. An overview of the portfolio is provided above and the split of hectares by country and by afforestation/forestry is illustrated below.

The portfolio's allocation continues to be weighted towards Scotland (82% of FSF's portfolio by land area), which is the most forested of the UK countries and the closest to achieving its annual tree planting targets. Deployment into Scottish properties is also aided by the larger property parcel sizes. We expect deployment in 2023 to be weighted towards Scottish properties.

Wales (12% of FSF's portfolio by land area) is the second largest country allocation within FSF's portfolio and government targets for afforestation in Wales are significant.

However, properties and parcel sizes tend to be smaller than in Scotland, particularly for afforestation properties, which limits opportunities to deploy at scale. We are also seeking opportunities in Northern England to slightly increase the allocation, but we note that this is a relatively more challenging regulatory environment with England yet to fulfil its annual planting targets. We expect 2023 deployment into England to remain a relatively low proportion of total deployment, versus both Scotland and Wales.

Following the release of the Interim Report, the Investment Manager has carried out a detailed review of allocation to non-forestry assets. The information below now includes non-forestry assets as a reporting metric in the portfolio allocation calculation, as is illustrated on below. In future, the allocation to afforestation, forestry and non-forestry assets will be reported, monitored and measured on this basis.

Portfolio valuation

As at 30 September 2022, the forestry portfolio held through SPVs as described below, was valued at £144.8 million. Since IPO, the portfolio delivered a valuation gain of £11.5 million in the period.

Afforestation properties delivered gains of £7.5 million. The largest percentage valuation increases were from two planted afforestation properties, Mountmill Burn and Banc Farm.

Using Mountmill Burn as an example of what occurs when development milestones are reached, the property was originally valued at £1.4 million at acquisition. At that time, Mountmill Burn was an afforestation scheme still in development and unplanted. A year later, Mountmill Burn has been fully planted and the saplings are establishing well. Mountmill Burn was valued in September 2022, as part of FSF's portfolio valuation, at £2.5 million, an increase of approximately £1.1 million equivalent to a 74% increase on a year earlier. In addition, Mountmill Burn has seen a further £340k of value ascribed to progress towards creation of 19,466 carbon credits to the property's valuation, taking total returns delivered on Mountmill Burn to £1.4 million, an increase of 97%.

Both planted properties demonstrate the capital appreciation potential of afforestation sites once development milestones are met. The Company has a further 25 afforestation properties as part of a series of development activities which is estimated to see the creation of approximately 800,000 voluntary carbon credits. This estimate takes into consideration the verifier's 20% buffer to ensure that the number of units offset or traded is conservative versus the estimated carbon actually sequestered.

Afforestation properties remain the engine room of performance and the Company is looking to increase the portfolio allocation to this asset type in the coming year. Successful afforestation development and the securing of the related voluntary carbon credits is a core part of the Company's business model and the value recognition received on the first two afforestation projects validates this strategy.

Standing forestry properties delivered gains of £1.2 million from acquisition to 30 September 2022. Valuations for established forest properties have remained relatively stable.

Mixed forestry and afforestation properties, a category dominated by the Fordie Estate, delivered a 18.4% increase from acquisition to 30 September 2022, a £2.2 million uplift. The Fordie Estate development, which includes an afforestation scheme of material scale, continues to progress well.

Debt financing

As mentioned by the Chair, the Company completed the arrangement of a £30 million RCF and an uncommitted accordion facility of up to an additional £30 million on favourable margins. The RCF gives FSF a committed source of flexible funding outside equity raisings.

Once drawn, the facility is expected to be paid down periodically using the proceeds of subsequent equity issues.

This enables FSF to make new investments with certainty of funding and on a timely basis, reducing cash drag associated with holding cash balances.

Pleasingly, the interest margin chargeable on the RCF is linked to the Company's sustainability and ESG ("S & ESG") performance, with FSF incurring a premium or discount to its margin based on its performance against defined targets. These S & ESG targets are:

Performance against these targets will be measured annually, with the interest cost of the RCF being amended accordingly in the following year. The lender is Virgin Money and the interest margin can vary between 200 bps and 220 bps over SONIA (Sterling Overnight Index Average), depending on performance against the Company's S & ESG targets.

Since arranging the facility, no drawdowns of the RCF have been made and the potential utilisation of the facility will be carefully considered by the Investment Manager in the context of rising interest rates and market conditions. However, having the RCF available gives the Company significant manoeuvrability for strategic purchases and enhances growth prospects for the future. Looking forward, we hope to deploy the proceeds of the RCF opportunistically into favourably priced properties.

Operations

Established forestry

Of the Company's established forestry, 3,495 hectares is stocked and 48% is dedicated to native broadleaves, rare and endangered trees and open ground.

Planting

Excitingly, during FSF's first year, planting completion was reached on two afforestation projects (Banc Farm and Mountmill Burn), which has seen approximately 514,000 trees planted and establishing well.

The Company has also been developing its other 26 properties where afforestation activity is possible. Sixteen sites have formally completed planting designs and are now busy gaining permits, grants and admission to the Woodland Carbon Code ("WCC") register. The ten other afforestation properties are expected to complete planting designs in the first half of FY23.

The total portfolio will see the development of 3,917 hectares and 6.4 million trees are expected to be planted throughout 2023 and 2024. Current development plans see 52% of the total area dedicated to commercial conifers, alongside 16% of land area with native broadleaves, rare and endangered trees, alongside 32% dedicated to open ground.

Afforestation asset development progress

Twenty-seven afforestation properties and one mixed afforestation and forestry property were being developed at the year-end date. The status of each property at the year end was as follows:

Harvesting

The Investment Manager took the opportunity during the period to commence harvesting at two forests at good pricing levels. Two other forests have proceeded as planned this winter to clear up wind blow from Storm Arwen. In total, this is expected to yield c.26,000 tonnes of timber harvesting. There will also be a thinning operation carried out at two sites in order to comply with Statutory Plant Health Notices ("SPHNs"); this is expected to yield a further c.4,000 tonnes of timber. Both SPHNs that have been issued are in relation to infected Larch. Larch trees are known to be more susceptible to the Phythopthora Ramorum disease that is currently prevalent, and, provided the SPHN felling is carried out, this poses no further risk to the wider forests. The timber from the Larch trees harvested can still be sold in the usual way to sawmills, so there is no loss in revenue associated with the process.

However, timber pricing was generally weaker during the year. As a result of an increase of timber supply following the end of COVID-19 restrictions and related timber demand surge, and higher-than-normal timber supply inflows following Storm Arwen in November 2021, planned harvesting at ten FSF properties of harvestable age was postponed. In total, c.100,000 tonnes of timber within the portfolio have reached maturity and is in a five-to-ten-year optimum harvesting window.

The Company has set aside sufficient working capital and forecast future capital expenditure to provide the Company with flexibility to adjust and postpone the timing of commencing harvesting on these sites.

The Company also enjoys significant income from woodland creation grants, which offset a large portion of the capital expenditure invested into planting afforestation sites.

The Company is well capitalised and pursues a total return, rather than a dividend yield strategy, providing it with the ability to be flexible with its harvesting programme, when supply and/or demand variances indicate that it is beneficial to do so. The timber will remain "on the stump" and continue to enjoy biological growth until harvesting is deemed beneficial to the Company's NAV. A harvesting programme for 2023 that ensures maximum value is captured for any of the Company's mature timber is being reviewed. All relevant felling permits have been secured and FSF is able to mobilise at short notice when market conditions improve.

Health and safety ("H&S")

H&S is a priority for the Company. No near misses or RIDDORs (Reporting of Injuries, Diseases and Dangerous Occurrences Regulations) have been reported since the Company's establishment.

The Company continues to invest in enhancing its H&S reporting processes. At the time of writing, Quadriga, an H&S specialist adviser, have been re-engaged to carry out an H&S audit on a second forest manager, following their review of the first manager in the first half of the financial year.

Following the advice of the first Quadriga report carried out during the period, the H&S reporting process has been expanded. There is a flow of H&S information from the forest managers to the Company Directors on a monthly basis. This allows any H&S incidents to be discussed and appropriately responded to. This information then flows through to the Company Board on a quarterly basis as part of the Board report.

One initiative implemented by FSF during period is introducing the requirement for all operatives to carry a lone working device when working in the forest; thus ensuring they are always able to contact someone in the event of an emergency. Foresight Asset Management continue to look at ways to ensure FSF remain ahead of the industry in relation to H&S and will continue to work with E.J. Downs Forestry and the forest managers in order to do so. E.J. Downs Forestry have significant experience in the forestry management space and advise FSF on silvicultural decisions.

FSC and PEFC accreditation

The Company aims to achieve both the Forest Stewardship Council ("FSC") and Programme for the Endorsement of Forest Certification ("PEFC") accreditation for each property within 12 months of acquisition. As at 30 September 2022, the Company had received dual accreditation for 30 properties.

OPERATIONAL CASE STUDY

Coull Woodlands

Aberdeenshire, Scotland

Coull Woodlands ("Coull") is a 370-hectare, dual FSC and PEFC certified commercial forestry project in Aberdeenshire, Scotland. It is a highly productive commercial forestry asset, with a diverse age profile due to the harvesting that has been carried out on several coupes of the first rotation. Coull was purchased by FSF as part of the initial seed asset transaction in March 2022.

Since acquisition, E.J. Downs Forestry worked closely with the underlying forest manager, RTS, and the Foresight Asset Management team to develop a plan to remove weeds and replant these compartments, continuing to use Sitka Spruce as the main restock crop. These reparative works have been carried out to a high standard and a minimal beat up1 was required of these new crops, once again demonstrating the highly fertile nature of the woodland.

The Long-Term Forest Plan ("LTFP") outlines plans to continue restructuring the forest, removing the mature crops and restocking these areas with Spruce. The mature pine is well-thinned and of a generally good quality for Scots Pine.

Near-term plans are for the removal of approximately 4,500 tonnes of timber in a single harvesting coupe, crystallising some of the value of these compartments. As has previously been done at Coull, these areas will be restocked with Sitka Spruce as the main species alongside a mix of Norway Spruce and Scots Pine to diversify the compartments.

In addition to the commercial areas of Coull, there is also 34.5 hectares of mixed broadleaves and open ground. Under the LTFP, this ground will be maintained in line with silvicultural best practice, maximising the value add to the site from an ecological and amenity perspective in line with the Investment Manager's sustainable investment strategy.

In general, Coull offers excellent commercial and community value providing high-quality timber into the UK timber market in the immediate term and re-stocking the harvested areas with high-yielding Spruce and Pine crops with the goal of longer-term yields. Through these restructuring works FSF believes that the financial, community and environmental value of Coull will flourish.

Our Markets

Voluntary Carbon Market

The Investment Manager has been working in close collaboration with the London Stock Exchange ("LSE") in relation to their new Voluntary Carbon Market ("VCM") designation. This allows market participants to easily identify listed investment companies that are contributing positively to the establishment and scale-up of voluntary carbon markets. FSF qualifies under all of the criteria and is the first VCM designated company on the LSE. As part of this, FSF intends to give investors the choice to receive cash dividends from the net proceeds of the sale of voluntary carbon credits, or to elect to receive in-specie voluntary carbon credit dividends. If credits are received in-specie they can be directly utilised by the recipient for its own net zero offsetting or onward carbon trading strategy. The designation enables investors to:

On the demand side, according to Trove Research, at the end of calendar Q3 2022 a total of 3,729 companies globally had put Science Based Target initiatives ("SBTi") in place, or had committed to one. Positively, this represented a 142% increase from the commitment levels in Q3 2021.

On the supply side, over the same period, the number of new voluntary carbon credits issued each quarter has fallen for four consecutive quarters, declining at a rate of 16% CAGR since Q4 2021. It is unclear what has driven this decline. In the same period, the retirement of units decreased by 14% CAGR but regained 9% from Q2 to Q3 2022. The market surplus rose by 2% to a new peak of 667 Mt in Q3 2022. Foresight expects to see a reducing surplus lifetime trend in 2023 as supply increasingly tightens.

As part of the process for ascribing carbon unit value to the Banc Farm and Mountmill Burn afforestation properties, the Investment Manager and the Company's auditor have reviewed evidence of completed transactions for purchases of UK voluntary carbon units, with the price of pending issuance units ("PIUs") sold ranging between £14 and £35 per credit. Within the calendar year, there is an upward pricing trajectory in prices paid. It is worth noting that the value of individual carbon credits is influenced by the location of the project (with those close to populated areas attracting a premium price), the status of the carbon credit (with woodland carbon units ("WCUs") that are capable of retirement for offsetting purposes trading at a significant premium over PIUs that have yet to mature to become WCUs) and the project's specific co-benefits beyond just carbon sequestration (with projects that have strong nature positive co-benefits, such as biodiversity, trading at premiums). The outlook for voluntary carbon markets remains strong. Foresight is encouraged by the level of new SBTi net zero pledges made by companies in the period. Whilst voluntary carbon prices are down from their January peak, the annual pricing trend remains positive. Foresight believes that we are likely to see sustained price volatility, an increasingly tight supply and increasing prices for nature-based voluntary carbon credits over the coming years. This view is supported by research published by Boston Consulting Group which forecasts that there will be an insufficient inventory of voluntary carbon credits to meet forecast demand by 2028.

Immediately following the end of the reporting period (1 October 2022) the WCC released a new financial additionality test methodology which affects a number of FSF's assets. The principle of additionality looks to test that a positive carbon sequestration/mitigation activity, development or intervention would not have occurred in the absence of the incentive created by carbon credit revenues. In other words, if the activity, development or intervention would likely happen anyway with or without carbon credit revenues then a project is not defined as an additional contributor to net zero goals.

Banc Farm and Mountmill Burn fall under the old regime and for new pipeline assets the known adjustments are being incorporated into the prices offered. However, 19 of FSF's afforestation assets are affected and Foresight is currently evaluating the impact, which is most likely to manifest itself in a reduction in grants taken and/or allocation to commercial forestry within scheme designs in order to achieve financial additionality.

Foresight is also working closely with industry body Confor and other market participants to provide constructive feedback to the WCC regarding various aspects of the methodology. The consultation is ongoing, with the WCC already having acknowledged some of the points made and adjusting the methodology accordingly, which has a positive impact for the Company and the wider afforestation market. Further updates will be provided once conclusions have been reached and further analysis has been carried out by Foresight regarding impacts.

Timber uses

Timber outputs are broken down into three categories depending on the top diameter:

UK timber market

After a period of unprecedented demand and high timber pricing due to COVID-19 during 2020 and 2021, the combination of Storm Arwen and the cost-of-living crisis have left UK sawmills with excess stock during 2022 and UK sawlog and medium-sized roundwood prices have fallen accordingly through the year.

Storm Arwen is estimated to have brought forward early supply of 1 million cubic metres of wind-blown timber. However, in a country that imports c.80% per annum, market practitioners are generally of the view that the impact will likely have been fully absorbed by the market by early 2023.

Trees that were wind-blown before reaching prime age for harvesting will only result in a tighter UK timber supply in future years.

Foresight understands that the high inventory levels held as a result of COVID-19 by the sawmills are re-balancing as many UK forest owners, like FSF, have chosen to leave value 'on the stump', by postponing harvesting and looking forward to how 2023 order books shape up.

As the financial implications of the COVID-19 pandemic, the outbreak of war in Ukraine and the recent political and financial actions taken by the Bank of England and the UK Government take effect, most forecasters are anticipating a slowing of growth in the UK economy and a period of shallow recession over the next year.

It is likely that such an economic environment will result in decreased demand for UK sustainable timber. The construction products industry currently continues to forecast growth in overall demand during 2022 and 2023 in anticipation that large warehouse and major infrastructure construction projects will go ahead but with downgrades to the previous estimates, driven by an expected slowdown in the private housing and repair, maintenance and improvement ("RM&I") markets. The UK S&P Global Construction Purchasing Managers Index ("PMI") has declined approximately 17% from just prior to the Russian invasion of Ukraine (February 2022) to August 2022.

However, a weak GBP makes imported timber relatively less attractive versus home-grown UK timber and the government may choose to boost its 'build back better' efforts to offset recessionary pressures, which may partially offset reduced demand elsewhere.

The Investment Manager remains of the view that the embedded UK timber supply deficit and the qualities of timber as a sustainable material for construction and other uses provides a significant opportunity if the harvesting strategy for the Company's timber is pursued in the correct manner.

European and global timber market

Inflationary and economic pressures in Europe are not anticipated to increase demand either, with the latest available construction confidence indicators reporting decreases.

In China, new government rules limiting gearing levels for housing development have caused serious debt servicing issues for major property developers and unwanted knock-on effects further down the supply chain. Property makes up a large part of the Chinese economy and the debt restructuring required is dramatic. This has had a substantial negative effect on house prices and construction in China, although the underlying demand for new housing still prevails and it seems likely that the government will take action to stabilise the situation and continue to incentivise infrastructure projects as part of that.

On the supply side there are forces moving in the opposite direction, mainly stemming from Russia's war in Ukraine, to create shortages of and competition for material.

Russian, Belarusian and Ukrainian timber is all now considered as conflict timber by the FSC and PEFC. With timber from those geographies representing a significant amount of global and European timber demand, this creates an intense supply shortage of certified timber globally.

It is understood that volumes of both certified and uncertified harvested timber have increased elsewhere to make up for some of the shortfall. For instance, Finland is expected to boost harvesting volumes by 3% for each of the next two years, turning Finland's forests into a net carbon emitter. Another example is Estonia, which has announced a relaxation of its logging restrictions on state-owned land, accounting for roughly half of the country's forests. As a result, harvesting is expected to increase. Further, satellite imagery of Ukraine illustrates extensive forest fire damage caused by the conflict, further reducing European supplies. This sort of drastic action demonstrates the intensity of the current shortages.

War in Ukraine impacts on UK timber market

In the near term, it is forecast that imports of Russian timber to the UK will have fallen to near zero. Wood pellets, plywood and sawn softwood imports will be the most impacted. According to Forest Research, in 2017, imported Russian wood pellets accounted for 4% of total UK imported wood pellets, Russian plywood accounted for 8% of total UK imported plywood and Russian sawn softwood accounted for 7% of total UK sawn softwood imports. We have now started to observe the tightening supply of timber translate through to imported timber prices, with the TDUK Structural Timber Imported Price Index increasing by c.9% from immediately prior to the Russian invasion to April 2022.

The European energy crisis is also having an impact. With Russia materially reducing gas supplies and Europe keen to quickly become less reliant on Russian energy, parts of Europe have warned of the risk of rolling blackouts and energy rationing this winter. Europe is already the largest consumer of wood pellets, used for bioenergy generation, globally.

Although there is not always uniform consensus regarding the detailed rules and regulations relating to bioenergy generation, the current status in Europe is that wood chips and wood pellets are considered a renewable energy resource. With the combined effects of lower certified timber supply and very high natural gas prices, the value of chipwood, small roundwood and medium roundwood is already experiencing upward pricing pressures in the UK and Foresight believes this is likely to be sustained for at least the rest of 2022 and the first half of 2023. Further, over the medium and longer term, the accelerated harvesting of timber elsewhere is likely to reduce overall supplies, and increase the relative value of standing timber.

Strong relationships with offtakers

Through the Investment Manager, the Board and its network of advisers, FSF has existing relationships with the major timber and wood processors in the UK. At two sites within the FSF portfolio during the period, harvesting agreements have been put in place.

The Company sells timber in both standing (offtaker arranges all harvesting and haulage) and delivered (FSF harvests and delivers to mill) formats. The Company sells timber via both tender sales and bilateral sales processes, depending on site-specifics and market conditions. The sales arrangements made during the period are a demonstration of strong relationships between FSF and its customers, who rely on it for supply of UK softwood timber.

Timber market conclusion

With the overall weaker UK and global economic outlook, Foresight's view is that UK timber demand will reduce in the short term. However, with the effects of Storm Arwen now largely absorbed by the market, mill inventories re-balancing, weak GBP making imports less attractive in relative terms and material supply-side issues as a result of the conflict in Ukraine, the Investment Manager will continue to explore opportunities to achieve good value for the Company's timber stock in 2023. Given the fundamental structural supply shortages for timber in the UK and globally, Foresight remains of the view that the medium and long-term prospects for UK forest owners are strong.

Sustainability and ESG

The UK, and the world more broadly, are in the midst of both a climate and a biodiversity crisis.

Meanwhile, the UK's high reliance on timber imports, with current import levels constituting c.80% of total national demand, is a limiting factor in its ability to adopt more sustainable building and manufacturing practices. Through an integrated approach to sustainable forest management, FSF is uniquely placed to meaningfully address all three areas of concern.

A focus on enhancing commercial productivity increases the portfolio's capacity for direct sequestration of CO2, while a purposeful approach to nurturing both natural habitat and species diversity helps build resilience against ever-changing and unpredictable environmental conditions.

Both are seen as key drivers of portfolio value as the notions of self-reliance and nature recovery become ever-more prevalent.

The FSF unaudited Interim Report for 2022 clearly outlined the Fund's sustainability and ESG objectives. These act as the guiding principles for everything the Fund hopes to achieve in terms of its contribution to both the national and international sustainability agenda.

Alongside regulated reporting requirements, these objectives provide the focus for the sustainability and ESG data presented within this report. A standalone Sustainability and ESG Report, due to be released in 2023, will provide added detail and case studies of how these objectives are being achieved.

Sustainability and ESG ("S & ESG") objectives

Sustainable Development Goals ("SDG") impact reporting

Demonstrating FSF's commitment to sustainability is the Company's ability to report against the UN Sustainable Development Goals ("SDGs"). The SDGs, which were adopted by all United Nations member states in 2015, comprise the most urgent economic, social and environmental issues to be addressed for peace and prosperity for people and the planet.

To be achieved by 2030, they recognise that ending poverty must go hand-in-hand with strategies that build economic growth and address a range of social needs including education, health, social protection and job opportunities, while tackling climate change and environmental protection. The following table represents the Company's contribution to the SDGs:

Timber

Environmental impact

Pollutant removals

Sustainably managed watercourses

Carbon removals3

Natural capital services

Biodiversity

Biodiversity measurement and management

In accordance with the Prospectus, the Company seeks to preserve and proactively enhance natural capital and biodiversity across its portfolio. As with all biodiversity management initiatives, the first step in this process is to baseline the types and levels of biodiversity across the Company's various forestry and afforestation sites.

The Company has engaged SLR Consulting, a global leader in environmental advisory services, to conduct this baselining work. The primary aim of the study is to provide a consistent biodiversity baseline across the portfolio of forestry and afforestation sites for the purposes of future monitoring and assessment against biodiversity standards. This may also include a predicted performance assessment, using habitat type, habitat condition and other factors to generate an overall estimation on future biodiversity levels.

Work to complete the baselining surveys and predicted performance reviews are ongoing. The results from these assessments and a more comprehensive update will be shared in 2023.

Carbon credits

TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES ("TCFD")

The Company recognises climate change as one of the defining challenges of our time and is supportive of the framework established by the Task Force on Climate-related Financial Disclosures ("TCFD"). TCFD creates a uniform approach for organisations to report on how they expect climate-related risks and opportunities to impact upon their business over time.

The Company has sought to ensure that the consideration of climate-related matters is appropriately embedded throughout its governance, strategy and risk management processes. The Company will provide a comprehensive response to all 11 of the recommended disclosures within the Sustainability and ESG Report in 2023, but recognises that its TCFD reporting will continue to develop and be further enhanced in the future.

For the purposes of this Annual Report, the TCFD core metrics are presented as a basis for comparison against other asset classes and peer funds.

TCFD core metrics

The Company's focus for quantitative reporting of exposure to climate-related risk is achieved using the universally accepted core metrics, as recommended by the TCFD, including:

In line with current FCA guidance, the calculation of these metrics will be performed using scope 1 and scope 2 emissions only, with scope 3 emissions to be incorporated in future reports. The Investment Manager is currently working with external consultants to better understand and prepare to report on scope 3 emissions.

In using these core metrics, the Company is not only able to compare performance amongst its own assets but against those of its wider peer group, further incentivising the decarbonisation of the Company's portfolio. Data drawn from the calculation of the core metrics will be used as an aid to driving decarbonisation across the portfolio and to highlight carbon hotspots in specific business areas as a means of influencing decision-making across the business.

Calculation methodologies taken from TCFD website.

SFDR

The Sustainable Finance Disclosure Regulation ("SFDR") is a framework designed to increase transparency on sustainability reporting with a view to facilitating sustainable investment practices and to aid the understanding of sustainability credentials as published by funds and/or companies.

FSF considers itself an Article 9 fund and the SFDR Product Disclosure for the Fund can be located at fsfc.foresightgroup.eu[.]

Furthermore, as an Article 9 fund, FSF is required to report on the 14 Principal Adverse Impact indicators as prescribed in the Regulatory Technical Standards. This table can be found published on the Company's website alongside the Annual Report.

EU Taxonomy

Under SFDR, Article 9 funds must report on their level of alignment to the EU Taxonomy for Sustainable Activities ("EU Taxonomy").

The aim of the EU Taxonomy is to create security for investors, protect private investors from greenwashing, help companies to become more climate-friendly, mitigate market fragmentation and help move capital to where it is most needed.

The Company has set the objective of having all of its assets compliant with the EU Taxonomy's pre-determined screening criteria. As such, based on internal assessment, FSF believes 100% of its assets to be aligned to the EU Taxonomy.

Absolute emissions

Scope 1

Scope 2

Scope 3

SECTION 172 AND STAKEHOLDERS

Section 172

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

Since the Company's inception in 2021, the Board has taken its responsibilities towards all the Company's stakeholders as an utmost consideration in every scheduled Board meeting as well as at the inaugural Management Engagement Committee meeting where relationships with all the stakeholder groups were considered in detail.

The purpose of the Company is to act as an investment vehicle to provide financial returns to its Shareholders over time. Investment vehicles are long-term and are typically externally managed, have no employees and are overseen by an independent non-executive Board of Directors. The role of the Investment Manager is particularly important in engaging with stakeholders in the Company and reporting on developments to the Board.

Community engagement

The Foresight Sustainable Forest Management approach is applied across the Company's afforestation projects as well as its established forest and woodland assets. Some additional examples, not already highlighted in the Executive Summary section above, are provided below of where this approach has been pro-actively pursued during the period, with a particular focus on community engagement and our drive to unlock positive natural capital service and societal benefits:

Stakeholders: Local communities and the environment

Role of the Board

The Board retains responsibility for taking all decisions relating to the Company's corporate governance, strategy and for monitoring the performance of the Company's service providers. As laid out in the Prospectus, the Investment Manager has discretion over investment decisions within the Investment Policy; the Board has oversight and ultimate control. The Board is engaged with the activities of the Company and all Board members have relevant direct experience for supporting the activities of the Company, including substantial experience on other listed and non-listed entities.

The Board aims to ensure that the Company operates in a transparent manner where all parties are treated with respect and provided with the opportunity to offer practical challenge and participate in positive debate which is focused on the aim of achieving the expectations of Shareholders and other stakeholders alike. The Board, with the assistance of the Management Engagement Committee, reviews the culture and manner in which the Investment Manager operates at its scheduled meetings and through its annual performance review. Regular reporting and feedback from other key service providers is also sought and reviewed by the Management Engagement Committee on an annual basis.

The Board is conscious of the ways it promotes the Company's culture and ensures that, as part of its regular oversight, the integrity of the Company's affairs is central to the way in which the Company's activities are managed and promoted. The Board works closely with the Investment Manager and the Company Secretary in reviewing how stakeholder issues are handled, ensuring good governance and responsibility in managing the Company's affairs, as well as visibility and openness in how these are conducted.

As the Company is externally managed and has no employees, the Board considers the key stakeholders to be Shareholders, local communities closely linked to the portfolio, customers and agents of the Company, including the Investment Manager.

The Board is acutely aware of its responsibilities to all the stakeholders in the Company and has taken into account the following:

The Company regularly interacts with a variety of stakeholders important to its success and strives to strike the right balance between communication and direct engagement and is entirely open to contact with stakeholders where there are issues to discuss.

As the Company grows, the Board intends to continue visiting forestry assets. The Board makes detailed enquiries on the assets in the portfolio and has periodic meetings with key stakeholders on matters of particular importance.

Understanding stakeholders' views influences the Company's investment strategy, including its focus on acquiring and managing assets in a way that promotes capital growth. The Board is also mindful of how Shareholders are affected by the secondary market liquidity in the Company's shares and how the shares are rated relative to its Net Asset Value ("NAV"). The Board, through the Company's broker, promotes secondary market interest in the Company's shares as part of its ongoing commitment to existing and future Shareholders.

Engagement with Shareholders

As a public company listed on the London Stock Exchange, the Company is subject to the Listing Rules and the Disclosure Guidance and Transparency Rules. The Listing Rules include a principle that a listed company must ensure that it treats all holders of the same class of shares that are in the same position equally in respect of the rights attaching to such shares. With the assistance of regular discussions with and the formal advice from the Company's legal counsel, Company Secretary and corporate broker, the Board abides by the Listing Rules, as it does with other statutory provisions. Likewise, the Board is kept appraised of developments in corporate governance guidance, reporting standards and other non-statutory provisions and does its best to comply or explain why it does not comply.

The Investment Manager has developed relationships with key Shareholders and prospective investors. It is in regular contact with investors and reports back to the Board. During discussions, Shareholders often ask for additional information around certain aspects of the Company. Where it is appropriate to do so, the Investment Manager will provide this detail. For example, additional requests for information have been made on ESG matters, which are covered in more detail in the Directors' report, and on progress with deployment and acquisitions.

The Company will continue to engage with Shareholders in the future to ensure that there is an understanding of stakeholders' views on investment strategy, corporate developments, governance and other issues such as the importance of sustainable income, asset enhancement potential and ESG.

The Company has routine engagement with Shareholders and prospective investors through the publication of interim and annual accounts, the Annual General Meeting ("AGM") and regular news and bi-annual NAV updates, all published on the Company's website.

Engagement with the Investment Manager

The Investment Manager is responsible for the implementation of the investment strategy and the day-to-day investment decisions, including identifying assets for acquisition. The Board engages constructively with the Investment Manager to ensure the expectations of Shareholders are being met and it is aware of the challenges being faced, including meeting the long-term objectives for the Company's growth.

The Board and the Investment Manager maintain an ongoing, open dialogue on key issues facing the Company. This open dialogue takes the form of regular Board meetings and very regular but more informal contact, as appropriate, including additional ad hoc Board and Committee meetings. This ensures that the Company and the Investment Manager have aligned interests to safeguard the Company's position and to try and ensure the future success of the Company.

The Board regularly reviews the Company's performance against its investment objectives and holds an annual strategy review meeting to ensure that the Company is positioned well for the future delivery of its objective for its Shareholders. The Board receives presentations from the Investment Manager at every Board meeting to help it to exercise effective oversight of the Company's strategy and the performance of the Investment Manager. The Board, through the Management Engagement Committee, reviews formally the performance of the Investment Manager, at least annually.

Engagement with lender

The Company has a Revolving Credit Facility with Clydesdale Bank Plc ("Clydesdale"). This facility is subject to covenants and lender consent may be required on certain business decisions. The Investment Manager is in regular contact with Clydesdale to keep it appraised of ongoing portfolio matters and general market updates so that they have a full understanding of the Company and how it is performing.

Engagement with key service providers

The Board seeks to maintain constructive relationships with the Company's suppliers, either directly or through the Investment Manager, with regular communications and meetings. The Management Engagement Committee conducts an annual review of the performance and terms and conditions of the Company's main service providers to ensure that they are performing their responsibilities in line with Board expectations and providing value for money.

Engagement with local communities and the environment

The Board and Investment Manager are committed to investing in a responsible manner and the Investment Manager embeds the requirements of Article 9 into its investment decision-making process. The Board also formally constituted a Sustainability and ESG Committee during the year, to focus on embedding ESG into the Company's strategy and objectives. Further detail on the work of this Committee can be found in the online report.

In 2021, the AIC launched an option for individual investment company ESG disclosures to be published on its website. The Company has complied with this request and submitted a summary ESG strategy and this is now publicly available on the Company's page on the AIC website.

The Company was awarded the London Stock Exchange's Green Economy Mark upon its IPO, which recognises London-listed companies and funds that derive more than 50% of their revenues from products and services that are contributing to environmental objectives such as climate change mitigation and adaptation, waste and pollution reduction, and the circular economy.

The Company aims to maximise its social and community contribution to the markets in which it operates. In partnership with Tilhill Forestry Limited, the UK's leading forest management, timber harvesting and landscaping company, the Company launched a Forestry Skills Training Programme during the year. Initially focused in Wales, the programme is targeted to extend to Scotland and England in due course. The initiative aims to directly help rural farming communities adapt to afforestation-related land use change by providing local community members with the skills, training, qualifications and safety equipment required to seek employment in the forestry sector.

The Board is also committed to ensuring that it operates in a responsible and sustainable manner, having regard for the Company's suppliers, local communities and the environment. In order to achieve this, the Board has placed ESG factors at the heart of its investment objectives to guide the way it operates.

Risk and Risk Management

FSF has a comprehensive risk management framework overseen by the Audit Committee, comprising the Independent Non-Executive Directors.

Risk is the potential for events to occur that may result in damage, liability or loss. Such occurrences could adversely impact the Company's business model, reputation or financial standing. Alternatively, under a well-formed risk management framework, potential risks can be identified in advance and can either be mitigated or possibly converted into opportunities.

Below details the principal risks that the Directors consider are material. Given that the Company delegates certain activities to the Investment Manager, reliance is also placed on the controls of the Company's service providers. The purpose of the Company's risk management policies and procedures is not to eliminate risk completely, rather it is to reduce the likelihood of occurrence and to ensure that the Company is adequately prepared to deal with risks so as to minimise their impact should they materialise.

The Company's risk register covers seven main areas of risk:

See more in the TCFD report above.

Each of these areas, together with the principal risks within that category, are summarised in the table below, followed by a detailed discussion of the mitigating factors.

FINANCIAL REVIEW

Analysis of financial results

The financial statements of the Company from incorporation on 31 August 2021 to 30 September 2022 are set out below.

The Company prepared the financial statements from the date of incorporation to 30 September 2022 in accordance with the UK adopted International Accounting Standards as applicable to companies reporting under those standards. The Company applies IFRS 10 Investment Entities: Amendments to IFRS 10, IFRS 12 and measures all their subsidiaries that are themselves investment entities at fair value. The Company accounts for its interest in its wholly owned direct subsidiary FSFC Holdings Limited as an investment at fair value through profit or loss in accordance with IFRS 13 Fair Value Measurement.

The primary impact of this application, in comparison to consolidating subsidiaries, is that the cash balance before taxes, the working capital balances and borrowings in the intermediate holding companies are presented as part of the Company's fair value of investments.

The Company's intermediate holding companies provide services that relate to the Company's investment activities on behalf of the parent which are incidental to the management of the portfolio.

The Company, its subsidiaries FSFC Holdings Limited and FSFC Holdings 2 Limited (together the "Group"), hold investments in portfolio assets which intend to make distributions in the form of interest on loans and dividends on equity as well as loan repayments and equity redemptions.

For more information on the basis of accounting and Company structure, please refer to the notes to the financial statements below.

Net assets

The Net Asset Value ("NAV") at 30 September 2022 was £180.6 million and comprised £144.2 million portfolio value of forestry and afforestation assets, with an additional £0.6 million carbon credit valuation, cash balances of £36.3 million. The cash balances are made up of £34.3 million in the Company and £2.0 million in the project companies, offset by £0.5 million of other net liabilities (£0.5 million of other liabilities in the project companies). The Gross Asset Value ("GAV") is equal to the sum of the NAV and the outstanding debt as described in the alternative performance measures table on page 109. The GAV as at 30 September 2022 was £180.6 million.

Analysis of the Company's net assets at 30 September 2022

Net Asset Value bridge

During the period the Company raised a total of £175.0 million (£130.0 million at IPO in November 2021 and £45.0 million in June 2022). This was offset by cumulative capital raise fees of £3.2 million.

The £10.9 million fair value increase of the afforestation and forestry assets held by the Group has been offset by operating costs of £2.7 million (£2.3 million of Fund operating costs for the Company, £0.4 million of project companies' outflows.)

The 36,116 carbon credits yet to be realised but attributed to the two underlying afforestation assets where planting has completed have also been valued at £0.6 million, resulting in a Net Asset Value of £180.6 million at 30 September 2022.

Company performance

Profit and loss

The Company's profit before tax for the period ending 30 September 2022 was £8.8 million (6.2 pence per share).

For the same period to 30 September 2022, the total return on investments was £11.0 million, which relates to £0.9 million of interest on the FSFC Holdings loan notes and £10.1 million net gains on investments at fair value. The interest income is from the Company's Shareholder loan to FSFC Holdings Limited. The net gain on investment is generated by the net fair value movement on the Company's investment in FSFC Holdings Limited.

Operating expenses included in the income statement for the period were £2.2 million, in line with expectations. These comprise investment management fees of £1.1 million and £1.1 million of operating expenses. The details on how the investment management fees are charged are set out in note 5 to the financial statements.

Ongoing charges

The "ongoing charges" ratio is an indicator of the costs incurred in the day-to-day management of the Fund. FSF uses the AIC-recommended methodology for calculating this ratio, which is an annual figure.

The ongoing charges ratio percentage from incorporation on 31 August 2021 to 30 September 2022 was 1.4%. The ongoing charges have been calculated, in accordance with AIC guidance, as annualised ongoing charges i.e. excluding acquisition costs and other non-recurring items) divided by the average published unaudited Net Asset Value in the period. The ongoing charges percentage has been calculated on the consolidated basis and therefore takes into consideration the expenses of FSF Holdings as well as the Company.

The Investment Manager believed this to be competitive for the market in which FSF operates and the stage of development and size of the Fund, demonstrating that management of the Fund is efficient with minimal expense incurred in its ordinary operation.

Cash flow

The Company held cash balances at 30 September 2022 of £34.3 million. This amount excludes cash held in subsidiaries. The breakdown of the movements in cash during the period is shown below.

Cash flows of the Company for the period from incorporation on 31 August 2021 to 30 September 2022 (£million)

Cash flows of the Group for the period from incorporation on 31 August 2021 to 30 September 2022 (£million)

The Group is defined as the Company and its two intermediate holding companies. The cash flows for the Group of £34.8 million include £0.5 million in FSF Holdings 2 Ltd.

Portfolio valuation

Methodology

Savills Advisory Services Limited ("Savills") is engaged by the Company to provide a fair value valuation of the underlying forestry assets held through the SPVs in accordance with the Royal Institution of Chartered Surveyors ("RICS") Valuation - Global Standards July 2017 (the "Red Book").

The Red Book valuation is compliant with the UK adopted International Accounting Standards as part of the International Valuation Standards which requires investment properties to be considered on the basis of fair value at the balance sheet date. IFRS 13 outlines the principles for fair value measurement which Savills' valuation is consistent with. The Red Book valuations are undertaken on an asset-by-asset basis and will be completed semi-annually.

The fair value assessment of the assets has been completed by Savills on a comparable basis by looking at transactions of similar assets. Afforestation land comparables include the rights to voluntary carbon unit creation. However, the Red Book valuation approach is largely backward-looking and thus the Investment Manager is of the view that the valuations are likely to be conservative in relation to the potential future value of the voluntary carbon units that could be generated.

The Manager believes the Red Book valuation does not include any value in relation to progress in units ("PIUs") as at 30 September 2022 and has therefore calculated an estimated value on the progress made on obtaining the rights to PIUs as to date no PIUs have been authorised by the Woodland Trust.

The Red Book methodology considers a number of additional factors impacting the valuation. A reasonable view of the potential for afforestation sites' value uplift over time is considered rather than valuing the land in its current state. Savills also consider the stage of each site within the forestry grant application process and may make reassessments as to the value of a site when a new developmental milestone occurs. Additionally, as the assets under ownership are located across the UK (Scotland, North England and Wales), the external valuer accounts for the potential differences in market interest and demand at the different locations. On a case-by-case basis Savills will also assess the extent of damage suffered by sites due to any extreme windblow incidents. Where damage is extensive, Savills will make prudent adjustments to the value of the site, if it is evident that some of the affected timber may be challenging to recover.

FINANCIAL STATEMENTS

INCOME STATEMENT

FOR THE PERIOD FROM 31 AUGUST 2021 (INCORPORATION) TO 30 SEPTEMBER 2022

All results are derived from continuing operations.

The supplementary revenue and capital columns are presented for information purposes in accordance with the Statement of Recommended Practice issue by The Association of Investment Companies ("AIC").

There are no items of other comprehensive income in the current period, other than the profit for the period, and therefore no separate statement of comprehensive income has been presented.

The accompanying notes below form an integral part of the financial statements.

STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2022

The financial statements were approved and authorised for issue by the Board of Directors on 14 December 2022.

They were signed on its behalf by:

Richard Davidson

Chair

The accompanying notes form an integral part of the financial statements.

STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD FROM 31 AUGUST 2021 (INCORPORATION) TO 30 SEPTEMBER 2022

The accompanying notes form an integral part of the financial statements.

The Company's distributable reserves consist of the capital reserve attributable to fair value unrealised gains on the Fund portfolio's valuation.

STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM 31 AUGUST 2021 (INCORPORATION) TO 30 SEPTEMBER 2022

The accompanying notes form an integral part of the financial statements.

NOTES TO THE AUDITED FINANCIAL STATEMENTS

FOR THE PERIOD FROM 31 AUGUST 2021 (INCORPORATION) TO 30 SEPTEMBER 2022

1. General information

(a) Statutory Information

Foresight Sustainable Forestry Company Plc (the "Company" or "FSF"), a public limited company limited by shares, was incorporated and registered in England and Wales on 31 August 2021 with registered number 13594181 pursuant to the Companies Act 2006. The Company's registered address is C/O Foresight Group, The Shard, 32 London Bridge Street, London, United Kingdom, SE1 9SG.

(b) Corporate structure

The Company has one investment, FSFC Holdings Limited, and FSFC Holdings Limited in turn has one investment, FSFC Holdings 2 Limited; together this is the "Group".

FSFC Holdings 2 Limited has three investments: FSFC Company 1 Limited, Blackmead Forestry Limited and Blackmead Forestry II Limited. Blackmead Forestry Limited has two investments: Coull Forestry Limited and Fordie Estates Limited. These five entities together are the special purpose vehicles or "SPVs".

The Group's principal activity is investing in UK forestry, afforestation and natural capital assets.

The audited financial statements of the Company are for the period from incorporation on 31 August 2021 to 30 September 2022 and have been prepared on the basis of the accounting policies set out below. The financial statements comprise only the results of the Company, as its direct investments in FSFC Holdings Limited, FSFC Holdings 2 Limited, and all underlying SPVs thereafter, are measured at fair value as detailed in the significant accounting policies below.

2. Significant accounting policies

(a) Basis of preparation

The set of financial statements has been prepared in accordance with UK adopted International Accounting Standards. The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain assets and on a going concern basis. The accounting policies set out below have, unless otherwise stated, been applied consistently to the period presented in these financial statements.

These financial statements have also been prepared in accordance with the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts ("SORP") issued in April 2021 by the Association of Investment Companies ("AIC").

There are several amendments and standards that have been issued and will be effective in future periods however, none of these are expected to have a material effect.

The following standards became effective during the period and did not have a material impact on the Company's reported results:

IFRS 10 Consolidated Financial Statements

IFRS 10 requires an entity that controls (meaning it is exposed, or has rights, to variable returns from its involvement with the investee entity and has the ability to affect those returns through its power over the investee) one or more other entities, to present consolidated financial statements. Consolidated financial statements consist of assets, liabilities, equity, income, expenses and cash flows of a parent and its subsidiaries as those of a single economic entity. Notwithstanding the application of IFRS 10 in establishing the Fund as an investment entity, the standard has not been adopted in full in as far as presenting consolidated financial statements, as the Fund has presented these financial statements on a fair value basis instead, pursuant to IFRS 13.

IFRS 16 Leases

IFRS 16 requires lessees to account for all leases under a single on-balance sheet model in a similar way to finance leases under IAS 17. Lessor accounting is substantially unchanged from today's accounting under IAS 17. Lessors will continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases. The standard requires lessees and lessors to make more extensive disclosures than under IAS 17. IFRS 16 is effective for annual periods beginning on or after 1 January 2019, however early adoption is permitted. The Fund is neither a lessor nor lessee, thus has not adopted this standard.

These financial statements are presented in sterling (£) and rounded to the nearest thousand unless otherwise stated. They have been prepared on accounting policies, significant judgements, key assumptions and estimates set out below.

These financial statements constitute statutory accounts as defined in Section 434(3) of the Companies Act 2006 as they are audited. The financial statements include all information and disclosures required in annual audited financial statements.

The audited financial statements incorporate the financial statements of the Company only.

Any estimates and underlying assumptions are reviewed on a regular basis and revisions to accounting estimates are recognised in the period when they occur and in any future period affected. The significant estimates, judgements or assumptions are set out below. This is the Company's first accounting period, so there are no comparatives.

(b) Going concern

The Directors have adopted the going concern basis in preparing the Annual Report. In their assessment of going concern they have reviewed comprehensive cash flow forecasts prepared by the Investment Manager and believe based on the forecasts and an assessment of the Company's cash position and liquidity of the investment portfolio that the Company will continue in operational existence for at least 12 months from the date of approval of the financial statements and therefore consider it appropriate to prepare the financial statements on a going concern basis. As at 30 September 2022, the Company had net assets of £180.6 million including £34.3 million of cash which are sufficient to meet current obligations as they fall due.

The Directors have also assessed the impact of significant potential risks to the operations of the Company since incorporation and the principal risks in the UK forestry and afforestation markets including the various risk mitigation measures in place and do not consider this to have a material impact on the assessment of the Company as a going concern.

Market risk

The Company has assessed its potential exposure to being negatively impacted by a sudden loss of revenue stream. The relevance of this risk has been significant given the recent impacts made by the COVID-19 pandemic and the Ukraine-Russia conflict. The Company has assessed these risks alongside the potential risk of similar events having a negative impact on revenue recoverability. The potential impacts of such market risks include, but are not limited to:

Each of the above potential impacts could have a direct influence on the amount that can be distributed to the Company by its subsidiaries. Foresight has reviewed the portfolio's exposure to these risks and has concluded that if, even in the unlikely case, these adverse impacts on revenue recoverability are material, the Company should still have sufficient funds to continue operations for the foreseeable future. If such impacts were to continue on a long-term basis, continued monitoring processes would need to be actioned.

Liquidity risk

Due to the nature of the Company's operation and deployment strategy, there could be potential exposure to liquidity risk, whereby the entity would encounter difficulties in paying its financial liabilities. The Directors have considered this risk and are satisfied that FSF has adequate financial resources to settle its recurring expenses for the foreseeable future, based on evidence provided from cash flow forecasting and sensitivity testing to satisfy both the Investment Manager and the Directors that the Company has sufficient funds available.

The Directors are satisfied that FSF has sufficient resources to continue to operate for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they have adopted the going concern basis in preparation of these financial statements.

(c) Segmental reporting

The Directors are of the opinion that the Company is engaged in a single segment of business, being investment in UK forestry and afforestation assets, to generate real returns for investors as well as capital appreciation. The financial information used by the Board to allocate resources and manage the Company presents the business as a single segment comprising a homogeneous portfolio.

(d) Key judgements

Fair valuation of investment assets

The market value of the Company's underlying investment portfolio held through its SPVs consisting of Forestry, Afforestation and Non-core assets (investment portfolio/ properties) is determined by an external valuer (see note 10) to be the estimated amount for which an asset should exchange on the date of the valuation in an arm's-length transaction. Properties have been valued on an individual basis. The external valuer prepares their valuations in accordance with the RICS Valuation - Global Standards July 2017 (the "Red Book"). Factors reflected comprise current market conditions including the comparable market value of similar freehold forestry assets, the potential uplift in land value above current in-use value (relevant to planting land), the location and situation of individual assets, potential vulnerability to winter storms and the developmental status of properties (if afforestation). The market conditions stated are assessed on a bi-annual basis. The significant methods and assumptions used by the external valuers in estimating the fair value of investment assets are set out in note 10. The carbon credits valuation are not determined by an external valuer and are subject to Directors' judgement and estimation.

(e) Taxation

Income taxes

Income taxes represent the sum of the tax currently payable, withholding taxes suffered and deferred tax. Tax is charged or credited in the statement of comprehensive income, except where it relates to items charged or credited directly to equity, in which case the tax is also dealt with in equity.

The tax currently payable is based on the taxable profit for the year. This may differ from the profit included in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. To enable the tax charge to be based on the profit for the year, deferred tax is provided in full on temporary timing differences, at the rates of tax expected to apply when these differences crystallise.

Deferred tax assets are recognised only to the extent that it is probable that sufficient taxable profits will be available against which temporary differences can be set off. In practice, some assets that are likely to give rise to timing differences will be treated as capital for tax purposes. Given capital items are exempt from tax under the Investment Trust Company rules, deferred tax is not expected to be recognised on these balances.

All deferred tax liabilities are offset against deferred tax assets, where appropriate, in accordance with the provisions of IAS 12. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

3. Basis of consolidation

The Company's objective is to invest in UK forestry and afforestation assets through its holding companies, which will typically issue equity and loans to finance the investments.

Assessment as an investment entity

IFRS 10 Consolidated Financial Statements sets out the following essential criteria, necessary for a company to be considered as an investment entity.

Definition of an investment entity/trust:

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

The Directors have concluded that the Company meets the definition of an investment entity in accordance with IFRS 10 after evaluation of the relevant criteria.

The Directors continue to consider the Company demonstrates the characteristics and meets the requirements to be considered an investment entity.

IFRS 10 states that investment entities are required to hold subsidiaries at fair value through profit or loss rather than consolidation on a line-by-line basis; this means that the Group's cash, debt and working capital balances are included in the fair value of the investment instead of in the Company's assets and liabilities. The Company has one investee, namely FSFC Holdings Limited, which invests the funds of the FSF investors on its behalf and is effectively performing investment management services on behalf of several unrelated beneficiary investors.

4. Return on investment and interest income

5. Investment management fees

Foresight Group LLP was appointed as the Investment Manager for the Company under an Investment Management Agreement. Under the terms of the agreement, the Investment Manager is entitled to a management fee from the Company, which is calculated quarterly in arrears at 0.85% of NAV per annum up to £500 million and 0.75% per annum in excess of £500 million.

The Company paid £687,218 during the period. Investment management fees of £384,092 were billed at the period end and remained to be paid to Foresight Group LLP.

6. Operating expenses

Other expenses include adviser fees, independent valuer fees, broker fees, depository fees and other company-related costs.

The Company had no employees during the period (30 September 2022: nil). There was no Directors' remuneration for the period other than the fees detailed in note 19.

Included within other expenses is an amount of £118,250 to Ernst & Young LLP for the audit of the Company for the period ended 30 September 2022.

Details of Directors' fees are set out in note 22.

7. Dividends

The Company did not pay any dividends in the period from incorporation to 30 September 2022.

8. Taxation

The Company received notice on 11 November 2021 confirming it is an approved Investment Trust for accounting periods commencing on or after 23 November 2021. The approval is subject to the Company continuing to meet the eligibility conditions of Section 1158 of the Corporation Taxes Act 2010. Furthermore, there are also ongoing requirements for approved companies in Chapter 3 of Part 2 Investment Trust (Approved Company) (Tax) Regulations 2011 (Statutory Instrument 2011/2999). To maintain its ITC status, the Company must adhere to the following conditions throughout an accounting period:

The Company regularly monitors the conditions required to maintain ITC status.

Analysis of tax expense

There was no corporation tax payable during the period from incorporation on 31 August 2021 to 30 September 2022. As a result, the tax charge for the period is £nil. Investment gains are exempt from tax owing to the Company's status as an investment trust.

Reconciliation of income taxes in the statement of comprehensive income

The tax charge for the period is different from the standard rate of corporation tax in the UK, currently 19% (2021: 19%), and the difference is explained below:

Factors that may affect future total tax charges

Following the March 2022 Budget, the corporation tax rate will increase from 19% to 25% with effect from April 2023. The Company is recognised as an ITC for this interim accounting period and is taxed at the current main rate of 19%.

At the period end, there is a potential deferred tax asset of £253,194 in relation to excess management expenses carried forward. The deferred tax asset is unrecognised at the period end in line with the Company's stated accounting policy.

9. Earnings per share

10. Investments at fair value through profit and loss

There is a loan between FSF and FSFC Holdings Limited for £21,821,094. The rate of interest on the loan is 7% per annum. Interest accrued at the period end and outstanding at the reporting date was £852,198.

The Company owns 11,435,005,921 shares in FSFC Holdings Limited that were purchased for a consideration of £0.01 per share.

Fair value investments

The Investment Manager has carried out fair value market valuations of the underlying SPV investments as at 30 September 2022 on a RICS basis, as performed by Savills. The Directors have approved the methodology used, as well as confirming their understanding of all underlying key assumptions applicable. All SPV investments are at fair value through profit or loss and are valued using the IFRS 13 framework for fair value measurement.

Savills includes all investments under ownership by FSF in their portfolio valuation, for both afforestation and forestry properties. The valuations have been prepared in accordance with the RICS Valuation - Global Standards July 2017 (the "Red Book") and incorporate the recommendations of the International Valuation Standards, which are consistent with the principles set out in IFRS 13.

Savills, in forming its opinion, makes various assumptions on the basis of current market conditions; the following are the key assumptions are made:

In addition, the Investment Manager believes the Red Book valuation does not include any value in relation to progress in units ("PIUs") as at 30 September 2022 and has therefore calculated an estimated value on the progress made on obtaining the rights to PIUs as to date no PIUs have been authorised by the Woodland Trust.

Fair value hierarchy

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole - these levels are defined, as per IFRS 13, below:

The Company considers that all of its investments fall within Level 3 of the fair value hierarchy as defined by IFRS 13.

There have been no transfers between Level 1 and Level 2 during any of the periods, nor have there been any transfers between Level 2 and Level 3 during any of the periods.

The valuations have been prepared on the basis of market value, which is defined in the RICS Valuation Standards as: "The estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion."

Market value as defined in the RICS Valuation Standards meets the requirements of fair value defined under IFRS.

11. Trade and other receivables

12. Trade and other payables

The total for creditors as at 30 September 2022 includes an amount of £384,092 relating to investment management fees charged by Foresight Group LLP to services provided during the period. Similarly, an amount of £31,373 relating to administration services fees has also been charged by Foresight Group LLP.

13. Share capital