Sequoia Economic Infrastructure Fund Regulatory News (SEQI)

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

16 January 2024

Sequoia Economic Infrastructure Income Fund Limited

("SEQI" or the "Company")

NAV update

The NAV per share for SEQI, the specialist investor in economic infrastructure debt, increased to 94.41 pence per share from the prior month's NAV per share of 92.89 pence, an increase of 1.52 pence per share, underpinned by steady interest income and increases in asset valuations in the month of December.

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

Inflation is expected to continue to ease throughout 2024, as central banks predict that the target inflation rate of 2% will be met by the US and Eurozone in 2024 and in early 2025 in the UK. The recent economic data shows that US inflation cooled faster than expected late last year. The core measure of personal consumption expenditures (PCE) price inflation showed prices fell 0.1% in November, taking the annual rate of increase below 3%. The core rate, of which 2% is targeted by the FOMC, fell to 3.2%, its lowest since March 2021. The UK's inflation rate in November 2023, as measured by the Consumer Price Index (CPI) was 3.9%, falling 6.8% year-on-year and 0.7% from the previous month. In the Eurozone, Headline CPI increased to 2.9% from a 29-month low of 2.4% in November. Core inflation slowed from 3.6% to 3.4% over the same period.

The US Federal Reserve, the Bank of England and the European Central Bank all left rates unchanged during December at 5.50%, 5.25% and 4.00% respectively. The market is now pricing in rate cuts over the course of 2024, with base rates expected to fall by 1.0 - 1.5% by the end of 2024 across all three regions.

Asset valuations

The Investment Adviser believes that the recent economic data on inflation and base rates points towards a helpful possible tailwind to the Company's NAV, as falling interest rates continue to increase the value of SEQI's underlying portfolio, as evidenced by the increase in asset valuations of 0.76p per share in December 2023. 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 29 December 2023, 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.

Share buybacks

The Company continued to repurchase shares and bought back 5,235,918 of its ordinary shares at an average purchase price of 82.48 pence per share in December 2023. The Company first started buying shares back in July 2022 and has bought back 115,934,458 ordinary shares as of 29 December 2023 with the buyback continuing into January 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 has drawn £76.8 million on its revolving credit facility (RCF) of £325 million during December 2023 and currently has strong liquidity, with cash of £139.8 million (inclusive of RCF drawings), and undrawn investment commitments of £134.1 million. The RCF was cautiously utilised during December 2023 to manage cashflows during the misalignment of new investments against the repayment of existing investments.

The Company's invested portfolio consisted of 54 private debt investments and 4 infrastructure bonds across 8 sectors and 28 sub-sectors. It had an annualised yield-to-maturity (or yield-to-worst in the case of callable bonds) of 10.0% and a cash yield of 7.8% (excluding deposit accounts and investments rated lower than single C). The weighted average portfolio life remains short and is approximately 3.5 years. Private debt investments represented 96.7% of the total portfolio. The Company's invested portfolio currently consists of 44.3%[1] floating rate investments and remains geographically diversified with 52.8% located across the USA, 26.0% in the UK, 21.1% 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 $90million interest rate swap in October with a maturity of seven years to lock in a portion of the current high rates being paid by borrowers and to allow tactical management of the portfolio's fixed rate exposure. 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 December 2023 (excluding small loan drawings of less than £0.5 million and including the two new transactions referred to above):

? A senior loan for £56m to Project Sienna, a leading UK wood biomass fuel supplier based in the UK;

? A senior loan for $40.0m to Texas Power, who operate gas-fired power plants and provide critical power generation and reliability services to the Texas grid;

? Two additional senior loans for $5m each to Tracy Hills Holdings Company LLC Facility B to finance the separate undrawn revolving credit facility (the Company's total commitment for $15.0m has now been met). Tracy Hills is a residential infrastructure project in California; and

? An additional loan for $3m to Rand Parent LLC (Atlas Air), a NY-based global operator in the airfreight transportation services sectors.

The following investments sold or prepaid in December 2023

? A full repayment of Madrid Metro 2024 Term Notes for ?3.8m, financing four special purpose vehicles that lease rolling stock to the Madrid Metro.

Non-performing loans

The Investment Adviser continues to actively manage its non-performing loans with the loans being independently marked to market by PwC as part of the monthly valuation process. Further updates will be provided to shareholders in the future when material developments occur.

Ordinary Portfolio Summary (15 largest settled investments)

Note (1) - 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.