REG - Sequoia Econ Infra - Half-year Financial Report
28/11/2025 07:00
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RNS Number : 3621J Sequoia Economic Infra Inc Fd Ld 28 November 2025
Sequoia Economic Infrastructure Income Fund Limited
("SEQI" or the "Fund")
Strong first half performance
Half Year Results for the financial period ended 30 September 2025
Financial Highlights to 30 September 2025 31 March 2025
Total net assets £1,440,762,604 £1,439,188,600
Net Asset Value ("NAV") per Ordinary Share* 93.67p 92.55p
Ordinary Share price* 77.90p 78.30p
Ordinary Share discount to NAV (16.8)% (15.4)%
Earnings per Ordinary Share 4.40p 4.26p
Dividends declared 3.4375p 3.4375p
Annualised dividend yield 8.8% 8.6%
ESG score of the portfolio** 65.44 64.70
* Cum dividend
** As measured by the in-house proprietary scoring methodology
KEY HIGHLIGHTS
· Increased NAV driven by steady, predictable interest income and
resilient credit performance
o NAV increased 1.12p to 93.67 (FY2024: 92.55); annualised NAV total return
of 10.1%, in excess of the Fund's target annual gross return of 8-9%
o Dividends of 3.44p per Ordinary Share, consistent with full-year target
dividend of 6.875p; dividend remains fully cash covered by a factor of 1.01x
(FY2024: 1.00x)
· Maintained robust, diversified portfolio credit quality, while
targeting investments yielding in excess of 9%
o Prioritising operational assets (88.3% of portfolio), senior secured debt
(57.2% of portfolio), and non-cyclical industries
o Reduced proportion of NPLs to 0.6% of NAV (HY2024: 5.5%) and no new NPLs
recorded during the period
· Originated £213 million of new loans over the period, at a weighted
average yield-to-maturity of 8.9%
o Proactive balance sheet management following higher than usual levels of
loan repayments
o Use of leverage to ensure the Fund remains fully invested to minimise cash
drag and take advantage of attractive £350m pipeline of potential investments
· Well positioned for falling interest rates with 61.7% of the
portfolio in fixed rate investments, including the effect of interest rate
hedges (FY2024: 58%), locking in current higher interest rates for longer
o Protecting the Fund's income, and dividend cover, should interest rates
fall
o Shorter weighted average maturity, increasing reinvestment flexibility as
spreads evolve
· Further positive "pull-to-par" effects will be recognised over time
o A substantial amount of unrealised valuation decreases that were caused by
the rapid increase in term rates over recent years are likely to be reversed
o Pull-to-par upside of 3.1p per share (to 30 September 2028)
· Continued proactive management of share price discount to NAV with
share buyback programme
o Maintained balanced but flexible approach to capital allocation with 17.0
million Ordinary Shares purchased over the period at a total cost of £13.2
million
o 213.2 million Shares repurchased since the beginning of the programme
o Programme adapts based on portfolio liquidity, discount to NAV and other
market factors
· ESG score of the portfolio increased, rising to 65.44 (FY2024: 64.70)
o Driven by selective investment activity and steady progress of the Fund's
borrowers in enhancing their sustainability performance and reporting
James Stewart, Chair, commented:
"SEQI's strong performance over the first half reflects the resilience of our
diversified portfolio and the stability of our income generation, despite
challenging market conditions. We expect dividend cover to strengthen over the
second half, primarily due to the timing of income recognition and as we
redeploy repaid capital into higher-yielding opportunities.
We remain frustrated by the current level of discount and, although we do not
believe it reflects SEQI's long-term prospects, the resilience of our
investment portfolio or our ability to generate attractive returns, reducing
the discount remains a Board priority. We will continue to balance the use of
available cash, including proceeds from loan repayments, between new
originations and share buybacks.
As global demand for infrastructure capital remains high, we will maintain our
disciplined approach to investing in our active pipeline of high-quality
opportunities and continue to deliver sustainable value for shareholders."
Randall Sandstrom, Director and CEO/CIO, SIMCo, said:
"The combination of easing short-term rates and a higher for longer outlook
create a favourable environment for SEQI's absolute return strategy. In
addition, improving asset valuations and reinvestment into higher-yielding
opportunities are expected to support future returns."
INVESTOR PRESENTATION
The Investment Adviser will host a virtual presentation on the interim results
for investors and analysts today at 9.00am. 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/6917005627ca940014469918
(https://stream.brrmedia.co.uk/broadcast/6917005627ca940014469918)
Copies of the Interim Report and Accounts will shortly be available on the
Company's website www.seqi.fund (http://www.seqi.fund) 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
Rupert Budge
Teneo (Financial PR) +44 (0)20 7260 2700
Elizabeth Snow sequoia@teneo.com (mailto:sequoia@teneo.com)
Rob Yates
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 SEQI's Interim Report for the six‑month
period ended 30 September 2025.
Overall, the portfolio's performance has been strong in the first half of this
financial year, supported by steady, predictable interest income and resilient
credit performance.
The Fund's NAV per share rose by 1.12p, or approximately 1.2%, from 92.55 to
93.67, driven in part by the strong interest income of the portfolio. SEQI
paid dividends of 3.44p per Ordinary Share during the first half, consistent
with our full-year target dividend of 6.875p, resulting in a total NAV return
of 5.0% (not annualised).
This performance was stronger than that of comparable debt investments such as
leveraged loans and high-yield bonds, as well as gilts, over the same period.
The discount to NAV widened from 15.4% to 16.8% during the period, which,
although it compares favourably with SEQI's broader infrastructure investment
trust peer group that ended the period trading at an average discount of
19.2%, remains disappointing. Managing SEQI's discount to NAV remains a
significant focus for the Board and is discussed in more detail below.
Portfolio performance
The strong NAV performance reflects the portfolio's solid and resilient credit
performance and ability to generate income. There were no new non-performing
loans ("NPLs") recorded during the period. Efforts continue to maximise value
from the remaining legacy NPLs, which now represent only 0.6% of the portfolio
as at 30 September 2025 (compared to 5.5% a year ago). This is testament to
the Fund's prudent valuation policy and to the Investment Adviser's ability to
protect value and maximise recovery. Given the Fund's high-yield investment
strategy, it is to be expected that a small number of loans will occasionally
underperform.
In total, 15.4% of the portfolio (including NPLs) is subject to our enhanced
monitoring practices (15.5% as at 30 September 2024). The largest exposure in
this category, representing 6.6% of our portfolio, is to Active Care Group
("ACG"), a UK national provider of specialist health accommodation and complex
care services. Following the restructuring of the business in May 2024, our
investment in ACG comprises a senior secured loan to the operating company, a
loan to its parent company, and holding of the majority of its equity capital.
Over the period of our equity ownership, ACG has made meaningful operational
and financial progress against its turnaround strategy and is implementing a
multi-year asset optimisation programme.
Managing SEQI's balance sheet
We have seen an exceptionally high level of loan prepayments over the first
half of the year: £226 million compared with £84 million for the whole of
the previous financial year. The predominant reason was borrowers taking
advantage of tighter lending margins in the leverage-loan and high-yield bond
markets.
Many of these prepayments were anticipated by the Investment Adviser, and the
Fund was able to prepare for the loss of these loans by drawing on its
revolving credit facility ("RCF") ahead of time to invest in new opportunities
from our healthy pipeline, and then repaying the facility in full shortly
after the period end using the proceeds from the prepayments. Over the period,
we originated £213 million of new loans, at a weighted average
yield-to-maturity of 8.9%.
The ability to source, carry out effective due diligence and execute new loans
is a fundamental part of SEQI's value proposition for our Shareholders. Since
its IPO, the Fund has made over 260 debt investments, deploying over £5.2
billion across a wide range of infrastructure sectors. Over half have been
either proprietary (with SEQI as sole lender and arranger) or in small club
deals (where SEQI has significant influence in the structuring and pricing of
the loan).
The scheduled and early repayment of loans is a natural feature of portfolio
lending and is factored into our operating model. Provided the Fund is
properly prepared, the return of capital offers a strategic advantage by
allowing capital to be reallocated in a meaningful way between new loans and
share buybacks and to generate significant fees while allowing the Investment
Adviser to reposition the portfolio in new or undervalued sectors.
Share discount and capital allocation
The Board remains disappointed and frustrated by the persistent discount to
NAV. We do not believe that the current levels reflect SEQI's long-term
prospects, the resilience of its investment portfolio or its ability to
generate attractive returns for our Shareholders.
Investment trusts are an important part of the UK's investment landscape,
however sentiment has weighed on the broader sector in recent years. More
joined-up policy and regulatory support is needed for the sector to support a
recovery in sentiment, and to ensure they continue contributing meaningfully
to the wider UK economy.
Although we believe that the main reason for SEQI's discount relates to the
wider sentiment impacting the investment trust sector, reducing the discount
remains a core priority focus and objective for the Board.
As part of this focus, we have been pursuing a strategy to market the Fund to
new investors. Our joint brokers, J.P. Morgan Cazenove ("JPM Cazenove") and
Jefferies International Limited ("Jefferies"), have been arranging meetings
and an ongoing programme of investor roadshows in the UK and internationally.
We have also successfully increased our retail investor base, supported by
Kepler Trust Intelligence, and we are pleased that the proportion of retail
investors on the register has grown over the past 12 months.
SEQI, as a debt fund, differs from many other investment companies in the
infrastructure sector, in that our capital recycles much more rapidly. How we
allocate our free capital is a significant consideration for the Board. We
believe in a balanced approach, investing in new opportunities in the
infrastructure debt market, returning capital to our Shareholders via share
buybacks, and at times repaying our RCF.
In the last six months we have bought back 17.0 million Ordinary Shares, on
top of 213.2 million Ordinary Shares purchased since July 2022, at a total
cost of £13.2 million. Buying back shares can be an attractive economic
proposition with a financial reward that only strengthens as the discount
widens, while providing secondary market liquidity.
However, an important consideration is to avoid the shrinkage of the Fund in
real terms. There are benefits of scale for a private debt fund, in terms of
being able to source more attractive infrastructure investments, execute
larger investments efficiently and retain the core components required for a
stable NAV product with a strong income focus to support the dividend. Whereas
a smaller fund may result in reduced diversification and a lower maximum deal
size, which may restrict us from supporting our target equity sponsors. Scale
also ensures that secondary market liquidity in our Ordinary Shares remains
strong, which is important for attracting and retaining investors.
If unwarranted levels of discount remain, we expect to continue buying back
shares as appropriate. We will continue monitoring best practice in the market
and actively review all available options, engaging with our Shareholders and
adopting an approach that seeks to take into account the views of all our
stakeholders.
Market outlook and investment strategy
Macro-economics
The economic outlook for the Fund's main markets is weaker than we have seen
in recent years, characterised by low growth, fiscal pressures and an ongoing
threat of inflationary pressures re-emerging. This is discussed in more detail
in the Investment Adviser's report.
In light of this weakening economic outlook, we will seek to avoid providing
highly leveraged loans that are exposed to the more cyclical parts of the
infrastructure market. Instead, we remain focused on providing leverage to
more defensive assets or, where there is some exposure to the economic cycle,
ensuring that leverage is prudent and risks adequately mitigated.
Historically, infrastructure has often outperformed other sectors during
periods of economic weakness, and it remains a distinct asset class for
investment in an era of global political and economic turbulence.
In short, our investment strategy is to maintain the robust diversified
credit quality of our portfolio, while targeting investments yielding in
excess of 9% (after taking account of the effect of currency hedging on
yields).
Interest rates
The interest rate environment in which the Fund operates has continued to
evolve. Short-term rates are falling but the current outlook is "higher for
longer". Long-term rates have increased materially, notably in the UK and US,
driven by inflation fears, a poor outlook for growth and fiscal pressure. This
outlook creates a sweet spot for income-generating strategies in private
credit as attractive returns are not dependent on wide yield spreads over
borrowing costs.
The Fund has looked to increase the fixed rate proportion of the portfolio
either by making fixed-rate loans or by entering into interest rate swaps.
Overall, 61.7% of our portfolio is now fixed or hedged into fixed rates. While
this is slightly above our target, given a prepayment on the last day of the
period, the overexposure was rebalanced in the following month. This strategy
should serve the Fund well if rates fall and will help to protect the dividend
cover in such a situation.
Exposure to the US infrastructure market
One recent development in the portfolio has been the moderation of our
exposure to the US infrastructure market. There are two reasons for this, as
explained in more detail in the Investment Adviser's report. Firstly,
uncertainty over, and adverse changes to, government policies, such as in the
renewable energy sector, has made it harder to find high-quality investments
with an acceptable risk profile. This has been compounded by the challenges in
assessing the consequences of the current administration's trade and tariff
policies, especially with regards to investments in the transport sector.
Secondly, the yield premium that we have historically seen in the US, relative
to (for example) Europe and the UK, has reduced in recent years. This is
possibly a consequence of the increasing proliferation of private credit funds
in the US.
Having said that, although our exposure to the US has shrunk by approximately
22% over the past 18 months, it is our largest geography and continues to
present attractive opportunities. It remains a large, diversified economy with
a significant requirement for capital (both debt and equity) for
infrastructure. Our approach has been to target those sectors that are
generally less exposed to political uncertainties such as grid infrastructure,
digitalisation and utilities. The US remains a core jurisdiction for the Fund.
Dividend
Portfolio interest income remains resilient given our continuing ability to
deploy capital at attractive rates in the main markets we operate in. In this
half year, our dividend remains fully cash covered by a factor of 1.01x. We
expect the dividend cover to increase over the second half of this year. We
also intend to use Fund leverage to ensure that we remain 100% invested at all
times and minimise cash drag.
Sustainability - Environmental, social and governance ('ESG') considerations
SEQI continues to pursue its comprehensive sustainability agenda through its
continued application of negative screening, positive screening for
opportunities that fall within one of its three defined sustainability themes,
and advancing the sustainability characteristics of the portfolio as measured
by its in-house ESG scoring system.
The portfolio's weighted average ESG score increased during the period, rising
from 64.70 at the last year-end to now 65.44, reflecting both selective
investment activity and the steady progress of our borrowers in enhancing
their sustainability performance as well as in their reporting.
During the period, we conducted a stakeholder evaluation of the relative
importance of certain areas of sustainability and responsible investment,
seeking inputs and feedback from Shareholders, our Investment Adviser and the
Board. This evaluation is a key element to a broader initiative covering our
Sustainability Framework. This initiative also includes a wholesale review of
our ESG scoring framework to reflect evolving market practices, regulatory
developments, ensuring continued relevance and rigour whilst also seeking to
address some of the limitations of the uniform approach embedded in our
current scoring methodology. We look forward to being able to share the
results and outcomes of this review in SEQI's forthcoming 2026 Annual Report.
Closing
SEQI remains a compelling investment proposition, offering investors access to
a diversified portfolio of essential infrastructure assets delivering
attractive, stable income largely underpinned by long-term contractual cash
flows. In a period of easing rates and constrained bank lending, the Fund is
well positioned to capture high-quality opportunities at favourable
risk-adjusted returns. We believe this combination of yield, resilience and
disciplined portfolio management places SEQI in an excellent position for the
period ahead.
I would like to close by thanking our Shareholders for your continued
commitment and support. Thanks also to Andrea Finegan, our Independent
Consultant, who has supported SEQI on risk and sustainability matters for many
years; and finally to my fellow Board members, the Investment Adviser,
Investment Manager, our Brokers and all the other critical service providers
who continue to manage the Fund prudently and who have collectively positioned
us well to continue delivering attractive returns.
These Interim Financial Statements do not take into account the Autumn 2025 UK
budget announcement due to timing. Should any matters relevant to the Fund be
subsequently identified, these will be communicated separately in due course.
James Stewart
Chairman
27 November 2025
INVESTMENT ADVISER'S REPORT
The Investment Adviser's objectives for the year
Over the course of the first half of the financial year, Sequoia Investment
Management Company Limited ("SIMCo" or the "Investment Adviser") has had the
following objectives for the Fund:
Gross portfolio return of 8-9%
· 9.7% portfolio yield
· 10.1% annualised NAV total return
Manage the portfolio responsibly through a falling interest rate environment
· 38.3% floating rate
· 61.7% fixed rate exposure (net of interest rate swaps)
Manage portfolio credit quality in the face of economic uncertainty
· 57.2% senior secured loans
· 38.1% weighted average equity cushion
Continue to enhance the Fund's sustainability profile
· 65.44 ESG score (64.70 as at 31 March 2025)
Timely and transparent investor reporting
· 12 monthly NAV updates
Dividend target of 6.875p per Ordinary Share per annum
· 3.4375p per Ordinary Share paid during the six-month period
Economic infrastructure is a diverse and highly cash-generative asset class
Economic infrastructure debt has established itself as a resilient and
dependable asset class, attracting a broad spectrum of investors. Borrowers in
this space typically operate within sectors characterised by substantial
barriers to entry, including high capital intensity and rigorous regulatory
frameworks, which protect incumbent operators and, by extension, their
creditors. These investments generally generate steady, predictable cash
flows, reflecting the essential nature of the underlying services. In
addition, the tangible assets that underpin economic infrastructure projects
provide a layer of security, further enhancing the stability and defensiveness
of the asset class.
Economic infrastructure debt continues to attract investors seeking steady
income and long-term resilience. Core sectors include transport, utilities,
energy, digitalisation, renewables, and select social infrastructure projects
with comparable attributes. These businesses frequently operate under
long-term concessions or licences, with revenues linked to usage or demand.
To mitigate demand risk, projects in this space are typically structured with
lower leverage, stronger equity buffers, conservative credit metrics, robust
covenant packages, and significant asset backing, all of which enhance
protection for lenders. In an environment marked by market volatility,
elevated geopolitical tensions, and persistent inflationary pressures, the
Fund has deliberately prioritised operational assets, senior secured debt, and
non-cyclical industries.
This disciplined approach, consistent with our broader balance sheet and
portfolio strategy, has strengthened resilience, reduced exposure to cyclical
stress, and ensured that SEQI remains well-positioned to capitalise on
attractive reinvestment opportunities while safeguarding investor returns.
The market environment during the period
Infrastructure debt continues to benefit from the stability of long-term
contracted revenues, though valuations remain influenced by broader market
forces. Over the past year, government bond markets saw sharp declines
followed by recovery, while heightened volatility, driven by persistent
inflation, tariff tensions, and geopolitical uncertainty, shaped investor
sentiment. Despite these pressures, pan-European high-yield bonds returned
approximately 3.6% year-on-year, and yield curves that had been inverted
through much of the prior period began to flatten as markets adjusted to
shifting inflation dynamics.
Inflation has remained above target across the US, UK, and Eurozone, with
upward pressure more pronounced in the US and UK while the Eurozone remains
close to target levels. Headline year-on-year rates have risen over the last
six months in the US, climbing from 2.4% to 2.9%, and in the UK from 2.8% to
3.8%, with the Eurozone flat at 2.2%. Higher energy prices, alongside wage
growth and persistent services inflation, have shaped the timing and scale of
monetary policy responses, with the US Federal Reserve, European Central Bank,
and the Bank of England each addressing distinct domestic challenges. Markets
currently anticipate further cuts in the US (around two additional in 2025),
compared with more limited easing expected in the UK, and the Eurozone's
expected conclusion to its cutting cycle.
The Fund's private debt portfolio remains sensitive to shifts in interest
rates and credit spreads in public markets. Volatility in government bonds,
high-yield credit, and leveraged loans has, at times, affected valuations;
however, such impacts are generally unrealised mark-to-market adjustments that
are reversed as loans approach maturity. While higher long-term interest rates
have slowed the reversal of these mark-downs for the fixed-rate portfolio as
at the end of the period, these effects have been more than offset by early
prepayments received. The implications of higher-for-longer rate expectations
are outlined further below in the Market backdrop section.
Private credit markets continue to expand as companies seek alternatives to
traditional financing. Direct lending to private equity-backed firms remains
particularly active, offering flexibility and yield premiums over syndicated
loans. Against this backdrop, the Fund is well positioned to capture
opportunities arising from refinancing and restructuring needs as borrowers
take advantage of declining debt service costs compared to prior years.
Market backdrop
Interest rates
What is happening?
Over the past year, the US, UK, and Eurozone have moved into a rate-cutting
cycle, with central banks easing policy for the first time in four years.
While the pace of reductions has varied by region, the shift marks a clear
departure from the tightening that dominated the prior period.
Why this matters to SEQI?
The combination of falling short-term rates and a "higher for longer" outlook
creates a favourable environment for SEQI's absolute return strategy. Returns
are supported by borrowers proven in higher-rate markets, reflecting credit
profiles that have adjusted to sustained elevated costs of capital rather than
those reliant on legacy low-rate financing. At the same time, higher long-term
rates in the UK and US sharpen the focus on portfolio positioning, influencing
the balance between fixed and floating exposure, the hedging strategy, and the
realisation of pull-to-par gains. This disciplined approach ensures that the
portfolio remains resilient while continuing to generate stable income and
capture reinvestment opportunities.
Difference between 10-year and 1-year government bond yield (%)
What is happening?
The difference between 10-year and 1-year government bond yields has shifted
from negative territory in 2023 to positive territory across all of SEQI's
investment jurisdictions by mid-2025. The UK has seen the steepest rise, with
spreads now over +1%, while the US and EU are both around +0.5-0.7%. This
marks a clear reversal of the prolonged period of yield curve inversion.
Why this matters to SEQI?
A normalising yield curve environment signals a move away from the stresses
associated with inverted curves and is typically supportive of improved
economic sentiment. For SEQI, this backdrop enhances confidence in the
resilience of borrower fundamentals and should encourage greater demand for
infrastructure credit.
European infrastructure loan financing
What is happening?
During 2025, utilities, renewables and the other categories have all seen
notable increases in loan financing. Renewables remain strong at approximately
£63 billion, utilities have more than doubled compared to the same period in
2024, and "other" sectors continue to attract sizeable volumes, underscoring
broad investor appetite beyond core areas.
Why this matters to SEQI?
During the period, SEQI's exposure to European jurisdictions increased from
23.5% to 28.0% through the acquisition of nine loans, including investments in
the utilities, renewables and other sectors.
NAV and Fund performance
Over the last six months, the Fund's NAV per Ordinary Share increased from
92.55p per Ordinary Share to 93.67p per Ordinary Share ex-dividend, driven by
the following effects:
Factor NAV effect
Interest income on the Fund's investments 4.30p
Portfolio valuation movements, net of foreign exchange and hedging movements 0.86p
IFRS adjustment from mid-price at acquisition to bid price (0.11)p
Operating costs (0.66)p
Gains from buying back Ordinary Shares at a discount to NAV 0.17p
Gross increase in NAV 4.56p
Less: Dividends paid (3.44)p
Net increase in NAV after payment of dividends 1.12p
The Fund delivered a total return on NAV of 5.0% for the six-month period,
exceeding its long-term net return objective of 7-8% per annum, and
outperforming high yield bonds which returned 3.6% during the same period.
SEQI's share price total return between March 2025 and September 2025 was
3.8%, outperforming 10-year Gilts, which returned 2.2% during the same period.
However, the portfolio underperformed relative to equity markets, trailing the
FTSE All Share Index, which increased by 11.4% during the same period.
As in previous periods, the principal factor that positively influenced NAV
performance was the interest income derived from investments. Valuation
movements in the Fund's investments have been positive, with the majority of
negative adjustments offset by the progress made on loans under enhanced
scrutiny and an uplift in the valuation of the Fund's fixed-rate assets.
Further positive "pull-to-par" effects will be recognised over time, as a
substantial amount of unrealised valuation decreases that were caused by the
rapid increase in term rates over recent years are likely to be reversed.
The Investment Adviser believes the portfolio is well positioned to outperform
liquid credit markets over the long term. Private debt typically delivers
higher yields than liquid credit of comparable quality, while
infrastructure-backed debt offers stronger resilience through asset support,
evidenced by the Fund's lower loss rates relative to equivalent liquid credit.
In addition, the portfolio's broad diversification across sectors,
sub-sectors, and geographies helps mitigate exposure to idiosyncratic risks,
reducing overall portfolio volatility through low asset correlation.
Share performance
As at 30 September 2025, SEQI had 1,538,099,673 Ordinary Shares in issue (31
March 2025: 1,555,061,936). The closing share price on that day was 77.90p per
Ordinary Share (31 March 2025: 78.30p per Ordinary Share), implying a market
capitalisation of approximately £1.20 billion, a decrease of c.£20.0 million
compared to six months ago, partially due to the Fund's share buyback
programme, which has reduced the number of Ordinary Shares in issue.
After taking account of dividends paid of 3.4375p per Ordinary Share, the
annualised share price total return over the period was 7.7%. The 0.4p
decrease in the share price over the six-month period was driven by a
persistent negative market sentiment toward alternative assets, including debt
funds in the listed investment company sector. Capital outflows, driven by
investors reallocating to tax-efficient government bonds and currently
high-yielding money market instruments, have further pressured share prices.
However, the sector experienced greater stability in the first half of this
financial year as key market interest rates were cut for the first time in
four years.
Both the Investment Adviser and SEQI's Directors believe the current share
price discount to NAV is still excessive and does not fully reflect the
portfolio's ability to deliver attractive risk-adjusted returns through
periods of economic uncertainty, its comparatively shorter investment
duration, and the strength of its valuation framework. Against this backdrop,
the Fund has maintained its policy of repurchasing Ordinary Shares it
considers undervalued, thereby enhancing NAV per Ordinary Share for existing
Shareholders. Over the past six months, 16,962,263 Ordinary Shares have been
repurchased at an average price of 77.76p. Since the launch of the buyback
programme in July 2022, a total of 230,139,325 Ordinary Shares have been
repurchased, representing 13.0% of the Ordinary Shares in issue at the outset.
This initiative has added 1.93p to NAV per Ordinary Share since inception.
Dividend Cover
In accordance with its target, the Fund has paid 3.4375p in dividends for the
last six months. The Fund's dividend cash cover was 1.01x for the first half
of the financial year, showing a slight improvement to the previous year's
cover of 1.00x.
We believe there is upside potential for the dividend cover for the remaining
half of the financial year and the near future given the extensive progress
that has been made on the non-cash generating assets of the portfolio.
Moreover, the higher proportion of fixed-rate investments, inclusive of
interest rate swaps, further protects the Fund's income from
larger-than-expected reductions in risk-free rates.
Fund performance
30 September 2025 31 March 2025 30 September
2024
NAV per Ordinary Share 93.67p 92.55p 95.03p
£ million 1,440.8 1,439.2 1
,
4
9
7
.
8
Cash held (including in the Subsidiaries) £ million 84.9 35.1 88.7
RCF utilisation £ million 33.2 56.9 20.0
Invested portfolio(1) percentage of NAV 96.6% 100.8% 89.9%
Total portfolio including investments in settlement 112.5% 109.8% 93.5%
Portfolio characteristics
30 September 2025 31 March 2025 30 September
2024
Number of investments 53 59 56
Valuation of investments £ million 1,366.2 1,422.7 1,346.3
ESG score 65.44 64.70 64.65
Largest exposure £ million 90.2 70.3 98.0
percentage of NAV 6.6% 4.9% 6.5%
Single largest investment £ million 65.0 61.7 61.7
percentage of NAV 4.8% 4.3% 4.1%
Average investment size £ million 25.3 23.7 21.4
Sectors by number of invested assets 8 8 8
Sub-sectors 28 29 29
Jurisdictions 11 10 10
Private debt percentage of invested assets 94.6% 90.8% 94.4%
Senior debt 57.2% 59.9% 58.5%
Floating rate 38.3% 40.6% 37.7%
Construction risk 11.7% 12.5% 8.1%
Weighted average maturity years 3.4 3.6 3.8
Weighted average life years 3.2 3.4 3.5
Yield-to-maturity 9.7% 9.9% 9.9%
Modified duration 2.1 1.9 2.0
1 Relates to the portfolio of investments held in the Subsidiaries
As shown in the table above, the Fund's NAV increased marginally by £1.6
million during the period. Without SEQI's ongoing share buyback programme,
which amounted to £13.2 million during the period, the NAV would have
increased by approximately £14.8 million.
The reduction in the weighted average maturity and life of the portfolio
enhances reinvestment flexibility and enables the Fund to capture attractive
spreads as opportunities arise, strengthening its positioning in the current
market environment. The Investment Adviser has also increased the allocation
to fixed-rate investments, which now represent nearly 62% of the portfolio
(net of interest rate swaps), in order to capitalise on elevated term rates.
The Fund's target remains unchanged at 60%, with the prepayment of a large
floating-rate loan on the final day of the period resulting in a slightly
elevated ratio. The temporary overexposure was addressed shortly after the
period end. In addition, the Fund has entered into longer-dated interest rate
swaps to compensate for the reducing weighted-average maturity of the
portfolio. This positioning allows the Fund to lock-in higher levels of income
in a declining rate environment compared with an unhedged mix of fixed and
floating-rate assets.
Credit performance
Over the past six months, the credit performance of the entire portfolio has
remained strong. However, given that the portfolio comprises high-yield debt
instruments, it is to be expected that a small proportion of investments will
face some credit issues over their lifetime. The Fund's annual loss rate is
0.54%, a marginal increase from the previous year's 0.51%, 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.
Updates on the Fund's two non-performing loans can be found below.
Non-performing loan
SEQI continues with legal proceedings on an asset equal to 0.5% of the
portfolio which is 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 Fund is unable to disclose the loan's
identity for commercial reasons.
US private school
A mortgage-secured loan, collateralised by a landmark educational property in
the US, has been adversely affected by recent US government budget cuts, which
have reduced the likelihood of securing new tenants. In March 2025, the
Department of Government Efficiency ("DOGE"), announced plans to reduce the US
Department of Education's workforce by approximately 50%, a reduction of
around 2,200 employees, and to curtail significantly federal funding for
education in Washington, D.C. (which, as a federal district, is not
state-funded). These developments have had a material negative impact on
leasing discussions with prospective tenants, most of whom are educational
institutions, leading to the cancellation of a previously anticipated lease.
Consequently, the loan's mark has been reduced, reflecting increased
uncertainty and a longer expected lease-up period. The carrying value of the
loan currently represents approximately 0.1% of the portfolio.
Higher scrutiny loan
The portfolio's largest single-name exposure, Active Care Group ("ACG"),
remains under enhanced scrutiny. Since SEQI assumed ownership following the
restructuring of our original loan to the company, ACG has delivered tangible
operational and financial progress against its turnaround strategy. This is
partially evidenced by Care Quality Commission inspection ratings over the
past 12 months, with 96% of services rated 'good' or 'outstanding', marking a
significant improvement from less than 75% at the time of the restructuring.
The company has also made a return to operational profitability. As part of
the turnaround, ACG is executing a multi-year asset optimisation programme
intended to strengthen its balance sheet and better align its portfolio with
long-term growth opportunities, including in private neuro-rehabilitation
facilities. In our view, successful delivery of this asset optimisation
programme should enhance enterprise value and support recovery prospects on
the loan with potential upside to our investment. The carrying value of this
exposure currently represents approximately 6.6% of the portfolio.
Balance sheet management
At the beginning of the period, the Fund held a cash balance of £35.1 million
(including £27.3 million held in the Subsidiaries) alongside £56.9 million
drawn on its revolving credit facility. Over the subsequent six months, the
Fund utilised its balance sheet flexibly, increasing the facility's
utilisation up to £114.5 million at its peak in July 2025 before repaying the
facility towards the end of the period. This ensured that repayments from
investments did not create cash drag, as the Fund was able to redeploy capital
efficiently during the interval between repayments and new commitments.
By the end of the period, the Fund held a cash balance of £84.9 million
(including £79.3 million held in the Subsidiaries) and had reduced its
utilisation of the revolving credit facility to £33.2 million, supported by
significant prepayments from Project Nimble and Tracy Hills, the latter at
September month-end. These inflows resulted in the Fund modestly de-leveraging
ahead of the half-year end, while maintaining sufficient liquidity to continue
supporting its investment pipeline.
The ongoing repayment and reinvestment cycle remains a key driver of the
Fund's balance sheet strength. Repayments provide upfront fee income and, when
actively managed, create opportunities to reinvest into attractive sectors
where the Fund sees strong relative value. This cycle supports the agility of
the Fund, allowing it to rebalance exposures, target favourable risk-adjusted
returns, and preserve capital efficiency, provided liquidity is actively
managed to avoid undue drag.
Overall, the Fund's approach to balance sheet management during the period
demonstrated a disciplined use of leverage, proactive recycling of capital,
and a focus on ensuring that repayments are translated into reinvestment
opportunities rather than idle cash balances. This strategy reinforces the
Fund's ability to generate income while maintaining balance sheet resilience.
The Investment Adviser also considers multiple scenarios of projected
repayment profiles as a basis for SEQI's dynamic RCF utilisation target.
Portfolio valuation
Currently, the average loan in the portfolio rated single-B or higher is
valued at approximately 98 pence in the pound. This discount primarily
reflects the impact of higher rates, relative to the market conditions
prevailing at origination. Over time, and absent any credit losses, as these
loans approach maturity, their value will accrete towards par value, a dynamic
commonly referred to as the "pull-to-par" effect.
These NAV estimates are calculated on the assumption that interest rates and
bond yields remain constant and they do not factor in NAV-accretive mechanisms
beyond the pull-to-par effect; the only variable considered being the passage
of time. Non-performing loans are excluded from the calculation, while
recoveries on underperforming loans are based on internal credit ratings. The
pull-to-par effect is expected to have a material positive impact on NAV over
the next three years.
Period Pull-to-par Pull-to-par
(£ million) (pence per Ordinary Share)
1 October 2025 to 30 September 2026 29.4 1.91
1 October 2026 to 30 September 2027 13.8 0.90
1 October 2027 to 30 September 2028 4.2 0.27
1 October 2028 and after 3.9 0.26
Portfolio update
SEQI's exposure to the US has moderated from 45.8% to 41.1% over the period,
reflecting disciplined allocation amid heightened policy uncertainty, shifting
regulatory priorities, and the risk of tariffs affecting cross-border trade
and investment flows. The Fund has deliberately pursued greater regional
diversification, with a growing pipeline of opportunities in Europe and the
UK.
As noted in the Chair's statement, our capital deployment has been shaped by
conditions in the US that have made investment in the jurisdiction slightly
less compelling than in previous years. For example, tariff policy has turned
into a moving target, with renewables being the most affected sector. What
started in May 2024 with an increase in duties on EVs, batteries and solar
inputs, has evolved into aggressive anti-dumping and countervailing tariffs on
solar cells and modules from Southeast Asia. Unsurprisingly, this has
introduced cost volatility into supply chains and project budgets. At the same
time, the power grid's bottlenecks remain material despite the Federal Energy
Regulatory Commission's Order 2023. The policy promised to speed up connecting
new power resources to the grid, and yet timelines on new projects continue to
be delayed in key regions. Against this backdrop, investment appetite has
almost entirely become a function of volatile wholesale market signals as seen
by the 22% increase in capacity prices within the largest US power grid
operator in July 2025, leading to a reawakening of originations.
Simultaneously, the historical yield pick-up available in US private credit
has declined as competition has intensified. Large managers have accumulated
dry powder, enabling mid-to-upper market borrowers to arbitrage lenders,
tightening the available spreads and softening terms relative to Europe and
the UK.
Taken together, these factors reduce the risk-adjusted appeal of new US
exposure at this stage in the cycle and motivated our tilt towards
jurisdictions where policy and pricing are currently more predictable.
That said, the US remains our single largest market and continues to present
attractive opportunities. It has a large, diversified economy with a
significant requirement for capital (both debt and equity) for infrastructure
and remains a core jurisdiction for the Fund. This is also reflected in the
pipeline of investment opportunities, particularly in grid infrastructure,
digitalisation and utilities, in keeping with our approach to target those
parts of the US infrastructure market that are least exposed or are considered
to have less exposure to political uncertainties, or which benefit from strong
tailwinds that provide enough momentum to absorb some policy uncertainty.
Examples would include the digitalisation and power sectors (which are
becoming increasingly linked, given the energy requirements of AI data
centres). By sourcing high quality private-sector infrastructure assets, with
a predominantly domestic consumption, the Fund has been able to keep meeting
its target returns, while maintaining an appropriate risk profile.
Recently, a few high-profile corporate defaults in the US have led to higher
scrutiny of the private credit markets. In a tightening credit spread
environment, it is sensible for investors to question the underwriting
discipline and leverage levels in certain private-credit segments. We would,
however, emphasise that our investment processes remain disciplined and that
the infrastructure sector continues to benefit from stable, contractual
cashflows and a low correlation to broader corporate credit.
Origination activities
The Fund's investment strategy spans both primary and secondary debt markets,
each offering distinct advantages. In the primary market, the Fund benefits
from upfront lending fees, the ability to structure investments to specific
requirements, and the additional return available through the illiquidity
premium. In the secondary market, acquisitions facilitate the rapid deployment
of capital into seasoned assets with established performance histories,
supporting efficient portfolio management.
Primary Market Origination
The Fund remains principally focused on the primary loan market, which
continues to offer attractive returns. The Investment Adviser targets
bilateral transactions, participates in selective "club" deals with small
groups of lenders, and also invests in broadly syndicated infrastructure
loans. Primary market lending is particularly attractive given its favourable
economics, including upfront fees and greater scope to negotiate bespoke
terms. As the Fund has grown, its activity in the primary market has expanded
accordingly and now accounts for the majority of the portfolio (89.0%).
Secondary Market Origination
Although the primary market is a key focus, the Fund also acquires assets from
banks or other lenders in the secondary market. This approach enables faster
capital allocation, as primary infrastructure debt transactions can take time
to finalise. Additionally, secondary market assets tend to offer greater
liquidity, providing the Fund with flexibility when liquidity needs arise.
Infrastructure loans often experience improved credit quality over time,
meaning many secondary loans offer enhanced credit strength compared to their
original issuance.
Strong pipeline of opportunities
The pipeline of investment opportunities remains strong, supported by a
sustained and growing global demand for infrastructure credit. According to
Preqin, global fundraising for infrastructure debt remains resilient. By March
2025, global infrastructure private funds' assets under management ("AUM")
grew to a combined total of USD 1.6 trillion.
A Compelling Market Opportunity
▪ Thematic alignment: decarbonisation, digitalisation, demographics,
deglobalisation
▪ Under-invested: bank lending constrained
▪ Optimal timing: high term rates with slow expected easing
▪ Equity-like returns: private mid-market premium spreads with credit
protections
▪ Diversifier: asset-backed cashflows and low correlation to broader private
credit
For SEQI, this strong demand environment should translate into a robust
pipeline of opportunities, ensuring continued access to high-quality
investments across geographies and sectors. The team remains well positioned
to selectively deploy capital into transactions that meet the Fund's strict
risk-return criteria.
The Investment Adviser has continued its active management of the Fund's
portfolio through its enhanced monitoring practices. However, we are pleased
to report that a number of investments which required more time-intensive
management have come to a successful completion. This has enabled an increased
focus on origination activities, resulting in a substantial pipeline of
approximately £350 million in potential investments. Whilst not every
opportunity within this pipeline will convert into an investment, the range
and volume of prospects sourced by the Investment Adviser demonstrate the
abundance of opportunities available in the market.
Potential investments span seven sectors and eight sub-sectors, offering a
diverse array of options for the portfolio. Importantly, current preliminary
analysis indicates that the average expected yield of these opportunities
stands at 9%, at the higher end of the Fund's gross target return range of
8-9%. The diversity and potential returns of the pipeline position the Fund
well for future growth, reinforcing confidence in SEQI's ongoing strategy.
Team
During the reporting period, the Investment Adviser has experienced limited
employee attrition. To promote the retention of expertise and institutional
knowledge, a long-term incentive plan remains in place.
Sequoia Investment Management Company Limited
Investment Adviser
27 November 2025
UNAUDITED CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME
For the period from 1 April 2025 to 30 September 2025
Period ended Period ended
30 September 2025 30 September 2024
(unaudited) (unaudited)
£ £
Income
Net losses on non-derivative financial assets at fair value through profit or (9,748,117) (67,483,092)
loss
Net gains on derivative financial assets at fair value through profit or loss 7,655,980 50,330,671
Investment income 80,993,486 94,858,567
Net foreign exchange (losses)/gains (266,825) 257,226
Total income 78,634,524 77,963,372
Expenses
Investment Adviser's fees 4,901,958 4,918,696
Investment Manager's fees 219,247 207,695
Directors' fees and expenses 196,385 163,293
Administration fees 293,873 246,263
Custodian fees 111,412 110,992
Auditor's fees 110,819 120,362
Legal and professional fees 296,156 1,223,394
Valuation fees 372,100 373,800
Listing, regulatory and statutory fees 80,270 85,283
Other expenses 417,814 334,326
Total operating expenses 7,000,034 7,784,104
Loan finance costs 3,717,659 2,020,391
Total expenses 10,717,693 9,804,495
Profit and total comprehensive income for the period 67,916,831 68,158,877
Basic and diluted earnings per Ordinary Share 4.40p 4.26p
All items in the above statement derive from continuing operations.
UNAUDITED CONDENSED INTERIM STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the period from 1 April 2025 to 30 September 2025
Unaudited Share Retained Total
capital losses
£ £ £
At 1 April 2025 1,664,593,419 (225,404,819) 1,439,188,600
Total comprehensive income for the period - 67,916,831 67,916,831
Share buybacks (13,203,100) - (13,203,100)
Dividends paid during the period - (53,139,727) (53,139,727)
At 30 September 2025 1,651,390,319 (210,627,715) 1,440,762,604
For the period from 1 April 2024 to 30 September 2024
Unaudited Share Retained Total
capital losses
£ £ £
At 1 April 2024 1,720,452,093 (196,169,547) 1,524,282,546
Total comprehensive income for the period - 68,158,877 68,158,877
Share buybacks (39,489,172) - (39,489,172)
Dividends paid during the period - (55,098,669) (55,098,669)
At 30 September 2024 1,680,962,921 (183,109,339) 1,497,853,582
UNAUDITED CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION
At 30 September 2025
30 September 2025 31 March 2025
(unaudited) (audited)
£ £
Non-current assets
Non-derivative financial assets at fair value through profit or loss 1,472,850,973 1,479,215,419
Current assets
Cash and cash equivalents 5,606,333 7,523,136
Trade and other receivables 2,113,486 2,411,179
Derivative financial assets at fair value through profit or loss 14,385,350 17,669,291
Total current assets 22,105,169 27,603,606
Total assets 1,494,956,142 1,506,819,025
Current liabilities
Trade and other payables 3,529,661 3,596,055
Derivative financial liabilities at fair value through profit or loss 17,454,233 7,181,087
Total current liabilities 20,983,894 10,777,142
Non-current liabilities
Loan payable 33,209,644 56,853,283
Total liabilities 54,193,538 67,630,425
Net assets 1,440,762,604 1,439,188,600
Equity
Share capital 1,651,390,319 1,664,593,419
Retained losses (210,627,715) (225,404,819)
Total equity 1,440,762,604 1,439,188,600
Number of Ordinary Shares 1,538,099,673 1,555,061,936
Net Asset Value per Ordinary Share 93.67p 92.55p
The Unaudited Condensed Interim Financial Statements were approved and
authorised for issue by the Board of Directors on 27 November 2025 and signed
on its behalf by:
Margaret Stephens
Director
UNAUDITED CONDENSED INTERIM STATEMENT OF CASH FLOWS
For the period from 1 April 2025 to 30 September 2025
Note Period ended Period ended
30 September 2025 (unaudited) 30 September 2024 (unaudited)
£ £
Cash flows from operating activities
Profit for the period 67,916,831 68,158,877
Adjustments for:
Net losses on non-derivative financial assets at fair value through profit or 9,748,117 67,483,092
loss
Net gains on derivative financial assets at fair value through profit or loss (7,655,980) (50,330,671)
Investment income (80,993,486) (94,858,567)
Net foreign exchange losses/(gains) 266,825 (257,226)
Loan finance costs 3,717,659 2,020,391
Increase in trade and other receivables (excluding prepaid finance costs and (203,677) (31,397)
investment income)
Decrease in trade and other payables (excluding accrued finance costs, (50,909) (172,166)
investment income and share buybacks)
(7,254,620) (7,987,667)
Cash received on settled forward contracts 22,552,172 18,591,478
Cash paid on settled forward contracts (829,404) (23,139)
Cash received on disposal of interest rate swaps - 5,323,394
Interest rate swap interest paid (509,701) (336,338)
Cash investment income received 48,041,384 50,989,194
Purchases of investments (251,427,683) (171,987,458)
Sales of investments 280,996,114 190,903,350
Net cash inflow from operating activities 91,568,262 85,472,814
Cash flows from financing activities
Proceeds from loan drawdowns 129,694,283 35,277,121
Loan repayments (153,540,476) (15,495,491)
Payments of loan finance costs (3,396,757) (3,311,373)
Share buybacks (13,050,412) (40,369,048)
Dividends paid (53,139,727) (55,098,669)
Net cash outflow from financing activities (93,433,089) (78,997,460)
Net (decrease)/increase in cash and cash equivalents (1,864,827) 6,475,354
Cash and cash equivalents at beginning of period 7,523,136 7,507,495
Effect of foreign exchange rate changes on cash and cash equivalents during (51,976) (56,916)
the period
Cash and cash equivalents at end of period 5,606,333 13,925,933
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