SEQI Sequoia Economic Infrastructure Income Fund Limited

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE UNITED STATES

16 September 2024

Sequoia Economic Infrastructure Income Fund Limited

("SEQI" or the "Company")

Monthly NAV and portfolio update

The NAV per share for SEQI, the specialist investor in economic infrastructure debt, increased to 94.46 pence per share from the prior month's NAV per share of 93.93 pence, representing an increase of 0.53 pence per share.

A full attribution of the changes in the NAV per share is as follows:

As the Company is approximately 100% currency-hedged, it does not expect to realise any material FX gains or losses over the life of its investments. However, the Company's NAV may include unrealised short-term FX gains or losses, driven by differences in the valuation methodologies of its FX hedges and the underlying investments - such movements will typically reverse over time.

Continuation Vote

The Board and the Investment Adviser were pleased to receive the support of an overwhelming majority of shareholders to the Company's triennial continuation vote passed at the 2024 AGM on 01 August 2024. 96.43% of the shares that were voted were in favour of Continuation and 66.57% of the shares were voted (the turnout).

Market Summary

On 01 August 2024, the Bank of England reduced its base rate from 5.25% to 5.00%, marking the first rate cut since March 2020. The US Federal Reserve ("the Fed") and the European Central Bank ("the ECB") maintained rates during August 2024 at 5.50% and 3.75% respectively.

On 06 September, The Fed policymakers signalled that they are ready to resume rate cuts during the central bank's meetings between 17-18 September, with at least one rate cut for 0.25% priced in during September 2024. On 12 September, the ECB reduced interest rates by 0.25% to 3.50%.

The most recent data on CPI inflation in the UK shows that it has risen to 2.2% in July 2024 from 2.0% in June 2024, and the markets have not currently priced in a further rate cut in the UK during the next decision on interest rates on 19 September. In the US, CPI inflation has slowed to 2.5% in August 2024 from 2.9% in July 2024. In the Eurozone, CPI inflation has reduced to 2.2% in August 2024 from 2.6% in July 2024, indicating some progress towards the ECB's 2.0% target and aligning with a backdrop that favours interest rate cuts by the central bank.

As inflation abates, the likelihood of future interest rate cuts increases, which makes alternative investments such as infrastructure more attractive when compared to liquid credit. The Investment Adviser is also currently locking in higher interest rates; 60.7% of portfolio is in fixed rate investments as of August 2024, and has positioned 53.2% of the portfolio in Defensive sectors (Renewables, Digitalisation, Utility and Accommodation). These are viewed as Defensive because they provide essential services and often operate within a regulated or contractual framework or have high barriers to entry.

Once a downwards trend toward a lower interest rate environment unfolds, this will be supportive of fixed rate loans and bonds, as it will accelerate their pull-to-par (the portfolio pull-to-par is 3.4 pence per share as of August 2024). Further, as short-term rates begin to fall, yield curves will become less inverted or turn positive again, supporting a bid for risk in the market.

Portfolio update

The Company has drawn £20.3 million on its revolving credit facility (RCF) of £300.0 million during August 2024 and currently has cash of £55.9 million (inclusive of interest income and RCF drawings), and undrawn investment commitments of £54.1 million. The RCF is primarily utilised to manage cashflows through the timing of new investments against the repayment of existing investments.

As at 30 August 2024, the Company's invested portfolio consisted of 55 private debt investments and 2 infrastructure bonds, diversified across 8 sectors and 30 sub-sectors. 59.6% of the portfolio comprised of senior secured loans. It had an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 10.22% and a cash yield of 8.10% (excluding deposit accounts). The weighted average portfolio life remains short and is approximately 3.6 years. This short duration means that as loans mature, the Company can take advantage of higher yields in the current interest rate environment.

Private debt investments represented 94.4% of the total portfolio, allowing the Company to capture illiquidity yield premiums. The Company's invested portfolio currently consists of 39.3%[1] floating rate investments and remains geographically diversified with 49.0% located across the USA, 28.1% in the UK, 22.8% in Europe, and 0.1% in Australia/New Zealand.

The portfolio remains highly diversified by sector and size. The average loan represents approximately 1.7% of the total portfolio.

At month end, approximately 100% of the Company's NAV consisted of either Sterling assets or was hedged into Sterling. The Company has adequate liquidity to cover margin calls, if any, on its hedging book.

Investment activity in August 2024

SEQI continues to carefully scrutinise new investment opportunities arising from the repayment of loans in a disciplined manner alongside other uses of proceeds such as share buybacks and ensuring it has significant liquidity on its RCF.

The following investments (exceeding £0.5m) were made in August 2024:

An additional senior loan for $2.625 million to SL 4000 Connecticut LLC (formerly known as Whittle Schools). The financing was provided alongside other stakeholders in the property to provide additional liquidity to enable re-tenanting and/or sale of the building.

No investments repaid during August 2024

Share buybacks

The Company bought back 6,147,490 of its ordinary shares at an average purchase price of 79.77 pence per share in August 2024. The Company first started buying back shares in July 2022 and has bought back 184,338,289 ordinary shares as of 30 August 2024, with the buyback continuing into September 2024. This share repurchase activity by the Company continues to contribute positively to NAV accretion. The rate at which SEQI buys back shares will vary depending on various factors, including the level of our share price discount to NAV.

Non-performing loans

The Investment Advisor continues to actively manage its existing non-performing loans with the loans being independently marked to market by PwC as part of the monthly review process. We will continue to provide updates to shareholders on a monthly basis.

Portfolio Summary (15 largest settled investments)

Note (2) - excluding accrued interest.

Note (3) - Montreux HoldCo Facility was restructured and replaced with an equivalent loan on extended terms to a newly established entity, Gadwall Holdings. As part of the restructuring, an additional loan for £34.8 million was also made to ACG BidCo Limited as a senior secured loan. The combined value of both loans to the Group equates to 5.3% of the NAV.

The Company's monthly investor report and additional portfolio disclosure will be made available at: https://www.seqi.fund

LEI: 2138006OW12FQHJ6PX91

This announcement is not for publication or distribution, directly or indirectly, in or into the United States of America. This announcement is not an offer of securities for sale into the United States.  The securities referred to herein have not been and will not be registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States, except pursuant to an applicable exemption from registration.  No public offering of securities is being made in the United States.

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About Sequoia Economic Infrastructure Income Fund Limited

The Company seeks to provide investors with regular, sustained, long-term distributions and capital appreciation from a diversified portfolio of senior and subordinated economic infrastructure debt investments. The Company is advised by Sequoia Investment Management Company Limited.