REG - Sequoia Econ Infra - FINAL RESULTS
25/06/2025 07:02
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RNS Number : 2646O Sequoia Economic Infra Inc Fd Ld 25 June 2025
Sequoia Economic Infrastructure Income Fund Limited
(the "Company")
Final Results for the year ended 31 March 2025
Financial Highlights to 31 March 2025 31 March 2024
Total net assets £1,439,188,600 £1,524,282,546
Net Asset Value ("NAV") per Ordinary Share* 92.55p 93.77p
Ordinary Share price* 78.30p 81.10p
Ordinary Share discount to NAV (15.4)% (13.5)%
Earnings per share 5.04p 6.58p
Dividends paid in respect of the year** 6.875p 6.875p
Annualised dividend yield 8.8% 8.3%
* 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
(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/
(https://www.seqi.fund/investors/results/) and on the National Storage
Mechanism.
For further information, please contact:
Sequoia Investment Management Company +44 (0) 20 7079 0480
Randall Sandstrom
Steve Cook
Dolf Kohnhorst
Anurag Gupta
Jefferies International Limited (Corporate Broker & Financial Adviser) +44 (0) 20 7029 8000
Gaudi Le Roux
Harry Randall
J.P. Morgan Cazenove (Corporate Broker & +44 (0) 20 7742 4000
Financial Adviser)
William Simmonds
Jeremie Birnbaum
Teneo (Financial PR) +44 (0)20 7260 2700
Elizabeth Snow sequoia@teneo.com (mailto:sequoia@teneo.com)
Colette Cahill
Apex Fund and Corporate Services (Guernsey) Limited (Company Secretary) +44 (0) 20 7592 0419
Aoife Bennett
James Taylor
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/
(http://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:
Goal Commentary
Gross portfolio return of 8-9% The Fund is invested in a portfolio which currently yields approximately 10%
and produced a NAV total return of 6.1% in the year, below the Company's
target net annual return of 7-8% after approximate annual costs of 1%
Manage portfolio credit quality in the face of economic uncertainty The proportion of the portfolio invested in senior secured loans rose from
58.6% to 59.9%; the weighted average "equity cushion" rose from 38% to 39%;
and NPLs have fallen from 5.4% to 1.0% of NAV.
Target an interest rate profile of 40% floating rate and 60% fixed rate, to The floating rate portion of the portfolio fell to 40.6% on 31 March 2025 from
reflect the likelihood of falling interest rates 42.1% a year previously. This was achieved through our loan origination
activities and by the tactical use of interest rate swaps.
Dividend target of 6.875p per Ordinary share per annum The Company paid four quarterly dividends of 1.71875p per ordinary share in
line with its dividend target, amounting to a total of 6.875p
Follow a sustainable investment strategy and continue to enhance the SEQI has increased the overall ESG score of its portfolio from 62.77 to
sustainability profile of the Company and the Portfolio 64.70∆.
SEQI refreshed its sustainability framework to align with evolving market
standards and forward-looking best practices. Further details on the updated
approach can be found in the sustainability section of our website:
https://www.seqi.fund/sustainability/
Timely and transparent investor reporting The Company's Factsheet, RNS NAV announcements and full portfolios have been
provided monthly for full transparency.
Investor engagement has continued over the financial year including a capital
markets seminar, smaller bespoke investor events and a results roadshow as
well.
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).
Factor NAV effect
Interest income on the Company's investments 8.17p
Portfolio valuation movements, net of foreign exchange and hedge movements (1.45)p
IFRS adjustment from mid-price at acquisition to bid price (0.17)p
Operating costs (1.59)p
Gains from buying back shares at a discount to NAV 0.70p
Gross increase in NAV 5.66p
Less: Dividends paid (6.88)p
Net decrease in NAV after payment of dividends (1.22)p
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.
Fund performance
31 March 31 March 31 March
2025 2024 2023
Net asset value per Ordinary Share 92.55p 93.77p 93.26p
£ million 1,493.2 1 1
, ,
5 6
2 1
4 7
. .
3 9
Cash held (including in the Subsidiaries) £ million 35.1 99.4 68.7
Balance of RCF £ million 56.9 0.0 181.8
Invested portfolio percentage of NAV 100.8% 90.6% 106.5%
Total portfolio including investments in settlement 109.8% 94.2% 109.6%
Portfolio characteristics(1)
31 March 2025 31 March 31 March 2023
2024
Number of investments 59 55 68
Valuation of investments £ million 1,422.7 1,380.7 1,723.5
ESG score 64.70∆ 62.77 62.29
Largest exposure £ million 70.3 60.6 61.0
percentage of NAV 4.9% 4.0% 3.8%
Single largest investment £ million 61.7 60.6 61.0
percentage of NAV 4.3% 4.0% 3.8%
Average investment size £ million 23.7 22.6 25.3
Sectors by number of invested assets 8 8 8
Sub-sectors 29 30 26
Jurisdictions 10 10 12
Private debt percentage of invested assets 90.8% 96.9% 98.1%
Senior debt 59.9% 58.6% 57.2%
Floating rate 40.6% 42.1% 58.4%
Construction risk 12.5% 7.4% 14.2%
Weighted-average maturity years 3.6 4.4 4.1
Weighted-average life years 3.4 3.9 3.5
Yield-to-maturity 9.9% 10.0% 11.9%
Modified duration 1.9 2.2 1.5
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/
(http://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
31 March 2025 31 March 2024
Note £ £
Revenue
Net (losses)/gains on non-derivative financial assets at fair value through 6 (4,073,438) 70,975,563
profit or loss
Net gains on derivative financial assets at fair value through profit or loss 7 21,885,607 40,756,355
Investment income 9 78,766,311 20,023,606
Net foreign exchange gains 2,588,001 161,656
Total revenue 99,166,481 131,917,180
Expenses
Investment Adviser's fees 10 9,837,744 9,937,332
Investment Manager's fees 10 427,098 401,973
Directors' fees and expenses 333,969 367,726
Administration fees 10 505,738 504,656
Auditor's fees 246,112 210,700
Legal and professional fees* 1,850,074 2,523,484
Valuation fees 725,500 733,100
Custodian fees 219,056 231,465
Listing, regulatory and statutory fees 167,894 142,101
Other expenses 720,827 512,949
Total operating expenses 15,034,012 15,565,486
Loan finance costs 15 4,332,589 5,926,840
Total expenses 19,366,601 21,492,326
Profit and total comprehensive income for the year 79,799,880 110,424,854
Basic and diluted earnings per Ordinary Share 13 5.04p 6.58p
* 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
Year ended 31 March 2025 Note Share Retained Total
capital losses
£ £ £
At 1 April 2024 1,720,452,093 (196,169,547) 1,524,282,546
Ordinary Shares buybacks during the year 12 (55,858,674) - (55,858,674)
Total comprehensive income for the year - 79,799,880 79,799,880
Dividends paid during the year 4 - (109,035,152) (109,035,152)
At 31 March 2025 1,664,593,419 (225,404,819) 1,439,188,600
Year ended 31 March 2024 Note Share Retained Total
capital losses
£ £ £
At 1 April 2023 1,808,622,511 (190,769,209) 1,617,853,302
Ordinary Shares buybacks during the year 12 (88,170,418) - (88,170,418)
Total comprehensive income for the year - 110,424,854 110,424,854
Dividends paid during the year 4 - (115,825,192) (115,825,192)
At 31 March 2024 1,720,452,093 (196,169,547) 1,524,282,546
STATEMENT OF FINANCIAL POSITION
At 31 March 2025
31 March 2025 31 March 2024
Note £ £
Non-current assets
Non-derivative financial assets at fair value through profit or loss 6 1,479,215,419 1,493,171,675
Current assets
Cash and cash equivalents 8 7,523,136 7,507,495
Trade and other receivables 14 2,411,179 602,507
Derivative financial assets at fair value through profit or loss 7 17,669,291 28,098,804
Total current assets 27,603,606 36,208,806
Total assets 1,506,819,025 1,529,380,481
Current liabilities
Trade and other payables 16 3,596,055 4,322,344
Derivative financial liabilities at fair value through profit or loss 7 7,181,087 775,591
Total current liabilities 10,777,142 5,097,935
Non-current liabilities
Loan payable 15 56,853,283 -
Total liabilities 67,630,425 5,097,935
Net assets 1,439,188,600 1,524,282,546
Equity
Share capital 12 1,664,593,419 1,720,452,093
Retained losses (225,404,819) (196,169,547)
Total equity 1,439,188,600 1,524,282,546
Number of Ordinary Shares 12 1,555,061,936 1,625,484,274
Net asset value per Ordinary Share 92.55p 93.77p
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
31 March 2025 31 March 2024
Note £ £
Cash flows from operating activities
Profit for the year 79,799,880 110,424,854
Adjusted for:
Net losses/(gains) on non-derivative financial assets at fair value through 6 4,073,438 (70,975,563)
profit or loss
Net gains on derivative financial assets at fair value through profit or loss 7 (21,885,607) (40,756,355)
Investment income (78,766,311) (20,023,606)
Net foreign exchange gains (2,588,001) (161,656)
Loan finance costs 15 4,332,589 5,926,840
(Increase)/decrease in trade and other receivables (excluding prepaid finance 14 (59,360) 52,156
costs and investment income)
Decrease in trade and other payables (excluding accrued finance costs, 16 (58,883) (546,980)
investment income and Ordinary Share buybacks)
(15,152,255) (16,060,310)
Cash received on settled forward contracts 36,116,611 31,086,892
Cash paid on settled forward contracts (1,682,966) (25,459,874)
Cash investment income received 107,906,897 131,219,401
Cash received on disposal of interest rate swaps 7 5,323,394 -
Interest rate swap interest paid 7 (1,036,423) -
Purchases of investments 6 (304,401,710) (349,917,050)
Sales of investments 6 285,143,942 619,536,166
Net cash inflow from operating activities 112,217,490 390,405,225
Cash flows from financing activities
Proceeds from loan drawdowns 15 92,493,120 77,384,713
Loan repayments 15 (35,538,975) (256,710,836)
Payment of loan finance costs 15 (5,030,210) (4,810,404)
Ordinary Share buybacks (57,033,497) (87,992,882)
Dividends paid (109,035,152) (115,825,192)
Net cash outflow from financing activities (114,144,714) (387,954,601)
Net (decrease)/increase in cash and cash equivalents (1,927,224) 2,450,624
Cash and cash equivalents at beginning of year 7,507,495 7,363,120
Effect of foreign exchange rate changes on cash and cash equivalents during 1,942,865 (2,306,249)
the year
Cash and cash equivalents at end of year 7,523,136 7,507,495
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