Foresight Solar Fund : Audited Annual Report and Financial Statements y/e 31 December 2023

YEARS

FORESIGHT SOLAR FUND LIMITED

ANNUAL REPORT AND FINANCIAL STATEMENTS

For the year ended 31 December 2023

ABOUT US

FRONT COVER IMAGE

Shotwick, UK

Foresight Solar is a closed-ended investment company with more than £1.2 billion deployed in a diversified portfolio of solar PV and battery storage assets.

The sustainability-focused fund contributes to a lower carbon future by investing in and managing approximately 1GW of renewable energy infrastructure.

In this report

	Investment
Chair's Statement	Manager's Report	Sustainability

Page 6

Page 13

Page 43

Foresight Solar Fund Limited was awarded the Green Economy Mark in 2019. This recognises companies that derive 50% or more of their revenues from environmental solutions.

Contents

Strategic Report

Highlights

Business Model

Company Structure

Chair's Statement

Investment Manager's Report

Sustainability

Risk and Risk Management

Going Concern

and Viability Statement

Financial Review

Alternative Performance Measures ("APMs")

Governance

1	Board of Directors	94
3	Corporate Governance Report	96
4	Management Engagement
6	Committee Report	104
13	Nomination Committee Report	106
43	Audit and Risk Committee Report	109
56	Directors' Remuneration Report	113
	Directors' Report	115
80	Statement of Directors'
82	Responsibilities	118
91
	Financial Statements
	Independent Auditor's Report	120
	Statement of Profit and Loss
	and Other Comprehensive Income	127
	Statement of Financial Position	128
	Statement of Changes in Equity	129
	Statement of Cash Flows	130
	Notes to the Financial Statements	131
	AIFMD Disclosures (Unaudited)	163
	Advisors	164
	Glossary of Terms	165

1	FORESIGHT SOLAR FUND LIMITED	STRATEGIC REPORT	GOVERNANCE
	Annual Report and Financial Statements 31 December 2023

HIGHLIGHTS

AS AT 31 DECEMBER 2023

[•]

Investment

objectives: Key performance indicators ("KPIs")1

	£697.9m	118.4p	8.0%	6.2%
	NET ASSET VALUE	NAV PER SHARE	ANNUALISED TOTAL	ANNUALISED TOTAL
Preserve	("NAV")	(31 December 2022:	NAV RETURN SINCE	SHAREHOLDER
(31 December 2022:	126.5p)	IPO	RETURN SINCE IPO
and enhance
£771.5m)		(31 December 2022:	(31 December 2022:
capital value
		9.0%)	7.8%)
	7.55p	1.6x	£295.9m
	DIVIDEND PER SHARE	NET DIVIDEND COVER	TOTAL DIVIDENDS PAID
Deliver sustainable,	DECLARED FOR 2023	FOR 20232	SINCE IPO
progressive	(31 December 2022:
7.12p)
quarterly dividends
	6.0%	1.5x	33.3%
	TARGET DIVIDEND	ESTIMATED NET	DIVIDEND GROWTH
	GROWTH FOR 2024	DIVIDEND COVER FOR	SINCE IPO
		2024	(Including 2024 target)
	969MW	467MWp
	PORTFOLIO CAPACITY	PROPRIETARY
Develop further		DEVELOPMENT
portfolio		PIPELINE
diversification

FINANCIAL STATEMENTS

1. Refer to the Alternative Performance Measures ("APMs") shown on page 91 for more details and definitions of the terms used in this report.
2. Net dividend cover calculated solely from operating cash flow generated in the period.	SANDRIDGE, UK

2	FORESIGHT SOLAR FUND LIMITED	STRATEGIC REPORT
	Annual Report and Financial Statements 31 December 2023

HIGHLIGHTS CONTINUED

AS AT 31 DECEMBER 2023

Foresight Solar celebrated its ten-year anniversary on the London Stock Exchange in October

Grew the proprietary pipeline

Acquired the rights to a 467MWp portfolio of development-stage solar projects.

Record cash distribution from assets

The £120.4 million was the highest in Foresight Solar's decade-long history.

First project sale

Divested a stake in the Spanish Lorca portfolio at a 21% premium to holding value, highlighting the Company's prudent valuation assumptions.

£20 million returned to Shareholders via buybacks

Deployed half of the committed repurchase allocation, delivering 1.1 pence per share ("pps") of NAV accretion.

Lowered gearing

Divestment proceeds and free cash used to repay £40 million of variable rate debt.

Record renewable electricity generation

1,094GWh1 exported to the grid, enough to power 402,754 UK households for a year.

Increased dividend target

Board approved the 7.55pps dividend for 2023 and announced an increase of 6% year-on-year to a 8.00pps payout target for 2024.

1. Generation figures have been adjusted, where relevant, for events in which compensation has been, or will be, received.

GOVERNANCE

FINANCIAL STATEMENTS

10 YEARS ON LSE, UK

3 FORESIGHT SOLAR FUND LIMITED

Annual Report and Financial Statements 31 December 2023

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

BUSINESS MODEL

What we do

Foresight Solar is a sustainability-focused investment trust that aims to deliver progressive returns alongside long-term NAV growth by owning, developing and operating utility-scale solar and battery assets.

How we create value

1. Identify, acquire

The Investment Manager leverages its global footprint and local networks to source solar PV and battery storage opportunities at different stages of development. These are screened for suitability and potential targets are subject to due diligence to assess risks, confirm valuation assumptions and review sustainability considerations. Investment approval is multilevel and culminates with Board sign-off for all material decisions.

2. Develop, build

There is a strong focus on risk and opportunity identification and mitigation to deliver assets in line with their investment case. The Company actively manages assets, employing strategic approaches

to make development, construction and maintenance determinations. To minimise risks, Foresight Solar partners with credible and experienced counterparties to secure future pipeline, build out projects and manage them. Regular communication with the Board ensures effective asset management.

3. Operate, enhance

The Company seeks to ensure optimal operational availability and maximise revenue potential. The portfolio is regularly assessed for opportunities to improve performance, both operational and financial, and to better meet sustainability objectives. The Investment Manager regularly seeks to capture the value identified for the benefit of Shareholders.

4. Hold/exit, redeploy

Foresight Solar's strategy involves holding assets for cash yield that supports its progressive dividend. Alongside this, there

is the opportunity to provide Shareholders with long-term NAV growth from bringing projects from development to construction and then to operation. In certain instances, the Company will generate additional value by divesting assets at favourable prices. The Investment Manager and the Board evaluate these opportunities against diversification goals and an asset's potential to generate stable financial returns over time.

The value we create

Financial benefits

£120.4m

distributed from underlying assets in 2023

£295.9m

paid to Shareholders in dividends since IPO

Environmental benefits

1,094GWh1 of clean energy generated in 2023, enough to power

402,754 UK homes for a year

378,486tCO2e

Sustainability considerations

avoided compared to country-specific grid intensity

Environmental, social and governance criteria are integral in any investment assessment. The Investment Manager undertakes a thorough analysis against a predetermined minimum threshold for any asset.

Third-party service providers, sometimes with the assistance of technical advisors, monitor and manage the day-today performance, including sustainability KPIs, of each asset in the portfolio.

Measurement of sustainability KPIs from as early as the due diligence phase all the way to investment, and later to operation, allows the Asset Manager to continually seek and execute improvement opportunities across the portfolio.

Sales proceeds will typically be used to repay debt or to invest in new assets that provide attractive risk-adjusted returns, including development-stage options that grow the Company's pipeline and provide more upside pathways.

Social benefits

£392,816

contributed to local communities where the Company operated in 2023

1. Generation figures have been adjusted, where relevant, for events in which compensation has been, or will be, received.

4 FORESIGHT SOLAR FUND LIMITED

Annual Report and Financial Statements 31 December 2023

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

COMPANY STRUCTURE

Foresight Solar Fund Limited is a closed-ended company with an indefinite life. It 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 UK's largest listed solar investment company at the time. Its shares are listed on the Premium Segment of the Official List and traded on the London Stock Exchange's Main Market. The Company is also a constituent of the FTSE

250. As at 31 December 2023, there were 589,239,345 Ordinary Shares in issue.

As an investment company, Foresight Solar has no direct employees and outsources its operations to certain key service providers. FSFL makes its investments through intermediate holding companies and underlying project vehicles/special purpose vehicles.

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

Shareholders

Dividends

Equity

investment

Short and long-term

Foresight Solar Fund

debt providers

Limited

Shareholder loan

Shareholder

repayments,

loans, equity

equity

investment

distributions

Asset Manager

HOLDCOs

Foresight Group Asset

Intermediate Holdings

Management

Companies

Shareholder loan

Shareholder

repayments,

loans, equity

equity

investment

distributions

Assets

Project Special Purpose

Vehicles

Investment Manager

Foresight Group LLP

Company Secretary

• Administrator JTC (Jersey)

Other key service

providers and advisors

Corporate Brokers -

Jefferies International

Limited, Singer Capital

Markets

Auditor - KPMG

Registrar - Computershare

Investor Services

Legal Advisors - Dickson

Minto, Ogier

5 FORESIGHT SOLAR FUND LIMITED

Annual Report and Financial Statements 31 December 2023

COMPANY STRUCTURE CONTINUED

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Investment objective

The Company's objective is to provide investors with a sustainable, progressive quarterly dividend and enhanced capital value through investment in a diversified portfolio of ground-based solar farms and battery storage systems ("BESS") predominantly located in the UK.

Investment policy and strategy

Foresight Solar pursues its investment objective by acquiring and managing solar PV and BESS assets at different stages of maturity.

The Company's aim is to build a diversified portfolio with majority or minority ownership. When investing in a stake of less than 100%, Foresight Solar secures its rights through shareholder agreements and other legal transaction documents. Investments may be made in equity, debt or intermediate instruments but not in securities traded on an investment exchange. To optimise returns, the Company is permitted to invest money held for working capital in cash deposits, gilts and money market funds.

Operationally, each solar power plant in the portfolio enters a power purchase agreement ("PPA") with a creditworthy offtaker. Under these contracts, the Special Purpose Vehicles ("SPVs") sell electricity and, in some cases, green certificates to the designated buyer. Not all PPAs include mechanisms such as fixed prices or price floors, allowing the Company to retain some exposure to merchant power prices.

Investment restrictions

To diversify its portfolio and spread risk, there are limitations to the Company's investment universe and approach:

• Geography: Investments outside the UK are limited to 25% of Gross Asset Value ("GAV"). (Refer to the APMs shown on page 91 for more details and definitions.)
• Leverage: Gearing, calculated as overall Company borrowing as a percentage of GAV, will not exceed
  50% at the time of drawdown. The Board intends to limit long-term gearing, calculated as overall Company borrowings excluding intra-Group loans and revolving credit facilities, to 40% of GAV.
• Portfolio composition: No single asset shall exceed 30% of GAV post-acquisition. If the investment is an additional stake in an existing asset, the combined value should not exceed 30%.
• Stage: Foresight Solar is allowed to deploy no more than 5% of GAV in development-stage projects. These assets are characterised as solar or BESS opportunities that are pre-construction and may not have secured grid connection rights or planning consent on the date of investment. Similarly, projects under construction are limited to 25% of GAV.
• Technology: The Company may only invest in utility-scale battery storage systems up to a limit of 10% of GAV.

Any material change to the investment policy will require the prior approval of Shareholders by way of an ordinary resolution, in accordance with the Listing Rules.

Alternative Investment Fund Management Directive ("AIFMD")

Although the Company is located outside the European Economic Area, its marketing activities in the UK are subject to regulation implemented under the AIFMD and the National Private Placement Regime.

The AIFMD, as implemented across the European Union ("EU") and in the UK, aims to harmonise the regulation of Alternative Investment Fund Managers ("AIFMs"), as well as impose obligations on firms that manage or distribute alternative investment funds in the EU or the UK or that market shares in such funds to EU or UK investors.

Under the AIFMD, the Company is self-managed and acts as its own AIFM.

6 FORESIGHT SOLAR FUND LIMITED

Annual Report and Financial Statements 31 December 2023

CHAIR'S STATEMENT

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

On behalf of the Board, I am pleased to present the audited Annual Report and Financial Statements for Foresight Solar Fund Limited ("Foresight Solar", the "Company" or "FSFL") for the year ended 31 December 2023.

In its tenth year, Foresight Solar performed well in a challenging market. As central banks sought to tame inflation, interest rates in many countries increased at the fastest pace for a generation. Investors reacted to the uncertainty of when the tightening cycle would peak and the prospect of rates remaining higher for a prolonged period. As a result of these technical market dislocations, share price discounts to NAV across the real assets investment trust sector widened significantly.

It was key to respond to these circumstances rapidly in support of Shareholders' interests. Therefore, the Board implemented a package of measures that included a share buyback programme, asset sales and debt repayment, all reflective of a disciplined approach to capital allocation.

These initiatives were based on the view that markets have been significantly undervaluing Foresight Solar's portfolio, making a compelling case for re-investment in the Company's stock.

Both during and after the period, several large subsidy-backed solar portfolios were sold in the UK. The deals presented reliable benchmarks for projects comparable to Foresight Solar's in the country. In each case, the transactions closed at valuations materially above FSFL's £1.17 million per megawatt holding value (31 December 2022: £1.29m/MW), supporting the Company's more conservative valuation assumptions. (See page 42 for details on the UK portfolio valuation.)

Although navigating the complexities of the market required the Directors' and the Investment Manager's full attention, 2023 was a milestone year. On the operational side, the portfolio distributed a record amount of cash, positioning the Company well for the future and providing confidence in a resilient dividend with a cover of 1.61x. The extra capital allowed the Board to pay down floating rate debt and return an extra £20 million to investors via share buybacks. There is now adequate liquidity for FSFL to invest in returns-accretive opportunities when markets recover.

This was a tough period for markets, but Foresight Solar's record electricity production and historic cash generation helped it provide strong income for Shareholders and set itself up for growth once macro conditions improve.

Alexander Ohlsson

Chair

NAV total return and total shareholder return since IPO

%

150

120

90

60

30

0

-30
2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023

Total shareholder return ("TSR") NAV total return

7 FORESIGHT SOLAR FUND LIMITED

Annual Report and Financial Statements 31 December 2023

STRATEGIC REPORT

GOVERNANCE

FINANCIAL STATEMENTS

CHAIR'S STATEMENT CONTINUED

Generation from the UK portfolio was once again above budget. Production was lower than expected in Australia due to record economic curtailment, and marginally below budget in Spain as a result of mixed weather conditions. Although Foresight Solar's 58 operating assets generated more than 1TWh of electricity for the first time, global production was 1.9% below forecast.

This was enough renewable energy to power the equivalent of over 402,000 UK homes for an entire year¹. Considering the Company's contribution throughout the past decade, the projects have exported enough electricity to meet the demand of almost 10% of UK households for an entire year. That's an undeniable contribution to the decarbonisation of energy production and the fight against climate change. (See in the Sustainability section of this report from page 43 for more details.)

We are proud of the Company's performance over the last ten years, having consistently delivered on its investment objectives. Shareholders have received a sustainable, progressive dividend that has now increased more than 33%. An investor who bought FSFL stock for 100 pence at listing would have received 66.49 pence in income along the way. Including the Company's growth over that time, that has delivered a total NAV return of 120% and a total shareholder return of 84% since IPO.

The Company has unquestionably been impacted by the challenging macroeconomic landscape over 2023 and it is frustrating to see the share price trade at a significant discount to NAV. The Directors remain focused on taking action to address the discount whilst acknowledging that there are elements outside of the Company's control.

The Board is united in its belief that Foresight Solar will continue to deliver income and capital growth for investors, and, therefore, will recommend Shareholders vote against the resolution to discontinue the Company at

Investments and realisations

In March, Foresight Solar completed Project Lynx, the first acquisition of its growing proprietary development pipeline. Leveraging the Investment Manager's local network in Spain, FSFL purchased the full rights to a 467MWp portfolio of six solar projects. This is an exciting opportunity that represents the first of several planned investments into early-stage assets to drive long-term growth in a capital-efficient manner.

On the capital recycling side, the Company also made its first divestment, selling a 50% stake in Lorca, a 99MW portfolio of three operational assets in Spain. The deal, which closed at an attractive 21% premium to holding value, was the first stage of a phased programme to sell around 200MW of assets. It exemplifies FSFL's strategy to crystallise value uplifts from projects and eventually recycle capital to accelerate growth. (See page 23 for a case study of how this capital allocation approach has been implemented).

The proceeds from the transaction were immediately used to pay down the revolving credit facility ("RCF"), lowering variable interest rate debt. The additional liquidity may also facilitate future deployment into other development and construction-stage opportunities. We look forward to updating Shareholders on divestments as the programme continues into 2024.

Key financials

The NAV per Ordinary Share at 31 December 2023 was

118.4 pence (31 December 2022: 126.5 pence). (See page 40 for details on Net Asset Value movements.)

In response to the continued rise in UK gilt yields and the subsequent narrowing of risk premia, the Board increased discount rates by an average of 0.87 percentage points for the year. This brought the portfolio's weighted average discount rate to 8.03%, the highest in the Company's history. In total, the increase in discount rates resulted in a NAV reduction of 6.8 pence per share ("pps") over the year. With an implied real return of 5% to 6% over assumed long-term inflation and clear opportunities for growth, the Board considers that Foresight Solar continues to be positioned attractively for investors.

Power price forecasts softened across markets during the year, falling from their first quarter highs. Against this backdrop, Foresight Solar reaped the benefits of a prudent hedging strategy which locked in exposure to elevated electricity prices. This insulated the portfolio from near-term adverse shifts in valuation and anchored the Net Asset Value. Viewed in isolation, the fall in power price forecasts led to a NAV reduction of 3.9 pps. At the same time, the falling power price estimates in the UK reduced the Company's Electricity Generator Levy liability. On

its own, this move resulted in an uplift to NAV of 3.1 pps, almost offsetting the fall in power forecasts.

Total revenue for the year was £162.2 million (31 December 2022: £164.5 million), with EBITDA of £136.2 million

(31 December 2022: £141.2 million). Both metrics were marginally below budget, mostly resulting from merchant prices falling further than expected - although this only represented a small proportion of income.

the next Annual General Meeting ("AGM") in June.

1. Based on Ofgem consumption estimate of 2,700kWh/year for the typical UK household.

8	FORESIGHT SOLAR FUND LIMITED	STRATEGIC REPORT
	Annual Report and Financial Statements 31 December 2023

CHAIR'S STATEMENT CONTINUED

GOVERNANCE

FINANCIAL STATEMENTS

Key financials continued

Due in part to timing of cash receipts, the Company recorded its highest ever distributions from assets, with £120.4 million paid from the portfolio in 2023, an 8% increase from the £111.8 million achieved the previous year.

The Directors believe the market is materially undervaluing the portfolio, a view supported by recent comparable transactions. Starting with an initial share buyback of £10 million in May, the Board has since increased this allocation four-fold, becoming proportionally one of the largest repurchase programmes in the renewable investment trust sector. Share buybacks of £19.9 million at a weighted average price of 96.1pps during the year contributed to 1.1pps in NAV accretion. The shares are held in treasury.

Operational performance

The UK portfolio once again delivered solid performance, with good levels of availability enabling the assets to capture slightly higher-than-expected solar irradiation and deliver annual generation 0.7% above budget. Looking

at the technical performance, excluding distribution network operator ("DNO") outages, electricity production was 1.2% above budget, with irradiation 2.1% higher than expectations. (See page 32 for details on portfolio performance.)

The Spanish projects had their first full year of operations and contributed towards the Company's investment objectives with encouraging initial performance. Production was 1.5% below budget, predominantly due to heavy storms early in the year that caused irradiation to be 1.6% below forecasts. Excluding DNO outages, generation was in line with budget, implying a positive performance ratio for the portfolio.

Having been ahead of forecast for the first half of 2023, the Australian plants were subject to unusually high levels of economic curtailment in the third quarter. This meant that, according to local regulations, the sites were forced to shut down when there was excess generation on the network. Overall, production was 9% below budget.

The Board and the Investment Manager are acutely aware of the challenges the country's grid system poses and this is a key focus area for the coming year.

Construction and development

The construction of Sandridge BESS continues to progress. Despite delays caused by grid reinforcement works, the Investment Manager expects the site to be energised in summer 2024, reaching commercial operations shortly thereafter.

Foresight Solar holds 50% stakes in two other preconstruction battery projects, totalling 50MW. The Investment Manager has conducted preliminary activities required to build these assets and is now considering the best options to progress the sites given FSFL's capital allocation strategy.

In Spain, the first project from the solar development portfolio may be granted approval later this year. Once it achieves planning consent, the Board will evaluate various options, including whether to progress through construction or to divest and capitalise on the development gain.

LOS PICOS, SPAIN