Sequoia Economic Infrastructure Fund Regulatory News (SEQI)

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

15 February 2024

Sequoia Economic Infrastructure Income Fund Limited

("SEQI" or the "Company")

Monthly NAV update

The NAV per share for SEQI, the specialist investor in economic infrastructure debt, increased to 93.54 pence per share from the prior month's NAV per share of 92.69 pence, (being the 29 December 2023 cum-income NAV of 94.41 less the dividend of 1.71875 pence per share declared in respect of the quarter ended 29 December 2023 and payable on 29 February 2024), representing an increase of 0.85 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.

Market Summary

The US Federal Reserve, the Bank of England and the European Central Bank all left rates unchanged during January 2024 at 5.50%, 5.25% and 4.00% respectively. The recent data on annual inflation shows that CPI decreased during the same period by 0.3% to 3.1% in the US, remained the same in the UK at 4%, and is expected to decline by 0.1% in the Eurozone to 2.8%. The market is still pricing in significant rate cuts this year, with base rates expected to fall by up to 1.5% over the course of 2024. Central banks predict that the target inflation rate of 2.0% will be met by the US and Eurozone in 2024 and in early 2025 in the UK.

Following a considerable reduction in key risk-free rates in December 2023, January 2024 saw some reversal of this: 10-year Government bond yields in the US, the UK and Europe rose by 0.1%, 0.2% and 0.3% respectively over the month. This was partially offset by modest declines in credit spreads.

The Company's yield-to-maturity is down marginally from 10.0% in December 2023 to 9.9% in January 2024, mainly due to the repayment of three loans with above average weighted yield-to-maturities.

The Investment Adviser believes that the long-term outlook on inflation and base rates still points towards a beneficial tailwind to the Company's NAV, as falling rates would typically increase asset valuations. Investors are reminded that unrealised mark-to-market adjustments from rising interest rates should reverse over time as the investments approach their repayment date (the "pull-to-par" effect), assuming there are no performance-related adjustments required to their value. As at 31 January 2024, the positive effect of pull-to-par is estimated to be worth approximately 4.0p per share over the course of the life of the Company's investments.

The Investment Adviser also notes that the portfolio has been resilient in being able to generate healthy cashflows despite ongoing macroeconomic challenges. Inflation is falling, energy markets are normalising and interest rates appear to be at their peak levels. These stabilising macro-economic themes provide a foundation for steadier credit markets. For a significant period now, the Investment Adviser has also focused on making senior secured - rather than subordinated loans, and has favoured sectors of the infrastructure market with defensive characteristics rather than cyclical sectors. As at 31 January 2024, 57.3% of the portfolio comprised of senior secured loans and 51.6% remained in defensive sectors (renewables, digitalisation, utility and accommodation).

Share buybacks

The Company continued to repurchase shares and bought back 5,847,346 of its ordinary shares at an average purchase price of 82.97 pence per share in January 2024. The Company first started buying shares back in July 2022 and has bought back 121,781,804 ordinary shares as of 31 January 2024 with the buyback continuing into February 2024. This share repurchase activity continues to contribute positively to NAV per share over time.

The Board and the Investment Adviser remain confident in the Company's NAV, including uplifts over time expected from the pull-to-par effect. The rate at which SEQI buys back shares will vary depending on various factors, including the level of our share price discount to NAV.

Portfolio update

The Company currently has strong liquidity, with cash of £133.4 million, compared to undrawn investment commitments of £42.4 million. The Company's revolving credit facility (RCF) of £325 million is also undrawn. The Company's policy in the current market is to operate with little or no leverage, but the RCF can be used to manage the potential misalignment of new investments versus the repayment of existing investments.

The Company's invested portfolio consisted of 53 private debt investments and 4 infrastructure bonds diversified across 8 sectors and 30 sub-sectors. It had an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 9.9% and a cash yield of 7.9% (excluding deposit accounts and investments rated lower than single C). The weighted average portfolio life remains short and is approximately 3.9 years, which has increased from 3.5 years in December 2023 due to the repayment of three investments which reached maturity and the addition of two new investments which mature in 2028 and 2030. Private debt investments represented 97.7% of the total portfolio. The Company's invested portfolio currently consists of 42.9%[1] floating rate investments and remains geographically diversified with 52.7% located across the USA, 24.8% in the UK, 22.4% in Europe, and 0.1% in Australia/New Zealand.

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. The Company entered into a $90 million interest rate swap in October 2023 with a maturity of seven years to lock in a portion of the current high rates being paid by borrowers. The Company also continues to monitor attractive opportunities to lock in higher interest rates on a tactical basis.

Settled investments

SEQI continues to carefully scrutinise new investment opportunities in a disciplined manner alongside other uses of proceeds such as share buybacks and ensuring it has adequate liquidity on its RCF. Aside from these uses of capital, the following investments settled in January 2024 (excluding small loan drawings of less than £0.5 million):

? A senior loan for $65 million to Roseton, a dual fuel-fired electricity generation plant located in the Town of Newburgh in Orange County, New York State. The 1,210 MW generation asset is critical to supporting grid reliability in the greater New York City region. The yield-to-worst on this loan is approximately 10.0%; and

? A primary loan for ?50 million to Euroports (2nd Lien 2030), a leading international ports operator. The borrower issued a new bond to refinance Euroports (2nd Lien 2026) and SEQI has upsized its loan by an additional ?8 million. The yield-to-worst on this loan is approximately 11.0%.

The following investments repaid in January 2024

? A full repayment of a primary mezzanine loan to Euroports (2nd Lien 2026) for ?42 million, as mentioned above. The yield-to-worst on this loan is approximately 12.6%;

? A full repayment of Project Lanthanum for $40 million, a leading developer of hyperscale data centres in Ashburn, Virginia. The yield-to-worst on this loan is approximately 12.5%;

? A full repayment of £33.3 million on Bannister Senior Secured, a specialist mental healthcare service provider in the UK. The yield-to-worst on this loan is approximately 9.5%; and

? A full repayment of a senior loan to Tracy Hills Holdings Company LLC Facility B for $15 million on the revolving credit facility. The borrower can choose to draw up to $15 million on this facility until the loan matures in 2029. Tracy Hills is a residential infrastructure project in California. The yield-to-worst on this loan is approximately 12.0%.

Non-performing loans

The portfolio is performing well and there have been no material changes to the non-performing loans. The portfolio is highly diversified, with the average loan representing about 1.6% of the total portfolio and the largest 4.4%. Further updates will be provided to shareholders in the future when material developments occur.

Portfolio Summary (15 largest settled investments)

Note (2) - excluding accrued interest.

Disclaimer: the dividend increase is a target and not a profit forecast

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.