Foresight Solar Fund Regulatory News (FSFL)

9 March 2020

Foresight Solar Fund Limited

('Foresight Solar', 'FSFL' or 'the Company')

Annual Results to 31 December 2020

Foresight Solar, a fund investing in a diversified portfolio of ground-based solar PV assets in the UK and internationally, is pleased to announce its Annual Results for the year ended 31 December 2020.

Highlights

Key Metrics

* Calculated as NAV plus outstanding debt.

Commenting on the Company's results, Alex Ohlsson, Chairman of Foresight Solar Fund Limited, said:

"In a uniquely challenging environment, 2020 saw the Company deliver a strong operational performance in the UK, make good progress on its Australian solar portfolio, reach a significant milestone with its first investments in continental Europe and in unsubsidised solar and again, meet its dividend target for the year.

"Foresight Solar's UK portfolio delivered another year of positive performance, with UK electricity generation for the year 8.4% above base case expectations due to good irradiation levels and asset availability. In continental Europe, the acquisition of four greenfield assets in Spain demonstrated our ability to source assets that should deliver stable cash flows at attractive risk-adjusted returns and marked an important step in our international expansion strategy. With these acquisitions, our portfolio has grown to 58 assets with a total generating capacity of 994MW. The recent vote by shareholders to allow the introduction of Battery Storage Systems to the portfolio represents another exciting area of growth for the Company.

"While we will continue to monitor and evaluate targeted growth opportunities, the year ahead will again see us focus on delivering our optimisation initiatives and a strong operational performance. The safety of all our stakeholders and our commitment to providing an attractive yield alongside positive sustainability outcomes remain our top priorities."

Results presentation

Foresight Solar Fund Ltd is holding a webcast presentation for analysts at 08:30 today. Analysts wishing to attend should contact foresightsolar@citigatedewerogerson.com to register. An investor presentation will also be uploaded to the FSFL website.

Dividend Declaration

Foresight Solar is also pleased to announce a fourth interim dividend, in respect of the period 1 October 2020 to 31 December 2020, of 1.73 pence per ordinary share ("the Dividend"). The shares will go ex-dividend on 29 April 2021 and the Dividend will be paid on 28 May 2021 to shareholders on the register as at the close of business on 30 April 2021.

Full details of the scrip dividend alternative that is being offered in respect of the Dividend (the "Scrip Offer") and the Scrip Dividend Scheme can be found in the Scrip Dividend Alternative Offer Document (the "Scrip Document") available on the Company's website at https://fsfl.foresightgroup.eu/investor-relations/dividend-history/. The Scrip Document is also available on the National Storage Mechanism website at www.morningstarco.uk/uk/NSM and copies are also available for inspection at JTC House, 28 Esplanade, St. Helier, Jersey JE2 3QA.

The reference price of the new shares issued under the Scrip Offer will be calculated and published on or around 6 May 2021.

Shareholders will receive the Dividend in cash, unless they have previously completed a standing election (a "Form of Election") to receive new shares pursuant to the Scrip Offer. Shareholders who would like to receive such new shares rather than cash, and who have not previously submitted a Form of Election, should complete the Form of Election at the back of the Scrip Document and return it to the Company's Receiving Agent, Computershare Investors Service (Jersey) Limited by no later than 5.00pm on 17 May 2021.

The expected timetable in relation to the Dividend will be as follows:

For further information, please contact:

Foresight Group +44 (0)20 3667 8147Jonathon McManus InstitutionalIR@ForesightGroup.eu

Jefferies International Limited

+44 (0)20 7029 8000

Neil Winward

Gaudi Le Roux

Citigate Dewe Rogerson +44 (0)20 7638 9571 Toby Moore

Elizabeth KittleLucy Gibbs

Notes to Editors

About Foresight Solar Fund Limited

Foresight Solar is a Jersey registered, closed-end investment company investing in a diversified portfolio of ground-based solar PV assets in the UK, Australia and Spain.

Since its IPO in October 2013, FSFL has raised more than £634 million through multiple share placings. It is the largest UK-listed dedicated solar energy investment company by solar installed capacity and market capitalisation.

The Company targets a progressive dividend policy and has paid all target dividends to date. The target dividend for 2021 is 6.98 pence per share.

FSFL is managed by Foresight Group, a leading independent Global Infrastructure & Private Equity manager, which provides FSFL with depth of experience in fund management, deal origination and execution. The Company has a fully independent Board of Directors and is chaired by Alex Ohlsson. The lead Investment Manager for the Company is Ricardo Piñeiro, Partner at Foresight Group.

Foresight solar fund limited

AUDITED ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR1 JANUARY 2020 TO31 DECEMBER 2020

Financial Highlights

As at 31 December 2020

Net Asset Value ("NAV")

£582.2m

(31 Dec 2019: £628.0m)

NAV per Share

95.8p

(31 Dec 2019: 103.8p)

Gross Asset Value ("GAV")

£1,054.6m*

(31 Dec 2019: £1,071.5m)

Dividend per Share declared relating to the YEAR

6.91p

Market Capitalisation

£622.9m

TOTAL SHAREHOLDER RETURN SINCE IPO

50.7%

ANNUALISED TOTAL SHAREHOLDER RETURN SINCE IPO

5.9%

(1) Versus coal equivalent

Chairman's Statement

On behalf of the Board, I am pleased to present the Audited Annual Report and Financial Statements for Foresight Solar Fund Limited (the "Company" or the "Fund") for the year ended 31 December 2020.

Despite the unique challenges presented by the COVID-19 pandemic in 2020, the Company delivered another year of growth, good operational performance and paid its target dividend to shareholders. The Company also took three significant strategic steps: geographically diversifying its portfolio through the acquisition of its first Spanish solar assets; making its first investment into subsidy-free solar; and securing shareholder approval to introduce Battery Storage Systems ("BSS") to the portfolio.

Inevitably, the emergence of COVID-19 and the operational challenges brought about by restrictions on movement were the primary focus of the Investment Manager and Board for much of the period. During the first UK national lockdown in April, the Investment Manager moved swiftly to implement its Business Continuity Plan and co-ordinated closely with its operational service providers to ensure the safety of its staff and stakeholders and the operational stability of the portfolio. This rapid and co-ordinated action between key service providers meant that there was no operational disruption during the year as a result of the pandemic.

The shutdown of UK heavy and commercial industry during the first lockdown led to a collapse in demand for electricity and a sharp fall in power prices in the second quarter of 2020. Prices gradually recovered in the second half of the year, reaching pre-pandemic levels by year-end. Despite a fall in the price at which generators were able to sell their power in the merchant markets, the Company met its dividend target for the year as a result of the strategic decision to maintain a high proportion of fixed revenues linked to government subsidies and fixed price arrangements in the short and medium term. As a result of the price recovery in the last few months of 2020, the Company increased the percentage of energy sales under fixed price arrangements for 2021 and 2022 providing additional support to future dividends.

The Company's existing UK portfolio is now well-established and operating in a 'steady state', as evidenced by another year of positive operational performance. In the UK, electricity generation for the period was 8.4% above base case expectations due to good irradiation levels and asset availability. In Australia, the Company continued to make good progress on its solar portfolio with Oakey 2 reaching full export capacity, with all four Australian assets now fully operational.

The Company reached a significant growth milestone in August when it announced the acquisition of its first asset in Spain, a deal which also marked the Company's first venture into subsidy-free solar. This acquisition was followed by a further acquisition of a portfolio of three Spanish subsidy-free assets in December. All four acquisitions are greenfield and their construction will be overseen by the Investment Manager's team on the ground in Madrid, a benefit of Foresight Group's significant regional expertise in Europe.

As well as providing meaningful geographic diversification and building upon the Company's existing Australian portfolio, these Spanish acquisitions demonstrate the Company's ability to source and deliver projected stable cash flows at attractive risk-adjusted returns, and an important step in its international expansion strategy. With these acquisitions, the portfolio has grown to 58 assets with a generating capacity of 994MW. The recent vote by shareholders to allow an allocation to BSS of up to 10% of GAV provides an additional and exciting area of potential growth for the Company.

KEY FINANCIALS

In 2020, the Net Asset Value ("NAV") per Ordinary Share decreased by 8.0 pence to 95.8 pence (31 December 2019: 103.8 pence).

The Company's financial performance in the year was negatively affected by the weakening of both short and long-term UK wholesale power price forecasts due to the COVID-19, resulting in an impact to NAV of 13.1 pence per share. Much of this impact was due to a significant decline in power prices seen in the first half of the year. However, power prices stabilised and then recovered during the second half of the year with a return to pre-pandemic price levels by the end of the year.

The negative effect of power prices on the Company's NAV was offset somewhat by a reduction in discount rates applied to the UK portfolio during the year of -0.50%. The Board believes that a discount rate of 6.5% is a fair and accurate rate to apply with the reduction justified by the ongoing demand for UK operational solar assets and recent transactions in the market.

The Investment Manager has a number of tools at its disposal to mitigate its exposure to merchant power prices, but the Company will continue to have an element of its revenue exposed to this market risk.

OPERATIONAL PERFORMANCE

Operational performance across the Company's global portfolio was in line with its target over the year, producing approximately 969,000MWh of clean electricity across the 54 operating assets, continuing the strong performance of recent years.

The UK portfolio delivered another year of positive performance, ahead of budget, generating 739MWh (FY19: 713MWh). Electricity generation for the period was 8.4% above expectations, aided by strong irradiation levels which were 8.5% above budget.

The Australian portfolio also contributed significantly to overall production, generating 230MWh during the period (FY19: 35MWh). The Oakey 2 project reached full export capacity in October 2020, with final commissioning tests ongoing. In addition, the export restriction which had curtailed 50% of the site's total capacity since the last quarter of 2019 was removed in April.

Optimisation initiatives across the portfolio were successfully deployed through the course of the year to improve energy generation, reducing downtime and lowering operational costs. This work will continue into 2021.

ACQUISITIONS

The Company has previously highlighted the attraction of the Iberian solar market which benefits from very high levels of irradiation and the ability to enter long-term PPAs with high quality counterparties without the need for government subsidies.

The Company is therefore pleased to have made two significant acquisitions during the period, adding four subsidy-free assets in Spain with strong production profiles. When construction completes in 2021/2022, the sites will add a further 125MW of generating capacity to the Company's global portfolio. Both acquisitions will include long-term fixed price arrangements with highly credible counterparties that will deliver contracted revenues and support the Company's ability to provide attractive risk-adjusted returns while increasing the portfolio's international diversification. At the time of the investment, the Company's international portfolio represented 17% of gross asset value.

DIVIDENDS

The Company has declared total dividends of 6.91 pence per share for the year, in line with its target. The fourth and final FY2020 dividend of 1.73 pence per share will be paid on 29 May 2021.

Dividend cover for the period on a cash basis was 1.11 times, including the impact of the scrip dividend programme. The Company has met all dividend targets since its launch.

The Board is pleased to declare a target dividend of 6.98 pence per share for FY2021, an increase of 1% compared with 2020.

DEBT FACILITIES

At 31 December 2020, the total outstanding debt of the Company and its subsidiaries amounted to £472.4 million (31 December 2019: £443.5 million), with long term debt representing £391.55 million (December 2019: £403.5 million). Total gearing increased to 45% of Gross Asset Value ("GAV") (December 2019: 41%) following Revolving Credit Facility drawdowns of £40.9 million during the year. Long-term debt represented 37% of GAV (2019: 38%), remaining within the 40% long-term debt target set by the Board. The Company's net debt position, when considering the available cash balances, represented 37% of GAV.

The Company's Revolving Credit Facility totalled £105 million at 31 December 2020, of which £24.1 million remains available for investment following the two Spanish acquisitions, providing the Company with flexibility to pursue further acquisitions should suitable opportunities arise.

The Board believes the current level of Company debt to be appropriate to the size and revenue profile of the portfolio.

CHANGE TO INVESTMENT POLICY

For some time the Investment Manager has been reviewing the attractiveness and viability of BSS with a particular focus on co-locating batteries alongside its existing UK operational assets, leveraging the wider experience of Foresight Group in the sector. Following an extensive review, the Investment Manager has identified several sites with available land and grid capacity to support BSS co-location. The market for greenfield co-location opportunities continues to develop and is expected to represent an attractive opportunity in the future as a significant contributor to the transition to low-carbon energy. The Board believes that the addition of a limited number of batteries to the existing UK solar portfolio, along with greenfield co-location investments, will provide clear benefits to the Company's investors, including an additional and diversified source of portfolio revenue with attractive risk/return characteristics. As such, a formal proposal to approve an allocation to BSS of up to ten per cent of the Company's GAV was put to shareholders at a General Meeting on 15 February 2021 and approved overwhelmingly. The Board looks forward to working with the Investment Manager to gradually introduce BSS opportunities into the portfolio.

LISTING OF INVESTMENT MANAGER

The Company's Investment Manager, Foresight Group LLP, undertook a successful listing on the London Stock Exchange as Foresight Group Holdings Ltd (FSG) on 9 February 2021. The Board welcomes the additional visibility and profile this will provide for its Investment Manager and is confident that the services provided by the Investment Manager will remain of the same high standard following its listing.

SUSTAINABILITY UPDATE

The World Economic Forum's 2021 edition of its Global Risks Report has once again highlighted environmental risks such as 'Extreme Weather', 'Climate Action Failure', 'Human Environmental Failure, and 'Biodiversity Loss' as four of its top five most likely global risks[2]. While the existence of these non-financial risks to financial returns is not new, there is a growing focus by both governments and investors on their likelihood and impact.

The Company has frequently reported on the positive social and environmental benefits generated by its investments in renewable energy assets. The portfolio has grown consistently since the Company's inception in 2013 and each year has provided energy suppliers, companies and households with electricity generated with a minimal carbon footprint. The electricity generated in 2020 alone equated to enough clean energy to power over 334,000 UK homes.

The Company has undertaken a number of initiatives during the year to improve its sustainability credentials. The Investment Manager has secured independent certification of compliance with the EU Taxonomy for sustainable activities for two of its assets, one in the UK and one in Australia, which it believes are representative of the broader portfolio. While the green nature of the Company's activities may appear abundantly clear, the Board believes that third-party verification of assets in each of the geographies in which it operates should give investors further comfort in the Company's sustainability credentials. EU Taxonomy certification should also help to attract the attention of potential new investors seeking investment solutions with a measurable social and environmental impact alongside attractive financial returns.

As reported in the 2020 Interim report, the Investment Manager continues to work with its key operational counterparties to ensure they operate in a manner that places sustainability at the core of their service delivery. During the course of the year, the Company's three largest O&M providers entered into Sustainability Agreements that commit them to complying with a number of guidelines that ensure ESG considerations are embedded into their operating practices. The Board and Investment Manager will monitor the compliance of its counterparties with this agreement on an annual basis with the aim of encouraging ongoing engagement and improvement in this important area.

BOARD UPDATE

In September 2020, Ms Ann Markey was appointed as a Non-Executive Director, bringing the size of the Company's Board to five. Ms Markey is an experienced business leader and non-executive director with a strong financial background and over 20 years' experience as a senior executive and board director in a number of businesses, in both the public and private sectors. Ms Markey has extensive experience in the electricity industry, particularly in thermal and renewable generation, including Photovoltaic ("PV") solar and wind. Since her appointment in September, Ms Markey has already proved to be a valuable addition to the Board.

OUTLOOK

Tangible progress towards net-zero remains a top priority for the UK Government in 2021. Whilst COVID-19 has disrupted all areas of life for individuals, businesses and society, the consequences of the pandemic seem set to boost the decarbonisation agenda rather than to hinder it. The 'Build Back Better' and 'Green Recovery' agendas place renewables at the heart of the UK economic recovery plan and the country will take centre stage in global climate change discussions in November when Glasgow hosts the 26th UN Climate Change Conference of the Parties. Other international governments have also announced ambitious decarbonisation targets.

The commitment to decarbonised economies is expected to create new support mechanisms for solar technologies. The UK's Contracts for Difference auction expected to take place in late 2021 will reintroduce solar as a qualifying technology and the successful Spanish auction announced in January 2021 awarded 2GW of new solar PV capacity.

In this context, the demand for renewable energy assets such as utility scale solar, is only set to increase as renewables become an increasingly central component of the energy mix. As a result, the pricing environment for operational assets with high levels of contracted revenues in both the UK and Europe is set to remain competitive, presenting modest investment opportunities for the Company.

The measures implemented in recent periods mean that the impact on the Company of the UK leaving the EU is expected to be minimal. The Board and the Investment Manager will, however, continue to review this development.

The acquisition of the Company's first subsidy-free assets is an exciting development and the result of its targeted efforts to identify attractive opportunities in this emerging market. It is the Investment Manager's view that this market will continue to develop in the UK and other international markets, in particular Southern Europe, and will continue to monitor opportunities in the space.

The recent change to the investment policy will also allow the Company to target BSS investments, either alongside the existing portfolio or as a greenfield investment, with an initial focus in the UK market given the size of the opportunity. As the proportion of renewable energy generation increases, the requirement for grid stability and services that are able to rebalance the intermittent nature of solar energy are expected to increase. BSS are expected to have a more significant role in this energy transition process.

At portfolio level, the Asset Manager will continue its focus on delivering continued positive operational performance along with optimisation initiatives, either at a technical or commercial level. The Company will continue to leverage the expertise of the Asset Manager to deliver solid operational performance whilst placing its sustainability targets at the centre of its operational objectives.

The Company will continue to prioritise the safety of all its stakeholders and its commitment to sustainable strategies.

On behalf of the Board of Directors, I would like to conclude by thanking our suppliers and service providers for the commitment they have shown throughout such a challenging and uncertain year.

Annual General Meeting

We look forward to meeting shareholders at the Company's next Annual General Meeting ("AGM") on 16 June 2020 at 9:30am. Details of how shareholders may participate in the AGM will be announced in due course.

Alexander OhlssonChairman8 March 2020

Portfolio Overview

Operating Asset Locations

United Kingdom

Construction Asset Locations

Spain

Operating Asset Locations

Australia

STRATEGIC REPORT

CORPORATE SUMMARY

The Company is a closed-ended company with an indefinite life and was incorporated in Jersey under the Companies (Jersey) Law 1991, as amended on 13 August 2013, with registration number 113721.

The Company's Initial Public Offering on 24 October 2013 raised £150 million, creating the largest dedicated solar investment company listed in the UK at the time. Following multiple equity raises since launch, the Company has grown steadily and now owns a portfolio with a gross asset value of £1,054.6 million as at 31 December 2020. It is the largest UK-listed dedicated solar energy investment company by installed capacity and market capitalisation.

As at 31 December 2020, the Company has 607,711,311 ordinary shares in issue which are listed on the premium segment of the Official List and traded on the London Stock Exchange's Main Market.

OPERATING STRUCTURE AND BUSINESS MODEL

As an Investment Company, the Company has no direct employees and outsources all operations to a number of key service providers.

The Company, makes its investments through intermediate holding companies and underlying Project Vehicles/Special Purpose Vehicles ("SPVs").

The operating structure and key service providers are detailed in the graphic below:

SIGNIFICANT SHAREHOLDERS

The Company's shareholders include a large mix of institutional and retail investors.

Shareholders in the Company with more than a 5% holding as at 31 December 2020 are as follows:

INVESTMENT OBJECTIVE

The Company's objective is to provide investors with a sustainable, progressive quarterly dividend and enhanced capital value, through investment in ground-based solar and BSS predominantly located in the UK.

INVESTMENT POLICY

The Company pursues its investment objective by acquiring ground-based, operational solar power plants. The Company is also permitted to invest in utility scale battery storage systems up to a limit of 10 per cent. of the GAV of the Company, calculated at the time of investment.

Investments in assets which are, when acquired, still under construction will be limited to 25 per cent. of the GAV of the Company and subsidiaries, calculated at the time of investment.

Investments outside the UK will be limited to 25 per cent. of the GAV of the Company and subsidiaries, calculated at the time of investment.

INVESTMENT POLICY CHANGE - BACKGROUND AND RATIONALE

At a General Meeting of the Company held post-period end on 15 February 2021, shareholders overwhelmingly voted in favour of proposals to amend the Company's Investment Policy. The policy change will permit investment into BSS up to 10% of the Gross Asset Value of the Fund.

Energy generated from renewable sources is expected to represent an increasing proportion of the total energy generation capacity versus other forms of generation. The intermittent nature of primary renewable technologies (particularly solar and wind) results in increased risk of imbalance between demand and supply on the grid, leading to increased price volatility. BSS support a rebalancing of the grid and prevent loss of inertia for the system operator. In return, a number of financial incentives are available to BSS in addition to potential arbitrage opportunities relating to the wholesale market price itself.

Foresight Group was an early investor into the UK battery storage market investing in 45 MW of battery storage facilities in 2018 and has since invested in BSS co-located with hydro assets. Foresight Group is also monitoring the landscape for BSS across other countries, including those in which the Company holds investments. Based on this analysis the Investment Manager has identified that at least 21 of the Company's current portfolio of 50 ground based solar power plant sites are potentially suitable for BSS development.

Although the new Investment Policy will permit the Company to invest in BSS assets without them having to be co-located on the Company's solar power plants sites, co-located opportunities, greenfield of alongside the existing solar portfolio assets, represent a more immediately accessible opportunity-base. Co-locating BSS with the Company's existing solar power plant sites ensures a lower capital cost for BSS development versus investing in standalone storage assets.

This is achieved by sharing existing infrastructure with the site, most importantly the grid connection, but also the land, access tracks and security arrangements.

In addition to delivering higher diversification of cash flows available for distribution, the co-location of battery storage, when retrofitted onto an existing portfolio solar power plant site, is not expected to impact the value of the solar power plant investment, as the batteries will operate within the excess grid capacity outside of the solar generation profile.

INVESTMENT STRATEGY

The Company will seek to build a diversified portfolio of assets by acquiring majority or minority stakes in individual ground-based solar assets and BSS.

When investing in a stake of less than 100 per cent in a solar power plant SPV, the Company will secure its shareholder rights through shareholders' agreements and other legal transaction documents.

Power Purchase Agreements ("PPAs") will be entered into between each of the individual solar power plant SPVs in the portfolio and creditworthy offtakers. Under the PPAs, the SPVs will sell solar generated electricity and/or green benefits to the designated offtaker. The Company may retain exposure to power prices through PPAs that do not include mechanisms such as fixed prices or price floors.

Investment may be made in equity, debt or intermediate instruments but not in instruments traded on any investment exchange.

The Company is permitted to invest cash held for working capital purposes and awaiting investment in cash deposits, gilts and money market funds.

INVESTMENT RESTRICTIONS

In order to spread risk and diversify its portfolio, at the time of investment no single asset shall exceed 30% of the Company's GAV post-acquisition. If the investment is an additional stake in an existing investment, the combined value of both the existing stake and the additional stake acquired should also not exceed 30%.

The Company's portfolio will provide diversified exposure through the inclusion of not less than five individual solar power plants and the Company will also seek to diversify risk by ensuring that a significant proportion of its expected income stream is derived from regulatory support (which will consist of, for example, without limitation, ROCs and FiTs for UK assets). Diversification will also be achieved by the Company using a number of different third-party providers such as developers, engineering, procurement and construction ("EPC") contractors, operations and maintenance ("O&M") contractors, panel manufacturers, landlords and distribution network operators.

The Articles provide that gearing, calculated as Group borrowing (including any asset level gearing) as a percentage of the Company's GAV, will not exceed 50% at the time of drawdown. It is the Board's current intention that long-term gearing (including long-term, asset level gearing), calculated as Group borrowings (excluding intra-group borrowings (i.e. borrowing between members of the Group) and revolving credit facilities) as a percentage of the Company's GAV will not exceed 40 per cent at the time of drawdown.

Investments in BSS will be limited to 10 per cent of the GAV of the Company and subsidiaries, calculated at the time of investment.

Any material change to the investment policy will require the prior approval of shareholders by way of an ordinary resolution (for so long as the Ordinary Shares are listed on the Official List) in accordance with the Listing Rules.

INVESTMENT MANAGER

The Company's Investment Manager, Foresight Group LLP, is responsible for the acquisition and management of the Company's assets, including the sourcing and structuring of new acquisitions and advising on the Company's borrowing strategy. Foresight Group is authorised and regulated by the Financial Conduct Authority.

The Investment Manager was founded in 1984, and is now a leading independent infrastructure and private equity investment company listed on the London Stock Exchange that currently manages over £6.8 billion of assets on behalf of institutions and retail clients with offices in Australia, Italy, Spain, Luxembourg and the UK. Foresight Group's global infrastructure investments total £6.1 billion, with a cumulative generating capacity of over 2.7GW. The infrastructure investment team was established in 2007 and currently manages over 100 solar power assets across the UK, Europe and Australia with a total generating capacity of 1.5GW.

Foresight Infrastructure's team consisted of 107 full time employees as at 30 September 2020. The team is comprised of

The Foresight infrastructure team has substantial experience in sourcing and executing all required elements of the capital structure of an investment across geographies, including project-level debt finance and other required forms of finance.

The key strengths of the infrastructure investment team include (i) sourcing and execution of asset acquisitions; (ii) experience of pricing complex revenue streams; (iii) pricing wholesale power exposure; (iv) managing construction projects; and (v) finance and structuring, including bank debt and project finance.

The asset management team consists of individuals with engineering, consulting and operations backgrounds, accountants and in-house personnel responsible for the process of "on-boarding" and managing acquired assets as well as a technical team of specialist infrastructure engineers that help by evaluating an asset's operational and physical characteristics during due diligence, construction management and assist the asset management team to manage the assets by identifying and implementing optimisations post-acquisition. Members of these teams work together throughout the investment lifecycle.

The asset management services provided ensure the day to day operation of the sites is robust, with commercial and strategic decisions clearly communicated to the O&M counterparties. The services also include:

ALTERNATIVE INVESTMENT FUND MANAGEMENT DIRECTIVE ("AIFMD")

The AIFMD, which was implemented across the EU on 22 July 2013, aims to harmonise the regulation of Alternative Investment Fund Managers ("AIFMs") and imposes obligations on managers who manage or distribute Alternative Investment Funds ("AIFs") in the EU or who market shares in such funds to EU investors. Under the AIFMD, the Company is self-managed and acts as its own Alternative Investment Fund Manager.

The Company is located outside the European Economic Area ("EEA") but the Company's marketing activities in the UK are subject to regulation under the AIFMD and the National Private Placement Regime.

RISK AND RISK MANAGMENT

The Company is exposed to a number of risks that have the potential to materially affect the Company's valuation, reputation and financial or operational performance. The nature and levels of risk are identified according to the Company's investment objectives and existing policies, with the levels of risk tolerance ultimately defined by the Board.

The Investment Manager and the Administrator have a comprehensive Risk Management Framework in place which is reviewed on a regular basis by the Company's Audit and Risk Committee and then by the Board, with the objective of reducing the likelihood and the impact of principal and emerging risks. Reliance is placed on the internal systems and controls of the Investment Manager and external service providers such as the Administrator to effectively manage risk across the portfolio and maintain an up-to-date risk register. The adequacy and effectiveness of the systems of internal control are reviewed by the Audit and Risk Committee annually.

Climate change related risk and Task Force on Climate-related Financial Disclosures ("TCFD") reporting

The Company recognises that risks traditionally considered to be non-financial, such as climate change, have the potential to impact upon long-term shareholder returns across many sectors. While the Board believe that the Company's investments are making a meaningful contribution towards decarbonisation efforts in the countries in which it operates, the Company is working with its manager to assess climate related-risks and opportunities within its portfolio and to consider an appropriate reporting framework going forwards in line with recommendations made by the Task Force on Climate-related Financial Disclosures.

Emerging Risks

Risks that are characterised by a degree of uncertainty are regularly reviewed by the Board, with the support of the Investment Manager, the Administrator and other relevant advisers. During the period, risks relating to global pandemics, such as COVID-19, and the potential future impact on operational performance and cash flow generation in the short and medium-term have been reviewed and continue to be closely monitored. This risk is still considered material by the Investment Manager however the disruption to the portfolio operations to date has been minimal.

Principal Risks

Set out below are the principal risks and uncertainties which the Company believes are most relevant, given the nature of its business, together with their mitigants.

More information on the risks that should be considered before investing in the Company are contained within the Prospectus which is available at https://fsfl.foresightgroup.eu/investor-relations/publications/prospectus/

Investment Manager's Report

PORTFOLIO SUMMARY

As at 31 December 2020, the Company's portfolio comprised 58 assets with a total installed capacity of 994 MW, of which 125 MW remain under construction. In the UK, the Company has an operational portfolio of 50 assets representing a total installed capacity of 723 MW. The Company owns a further four operational assets in Australia which account for 146 MW of installed capacity. Two acquisitions in 2020 added an additional four 4 subsidy free assets in Spain which will add an additional 125 MW on completion of construction.

The Company's UK assets all benefit from regulatory support and are accredited under the Renewables Obligation ("RO") scheme, with the exception of Yardwall which is a Feed-in-Tariff scheme ("FiT") accredited asset representing less than 1% of the UK portfolio. The Australian assets benefit from subsidies in the form of Large-Scale Generation Certificates ("LGC").

The Company's recently acquired greenfield projects in Spain will not benefit from regulatory support but are expected to benefit from long-term PPAs providing a high proportion of contracted revenues that, when calculated on a net present value basis over the life of the projects, deliver an attractive risk profile considering the Company's investment objectives.

ACQUISITIONS

The Company made two significant acquisitions in 2020 adding 125 MW to the portfolio across four assets located in Spain. These first acquisitions in continental Europe add significant geographic diversification to the portfolio, and also represented the Company's first investments in the subsidy-free market.

The Spanish electricity market has been integrated into the Iberian market or MIBEL ("Mercado Ibérico de Electricidad") since 2006, following the liberalisation of the Spanish market in 1998. Historically it has been vertically integrated and dominated by large local utilities in terms of generation, distribution and supply of electricity. The transmission network is operated exclusively by Red Eléctrica Española, the Spanish transmission system operator. The market has a well-established grid infrastructure, planning and grid connection process.

At the end of 2019 installed renewable energy capacity totalled 54 GW, or 52% of the total installed capacity, with renewable electricity generation accounting for 39% of the total electricity generated. Solar accounted for 8.6 GW at the end of 2019, a growth rate of more than 93% compared to the previous year. This was the result of a recent period of energy transition supported by the Spanish Government's commitment to the decarbonisation targets defined in the National Energy and Climate Plan. These targets include the goal of renewable energy sources representing 35% of total generation by 2030 and 100% by 2050.

The Spanish renewable energy market has also been supported by the introduction of a new auction subsidy programme and a well developed PPA market which enables solar operators to secure high levels of contracted revenues in the long term from high quality counterparties.

When combined with the country's high level of irradiation and decreasing solar installation costs, the opportunity to invest in greenfield subsidy-free assets delivers attractive return targets at the PPA prices currently available in the market.

Both acquisitions will be funded through construction according to a fixed price EPC contract with a payment schedule linked to key construction milestones, offering additional financial protection against commissioning delays. The construction process will be overseen by the Investment Manager's team based in Madrid with the support of third-party technical advisers.

* Includes estmated construction costs

Virgin del Carmen

In September 2020 the Company announced the acquisition of the 26.1 MW Virgen del Carmen asset. The acquisition will represent an investment of €20.2 million (£18.0 million) once construction is completed and will benefit from a long-term PPA entered with into with Shell Energy Europe Limited, a subsidiary of Royal Dutch Shell Plc, for the sale of electricity under a fixed price agreement until 2030. Construction at the site has already begun with operations targeted to start in the third quarter of 2021. .

Andalusia Portfolio

On the 4 January 2021, the Company announced the acquisition on 31 December 2020 of a further 98.5 MW portfolio of three subsidy-free greenfield assets located in the Andalusia region of Spain. Total transaction costs are expected to amount to €72 million once construction is completed and include the acquisition of development rights for approximately €15 million. Construction is expected to start in Summer 2021, with operations targeted to start in June 2022.

It is the Company's current intention to introduce a conservative level of project finance at portfolio level to partially fund construction milestones, with the remaining funding being provided through the Company's existing revolving credit facilities. The project finance facility will be in place before the start of construction

It is anticipated that a long-term Power Purchase Agreement will be signed with a major European energy supplier, also before the start of construction.

MARKET DEVELOPMENTS

Governments in the UK and across Europe continue to remain supportive of the renewables sector and have made commitments to green energy and decarbonisation as central pillars of their pandemic recovery packages. In November the UK Prime Minister announced plans for a Green Industrial Revolution which included a 'Ten Point Plan' which promised to mobilise up to £12 billion of state investment and potentially three times as much from the private sector in a bid to create 250,000 'green jobs'. The UK has also stated its intention to use both the G7 Summit in June and the COP26 Summit in November to push other countries to follow its ambitious net carbon neutral plans.

Despite the disruption caused by the emergence of COVID-19 during 2020, the UK continued on its path towards its 2050 decarbonisation goal with renewables continuing to play an increasing role. While the extensive pipeline of UK subsidy free solar expected to be constructed during the year fell short of expectations, it is estimated that a further 545 MW of solar capacity was connected in 2020, 60% of which was utility scale[3]. European markets also saw a similar impact on expected buildout during the period but still delivered a meaningful number of subsidy-free projects in specific markets.

This new wave of subsidy-free buildout occurred in a year when global power prices were severely impacted by a collapse in electricity demand in the wake of COVID-19 related national shutdowns. The prospect for an increased rate of build out in both the UK and Europe going forwards remains strong with prices across Europe having now recovered from the lows of the first half of 2020 and investor appetite for solar projects expected to remain strong.

The next UK Contract for Difference (CfD) auction in November 2021 is likely to further boost the UK renewables industry with an additional 12 GW of capacity expected to be made available. Solar will once again be an eligible technology in the auction having been excluded in recent auction rounds. It remains to be seen whether solar developers will be able to secure pricing attractive enough to make their participation economically viable.

2020 marked the year the UK left the European Union, with the EU-UK Trade and Cooperation Agreement agreed on 24 December 2020 and ratified by the UK Parliament on 30 December 2020. The impact on the Company is expected to be limited considering the measures implemented in recent periods including maintaining robust levels of spare parts. The Investment Manager will continue to review the impact of the Agreement on the Company's operations.

In Australia, State Governments continue to support the growth of the renewable energy market with each State having adopted a net zero target by 2050. New South Wales released the Energy Infrastructure Roadmap looking to support up to 12 GW of renewables and up to 3 GW of pumped hydro. Victoria has passed the legislation to increase its renewable energy target to 50% by 2030 and has developed a rooftop Solar Homes Program, which is targeting 650,000 home solar installations in Victoria over the next 10 years. Queensland has announced A$500 million government funding for Renewable Energy Zones and to support State owned companies investment in renewables.

In September 2020, the Federal Energy Security Board released its Post-2025 consultation paper which recommends changes to the existing market design and recommends an alternative market design to deliver a secure, reliable and lower emissions electricity system at least-cost. The paper covered seven market design concepts, including resource adequacy mechanisms, essential system services, two-sided markets and transmission access reforms. The Company is actively engaging in the regulatory dialogue through meetings with the regulators, written submissions and participation in industry groups and closely monitoring proposed regulatory changes.

Investment Manager's Outlook

The operational and financial resilience shown by the portfolio and the broader renewables industry throughout 2020 has once again demonstrated the attractiveness of the asset class and helped to support ongoing demand for existing operational assets as well as fuelled continued interest from developers considering subsidy-free development.

Given the consolidation and competition for subsidised operating assets witnessed in previous years in both the UK and Europe, the opportunities for the Company to make further acquisitions in this area are likely to be limited.

However with electricity prices in the UK and other international markets recovering from the economic impact and low electricity demand caused by the COVID-19 pandemic, it is now expected that a significant volume of subsidy-free solar projects should come to market in 2021 and at a time when installation costs continue to decrease. Investment opportunities within the international solar market in developed economies, in particular Southern Europe, are expected to become increasingly attractive considering the longer PPA tenors available.

Following the acquisition of the Company's first subsidy-free assets in Spain, the focus of the Investment Manager will be on delivering these projects on schedule as well as continuing to monitor the market for further attractive subsidy-free assets. The Investment Manager will also explore options to optimise the capital structure of the Company's significant Australian operating portfolio following the completion of Oakey 2.

BSS co-location opportunities in the UK, either alongside the existing portfolio or as a greenfield investment, will continue to be developed during 2021 following the Investment Policy change approved by shareholders in February this year, with the objective of finalising an initial investment in 2021.

From a portfolio perspective the Asset Manager will continue to focus on optimisation initiatives and maintaining the high operational performance that the UK portfolio demonstrated in 2020.

Finally, we will continue to deliver an asset management approach focused on sustainability and are aiming to deliver best-in-class initiatives with the co-operation of local communities and counterparties.

REVENUE ANALYSIS

The Company's revenues are generated from the export of electricity from the portfolio assets into the grid. The revenues are predominantly the result of the regulatory support mechanisms available in the markets in which the Company operates and the sale of electricity to third-party offtakers either at fixed or merchant electricity prices.

In 2020, approximately 62% of revenue was derived from subsidies, with the remaining 38% from the sale of electricity.

For 2021, 80% of the total expected revenues for the UK portfolio are considered fixed. That percentage decreases to 71% when total portfolio revenues are taken into consideration.

Power Prices

United Kingdom

Wholesale power prices decreased throughout the first half of 2020, reaching prices close to £22/MWh in May 2020 as a result of the COVID-19 restrictions. The downward trend was initially driven by lower natural gas prices globally as a result of new supplies from the US and Australia entering the market at the beginning of the period. In addition to this, historically high gas storage levels in Western Europe, following consecutive mild winters had a downward effect on spot and forward prices for natural gas, resulting in further downward pressure on wholesale power prices. From this already soft position, the UK Government's restrictions in response to the COVID-19 pandemic drove down demand for gas, oil and power which has resulted in even lower wholesale power prices from March until June, with primary electricity demand in certain periods decreasing up to 10% below the previous year.

The second half of 2020 saw a steady recovery as economic activity resumed after the first national lockdown with prices reaching approximately £44/MWh in September. Prices continued to rise as the UK entered the winter months and the increase in demand served to offset further Government restrictions, prices reaching a 2020 peak at approximately £55/MWh in December.

The average power price achieved across the UK portfolio during the year, including fixed price arrangements was £37.05/MWh, versus £45.38/MWh in 2019, a decrease of 18%.

As a result of the recovery in power prices and higher short-term forecast, the Company increased the percentage of UK electricity sales under fixed price arrangements with the aim of delivering a higher cash flow predictability in 2021. Fixed price arrangements for 2021 currently represent 54% of the total expected UK electricity sales at a weighted-average price of £44.38/MWh, against. 32% as at 31 December 2019, at a weighted average price of £52.33/MWh.

The Investment Manager regularly reassesses conditions in the electricity market and updates its view on likely future movements. The Company retains the option to fix the PPAs of its portfolio assets at any time, but the Investment Manager is satisfied that the current proportion of fixed price arrangements offers an appropriate level of price certainty in the short term.

DAILY AND MONTHLY GENERATION WEIGHTED SPOT ELECTRICITY PRICES AT UK PORTFOLIO LEVEL (£/MWh)

Australia

The National Electricity Market (NEM) was less impacted than the UK and European markets by the decreased demand for electricity due to COVID-19. Compared to the significant drops in demand witnessed elsewhere in Q2 2020, NEM operational demand was down only 2% year-on-year. However, mild Q4 weather and continued strong uptake of distributed solar PV led to an overall 2.6% decrease in operational demand across the NEM comparing to 2019. During 2020, approximately 3GW of distributed PV capacity was installed Australia wide, up around 50% on the previous record in 2019.

During the period, the average wholesale power price decreased by 47% across the NEM, mainly driven by decreased operational demand and lower gas and coal prices due to the impact of COVID-19, coupled with the increased variable renewable energy output. Average wholesale prices in Queensland and Victoria were A$41/MWh and A$52/MWh respectively in 2020, down from A$80/MWh and A$110/MWh in 2019.

Subsidy revenues

The Renewables Obligation Certificate ("ROC") buy-out price for the 2019-2020 annual compliance period increased to £48.78 (2018-19 compliance period: £47.22), reflecting the average monthly percentage change in RPI during 2019. On average, the Company received 1.42 ROC/MWh across the UK portfolio. The 2020/21 FiT rate for the Yardall asset is£73.50/MWh.

In Australia, the average LGC price secured by the portfolio assets in 2020 was A$39.2 per certificate. During the period the Company entered new agreements for the sale of LGCs at a fixed price with Origin Energy until 2030 for Bannerton and Oakey 2 reducing the portfolio exposure to LGC market price volatility. The new contracts had a minor positive impact to NAV due to the higher contracted LGC price against the market price forecast. In the case of Bannerton, the new agreement will target the annual uncontracted LGC volume not sold under the LGC agreement signed with the Victorian government until 2028.

Power Price Forecasts

The Investment Manager uses forward looking power price assumptions to assess the likely future income of the portfolio assets for valuation purposes. The Company's assumptions are formed from a blended average of the wholesale power price forecasts provided by third-party consultants and are updated on a quarterly basis for each relevant market without further adjustments from the Investment Manager. For assets with fixed price arrangements in place, the contracted values are used instead. The same methodology will be applied to the Spanish subsidy-free assets acquired during the period.

During the year the Company revisited its UK power price forecast methodology and introduced a third independent market consultant to the blended average forecast methodology. In the Investment Manager's view this adjustment is expected to present a more comprehensive forecast approach providing further stability to the to the Company's valuation. As part of this review the Company has also updated the expected capture price discounts for solar technologies as a result of revised levels of penetration of low marginal cost renewable generators on the network.

Operational and Financial Review

United Kingdom

In 2020, long-term average annual power price forecasts decreased by 11.3% across the duration of the curves used to model the Company's long-term cashflows. This was due to movements in the short to medium term as a result of COVID-19 and the forecast impact on economic activity. The longer-term outlook has also declined as a result of the higher capture price discount assumed for solar generation.

The Company's forecasts over the short to medium-term assume an increase in prices in real terms of 0.8% per annum with prices then declining 0.9% per annum in the longer term as solar capture price discounts are expected to become more prominent. The net impact is a 0.1% annual average decrease in the power curve forecast.

Where the assumed asset life extends beyond 2050, the Investment Manager has assumed no real growth in forecast power prices.

Australia

The wholesale power price is expected to recover and remain stable through the 2020s, rising in the 2030s as coal fired plants are retired and more expensive gas and flexible technologies set the price more frequently, with pricing shadowing the marginal cost of gas generation.

However, the solar capture price discount to the baseload price is forecast to widen as new capacity increases the expected timing imbalance between peak demand and renewable energy production, partially mitigated by an increase in storage and pumped hydro capacity. Buildout of State-backed renewable schemes will also put downward pressure on solar capture price in the short-to medium term.

Asset Manager's Operational Report

UK Portfolio Performance

The UK portfolio continued to outperform expectations during the period with electricity generation substantially above base case at 8.4% when adjusted for financial compensation received. Performance has primarily been driven by high irradiation in the first half of 2020, giving an annual value of 8.5% above base case, combined with a high level of asset availability.

There has been negligible impact on the operation of the portfolio in terms of production due to the COVID-19 pandemic. Corrective maintenance required to resolve faults has been unaffected as asset operators were still able to act quickly and safely as issues arose during the period. Where it was not possible to complete preventative maintenance at the required time, operators have still been able to complete all required preventative maintenance across the portfolio. As per the Interim report, whilst the Asset Manager saw DNO outages being cancelled in the early part of 2020 given the high irradiation levels at that time, the impact of experiencing more outages during the latter months of the year was reduced.

Health and Safety

In 2020 a range of activities were undertaken to enhance the Health and Safety performances of the solar assets in the portfolio.

Health and Safety policies were reviewed at the Fund and SPV level and are being cascaded through the supply chain that supports the portfolio to ensure alignment in this key area. The contracting arrangements for Asset Managers and Operations and Maintenance (O&M) provisions were simplified to make it easier to monitor portfolio compliance and report issues more effectively. In addition to this, the systems and processes that govern the management of Health and Safety were reviewed and good practices and learnings were incorporated.

The Asset Manager worked in partnership with the O&M contractors by providing direction and guidance as needed. In particular, during the outbreak of the COVID-19 pandemic, close communication with O&Ms was established, to track and understand the emerging risks to operatives maintaining the sites. This ensured high levels of performance were maintained while adjusting to new working practices and keeping everyone involved in the portfolio safe throughout this very challenging period.

During the year competency assessments were performed on the portfolio O&M contractors to assure their Health and Safety management systems adhered to good practice and a programme of site audits was completed across every site in the portfolio.

The Asset Manager continues to monitor Health and Safety incidents and uses the feedback from these events to raise awareness and drive improvement of key Health and Safety risks.

UK Thefts

A limited number of portfolio assets were affected by cabling thefts in the period. Where sites were targeted remedial works were carried out promptly to minimise any downtime. The Asset Manager continues to work with the site operators to ensure that all security systems are appropriate and fully functional whilst also implementing further innovations to prevent future theft attempts.

OFGEM Audits

During the year a number of asset RO accreditations were audited by OFGEM. To date the results of the Audits have been deemed as satisfactory.

Optimisation

Repowering works have now started to be evaluated and examples have now completed within the portfolio, as reported in the Interim report, where a full inverter station was repowered at Pitworthy. The exchange involved moving from central inverters to a bank of string inverters. The repowering exercise has proved very successful in terms of performance with the additional benefit that the components exchanged can now be used as spare parts across the wider portfolio.

The evaluation of Anti-Reflective coating at a number of the sites within the portfolio is continuing with Contractual terms now being discussed with a supplier with a view to rolling out further in Q3 2021. Separately a study has been conducted to calculate the actual degradation of the solar modules in one of the portfolio assets by flash testing a sample of modules. The initial results have shown that the true degradation of the modules at the asset are lower than that assumed and the commercial impacts of this are being now being assessed.

During 2020 the Energy Networks Association (ENA) incentivised asset owners of generating plants to make changes to relay settings to improve network resilience with payments for the works being provided by the DNOs. The Asset Manager worked with the DNOs and Operators to complete changes on 38 sites in the portfolio to ensure the works were carried out within the required timeframe before the works become enforceable and no payment available.

Commercial optimisation initiatives continue with examples such as a review of the supply capacity at each asset being completed. Where the agreed supply capacity was too great based on the actual electricity consumption at the site these were reduced accordingly which in turn passed on cost savings to the SPVs.

The Asset Manager is pleased to report that all of the EPC Final Acceptance Certificate (FAC) processes for UK assets have now been complete and all FACs have been signed between contractors and SPVs across the UK portfolio. Over the years the process has ensured that sites are handed over in the best possible condition after the initial two years of operation to maintain performance for the life of the plant and therefore has been a key optimisation strategy.

Previous initiatives such as critical spare parts have continued to contribute to the stable performance of the portfolio during the year and shall continue to be evaluated. With the experience now gained by the Asset Manager, there is the ability to feed this practical knowledge back into the new projects that are being developed and constructed. In particular, construction management, site design, key component quality control, improvement of warranty terms and key contractual terms for both EPC and O&M Contracts.

Australian Portfolio Update

The Company's Australian portfolio is now entirely operational following the construction delays in Oakey 2. This asset has gone through all the required stages of commissioning and has been able to export at installed capacity since October 2020.

Longreach

The site has been experiencing limited grid curtailment since commissioning due to reduced loads in the area and a low capacity grid transformer. The Asset Manager, working closely with the local grid operator Ergon, has supported the retrofitting of the grid transformer, and resolved the local grid constraint in October. The Asset Manager has also been working with the tracker manufacturer to implement a new tracker algorithm, to increase energy yield in diffuse light conditions and early/late winter sun hours.

Bannerton

The project first achieved full export capacity in the first quarter of 2019 but due to an oscillation issue on the network the project and four other local generators were constrained to 50% of output from September 2019 to April 2020. The Asset Manager worked closely with the market operator, the network operator, the inverter supplier and the other affected generators in a collaborative industry effort to tune the inverter settings required to resolve the issue and lift the constraint. The site performance has been affected by the export constraint and by irradiation levels below budget in the second half of the period.

Oakey 2

The area of Oakey 2 which was affected by storm damage in 2020 affecting approximately 15% of the site has been rebuilt during the period. The trackers structures have been reinforced and their control system redesigned to meet the design wind speed required for the site.

In parallel, the Asset Manager has successfully negotiated a staged commissioning plan with the Network Provider to allow commissioning to progress despite the re-construction works affecting various areas of the plant, hence minimising the production losses. The plant has been allowed to export at nominal capacity since October 2020 while the final commissioning works are ongoing and further power quality equipment is installed on site.

The project received approximately A$6.4 million in insurance proceeds during the period as compensation for revenue losses resulting from the delays in the construction caused by the storm events.

Spanish Portfolio Update

Virgin del Carmen (Under Construction)

Since deal completion all key components have been agreed and purchase orders placed. There is already close liaison with the EPC contractor and the network operator to ensure the grid elements of the project are delivered on time. Construction at site is now underway and the project plan is being closely monitored by a dedicated Construction Manager to ensure a timely grid connection in Q3 2021.

Andalusia portfolio (Under Construction)

Construction is expected to start in summer 2021, with operations targeted for June 2022.

Operational and Financial Review

Production Summary

The production figures below have been adjusted, where relevant, for events where financial compensation has been, or will be, received.

UK

Australia

\* Totals may not sum due to rounding

Overall Portfolio

\* Totals may not sum due to rounding

Financial Report

KEY INVESTMENT METRICS

Movements in Net Asset Value

The Company's NAV per share decreased from 103.8 pence to 95.8 pence during the reporting period. A breakdown in the movement of the NAV is shown in the table below.

\* Totals may not sum due to rounding

Valuation methodology

The Investment Manager is responsible for providing fair market valuations of the Company's underlying assets to the Board of Directors. The Directors review and approve these valuations following appropriate examination and challenge. Valuations are undertaken quarterly. A broad range of assumptions are used in the valuation models. These assumptions are based on long-term forecasts and are not materially affected by short-term fluctuations, economic or technical.

It is the policy of the Investment Manager to value with reference to Discounted Cash Flows ("DCF") from the date of acquisition. Assets under construction are valued at cost until the date of commissioning and start of operations. Revenues accrued during construction or commissioning process do not form part of the DCF calculation in making a fair valuation.

The current portfolio consists of non-market traded investments and valuations are based on a DCF methodology or held at cost where the assets have not yet reached commissioning. This methodology adheres to both IAS 39 and IFRS 13 accounting standards as well as the International Private Equity and Venture Capital ("IPEV") Valuation Guidelines.

The Company's Directors review and challenge the operating and financial assumptions, including the discount rates, used in the valuation of the Company's portfolio and approve them based on the recommendation of the Investment Manager.

Discount rates for valuation

During the period, the Investment Manager undertook a review of the discount rates applied to the valuation of the portfolio as a result of the valuation information received from participating in a number of tender processes to acquire UK operational assets during the period. As a result of this analysis, discount rates for the UK portfolio have been reduced by 0.50% from 7.00% to 6.50% on a levered basis in order to bring valuations in line with the expected market pricing for operational assets.

The discount rate used for UK asset cashflows which have received lease extensions beyond the initial investment period of 25 years is 7.50% for subsequent years, reflecting the merchant risk of the expected cash flows beyond the initial 25-year period.

For the Australian portfolio, assets are valued using a discount rate which is dependent on the level of contracted revenues in place. The weighted average discount rate across the Australian portfolio is 8.60% on a levered basis. This has increased over the period as a result of the Oakey 2 asset being valued on a DCF methodology for the first time. Adding the Oakey 2 asset to the DCF during the period had a negative impact on valuation of approximately £7.7 million, predominantly due to the adoption of a lower power price forecast compared to the forecast at the date of acquisition.

For the Australian portfolio, assets are valued using a discount rate which is dependent on the level of contracted revenues in place. The weighted average discount rate across the Australian portfolio is 8.60% on a levered basis. This has increased over the period as a result of Oakey 2 being valued on a DCF methodology for the first time. The Oakey 2 asset was added to the DCF during the period at a valuation below historical cost due to adoption of a lower power price forecast compared to the forecast at the date of acquisition.

The weighted average levered discount rate across the portfolio is now 6.74% compared to 7.06% as at 31 December 2019.

Assets under construction are valued at cost and will continue to be held at cost until the assets are connected to the grid and fully operational.

Non-UK assets valuations are updated quarterly to reflect movements related to exchange rates.

Asset life

The expected weighted average life of the UK portfolio as at 31 December 2020 is 30.6 years (31 December 2019: 29.8 years) from the date of commissioning. This represents a remaining portfolio useful life of 24.8 years when the historical operational periods are taken into consideration.

The average useful economic life across 40 of the 50 UK assets goes beyond 25 years, averaging 32.0 years from the date of commissioning. Additional conservative operational and lifecycle costs are incorporated into the extended useful life period.

The useful economic life for assets located in Australia increased to 30 years from the 25 year assumption at the date of acquisition.

Movements in Net Asset Value (£m and Pence Per Share)

Totals may not sum due to rounding

Dividends Paid

The Company paid dividends of £38.7 million during the year to 31 December 2020.

Fund Costs

Total costs of £10.4 million, which include management fees, financing, other costs and corporation tax were incurred by the Company and its subsidiaries on a consolidated basis during the year.

Time Value

A value uplift resulting from moving the valuation date forward and therefore bringing future cash flows closer to the present date (and therefore discounting them less).

Projects Actuals

Cash generation from UK projects exceeded modelled forecasts by £3.7 million in the year due to base case outperformance.

Foreign Exchange Movements

Fluctuations in the exchange rate over the period impacted the GBP valuation of Australian assets.

Power Price Forecasts

The Company uses forward looking power price assumptions to assess the likely future income of the portfolio assets for valuation purposes. The Company's assumptions are based upon a blended average of the forecasts provided by third party consultants and are updated on a quarterly basis. The valuation change during the period includes the impact of moving Oakey 2 to the DCF and adopting the latest Queensland power price forecast resulting in a materially adverse impact to the project valuation.

Discount Rate

The levered discount rate for UK operational assets has decreased from 7.00% to 6.50% and the Australian portfolio average rate increased to 8.60%.

Corporation Tax

The Government has held the corporation tax rate flat at 19% at the beginning of the period, abandoning the previously announced plan to cut the rate to 17%.

The Investment Manager notes the announcement, post-period end, made by the UK Chancellor as part of his Budget on 3 March 2021 stating his intention to increase the rate of UK Corporation tax from 19% to 25% from 2023. The impact of this proposal is not currently reflected in the 31 December 2020 NAV. Please refer to the Valuation Sensitivities section of this report for an estimate of the impact of the proposals.

Inflation Forecasts

UK RPI in 2020 was below the forecast rate used by the Company, which results in an adverse impact to the valuation as a significant portion of forecast revenue is RPI-linked.

The Company increased its medium-term inflation forecast by 0.25% to 3.00% for the purposes of UK asset valuations. Post 2030, the inflation forecast decreases to reflect the impact of the RPI reform now confirmed by the UK Government. The impact of such reform remains uncertain with the Investment Manager assuming an inflation rate of 2.25% based on the historical analysis between RPI and CPI rates and current pricing of long-term inflation swaps.

Operational

Multiple assets in the UK portfolio have signed contracts fixing prices for 2021 and 2022 above the forecast power prices. Additionally, this step includes a review of operational cost assumptions across the Australian portfolio.

Asset Life

The Company has extended the forecast useful economic life of UK and Australian solar assets to 40 years and 30 years respectively within existing land lease restrictions.

Valuation Sensitivities

Where possible, assumptions are based on observable market and technical data. In many cases, such as forward power prices, independent advisors are used to provide evidenced information enabling the Investment Manager to adopt a prudent approach. The Investment Manager has set out the inputs which it has ascertained would have a material effect upon the NAV in note 16 of the Financial Statements. All sensitivities are calculated independently of each other.

The Investment Manager notes the announcement made by the UK Chancellor as part of his Budget on 3 March 2021 stating his intention to increase the rate of UK Corporation tax from 19% to 25% from 2023.

The impact of this proposal is not currently reflected in the 31 December 2020 NAV. It is anticipated that should the proposal be implemented this will have an estimated impact on NAV of £(8.7) million or (1.4) pence per share.

Financial Review

The Company applies IFRS 10 and Investment Entities: Amendments to IFRS 10, IFRS 12 and IAS 28, which states that investment entities should measure all their subsidiaries that are themselves investment entities at fair value. The Company accounts for its interest in its wholly owned direct subsidiary Foresight Solar (UK Hold Co) Limited as an investment at fair value through profit or loss.

The primary impact of this application, in comparison to consolidating subsidiaries, is that the cash balances, 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 and its intermediate holding companies (the "Group") hold investments in 58 portfolio assets which make distributions in the form of interest on loans and dividends of equity as well as loan repayments and equity redemptions.

For more information on the basis of accounting and Company structure please see refer to the Notes to the Financial Statements starting on page 52.

Key metrics for the year ended 31 December 2020

Net Assets

Net assets decreased from £628.0 million at 31 December 2019 to £582.2 million at 31 December 2020, primarily driven by the reduction of the long-term power price forecast on the portfolio value.

The net assets of £582.2 million comprise the £983.7 million portfolio of UK, Australian and Spanish solar investments, the group's cash balance of £85.9 million (including the Company's cash balance of £16.9 million), partially offset by £391.5 million long term debt, £80.9 million of RCF outstanding debt and other net liabilities of £15.0 million.

The intermediate holding companies' net liabilities of £472.4 million comprises long term debt of £391.5 million and £80.9 million outstanding on the RCF.

Analysis of the Group's net assets at 31 December 2020

Third Party Debt Arrangements and Gearing Position

As at 31 December 2020, total outstanding long-term debt was £391.5 million, representing 37% of the GAV (calculated as NAV plus outstanding debt) of the Company and its subsidiaries (31 December 2019: £403.5 million or 38% of GAV).

As at 31 December, total outstanding debt including RCFs was £472.4 million, representing 45% of GAV (31 December 2019: £443.5 million or 41% of GAV).

The Company's Group net debt position, after deducting existing Group cash balances, is £386.5 million, representing 37% of GAV.

Long-Term Facilities

As at 31 December 2020, £391.5 million of long-term debt facilities were outstanding.

Inflation linked debt facilities represent £82.3 million of total long-term debt outstanding as at 31 December 2020.

At 31 December, the average cost of long-term debt, was 2.69% per annum, including the cost of inflation linked facilities of 1.33% per annum. The cost of the inflation linked facility is expected to increase over time in line with the Company's long-term RPI expectations of 3% in the medium term and 2.25% post 2030 to reflect RPI reform.

Revolving Credit Facilities

The Company currently holds two separate RCF facilities totalling £105 million. At the end of the period £24.1 million remain undrawn.

At 31 December 2020, the weighted total cost of the RCFs was 2.5% per annum (2019: 2.8%).

The existing RCF facilities will expire in March and August 2022 and are expected to be refinanced during the second half of 2021.

Debt Structure

The following table summarises the debt position of the Company as 31 December.

(1) Interest rate swap for 100% of the outstanding debt during the initial five years, 75% from years six to ten and 50% thereafter

(2) Australian debt prorated for Company's share of asset ownership. AUD/GBP exchange rate of 0.56 as at 31 December 2020

The Company continues to have limited exposure to benchmark rate movements in the UK and Australia as a result of the long-term interest rate swaps in place to protect the Company from underlying interest rate movements. Sterling denominated debt facilities priced over LIBOR benefit from interest rate swaps hedging between 80% and 100% of the outstanding debt during the terms of the loans, depending on the facility. In Australia, debt facilities entered into with the CEFC have no exposure to the Bank Bill Swap Bid Rate ("BBSY") as the rate was fixed at financial close. Debt facilities provided by Mitsubishi UFJ Financial Group ("MUFG") have in place interest rate swaps on a decreasing nominal amount for a notional tenor of 20 years from financial close. Term loans totalling A$73.5m linked to three Australian portfolio assets and the Company's £105 million revolving credit facilities will expire in 2022 and are expected to be refinanced during 2021.

Profit and Loss

The Company's loss before tax for the year ended 31 December 2020 is £(7.2)m, generating losses of 1.2 pence per share.

In the year to 31 December 2020, the operating income and gains/(losses) on fair value of investments was £(0.3) million which comprised of the receipt of £39.6 million of interest on the Foresight Solar (UK HoldCo) loan notes and £39.9m net losses on investments at fair value incurred in the year.

Operating expenses included in the income statement for the year were £6.9 million, in line with expectations. These comprise Investment Management fees of £5.8 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.

Cash flow

The Company had a total cash balance at 31 December 2020 of £16.9 million (31 December 2019 of £18.9 million). This amount excludes cash held in Subsidiaries. The breakdown of the movements in cash during the year is shown below.

Cash flows of the Company only for the year to 31 December 2020 (£million)

Cash flows of the Portfolio for the year to 31 December 2020 (£million)

For the year to 31 December, the underlying UK and Australian assets generated £90.6m and A$12.3m in revenue from the sale of electricity and related subsidies. £19.7m and A$4.6m of operating expenses were paid in the same period.

In the year, £2.5m was paid in relation to the Second Generation Portfolio 1 debt facility and $4.2m in relation to the Australian debt facilities that are not included within the Group.

Cash flows of the Company and intermediate holding companies for the year to 31 December 2020 (£million)

During the year to 31 December the underlying solar assets paid £76.7 million of ordinary distributions to the intermediate holding companies.

Cash received from underlying solar investments covers the long-term debt repayments, financing costs and the operating and administrative expenses of the Company and the intermediate holding companies as well as the dividends declared to shareholders.

During the year the Group received £6.3m in relation to a bond call on the EPC contract at Shotwick.

The total Group cash balance of £85.9 million includes RCF proceeds of £13.7 million in relation to the acquisitions of Virgen Del Carmen and Andalusia Portfolio to be invested in 2021.

Dividend Cover

Total dividends of £38.7 million were paid during the year 31 December 2020. Compared with the relevant net cash flows from operations of the Company and underlying investments of £42.9 million, these dividends were covered 1.11 times (31 December 2019: 1.10 times), including the impact of the scrip dividend programme.

Dividends

The Company has declared dividends for the year ended 31 December 2020 of 6.91 pence.

The Company has met all target dividends since IPO and follows a progressive dividend policy aiming to grow its dividend over time.

Dividend Timetable for FY2020

On 9 March 2021 the Board announced a fourth and final dividend relating to FY2020 of 1.73 pence per share.

Full details of the scrip dividend alternative that is being offered in respect of the Dividend (the "Scrip Offer"), its timetable and the Scrip Dividend Scheme can be found in the Scrip Dividend Alternative Offer Document (the "Scrip Document") available on the Company's website to view and/or download at fsfl.foresightgroup.eu/investor-relations/. The Scrip Document is also available on the National Storage Mechanism website at www.morningstar.co.uk/uk/NSM and copies are also available for inspection at JTC House, 28 Esplanade, St. Helier, Jersey JE2 3QA.

Foreign Exchange

The Company is exposed to foreign exchange movements in respect of its investments in Australia and Spain. As such, the Company continues to implement a hedging strategy in order to reduce the possible impact of currency fluctuations and to minimise the volatility of equity returns and cash flow distributions.

Foreign exchange hedging will not be applied to the cost of the equity investments, considering the long-term investment strategy of the Company.

For Australian assets the Company has entered into a rolling 2-year forward contracts strategy for an amount equivalent to approximately 75% of its expected distributable foreign currency cash flows at project level. For the Spanish assets recently acquired, the Company has implemented a 10-year rolling foreign currency hedging strategy covering c.80% of the expected annual cash flows.

The Company reviews its foreign exchange strategy on a regular basis with the objective of limiting the short-term volatility in sterling distributable cash flows caused by foreign exchange fluctuations and optimising the costs of the hedging instruments.

Ongoing Charges

The ongoing charges ratio for the year to 31 December was 1.18% (31 December 2019: 1.14%). This has been calculated using methodology as recommended by the Association of Investment Companies ("AIC"). Asset management fees charged by Foresight Group LLP on an arm's length basis at project level are excluded from the ongoing charge ratio.

SUSTAINABILITY AND ESG REPORT

Approach

Sustainability and Environmental, Social and Governance ("ESG") considerations are firmly at the centre of the Company's strategy, helping to inform its investment process and its asset management operations. 2020 marked a year of significant development in terms of how the Company embeds ESG considerations in the way it does business to achieve sustainable growth, recognising that such factors are of increasing importance to global investors.

The nature of the Company's business means it is well positioned to serve the needs of those investors seeking to achieve positive environmental and social outcomes alongside attractive financial returns.

2020 Highlights

EU Taxonomy Asset Accreditation

During 2020 the Company took the landmark step of seeking independent validation of its compliance with the EU Taxonomy for Sustainable Finance framework.

According to the EU, 'the EU taxonomy is a classification system, establishing a list of environmentally sustainable economic activities. The EU taxonomy is an important enabler to scale up sustainable investment and to implement the European Green Deal. Notably, by providing appropriate definitions to companies, investors and policymakers on which economic activities can be considered environmentally sustainable, it is expected to create security for investors, protect private investors from greenwashing, help companies to plan the transition, mitigate market fragmentation and eventually help shift investments where they are most needed.'[4]

Details of the EU Taxonomy for Sustainable Activities is available on the European Commission website:

https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/eu-taxonomy-sustainable-activities_en

Working with leading environmental consultant Aardvark EM the Company submitted two of its assets for certification, Paddock Wood in the United Kingdom and Oakey I in Australia. The review was conducted against the criteria set out in the EU Taxonomy for Sustainable Finance's Technical Report dated June 2019, Section 22.3 - Production of Electricity from Solar PV.

The validation of compliance of both assets was confirmed in December 2020.

The Investment Manager is also seeking to obtain validation for the newly acquired construction project in Spain, Virgen del Carmen.

The validation reports are available on the Company's website https://fsfl.foresightgroup.eu/.

O&M Sustainability Agreements

As reported in the 2020 Interim Reports the Investment Manager has established an O&M Provider Sustainability Agreement which has been signed by three of the Company's major O&M providers. As important stakeholders in the success of the Company, we are pleased that these key O&M providers have agreed to align their approach with that of our own in placing sustainability at the heart of their operations. 

This ground-breaking agreement stipulates where the Investment Manager believes positive environmental and social outcomes can be achieved within supplier activity. The Investment Manager also believes that adherence can offer long-term cost benefits and business opportunities through more efficient use of resources and intelligent forward planning. 

In the long-term, Foresight will expect its O&M providers to track their own performances in these areas and provide related evidence. Foresight also expects its O&M providers to communicate these requirements and standards within their supply chain. 

In order to review the performance of our O&M providers, the Investment Manager will meet with them once a year and discuss how these principles worked in practice, as well as working together to update the principles, if necessary. Foresight plans to integrate these principles into future O&M contracts. 

CONTRIBUTION TO SUSTAINABLE DEVELOPMENT GOALS

Demonstrating Foresight Group's commitment to sustainability is the Company's ability to report against the United Nations 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.

While we support all SDGs, Foresight Group contributes most significantly to the following:

Sustainability priorities and progress in 2020

There are five central themes to Foresight Group's Sustainability Evaluation Criteria:

The Company's adherence, and contribution, to these themes is assessed below.

This theme supports reporting on the development of affordable and clean energy, improved resource and energy efficiency and contributions to the fight against climate change.

In 2020, the Company's operational portfolio produced over 969GWh of renewable energy. Furthermore, using OFGEM's assessment that the average UK household consumes 2.9 MWh per year, it can be inferred that the Company's portfolio generated enough clean electricity to power c. 334,000 UK homes during the period.

Each asset is closely monitored for its localised environmental impact. As such, this criterion assesses potential environmental impacts such as emissions to air, land and water, effects on biodiversity and noise and light pollution. The Asset Manager ensures that solar power plants are managed in a manner that maximises the agricultural, landscape, biodiversity and wildlife potential, which can also contribute to lowering maintenance costs and enhancing security.

The Asset Management team has continued to pursue a number of initiatives to ensure the solar power plants are being effectively managed for agriculture, landscape, and biodiversity. Such schemes include:

During the acquisition process, and throughout an asset's lifecycle, the Company engages with contractors, local residents, community organisations, landowners and local authorities to promote public support for the project, maximise the local benefit and minimise any actual or perceived negative effects. This has been achieved through a number of initiatives:

The Asset Manager actively reviews the regulatory and property consents of every solar asset to ensure compliance with the permissions and conditions attached to each site and actively engages with local government organisations to ensure ongoing compliance. In addition to ensuring the Company is protected from potential legal issues, this promotes trust with the sites' local communities.

Compliance

Integral to the maintenance of the Company's reputation is its regulatory compliance and adherence to relevant laws. The Company is committed to carrying out business fairly, honestly and in compliance with laws and regulations and the Investment Manager has established policies and procedures to prevent bribery within its organisation. The Company is also committed to a policy to conduct all its business in an honest and ethical manner, taking a zero-tolerance approach to facilitation of tax evasion, whether under Jersey Law, UK law or under the law of any foreign country.

As a means of ensuring that sustainability considerations are at the forefront of the investment process, the Investment Manager delivers 'Best Practice' sessions to its staff. These sessions focus on how the sustainability performance of a given asset can be assessed, measured and improved, whilst also demonstrating how good ESG management can result in financial benefits. Foresight Group's staff are taken on induction tours of the assets and educated on how the sites are managed for biodiversity and habitat gain, as well as the processes undertaken to ensure the sites are in compliance with environmental and planning laws.

More details of the Company's approach to governance are contained in the Corporate Governance Report.

Counterparty due diligence forms an essential part of ensuring that key counterparties are reputable, experienced, competent and that they have robust and sustainable supply chains and have an approach to governance, compliance and ESG aligned with the Company, which must be evidenced by appropriate policies.

Two initiatives are being undertaken by the Company to further enhance these processes, with a view to improving overall asset performance and protecting the Company against reputational risk.

Corporate Governance Report

The Company is a member of the Association of Investment Companies ("AIC"). The Board has considered the Principles and Provisions of the AIC Code of Corporate Governance (AIC Code). The AIC Code addresses the relevant Principles and Provisions set out in the UK Corporate Governance Code (the UK Code), as well as setting out additional Provisions on issues that are of specific relevance to the Foresight Solar Fund Limited.

The AIC Code is available on the AIC website (https://www.theaic.co.uk/aic-code-of-corporate-governance).

The AIC Code includes an explanation of how this Code adapts the Principles and Provisions set out in the UK Code to make them relevant for investment companies.

The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council and is supported by the Jersey Financial Services Commission (JFSC), provides more relevant information to shareholders.

The Company has applied the Principles and complied with the Provisions of the AIC Code published in February 2019.

The Board

The Company has a Board of five Non-Executive Directors and all directors are considered by the Board to be independent. During the year, the Board recruited Ann Markey as an independent non-executive director.

Ms Markey's strong financial expertise and substantial renewable energy experience will not only contribute to the Board's current mix of skills, experience and knowledge, but also support the Board's pursuit of diversity of gender, social and ethnic backgrounds, cognitive and personal strengths as set out in the Company's diversity policy. The Board now has 40% female representation on the Board and will continue to look for opportunities to further promote diversity on the Board under its diversity policy.

During the year, Chris Ambler was appointed as the Senior Independent Director ("SID"). As SID, Mr Ambler will be responsible for providing a sounding board for the Chairman and will serve as an intermediary for the other Directors and Shareholders.

Mr. Ohlsson, Mr. Ambler, Mrs. O'Keefe and Mr. Dicks were all reappointed at the Annual General Meeting of the Company held on 16 July 2021. All of these Directors will, again, offer themselves for re-election at the Company's 2021 Annual General Meeting. Ms Markey will also stand for election at the 2021 Annual General Meeting.

Division of Responsibilities

The Board is responsible to Shareholders for the proper management of the Company and Board meetings are held on at least a quarterly basis with further ad hoc meetings scheduled as required. In the year under review 10 Board meetings were held, including quarterly meetings and ad hoc meetings.

The Board has formally adopted a schedule of matters for which its approval is required, thus maintaining full and effective control over appropriate strategic, financial, operational and compliance issues. The Investment Management Agreement between the Company and the Investment Manager sets out the matters over which the Investment Manager has authority, including monitoring and managing the existing investment portfolio and the limits above which Board approval must be sought. All other matters are reserved for approval by the Board of Directors.

Individual Directors may, at the expense of the Company, seek independent professional advice on any matter that concerns them in the furtherance of their duties. In terms of the requirements of the Articles of Association, the Directors retire periodically at every third Annual General Meeting after the AGM at which they were elected.

Full details of duties and obligations are provided at the time of appointment and are supplemented by further details as requirements change. A formal induction programme for all new Directors appointed to the Board is now in place.

The Board has access to the officers of the Company Secretary who also attend Board Meetings. Representatives of the Investment Manager attend all formal Board Meetings although the Directors may meet without the Investment Manager being present. Informal meetings with the Investment Manager are also held between Board Meetings as required. The Company Secretary provides full information on the Company's assets, liabilities and other relevant information to the Board in advance of each Board Meeting. Attendance by Directors at Board and Committee meetings is detailed in the table below.

Board Committees

The Board has adopted formal terms of reference, which are available to view by writing to the Company Secretary at the registered office, for four standing Committees which make recommendations to the Board in specific areas.

The Audit and Risk Committee comprises Chris Ambler (Chairman), Alex Ohlsson, Monique O'Keefe, Ann Markey and Peter Dicks, all of whom are considered to have sufficient financial experience to discharge the role. The Committee meets at least three times a year to, amongst other things, consider the following:

KPMG LLP has completed the Company's external audit for the year and has not performed any non-audit services during the year. JTC (Jersey) Limited prepares all necessary tax returns following sign off of the annual accounts.

The Management Engagement Committee, which has responsibility for reviewing the terms of the Investment Management Agreement between the Company and the Investment Manager and other service providers as considered appropriate. This Committee meets at least annually. This committee comprises of Alex Ohlsson (Chairman), Peter Dicks, Ann Markey, Monique O'Keefe and Chris Ambler.

The Board had a Remuneration and Nomination Committee, but, on 27 March 2020, resolved to split this Committee into two committees, a Remuneration Committee and a Nomination Committee. The Remuneration and Nomination Committee, did, however, meet twice during the year and its primary responsibility was to review and implement a formal and transparent procedure for developing policy on new Director appointments and remuneration, including fixing the remuneration packages of individual Directors as considered appropriate. This committee comprised of Monique O'Keefe (Chairman), Peter Dicks, Alex Ohlsson and Chris Ambler.

The Remuneration Committee (as a standalone committee) did not meet during the year, but this committee now is responsible for the development of remuneration policies and practices that will be designed to support the Company's strategy and to promote its long-term success. Further, this committee is responsible for the implementation of a formal and transparent procedure for developing policy on remuneration, determining the policy and setting the remuneration for the Chair. This committee comprises of Monique O'Keefe (Chairman), Peter Dicks, Ann Markey, Alex Ohlsson and Chris Ambler.

The Nomination Committee met once during the year (as a standalone committee) to consider the Company's recruitment of Ann Markey to the Board. The Nomination Committee is responsible for leading the process for appointments, ensuring plans are in place for orderly succession to the Board and to oversee the development of a diverse pipeline for succession. This committee will also be responsible for promoting diversity of gender, social and ethnic backgrounds, cognitive and personal strengths on the Board in line with the Company's diversity policy. This committee comprises of Monique O'Keefe (Chairman), Peter Dicks, Ann Markey, Alex Ohlsson and Chris Ambler.

With the addition of Ms Markey to the Board, and now that her initial period with the Board is complete, the Board is reviewing the composition of its Board committees to assess the most appropriate committee structure to fully leverage the skill sets of each director. The Nomination Committee is working with the Chairman of the Board to make recommendations on how the Board committees could be most efficiently served with the new larger board. Previously, with only four Board members on the Board, the Board was of the view that having all board members share the workload of the board's committee was the most appropriate approach.

The Board believes that, as a whole, it has an appropriate balance of skills, experience and knowledge. The Board also believes that diversity of experience and approach, including gender diversity, amongst Board members is important and it is the Company's policy to give careful consideration to issues of Board balance and diversity when making new appointments.

In 2018, the Board adopted a formal Diversity Policy in order to support the Board's commitment to increasing diversity at board level as an essential element in maintaining an effective Board.

Board Performance Evaluation

The Board undertakes an annual evaluation of its own performance and that of its Committees through an initial evaluation questionnaire. The Chair then discusses the results with the Board and its Committees and takes appropriate action to address any issues arising from the process. The Board undertakes an externally facilitated effectiveness assessment every three years.

During the year under review the Company conducted an internal review of the Board's effectiveness. This review included an evaluation of the Chairman, each Director, the Board as a whole, and each of the Board's committee.

Under the leadership of the Nomination Committee, this effectiveness review identified a number of points for the Board and the Committee to consider in order to improve its effectiveness. The Board identified that, while historical engagement with shareholders and stakeholders has been good, additional shareholder and stakeholder engagement would be desirable during 2021. The Board also emphasised the need to ensure that the Board and its Management Engagement Committee were providing robust and constructive challenge to the Company's Investment Manager. As referenced earlier in this section of the Annual Report, the Board will also be considering the membership of each of the Board's committees in order to ensure that each committee has the appropriate skills, experience and expertise and that the workload of these committees is appropriate distributed amongst the Company's five directors.

Overall the Board is of the view that the Board, the Chair, each of the Directors and all Committees have performed well during the year and have adapted well to the challenging circumstances which arose during the pandemic. The Board continues to work well with the Investment Manager in developing the Company's growth strategy and promoting the long-term success of the Company.

Stakeholder Engagement

Directors are required to act in good faith at all times and to act in a way that promotes the long-term success of the company for the benefits of stakeholders as a whole. While the Company is an externally managed Investment Company with no employees, the Company has identified the following key stakeholders:

Engagement with Shareholders

Shareholders are the primary stakeholders in an Investment Company and all key decisions are carefully considered with their long-term interests in mind. The Company, supported by its Investment Manager, communicates with its shareholders through a variety of means and welcomes their views at all times. This includes the publication of comprehensive Annual and Interim reports, market announcements, investor factsheets, and through the Company's dedicated website.

All shareholders are invited to the Annual General Meeting where they have the opportunity to ask questions of the Directors, including the Chairman, as well as the Chairman of the Audit and Risk, Remuneration and Nomination and the Management and Engagement Committee. The Board also makes itself available to meet with key shareholders at their request.

The Investment Manager undertakes shareholder roadshows following the publication of Annual and Interim results giving shareholders the opportunity to meet key members of the team responsible for portfolio management. The Investment Manager also makes itself available to meet shareholders and analysts throughout the year as required.

In addition, the Investment Manager and the Company's broker report to the Board on, at least, a quarterly basis and provide the Board with an overview of feedback and recommendations on how to address any issues raised.

Engagement with the Investment Manager

The Company, supported by its Management Engagement Committee, conducts an annual review of the Investment Manager's performance and the terms of engagement of the Investment Manager. This review is focused on constructive engagement with the Investment Manager in order to ensure that the expectations of the shareholders are being met and that the Board is cognisant of challenges being faced by the Investment Manager. The Board and the Investment Manager maintain an ongoing an open dialogue on key issues facing the Company with a view to ensuring that recommendations by the Investment Manager and key decisions taken by the Board are aligned with achieving long term shareholder value.

Engagement with communities

The Company remains committed to proactively engaging with the communities within which the Company operates. The details of the Company's community initiatives can be found on page 50.

Engagement with business partners and key service providers

The Company, supported by its Management Engagement Committee, reviews all key service providers and the terms of their engagement. During the year, the Company enhanced its review process by proactively seeking positive feedback from its key service providers. This process allows for two-way engagement between the Board and key service providers on service delivery expectations and feedback on important issues experienced by service providers during the year. The intention of the Company is to maintain and develop high standard of business conduct across all key service providers.

Summary of Key Stakeholders

Internal Control

The Directors of the Company have overall responsibility for the Company's system of internal controls and the review of their effectiveness. The internal controls system is designed to manage, rather than eliminate, the risks of failure to achieve the Company's business objectives. The system is designed to meet the particular needs of the Company and the risks to which it is exposed and by its nature can provide reasonable but not absolute assurance against misstatement or loss.

The Board's appointment of JTC (Jersey) Limited as accountant and administrator has delegated the financial administration of the Company. There is an established system of financial controls in place, to ensure that proper accounting records are maintained and that financial information for use within the business and for reporting to Shareholders is accurate and reliable and that the Company's assets are safeguarded.

Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring that Board procedures and applicable rules and regulations are complied with.

Pursuant to the terms of its appointment, the Investment Manager provides the Company's Board with an investment pipeline of potential assets in solar energy infrastructure investments for it to consider and has physical custody of documents of title relating to the equity investments involved.

The Investment Manager confirms that there is a continuous process for identifying, evaluating and managing the significant risks faced by the Company. This has been in place for the year under review and up to the date of approval of the Annual Report and financial statements and is regularly reviewed by the Board. The process uses a risk-based approach to internal control whereby a Business Risk Assessment is maintained on a risk matrix that identifies the key functions carried out by the Investment Manager and other service providers, the individual activities undertaken within those functions, the risks associated with each activity and the controls employed to minimise those risks. A residual risk rating is then applied. The Board is provided with reports highlighting all material changes to the risk ratings and confirming the action that has or is being taken. This process covers consideration of the key business, operational, compliance and financial risks facing the Company and includes consideration of the risks associated with the Company's arrangements with professional advisors.

The Audit and Risk Committee has carried out a review of the effectiveness of the system of internal control, together with a review of the operational and compliance controls and risk management. The Audit and Risk Committee has reported its conclusions to the Board which was satisfied with the outcome of the review.

The Board monitors the investment performance of the Company in comparison to its objectives at each Board meeting. The Board also reviews the Company's activities since the last Board meeting to ensure that the Investment Manager adheres to the agreed investment policy and approved investment guidelines and, if necessary, approves changes to such policy and guidelines.

The Board has reviewed the need for an internal audit function. It has decided that the systems and procedures employed by the Investment Manager, the Audit and Risk Committee and other third party advisers provide sufficient assurance that a sound system of internal control to safeguard Shareholders' investment and the Company's assets, is in place and maintained. In addition, the Company's financial statements are audited by external Auditors and thus an internal audit function specific to the Company is considered unnecessary.

Directors' Professional Development

Full details of duties and obligations are provided at the time of appointment and are supplemented by further details as requirements change. A formal induction programme for new Directors is now in place. Directors are also provided with key information on the Company's policies, regulatory and statutory requirements and internal controls on a regular basis. Changes affecting Directors' responsibilities are advised to the Board as they arise. Directors also participate in industry seminars.

Bribery Act 2010

The Company is committed to carrying out business fairly, honestly and openly. The Investment Manager has established policies and procedures to prevent bribery within its organisation.

Criminal Finances Act 2017

The Company has committed to a policy to conduct all of its business in an honest and ethical manner. The Company takes a zero-tolerance approach to facilitation of tax evasion, whether under UK law or under the law of any foreign country.

The Company is committed to acting professionally, fairly and with integrity in all of its business dealings and relationships wherever it operates and implementing and enforcing effective systems to counter tax evasion facilitation.

The Company will uphold all laws relevant to countering tax evasion in all the jurisdictions in which the Company operates, including the Criminal Finances Act 2017.

Going Concern

The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in this report. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are referred to in the Chairman's Statement, Investment Manager's Report and Notes to the Accounts. In addition, the financial statements include the Company's objectives, policies and procedures for managing its capital; its financial risk management objectives; and its exposures to credit risk and liquidity risk.

An evaluation of the cash flow impact of reduced generation of electricity, reduced power prices and the removal of the three highest generating assets in the portfolio, for the period to 30 June 2022 (the "going concern assessment period"), was undertaken by the Investment Manager and approved by the board of Directors. The evaluation demonstrated the Company would be able to meet it liabilities and could continue to meet its dividend target in the going concern assessment period. It was also noted no debt covenants would be breached in the same period.

Consequently, the Directors are confident that the company will have sufficient funds to continue to meet its liabilities as they fall due for the going concern assessment period and have therefore prepared the financial statements on a going concern basis.

Viability Statement

In accordance with the UK Corporate Governance Code, the Directors have assessed the viability of the Company over a three year period to 31 December 2023, taking into account the Company's current position and the potential impact of the principal risks and uncertainties set out under Risk Management. Based on this assessment, the Directors confirm that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to 31 December 2023.

The Directors have determined that a three year period to 31 December 2023 constitutes an appropriate period over which to provide its viability statement. This is the period focussed on by the Board during the strategic planning process and is considered reasonable for a business of its size and nature. Whilst the Directors have no reason to believe the Company will not be viable over a longer period, it believes this presents users of the Annual Report with a reasonable degree of confidence whilst still providing a longer-term perspective.

In making this statement, the Board carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. A summary of key valuation sensitivities is set out earlier in the document.

The Board also considers the ability of the Company to raise finance and deploy capital. The results take into account the availability and likely effectiveness of the mitigating actions that could be taken to avoid or reduce the impact or occurrence of the underlying risks.

This review has considered the principal risks which were identified by the Investment Manager. The Board concentrated its effort on the major factors which affect the economic, regulatory and political environment. The Board also paid particular attention to the importance of its close working relationship with the Investment Manager.

As part of this process, the Directors have also considered the ongoing viability of the Company's long-term debt strategy.

Directors' Remuneration Report

Introduction

The Board has prepared this report in line with the AIC code. An ordinary resolution to approve this report will be put to the members at the forthcoming 2021 Annual General Meeting.

Annual Statement from the Chairman of the Remuneration and Nomination Committee

The Board, which is profiled below, consists solely of Non-Executive Directors and the Committee considers at least annually the level of the Board's fees.

Consideration by the Directors of matters relating to Directors' Remuneration

The Remuneration Committee comprises five Directors: Monique O'Keefe (Chairman), Alex Ohlsson, Ann Markey, Chris Ambler and Peter Dicks. The Committee has responsibility for reviewing the remuneration of the Directors, specifically reflecting the time commitment and responsibilities of the role and meets at least annually. The Committee also undertakes external comparisons and reviews to ensure that the levels of remuneration paid are broadly in line with industry standards and members have access to independent advice where they consider it appropriate.

During the year neither the Board nor the Committee has been provided with external advice or services by any person, but has received industry comparison information from the Investment Manager in respect of the Directors' remuneration and from the external Board evaluator. The remuneration policy set by the Board is described below. Individual remuneration packages are determined by the Remuneration and Nomination Committee within the framework of this policy.

The Committee will consider seeking external guidance from an independent remuneration consultant during 2021 to review the fees paid to the Directors.

The Directors are not involved in deciding their own individual remuneration with each Director abstaining from voting on their own remuneration.

Remuneration Policy

The Board's policy is that the remuneration of Non-Executive Directors should reflect time spent and the responsibilities borne by the Directors for the Company's affairs and should be sufficient to enable candidates of high calibre to be recruited. The levels of Directors' fees paid by the Company for the year ended 31 December 2020 were agreed in 2016. It is considered appropriate that no aspect of Directors' remuneration should be performance related in light of the Directors' Non-Executive status.

The Company's policy is to pay the Directors quarterly in arrears, to the Directors personally (or to a third party if requested by any Director). Mr Ohlsson's remuneration is paid to Carey Olsen Corporate Services Jersey Limited Plc. 20% of Mr Ambler's remuneration is paid to Jersey Electricity Plc. None of the Directors has a service contract but, under their individual letters of appointment may resign at any time by mutual consent. No compensation is payable to Directors leaving office. As the Directors are not appointed for a fixed length of time there is no unexpired term to their appointment.

The above remuneration policy was approved by the Shareholders at the Annual General Meeting held on 16 July 2020 for the financial year to 31 December 2020 and will apply in subsequent years. Shareholders' views in respect of Directors' remuneration are communicated at the Company's Annual General Meeting and are taken into account in formulating the Directors' remuneration policy.

Details of Individual Emoluments and Compensation

The emoluments in respect of qualifying services of each person who served as a Director during the year and those forecast for the year ahead are shown below. No Director has waived or agreed to waive any emoluments from the Company in the year under review. No other remuneration was paid or payable by the Company during the current year nor were any expenses claimed by or paid to them other than for expenses incurred wholly, necessarily and exclusively in furtherance of their duties as Directors of the Company. The Company's Articles of Association do not set an annual limit on the level of Directors' fees but fees must be considered within the wider Remuneration Policy noted above. Directors' liability insurance is held by the Company in respect of the Directors.

Appointments and Succession Planning

All appointments to the Board are subject to a formal, rigorous and transparent procedure and are typically supported by external search consultants. The requirements for vacancies on the Board are set with reference to objective criteria and promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths.

Further, the Board reviews, at least annually, its effectiveness and its combination of skills, experience and knowledge.

The Board, supported by its Nomination Committee, assesses the need for succession planning on an annual basis. The Nomination Committee has recently considered the tenure of Mr Ohlsson, Mr Ambler and Mr Dicks. In light of the high performance of the directors, the longer term nature of the assets, and the refreshed board composition (following the recent appointments of Mrs O'Keefe and Ms Markey), the Nomination Committee has recommended to the Board that the continued service of these directors on the Board be welcomed.

Directors' Interests

Directors who had interests in the shares of the Company as at 31 December 2020 are shown below. The Directors do not have any options over shares. Mr Dicks had an investment programme in place during the year whereby the dividends paid to him during the year were used by him to acquire further shares in the Company.

Approval of Report

The Board will propose a resolution at the forthcoming AGM that the remuneration of the Directors will be at the levels shown above for the year to 31 December 2021.

Audit and Risk Committee Report

Audit and Risk Committee Report

The Audit and Risk Committee (the "Committee") is chaired by Chris Ambler and comprises the full Board. The Committee operates within clearly defined terms of reference. The terms of reference were reviewed during the year under review and were updated as deemed appropriate, including enhancing the Committee's scope to consider key risks faced by the Company.

Meetings are scheduled to coincide with the reporting cycle of the Company and the Committee has met four times in the year under review. The function of the Committee is to ensure that the Company maintains the highest standards of integrity, financial reporting, internal and risk management systems and corporate governance.

Historically, the Board considered it appropriate to have the Chair of the Board on the Audit and Risk Committee given the size of the Board and in order to take advantage of the experience and expertise held by Mr Ohlsson. With the growth of the Board to five directors in 2020 and the additional relevant financial experience and expertise held by Ms. Markey, the Board will review the composition of the Audit and Risk Committee during 2021 and will consider if it remains necessary for the Chair of the Board to continue to serve on the Audit and Risk Committee.

None of the members of the Committee have any involvement in the preparation of the financial statements of the Company.

The Committee is charged with maintaining an open and effective relationship with the Company's Auditors. The Chairman of the Committee keeps in regular contact with the Auditors throughout the audit process and the Auditors attend the Committee meetings at which the Company's accounts are considered. The Committee reports directly to the Board which retains the ultimate responsibility for the financial statements of the Company.

Significant Issues Considered

The Committee has identified and considered the following principal key areas of risk in relation to the business activities and financial statements of the company:

Valuation of unquoted investments. This issue was discussed with the Investment Manager and the Auditor at the planning and conclusion of the audit of the financial statements, as explained below:

Valuation of Unquoted Investments

The unquoted investment is a 100% controlling interest in Foresight Solar (UK Hold Co) Limited ("UK Hold Co"), a non-consolidated subsidiary company which is measured at fair value. The majority of UK Hold Co's total assets (by value) are in companies where no quoted market price is available. 100% controlling interests are held in these companies, being FS Top Holdco 2 Ltd, FS Holdco Limited ("FS Holdco"), FS Holdco 3 Limited ("FS Holdco 3") and FS Holdco 4 Limited ("FS Holdco 4"). FS Top Holdco 2 Ltd ("FS Top Holdco 2") in turn holds a 100% controlling interest in Foresight Intermediate Solar Holding Limited ("FISH") that then holds a 100% controlling interest in FS Holdco 2 ("FS Holdco 2"). FS Holdco 2 also has a 100% controlling interest investment in FS Debtco Limited ("FS Debtco"). These are all non-consolidated subsidiary companies which are also measured at fair value, established by using the fair value of the net assets of the aforementioned.

The majority of FS Holdco's and FS Debtco's total assets (by value) are held in investments where no quoted market price is available. FS Holdco's and FS Debtco's assets are valued by using discounted cash flow measurements. FS Holdco 4 contains four assets held at cost at 31 December 2020. These valuations of underlying investments are seen to be areas of inherent risk and judgement. There is an inherent risk of the Investment Manager unfairly valuing the investment due to the Investment Manager's fee being linked directly to the Net Asset Value of the Company.

During the valuation process the Board and the Committee and the Investment Manager follow the valuation methodologies for unlisted investments as set out in the International Private Equity and Venture Capital Valuation guidelines and appropriate industry valuation benchmarks. These valuation policies are set out in note 2 of the accounts. These were then further reviewed by the Committee. The Investment Manager confirmed to the Audit Committee that the underlying investment valuations had been calculated consistently throughout the year and in accordance with published industry guidelines, taking account of the latest available information about investee companies and current market data. Furthermore, the Investment Manager held discussions regarding the investment valuations with the Auditors.

The Investment Manager has agreed the valuation assumptions with the Committee.

Key assumptions used in the valuation forecasts are detailed in note 16 of the financial statements. The Investment Manager has provided sensitivities around those assumptions which are also detailed in note 16.

The Investment Manager has historically employed two independent energy consultants to provide forward looking power price forecasts which are a key input into portfolio valuations. Given the increased volatility witnessed in short term-power prices during the year the Investment Manager has added an additional consultant's power forecasts to its valuations in an attempt to improve the accuracy of this key input.

The Investment Manager confirmed to the Committee that they were not aware of any material misstatements. Having reviewed the reports received from the Investment Manager and Auditors, the Committee is satisfied that the key areas of risk and judgement have been addressed appropriately in the financial statements and that the significant assumptions used in determining the value of assets and liabilities have been properly appraised and are sufficiently robust. The Committee considers that KPMG LLP has carried out its duties as Auditor in a diligent and professional manner.

During the year, the Committee assessed the effectiveness of the current external audit process by assessing and discussing specific audit documentation presented to it in accordance with guidance issued by the Auditing Practices Board. The Audit Partner, or alternatively responsible person, is rotated every five years ensuring that objectivity and independence is not impaired. KPMG LLP has audited the Company since its IPO in 2013, the first financial year end being 31 December 2014. A new audit partner was appointed in November 2017, and the current audit partner rotated onto the Company's audit in November 2020.

The Committee considered the performance of the Auditor during the year and agreed that KPMG LLP have provided a high level of service and maintained a good knowledge of the market, making sure audit quality continued to be maintained. There were no non-audit services provided by the Companies auditor during the year.

Statement of Directors' Responsibilities

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS

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

Company Law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and applicable law.

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

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies (Jersey) Law 1991. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Report that complies with that law and those regulations.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware; and each director has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

Responsibility statement of the Directors in respect of the Annual Financial Report

We confirm that to the best of our knowledge:

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Alexander OhlssonChairman

For and on behalf of Foresight Solar Fund Limited8 March 2020

AUSTRALIA

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