US Solar Fund : Annual Financial Report

US SOLAR FUND PLC

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023

RENEWABLE ENERGY SUSTAINABLE INVESTMENTS

US SOLAR FUND PLC (USF OR THE COMPANY) IS A RENEWABLE ENERGY FUND THAT AIMS TO PROVIDE INVESTORS WITH ATTRACTIVE AND SUSTAINABLE DIVIDENDS WITH AN ELEMENT OF CAPITAL GROWTH BY INVESTING IN A DIVERSIFIED PORTFOLIO OF SOLAR POWER ASSETS IN NORTH AMERICA AND OTHER OECD COUNTRIES IN THE AMERICAS.

The Company develops, acquires or constructs solar power assets that are expected to have an asset life of at least 30 years and generate stable cash flows by selling electricity to creditworthy offtakers under long-term power purchase agreements. The Company's portfolio currently consists of 41 operational solar projects with a total capacity of 443MWDC, all located in the United States.

OVERVIEW

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS

Company facts1

The Company is a closed-end investment trust incorporated under the laws of England (company number 11761009).

The Company was admitted to the premium listing segment of the Official List of the FCA and to trading on the main market of the London Stock Exchange on 16 April 2019.

The total number of Ordinary Shares in issue is 332,192,361 which denominated in both US Dollars (ticker 'USF') and Sterling (ticker 'USFP').

The Company's current portfolio comprises of 41 assets located in California, North Carolina, Oregon and Utah with a total capacity of 443MWDC. The Company sold one asset (Mount Signal 2) in June 2023.

Since 1 December 2023, the Company has been managed by Amber Infrastructure Investment Advisor, LLC (AIIA or the Investment Manager), part of the Amber Infrastructure Group (Amber). Prior to this date, the Company was managed by New Energy Solar Manager, Pty Ltd.

$258.2 million Net Asset Value.

$177.7 million market capitalisation.

Contents

• 1 OVERVIEW

  58 CORPORATE GOVERNANCE

  *GLOSSARY

• 2 2023 Highlights

  • 58 Summary of Investment Policy

• 4 2023 In Review

  • 59 Board of Directors

  • 60 Directors' Report

• 6 STRATEGIC REPORT

• 62 Corporate Governance Report

  • 6 Chair's Statement

• 68 Audit Committee Report

  • 9 Why Invest?

• 71 Directors' Remuneration Report

  • 10 Introduction to the Investment Manager

• 73 Directors' Responsibilities Statement

• 12 Objectives

  74 FINANCIAL STATEMENTS

  Certain words and terms used throughout this Annual Report and Financial Statements are defined in the Glossary on pages 100 to 102. Where alternative performance measures (APMs) are used, these are identified by being marked with an *. In accordance with ESMA Guidelines on APMs, the Board has considered what APMs are included in the Annual Report and financial statements which require further clarification. An APM is defined as a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.

• 14 Portfolio Overview

  • 74 Independent Auditor's Report

• 18 Operating Review

• 34 Case Study

  • 81 Consolidated Financial Statements (Audited)

    APMs included in the Annual Report and financial statements are identified as non-GAAP measures and are defined within the Glossary

    COVER IMAGES

• 36 Responsible Investment

• 46 Risk and Risk Management

  • 85 Notes to the Consolidated Financial Statements (Audited)

  Front cover: Suntex (Euryalus Portfolio),

  15.3MWDC (Oregon)

  Photo credit: US Solar Fund plc

• 56 Section 172

Inside cover: Milford, 127.8MWDC (Utah)

100 GLOSSARY*

Photo credit: US Solar Fund plc

103 KEY CONTACTS

104 NOTICE OF AGM

1 Figures as at 31 December 2023 unless otherwise specified.

Visit our company websitehttps://www.ussolarfund.co.uk/

2023 HIGHLIGHTS

Financial highlights

$258.2m	$0.78	(1.7%)
Net Asset Value (NAV)*	NAV per share*	NAV total return2*
2022: $320.0m	2022: $0.96	2022: 9.98%
$18.7m	0.95x	$(43.1m)
Dividends paid3*	Total dividend cover 4*	IFRS loss for the year 5
2022: $18.4m	2022: 1.20x	2022: $14.5m profit
(34.4%)	$0.54	(30.8%)
Total Shareholder Return (TSR)6*	Share price as at 30 December 2023	Discount to NAV7*
2022: (5.95%)	2022: $0.84	2022: (12.8%)

• 2 NAV total return is based on dividends paid throughout the period and NAV movement since inception.

• 3 Excludes Q3 2023 dividend paid to shareholders which was transferred in advance of the year end to the registrar to facilitate payment to shareholders

• 4 Presented on a total cash generation including one-off gains on asset sale. See pages 24 to 25 for further dividend cover analysis.

5 6 7

Includes unrealised losses on the portfolio fair value for the year ended 31 December 2023.

Total return to shareholders is based on dividends paid and reinvested (at ex-dividend date) throughout the period and share price movement since the issue price of $1.00. The percentage by which the closing share price on comparable dates exceeds/(falls short of) the NAV per share.

Operational highlights

Environmental highlights10 11

41

443MWDC

480,900

Operating Solar Assets 2022: 42

Total capacity 2022: 543MWDC

tCO2 emissions avoided 2022: 618,000 t

816GWh

(7.2%)

83,100

Total electricity generation8 2022: 904GWh

Generation against forecast 2022: (4.9%)

Equivalent US homes powered 2022: 95,000

11.9 years

BBB+

104,500

Weighted average PPA term remaining9 2022: 13.8 years

Average offtaker credit rating 2022: BBB+

Equivalent US cars removed from the road 2022: 134,000

• 8 The total electricity generation data includes Mount Signal 2 (MS2) for the first six months of 2023.

• 9 Remaining PPA term from 31 December 2023.

• 10 Environmental figures use actual generation figures for the period. US CO2 emissions displacement is calculated using data from the US Environmental Protection Agency's 'Avoid Emissions and generation Tool' (AVERT), Equivalent US homes and cars removed figures are based on CO2 emissions displaced and data from the US Environmental Protection Agency and US Energy Information Administration.

• 11 Based on the total electricity generation data includes MS2 for the first six months of 2023.

2023 IN REVIEW

INITIATION OF STRATEGIC REVIEW

The Company announces it is undertaking a strategic review due to the sustained discount in its share price relative to its underlying NAV.

The Board worked closely with its advisors to explore all options available to maximise value for shareholders, including a sale of the Company, its assets and changing the investment management arrangements of the Company.

MN8 exercises its option to acquire the Company's 50% interest in MS2.

Financial close of MS2 sale

MN8 Energy LLC, is a renewable energy business formerly known as Goldman Sachs Renewable Power LLC, who were granted a purchase option in 2022 to acquire the Company's interest In MS2.

USF's sale of its 50% interest in MS2 reaches financial close.

Strategic review outcomes announced The Board announces that the current market backdrop is not conducive to a sale of the Company or its assets and confirms that the existing

Investment Management Agreement with New Energy Solar Manager, will not extend beyond the expiry of the initial five year term in April 2024.

2022 22 OCTOBER

2023

JANUARY

26 JUNE

10 JULY

OVERVIEW

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTS



Amber is appointed

County Home (Heelstone Portfolio),

Investment Manager

2.6MWDC (North Carolina)

RCF renewed The Company renews the $40 million USF Avon LLC corporate revolving credit facility on favourable terms. This facility was fully repaid in June 2023 with a portion of the MS2 proceeds and remained undrawn as at 31 December 2023 (and continues to be undrawn).

Amber Infrastructure Investment Advisor, LLC is appointed as Investment Manager and third-country AIFM of the Company.

More information about the Investment Manager is set out on pages 10 to 11.

See alsohttp://www.amberinfrastructure.com.

Investment Policy changes effective Changes to the Company's investment policy, as approved by the shareholders at a general meeting held on 17 November 2023, become effective.

Heelstone tax equity buyout The final tax equity partners who provided tax equity financings to support the construction of the Heelstone portfolio, are bought out as expected, releasing the Company from all tax equity commitments connected to the Heelstone portfolio.

Amber announced as preferred Investment Manager candidate The Company announces Amber is selected as preferred Investment Manager candidate, following a multi-phase competitive process conducted by the Board as part of the strategic review.

Shareholder's approve change to investment policy

Oregon REC Agreements announced

At a general meeting of shareholders, changes to the Company's investment policy are approved. The changes are principally clarificatory in nature, bringing the Company's investment policy into line with market and its peer group as well as expressly including late-stage development investments in scope for the Company. Full details of the changes can be found at https://www. ussolarfund.co.uk/sites/default/ files/267093_us_solar_fund_circular_ web.pdf. Refer also to page 58.

The Company announces that six of the Company's assets located in Oregon have signed new long-term contracts to sell Renewable Energy Certificates. More information about these REC Agreements is contained on pages 34 to 35.

21 AUGUST

6 SEPTEMBER

17 NOVEMBER

1 DECEMBER

18 DECEMBER

20 DECEMBER

CHAIR'S STATEMENT

I am pleased that the end of 2023 sees the Company in a stronger position having secured a new Investment Manager, Amber Infrastructure Investment Advisor, LLC, and delivered reasonable asset level performance during the year.

GILL NOTT CHAIR

Dear Shareholders,

I am pleased that the end of 2023 sees the Company in a stronger position having secured a new Investment Manager, Amber Infrastructure Investment Advisor, LLC, and delivered reasonable asset level performance during the year.

The last 12 months will be remembered as a challenging year for the financial markets. For USF, the effects of continuing macroeconomic volatility were further compounded by the uncertainty created by the Company's strategic review and the departure of USF's previous Investment Manager, New Energy Solar Manager.

As a result, and as has been observed across the entire UK investment company landscape, and the renewable sector specifically, the Company's shares have traded at a discount for a significant period. Whilst we are unable to control the macroeconomic factors that impact the share price at a particular point in time, the USF portfolio has continued to exhibit characteristics of high-quality infrastructure assets consistent with the Company's investment objective.

STRATEGIC REVIEW AND APPOINTMENT OF AMBER AS INVESTMENT MANAGER

The Board announced a strategic review in October 2022 to consider all potential options to maximise shareholder value. This was due to the sustained discount of the share price to NAV which had impeded the Company's ability to grow its asset base. The strategic review did not attract binding offers for the Company or its assets and concluded with the appointment of Amber Infrastructure Investment Advisor, LLC as the Company's Investment Manager. I thank the Board for their support and active involvement in stewarding USF through the strategic review together with the time and feedback that many of our Shareholders shared during this process.

OVERVIEW

STRATEGIC REPORT

CORPORATE GOVERNANCEFINANCIAL STATEMENTS

Amber was selected through a competitive process based on its experience in the US solar sector and advising a UK closed end listed investment company. Amber Infrastructure Investment Advisor, LLC, was formally appointed as the Company's Investment Manager on 1 December 2023. Following its appointment, the Investment Manager purchased five million shares in the Company in January 2024, further demonstrating its commitment to supporting the Board's strategic direction for the Company.

More information about the Investment Manager and the wider Amber group is available on pages 10 to 11.

PORTFOLIO UPDATE AND FINANCIAL PERFORMANCE

The Company owns a portfolio of assets located across four states in the US. The portfolio generated over 816 GWh of energy in 2023 which was approximately 7% below generation forecasts. The underperformance was due to below forecast solar irradiance as well as higher than expected unscheduled outages and other non-irradiance related factors. Enhancing portfolio performance by reducing unplanned outages to improve availability is an operational priority for the Board and the Investment Manager in 2024.

In June 2023, the Company finalised the |sale of its 50% share in Mount Signal 2 to MN8 Energy LLC, a renewable energy business formerly known as Goldman Sachs Renewable Power LLC. This followed the January 2023 exercise by MN8 of the purchase option granted to it in 2022 and the signing of a binding sale agreement in April 2023.

The Board confirms it is not currently seeking new investment opportunities due to the discounted share price.

Utilising a portion of the proceeds from the Mount Signal 2 sale (approximately $4.5m), the Company's $40 million revolving credit facility was fully repaid in June 2023. The facility was extended on superior terms in August 2023 and currently remains undrawn.

Over the year to 31 December 2023, the Company's audited NAV decreased to $258.2 million (31 December 2022: $320.00 million) and NAV per share to $0.78 per share (31 December 2022: $0.96 per Ordinary Share). The decrease in NAV is attributable largely to an increase in discount rates, driven by increases to the risk premium used as part of the valuation process. In addition, the nominal Power Purchase Agreements (PPAs) that comprise a large proportion of the Company's revenues over the next ten years provide fixed, contracted revenue payments that do not adjust in line with prevailing inflation. The Company's operating cost base is impacted by inflation leading to an expectation of relatively poor performance during periods of high inflation such as we have experienced in the recent past. Operating cost increases related to prior year's inflation and cost increases have now been included in the NAV, which has further attributed to the reduction in NAV. Finally the NAV has been impacted by the costs incurred by the Company to complete the strategic review.

In the 2023 interim accounts we advised shareholders that, as result of the feedback received during the strategic review and due to current market conditions, the Board felt it prudent to use the investment fair values at the lower end of the range provided by our Independent Valuer. We continue to believe that this is an appropriate and conservative approach, mainly due to limited benchmark transactions in the market for a comparable portfolio.

We do however plan to revisit this decision regularly, assessing information gathered by the Investment Manager, to determine the ongoing appropriateness of the use of the lower end of the Independent Valuer's range. More detailed information about the specific factors impacting the NAV are set out on page 26. Our intention is to continue to provide disclosures which demonstrate how external and portfolio specific factors impact the NAV.

CAPITAL MANAGEMENT

Assisted by Amber, the Company is currently analysing options available to it to return capital to Shareholders (including through a share buyback) and refinancing of the Company's existing debt as a means to optimise the Company's capital structure and improve the operational cash flows.

The Board will provide an update following the conclusion of this analysis, which is expected by the end of April 2024, which will include recommendations with respect to the use of remaining proceeds from the sale of Mount Signal 2.

DIVIDENDS AND OPERATING CASH FLOWS

The Company delivered a dividend of 5.66 cents per share for 2023, an increase of 1.5% over the 2022 dividend of 5.58 cents per share. Dividends paid in the year were 0.95x cash covered on a total cash basis (2022: 1.20x). The decrease compared to prior year was the result of a number of factors including a reduction in revenues generated by the portfolio following the sale of MS2 in the year, as well as an increase in the operational costs resulting from inflation and one-off costs incurred as part of the strategic review.

Looking ahead the Company's forecast operating cash flows have also reduced as a result of a number of factors including increases in operating costs and revisions to key operating cost assumptions to align with actual costs.

CHAIR'S STATEMENT CONTINUED

Based on the Company's reduced forecast operating cash flows, once the return of capital and refinancing analysis referred to above has been finalised, the Board intends to review the existing dividend policy to ensure that the dividend target is sustainable and supported by forecast operating cash flows.

GOVERNANCE

The Company, under the Investment Manager's guidance, has sought to improve disclosures and provide additional information in this Annual Report for the benefit of existing and prospective shareholders. This includes a more detailed explanation of the buildup of NAV and portfolio movement bridge, enhancements to the portfolio's forecast cash generation disclosures along with clear disclosure on the fixed elements of the revenue streams.

It is with regret that we announce Rachael Nutter will not stand for re-election to the Board at the Company's upcoming AGM due to an imminent increase in other work commitments. A process is under way to recruit Rachael's replacement as part of wider succession planning. I thank Rachael for her valued contributions and wise counsel over the past five years.

DISCONTINUATION VOTE

As required by the Company's Articles, because the Company has traded at an average discount to NAV in excess of 10% over the course of 2023, a special resolution will be proposed at the Company's forthcoming AGM, for shareholders to vote to wind up or otherwise reconstruct the Company.

If such a discontinuation resolution is passed, the Company's Articles provide the Board with four months to put forward a proposal.

OUTLOOK

The Company and the high-quality infrastructure assets comprising its portfolio continue to perform reasonably. The US states in which the Company's assets are located continue to provide a supportive backdrop for renewable generation, which we expect will continue irrespective of the outcome of the 2024 US federal election.

The Board remains of the view that the current discount to NAV does not reflect the underlying value of the Company and remains committed to the creation and delivery of long-term shareholder value. The strategic review conducted throughout 2023, demonstrated that prevailing market conditions are not conducive to the Company realising the value of its assets.

For these reasons, the Board recommends that shareholders vote against the discontinuation of the Company at the Company's forthcoming AGM.

I and my fellow Directors thank you for your continued support.

GILL NOTT CHAIR

22 March 2024

Visit our company websitehttps://www.ussolarfund.co.uk/

The US states in which the Company's assets are located continue to provide a supportive backdrop for renewable generation, which we expect will continue irrespective of the outcome of the 2024 US federal election.