Sequoia Economic Infrastructure Income Fund Limited

(the "Company")

Final Results for the year ended 31 March 2025

* Cum dividend

** Includes the dividend paid in May 2025 in respect of the quarter ended 31 March 2025 and excludes the dividend paid in May 2024 in respect of the quarter ended 31 March 2024 (2024: includes the dividend paid in May 2024 in respect of the quarter ended 31 March 2024 and excludes the dividend paid in May 2023 in respect of the quarter ended 31 March 2023)

KEY HIGHLIGHTS

·    Diversified portfolio of predominantly senior secured loans targeting yields of 9-10%

o  Additional £328 million of new loans made favouring highly defensive sectors to retain diversification and capture attractive income opportunities

o  Improved credit quality of portfolio; increased proportion of senior secured loans to 59.9% (2024: 58.6%) 

·    Reduced proportion of NPLs to 1% of NAV (2024: 5.4%) following successful recovery

o  Change in NAV driven by interest income, offset by a 1.45p Ordinary Share write-down of one NPL and operating costs of c.1%

o  Full recovery, including accrued interest, expected on Bulb Energy loan, exited Glasgow property loan with potential for future earn outs, and received final payment on Salt Lake loan 

·    Resilient portfolio generating substantial cash, despite challenging market environment

o  Dividends totalling 6.875p per Ordinary Share (2024: 6.875p); Dividend cash cover of 1.00x (2024: 1.06x) 

·    Proactive management of share price discount to NAV with share buyback delivering a positive NAV gain of 0.70p per Ordinary Share

o  70.4 million Shares repurchased over the financial year representing £55.9 million (2024: £88.2 million) and 213.2 million Shares repurchased since the beginning of the programme 

·    Well positioned for falling interest rates with 59.4% of portfolio in fixed rate investments (2024: 57.9%), locking in current higher interest rates

o  Short weighted average maturity of 3.6 years enables ongoing reinvestment of capital at higher prevailing rates 

·    ESG score of the portfolio increased to 64.70∆ (2024: 62.77)

​

o  Driven by new loans and active engagement with borrowers

James Stewart, Chair, commented:

"Our performance demonstrates the resilience of the Fund in the face of a challenging market environment. We continue to generate significant cash and have continued to deploy funds into the pipeline of opportunities, further diversifying and enhancing the credit quality of the portfolio through new loans. This is in addition to our ongoing share buyback programme that has been active throughout the year.

The Fund remains well positioned against the ongoing volatile macroeconomic conditions, and with 59% of our portfolio locked in at fixed interest rates, we are well placed to meet target returns even if interest rates continue to fall. The high levels of global demand for infrastructure capital mean we have a strong pipeline of investment opportunities, and we will maintain our highly selective approach, focusing on infrastructure assets with defensive characteristics.

SEQI celebrated its tenth anniversary of listing on 3 March 2025. We have come a long way over the past decade, and I would like to thank our shareholders for their continued support. We operate in challenging times but remain confident in our continued ability to deliver strong risk-adjusted returns for investors."

Randall Sandstrom, Director and CEO/CIO, SIMCo, said:

"Demand for infrastructure funding remains significant, and levels will only increase over the next year, driven by global mega-trends of decarbonisation, digitalisation, and deglobalisation. Private debt has a vital role in bridging the persistent funding gaps, as regulatory constraints have reduced the capacity of banks to meet borrower needs. This is encouraging for the Fund's pipeline and future performance.

As central banks in the US, UK and Europe continue to implement interest rate cuts, the Fund's floating rate investments should continue to de-risk. The transition towards a lower-rate environment will enable our investments to benefit from an accelerated pull-to-par, with market prices rising more quickly towards par value as the discount rate used to value future cash flows falls. We remain confident that the dividend is sustainable, reflecting the strong pipeline of investment opportunities and the yields available on private infrastructure debt."

INVESTOR PRESENTATION

The Investment Adviser will host a virtual presentation on the annual results for investors and analysts today at 09:00am BST. There will be the opportunity for participants to ask questions at the end of the presentation. Those wishing to attend should register via the following link:

https://stream.brrmedia.co.uk/broadcast/684951e9bb48f90012dc21b4

Copies of the Annual Report and Accounts will shortly be available on the Company's website https://www.seqi.fund/investors/results/ and on the National Storage Mechanism.

For further information, please contact:

CHAIR'S STATEMENT

It is my pleasure to present to you the Annual Report and Audited Financial Statements of the Company for the financial year ended 31 March 2025.

The Fund's diversified infrastructure debt portfolio continues to demonstrate its resilience by generating significant levels of cash in the face of a challenging market environment and volatile macro-economic backdrop.

The Company's underlying investment portfolio has had a steady year, delivering a NAV total return of 6.1%, slightly below its target of 7-8%. The Board remains confident in the investment qualities of the infrastructure sector and infrastructure debt as an asset class. We have successfully deployed capital in accordance with our strategy of maintaining portfolio diversification and credit quality by continuing to target loan yields of 9-10%.

NAV and share price performance

Over the financial year, the Company's NAV per Ordinary Share declined from 93.77p to 92.55p, after paying dividends of 6.875p, producing a NAV total return of 6.1% (2024: 8.1%), compared to our target return of 7-8%.

The change in the NAV has been largely driven by interest income during the year (8.17p per Ordinary Share) and offset by dividends (6.875p per Ordinary Share), operating costs (1.59p per Ordinary Share) and negative valuation changes (1.45p per Ordinary Share). The share buyback programme delivered a positive NAV gain of 0.70p per Ordinary Share over the year. The negative valuation movement is primarily due to a 1.45p per Ordinary Share write-down of one of our non-performing loans. Our Investment Adviser, Sequoia Investment Management Company Limited ("SIMCo"), discusses these movements in more detail in its report.

Our portfolio underperformed the liquid credit markets this year, with leveraged loans and high yield bonds generating total returns of 7.5% and 7.8% respectively. We believe that this largely reflects the rapid collapse in lending rates in those markets, which has boosted the value of older loans and bonds written in the past (since they are at old and higher lending rates), even while new loans in those markets became less attractive. For example, the average BB-rated leveraged loan interest rate (on new loans) fell from SOFR+2.99% to SOFR+2.66% over the course of the financial year; meanwhile the price of the average leveraged loan decreased from 99.6% to 99.3% over the same period.

Capital allocation

During the financial year, the Company has maintained a balanced approach to capital allocation, by returning £55.9 million to Shareholders through its share buyback programme, extending £328 million of new loans (including some commitments entered into but not fully drawn by year end) and enhancing diversification across the portfolio. These new investments were predominantly senior secured loans (representing 83% of the total) in Europe and the UK (collectively 72% of the total), and were well diversified, being spread across six of the Company's eight investment sectors.

These new loans were largely financed by the natural recycling of maturing loans, but we have also allowed our revolving credit facility ("RCF") to be moderately utilised, with year-end leverage of £56.9 million (representing 4% of NAV). We considered that this amount of leverage was acceptable and consistent with our long-standing strategy of having no structural leverage while endeavouring to remain fully invested. We have very good visibility on loans scheduled for repayment in the near term, and therefore the drawings on the RCF can be repaid if necessary.

The Board believes that, looking to the future, it is important for the Company to continue making new investments in a balanced manner to maintain an active presence in the infrastructure debt market. This will continue to enhance access to high-quality transactions alongside reputable sponsors.

Share price performance and the ongoing discount

The market environment has remained challenging for all investment companies, and in particular the alternatives sector, where most of the companies' shares are continuing to trade at a significant discount to NAV. Across the infrastructure, renewable energy and debt sectors of investment trusts - which includes 40 different trusts with a combined market capitalisation of £23 billion (as at our year end) - the average discount has increased from 20.6% at the start of the financial year to 22.0% at the end. Over the course of the year, SEQI's share price discount to NAV increased from 13.5% to 15.4%. The Company's share price fell over the year, from 81.10p to 78.30p with a share price total return of 5.3% (2024: 9.6%), once dividends are taken into account. Share performance is discussed in more detail in the Investment Adviser's report.

While emphasising we are not complacent with the level of our discount, we are pleased that our discount is towards the narrow end of the market range, and has been one of the least volatile in the sector. Reducing (and eventually eliminating) the discount remains a key strategic objective of the Board. To help achieve this, we have:

› an active buyback programme, with 70.4 million shares; £55.9 million (2024: £88.2 million) repurchased over the financial year and 213.2 million shares repurchased since the beginning of the programme;

› a continuing active dialogue with investors and a philosophy of open and transparent dissemination of information with considerable investment in online content on the Fund's website and monthly investor reporting;

› worked with other investment companies (especially in the alternatives sector) to address the ongoing "cost disclosure" problem, which has led to companies like ours being unfairly treated when compared with other types of investment structures;

› appointed a second Broker, J.P. Morgan Cazenove, to complement the services offered by Jefferies and help us execute our marketing and investor engagement strategy, particularly overseas; and

› an ongoing programme, working with the Investment Adviser and our joint Brokers, to market the Ordinary Shares to a wider audience, with the goal of attracting new investors. We also extended the mandate of Kepler Trust Intelligence to help increase our engagement with retail investors.

The ongoing share purchases by the Directors of the Company and the directors of the Investment Adviser reflect our shared conviction in the investment case and the value provided by the current share price. In total, 62,059 (2024: 122,656) Ordinary Shares were bought by these parties during the financial year. In addition, the Investment Adviser bought 1,235,468 (2024: 1,272,199) Ordinary Shares during the financial year. None of these parties sold any shares in the year, bringing their aggregate investment in the Company to 8,092,121 Ordinary Shares.

Dividend

Our dividend of 6.875p per Ordinary Share remains cash covered at 1.00x (2024: 1.06x). The level of cash cover is lower than the previous year, due in part to "cash drag", referring to cash held over the year reducing the Fund's level of investment income and less capitalised interest received.

The repayment of capitalised interest is an essential component of the Company's cash cover. However, given that its timing is tied to the eventual repayment or sale of the Company's assets, it is unevenly distributed over the life of the Company, which can result in fluctuations in the dividend cash cover. This also affected this year's cash cover.

In addition, the share buybacks, while being accretive to NAV, free up less cash than cash generated by extending new loans.

The Board has also considered the ratio of dividends per share to earnings per share, which is 137% (2024: 105%). While a ratio of more than 100% is undesirable, it does not imply that the dividend is unsustainable, as the ratio is driven in part by unrealised mark-to-market adjustments in the carrying value of performing loans - this type of price adjustment does not affect the long-term income-generating ability of those loans. Moreover, the ratio does not reflect the NAV benefits of the share buyback, which creates capital value in an economic sense, but this is not captured in earnings per share.

Paying a stable, attractive and covered dividend is an important part of the Company's value proposition to investors The Board believes that the current level can and will be maintained. However, the Board is mindful of the increased risk environment and the fact that interest rates are forecast to fall, and so will keep the level of dividend under review to ensure that it remains affordable and sustainable.

Portfolio performance

Our investment strategy over the financial year has been to maintain portfolio credit quality and diversification, while targeting a portfolio yield of 9-10%.

› Credit quality has improved on a number of metrics: the proportion of the portfolio invested in senior secured loans rose from 58.6% to 59.9%; the weighted average "equity cushion" (being the average amount of equity capital in the businesses that we lend to, expressed as a percentage of their total capital) rose from 38% to 39%.

› Diversification has been maintained: the overall number of investments increased from 55 to 59, covering eight sectors and 29 sub-sectors.

› Yield has been maintained: our portfolio's weighted average yield-to-maturity, which measures both the income and future capital gains, fell slightly from 10.0% to 9.8% - a significantly smaller fall than for UK base rates, reflecting the high proportion of fixed-rate loans in the portfolio and the impact of the interest rate hedging strategy we undertook to protect the Company from falling interest rates.

During the year, SEQI committed £328 million to new loans, contributing to a more balanced sector and geographic mix, as well as a more defensive positioning through a slightly higher proportion of senior-ranked loans.

We have made progress on our non-performing loans ("NPLs"), which now represent only 1.0% of our NAV compared to 5.4% last year. We no longer classify our loan to Bulb Energy as an NPL as we expect to receive back in full the amount lent (including accrued interest). During the year we also sold our loan backed by a property in Glasgow (originally student accommodation but re-purposed as a hotel). This position has been fully exited, although we retain the right to an "earn out" payment based on the future performance of the asset. Shortly before the year end, we received the final, residual payment on the Salt Lake investment in Australia.

Our remaining two NPLs comprise a loan backed by a property in Washington DC that was previously leased to a school (representing 0.4% of NAV) and a municipal infrastructure loan (representing 0.6% of NAV). The valuations for both loans have been written down during the year and reflect a prudent view on the possible outcomes. The Investment Adviser continues to work diligently to realise value from these investments. We will update our investors as and when we are able to. NPLs are discussed in more detail in the Investment Adviser's report.

The Investment Adviser closely monitors each and every loan within the portfolio. The Board reviews the portfolio at each quarterly Board meeting and, in addition, undertakes a more detailed review semi‑annually. When necessary, loans are also subject to further and enhanced scrutiny by our Investment Adviser. As at year end, approximately 15.0% of our portfolio (including the NPLs mentioned above) was receiving enhanced scrutiny. This compares to 15.5% at the time of the Interim Financial Statements and 12.0% at the prior year end. The Board has closely reviewed these positions and is comfortable that their current marks fairly reflect the current value.

SEQI adopts a robust, independent approach to calculating the NAV of its portfolio: our approach is to calculate and publish a monthly NAV report that investors can have great confidence in. Monthly reviews are more frequent than many of our peers in the listed fund sector (in particular for alternative investments) and additionally, the marks are independently reviewed every month by our valuation agent PricewaterhouseCoopers LLP ("PwC") and audited annually by our independent auditor, Grant Thornton.

Valuations of performing loans are fundamentally simpler than valuations of equity investments. For a performing loan, the cash flows are typically known, as they are supported by contractual commitments. The assessment that is required is limited to applying the appropriate discount rate, for which there are many publicly available reference points, such as sector-specific leveraged loan indices. By contrast, for equity investments, both the future cash flows and the discount rate need to be assessed. In summary, our NAV is calculated more frequently, more objectively and in a more straightforward manner than many other funds in our sector.

The first 10 years of the Company's life

The Company celebrated its 10th anniversary of listing on 3 March 2025, and this is a good opportunity to look back and reflect on what has been achieved.

The IPO itself was for a moderate size of £150 million. What made the Company stand out was our clearly defined and differentiated investment strategy - providing a diversified portfolio of private debt, backed by economic infrastructure, in developed markets. There remains no other fund like us, and therefore we consider that we provide our Shareholders with a risk-return proposition that they cannot easily get elsewhere. This has enabled us to grow the Company through 10 subsequent capital raises to being a FTSE 250 company today.

Of course, having a strategy is one thing; being able to execute it is another. The Investment Adviser has carefully built our portfolio based on deep due diligence of the underlying businesses that we lend to, reflecting the risks and opportunities in the markets at the time. We have been careful to avoid "mission creep".

This methodical approach has led to a strong credit performance and low credit losses through turbulent times: the COVID-19 lockdowns and their economic consequences; geopolitical events; Brexit; an energy crisis in Europe; very low interest rates followed by a rapid escalation in rates; and a period of the highest inflation for 40 years. It is through this turmoil that one of the main attractions of infrastructure debt becomes clear: its ability to weather the storm.

Another important part of our strategy has been engagement with our Shareholders. We have adopted a policy of high levels of disclosure through our website and factsheets and other forms of investor reporting. We have listened to Shareholders and adopted our approach to reflect what is important to them: we were an early integrator of sustainability factors into our investment process and reporting; we have been able to increase our dividend over time; and we were one of the first listed alternatives funds to start buying back shares as discounts in the sector started to emerge.

Sustainability

In a year marked by global uncertainty and intensifying scrutiny of sustainability, SEQI remains committed to integrating material sustainability considerations into its investment approach. We believe it is the right thing to do and it is an integral part of full and proper risk assessment of long-term credit performance. We recognise the essential role infrastructure will play in enabling a more sustainable future, and whilst SEQI is not an impact fund, many of the assets it finances - across renewables, transport, digital and essential services for example - are supportive of the climate transition and building resilient, future-proofed economies.

With this in mind, the Fund has continued to make progress on the sustainability of its own operations. This year we introduced a stand-alone Governance Policy, which details the Company's governance structures, policies and oversight as well as the Fund's approach to assessing good governance at borrowers. Sustainability factors at portfolio level are thoroughly assessed using SIMCo's sustainability framework and methodology. KPMG have again provided independent assurance over all three components of SEQI's sustainability integration processes: negative screening, thematic investing and the portfolio's average ESG score∆.

This year also saw the weighted average ESG score increasing to 64.70∆, largely driven by judicious acquisitions and active engagement work throughout the year. Our efforts in borrower engagement are illustrated by a market-leading response rate to our annual sustainability questionnaire - 93% of portfolio companies completed this on an almost entirely voluntary basis. In addition, sustainability-linked covenants are now in place across eight projects in the portfolio, the highest it has ever been. This reflects our growing influence and the strong relationships SIMCo has built with our borrowers' management teams. It is this kind of impactful work that contributed to SIMCo's Sustainability Manager being recognised with two industry accolades this year. Similarly, our Shareholder engagement also intensified this year with SEQI hosting an inaugural ESG event, at which investors gathered for a breakfast roundtable to discuss common ESG challenges and key emerging themes and opportunities.

This year also marks a milestone in our climate reporting journey. For the first time, SEQI is able to disclose emissions data for the Company and the portfolio is in alignment with all recommendations of the TCFD framework, as it onboarded Altitude by AXA Climate to assist with sourcing emissions estimates and analysis of assets under different climate scenarios. This enhanced capability will support deeper climate risk analysis and strengthen our engagement with borrowers on these issues going forward.

As we look ahead, SEQI will continue to monitor the fast-evolving regulatory landscape, including the FCA's Sustainability Disclosure Requirements ("SDR") and the International Sustainability Standards Board's ("ISSB") IFRS Sustainability Disclosure Standards, while exploring how to incorporate nature and biodiversity into our sustainability assessments. Looking back over the 10 years since SEQI's IPO, we are proud of how far we've come on our sustainability journey and remain committed to making sustainability an enduring part of our future strategy.

Board changes

For the last three years the Board has consisted of five members. Last autumn the Remuneration and Nomination Committee reviewed the make-up of the Board and noted a substantial increase in the workload and responsibilities following changes to reporting standards and the need to maintain more active portfolio oversight and Shareholder engagement in an elevated market risk environment. The Board subsequently decided to recruit an additional Board member.

Following an extensive independent search, I was very pleased to welcome Selina Sagayam to the Board on 1 April 2025.

Until 2024, Selina was Senior Counsel at Gibson, Dunn & Crutcher where she also led the firm's environment, social and governance practice. She has extensive experience as a mergers and acquisitions, corporate governance, financial services and regulatory law adviser. Selina will assume the position of Chair of the ESG and Stakeholder Engagement Committee.

I was very sorry that, following a close family bereavement, Fiona Le Poidevin decided to step down as a Director with effect from 31 March 2025. I am very grateful for all that Fiona contributed to SEQI. Margaret Stephens has taken over as the Chair of the Audit Committee. Margaret is a qualified Chartered Accountant and is an experienced audit committee chair with investment company experience. An external independent search process was undertaken to find a suitable Guernsey-resident non-executive Director to replace Fiona. I look forward to welcoming Nicola Paul to the board on 1 July 2025. Nicola has recently retired as an associate partner of Deloitte and has a strong background in audit and control evaluation, which will assist the Board in complying with future reporting requirements.

I would also like to say thank you to Kate Thurman, one of our Independent Consultants, who has stepped down having supported SEQI over many years.

Outlook

Our investment strategy is to maintain the level of credit quality across the portfolio, whilst targeting a portfolio yield of 9-10%. We are very mindful of the current high level of global uncertainty and the generally challenging economic outlook for many of the countries that we operate in. This is discussed in more detail in the Investment Adviser's report.

We believe that the diversification and the credit quality of the portfolio will stand us in good stead and we will maintain a prudent approach to credit risk in our approach to new investments. One consequence of the heightened market volatility is that lending terms have improved (from the perspective of lenders) since the end of the financial year. This means we remain confident that we will be able to meet our target returns, even if interest rates continue to fall.

Given the high level of global demand for infrastructure capital, our Investment Adviser's pipeline of opportunities remains strong and they are able to adopt a highly selective approach to investment.

We will also continue to monitor our share price closely and, where appropriate, engage in share buybacks. The rate at which we buy back shares will flex depending on various factors, including the level of our share price discount to NAV. The Board is not satisfied with the current share price and our strategic goal remains to eliminate the discount.

Finally, I would like to thank our Shareholders for their continued support. We operate in challenging times, but we believe that lending to infrastructure projects remains a robust, differentiated strategy that can deliver strong risk-adjusted returns for investors.

James Stewart

Chair

24 June 2025

∆ KPMG has issued independent limited assurance over the selected data indicated with a reference in the 2025 Annual Report. The reporting criteria and assurance opinion are available in the Sustainability Publications section of our website: www.seqi.fund/sustainability/publications/

INVESTMENT ADVISER'S REPORT

The Investment Adviser's objectives for the year

During the financial year, Sequoia Investment Management Company Limited ("SIMCo" or the "Investment Adviser") has had the following objectives for the Fund:

Overview of infrastructure debt

The sectors applicable to this type of debt include transportation, utilities, power, renewables, telecommunications and social infrastructure, often benefiting from long-term concessions, regulatory frameworks or usage-based revenues. These dynamics create structural stability and consistent demand, even amid market uncertainty. These sectors are typically governed by long-term concessions or licenses, with revenues tied to demand, usage or volume. To mitigate demand risk, economic infrastructure projects generally employ lower leverage than availability-based social infrastructure, maintaining larger equity cushions, conservative credit ratios, strong covenants and more substantial asset backing for lenders. This disciplined approach has remained central to SEQI's strategy throughout the year.

Since the 2008 global financial crisis, traditional bank lending has become more constrained, focusing primarily on well-established sectors at conservative leverage levels. In parallel, a structural shift began to unfold, as governments in developed markets turned increasingly to the private sector to help finance expanding social programmes, driven by demographic pressures and post-crisis fiscal challenges.

In response, governments increasingly turned to the private sector, not only to support traditional infrastructure, but to fund the emerging mega‑sectors of energy transition and digitalisation. While renewables initially benefited from subsidies, both sectors evolved as commercially driven, globally distributed opportunities.

This marked a shift away from centralised, government-funded infrastructure models towards a more fragmented, mid-market landscape. Assets became more diverse in scale and geography, often financed outside the realm of traditional institutions. At the same time, the era of large-scale Public‑Private Partnerships ("PPPs") in the UK and Europe began to wane, as public sentiment shifted and bank appetite retreated, even as those projects continued to attract higher loan-to-value financing.

Market backdrop

Consumer price index year-on-year

What is happening?

Inflation across all the Fund's investment jurisdictions is abating to levels approaching the respective central banks' targets. However, renewed tariff activity may introduce upward inflationary pressures in the short to medium term through higher import costs. While the immediate effect of tariffs may be an uptick in consumer prices due to higher costs for imported goods, these pressures may be temporary. Supply chains are likely to adjust over time, with businesses seeking alternative sources or passing on only partial cost increases.

Why this matters to the Fund

As inflation gradually abates over time, the likelihood of future interest rate cuts increases, making alternative investments such as infrastructure more attractive when compared to liquid debt. While the pace and size of interest rate cuts will vary across the Fund's different investment jurisdictions, the general consensus remains one of declining interest rates throughout the year. A lower inflation environment also helps ease cost pressures during the construction phase of projects, thereby reducing construction risk, all else being equal.

Overnight finance rates

What is happening?

Central banks in the US, UK and Europe are continuing to implement interest rate cuts to overnight interest rates, following a period of stabilisation.

Why this matters to the Fund

The portfolio's floating rate investments are beginning to de-risk, with borrowing costs now past their peak and expected to decline further amid early interest rate cuts and continued disinflation. As the market transitions toward a lower-rate environment, fixed-rate loans and bonds stand to benefit from an accelerated pull-to-par. At the same time, a normalising yield curve, with a reduced or positive slope, may support risk appetite in the broader market, though it could temper borrower interest in locking in long-term debt.

ICE BofA BB US high yield index option-adjusted spread (%)

What is happening?

While BB credit spreads remain tight, potential risks such as geopolitical tensions, trade policies and shifts in monetary policy could influence future spread movements.

Why this matters to the Fund

Wider credit spreads matter for the Fund by creating both risks and opportunities. On the one hand, they could lead to mark-to-market declines on existing holdings and signal rising credit risk or market stress, potentially impacting NAV and borrower fundamentals. On the other hand, wider spreads could allow the Fund to earn higher yields on new investments and potentially take advantage of dislocations or undervalued infrastructure debt. While short-term valuation pressures may emerge, a disciplined approach could turn spread widening into a long-term income and return opportunity.

Themes in the infrastructure debt market

Over the course of the financial year, the Investment Adviser has identified several key themes shaping the infrastructure debt market. These themes have influenced both the types of opportunities being pursued and the way capital is being allocated within the portfolio. What follows is a summary of the most prominent developments observed.

The three "D"s - decarbonisation, digitalisation and deglobalisation

While the funding needs for building traditional infrastructure (such as transport assets and utilities) is immense - just the capital needed for the maintenance of existing stock runs to trillions of dollars - there is currently an ever-larger funding requirement arising from the global "mega-trends" of:

› Decarbonisation - including renewable energy, grid enhancement, energy storage, energy security and a host of ancillary services;

› Digitalisation - including data centres, mobile phone towers, fixed line networks, data cables, satellites and broadband; and

› Deglobalisation - including power, transport and logistics infrastructure being driven by onshoring of supply chains.

Demand for private debt continues to grow

Infrastructure has emerged as one of the fastest‑growing asset classes globally, with assets under management ("AUM") increasing at an average annual rate of 19.7% since 2015 (Macquarie).

Looking ahead, this momentum is expected to continue, as Preqin forecasts that total private infrastructure AUM will grow from USD1.17 trillion in 2023 to USD1.88 trillion by the end of 2027 (Preqin). Within this expanding asset class, infrastructure credit is gaining traction among institutional investors drawn to its defensive characteristics, consistent cash flows and attractive risk-adjusted returns. While growing investor interest may lead to increased competition for high-quality private infrastructure debt opportunities, we believe SEQI is well positioned to navigate this dynamic, as the Company benefits from its established track record, deep origination networks and the specialist expertise of its Investment Adviser.

Moreover, although the supply of debt capital is growing, it is very likely that the demand for debt capital is growing at least at the same rate, cancelling out largely or entirely the effect of competition.

This overall trend is also driven by a persistent funding gap in global infrastructure, particularly in sectors like energy transition and digitalisation, where private debt plays a vital complementary role to equity. As bank retrenchment continues and capital demands increase, the favourable structural tailwinds for infrastructure credit are expected to endure, supporting long-term investor appetite.

Tariffs

Recent tariff measures and trade policy shifts between the US and the rest of the world have renewed volatility in international financial markets. With these geopolitical frictions and protectionist strategies back in focus, the Investment Adviser believes prolonged tariffs could pose a drag on global economic momentum and fuel inflationary pressures across the US, UK and Eurozone in the short to medium term.

Economic uncertainty

The recent sell-off in US equity markets reflects growing investor unease over elevated valuations, persistent inflationary pressures and the rising likelihood of a recession. Should economic conditions deteriorate further, sectors with high operating leverage or consumer dependency, such as transport and social infrastructure, may face increased credit risk. While the Fund remains well diversified, the Investment Adviser continues to closely monitor these exposures and has actively tilted the portfolio towards defensive sectors such as digitalisation, accommodation, utilities and renewables, which are typically more resilient in downturn scenarios.

As at 31 March 2025, 54.7% of the portfolio is invested in defensive sectors, increasing from 50.8% the previous year. The Fund's investments in defensive sectors make it well positioned to withstand economic downturns and inflationary pressures.

NAV performance

Over the last 12 months, the Company's NAV per share decreased from 93.77p per share to 92.55p per share ex-dividend driven by the effects as per the analysis in the table below. The total return on the NAV1 was equal to 6.1% over the period. This is below the Company's long-term return expectations of 7-8% p.a.; however, we outperformed the total return of the FTSE 250 Index by 5.0%. In comparison to credit markets, SEQI delivered returns 1.4% lower than high yield bonds, but beat 10-year gilts by 1.6% (in each case measuring the total return).

The NAV decline during the year was primarily due to reductions in carrying value of the Fund's non‑performing loans (as discussed below under 'Credit performance') and the impact of higher discount rates, offset in part by pull-to-par gains over the year

Pull-to-par

The portfolio pull-to-par, which is a measure of future NAV gains that will arise solely through the passage of time, is 4.0p per share as at 31 March 2025, decreasing marginally from 4.1p per share as at 31 March 2024.

The "pull-to-par" effect refers to the principle that a debt instrument's market value progressively approaches its notional value as it nears maturity, assuming stable credit quality and no risk of default. This occurs because the issuer is contractually obligated to repay the notional amount at redemption. As a result, the investment's market price increasingly aligns with its redemption value over time, regardless of prevailing market conditions.

For example, a loan to Infinis, a UK renewables company investing in landfill gas projects, was priced at 93.0 at year end, even though the credit is performing in line with expectations. The loan matures in 2032 and is expected to pull to par over time. As a fixed-rate and long-dated investment, its current price reflects the interest rate environment rather than any credit concerns. Over the coming years, assuming no deterioration in credit quality, its price will naturally converge toward par, contributing positively to the portfolio's NAV through the pull-to-par effect.

Share performance

As at 31 March 2025, the Company had 1,555,061,936 Ordinary Shares in issue (31 March 2024: 1,625,484,274). The closing share price on that day was 78.3p per Ordinary Share (31 March 2024: 81.1p per Ordinary Share), implying a market capitalisation for the Company of approximately £1.2 billion, a decrease of approximately £100.7 million compared to 12 months ago; approximately 45% of this decline is due to the Company's share buyback programme, with the balance due to the decline in the share price. After taking account of quarterly dividends amounting to 6.875p per Ordinary Share, the share price total return1 over the period was 5.3%, outperforming the FTSE 250 Index by 4.2% during the same period.

A key driver of SEQI's share price discount to NAV is broader listed market sentiment towards alternative assets, such as renewable energy, private equity and private debt. Discounts across the sector have increased over the year - for example, the average discount for UK-listed renewable energy funds has increased from 29.7% to 35.1%, and for infrastructure listed funds from 17.7% to 25.0%.

This sentiment reflects the lingering effects of inflation, subdued economic growth and ongoing scepticism around valuation methodologies across parts of the alternatives sector, compounded by structural market dynamics such as index rebalancing and multi-asset allocation shifts. The Investment Adviser remains focused on levers within SEQI's control and reassures investors that its valuations are subject to independent monthly review and robust processes. Unlike many private equity, infrastructure equity or real estate investment vehicles, SEQI publishes its NAV monthly, offering greater transparency and frequency of reporting.

The sector-wide discount to NAV has been further pressured by capital outflows, as investors reallocated from listed alternatives into other investment types such as government bonds. This shift created pockets of forced selling, contributing to downward pressure on share prices. However, market conditions have stabilised during the financial year, as policy rates in key markets are past their peak and are anticipated to further decrease in light of the recent interest rate cuts. Also, due to the ongoing sell-off in the financial markets, analysts expect central banks to ease monetary policy by reducing interest rates more than previously expected, with bond futures pricing in the likelihood of at least two or three more rate cuts by the Federal Reserve before the end of the calendar year.

The Company is well positioned to capitalise on this environment, supported by the portfolio's short weighted average maturity (3.6 years as at 31 March 2025) which has enabled the reinvestment of capital at higher prevailing rates. To enhance this strategy, the Investment Adviser amended the investment policy to allow up to 60% of assets to be held in fixed-rate instruments. One additional interest rate swap has been executed, enabling SEQI to receive fixed-rate payments while paying a floating rate - further locking in favourable yields. Both the Investment Adviser and the Board believe the current share price discount to NAV is unwarranted given the strength and resilience of the portfolio.

We collectively believe that it does not accurately reflect the potential of the investment portfolio to deliver attractive risk-adjusted returns during periods of economic uncertainty; its shorter investment duration; and its robust NAV approach.

With this backdrop, SEQI continues to buy back its Ordinary Shares, which it considers to be undervalued, thereby providing NAV accretion for existing Shareholders. In the past 12 months alone, the Company has repurchased 70,422,338 Ordinary Shares. The share buyback programme was first announced in July 2022, and since then, the Company has bought back a total of 213,177,062 Ordinary Shares, approximately 13% of its total outstanding Ordinary Shares as at 31 March 2025. This has resulted in an increase in NAV per Ordinary Share of 1.8p since the implementation of the buyback programme

Dividend cash cover

SEQI has paid 6.875p in dividends during the last 12 months in accordance with its target. The Company's dividend cash cover was 1.00x for the financial year. This is lower than in the previous year, for the following reasons:

› a timing effect where the receipt in cash of capitalised PIK interest did not fall during the financial year;

› some cash drag during the year; over the period, the Fund had an average cash balance of £59.8 million, due to a combination of de‑leveraging the Company and receiving prepayments (where borrowers repay their loans earlier than scheduled). While this had been fully invested by the end of the year, the cash held over the year reduced the Fund's level of investment income. For example, had it been invested in infrastructure loans yielding 9%, the dividend cover would have been 1.02x; and

› the share buyback, whilst accretive to NAV, is dilutive for dividend cash cover since, although the Company avoids paying dividends on the shares bought back, it misses out on the upfront fees normally earned by lenders. In other words, while buying back shares is accretive to the NAV, it generates less cash income than making new loans. Conversely, if the NAV gain on buying back shares at a discount were to be treated like a realised NAV gain arising from investment activities, the dividend cover would have been approximately 1.10x.

Looking forward, the Investment Adviser is of the view that the dividend is sustainable and dividend cover should improve over time, reflecting the strong pipeline of investment opportunities and the yields available on private infrastructure debt.

Portfolio overview

Throughout the fiscal year, the Fund maintained a disciplined focus on building and managing a diversified portfolio of private debt investments across core infrastructure sectors in jurisdictions with low political and regulatory risk. The strategy remained centred on delivering target returns while maintaining the credit quality of the portfolio. This was achieved through a cautious approach, favouring senior secured debt, maintaining exposure to resilient sectors and steadily enhancing overall portfolio credit quality.

The current highlights of the Fund's portfolio, which reflect the results of these efforts, include:

Diversification

The Fund's portfolio is well diversified across loan types, geographies, sectors and sub-sectors, supported by defined investment limits that preserve this balance.

Credit quality

› 59.9% of the portfolio is in senior secured loans and 40.1% in subordinated debt, a marginal increase from the previous fiscal year when 58.6% of the portfolio was in senior secured loans and 41.4% in subordinated debt.

› Continued preference for "defensive" types of infrastructure, i.e. loans to projects that provide essential services, often operating within a regulated or contractual framework or have high barriers to entry.

› Our policy not to invest in distressed, stressed or "CCC profile" loans remains in place.

› Our proportion of NPLs has fallen from 5.4% to 1.0%, the lowest level since 2020.

Construction risk

The Fund maintains a cautious approach to greenfield construction projects. While it has the flexibility to allocate up to 20% of NAV to assets under construction, actual exposure stood at 12.5% of the portfolio as at 31 March 2025 (2024: 7.4%). This remains below the Fund's historical average, reflecting a deliberately conservative stance in response to a subdued growth outlook and ongoing supply chain challenges.

The Fund applies a selective and disciplined approach to project origination, investing only where it believes the return appropriately compensates for the construction-related risk involved. It avoids projects carrying both construction and demand or ramp-up risk, maintaining a strong focus on credit quality and underlying borrower fundamentals.

A focus on private debt

The percentage of private debt has declined by 6.1% during the year to 90.8% of the portfolio as at 31 March 2025. This was partly due to the refinancing of an OCU Group private loan to a public Term Loan B, with the Fund's participation for £45 million settling during November 2024. OCU Group is a leading UK infrastructure engineering services provider. The Fund also invested an additional c.£41 million in the secondary market on bonds with Navigator Holdings Ltd (US specialist shipping), Techem GmbH (German smart metering) and TSM II LuxCo 21 SARL (Dutch utility services) to improve sector diversification and to add a further source of liquidity, whilst facilitating the efficient deployment of capital into seasoned assets with established performance histories.

The strategy still remains anchored in private debt. This focus is underpinned by the ability to capture an illiquidity premium (the additional yield private debt typically offers over comparable liquid bonds). Given the Fund's long-term, buy-and-hold approach, accessing this premium is a deliberate and effective strategy. Research conducted by the Investment Adviser suggests that infrastructure private debt can yield 1-2% more than publicly rated equivalents.

Consistent NAV returns during volatility

Over the past decade, SEQI has delivered an annualised total NAV return1 of 7.3%, significantly outperforming both the FTSE 250 Index and GBP‑hedged high yield bonds over the same period, which returned 4.1% and 3.3% respectively. This strong long-term track record underscores the consistency of SEQI's investment approach, even as the year unfolded against a backdrop of macro‑economic uncertainty and elevated volatility in listed alternatives - and reflects the strength of SEQI's strategy in capturing risk-adjusted returns amid a transitioning interest rate environment.

With a weighted average yield-to-maturity of 9.9% and a portfolio pull-to-par of 4.0p per share, SEQI is structurally positioned to benefit from both sustained income and capital appreciation as assets mature. Portfolio quality remained resilient, with NPLs declining to their lowest level since 2020. A deliberate tilt toward senior secured and fixed-rate debt further enhanced downside protection.

The Investment Adviser's active deployment of capital, including targeted secondary market investments and strategic utilisation of the RCF, supported both diversification and liquidity. Together, these measures underscore a disciplined and forward-looking investment approach that continues to deliver robust income and preserve long-term Shareholder value. We acknowledge that SEQI's share price performance has been less strong, which we attribute to various sector headwinds which we have faced over the last three years, alongside many of our peers. This is deeply frustrating to us and we are committed to working with the Board to remedy this.

Portfolio characteristics

As shown in the following table, the Fund increased its number of investments from 55 to 59 over the 12-month period. The Investment Adviser has actively redeployed capital from maturing assets into an attractive pipeline of opportunities, while also drawing £56.9 million from the £300 million RCF with J.P. Morgan Chase Bank, N.A., London Branch as at 31 March 2025, to sustain capital deployment momentum. This growth in investment activity has been carefully managed to preserve the Fund's diversification, with continued exposure across eight sectors and a broad range of sub-sectors, from 30 in March 2024 to 29 in March 2025.

In addition, SEQI continues to redeploy capital towards share buybacks, taking advantage of the persistent discount to NAV.

The Fund's investment portfolio grew by approximately £42 million over the financial year, driven by renewed utilisation of the revolving credit facility. This follows the full repayment of the revolving credit facility in the previous financial year, during which SEQI had been de-leveraged.

Over the past 12 months, the proportion of the Fund's investment in senior secured debt has increased marginally, from 58.6% in March 2024 to 59.9% in March 2025, ensuring defensive positioning.

Additionally, following a strategy to lock in currently high long-term rates, the Fund has continued its shift towards a higher percentage of fixed-rate assets, with 59.4% of the portfolio invested in fixed‑rate assets as at year end, an increase from 57.9% as at the prior year end.

1 Relates to the portfolio of investments held in the Subsidiaries

∆ KPMG has issued independent limited assurance over the selected data indicated with a reference in the 2025 Annual Report. The reporting criteria and assurance opinion are available in the Sustainability Publications section of our website: www.seqi.fund/sustainability/publications/

Credit performance

Over the past financial year, the credit performance of the entire portfolio has remained resilient. Given that the portfolio is made up of high-yield debt instruments, it is to be expected that a small fraction of investments might face some credit issues over their lifetime. The Fund's annual loss rate is 0.58%, a marginal increase from the previous year's 0.53%, due to additional write-downs of non-performing loans. This compares well to broader credit (non‑financial corporate debt) with a similar credit rating, where the historical annual loss rates are typically a multiple of this level.

Lenders are, in general, obligated to maintain confidentiality towards the companies they lend to. Therefore, the Company's policy is not to publicly discuss underperforming loans, except when the borrower has entered a public insolvency process (such as administration in the UK or Chapter 11 in the US).

Publicly discussing an underperforming business could potentially worsen its problems, for instance, by making it more difficult to retain employees or secure new contracts.

The Fund continues to work towards maximising recovery from the NPLs in the portfolio (equal to 1.0% of NAV, down from 5.4% at the end of the prior financial year). Updates are as follows:

US educational facility

A loan that is collateralised by a landmark US educational building was adversely impacted by government cuts which reduced the likelihood of finding new tenants. In March 2025, the Department of Government Efficiency ("DOGE"), under the leadership of Elon Musk within the Trump administration, announced plans to reduce the U.S. Department of Education's workforce by approximately 50%, affecting around 2,200 employees and significantly reducing funding to the provision of education in Washington DC (which is federally funded since it is not in any state).

This development has had a material adverse impact on leasing negotiations with prospective tenants, which are predominantly educational entities, resulting in a delay to the anticipated lease‑up timeline, and as a result, the mark of the loan has been reduced. The carrying value of the loan currently equals 0.4% of NAV.

Non-disclosed loan

SEQI has also commenced legal proceedings on an asset equal to 0.6% of NAV which is now being classed as non-performing. The loan is backed by a recently revalued asset and is marked in line with a conservative estimate of a recovery backed by that asset. The Company is unable to disclose the loan's identity for commercial reasons.

Resolution of previous NPLs

During the year, the Fund received £17 million on its loan to Bulb Energy; we no longer include it in our NPLs since we expect to make a full recovery on it, including capitalised interest.

The Fund sold in full its loan backed by a property in Glasgow. The Fund retains some "earn out" potential on the loan based upon its future value and various performance metrics.

The Fund also received the final residual payment on the Salt Lake loan that was sold in the previous financial year. This is now fully exited.

Balance sheet management

In line with its objectives, the Fund has reduced its cash balance from £99.4 million (including £91.9 million held in the Subsidiaries) as at 31 March 2024 to £34.9 million (including £27.3 million held in the Subsidiaries) as at 31 March 2025, while also drawing £56.9 million on its previously undrawn £300 million RCF. While maintaining liquidity provides flexibility, it also carries a high opportunity cost. As such, the Investment Adviser continues to actively originate new transactions, supported by a dynamic pipeline exceeding £200 million in potential opportunities.

Given the current portfolio composition, the Fund is focused on generating new investments in sectors where increased exposure is desirable, notably renewables, power and digitalisation, as part of its ongoing strategy to enhance diversification.

Alongside this selective deployment into new infrastructure loans, the Company remains committed to its active share buyback programme. The strong cash-generative nature of infrastructure debt supports this dual-track approach, enabling SEQI to pursue buybacks while continuing to deliver on its long-term investment objectives.

Origination activities

SEQI's investment strategy targets opportunities across both the primary and secondary debt markets, each offering distinct advantages. Primary market investments allow the Fund to earn upfront lending fees and structure transactions to meet specific risk and return criteria. In contrast, secondary market acquisitions facilitate the efficient deployment of capital into seasoned assets with established performance histories.

Primary market origination

The Fund maintains a strong focus on the primary loan market, which continues to offer compelling investment opportunities. The Investment Adviser actively originates bilateral transactions and participates in "club" deals involving a small group of aligned lenders. The Fund has also taken part in selectively syndicated infrastructure loans where appropriate.

Primary market investments remain attractive due to their favourable economics, providing access to upfront lending fees and greater flexibility in structuring terms. As the Fund has grown, its primary market activity has expanded accordingly and now accounts for the majority of the portfolio, representing 82.4% as at 31 March 2025.

Secondary market origination

While the primary market remains the Fund's core focus, selected investments are also sourced from banks and other lenders through the secondary market. This approach enables the rapid deployment of capital, providing an efficient complement to the often more expensive and longer execution timelines associated with primary infrastructure transactions.

Secondary market acquisitions also contribute to portfolio liquidity, enhancing flexibility when greater liquidity is required. In many cases, these assets benefit from improved credit profiles over time, as infrastructure loans tend to exhibit credit quality enhancement post-origination - making them an attractive addition to the Fund's portfolio.

Sequoia Investment Management Company Limited

Investment Adviser

24 June 2025

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 March 2025

* Legal and professional fees include an amount of £1,025,463 (2024: £1,237,263) in respect of fees relating to the Fund's investment in Bulb Energy.

All items in the above statement are from continuing operations.

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the year ended 31 March 2025

STATEMENT OF FINANCIAL POSITION

At 31 March 2025

The Financial Statements approved and authorised for issue by the Board of Directors on 24 June 2025 and signed on its behalf by:

James Stewart

Chair

STATEMENT OF CASH FLOWS

For the year ended 31 March 2025