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Share Name Share Symbol Market Type Share ISIN Share Description
Us Solar Fund Plc LSE:USF London Ordinary Share GB00BJCWFX49 ORD USD0.01
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.0025 0.24% 1.025 1.01 1.04 1.025 1.025 1.025 1,708,401 08:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Equity Investment Instruments 3.2 0.3 0.2 512.5 205

US Solar Fund PLC Annual Results to 31 December 2020 & Dividend

16/03/2021 7:01am

UK Regulatory (RNS & others)


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RNS Number : 3378S

US Solar Fund PLC

16 March 2021

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, TO US PERSONS OR INTO OR WITHIN THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN, OR ANY OTHER JURISDICTION WHERE, OR TO ANY OTHER PERSON TO WHOM, TO DO SO WOULD BE UNLAWFUL. THE INFORMATION CONTAINED HEREIN DOES NOT CONSTITUTE OR FORM PART OF ANY OFFER TO SELL OR ISSUE, OR ANY SOLICITATION OF ANY OFFER TO PURCHASE, SUBSCRIBE FOR OR OTHERWISE ACQUIRE, ANY INVESTMENTS IN ANY JURISDICTION.

16 March 2021

US SOLAR FUND PLC (USF, the "Company")

Annual Results to 31 December 2020 and Dividend Announcement

US Solar Fund PLC (LSE: USF) is pleased to announce its annual results. This covers the period ending 31 December 2020.

Highlights to 31 December 2020

-- Over the course of the year, the Investment Manager has focused on achieving its operational and dividend targets.

-- As at 31 December 2020, the Company had closed on five transactions since IPO, totalling 41 assets. These solar projects are spread across four states in the US with a total a capacity of 443MW(DC) . All 41 assets have power purchase agreements (PPAs) for 100% of generation with investment-grade offtakers for a weighted average term remaining of 14.9 years.

-- All of USF's assets are fully operational as at 31 December 2020. At the end of the period, USF had also executed binding agreements to acquire an initial 25% interest in an operating solar plant, Mount Signal 2 (MS2), bringing USF's portfolio to a total of 493MW(DC) of fully operating assets with a weighted average investment-grade PPA term remaining of 15.4 years.

-- USF's NAV at 31 December 2020 was $194.2 million. The 31 December 2020 NAV increased by US$1.3 million from 30 June 2020, due to construction cost savings on the Milford project, strong operating performance, and discount rate reductions as the portfolio moved to a fully operational state.

-- All 41 operating assets held for the year ending 31 December 2020 have been externally valued by KPMG, with the Company recognising a small gain across the portfolio due to positive working capital movements and increased portfolio valuations reflecting initial uplifts as assets commence operations.

-- In December 2020, one of the Company's wholly owned US subsidiaries signed a new $25 million revolving credit facility with Fifth Third Bank National Association (FTB Facility). The FTB Facility provides liquidity for capital expenditures, working capital and general corporate purposes. The FTB Facility is currently undrawn.

-- As at 31 December 2020, the Investment Manager's pipeline included 2.8GW(DC) of high-quality assets, with an aggregate value of approximately $2.7 billion in cash equity value and a weighted-average PPA term remaining of 15 years.

Dividends

-- The Board is pleased to declare a dividend for the quarter ended 31 December 2020 of 0.50 cents per ordinary share. The dividend will be paid on 12 April 2021 to shareholders on the register as at the close of business on 26 March 2021. The ex-dividend date is 25 March 2021. This brings the total dividend for FY 2020 to 2.0 cents per ordinary share.

-- With all projects now operating, USF confirms its 2021 annual dividend target of 5.5 cents per ordinary share, which will continue to be paid quarterly and be covered with operating cashflows.

-- The Company expects to declare the dividend for the quarter ended 31 March 2021 in June 2021, for payment in July 2021.

Highlights after Period-End

-- On 10 February 2021, the Company announced it was assessing debt and equity fund raising options. Any further fundraising is subject to Board and customary regulatory approvals and the Company will make a further announcement in due course.

Gill Nott, Chair of the Company said:

"US Solar Fund has continued to operate smoothly during 2020, and the Board would like to thank the Investment Manager's staff for their all hard work over the year. Despite challenges caused by the pandemic, they delivered seven in-construction assets through to full commercial operation. The entire portfolio is now fully operational and the Company confirms its 5.5 cent dividend target for 2021, to be fully covered with operating cashflows.

Having delivered on its IPO goals, the Company is now well-positioned for future growth. Following November's Presidential elections, certainty over the political direction points to a supportive policy outlook for renewables and an accelerating energy transition in the US. The Investment Manager continues to maintain a pipeline of very attractive investment opportunities. We thank shareholders for their support and look forward to providing updates on further progress in the year ahead."

The Company's Annual Report and Financial Statements for the period ending 31 December 2020 are available on the Company's website at: www.ussolarfund.co.uk/investor-centre/key-documents-and-disclosure and can be found at https://data.fca.org.uk/#/nsm/nationalstoragemechanism .

For further information, please contact:

 
US Solar Fund 
 Liam Thomas                      +61 2 8622 9123 
Cenkos Securities plc 
 James King 
 Tunga Chigovanyika 
 Will Talkington                  +44 20 7397 8900 
Jefferies International Limited 
 Stuart Klein 
 Gaudi le Roux 
 Neil Winward                     +44 20 7029 8000 
KL Communications                 +44 20 3995 6673 
Charles Gorman 
 Charlotte Stickings 
 

About US Solar Fund plc

US Solar Fund plc listed on the premium segment of the London Stock Exchange in April 2019, following its successful US$200m IPO. The Company's investment objective is 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 acquires or constructs, owns and operates solar power assets that are expected to have an asset life of at least 30 years and generate stable and uncorrelated cashflows by selling electricity to creditworthy offtakers under long-term power purchase agreements (or PPAs).

Further information on the Company can be found on its website at http://www.ussolarfund.co.uk .

About the Investment Manager

USF is managed by New Energy Solar Manager (NESM). NESM also manages New Energy Solar, an Australian Securities Exchange (ASX)-listed fund. NESM manages over US$1.4bn of invested capital across US and Australian solar plants.

NESM is owned by E&P Funds, the funds management division of E&P Financial Group, an ASX listed company (ASX: EP1) with over A$20 billion of funds under advice.

Chair's Statement

I am pleased to present the second Annual Report for US Solar Fund plc for the period ended 31 December 2020. It has been a very unusual year as a result of the global pandemic of COVID-19. The Board and the Investment Manager have met regularly, albeit virtually, and I am delighted

to say that the Company has continued to operate smoothly despite working remotely and with the Board and the Investment Manager spread across three continents. Also, in the face of the obvious challenges that the pandemic presented during the period, the Company reached completion of its final in-construction project on time and under budget, the entire 443MWDC, 41 project portfolio as at 31 December 2020, is now fully operational, and the Company is working toward financial close on its sixth acquisition; Mount Signal 2 (MS2). The operating assets performed well overall during 2020, with actual production of 374 gigawatt-hours (GWh); 2% above budgeted or forecast production of 365GWh; and 4% above weather-adjusted expected production of 360GWh. The recently approved US coronavirus relief package, proposed by the Biden administration, extends the existing Investment Tax Credit (ITC) incentives for solar at current rates for two years. Although this move does not impact USF's operational projects, it supports the economics of new solar projects which is expected to positively impact USF's investment pipeline.

The Board believes that USF's long-term contracted cash flows are particularly attractive in the current environment of low interest rates and reduced dividends in many sectors. The share price has traded up during the period from $1.05 at the end of the last financial year (31 December 2019), to $1.075 at the end of this financial year (31 December 2020). Including dividends paid and reinvested during the period, shareholder total return since inception is 10.13%.

POTENTIAL FUNDRAISING

With the Initial Public Offering (IPO) proceeds now fully committed, the Company is considering raising additional funds. The funds are expected to be used to refinance the Heelstone portfolio (Acquisition Four) and acquire a further 25% of MS2 in California (bringing the Company's total ownership of the MS2 asset to 50%). The two transactions are expected to benefit the Company by reducing gearing, and increasing the size and diversification of the overall portfolio. Refer to Note 24 of the financial statements for further information on the potential equity raise.

PERFORMANCE

USF's NAV at 31 December 2020 was $194.2 million, a 0.7% increase from the $192.9 million reported at 30 June 2020 and 0.1% decrease from the 31 December 2019 NAV of $194.4 million. The 0.6 cent per share increase in NAV from 30 June 2020 reflects the payment of 1 cent per share in dividends and 0.7 cents per share in operating expenses, which were more than offset by a 2.3 cents per share net gain in the fair value of underlying investments. In accordance with Company policy, all 41 operating assets held for the year ending 31 December 2020 have been externally valued by KPMG, with the Company recognising a small gain across the portfolio due to positive working capital movements and increased portfolio valuations. The share price has also increased from $1.05 at 31 December 2019 ($0.94 at 30 June 2020) to $1.075 over the period and was trading at $1.06 as at 1 March 2021. The shares have traded at an average premium to NAV of 10.9% since 31 December 2020.

PORTFOLIO PROGRESS

During 2020, USF closed the acquisition of ten operational utility-scale solar projects in Oregon (140MWDC), 22 operational projects in North Carolina (130MWDC) and two operational projects in California (7MWDC). USF also executed a binding agreement to acquire a 25% interest in MS2 (Tranche One), a 200MWDC utility-scale solar operating project in California, with an option to acquire a further 25% (Tranche Two). All 41 of USF's Solar Assets have power purchase agreements (PPAs) in place with contracted prices for 100% of electricity generated. Including the initial 25% stake in MS2, the PPAs have an average remaining term of 15.4 years at period end.

DIVID

The Company paid a dividend of 0.50 cents per share in February 2021 for the quarter ending 30 September 2020, totalling 1.00 cent per share for the six-month period, representing an annualised dividend of 2% when measured against the initial issue price of $1.00 per share.

With all projects now operating, USF expects to cover the remaining 2020 dividend with operating cash flows and confirms its 2021 annual dividend target of 5.5 cents per ordinary share will be covered with operating cash flows.

OUTLOOK AND COVID-19

The US is a leading global solar market and is expected to experience continued strong growth in the future. The Company believes this growth will largely be driven by the improving cost competitiveness of solar PV and, to a lesser extent, the continued support of state and federal incentive schemes.

During the period, the global COVID-19 pandemic continued spreading and the US has struggled to contain the virus. However, the initiation of the roll-out of vaccinations around the US, as well as the major focus on tackling the COVID-19 pandemic by President Biden, are both positive signs for 2021. Despite the widespread economic impact of the disruption caused by the virus, the US solar market has fared well during the period. Operation and construction of Solar Assets were both largely deemed essential services and allowed to continue with little

or no interruption. Indications of further growth of the industry also remain strong. 87GWDC of utility-scale PV is expected to be installed in the US from 2021 to 2025 according to Wood Mackenzie. This includes an 8.5GWDC increase on earlier forecasts (one month prior), after the ITC extension was recently passed. As solar is the most cost-effective new build source of power generation in much of the US, the outlook for solar in the US remains positive.

In January 2021 US legislation extended US$900 billion of coronavirus relief and decreed US$1.4 trillion in federal spending and tax extensions. The legislation delays the ITC step down for solar power by two years. This means that the ITC will remain at 26% for projects that begin construction by the end of 2022, will fall to 22% for projects that begin construction by the end of 2023, and then fall to 10% for commercial solar projects commencing construction from 2024 onwards. These changes do not impact the Company's operating portfolio, with the tax equity funding process completed on all projects, however the Company expects to see increased acquisition opportunities resulting from the ITC increase.

The impact of COVID-19 on the Company has been limited despite shutdown measures reducing US electricity demand by 3.8% during 2020. Despite this, USF's assets were able to continue to operate as normal and sell 100% of power generated to their offtakers, with utilities and system operators balancing electricity supply and demand by reducing output from their own generation or, where specific contractual mechanisms exist, requesting that other generators reduce output. With the COVID-19 recovery underway in the US, the EIA forecasts electricity demand will increase by 2.1% in 2021, placing USF in a strong position to continue to operate and sell power as normal.

We believe that USF's core business is resilient and that the Company is well-positioned for future growth. At the period end, all 41 projects acquired are operational and are generating revenue for the Company. The Board is pleased with the progress made committing all the IPO proceeds and successfully achieving a fully operating portfolio to support the full 5.5 cent per share dividend as targeted at IPO.

We are keen to engage with shareholders at the Annual General Meeting (AGM) which we intend to hold in May 2021. Details of the timing and nature of the meeting will be confirmed in due course subject to applicable Government legislation and restrictions.

GILL NOTT

CHAIR

16 March 2021

Investment Manager's Report

SUMMARY OF THE PERIOD

Over the course of the year, the Investment Manager has focused on achieving its operational and dividend targets. As at 31 December 2020, the Company had closed on five transactions since IPO, totalling 41 assets. These solar projects are spread across four states in the US with a total capacity of 443MWDC. All cash flows from these assets are contracted in the US with investment-grade offtakers for a weighted average of 14.9 years.

On 31 December 2020, the Company announced it had executed binding agreements to acquire up to a 50% interest in a 200MWDC operating solar plant located in the Imperial Valley of Southern California, MS2. On completion of Tranche One of the transaction, expected in March 2021, USF's total portfolio will be 493MWDC of fully operational assets, with a weighted average investment-grade PPA term of 15.4 years as at 31 December 2020.

COVID-19 had no material impact on USF's operating or construction assets over the period. All assets within the portfolio are now operating with USF's final in-construction asset reaching its commercial operations date under its PPA in November 2020; on time and under budget. At year end all assets are operational and generating revenues for USF.

INVESTMENT PORTFOLIO PROGRESS

USF closed three acquisition transactions between 1 January 2020 and 31 December 2020. In January 2020, USF closed the acquisition of eight operating utility-scale solar power projects totalling approximately 39MWDC in North Carolina from Greenbacker Renewable Energy Company LLC. The projects commenced commercial operations between 2012 and 2015 and all are selling 100% of their electricity output under fixed-price long-term PPAs with Duke Energy Progress and Progress Energy (S&P rating for both: A-).

In March 2020, USF closed the acquisition of a portfolio of 22 operating utility-scale solar power projects located in North Carolina, Oregon and California, with a total capacity of 177MWDC from Heelstone Renewable Energy, LLC. The assets sell 100% of their electricity output under fixed-price long-term PPAs to a variety of investment-grade offtakers (S&P ratings: from BBB+ to A).

In June 2020, USF closed the acquisition of four mechanically complete utility-scale solar power projects located in Oregon totalling 61MWDC. The portfolio was acquired from Southern Current LLC. The Investment Manager announced the commissioning of the four assets in July 2020, with the portfolio now operational. All four projects are selling 100% of their electricity output under long-term PPAs with Portland General Electric, an investor-owned utility based in Portland (S&P rating: BBB+).

During the year, USF brought its remaining seven in-construction assets to commercial operations; six in North Carolina and one in Utah. The six North Carolina projects totaling 39MWDC achieved commercial operations progressively during the year, with the Investment Manager working closely with the construction contractor to achieve operations in line with planned timeframes. These assets are selling 100% of their electricity output to Duke Energy Progress (S&P rating: A-), a subsidiary of Duke Energy, under long-term PPAs.

USF's final construction asset, the 128MWDC Milford project in Utah, achieved completion in November 2020 on time and under budget. The Company was pleased to benefit from construction and development cost savings of approximately $4 million as well as approximately

$1 million from better than expected test electricity sales, which resulted in a combined $5 million upside to the Company compared to acquisition assumptions. Milford is selling 100% of the electricity generated to PacifiCorp (S&P: A) for a remaining PPA term of 24.9 years as at 31 December 2020.

USF's portfolio is now fully operational, comprising 443MWDC of capacity across 41 projects, in four states and with a variety of investment-grade offtakers (S&P rated: BBB+ to A). In December 2020, the Company announced it had executed binding agreements to acquire a 25% interest in a 200MWDC operating solar plant located in the Imperial Valley of Southern California, MS2, with an option to acquire a further 25%. If the option of the additional 25% is exercised, USF's total operating portfolio will be 543MWDC.

US SOLAR FUND STRUCTURE

USF invests in its US-based subsidiary, USF Holding Corp., via a combination of debt and equity. USF is entitled to a Management Services Agreement (MSA) fee for the provision of management services to USF Holding Corp. In addition, the Company earns interest on the intercompany loan. Cash may also flow from USF Holding Corp. to USF as a dividend or return of capital, which is distributed to USF Holding Corp. on a periodic basis from the Company's underlying Solar Assets.

There are no restrictions on the movement of cash between USF and its subsidiary. As of 31 December 2020, the Company and USF Holding Corp. have available cash of $0.05 million and $14.3 million respectively, giving a total balance of $14.35 million which may be used to meet the obligations of USF. At 31 December 2020 an undrawn $25 million revolving credit facility was in place at USF Avon LLC (a wholly owned subsidiary of USF Holding Corp.), providing further liquidity support.

OPERATING ASSET UPDATE

The USF portfolio was fully operational by the end of 2020. The portfolio performed well overall during the year, with actual production of 374 GWh. USF measures "Actual" performance against "Forecast" and "Expected" targets. "Actual" production is the number of GWh generated and sold to the offtaker. "Forecast" (also called "Budget") is the P50 production forecast for the plant before any adjustment for experienced weather conditions. "Weather-adjusted expected" or simply "Expected" production is the Forecast production of the plant adjusted for weather conditions during the period. The difference between Actual and Expected production allows an assessment of asset performance excluding the impact of weather.

During 2020, USF's production of 374 GWh was 2% above budgeted or forecast production of 365GWh, and 4% above weather-adjusted expected production of 360GWh. This reflects a production index (actual generation divided by weather-adjusted expected generation) of 104% for the year.

UTAH

In Utah, the Company's newest asset Milford, which comprises 29% of USF's portfolio capacity by MWDC, performed above budget and weather- adjusted expectations between its commercial operations date (in November 2020) and year end. Prior to commercial operations, Milford also generated test revenue that exceeded expectations by approximately $1 million. In December, its first full month of operations, Milford performed above both budget and weather-adjusted expectations.

NORTH CAROLINA

In North Carolina, performance was below the Investment Manager's expectations during the year primarily due to storm-related grid outages, ongoing inverter issues at the 7MWDC Gauss site, and isolated inverter outages at other sites. Issues at Gauss were largely resolved under a warranty claim by year end, and inverter issues at other sites are being resolved progressively during the first quarter of 2021.

OREGON

USF's Oregon assets, which became fully operational in the third quarter, performed above budget but below weather-adjusted expectations. In the third quarter, production from the Oregon projects was reduced due to smoke and dust from West Coast wildfires. Additionally, the Oregon sites experienced significant snowfall during November and December thereby decreasing weather-adjusted performance. Snow coverage of solar panels across a site can be highly variable, and therefore snow coverage is not included in the adjustment for actual weather conditions. As a result, in periods where there has been snow coverage, performance against weather-adjusted expectations will be lower.

CALIFORNIA

During the year, the two assets in California (comprising 2% of USF's portfolio capacity by MWDC), were impacted by smoke and dust from the West Coast wildfires. In the fourth quarter, the assets performed below budget and weather-adjusted expectations due to soiling. This will be addressed by a panel washing before the 2021 summer high-production period.

POTENTIAL FUNDRAISING

Given that the proceeds of the IPO are now fully committed the Company is considering raising additional funds. The proceeds of a further fundraising could be used as part of a refinancing of the Heelstone (Acquisition Four) portfolio comprising 14 projects (90MWDC) in North Carolina, six projects (79MWDC) in Oregon and two projects (7MWDC) in California, as well as exercising the option to acquire a further 25% of MS2 in California (bringing the Company's total ownership of the asset to 50%). These two transactions could benefit the Company by reducing gearing, and increasing the size and diversification of the overall portfolio. Any further fundraising is subject to Board and customary regulatory approvals.

REVOLVER

In December 2020, one of the Company's wholly owned US subsidiaries signed a new $25 million revolving credit facility with Fifth Third Bank National Association (FTB Facility). The FTB Facility provides liquidity for capital expenditures, working capital, and general corporate purposes. It increases the Company's flexibility to consider bolt-on acquisition opportunities. As the Company grows, the FTB Facility could grow in parallel to further support the Company's growth. The FTB Facility may be used to fund transactions, allowing the Company to commit to transactions in the pipeline. The FTB Facility is currently undrawn.

PIPELINE UPDATE

The pipeline has remained robust since the Company's IPO ranging from US$1.9 billion to US$4.8 billion at any given quarter. As at 31 December 2020, the Investment Manager's pipeline included 2.8GWDC of high-quality assets, with an aggregate value of approximately $2.7 billion in cash equity value and a weighted-average PPA term of 15 years. This includes Tranche Two of MS2 which gives USF the option, exercisable for up to 12 months from completion of Tranche One, to acquire a further 25% of the 200MWDC asset. This compares to a pipeline of 2.0GWDC of assets with a $1.9 billion cash equity value, and an average PPA term of 14 years, at 31 December 2019.

Throughout the course of the year, the Investment Manager has screened over 13GWDC of projects, with a total cash equity value of over $13 billion. The Investment Manager continues to take a conservative approach to pricing. It also continues to strictly adhere to a process that is consistent with the strategy and return targets of the Company given the pipeline offers numerous high-quality construction-ready and operational investment opportunities.

THIRD-PARTY FRAUD

At the end of January 2020, the Investment Manager was the victim of a fraud by a third-party in relation to $6.9 million of contracted construction payments. The Company fully recovered the entire $6.9 million within two months. Immediately following the fraud, with the full support of the Board, the Investment Manager appointed a major accounting firm to review its financial controls and processes. The review was completed in March 2020 and the Investment Manager has implemented the enhancements to its financial controls and processes suggested by the accounting firm. The Investment Manager has also undertaken internal and external reviews focused on IT and email security, particularly with more employees working remotely as a result of COVID-19 workplace access restrictions, and recommended enhancements to cybersecurity are now in place.

In March 2021 the Board engaged the Company's Auditor Deloitte, LLP, to perform an Agreed Upon Procedures Engagement. This was to confirm that the recommendations made by a third-party accounting firm in March 2020 in connection with the Investment Manager's financial controls and processes had been implemented by the Investment Manager. No exceptions were noted from these procedures.

EVENTS AFTER THE PERIOD

On 10 February 2021, the Company announced it was assessing debt and equity fundraising options. Any further fundraising is subject to Board and customary regulatory approvals, and the Company will make an announcement in due course.

CORONAVIRUS

COVID-19 has had limited impact on the Company to date. Since the outbreak, USF has made changes to its work environment to ensure the health and safety of its employees, contractors, and stakeholders. The New York office is staffed on a limited basis with most of the US team working remotely using existing systems. The Sydney office has implemented staggered access arrangements to enable staff to work from the office while adhering to social distancing guidelines.

The Investment Manager works with contractors and other stakeholders to ensure that operational targets are met whilst also meeting relevant COVID-19 requirements. Essential for economic activity, the generation and provision of electricity in most of the US has not been significantly disrupted by the pandemic. USF's projects have continued to operate throughout the pandemic and service personnel have been permitted

to travel to sites to conduct work as needed. The Investment Manager continues to assess the current and potential impact of the COVID-19 measures implemented by US federal and state governments on the Company's investment strategy and operations.

The Investment Manager also monitors actual and forecast changes in electricity and financial markets to assess the potential impact on USF, developing scenarios and planning for a range of outcomes. Leading indicators monitored by the Investment Manager include:

-- Electricity prices: COVID-19 restrictions of economic activity have contributed to both reduced demand for electricity and an oversupply of oil on global markets. These factors have resulted in reduced electricity prices in many markets including most US electricity markets. USF's short- to medium-term exposure to electricity prices is limited, given its long-term PPAs (average of 15.4 years as at 31 December 2020 when including 25% interest of MS2).

-- Equity markets: UK equity markets have remained open during COVID-19. Renewables funds, in particular, have seen continued support from investors and continue to raise new capital, demonstrating demand for the sector.

-- Tax equity markets: Since the onset of COVID-19 it has become evident that tax equity funding may be less available than in previous years as the outlook for US corporate profitability remains weak, and the available pool of tax equity funding may shrink as a result. This is not a current issue for USF as tax equity funding is complete or committed for all USF projects and, at this time, it is not seeking to close any further transactions that require tax equity. The Investment Manager will continue to monitor US tax equity markets given the likely requirement for tax equity for any future transactions.

-- Debt markets: In the earlier stages of COVID-19, debt providers increased pricing and reduced lending volumes in response to the uncertainty of current and future economic conditions. Since then, debt markets have largely normalised and USF successfully put in place its FTB Facility later in the year. USF's existing assets are largely insulated from short- to medium-term movements in debt markets, with all debt in place for levered projects (Acquisition One, Four and Five). Long-term debt is in place for Acquisition Four and debt does not mature until after 2030. Refinancing of Acquisition Four is at USF's option and subject to raising additional equity capital.

-- Insurance: COVID-19 has caused the global insurance market, and specifically the renewables industry insurance market, to experience changes such as increased deductible amounts and additional conditions for business interruption coverage for events occurring offsite. The Investment Manager is working with underwriters and insurance brokers to implement appropriate coverage to address site risks.

For further information please see our COVID-19 Statement at www.ussolarfund.co.uk/usf-and-covid-19-pandemic .

INVESTMENT PORTFOLIO

As at 31 December 2020 the Company owned 41 operational, utility-scale solar projects, totalling 443MWDC. USF is expected to financially close on Tranche One of its sixth acquisition, a 25% stake in the 200MWDC MS2 project in Southern California, in March 2021, bringing the total operational portfolio to 42 projects with a total capacity of 493MWDC.

Table 1: Portfolio Overview

 
     Asset       Capacity     Location     Acquisition  Acquisition   Energy Offtaker   Offtaker    Remaining    COD 
                  (MWDC)                                    Date                          Credit    PPA Length 
                                                                                          Rating     (Years) 
    Milford       127.8         Utah           One        Aug 19        PacifiCorp       S&P: A       24.9      Nov 20 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                         Southern 
                                                                        California 
 Mount Signal      49.9      California        Six        Mar 19          Edison        S&P: BBB      19.4      Jan 20 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                     Portland General 
    Suntex         15.3        Oregon         Five        Jun 20          Electric      S&P: BBB+     10.6      Jul 20 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                     Portland General 
  West Hines       15.3        Oregon         Five        Jun 20          Electric      S&P: BBB+     10.6      Jun 20 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                     Portland General 
    Alkali         15.1        Oregon         Five        Jun 20          Electric      S&P: BBB+     10.7      Jun 20 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                     Portland General 
  Rock Garden      14.9        Oregon         Five        Jun 20          Electric      S&P: BBB+     10.7      Jun 20 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
   Chiloquin       14.0        Oregon         Four        Mar 20        PacifiCorp       S&P: A       11.0      Jan 18 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
     Dairy         14.0        Oregon         Four        Mar 20        PacifiCorp       S&P: A       10.8      Mar 18 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
  Tumbleweed       14.0        Oregon         Four        Mar 20        PacifiCorp       S&P: A       11.0      Dec 17 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
   Lakeview        13.7        Oregon         Four        Mar 20        PacifiCorp       S&P: A       10.8      Dec 17 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
  Turkey Hill      13.2        Oregon         Four        Mar 20        PacifiCorp       S&P: A       10.8      Dec 17 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
    Merrill        10.5        Oregon         Four        Mar 20        PacifiCorp       S&P: A       10.8      Jan 18 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
    Lane II        7.5     North Carolina      Two        Dec 19         Progress        S&P: A-      12.7      Jul 20 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
Pilot Mountain     7.5     North Carolina      Two        Dec 19         Carolinas       S&P: A-      12.7      Sep 20 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                     Virginia Electric 
  Davis Lane       7.0     North Carolina     Four        Mar 20          & Power       S&P: BBB+     12.0      Dec 17 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                     Virginia Electric 
     Gauss         7.0     North Carolina     Four        Mar 20          & Power       S&P: BBB+     12.6      Oct 18 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                      North Carolina 
    Jersey         7.0     North Carolina     Four        Mar 20          Electric       S&P: A-       7.0      Dec 17 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
   Sonne Two       7.0     North Carolina     Four        Mar 20         Carolinas       S&P: A-      10.6      Dec 16 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
    Red Oak        6.9     North Carolina     Four        Mar 20         Progress        S&P: A-      11.0      Dec 16 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                     Virginia Electric 
    Schell         6.9     North Carolina     Four        Mar 20          & Power       S&P: BBB+     11.0      Dec 16 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
   Siler 421       6.9     North Carolina     Four        Mar 20         Progress        S&P: A-      10.6      Dec 16 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
    Cotten         6.8     North Carolina     Four        Mar 20         Progress        S&P: A-      10.9      Nov 16 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
    Tiburon        6.7     North Carolina     Four        Mar 20         Carolinas       S&P: A-      10.6      Dec 16 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
 Monroe Moore      6.6     North Carolina     Four        Mar 20         Carolinas       S&P: A-      10.6      Dec 16 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
   Four Oaks       6.5     North Carolina     Three       Dec 19         Progress        S&P: A-       9.8      Oct 15 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
   Princeton       6.5     North Carolina     Three       Dec 19         Progress        S&P: A-       9.8      Oct 15 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
     Tate          6.5     North Carolina      Two        Dec 19         Progress        S&P: A-      12.7      Aug 20 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
   Freemont        6.4     North Carolina     Four        Mar 20         Carolinas       S&P: A-      10.6      Dec 16 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
   Mariposa        6.4     North Carolina     Four        Mar 20         Carolinas       S&P: A-      10.7      Sep 16 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
  S. Robeson       6.3     North Carolina     Three       Jan 20      Progress Energy    S&P: A-       6.6      Jul 12 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
     Sarah         6.3     North Carolina     Three       Dec 19         Progress        S&P: A-       9.5      Jun 15 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
     Nitro         6.2     North Carolina     Three       Dec 19         Progress        S&P: A-       8.9      Jul 15 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
   Sedberry        6.2     North Carolina     Four        Mar 20         Progress        S&P: A-      10.6      Dec 16 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
    Willard        6.0     North Carolina      Two        Dec 19         Progress        S&P: A-      12.7      Oct 20 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
    Benson         5.7     North Carolina      Two        Dec 19         Progress        S&P: A-      12.7      Aug 20 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
  Eagle Solar      5.6     North Carolina      Two        Dec 19         Progress        S&P: A-      12.7      Aug 20 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                      San Diego Gas & 
    Granger        3.9       California       Four        Mar 20          Electric      S&P: BBB+     15.7      Sep 16 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                      San Diego Gas & 
 Valley Center     3.0       California       Four        Mar 20          Electric      S&P: BBB+     15.9      Dec 16 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
  County Home      2.6     North Carolina     Four        Mar 20         Carolinas       S&P: A-      10.6      Sep 16 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
   Progress 
       1           2.5     North Carolina     Three       Jan 20      Progress Energy    S&P: A-      11.3      Apr 12 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
   Progress 
       2           2.5     North Carolina     Three       Jan 20      Progress Energy    S&P: A-       7.0      Apr 13 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
                                                                        Duke Energy 
    Faison         2.3     North Carolina     Three       Dec 19         Progress        S&P: A-       9.3      Jun 15 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
Grand Total       492.9                                                                               15.4 
                 --------  --------------  -----------  -----------  -----------------  ---------  -----------  ------ 
 

ACQUISITIONS

As of 31 December 2020, the Company had closed five acquisitions. Acquisitions One and Two completed in 2019, and Acquisitions Three, Four and Five were completed in 2020.

In December 2020, the Company announced it had executed binding agreements to acquire a 25% interest in MS2, a 200MWDC operating solar plant located in the Imperial Valley of Southern California, with an option to acquire a further 25%. Having already paid a $2.3 million deposit in December 2020, USF will fund the remainder of the $23 million Tranche One purchase price using a combination of available cash and the FTB Facility. Including MS2, the total committed capital is $194.4 million (with $179.2 million invested as at 31 December 2020).

Table 2 shows USF's completed and committed acquisitions as well as near-term growth options, being the acquisition of a further 25% stake in MS2, and the refinancing of the Acquisition Four portfolio. As the Company is fully invested and committed, executing these growth options is subject to the Company raising sufficient further equity capital. Figure 7 shows USF's portfolio by stage since IPO.

Table 2: Portfolio Acquisition Commitments and Growth Options

 
              US$(m)                 Invested   Remaining Commitment  Total Commitment 
                                     (as at 31 
                                     Dec 2020) 
   Acquisition One (Completed)         30.0              -                  30.0 
                                    ----------  --------------------  ---------------- 
   Acquisition Two (Completed)         42.6            (5.5)                37.1 
                                    ----------  --------------------  ---------------- 
  Acquisition Three (Completed)        36.1              -                  36.1 
                                    ----------  --------------------  ---------------- 
   Acquisition Four (Completed)        38.3              -                  38.3 
                                    ----------  --------------------  ---------------- 
   Acquisition Five (Completed)        29.9              -                  29.9 
                                    ----------  --------------------  ---------------- 
    Acquisition Six Trache One 
 (March 2021 Expected Completion)      2.3              20.7                23.0 
                                    ----------  --------------------  ---------------- 
   Total Committed and Invested       179.2             15.2               194.4 
                                    ----------  --------------------  ---------------- 
    Acquisition Six Trache Two          -           21.0 to 23.0        21.0 to 23.0 
          (Growth Option) 
                                    ----------  --------------------  ---------------- 
   Acquisition Four Refinancing 
          (Growth Option)               -               80.0                80.0 
                                    ----------  --------------------  ---------------- 
  Total Including Growth Options      179.2        116.2 to 118.2      295.4 to 297.4 
                                    ----------  --------------------  ---------------- 
 

US SOLAR MARKET UPDATE

Despite current pandemic conditions, US solar photovoltaic (PV) installations accounted for 43% of new US electricity-generating capacity additions from Q1 to Q3 2020, representing the largest share of new capacity addition by type, followed by natural gas with 30%. During Q3 2020, 2.7 gigawatts (GWDC) of utility-scale PV capacity was installed in the US, representing:

   --               a 90% increase compared to Q3 2019; 
   --               a 370% increase compared to Q3 five years prior; and 
   --               the largest third quarter for US utility-scale PV since 2016. 

This 2.7GWDC of utility-scale PV deployed brings 2020 cumulative installed capacity to 7.6GWDC through to the end of Q3 as seen in the figure below. A further 7GWDC is expected to be completed by the end of December 2020, which will put 2020 on track to be the largest year for US utility-scale PV installations.

According to Wood Mackenzie, the US utility-scale PV contracted pipeline grew by a further 7GWDC over the quarter to reach a record high of 69.2GWDC. The growth has been driven by continued expansion of state-level renewable energy targets as well as targets set by large corporates, utilities, and municipalities. While there have been concerns about the impact of COVID-19 on new project development, utility-scale PV is expected to remain the most economically competitive electricity source in the US. Voluntary procurement, where procurement is primarily driven by the attractive economics of utility-scale PV, continues to be the top driver of new projects contracted in the US at 53% of total projects in Q3 2020, as seen in Figure 9 below. The US utility-scale PV market is expecting to see a rise in Renewable Portfolio Standards (RPS) driven solar installations as state governments, utilities and corporations set more stringent renewable and carbon reduction targets. During 2020, utilities in states including California, Colorado and Washington announced carbon reduction targets to align with state policies, but some went further, setting targets above these policies. Since 2018, nine states have raised their RPS and carbon reduction targets.

Although the pandemic heightened uncertainty in financial and electricity markets, the utility-scale solar market has continued to expand. As at Q3 2020, Wood Mackenzie has not reported any pandemic-related delays in US utility-scale PV construction. As a result of the Investment Tax Credit (ITC) extension in January 2021, Wood Mackenzie increased their 2021-2025 US utility-scale PV capacity additions forecast by 8.5GWDC to 87GWDC (one month after its original forecast) and utilities across the US have continued to ramp up solar procurement in anticipation of the revised ITC timetable.

In December 2020, the pandemic relief package included a two-year extension on the ITC for solar systems across the US, with the Solar ITC remaining at 26% for projects that begin construction by the end of 2022 (previously set to drop from 26% to 22% for projects that begin construction in 2021). The ITC then steps down to 22% for projects that begin construction by the end of 2023 and then 10% for commercial projects commencing construction from 2024 onwards. As a result of the extension, Wood Mackenzie forecasts US utility-scale PV installations will increase by 10% between 2021 and 2025 due to developers having more breathing room to spread projects out to 2024 and 2025. Although these changes do not impact USF's current operating portfolio, the Investment Manager expects to see increased acquisition opportunities later in 2021 through 2023, and that the other components of the relief package will have a positive impact on the already buoyant renewable energy market in the US.

With President Biden now in the White House, the renewables industry is poised for strong support and growth. President Biden has released an outline of the "Build Back Better" plan that includes a $2 trillion investment towards deploying decarbonisation technologies within the economy, targeting a carbon-free power sector by 2035. Wood Mackenzie projects that to achieve this goal, there would need to be at least $2.2 trillion deployed in renewables and energy storage, driving US utility-scale capacity additions to be at least 100GWDC per year by 2025 onwards (capacity currently projected to be 11.8GWDC in 2025).

INVESTMENT PERFORMANCE

At 31 December 2020, the Company's shares were trading at $1.075 per share. This represents a 10.8% premium to the NAV of $194.2 million or $0.970 per share. The Net Asset Value (NAV) is defined as the total assets less any liabilities.

The Company generated a profit after tax of $3,650,037 (0.018 cents per share) during the period. Interest income of $224,699, foreign exchange gains of $3,411 on funds that were retained in GBP, MSA fee income of $3,000,000 from management services provided to the Fund's wholly owned US subsidiaries, and a net gain from investments of $3,300,528, which were offset by administrative and other expenses of $2,878,601. The net fair value gain on investments arose from positive value impacts due to the lower discount rates which offset the negative value impacts from updated merchant curves across the Fund's operating portfolio.

The financial statements of the Company are presented on pages 79 to 102. The Fund's sensitivity to discount rates and power prices is detailed below.

Table 3: Performance Summary

 
                             31 DECEMBER 2020   30 JUNE 2020  31 DECEMBER 
                                                                  2019 
    Number of projects              41               41            37 
                            ------------------  ------------  ------------ 
   Capacity of projects           443MW            443MW         382MW 
                            ------------------  ------------  ------------ 
           NAV                   $194.2m          $192.9m       $194.4m 
                            ------------------  ------------  ------------ 
      NAV per share               $0.970           $0.964        $0.972 
                            ------------------  ------------  ------------ 
  Ordinary shares issued           200m             200m          200m 
                            ------------------  ------------  ------------ 
   Closing share price 
           (USF)                  $1.075           $0.940        $1.050 
                            ------------------  ------------  ------------ 
  Market capitalisation 
 (based on closing price)         $215m            $188m         $210m 
                            ------------------  ------------  ------------ 
      Dividends paid        $4.00m (full year)  $2.00m (half  $0.82m (full 
                                                    year)         year) 
                            ------------------  ------------  ------------ 
 Share price total return 
        performance               10.13%          (4.67%)        5.44% 
                            ------------------  ------------  ------------ 
 

ONGOING CHARGES

The ongoing charges ratio of the Company is 1.48% of the average NAV for the period ended 31 December 2020. The ratio has been calculated using the AIC recommended methodology. The estimated total cost as laid out in the prospectus was 1.35% based on proceeds of $250 million. As total proceeds of the IPO were $200 million, this ratio is slightly higher than estimated at IPO but the Company expects that the ratio will decrease as further funds are raised.

VALUATION

NET ASSET VALUE

The NAV for the period ending 31 December 2020 is $194.2 million.

The valuation of the Solar Assets produced by the Investment Manager is based on valuations by an independent appraiser on a semi-annual basis as at 30 June and 31 December. These valuations form part of the NAV calculation of the Company, which is subject to audit. Additionally, an unaudited NAV and NAV per Ordinary Share is calculated in US dollars on a quarterly basis as at 31 March and 30 September by the administrator, JTC (UK) Limited, (Administrator) in conjunction with the Investment Manager.

VALUATION METHODOLOGY

The Company has engaged an independent third-party appraiser to value operational Solar Assets acquired by the Company and its Project SPVs, every six months as at 30 June and 31 December.

At each quarter end, the Investment Manager provides the relevant third-party or internal valuations of the Solar Assets together with the valuations of the other assets of the Company and its Project SPVs to the Company Secretary and Administrator of the Company.

The Administrator, in conjunction with the Investment Manager, calculates the NAV and the NAV per ordinary share as at the end of each quarter of the Company's financial year, and submits the same to the Board for its approval.

The valuation has been calculated in accordance with Uniform Standards of Professional Appraisal Practice (USPAP) as applied to PV electricity generation systems in the US.

Fair value for operational Solar Assets is derived from a discounted cash flow (DCF) methodology. For Solar Assets that are still under construction at the time of valuation, the purchase price of the Solar Power Asset including construction and acquisition costs is normally used as an appropriate estimate of fair value, provided no significant changes to key underlying economic considerations (such as major construction impediments or natural disasters) have arisen.

In a DCF analysis, the fair value of the Solar Power Asset is the present value of the asset's expected future cash flows, based on a range of operating assumptions for revenues and costs and an appropriate discount rate range.

The Investment Manager has reviewed a range of sources in determining the fair market valuation of the Solar Assets, including but not limited to:

   --               discount rates publicly disclosed by the Company's global peers; 
   --               discount rates applicable to comparable infrastructure asset classes; and 

-- capital asset price model outputs and implied risk premium over relevant risk-free rates.

A broad range of assumptions are used in valuation models. Where possible, assumptions are based on observable long-term historical market and technical data given the long-term life of the assets. The Investment Manager also engages technical experts such as long-term electricity price forecasters to provide long-term inputs for use in its valuations.

Long-term electricity price forecasts are obtained every six months from two leading independent power price forecasting firms for each jurisdiction in which Solar Assets are located. The most recent two electricity price forecasts from each firm are averaged and provided to the independent valuer to project the prices at which existing PPAs will be re-contracted. The averaging of curves and providers is used to prevent the valuation of the portfolio being unduly influenced by one forecaster's set of assumptions; to mitigate potential forecaster errors in a particular period; and to reduce the timing risk inherent in valuing the portfolio shortly before curve updates are released. The independent valuer assesses these forecast prices for reasonableness against their own internal forecasts and others in the marketplace.

The Investment Manager has used its judgement in arriving at appropriate discount rates which are consistent with the discount rates derived by the independent valuer. The Investment Manager's view of discount rates is based on its knowledge of the market, considering intelligence gained from its bidding activities, discussions with financial advisers in the appropriate market and publicly available information on relevant transactions.

NESM has engaged independent valuer KPMG to calculate the fair value of its operating renewable energy assets. KPMG is one of the largest valuation firms in the US with significant experience in estimating the fair value of solar and other renewable energy assets. In accordance with Company policy, all 41 operating assets were externally valued at 31 December 2020 (construction assets were held at cost in previous periods).

Primary valuation methodology:

-- The equity fair values of USF's construction assets are based on the equity purchase price plus transaction costs (no assets were valued at this basis for 31 December 2020 as all assets were operational at period end).

-- The equity fair values of USF's operational assets are based on DCF modelling of pre-tax cash flows to equity as at 31 December 2020. This methodology more accurately reflects the valuation impact of the discrete debt instruments that USF has in place when compared to an unlevered valuation.

-- A post-tax valuation is conducted at the US Holding Corp. level to cross-check the implied post-tax discount rate.

The discount rates used by the external valuer ranged from 6.5% to 7.0% on a pre-tax weighted average cost of capital (WACC) basis for unlevered assets (30 June 2020: 6.8% to 7.2%) and 8.1% to 9.7% on a pre-tax cost of equity basis (30 June 2020: 8.1% to 8.8%) for levered assets. The generally lower discount rates reflect projects moving from construction to operational stage. The use of a WACC or cost of equity in valuations is dependent on actual leverage employed. For 31 December 2020 valuations, given the impact of the pandemic, KPMG has included COVID-19 risk premiums in overall equity and asset-specific risk premiums.

TAX EQUITY

At a federal level in the US, the Investment Tax Credit (ITC) introduced in 2005 to give project owners tax credits for installing designated renewable energy generation equipment has been highly successful in driving renewable energy adoption in the US. In addition, certain solar PV assets are eligible for accelerated depreciation, enhancing US tax effectiveness.

In January 2021, new legislation delayed the ITC step down for solar power by two years. This means that the ITC will remain at 26% for projects that begin construction by the end of 2022, will fall to 22% for projects that begin construction by the end of 2023, and then fall to 10% for commercial solar projects commencing construction from 2024 onwards.

Typically, solar PV asset developers and equity investors do not have sufficient taxable income to fully utilise these tax attributes. Many investment structures for US solar PV assets include tax equity partners (usually banks and other financial institutions, insurance companies or large corporates) who have the capacity to use tax attributes in a shorter timeframe, alongside equity investors. The ability of tax equity partners to generate value from tax attributes, including the ITC, over a shorter time horizon allows them to invest in solar PV projects and generate a return through a combination of savings on other tax liabilities and project cash distributions. There is also a clear pathway to exiting

the investment if they do not have an appetite to be a long-term holder in the solar PV project. At 31 December 2020, tax equity financing was in place for all projects in the Company's portfolio except two projects in the Acquisition Four (Heelstone) portfolio where the remaining tax equity funding amount of approximately $5.5 million is expected in the first half of 2021.

   Table   4 below details  the  tax  equity arrangements for the Company's  portfolio. 
   Table  4:   Tax   Equity Summary 
 
 Solar Asset    Tax Equity Partner       Funding Status              Remaining 
                                                                      Commitment 
 Acquisition    Wells Fargo              Fully funded and active     - 
  One 
               -----------------------  --------------------------  ------------- 
 Acquisition                             Partially funded and 
  Two           US Bancorp                active                     $5.5 million 
               -----------------------  --------------------------  ------------- 
 Acquisition    US Bancorp               Fully funded and active     - 
  Three                                   (five projects) 
                                          Fully funded and exited 
                                          (three projects) 
               -----------------------  --------------------------  ------------- 
 Acquisition    Hartford Insurance       Fully funded and active     - 
  Four           Company; 
                 Valley National 
                 Bank; and US Bancorp 
               -----------------------  --------------------------  ------------- 
 Acquisition    US Bancorp               Fully funded and active     - 
  Five 
               -----------------------  --------------------------  ------------- 
 Acquisition    Wells Fargo              Fully funded                - 
  Six 
               -----------------------  --------------------------  ------------- 
 

GEARING

On a look-through basis USF had outstanding debt of $237.3 million as at 31 December 2020, based on the face value of drawn debt. This equates to 55.0% of Gross Asset Value (GAV) (calculated as NAV plus outstanding debt), noting the Prospectus permits gearing above 50% during construction and the first year in which all assets are operational. The Company expects to reduce gearing to 50% or below, subject to the Company refinancing the Acquisition Four portfolio with the proceeds of the announced capital raising.

   Table 5:   Gearing Summary 
 
                                  FACILITY                      DRAWN FACE VALUE                   DRAWN FAIR 
   SOLAR ASSET        LOAN TYPE       SIZE                       USD (M)                                VALUE 
                                   USD (M)                                                          USD (M)16 
 Acquisition 
  One               Term Loan         48.5                                  48.1                         51.0 
                 ---------------  --------  ------------------------------------  --------------------------- 
 Acquisition 
  Four              Term Loans       152.3                               14 7. 6                     1 60 . 8 
                 ---------------  --------  ------------------------------------  --------------------------- 
 Acquisition 
  Five              Term Loan         41.6                                  41.6                       41 . 9 
                 ---------------  --------  ------------------------------------  --------------------------- 
 Total                               242.4                                 237.3                        253.7 
                                  --------  ------------------------------------  --------------------------- 
 
   Refer   to Note 9 of the  financial statements for  further information  on USF's debt  facilities. 

SENSITIVITY ANALYSIS

The Investment Manager and the Company use sensitivity analysis to assess the impact of changes in key assumptions on the fair value of the Company's investments. The sensitivities shown in Figure 15 assume the relevant input is changed over the entire useful life of each of the underlying renewable energy assets, while all other variables remain constant. All sensitivities have been calculated independently of each other. The full sensitivity analysis, including comments on key assumptions and sensitivities, is included in Note 17 to the financial statements.

The Company has announced that it has the option to refinance the existing project-level debt associated with Acquisition Four with a new, smaller facility on more favourable terms resulting in lower gearing and improved returns. The Company also has the option to acquire a further 25% of MS2. The refinancing and the acquisition of the further 25% of MS2 would require the Company to raise approximately $100 million (net) of equity but results in reduced sensitivity to key assumptions as shown below. This is based on the equity raising and refinancing being completed in H1 2021.

The proposed Acquisition Four refinancing reduces the estimated impact of almost all key sensitivities.

SHARE CAPITAL

On 16 April 2019, 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.

As at 31 December 2020, 200,192,361 Ordinary Shares were in issue and no other classes of shares were in issue at that date. At 31 December 2019 there were 200,092,323 ordinary shares on issue.

During the period from 1 January 2020 to 31 December 2020, the Company issued 100,038 ordinary shares to the Investment Manager at a price of $0.964 per share, representing the amount due in shares to the Investment Manager for the period from 1 January 2020 to 30 June 2020, in accordance with the terms of the investment management agreement between the Company and New Energy Solar Manager Pty Limited.

INFORMATION ON THE INVESTMENT MANAGER

USF is managed by New Energy Solar Manager Pty Limited, which also manages New Energy Solar (www.newenergysolar.com.au). Combined, US Solar Fund and New Energy Solar have committed approximately US$1.3 billion to 57 projects totalling 1.2GWDC.

The Investment Manager has been given responsibility, subject to the overall supervision of the Board, for active discretionary investment management of the Portfolio in accordance with the Company's investment objective and policy. The Investment Manager offers in-house deal origination, execution, and asset management capabilities with experience in equity, tax equity, debt structuring and arranging, and active asset management. The Investment Manager's team currently consists of more than 20 investment and asset management professionals located in Sydney and New York. The Investment Manager is a corporate authorised representative of E&P Funds Management Pty Limited.

Environmental, Social and Governance

During the reporting period, the Company and Investment Manager focused on acquiring, onboarding and constructing assets, and in doing so, Environmental, Social and Governance (ESG) factors were taken into account.

With the Company investing in and selling the power output of Solar Assets to energy users, the Company directly contributes to renewable energy infrastructure and renewable power generation. As at 31 December 2020, USF's acquired portfolio comprised 41 operational solar plants, with the Company now responsible for displacing more than an estimated 618,000 tonnes19 of CO2 emissions, equivalent to powering over 74,000 US homes, or removing over 134,000 US cars from the road every year.

Core to the Company's investment and environmental objectives is the intention to build a long-term, sustainable business. Accordingly, the Directors and the Investment Manager are committed to managing USF in line with the core principles of good ESG practices.

Investing in utility-scale solar to provide attractive risk-adjusted returns for investors is, by its very nature, a compelling investment for investors focused on sustainability and ESG. It contributes positively and materially to the world's growing awareness of and momentum to address the impact of human activity on the environment and climate. Importantly, through developing utility-scale solar projects and contracting the PPAs with various offtakers, the Company directly contributes to the share of renewable energy in the global energy mix.

ESG DUE DILIGENCE AND ACQUISITION

-- Environmental Site Assessments are completed for all assets during diligence and obtained certification that all projects comply with applicable local, state, or federal law.

   --               Physical climate-related risks are considered during the diligence process. 

-- O&M contractors must obtain and maintain all permits required under applicable laws, including environmental regulations for each facility, and operate them accordingly.

-- EPC contracts require third parties to conduct themselves and their processes to the highest standard of environmental control and compliance with all applicable laws. Strict controls are implemented to avoid any spill contamination, hazardous substances, trade sanctions in supply chains, and waste containment, among others.

-- Prior to construction or investment, each solar asset site has, as part of the EPC contract, an agreed Health and Safety Plan that explicitly outlines health, safety and security measures to be employed and includes various state and federal laws to which all contractors, subcontractors, and site visitors must adhere, as well as injury reporting and investigation and corrective action processes.

ESG PRINCIPLES AT WORK IN USF

Adherence to ESG principles requires US Solar Fund to consider the broader impact of its activities and to incorporate practices to further the aim of these principles.

Environmental considerations incorporate the impact on both the local environment, as well as global issues like climate change. USF's primary activity is investing in Solar Assets which support renewable energy development and provide a clean energy source to communities in rural and metropolitan areas. Further, USF's strategy of owning and operating solar power portfolios directly contributes to the displacement of CO2 emissions and assists states in their transition to becoming low carbon economies, helping to achieve their respective renewable energy targets.

USF's positive environmental impact can be seen in USF's first acquisition, the Milford Solar project in Utah. This project generates over 277,500 megawatt hours of electricity annually. This volume of electricity is equivalent to displacing approximately 235,000 tonnes of CO2 emissions, powering 31,000 US homes, or removing 51,000 US cars from the road, every year.

The Company will often acquire plants that are not yet operational, and as such require many contractors and employees to construct each project. For example there were over 80 contractors on site for the construction of the 128MWDC Milford solar plant. The Company, through the engagement of its contractors, seeks to create quality jobs in the communities in which it operates. Once operational, the plants provide a smaller number of long-term employment opportunities for members of the communities in which the plants are located.

The Company is committed to making tangible contributions to the prosperity and economic development of the regions in which it operates. For example, the Company seeks to form open and strong relationships with the landowners on which its assets are located, as well as those near its assets. The Company also partners with educational and research institutions to share insights and data to further advance the solar industry.

These partnerships also help USF to continue to improve its practices around land preservation, a key consideration for the Company during an asset's construction phase and operational life.

Governance considerations require a company to examine its structure, leadership, shareholder rights and internal controls. USF's Board of Directors is independent of the Investment Manager and seeks to implement a system of rules and practices that preserves the integrity and efficiency of its operations. The Board has worked with the Investment Manager and Company Secretary to maintain a framework of governance to meet the interests of stakeholders including security holders, customers, financiers, government, suppliers and the community. The Company also considers acquisition and asset management principles and practices as they relate to dealing with anti-corruption and labour standards.

USF recognises that these governance considerations are critical to building a successful, long-term business.

SITE-SPECIFIC ESG INITIATIVES DURING OWNERSHIP

As assets are onboarded and in-construction assets become operational, site specific KPIs will be implemented based on a list of potential measures for each asset. The US is vast and contains many different ecological environments. The measures used for each site depend on the local environment as well as the size of the asset. As USF assets to date range from 2MWDC to 128MWDC different measures are appropriate for different size assets. The list below includes actual measures that have been implemented and options that are being considered at various USF sites:

ENVIRONMENTAL

   --               Grazing of sheep or livestock 
   --               Planting of local / indigenous grasses, plants or wildflowers 
   --               Implementation of sustainable drainage and flood control measures 

SOCIAL

-- Attendance at local community and government meetings to maintain community engagement and dialogue

-- Ongoing relationship development with O&M providers, construction contractors, and landowners to encourage local community engagement and contribution

   --               Effective complaint reporting and handling 

-- Engagement with local education institutions to help develop understanding of renewable energy

   --               Contributions to select local and regional charitable organisations 

-- On site, all injuries and incidents must be reported immediately, and reporting is followed by a well-documented investigation process, detailed report, and corrective action

GOVERNANCE

-- Periodic and regular review of safety statistics and site visits with site service providers to ensure compliance with local and regional laws and the Investment Manager's ESG practices

-- Annual review of contract compliance (including health and safety plans) with site service providers

SUSTAINABILITY

USF was established to both capitalise on and contribute to the world's increasing awareness of the impact of climate change and the need to better manage the world's resources for present and future generations. The Company is focused on sustainability, primarily as an investor in the solar industry, but also in the way the Company is managed.

ALIGNMENT WITH UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS (UNSDG)

In 2015, the United Nations (UN) developed 17 Sustainable Development Goals to enable individuals, organisations, corporations, and governments to implement, record and measure their approach to addressing global challenges including poverty, inequality, and climate change.

The Company is aligned with the UNSDG and has selected two core goals to which the Company can most measurably contribute.

 
                 Affordable and Clean Energy         Decent Work and Economic 
                                                      Growth 
Relevant Target  7.2 By 203, increase substantially  8.8 Protect labour 
                  the share of renewable              rights and promote 
                  energy in the global energy         safe and secure working 
                  mix.                                environments for all 
                                                      workers, including 
                                                      migrant workers, in 
                                                      particular women migrants, 
                                                      and those in precarious 
                                                      employment. 
                 ----------------------------------  --------------------------- 
Reporting        Measurement of carbon               Reporting on health 
                  impact of Solar Assets;             and safety strategic 
                  development of strategic            initiatives, planning 
                  plans for assets at end             and incidents at assets 
                  of life (e.g. solar panel           under ownership. 
                  recycling). 
                 ----------------------------------  --------------------------- 
 

UNSDG 7. 2

The 41 solar power projects in USF's portfolio have a combined capacity of 443MWDC. This power is generated without producing emissions and importantly, also replaces fossil-fuel generated power, thereby displacing CO2 emissions. As USF's 41 assets are now all operational, they will be responsible for displacing more than an estimated 618,000 tonnes of CO2 every year. Including MS2 in the portfolio, the CO2 emissions displaced by the Company's Solar Assets will be 679,000 tonnes20, equivalent to powering 92,000 US homes or removing 147,000 US cars off the road every year.

As a sustainably run business, USF is conscious of its obligations to carefully consider and plan for the future disposal of solar panels. Given USF's solar plants are relatively new, with only 8% of capacity (including all acquisitions) being operational for greater than five years and the majority being operational between two and five years, the business has not yet had to manage the disposal of large quantities of solar panels, due to the assumed solar asset life of 35+ years per project.

During construction and operation, the solar panels employed in USF's plants have proven to be robust and rates of damage and waste have been very low. With respect to the bulk of the panels installed at USF's solar power plants, USF intends to establish a solar panel recycling system that can facilitate the recovery of valuable secondary raw materials and promote high levels of reuse. To this end, USF is investigating the recycling programs available in the industry and the approaches of its development and construction partners.

UNSDG 8.8

When an acquired project is yet to be constructed, an Engineering, Procurement and Construction (EPC) Agreement must be agreed upon and signed before construction. This agreement contains a comprehensive and systematic Health and Safety Plan that explicitly outlines certain requirements according to each site location and layout of the project. This plan incorporates health, safety and security measures required by various state and federal laws to which all contractors, subcontractors and site visitors must adhere.

A site Health and Safety Committee is established for each project location, comprised of field representatives and management from the EPC contractor once construction commences. These representatives must obtain appropriate construction safety certification (known as "OSHA36") and are responsible for daily safety briefings. The representatives also facilitate weekly "toolbox" meetings, designed to address potential safety concerns on-site, and ensure the implementation of preventive safety measures.

Once a site is operational, and upon appointment of Operation and Maintenance contractors, a Safety and Health Management Plan is implemented. These plans provide personnel working at the site with a framework for addressing safety and health in the workplace with the goal of preventing any fatalities, injuries, illnesses and equipment damage. The approach is based on the principle that nearly all worksite fatalities, injuries and illnesses are preventable.

The Company and the Investment Manager are also focused on injury reporting and investigation as they allow for review of existing preventive measures, thereby reducing the likelihood of an event occurring. All injuries and incidents must be reported immediately on the construction site, followed by an investigation process, detailed report and corrective action.

Over the course of the period to 31 December 2020, there were two recordable injuries and one lost-time accident on site. In March, there was a foot injury on one of the Acquisition Two construction sites which resulted in lost time. The Investment Manager has worked with Horne Brothers Construction (the EPC provider) to determine the root cause of the accident and has completed a review of the incident with corrective actions. At the Milford construction site, there were two separate incidents over the period, a fractured wrist in April and an arm laceration in June.

McCarthy, the EPC contractor, have investigated the root cause of these accidents and have since made corrections to its operating procedures to prevent further injuries.

The Company and Investment Manager continue to monitor and maintain health and safety management policies and take a preventive and proactive approach when dealing with health and safety hazards, rigorously implementing safety practices and improving them where applicable.

Principal Risk and Uncertainties

The Board is responsible for financial reporting and controls, including the approval of the Annual Report and Accounts, the dividend policy, any significant changes in accounting policies or practices, and treasury policies including a use of derivative financial instruments.

The Company faces a broad range of risks that the Board and Investment Manager aim to mitigate through internal controls and other actions. These risks are regularly assessed on a periodic basis to ensure that the business operates smoothly and that any adverse effect on the Company's performance and share value is mitigated. To the extent possible, the Board also maintains a risk matrix that is reviewed annually under the risk management framework in place to minimise the impact of these risks should they occur. The risks that the Board and Investment Manager believe to be the most relevant to the business can be organised into key categories as set below:

   --               legal & regulatory risks; 
   --               financial & market risks; and 
   --               operational risks, 

Principal risks for the period and their mitigants are summarised in the tables below:

LEGAL & REGULATORY RISKS

 
Risk                  Impact on Company                      Mitigant 
Changes in             Regulation changes may adversely       The Company and Investment 
 laws or regulations    affect the business and performance    Manager monitor changes in 
 governing              of the Company. The Company            legislation for relevant 
 the Company's          is sensitive to tax changes            jurisdictions to enable rapid 
 operations             for example, including but             and effective response. This 
 or the Investment      not limited to income tax,             ensures that any upcoming 
 Manager's              Investment Tax Credits and             changes in legislation are 
 operations             tax restrictions on renewables.        proactively accounted for 
                        An adverse change in tax               when evaluating potential 
                        legislation may impact the             investment opportunities. 
                        Company's overall returns.             The Company and Investment 
                                                               Manager also consult with 
                                                               tax and regulatory experts 
                                                               as required. 
                      -------------------------------------  ------------------------------------ 
Political              Political risks often translate        As the Company's assets are 
 risks                  to elevated political uncertainties    in the US, the Investment 
                        and have detrimental effects           Manager does not consider 
                        on investment and currency             Brexit to cause significant 
                        markets. Ongoing Brexit uncertainty    risks to the US renewables 
                        may impact the Company's               market. The Company and Investment 
                        ability to raise additional            Manager monitor changes in 
                        funds. The outcome of US               legislation for relevant 
                        elections and the impacts              jurisdictions to enable rapid 
                        on renewable energy credits,           and effective response. The 
                        tax concessions and support            Company and Investment Manager 
                        for the renewable generation           also consult with tax and 
                        sector are uncertain.                  legislation experts as required. 
                                                               The election of the Biden 
                                                               administration has lowered 
                                                               the political risk associated 
                                                               with investment in US renewable 
                                                               energy. 
                      -------------------------------------  ------------------------------------ 
 

FINANCIAL & MARKET RISKS

 
 Risk                Impact on Company                          Mitigant 
 Long-term           PPA terms are generally shorter            The Company secures revenue 
  power price         than the expected useful                   by acquiring assets that have 
  fluctuations        life of Solar Assets so price              long-term PPAs in place (with 
                      forecasts are used to estimate             a minimum PPA term of 10 years 
                      the value of cash flows between            for each project or portfolio 
                      PPA expiry and the end of                  acquisition and a target weighted 
                      the asset's useful life.                   average PPA term of 15 years 
                      Lower wholesale electricity                for the Company's entire portfolio). 
                      price forecasts will reduce                The Company continues to regularly 
                      the revenue that the Solar                 monitor changes in expert energy 
                      Assets are expected to generate            price forecasts and ensures 
                      after PPA expiry, thereby                  that they are appropriately 
                      impacting asset valuations.                factored into asset valuations. 
                                                                 Additionally, the Company is 
                                                                 evaluating energy storage as 
                                                                 a means to reduce exposure 
                                                                 to power price and re-contracting 
                                                                 risk. 
                   -----------------------------------------  ---------------------------------------- 
 Valuation           The due diligence process                  The Company appoints an independent 
  of assets           that the Investment Manager                reputable firm to undertake 
                      undertakes in evaluating                   valuations of its Solar Assets 
                      acquisitions of Solar Assets               on at least an annual basis. 
                      may not reveal all facts                   Further, the Company appoints 
                      that may be relevant in connection         reputable third parties with 
                      with such investments. This                industry specific skills to 
                      could lead to valuation errors             assist in the due diligence 
                      that affect the returns achieved           process including reviewing 
                      by the underlying assets                   detailed financial model inputs. 
                      or results in inaccurate 
                      reporting to investors and 
                      other stakeholders. . 
                   -----------------------------------------  ---------------------------------------- 
 Access to           The Company has announced                  The Company is now fully invested 
  equity capital      it is considering fundraising              and trading at a premium to 
                      options to refinance the                   NAV. Recent successful equity 
                      Acquisition Four portfolio,                fundraisings in the renewables 
                      acquire a further 25% of                   sector suggest positive market 
                      MS2, or acquire other assets               sentiment toward the renewables 
                      consistent with investment                 sector. The Company's brokers 
                      policy. The Company may not                and the Investment Manager 
                      be able to raise the target                maintain regular contact with 
                      amount or any amount, in                   existing and prospective investors. 
                      which case it would not have 
                      sufficient equity capital 
                      to complete these transactions. 
                   -----------------------------------------  ---------------------------------------- 
 Access to           The Company may not be able                Debt and tax equity financing 
  capital from        to source funding from suitable            is in place for all projects 
  tax equity          tax equity partners and debt               in the Company's portfolio. 
  partners            providers which may limit                  The Company has appointed a 
  and debt            the amount of capital the                  reputable and experienced Investment 
  providers           Company is able to utilise                 Manager with strong existing 
                      in acquiring assets. Additionally,         banking and tax equity relationships. 
                      the Company may be exposed                 These existing relationships, 
                      to risks from its contractual              in addition to new relationships, 
                      relationships in relation                  developed with experienced 
                      to tax equity financing with               tax equity partners allow for 
                      any tax equity partner.                    various avenues to appoint 
                                                                 a partner best suited for the 
                                                                 project. The Company also continues 
                                                                 to monitor compliance with 
                                                                 tax equity financing provisions. 
                                                                 With respect to the Acquisition 
                                                                 Four 
                                                                 refinancing, the Company has 
                                                                 received a signed term sheet 
                                                                 to reduce execution risk. 
                   -----------------------------------------  ---------------------------------------- 
 Unable to           Whilst the Company is currently            The IPO proceeds are fully 
  source suitable     fully invested,                            invested in or committed to 
  Solar Assets        it may not be able to source               Solar Assets so the Company 
                      suitable assets in future,                 will need to raise new equity 
                      which would result in the                  capital. The Company has also 
                      Company holding levels of                  appointed an Investment Manager 
                      cash which are higher than                 with a dedicated team of experienced 
                      optimal. This cash would                   investment and renewable energy 
                      likely generate much lower                 professionals focused on sourcing, 
                      levels of returns than the                 evaluating and transacting 
                      assets in the Company, consequentially     on new investments for the 
                      adversely affecting the level              Company, when new capital is 
                      of returns to shareholders                 available. 
                      and the market value of the 
                      Company. 
                   -----------------------------------------  ---------------------------------------- 
 

OPERATIONAL RISKS

 
 Risk                 Impact on Company                       Mitigant 
 Operational          The Company is potentially              The Investment Management Agreement 
  fraud                exposed to financial losses             (IMA) provides USF with certain 
                       from fraudulent activities              protections through passing 
                       related to receipts from                certain responsibilities to 
                       counterparties or wholesale             the Investment Manager. The 
                       markets, or payments made               Investment Manager maintains 
                       to construction entities,               and adheres to policies and 
                       maintenance providers and               processes to mitigate the risk 
                       capital investors. .                    of fraud. The E&P Financial 
                                                               Group, of which the Investment 
                                                               Manager is a member, holds insurance 
                                                               which covers fraudulent incidents. 
                    --------------------------------------  ----------------------------------------- 
 Default of           The Company may experience              The Company has a fully operational 
  developer            a financial loss                        portfolio and with no Solar 
  or                   (realised or unrealised)                Assets under construction. Where 
  Engineering,         from a developer or EPC                 the Company undertakes construction 
  Procurement,         counterparty failing to perform         activity in the future, it appoints 
  Construction         their contractual                       experienced and reputable contractors 
  (EPC) contractor     obligations including warranty          with strong track records and 
                       obligations which                       through existing relationships 
                       continue after construction             with the Investment Manager. 
                       is completed.                           The Company will periodically 
                                                               review the credit ratings and 
                                                               other available financial indicators 
                                                               of counterparties before contracting 
                                                               and adjust risk premiums accordingly. 
 
                                                               Contractual protections in EPC 
                                                               contracts (milestone-based payments, 
                                                               performance security, liens 
                                                               over assets purchased and installed 
                                                               by the EPC contractor), means 
                                                               the potential impact of EPC 
                                                               contractor default during construction 
                                                               is largely limited to the time 
                                                               and cost of replacing the contractor 
                                                               rather than any persistent loss. 
                    --------------------------------------  ----------------------------------------- 
 Unfavourable         The Company may be exposed              The Company and Investment Manager 
  weather              to a lower than                         conduct sensitivity analysis 
  conditions           expected volume of revenue              on power generation when evaluating 
  including            generation produced by the              the acquisition target. The 
  climate              Solar Assets. Additionally,             Company and Investment Manager 
  change or            the Solar Assets may face               conduct sensitivity analysis 
  events               damages due to extreme weather          using a range of power generation 
                       conditions arising from climate         forecasts when evaluating acquisitions 
                       change.                                 however isolated or localised 
                                                               conditions such as storms, heavy 
                                                               snowfall, or smoke and dust 
                                                               events may cause production 
                                                               shortfalls outside the range 
                                                               of power generation forecasts. 
                                                               Investing in geographically 
                                                               diverse projects mitigates the 
                                                               impact of localised, unfavourable 
                                                               weather conditions. 
                    --------------------------------------  ----------------------------------------- 
 Under-               Global health concerns often            The Investment Manager has established 
  performance          translate to elevated uncertainties     systems and procedures that 
  of solar             in financial markets and                allow remote monitoring of the 
  power                have detrimental effects                solar power assets and remote 
  plants relative      on the global economy. The              work by staff. These systems 
  to acquisition       COVID-19 outbreak may impact            have operated throughout COVID-19. 
  assumptions          the Company's supply chain              The Investment Manager manages 
                       and service providers (such             costs by using fixed-time and 
                       as higher O&M costs, longer             fixed-cost contracts for construction, 
                       response times, and higher              working closely with EPC contractors 
                       insurance costs) and also               during the construction of assets, 
                       ability to raise additional             and with O&M contractors and 
                       funds.                                  other key suppliers once assets 
                                                               become operational. 
                    --------------------------------------  ----------------------------------------- 
 Counterparty         There is the potential for              There have been no material 
  credit risk          losses to be incurred due               changes to the creditworthiness 
                       to defaults by PPA counterparties,      of the USF counterparties as 
                       EPC contractors, derivative             a result of COVID-19, and the 
                       counterparties and multiple             Company and the Investment Manager 
                       deposit taking institutions.            diversified credit risk across 
                                                               investment-grade counterparties. 
                                                               No financial transactions are 
                                                               permitted with counterparties 
                                                               with a credit rating of less 
                                                               than BBB- from Standard & Poor's 
                                                               or Baa3 from Moody's unless 
                                                               specifically approved by the 
                                                               Board. The Investment Manager 
                                                               will continue to monitor credit 
                                                               market conditions, including 
                                                               as they apply to PPA counterparties. 
                    --------------------------------------  ----------------------------------------- 
 

LONGER TERM VIABILITY

The Board is responsible for financial reporting and controls, including the approval of the Annual Report and Accounts, the dividend policy, any significant changes in accounting policies or practices, and treasury policies including the use of derivative financial instruments. The Board of the Company is also required to assess the long-term prospects of the Company according to the Association of Investment Companies (AIC) Code. The Board has assessed the prospects of the group over a five-year period. The Board considers a five-year timeframe to be reasonable on the basis that the Company is in the initial stage of operating assets. The key risks facing the Company including, but not limited to, the risks mentioned on pages 30 to 33 have been individually assessed by the Board. The likelihood and impact of each risk on the Company prior to and after specific risk mitigation controls have taken place have been evaluated.

The Company owns a portfolio of Solar Assets in the US that are fully constructed, operational and generating renewable electricity. As a result, it benefits from predictable and reliable long-term cash flows and is subject to a set of risks that can be identified and assessed. Each Solar Asset is supported by a detailed financial model at acquisition and incorporated into the Company's valuation model for quarterly valuations, which are independently reviewed every half-year. The Board believes the diversification within the Company's portfolio of Solar Assets helps to withstand and mitigate the emerging and principal risks the Company is most likely to face. The Company's revenues from investments provide substantial cover to the operating expenses of the SPVs, USF Holding Corp., and the Company and any other costs likely to be faced by any of them over the viability assessment period. The Investment Manager also prepares a rolling detailed monthly two-year cash flow forecast to address and specifically consider the sustainability of the dividends.

After assessing these risks, and reviewing the Company's liquidity position, together with the Company's commitments, available but undrawn credit facilities, and forecasts of future performance under various scenarios, the Board has a reasonable expectation that the Company is well positioned to continue to operate and meet its liabilities over the short term and the five-year outlook period. While the Board has no reason to believe that the Company will not be viable beyond the specified outlook period, it is aware that it is difficult to foresee the viability of any business over a longer period given the inherent uncertainty involved.

It is important to note that the risks associated with investments within the infrastructure sector could result in a material adverse effect on the Company's performance and value of ordinary shares. When required, experts will be employed to gather information, including tax advisers, legal advisers, and environmental advisers.

STRATEGIC REPORT AND SECTION 172 OBLIGATIONS

The strategic report is set out on pages 1 to 36 of this document and has been prepared to provide information in relation to how the directors have performed their duty to promote the success of the company. The strategic report section was approved by the Board of Directors on 16 March 2021.

SECTION 172

Section 172 of the Companies Act 2006 recognises that directors are responsible for acting fairly as between members and in a way that they consider, in good faith, is the most likely to promote the success of the Company for the benefit of its Shareholders as a whole. In doing so, they are also required to consider the broader implications of their decisions and operations on other key stakeholders and their impact on the wider community and the environment. Key decisions are those that are either material to the Company or are significant to any of the Company's key stakeholders. The Company's engagement with key stakeholders and the key decisions that were made or approved by the Directors during the year are described below:

SHAREHOLDERS

The Company also relies on Shareholders for continued access to capital to support further growth of the Company.

The Investment Manager liaises with Shareholders through specified reporting of Company performance at set dates in the calendar, as well as ad hoc reporting of major announcements.

In addition, Shareholders have the opportunity to meet the Board at the Annual General Meeting (AGM). The Board is also endeavours to respond to any written queries made by Shareholders during the course of the period, or to meet with major Shareholders if so requested.

In addition to the formal business of the AGM, representatives of the Investment Manager and the Board are available to answer any questions a Shareholder may have.

LERS

The Company also relies on Lenders for continued access to capital to support further growth of the Company, and to refinance existing debt facilities at maturity, or prior to maturity where it is accretive for shareholders.

The Investment Manager liaises with Lenders through specified reporting of project level performance at set dates in the calendar, as well as ad hoc reporting of major announcements.

SERVICE PROVIDERS

Our service providers are fundamental to the quality of our product and to ensuring that as a business we meet the high standards of conduct that we set ourselves.

The Board meets at least annually to review the performance of the key service providers.

The Board has regular contact with the two main service providers: the Investment Manager and Administrator through quarterly board meetings with the Chair and Audit Chair meeting more regularly.

REGULATORS / GOVERNMENT

The Board regularly considers how it meets regulatory and statutory obligations and follows voluntary and best-practice guidance, including how any governance decisions it makes impact its stakeholders both in the short- and long-term.

PPA OFFTAKERS

The Offtakers for the Company's projects provide the main source of operating cash inflows to the Company. No Offtaker is a related party of the Board or Investment Manager. The Company is focused on ensuring assets operate in line with weather-adjusted expectations to deliver power to their PPA Offtakers.

LOCAL COMMUNITIES

The local communities, within which the Company's projects are based, provide local support as well as human resources to work on the project sites. The Company works actively with landholders and city councils, and has resolved egress and access, erosion, and land management issues during the year.

The strategic report is set out of page 1 to 36 of this document and was approved by the Board of Directors on 16 March 2021.

Directors' Responsibilities Statement

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

As a Company listed on the London Stock Exchange, US Solar Fund plc is subject to the FCA's Listing Rules and Disclosure and Transparency Rules, as well as to all applicable laws and regulations in England and Wales where it is registered.

The Annual Report and financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. Under Company law, the Directors must not approve the financial statements unless they are satisfied they give a true and fair view of the state of affairs of the Company and of the profit or loss for the period. In preparing these financial statements, the Directors should:

   --      select suitable accounting policies and then apply them consistently; 
   --      make judgements and estimates that are reasonable; 

-- specify which generally accepted accounting principles have been adopted in their preparation; and

-- prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping proper accounting records which are sufficient to show and explain the Company's transactions and are to disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are also responsible for preparing the Annual Report and financial statements and the Directors confirm that they consider that, taken as a whole, the Annual Report and financial statements are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy. In accordance with the FCA's Disclosure and Transparency Rules, the Directors confirm to the best of their knowledge that:

a) the financial statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company taken as a whole;

b) the Annual Report and accounts include a fair view of important events that have occurred during the financial period; and

c) the Annual Report and accounts include the related parties' transactions that have taken place in the financial period and that have materially affected the financial position or the performance of the enterprise during that period.

The Directors have acknowledged their responsibilities in relation to the financial statements for the period to 31 December 2020.

Statement of Profit and Loss and Other Comprehensive Income

FOR THE YEARED 31 DECEMBER 2020

 
                                           Revenue        C                  Total           Revenue       C apital            Total 
                         Notes              USD           apital             USD              USD           USD                 USD 
                                                          USD 
=====================  ========  =================  =============  ===============  ================  =============  =============== 
 Net gain on 
  investments 
  at fair value 
  through pro fi 
  t and loss                 10                  -     3,300,528       3,300,528                   -        472,416         472,416 
 MSA fee income            10      3,000,000                    -   3,000,000                      -              -                - 
 Interest income            6         224,699                   -       224,699       1,944,795                   -    1,944,795 
=====================  ========  =================  =============  ===============  ================  =============  =============== 
 Total income                      3,224,699         3,300,528       6,525,227        1,944,795          472,416        2,417,211 
=====================  ========  =================  =============  ===============  ================  =============  =============== 
 Expenditure 
 Administrative 
  and other expenses        7      (2,878,601)                  -   (2,878,601)      (2,120,851)                  -   (2,120,851) 
=====================  ========  =================  =============  ===============  ================  =============  =============== 
 Operating pro 
  fi t for the year 
  / perio d                           346,098        3,300,528       3,646,626         (176,056)         472,416         296,360 
 Gain / (loss) 
  on foreign exchange                    2,460                951          3,411           2,765        (153,045)       (150,280) 
=====================  ========  =================  =============  ===============  ================  =============  =============== 
 Pro fi t / (loss) 
  before taxation                     348,558         3,301,479      3,650,037         (173,291)          319,371        146,080 
 Taxation                   8                    -              -                -                 -              -                - 
=====================  ========  =================  =============  ===============  ================  =============  =============== 
 Pro fi t / (loss) 
  and total 
  comprehensive 
  income for the 
  year / perio d                        348,558         3,301,479      3,650,037         (173,291)          319,371        146,080 
 Earnings per share 
  (basic and diluted)                                                                     ( 0. 0 
  - cents/share             9            0.002             0.016           0.018           0 1 )            0.002            0.001 
=====================  ========  =================  =============  ===============  ================  =============  =============== 
 

All items dealt with in arriving at the result for the year relate to continuing operations.

The Total column of this statement represents the Company's profit and loss account. The financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The return on ordinary activities after taxation is the total comprehensive income and therefore no additional statement of other comprehensive income is presented. The supplementary revenue and capital columns are presented for information purposes, in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies, as further explained in note 2.

Statement of Financial Position

AS AT 31 DECEMBER 2020

 
                                                         31 DECEMBER                31 DECEMBER 
                                      Notes                     2020                       2019 
                                                                 USD                        USD 
==================================  =======  =======================  ========================= 
 Non-current assets 
 Investment held at fair                                                         119 , 472 , 
  value                                  10           195,324,276                 416 
==================================  =======  =======================  ========================= 
                                                      195,324,276                119,472,416 
==================================  =======  =======================  ========================= 
 Current assets 
 Tra de and other receivables            11                  45,587                    88,744 
 Cash and cash equivalents               12                 523,170               76,458,662 
==================================  =======  =======================  ========================= 
                                                            568,757               76,547,406 
==================================  =======  =======================  ========================= 
 T o t a l assets                                     195,893,033                196,019,822 
==================================  =======  =======================  ========================= 
 Current liabilities 
 Tra de and other payables               13                 732,723                   603,641 
 Dividends payable                       14              1,000,962                 1,000,461 
==================================  =======  =======================  ========================= 
                                                         1,733,685                 1,604,102 
==================================  =======  =======================  ========================= 
                                                                                  7 4 , 9 4 
 Net current (liabilities)/assets                        (1,164,928)               3 , 30 4 
==================================  =======  =======================  ========================= 
 Total net assets                                     194,159,348                194,415,720 
==================================  =======  =======================  ========================= 
 Shareholders equity 
  Share capital                          18                2,001,924                 2,000,923 
 Share premium                           18                 184,786                     89,350 
 Capital reduction reserve               18           188,176,521                192,179,367 
 Capital reserve                         19              3,271,402                    31 9, 371 
 Retained earnings                       19                 524,715                  (173,291) 
==================================  =======  =======================  ========================= 
 Total shareholders 
  equity                                              194,159,348                194,415,720 
==================================  =======  =======================  ========================= 
 Net asset value per 
  share                                  20                    0.970                      0.972 
 

The financial statements of US Solar Fund plc (registered number 11761009) were approved by the Board of Directors and authorised for issue on 16 March 2021. They were signed on its behalf by:

GILL NOTT

DIRECTOR

Date: 16 March 2021

Statement of Changes in Equity

FOR THE YEARED 31 DECEMBER 2020

 
                                                                  C APIT 
                               SHARE            SHARE                 AL      C A P IT       RETAINED           TOTAL 
                               CAPITAL          PREMIUM        REDUCTION      AL RESERVE     EARNINGS           E 
                                                                 RESERVE                                        QU ITY 
=============== 
                 Notes            USD             USD                USD          USD              USD             USD 
===============  ======  =============  ===============  ===============  ==============  ============  ============== 
 Balance at 1 
  January 2020            2,000,923            89,350     192,179,367         319,371        (173,291)  194,415,720 
===============  ======  =============  ===============  ===============  ==============  ============  ============== 
 Issue of share 
  capital            18         1,001          95,436                  -               -             -         96,437 
 Dividends           14              -                -     (4,002,846)                -             -    (4,002,846) 
 Tax charge           8              -                -                -    (349,448)         349,448                - 
 Profit & total 
  comprehensive 
  income for 
  the 
  year                               -                -                -   3,301,479          348,558      3,650,037 
===============  ======  =============  ===============  ===============  ==============  ============  ============== 
 Balance at 31 
  December 2020            2,001,924         184,786      188,176,521      3,271,402          524,715   194,159,348 
===============  ======  =============  ===============  ===============  ==============  ============  ============== 
 

FOR THE YEARED 31 DECEMBER 2020

 
                                                                       C APIT AL 
                                     SHARE              SHARE          REDUCTION    C A P            RETAINED               TOTAL 
                                     CAPITAL            PREMIUM          RESERVE    IT AL            EARNINGS               E 
                                                                                    RESERVE                                 QU ITY 
=============== 
                        Notes           USD                USD               USD          USD               USD               USD 
===============  ============  =============  =================  ===============  ==============  ===============  =============== 
 Balance at 10                             -                  -                -               -                -                - 
  January 2019 
===============  ============  =============  =================  ===============  ==============  ===============  =============== 
 Issue of share 
  capital                  18   2,000,923       198,089,350                    -               -                -  200,090,273 
 Equity issue 
  costs                    18              -      (4,000,000)                  -               -                -    (4,000,000) 
 Transfer to 
  capital 
  reduction 
  reserve                  18              -   (194,000,000)     194,000,000                   -                -                - 
 Dividends                 14              -                  -     (1,820,633)                -                -     (1,820,633) 
 Profit & total 
  comprehensive 
  income for 
  the 
  period                                   -                  -                -       31 9, 371        (173,291)          146,080 
===============  ============  =============  =================  ===============  ==============  ===============  =============== 
 Balance at 31 
  December 2019                 2,000,923              89,350     192,179,367        319,371          (173,291)     194,415,720 
===============  ============  =============  =================  ===============  ==============  ===============  =============== 
 
 

Statement of Cash Flows

FOR THE YEARED 31 DECEMBER 2020

 
 
                                                                        YEARED             PERIOD FROM 10 
                                                                       31 DECEMBER               JANUARY 2019 
                                                                              2020             TO 31 DECEMBER 
                                                                                                         2019 
============================================ 
                                                     Notes                     USD                        USD 
============================================  ============  ======================  ========================= 
 Cash flows from operating activities                                            -                          - 
============================================  ============  ======================  ========================= 
 (Loss)/profit for the year/period                                       3,650,037                    146,080 
 Adjustments for: 
 Net gain on investments at fair value 
  through profit and loss                               10             (3,300,528)              (194,000,000) 
 Equity settled management fee                                              96,437                     90,273 
 Losses on foreign exchange                                                (3,411)                    150,280 
============================================  ============  ======================  ========================= 
 Operating cash flows before movements 
  in working capital                                                       442,535                   (85,783) 
============================================  ============  ======================  ========================= 
 Decrease/(increase) in trade and other 
  receivables                                                                8,856                   (54,443) 
 Increase in trade and other payables                                      129,084                    603,641 
 Decrease/(increase) in interest receivable                                 34,301                   (34,301) 
============================================  ============  ======================  ========================= 
 Net cash generated from operating 
  activities                                                               614,776                    429,114 
============================================  ============  ======================  ========================= 
 Cash flows used in investing activities 
 Purchases of investments                     10                      (72,551,332)               (76,000,000) 
 Loan advanced                                10                                 -               (43,000,000) 
============================================  ============  ======================  ========================= 
 Net cash outflow from investing activities                           (72,551,332)              (119,000,000) 
============================================  ============  ======================  ========================= 
 Cash flows (utilised)/generated in 
  financing activities 
============================================  ============  ======================  ========================= 
 Dividends paid                                                        (4,002,347)                  (802,172) 
 Proceeds from issue of ordinary shares 
  at a premium                                                                   -                200,000,000 
 Share issue costs                                                               -                (4,000,000) 
============================================  ============  ======================  ========================= 
 Net cash (outflow)/inflow from financing 
  activities                                                           (4,002,347)                195,179,828 
============================================  ============  ======================  ========================= 
 Net (decrease)/increase in cash and 
  cash equivalents for the year/period                                (75,938,903)                 76,608,942 
 Effect of foreign exchange rate movements                                   3,411                  (150,280) 
 Cash and cash equivalents at the beginning                             76,458,662                          - 
  of the year/period 
============================================  ============  ======================  ========================= 
 Cash and cash equivalents at the end 
  of the year/period                                                       523,170                 76,458,662 
============================================  ============  ======================  ========================= 
 

Notes to the Financial Statements

FOR THE YEARED 31 DECEMBER 2020

   1.         GENERAL INFORMATION 

US Solar Fund plc (the Company) was incorporated as a Public Company, limited by shares, in England and Wales on 10 January 2019 with registered number 11761009. The registered office of the Company is The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF. Its share capital is denominated in US Dollars and currently consists of ordinary shares. The Company's principal activity is to invest in a diversified portfolio of Solar Power Assets located in North America and other countries forming part of the Organisation for Economic Co-operation and Development (OECD) in the Americas.

   2.         BASIS OF PREPARATION 

The financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union and also considers Statement of Recommended Practice "Financial Statements of Investment Trust Companies and Venture Capital Trusts", issued by the Association of Investment Companies, (the AIC SORP) in October, 2019. The financial statements have been prepared on a historical cost basis, except where balances are recognised at fair value. The principal accounting policies are set out in note 5. The first accounting period commenced on 10 January 2019 (incorporation date) and as a result the comparatives are presented for the period from 10 January 2019 until 31 December 2019.

In terms of the AIC SORP, the Company presents a Statement of Profit and Loss and Other Comprehensive Income, which shows amounts split between those which are revenue and capital in nature. The determination of whether an item should be recognised as revenue or capital (or part revenue and part capital) is carried out in accordance with the recommendations and principles as set out in the AIC SORP.

The determination of the revenue or capital nature of a transaction is determined by giving consideration to the underlying elements of the transaction. Capital transactions are considered to be those arising as a result of the appreciation or depreciation in the value of assets, whether due to the retranslation of assets held in foreign currency or fair value movements on investments held at fair value through profit and loss.

Revenue transactions are all transactions, other than those which have been identified as capital in nature.

FUNCTIONAL AND PRESENTATION CURRENCY

The currency of the primary economic environment in which the Company operates (the functional currency) is US Dollar, which is also the presentation currency.

GOING CONCERN

The financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in the financial statements and related notes. In addition, note 16 to the financial statements includes the policies and processes for managing its capital, its financial risk management, details of its financial instruments and its exposure to credit risk and liquidity risk. The impact of COVID-19 is detailed in the Chair's Statement on page 6 and Investment Manager's report on page 10. In the opinion of the Directors, the Company has sufficient financial resources and expectation of growth in the medium-term to meet its financial obligations.

The Company generated profit after tax of $3.7 million and operating cash flows of $0.4 million for the year. As at 31 December 2020, the company is in a net current liability position of $1.7 million and has available cash of $0.05 million. As of the same date, the Company's subsidiary, USF Holding Corp., has available cash of $14.3 million, which is available to meet the obligations of the Company. As such the Directors believe that the Company will continue into the foreseeable future and have adopted the going concern basis of preparation in preparing these financial statements. In December 2020, the Company (through a wholly owned US subsidiary) signed a new $25 million revolving credit facility with Fifth Third Bank National Association (FTB Facility). The FTB Facility provides liquidity for capital expenditures, working capital and general corporate purposes. At 31 December 2020 the facility was fully available but remained undrawn.

   3.         CRITICAL JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY 

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to the accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

During the year, the Directors considered the following significant judgements, estimates and assumptions:

JUDGEMENTS

ASSESSMENT AS AN INVESTMENT ENTITY

Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair value through profit or loss rather than consolidate them unless they provided investment related services to the Company. To determine that the Company continues to meet the definition of an investment entity, the Company is required to satisfy the following three criteria:

a) the Company obtains funds from one or more investors for the purpose of providing those investors with investment management services;

b) the Company commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and

c) the Company measures and evaluates the performance of substantially all of its investments on a fair value basis. The Company meets the criteria as follows:

-- the Company provides investment management services and has several investors who pool their funds to gain access to infrastructure related investment opportunities that they might not have had access to individually;

-- the stated strategy of the Company is to deliver stable returns to shareholders through investing in a diversified portfolio of utility-scale solar power plants and associated infrastructure, which may include transmission and

storage (e.g. batteries) assets which will typically be co- located with the solar power plant (together, Solar Power Assets) located in North America and other OECD countries in the Americas; and

-- the Company measures and evaluates the performance of all of its investments on a fair value basis. The fair value method is used to represent the Company's performance in its communication to the market, including investor presentations. In addition, the Company reports fair value information internally to Directors, who use fair value as the primary measurement attribute to evaluate performance.

The Directors are of the opinion that the Company has all the typical characteristics of an investment entity and continues to meet the definition in the standard. This conclusion will be reassessed on an annual basis.

In respect of the second criterion the Company's purpose is to invest funds for returns from capital appreciation and investment income. In respect of the requirement that investments should not be held indefinitely but should have an exit strategy for their realisation the Company may hold these assets until the end of their expected useful lives, unless there is an opportunity in the market to dispose of the investments at a price that is considered appropriate. There continues to be an active secondary market for renewables projects in the countries in which we operate.

As at 31 December 2020, the Company only had one subsidiary, USF Holding Corp. Being an investment entity, it is measured at fair value as opposed to being consolidated on a line-by-line basis, meaning its cash, debt and working capital balances are included in the fair value of investments rather than the Group's current assets.

ESTIMATES

VALUATION OF INVESTMENT IN SUBSIDIARY

The significant estimate in the Company's financial statements that carry the most significant risk of a material effect on next year's financial statements are the fair value of investments. This estimate is considered to be at risk of actual outcomes in the next 12 months varying from the estimates made in determining discount rates applied in calculating the reported amount of an asset, as the assumptions used are subject to measurement uncertainty and possible changes could be significant. Refer to note 17 for further year-end detail on the fair value measurement as at 31 December 2020.

   4.         NEW AND REVISED STANDARDS AND INTERPRETATIONS 

APPLICATION OF NEW AND REVISED STANDARDS

The accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended IFRS effective for the Group as of 1 January 2020. This adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements:

-- IAS 1 'Presentation of financial statements' and IAS 8 'Accounting policies, changes in accounting estimates and error' on definition of material These amendments to IAS 1, IAS 8 and consequential amendments to other IFRSs:

- use a consistent definition of materiality throughout IFRSs and the Conceptual Framework for Financial Reporting;

   -      clarify the explanation of the definition of material; and 
   -      incorporate some of the guidance in IAS 1 about immateriality information. 

-- IFRS 3 'Business Combinations'

On 22 October 2018, the IASB issued 'Definition of a Business (Amendments to IFRS 3)' aimed at resolving the difficulties that arise when an entity determines whether it has acquired a business or a group of assets.

The amendments are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020.

NEW AND REVISED STANDARDS IN ISSUE BUT NOT YET EFFECTIVE

There are no standards, amendments or interpretations in issue at the reporting date which have been issued but are not yet effective and are deemed to be material to the Company.

   5.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

The accounting policies used in the preparation of the financial statements have been consistently applied during the year ended 31 December 2020 as well as the prior period.

The principal accounting policies applied in the preparation of the financial statements are set out below:

SEGMENTAL INFORMATION

The Board is of the opinion that the Group is engaged in a single segment business, being the investment in Solar Power Assets located in North America and other countries forming part of the OECD in the Americas.

INCOME

Income comprises interest income (bank interest and loan interest). Interest income is recognised when it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably. Loan interest income is accrued by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

No income is earned from contracts with customers and as such IFRS 15 has not been applied.

EXPENSES

Operating expenses are the Company's costs incurred in connection with the on-going management of the Company's investments and administrative costs. Operating expenses are accounted for on an accruals basis.

The Company's management and administration fees, finance costs and all other expenses are charged through the Statement of Profit and Loss and Other Comprehensive Income.

Directly attributable acquisition costs of assets are capitalised on purchase of assets. Costs directly relating to the issue of ordinary shares are charged to share premium.

NET GAIN OR LOSS ON INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS

The Company recognises movements in the fair value of investments in subsidiaries through profit and loss.

TAXATION

The Company is approved as an Investment Trust Company under sections 1158 and 1159 of the Corporation Taxes Act 2010 and Part 2 Chapter 1 Statutory Instrument 2011/2999 for accounting periods commencing on or after 25 May 2018. The approval is subject to the Company continuing to meet the eligibility conditions of the Corporations Tax Act 2010 and the Statutory Instrument 2011/2999. The Company intends to ensure that it complies with the Investment Trust Company regulations on an ongoing basis and regularly monitors the conditions required to maintain Investment Trust Company status.

From 1 April 2015 there is a single corporation tax rate of 19%. Tax is recognised in the Statement of Profit and Loss and Other Comprehensive Income except to the extent that it relates to the items recognised as direct movements in equity, in which case it is similarly recognised as a direct movement in equity. Current tax is the expected tax payable on any taxable income for the period, using tax rates enacted or substantively enacted at the end of the relevant period.

INVESTMENT IN SUBSIDIARIES

Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed, or has rights, to variable returns from its involvement with the subsidiary entity and has the ability to affect those returns through its power over the subsidiary entity. In accordance with the exception under IFRS 10 Consolidated financial statements, the Company is an investment entity.

The Company does not have any subsidiaries that provide investment management services and are not themselves investment entities. As a result the Company does not consolidate any of its subsidiaries.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash at bank and deposits held with the bank.

TRADE AND OTHER RECEIVABLES

Trade and other receivables are recognised initially at fair value and subsequently stated at amortised cost less loss allowance which is calculated using the provision matrix of the expected credit loss model, the effect of which is considered immaterial.

TRADE AND OTHER PAYABLES

Trade and other payables are recognised initially at fair value and subsequently stated at amortised cost.

EQUITY

Equity instruments issued by the Company are recorded at the amount of the proceeds received, net of directly attributable issue costs. Costs not directly attributable to the issue are immediately expensed in the Statement of Profit and Loss and Other Comprehensive Income. The Company's capital is represented by the ordinary shares, Share Premium (until cancellation), Accumulated losses and Capital Reduction Reserve.

FINANCIAL INSTRUMENTS

In accordance with IFRS 9, the Company classifies its financial assets and financial liabilities at initial recognition into the categories of amortised cost or fair value through profit or loss. None of the financial instruments are classified as fair value through other comprehensive income.

FINANCIAL ASSETS

The Company classifies its financial assets at amortised cost or fair value through profit or loss on the basis of both:

-- the entity's business model for managing the financial assets

-- the contractual cash flow characteristics of the financial asset

FINANCIAL ASSETS MEASURED AT AMORTISED COST

A debt instrument is measured at amortised cost if it is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company includes in this category short-term non-financing receivables including cash and financial instruments classified as trade and other receivables.

FINANCIAL ASSETS MEASURED AT FAIR VALUE THROUGH PROFIT OR LOSS (FVPL)

A financial asset is measured at fair value through profit or loss if:

a) its contractual terms do not give rise to cash flows on specified dates that are solely payments of principal and interest (SPPI) on the principal amount outstanding; or

b) it is not held within a business model whose objective is either to collect contractual cash flows, or to both collect contractual cash flows and sell; or

   c)     it is classified as held for trading (derivative contracts in an asset position). 

The Company's investment in subsidiaries (which comprises both debt and equity) is held at fair value through profit or loss under IFRS 9 as the equity portion of the investment does not meet the SPPI test nor will the Company elect to designate the investments at fair value through other comprehensive income. The debt investment forms part of a group of assets that are managed and the performance evaluated on a fair value basis.

The Company includes in this category equity instruments including investments in subsidiaries (which comprises both debt and equity). There are no consolidated subsidiaries.

FINANCIAL LIABILITIES MEASURE AT AMORTISED COST

This category includes all financial liabilities, other than those measured at fair value through profit or loss, including short-term payables.

RECOGNITION AND DERECOGNITION

Financial assets are recognised on trade date, the date on which the Company commits to purchase or sell an asset. A financial asset is derecognised where the rights to receive cash flows from the asset have expired, or the Company has transferred its rights to receive cash flows from the asset. The Company derecognises a financial liability when the obligation under the liability is discharged, cancelled or expired.

IMPAIRMENT OF FINANCIAL ASSETS

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, there has been no impairment loss identified. Investment held at fair value through profit or loss is not subject to IFRS 9 impairment requirements.

The company holds trade receivables with no financing component and which have maturities of less than 12 months at amortised cost and, as such has chosen to apply an approach similar to the simplified approach for expected credit losses (ECL) under IFRS 9 to all of its trade receivables.

Interest receivable on cash balances, fall within the scope of IFRS 9. The Company has completed some high-level analysis and forward looking qualitative and quantitative information, the Directors consider the interest receivable to be low credit risk as the deposits are held with reputable financial institutions.

For interest receivable that are low credit risk, IFRS 9 allows a 12 month expected credit loss to be recognised. The Directors have concluded that any ECL on the interest receivable would be immaterial to the Annual Financial Statements and therefore no impairment adjustments were accounted for.

FAIR VALUE MEASUREMENT AND HIERARCHY

Fair value is the price that would be received on the sale of an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market. It is based on the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. A fair value measurement of a non-financial asset takes into account the best and highest value use for that asset.

The level in the fair value hierarchy within which the fair value measurement is categorised is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose significance of the inputs is assessed against the fair value measurement in its entirety. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs or any other significant unobservable inputs, that measurement is a Level 3 measurement.

The fair value hierarchy to be applied under IFRS 13 is as follows:

Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable. Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are carried at fair value and which will be recorded in the financial information on a recurring basis, the Company will determine whether transfers have occurred between levels in the hierarchy by reassessing categorisation at the end of each reporting period.

   6.         INTEREST INCOME 
 
 
                        31 DECEMBER 2019         31 DECEMBER 2019 
=============== 
                                     USD                      USD 
===============  =======================  ======================= 
 Bank interest                   244,699                1,994,795 
===============  =======================  ======================= 
                                 244,699                1,994,795 
===============  =======================  ======================= 
 
   7.         ADMINISTRATIVE AND OTHER EXPENSES 
 
                                                                    31 December              31 December 
                                                                           2020                     2019 
                                                                            USD                      USD 
============================================  =================================  ======================= 
 Administrative fees                                              1 3 8 , 0 8 5                 9 7, 458 
 Director & officer insurance                                            33,937                25,660 
 Directors fees                                                   264,040                     230,105 
 Fees payable to the Company's auditor 
  for the audit of the Company's fi nancial 
  statements                                                      141,140                       52,738 
 Fees payable to the Company's auditor 
  for non-audit services,1,2                                       24,606                       1 9, 957 
 Investment Management (recoupment)                                                           11 1 , 5 4 
  / expenses                                                              (350)                4 
 Investment Management fees3                                    1,939,925                  1,393,870 
 Legal and professional fees                                      107,357                      62,863 
 Regulatory fees                                                          9,364                13,684 
 Sundry expenses                                                  220,497                     112,972 
============================================  =================================  ======================= 
                                                               2,878,601                    2,120,851 
============================================  =================================  ======================= 
 

1 During the prior period, the Company's auditor, Deloitte, was paid GBP76,500 for their role as reporting accountant prior to the IPO. This fee was recognised directly in equity as a cost associated with the initial capital raising of the Company.

2 The non-audit services provided relates to the review of the interim financial statements (2019: initial financial statements).

3 2019 was not a full year. Investment Management fees commenced from 19 April 2019, when the Company was admitted for trading on the London Stock Exchange (LSE).

The Company has no employees and therefore no employee related costs have been incurred.

   8.         TAXATION 

The Company is approved as an Investment Trust Company with effect as of 16 April 2019 and is subject to tax at the UK corporation tax rate of 19%. An Investment Trust Company can claim a corporation tax deduction for dividends designated as interest distributions that are derived from net interest income. Therefore, no UK corporation tax charge has been recognised by the Company for the period ended 31 December 2020.

 
                                           31 December             31 December 2019 
                                                  2020                          USD 
                                                   USD 
 a) Tax charge in profit or loss:                (181)                       29,079 
      - UK corporation tax                           -                            - 
                                           31 December             31 December 2020 
                                                  2020                          USD 
                                                   USD 
 b) Reconciliation of the tax charge 
  for the year/period                         (41,823)                    (361,031) 
 Profit before tax                           3,650,037                      146,080 
=========================================  ===========  =========================== 
 Tax at UK main rate of 19%                    693,507                   2 7, 755 
 Tax effect of: 
 F ai r value gai ns / ( l osses) 
  on investments not taxable                 (666,720)                    299,309 
 Fore ig n exchange (gain) / loss 
  not taxable                                    (181)                     29,079 
 Non-deductible expenditure                      4,219                    4 , 888 
 Deferred tax not recognised on expenses 
  not utilised                                  10,998                          - 
 Dividends designated as interest 
  distributions                               (41,823)                  (361,031) 
=========================================  ===========  ========================= 
 T a x charge for the year / perio                   -                          - 
  d 
=========================================  ===========  ========================= 
 
 

The tax credit of $41,823 (2019: $361,031) arose as a result of dividends payable in respect of the year/period being designated as interest distributions in accordance with UK tax legislation specific to Investment Trust Companies.

Investment trust companies which have been approved by HM Revenue & Customs are exempt from UK corporation tax on their capital gains. Due to the Company's status as an approved investment trust company, and the intention to continue meeting the conditions required to maintain that approval for the foreseeable future, the Company has not provided for deferred tax in respect of any gains or losses arising on the revaluation of its investments. The Company has an unrecognised deferred tax asset of $19,465 (2019: $7,576) in respect of tax losses which are available to be carried forward and offset against future taxable profits. A deferred tax asset has not been recognised as it is considered unlikely that the Company will generate taxable profits in excess of deductible expenses in future periods. The unrecognised deferred tax asset has been calculated using a corporation tax rate of 19% (2019: 17%).

On 3 March 2021, the UK Government announced its intention to increase the rate of UK corporation tax rate from 19% to 25% with effect from 1 April 2023. If this rate change had been substantively enacted as at 31 December 2020, the unrecognised deferred tax asset as at 31 December 2020 would be $25,612.

   9.         EARNINGS PER SHARE 

Earnings per share amounts are calculated by dividing the profit or loss for the year/period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the year. As there are no dilutive instruments outstanding, basic and diluted earnings per share are identical.

 
                                                          31 December 2020           31 December 
                                                                                            2019 
===================================== 
                                                                       USD                   USD 
=====================================  ===================================  ==================== 
 Net profit attributable to ordinary 
  shareholders                                                   3,650,037               146,080 
 Weighted average number of ordinary 
  shares for the period                                        200,111,456           200,065,051 
=====================================  ===================================  ==================== 
 Earnings per share - Basic and 
  diluted (cents per share)                                          0.018                 0.001 
=====================================  ===================================  ==================== 
 

During the year ended 31 December 2020, the Company issued 100,038 (2019: 92,323) shares at US$1 (2019: US$1) per share to the Investment Manager in accordance with the fee arrangement established in the IPO Prospectus.

10. INVESTMENT IN SUBSIDIARY

 
                                                                                      B u sine         O w n ers 
                                                                                       ss               hip 
=================  ================  ================  ================  =====================  ====================== 
USF Holding 
 Corp. Delaware, 
 US                                                                                  Delaware                100% 
=================  ================  ================  ================  =====================  ====================== 
 
                                                                 Loans:               Net Fair                 Closing 
                            Opening            Equity         Principal                  Value                Balance: 
                             Equity      Acquisitions          Advanced               Movement                  Equity 
                                And        during the        during the                 During                     and 
                              Loans              Year              Year               the Year                   Loans 
                                USD               USD               USD                    USD                     USD 
 USF Holding 
  Corp. Delaware,         119 , 472 
  US                          , 416        72,551,332                 -              3,300,528             195,324,276 
=================  ================  ================  ================  =====================  ====================== 
 

From establishment to 31 December 2020, the Company has funded USF Holding Corp. with equity and debt, with the total amount of debt funding based on several criteria, including an arm's length gearing test satisfying thin capitalisation rules. Note 17 of these financial statements contains the components of the 31 December 2019 equity and loans balance. Fair value relates to USF's share of the underlying Solar Asset investment and cash flows only (i.e. balances exclude tax equity investment amounts) and expected returns and fair values are modelled after allowing for distributions to tax equity investors.

The net fair value movement comprises the following:

 
                                                    Total 
                                                      USD 
============================================  =========== 
 F ai r value gain on investments               6,871,600 
 Interest income                                  145,186 
 Operating costs                                (716,258) 
============================================  =========== 
 T o tal fair value movement                    6,300,528 
 MSA fee income - cash received transferred 
  to revenue reserve                          (3,000,000) 
============================================  =========== 
 Net fair value movement                        3,300,528 
============================================  =========== 
 

On 28 June 2019, the Company entered into a Management Services Agreement (MSA) with its subsidiary USF Holding Corp. The Board of the Company, with further assistance by delegation of its duties to the Investment Manager, provides strategic management services to USF Holding Corp relating to its current portfolio of US Solar Assets and potential acquisitions. The fair value gain for the year to 31 December 2020 includes an MSA fee of $3,000,000 (period to 31 December 2019: $2,047,726 included within the net fair value movement).

   The   investment  in   subsidiaries comprises on a 'look-through'  basis  the following: 
 
 
                                                          31 December 2020       31 December 2019 
                                                                       USD                    USD 
======================================  ==================================  ===================== 
 F ai r value of underlying solar 
  asset interests held (i)                                     434,066,094             97,857,436 
 Cash or cash equivalents                                       14,250,138             41,693,039 
 Fair value of 3rd party loan funding 
  provided (ii)                                              (250,455,652)           (22,800,746) 
 Fair value of interest rate swaps 
  on 3rd party loan funding provided 
  (ii)                                                         (3,202,369)              2,941,464 
 Deferred tax asset/liabilities                                    660,356                      - 
 Other net assets/liabilities                                        5,709              (218,777) 
======================================  ==================================  ===================== 
 Investment balance                                            195,324,276            119,472,416 
======================================  ==================================  ===================== 
 

(i) The balance recorded at 31 December 2020 relates to the company's interest in the Acquisition One, Acquisition Two, Acquisition Three, Acquisition Four and Acquisition Five portfolio solar asset plants.

(ii) Fair value of 3rd party loan funding provided and the fair value of interest rate swaps at 31

December  2020  was  $253,658,021   (2019: $19,859,282) is comprised of the following: 
 
                                                                           Facility             Drawn       Drawn Fair 
                                                                            Size           Face Value          Value21 
   Issuing Bank            Loan Type      H el d By                         U S D             US D(M)            U S D 
                                                                            (M)                                    (M) 
=======================  ============  =============================  =============  ================  =============== 
                                        USF Bristol Class B Member, 
 Zions Bancorporation,                   LLC (Acquisition One - 
  N.A.                   Term Loan       Milford)                         24.27            24.06              25.48 
                                        USF Bristol Class B Member, 
 KeyBank National                        LLC (Acquisition One - 
  Association            Term Loan       Milford)                         24.27            24.06              25 . 51 
                         Project        Acquisition Four (Heelstone)    1 5 2             1 4 7 
 Live Oak Bank            Debt           projects                        . 3 3             .6 0              160.75 
 
                                          SC Oregon 2, LLC 
 Fifth Third Bank,                        (Acquisition 
  National Association     Term Loan      Five - Dorset)                    41.59             41.59              41.92 
=======================  ============  =============================  =============  ================  =============== 
 Total                                                                  242.46            237.31             253.66 
====================================================================  =============  ================  =============== 
 

On 29 August 2019 , USF Bristol Class B Member, LLC and Milford Solar I Holdings, LLC, each as Acquisition One borrowers, entered into a financing agreement with Zions Bancorporation, N.A. and KeyBank National

Association, each as lenders. The facility included a construction loan commitment and an ITC bridge loan commitment of $48.5 million and $79.2 million, respectively. The ITC bridge loan was repaid in November 2020 using proceeds from the tax equity investor. Concurrently, the construction loan converted to a term loan with a mini-perm structure, which will be fully amortised over a 25-year period. The initial tenure of the loan is a 7-year period, after which the loan will be refinanced. The term loan facility is hedged with fixed interest rate swaps for the full duration of the amortisation period. As at 31 December 2020, the drawn fair value of the loan includes mark-to-market revaluation of associated

interest   rate   swaps  of  $(2.88)   million. 

Each project in Acquisition Four (Heelstone) holds debt with Live Oak Bank. As at 31 December 2020, the total drawn balance across all projects is $147 . 60 million. The Heelstone Energy IX - XIII portfolios are summarised as follows:

   --     HE IX portfolio - four project loans drawn to $14.80 million, maturing in March 2042 

-- HE X portfolio - seven project loans drawn to $29.31 million, with maturities ranging from April 2032 to March 2042

-- HE XI portfolio - two project loans drawn to $9.83 million, with maturities in May and September of 2042

-- HE XII portfolio - six project loans drawn to $81.49 million, with maturities ranging from April to June of 2043

-- He XIII portfolio - three project loans drawn to $12.16 million, with maturities ranging from April 2038 to June 2044

Between 9 May 2019 and 6 August 2019 , the Acquisition Five projects entered into construction loan agreements with Solar Construction Lending, LLC. The construction loans were repaid in September 2020 at substantial completion funding, and the managing member in the inverted lease structure, SC Oregon 2, LLC, entered into a term loan agreement with Fifth Third Bank, National Association. The term loan has a mini-perm structure and will be fully amortized over an 11-year period, with the initial tenure maturing in June 2026. This term loan facility is hedged with fixed interest rate swaps for the full duration of the loan, with a mark-to-market revaluation as at 31 December 2020 of $(0.32) million, included in the drawn fair value of the loan.

   In   addition to the above, the following  Letters of Credit   have been issued: 

-- KeyBank National Association has provided a Letter of Credit to USF Bristol Class B Member, LLC to the value of US$19.8 million, expiring in November 2026 concurrent with the mini-perm structure and will be refinanced thereafter.

-- Zions Bancorporation, N.A. has provided a Letter of Credit to USF Bristol Class B Member, LLC to the value of US$2.3 million, expiring in November 2026 concurrent with the mini-perm structure and will be refinanced thereafter.

-- Fifth Third Bank, N.A. has provided a Letter of Credit to SC Oregon 2, LLC to the value of US$4.5 million, expiring in June 2026 concurrent with the mini-perm structure and will be refinanced thereafter.

11. TRADE AND OTHER RECEIVABLES

 
                                  USD                       USD 
=============================  ======  ======================== 
 Deposit interest receivable        -                 34,301 
 Prepayments                   25,020                 12,883 
                                                      4 1 , 5 6 
 VAT receivable                20,567                  0 
=============================  ======  ======================== 
                               45,587                 88,744 
=============================  ======  ======================== 
 

12. CASH AND CASH EQUIVALENTS

 
                         31 December 2020              31 December 
                                      USD                     2019 
                                                               USD 
=======================  ================  ======================= 
 Cash at bank                     523,170                 85 , 914 
 Deposits held at bank                  -            76,372,748 
=======================  ================  ======================= 
                                  523,170            76,458,662 
=======================  ================  ======================= 
 
   13.       TRADE AND OTHER PAYABLES 
 
                                     31 December 2020            31 December 
                                                  USD                   2019 
                                                                         USD 
===================================  ================  ===================== 
 Creditors and operating accruals             194,705                112,499 
 Investment management fee accrual            538,018                491,142 
===================================  ================  ===================== 
                                              732,723               603,641 
===================================  ================  ===================== 
 
   14.       DIVIDS PAYABLE 

During the year, the Company declared dividends totalling $4,002,846 (10 January 2019 to 31 December 2019: $1,820,633) of which $3,001,884 (31 December 2019: $820,172) has been paid as at 31 December 2020. The Company declared a dividend of 0.50 cents per share, totalling $1,000,962 for the period ending 30 September 2020. The dividend was paid on 12 February 2021.

   15.       CATEGORIES OF FINANCIAL INSTRUMENTS 
 
                                        31 December 2020              31 December 
                                                     USD                     2019 
                                                                              USD 
======================================  ================  ======================= 
 
 Financial assets 
  Financial assets at fair value 
  through profit and loss: Investment                                119 , 472 , 
  in subsidiary                              195,324,276             416 
 
 Financial assets at amortised 
  cost: Trade and other receivables                    -                   34,301 
 Cash at bank                                    523,170            76,458,662 
======================================  ================  ======================= 
 Total financial assets                      195,847,446          195,965,379 
======================================  ================  ======================= 
 
 Financial liabilities 
  Financial liabilities at amortised 
  cost: Trade and other payables                 732,723                 603,641 
======================================  ================  ======================= 
 Total financial liabilities                     732,723               603,641 
======================================  ================  ======================= 
 

At the balance sheet date, all financial assets and liabilities were measured at amortised cost except for the investment in subsidiary which is measured at fair value as further explained in note 17.

   16.       FINANCIAL RISK MANAGEMENT 

The Company is exposed to certain risks through the ordinary course of business and the Company's financial risk management objective is to minimise the effect of these risks. The management of risks is performed by the Directors of the Company and the exposure to each financial risk considered potentially material to the Company, how it arises and the policy for managing it is summarised below:

CREDIT RISK

The Company is exposed to third-party credit risk in several instances and the possibility that counterparties with which the Company and its subsidiaries, together the Group, contracts may fail to perform their obligations in the manner anticipated by the Group.

Counterparty credit risk exposure limits are determined based on the credit rating of the counterparty. Counterparties are assessed and monitored on the basis of their ratings from Standard & Poor's and/or Moody's. No financial transactions are permitted with counterparties with a credit rating of less than BBB- from Standard & Poor's or Baa3 from Moody's unless specifically approved by the Board.

Cash and other assets that are required to be held in custody will be held at bank. Cash and other assets may not be treated as segregated assets and will therefore not be segregated from the banks own assets in the event of the insolvency of a custodian. Cash held with the bank will not be treated as client money subject to the rules of the FCA and may be used by the bank in the ordinary course of its own business. The Company will therefore be subject to the creditworthiness of the bank. In the event of the insolvency of the bank, the Company will rank as a general creditor in relation thereto and may not be able to recover such cash in full, or at all.

Credit risk is mainly at subsidiary level where the capital commitments are being made and is managed by diversifying exposures among a portfolio of counterparties and through applying credit limits to those counterparties with lower credit standing.

Credit exposures may also be managed using credit derivatives. No credit derivatives were in place as at 31 December 2020.

Cash and bank deposits are held with major international financial institutions who each hold a Moody's credit rating of A2 or higher.

LIQUIDITY RISK

The objective of liquidity management is to ensure that all commitments which are required to be funded can be met out of readily available and secure sources of funding. The Company's only financial liabilities are trade and other payables. The Company intends to hold sufficient cash across the Company and Subsidiary's operating accounts to meet the working capital needs over a horizon of at least the next 6 months. Cash held at subsidiary level is available to meet the obligations of the Company. As at 31 December 2020 USF Holding Corp. held cash at bank of $14,250,138 and had trade and other payables totalling $632,414. Cash flow forecasts are prepared on a monthly basis for a rolling 2-year period to assist in the ongoing analysis of short term cash flow.

The following table reflects the maturity analysis of financial assets and liabilities.

 
                                   <1 year              1 to 2             2 to 5                >5              Total 
  As at 31                             USD               years              years             years                USD 
  December 2020                                            USD                USD               USD 
=================  =======================  ==================  =================  ================  ================= 
 Financial assets 
 Financial assets 
 at fa 
 i r value 
 through pro 
 fi t and loss: 
 Loan to 
  subsidiary*                            -                   -                  -   47,818,615         47,818,615 
 Financial assets 
 at amortised 
 cost: 
 Tra de and other                        -                   -                  -                 -                  - 
 receivables 
 Cash at bank                      523,170                   -                  -                 -        523,170 
=================  =======================  ==================  =================  ================  ================= 
 T o t a l fi 
  nancial 
  assets                           523,170                   -                  -   47,818,615         48,341,785 
=================  =======================  ==================  =================  ================  ================= 
 
                                   <1 year               1 to              2 to 5             >5                 Total 
  As at 31                             USD               2                 years              years              USD 
  December 2020                                          years             USD                USD 
                                                         USD 
=================  =======================  ==================  =================  ================  ================= 
 Financial lia b 
 ilitie 
 s 
 Financial lia b 
 iliti 
 es at amortised 
 cost: 
 Tra de and other 
  payables                         732,723                   -                  -                 -        732,723 
=================  =======================  ==================  =================  ================  ================= 
 T o t a l fi 
  nancial 
  liabilities                      732,723                   -                  -                 -        732,723 
=================  =======================  ==================  =================  ================  ================= 
 

*Excludes the equity portion of the investment in subsidiary.

MARKET RISK

Market risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk reflects interest rate risk, currency risk and other price risks. The objective is to minimise market risk through managing and controlling these risks to acceptable parameters, while optimising returns. The Company uses financial instruments in the ordinary course of business, and also incurs financial liabilities, in order to manage market risks.

PRICE RISK

Price risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices. At 31 December 2020, the Company had no direct exposure to price risk. The effect of price on the Company's investments is considered in note 17.

INTEREST RATE RISK

Interest rate Risk is the risk of changes in the interest expense for debt, or interest received on deposits, as measured in the currency of that debt, due to movements in market interest rates.

The Company does not have any borrowings as at 31 December 2020. The Company may manage the cost of borrowing by borrowing using fixed rate instruments, and/or by overlaying interest rate derivatives against the Company's debt portfolio. Policy limits for the maximum and minimum levels of hedging relative to the expected net debt profile for rolling multi-year periods.

In considering whether to execute hedging transactions, the costs and benefits of hedging will be balanced against the effects of movements in interest rates on the debt portfolio.

At 31 December 2020, the Company is indirectly exposed to interest rate risk through its investment in the subsidiary. However this risk is managed at a subsidiary level and the effect of Interest rate risk on the Company is considered immaterial.

The Company may be exposed to changes in variable market rates of interest as this could impact the discount rate and therefore the valuation of the projects as well as the fair value of the loan to subsidiary.

CURRENCY RISK

The Net Asset Value of the Company is calculated in US Dollars whereas the financial instruments at year end may be in other currencies. The value in terms of USD of the financial instruments of the Company, which may be designated in any currency, may rise and fall due to exchange rate fluctuations of individual currencies. Adverse movements in currency exchange rates can result in a decrease and loss of capital. At year end, the currency exposure was considered immaterial.

Currency risk can be mitigated to some extent through transacting wherever possible in USD. Where non-USD exposures are unavoidable, the Company is able to manage exposures to movements in foreign currencies through foreign exchange derivative transactions.

CAPITAL RISK MANAGEMENT

The capital structure of the Company at year-end consists of equity attributable to equity holders of the Company, comprising issued capital, reserves and accumulated loss. The Company has no return on capital benchmark, but the Board continues to monitor the balance of the overall capital structure so as to maintain investor and market confidence. The Company is not subject to any external capital requirements.

   17.       FAIR VALUE MEASUREMENT 

The following table analyses within the fair value hierarchy the Company's assets and liabilities measured at fair value at 31 December 2020:

 
                            Level 1  Level 2              Level 3 
                                USD      USD                  USD 
==========================  =======  =======  =================== 
 Investment in subsidiary         -        -          168,243,133 
==========================  =======  =======  =================== 
 

The following table analyses within the fair value hierarchy the Company's assets and liabilities measured at fair value at 31 December 2019:

 
                            Level 1  Level 2              Level 3 
                                USD      USD                  USD 
==========================  =======  =======  =================== 
 Investment in subsidiary         -        -          119,472,416 
==========================  =======  =======  =================== 
 

The investments recognised at fair value through profit and loss are classified as Level 3 in the fair value hierarchy and the reconciliation in the movement of this Level 3 investment is presented below. No transfers between levels took place during the year.

 
                               31 December 2020          31 December 
                                            USD                 2019 
                                                                 USD 
=============================  ================  =================== 
 Opening balance                    119,472,416                    - 
=============================  ================  =================== 
 Add: purchases during the 
  year                               72,551,332           76,000,000 
=============================  ================  =================== 
 Add: loans advanced                          -           43,000,000 
=============================  ================  =================== 
 Less: receipt of MAS fee           (3,000,000)                    - 
  income 
=============================  ================  =================== 
 Total fair value movement 
  through the profit or loss 
  (capital)                           6,300,528              472,416 
=============================  ================  =================== 
 Closing balance                    195,324,276          119,472,416 
=============================  ================  =================== 
 

The Company's policy is to recognise transfers into and transfers out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer.

In accordance with the guidelines of the Company's valuation policy, all assets held as at 31 December 2020 have been valued by an external valuation expert, as they are now fully operational.

VALUATION APPROACH AND METHODOLOGY

Fair value for operational Solar Assets is derived using a discounted cash flow ( DCF) methodology. For Solar Assets that are not yet operational or where the completion of the acquisition by the Company has not occurred at the time of valuation, the purchase price of the Solar Power Asset including acquisition costs is normally used as an appropriate estimate of fair value provided no significant changes to key underlying economic considerations (such as major construction impediments or natural disasters) have arisen.

In a DCF analysis, the fair value of the Solar Power Asset is the present value of the asset's expected future cash flows, based on a range of operating assumptions for revenues and costs and an appropriate discount rate range.

The Investment Manager has reviewed a range of sources in determining the fair market valuation of the Solar Assets, including but not limited to:

   --     discount rates publicly disclosed by the Company's global peers; 
   --     discount rates applicable to comparable infrastructure asset classes; and 
   --     capital asset price model outputs and implied risk premium over relevant risk-free rates. 

A broad range of assumptions are used in valuation models. Given the long-term nature of the assets, valuations are assessed using long-term historical data to reflect the asset life.

Where possible, assumptions are based on observable market and technical data. The Investment Manager also engages technical experts such as long-term electricity price forecasters to provide long-term data for use in its valuations.

Long-term electricity price forecasts are obtained every six months from two leading independent power price forecasting firms for each jurisdiction in which Solar Assets are located. These two electricity price forecasts are averaged and provided to the independent valuer to project the prices at which existing power purchase agreements will be re-contracted. A blend of providers is used to prevent the valuation of the portfolio being unduly influenced by one forecaster's set of assumptions, to mitigate potential forecaster errors, and to reduce the timing risk inherent in valuing the portfolio shortly before curve updates are released. The independent valuer assesses these forecast prices for reasonableness against their own internal forecasts and others in the marketplace.

VALUATION PROCESS

NESM has engaged independent valuer KPMG to calculate the fair value of its operating renewable energy assets. KPMG is one of the largest valuation firms in the United States with significant experience in estimating the fair value of solar and other renewable energy assets. In accordance with Company policy, all 41 operating assets were externally valued at 31 December 2020 (construction assets were held at cost in previous periods). The valuation has been calculated in accordance with Uniform Standards of Professional Appraisal Practice (USPAP) as applied to photovoltaic electricity generation systems in the United States.

Primary valuation methodology:

-- The equity fair values of USF's construction assets are based on the equity purchase price plus transaction costs (no assets were valued at cost for 31 December 2020 as all assets were operational at period end).

-- The equity fair values of USF's operational assets are based on DCF modelling of pre-tax cash flows to equity as at 31 December 2020. This methodology more accurately reflects the valuation impact of the discrete debt instruments that USF has in place when compared to an unlevered valuation.

-- A post-tax valuation is conducted at the US Holding Corp. level to compare the implied post-tax discount rate.

In order to ensure that the potential impact of the pandemic is considered in the valuations, KPMG has included a specific COVID-19 risk premium in the discount rate used in valuations, and the Company has adopted merchant curves which include the impact of the pandemic on future power prices.

The discount rates used by the external valuer ranged from 6.5% to 7.0% on a pre-tax weighted average cost of capital (WACC) basis for levered assets (30 June 2020: 6.8% to 7.2%) and 8.1% to 9.7% on a pre-tax cost of equity basis (30 June 2020: 8.1% to 8.8%) for unlevered assets. The use of a WACC or cost of equity in valuations is dependent on actual leverage employed.

A summary of the movement during the year is included in the table below:

 
                                                                                                                                                           US CASH 
                                   ACQUISITION              ACQUISITION              ACQUISITION              ACQUISITION               ACQUISITION            AND           Total 
                                       ONE USD              TWO USD                  THREE USD                FOUR USD                     FIVE USD        WORKING             USD 
                                                                                                                                                           CAPITAL 
                                                                                                                                                          BALANCES 
                                                                                                                                                               USD 
==============================================  =======================  =======================  =======================  ========================  =============  ============== 
31 December 
 2019               29,098,744                     25,794,479                23,104,931                                 -                         -    41,474,262     119,472,416 
Additions                                          1 4 , 4 4 
 (at cost)        (2,805,553)22                     2 , 3 8 1                14,578,557               41,210,429              26,443,205              (23,009,010)     70,860,009 
Change in 
 fair value          3,750,354                       2,338,893                (1,613,379)             (2,931,796)               3,447,779                        -       4,991,851 
==============  ==============================  =======================  =======================  =======================  ========================  =============  ============== 
31 December 
 2020              30,043,545                      42,575,753                36,070,109              38,278,633               29,890,984               18,465,252     195,324,276 
==============  ==============================  =======================  =======================  =======================  ========================  =============  ============== 
 

SENSITIVITY ANALYSIS

Set out below are the initial indications of the key assumptions the Directors believe would have a material impact upon the fair value of the investments should they change. In the absence of an operating business model for each underlying renewable energy asset, the sensitivities have been conducted on the acquisition models of these assets. The following sensitivities assume the relevant input is changed over the entire useful life of each of the underlying renewable energy assets, while all other variables remain constant. All sensitivities have been calculated independently of each other.

The Directors consider the changes in inputs to be within a reasonable expected range based on their understanding of market transactions. This is not intended to imply that the likelihood of change or that possible changes in value would be restricted to this range.

 
 
                                            CHANGE IN               CHANGE IN NAV               CHANGE IN NAV 
                                                INPUT                                               PER SHARE 
                                                                          USD (M)                 USD (Cents) 
=====================================================  ==========================  ========================== 
Discount rate                                   +0.5%                      -10.06                       -5.05 
                                                -0.5%                      +11.24                       +5.64 
Electricity production 
 (change from P50)                                P90                      -31.66                      -15.89 
=====================================  ==============  ==========================  ========================== 
                                                  P10                      +30.88                      +15.50 
=====================================  ==============  ==========================  ========================== 
Merchant Period Electricity 
 Prices                                          -10%                      -16.30                       -8.19 
=====================================  ==============  ==========================  ========================== 
                                                 +10%                      +16.37                       +8.22 
=====================================  ==============  ==========================  ========================== 
Operating expenses                               +10%                      -14.06                       -7.06 
=====================================  ==============  ==========================  ========================== 
                                                 -10%                      +13.79                       +6.92 
=====================================  ==============  ==========================  ========================== 
Operating life                               -3 years                      -12.06                       -6.05 
=====================================  ==============  ==========================  ========================== 
                                             +3 years                      +10.21                       +5.13 
=====================================  ==============  ==========================  ========================== 
Tax rate                                          -5%                       -4.16                       -2.08 
=====================================  ==============  ==========================  ========================== 
                                                  +5%                       +4.14                       +2.07 
=====================================  ==============  ==========================  ========================== 
 

DISCOUNT RATE

The sensitivity demonstrates the impact of a change in the discount rate applied to the pre-tax, equity cash flows from all of the Company's renewable energy asset investments as at 31 December 2020. A range of +/- 0.5% has been considered to determine the resultant impact on the Company's NAV per share and the fair value of its solar asset investments.

As at 31 December 2020, the discount rate range used was 6.46% to 6.97% on a WACC basis, and 8.10% to 9.73% on a pre-tax cost of equity basis. The use of a WACC or cost of equity in valuations is dependent on actual leverage employed.

ELECTRICITY PRODUCTION

The Company's solar asset investments are valued based upon a forecast P50 solar energy generation profile (being a 50% probability that this generation estimate will be met or exceeded). A technical adviser has derived this generation estimate by taking into account a range of irradiation datasets, satellite and ground-based measurements, and site-specific loss factors including module performance degradation, module mismatch and inverter losses. These items are then considered in deriving the anticipated production of the individual solar asset (MWh per annum) based upon a 50% probability of exceedance.

The sensitivity estimates the impact on the fair value of solar asset investments and NAV per share of a change of production estimates to P90 (90% likely probability of exceedance) and a P10 generation estimate (10% probability of exceedance).

As P10 generation estimates were not independently obtained for each solar asset on or about the time of the asset acquisition, the Directors have determined a proxy P10 estimate for those assets by assessing the relationship between the independently determined P50 and P90 generation estimates for each of the assets in the Operating Portfolio (e.g. a one-year P90 generation estimate might be 92.5% of a one-year P50 generation estimate, implying that it is 7.5% lower than the P50 generation estimate).

In determining the proxy P10 generation estimate, the Directors have assumed that the relationship between a P50 generation estimate and a P10 generation estimate is the same as that between a P50 generation estimate and a P90 generation estimate in absolute terms. Therefore a one-year P10 generation estimate by this methodology would be 107.5% (i.e. 100% + 7.5%) of the asset's P50 generation estimate.

MERCHANT PERIOD ELECTRICITY PRICES

Each of the assets underlying the Company's solar asset investments have long-term PPAs in place with creditworthy energy purchasers and thus the PPA prices are not impacted by energy price changes during this period. For the post-PPA period of each solar asset, the Directors use long-term electricity price forecasts that have been prepared by a market consultant in their determination of the fair value of the Company's operating solar asset investments.

The sensitivities show the impact of an increase / decrease in power prices for each year of the power price curve for each plant over the plant's remaining economic life after the conclusion of the existing PPAs. A flat 10% increase / decrease in market electricity prices from forecasted levels over the remaining asset life of all plants have been used in the sensitivity analysis. Although a 10% increase / decrease is not typical, this figure has been used as merchant period prices are determined upon the discretion of expert market consultants.

OPERATING EXPENSES

The operating costs of the assets underlying the Company's solar asset investments include annual operations and maintenance (O&M), asset management (AM), insurance expenses, land lease expenses, major maintenance and general administration expenses. Most operating expenses for the Solar Power Assets are contracted and as such there is typically little variation in annual operating costs. However, there may be cases where all operating costs are recontracted at a 10% premium or discount.

The sensitivity above assumes a 10% increase / decrease in annual operating costs for all underlying assets and the resultant impact on the Company's fair value of investments and NAV per share.

OPERATING LIFE

The useful operating life of a solar asset is generally accepted by independent valuers to be the lesser of the lease term for asset site and the independent engineer's assessment of the asset's useful life. The Company's maximum useful life assumption is 35 years for newly constructed assets.

The sensitivity above assumes a three-year increase / decrease in useful operating life of the Company's Solar Assets, and the resultant impact on the Company's fair value of investments and NAV per share.

TAX RATE

The United States imposes a tax on profits of US resident corporations at a rate of 21%. The sensitivity above assumes the US corporate tax rate increases / decreases by 5% (to 26% / 16%) and shows the resultant impact on the Company's fair value of investments and NAV per share.

   18.       SHARE CAPITAL 
 
                                ORDINARY           SHARE              SHARE          REDUCTION          SHAREHOLDERS 
                                  SHARES         CAPITAL            PREMIUM            RESERVE                EQUITY 
                                NUMBER               USD                USD                USD                   USD 
=====================  =================  ==============  =================  =================  ==================== 
 As at 10 January                      -               -                                     -                     - 
  2019 
 Issue of fully 
  paid ordinary 
  shares at USD0.01                          2,000,923       198,089,350                     -        200,090,273 
 Equity issue costs                    -               -       (4,000,000)                   -          (4,000,000) 
 Transfer to capital 
  reduction reserve                    -               -    (194,000,000)       194,000,000                        - 
 Dividends                             -               -                  -        (1,820,633)           (1,820,633) 
=====================  =================  ==============  =================  =================  ==================== 
 As at 31 December 
  2019                     200,092,323       2,000,923              89,350       192,179,367          194,269,640 
 Issue of fully 
  paid ordinary 
  shares at USD0.01              100,038           1,001                  -                  -                     - 
 Dividends                             -               -                  -        (4,002,846)          (4,002,846) 
=====================  =================  ==============  =================  =================  ==================== 
 As at 31 December 
  2020                      200,192,361      2,001,924             184,786       188,176,521          190,363,231 
=====================  =================  ==============  =================  =================  ==================== 
 

The Company has an authorised share capital of 500,000,000 ordinary shares.

On incorporation the Company issued one ordinary share of $0.01 which was fully paid up.

On 10 April 2019, the Board approved the proposed placing and offer for subscription (together the Placing) of up to 200 million ordinary shares of $0.01 each in the capital of the Company at a price of $1 per ordinary share, raising gross proceeds from the Placing of $200 million.

Following a successful application to the High Court and lodgement of the Company's statement of capital with the Registrar of Companies, the Company was permitted to cancel its share premium account. This was effected on 21 June 2019 by a transfer of the balance of $194 million from the share premium account to the capital reduction reserve. The capital reduction reserve is classed as a distributable reserve and dividends to be paid by the Company are to be offset against this reserve.

The Company declared a dividend of 0.50 cents per share, totalling $1,000,962 for the period ending 30 September 2020. The dividend was paid on 12 February 2021. For the year ended 31 December 2020, the Company paid a total of 2.00 cents per share.

   19.       RESERVES 

The nature and purpose of each of the reserves included within equity at 31 December 2020 are as follows:

-- Share premium reserve: represents the surplus of the gross proceeds of share issues over the nominal value of the shares, net of the direct costs of equity issues and net of conversion amount. As at 31 December 2020 the share premium account has a balance of $184,786 (2019:$89,350).

-- Capital reduction reserve: represents a distributable reserve (which may be utilised in respect of dividend payouts) created following a court approved reduction in capital. As at 31 December 2020 the capital reduction reserve has a balance of $188,176,521 (2019:$192,179,367).

-- Capital reserve: represents cumulative net gains and losses, of a capital nature, recognised in the Statement of Profit and Loss and Other Comprehensive Income and associated tax allocations arising from the MSA fee income and interest distributions. As at 31 December 2020 the capital reserve reflects a profit of $3,271,402 (2019:$319,371 profit).

-- Retained earnings represent cumulative net gains and losses, of an income nature, recognised in the Statement of Profit and Loss and Other Comprehensive Income and associated tax allocations arising from the MSA fee income and interest distributions. As at 31 December 2020, retained earnings reflects a profit of $524,715 (2019:$173,291 loss).

The only movements in these reserves during the year are disclosed in the statement of changes in equity.

   20.       NET ASSET VALUE PER SHARE 

Basic NAV per share is calculated by dividing the Company's net assets as shown in the statement of financial position that are attributable to the ordinary equity holders of the Company by the number of ordinary shares outstanding at the end of the period. As there are no dilutive instruments outstanding, basic and diluted NAV per share are identical.

 
                                                                31 DECEMBER 2020          31 DECEMBER 
                                                                             USD                 2019 
                                                                                                  USD 
=============================  =================================================  =================== 
 Net assets per Statement of 
  Financial Position                                                 194,159,348       194,415,720 
 Ordinary shares in issue as 
  at 31 December                                                     200,192,361      200,092,323 
=============================  =================================================  =================== 
 NAV per share - Basic and 
  diluted                                                                  0.970                0.972 
=============================  =================================================  =================== 
 
   21.       CASH FLOW STATEMENT RECONCOLIATION 

IAS 7 Statement of Cash Flows require additional disclosures about changes in an entity's financing liabilities, arising from both cash flow and non- cash flow items. As at 31 December 2020 the Company has no financing liabilities and therefore no further disclosure is required.

   22.       TRANSACTIONS WITH RELATED PARTIES 

Details of related parties are set out below:

NON-EXECUTIVE DIRECTORS

Directors are paid fees of GBP40,000 per annum. In addition to this, Gillian Nott receives GBP20,000 per annum in respect of serving as Chair of the Board and Jamie Richards receives GBP10,000 per annum in respect of serving as Chair of the Audit committee.

Total Directors' fees of $264,040 (2019:$230,105) were incurred in respect of the year with none being outstanding and payable at the year-end (2019: $nil).

SUBSIDIARY

The Company previously issued loans totalling $43 million to its subsidiary USF Holding Corp. The principal portions of the loans are repayable in 7 years from issuance. The loans bear interest at rates of 5% and 4.1% respectively, payable semi-annually in arrears.

INVESTMENT MANAGER

The Investment Manager is entitled to management fees under the terms of the Investment Management Agreement. The Company shall pay to the Investment Manager an annual fee (exclusive of value added tax, which shall be added where applicable) payable quarterly in arrears calculated at the rate of:

 
ASSETS UNDER MANAGEMENT                  FEE BASED ON NAV 
===========================  ============================ 
 < $500 million                            1.0% per annum 
 $500 million to $1 billion                0.9% per annum 
===========================  ============================ 
 > $1 billion                              0.8% per annum 
===========================  ============================ 
 

Based on the Net Asset Value on the last Business Day of the relevant quarter.

The Management Fee due in respect of each quarter shall be invoiced by the Manager to the Company as at the final Business Day of the relevant quarter, and shall be due and payable in the following manner:

a) no later than 10 Business Days after the Payment Date, 90% of the Management Fee shall be paid to the Manager in cash to such bank account as the Manager may nominate for this purpose; and

b) 10% of the Management Fee shall be paid to the Manager or an Associate (as directed by the Manager) in the form of ordinary shares in accordance with the provisions stated in the Investment Management Agreement.

For the avoidance of doubt, where there are C Shares in issue, the advisory fee will be charged on the Net Asset Value attributable to the ordinary shares and C Shares respectively. On 10 November 2020, the Board approved a recommendation from the Investment Manager to have the Administrator arrange for 10 per cent of its Management Fee to be applied to purchase ordinary USF shares in the secondary market. From that time, the Company ceased issuing shares to the Investment Manager.

A management fee of $1,939,925 (2019: $1,393,870) was incurred during the year ($193,992 paid or payable in ordinary shares), of which $538,018 (2019: $491,142) remained payable at 31 December 2020 ($97,556 payable in ordinary shares). In addition to the management fee, the Manager shall also be entitled to payment of the following:

a) a fee for any successful arrangement of debt services payable at a rate of 0.5% of the debt face value; and

b) a fee for any oversight of asset construction services payable at market rates, negotiated on an arms' length basis and subject to the approval of the Board.

The Manager provides debt arranging services to the Fund, including contacting and liaising with capital providers, negotiating borrowing terms, obtaining credit ratings, implementing interest rate hedging strategies and executing documentation. The Manager was successful in securing debt, interest rate hedging and letter of credit facilities at competitive terms for the Fund, providing diversification to the Fund's capital sources.

For this service, the Manager receives debt arranging fees of 0.5% of the face value of new third-party debt and letter of credit facilities.

Debt arrangement fees totalling $336,500 ($125,000 accrued; $211,500 paid) were incurred during the year (2019: $nil). Asset management and construction services fees totalling $360,061 ($229,261 accrued; $130,800 paid) were incurred during the year (2019: $nil).

   23.       CAPITAL COMMITMENTS 

The Company had no contingencies and no other significant capital commitments at the reporting date.

   24.       POST BALANCE SHEET EVENTS 

On 16 March 2021, the Company announced a dividend of 0.50 cents per ordinary share for the period ending 31 December 2020.

On 10 February 2021, the Company announced it was assessing debt and equity fundraising options. Any further fundraising is subject to Board and customary regulatory approvals and the Company will make an announcement in due course.

There were no other events after reporting date which requires disclosure.

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END

FR SFASFMEFSESD

(END) Dow Jones Newswires

March 16, 2021 03:01 ET (07:01 GMT)

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