Company Announcements

COMPANY SUMMARY

Principal Activity

Sequoia Economic Infrastructure Income Fund Limited (the "Company") invests in a diversified portfolio of senior and subordinated economic infrastructure debt investments through its immediate subsidiary Sequoia IDF Asset Holdings S.A. (the "Subsidiary", together the "Fund"). The Company controls the Subsidiary through a holding of 100% of its shares.

Investment Objective

The Company's investment objective is to provide investors with regular, sustained, long‑term distributions and capital appreciation from a diversified portfolio of senior and subordinated economic infrastructure debt investments. This objective is subject to the Fund having a sufficient level of investment capital from time to time and the ability of the Fund to invest its cash in suitable investments.

Investment Policy

The Company's principal investment policy is to invest in a portfolio of loans, notes and bonds where all or substantially all of the associated underlying revenues are from business activities in the following market sectors: transport, transportation equipment, utilities, power, renewable energy, accommodation and telecommunications infrastructure. The revenues should derive from certain eligible jurisdictions, as defined in the Company's Prospectus. In addition, in excess of 50% of the portfolio should be floating rate or inflation-linked debt, and not more than 10% by value of the Fund's investments (at the time of investment) should relate to any one individual infrastructure asset.

Environmental, Social and Governance ("ESG") Policy

The Company takes its corporate and social responsibilities seriously. As part of its sustainability strategy, it has established a number of appropriate ESG policies which it takes into account at all stages of its investment process. The guiding principles behind its ESG programme are the United Nations Principles for Responsible Investment ("UNPRI"), to which the Investment Adviser is a signatory.

Dividend Policy

In the absence of any significant restricting factors, the Board expects to pay dividends totalling 6.25p per Ordinary Share per annum for the foreseeable future. The Company pays dividends on a quarterly basis.

At an Extraordinary General Meeting of the Company held on 25 February 2020, Shareholders approved the implementation of a scrip dividend scheme. For further details, please see note 5 to the Interim Financial Statements.

CHAIRMAN'S STATEMENT

It is my pleasure to present to you the Interim Report of Sequoia Economic Infrastructure Income Fund Limited (the "Company") for the six-month period of operations ended 30 September 2020.

NAV and Share Price Performance

Over the first half of this financial year, the Company's NAV per share² has increased from 96.69p to 100.17p. Over the same period, the Company has paid dividends of 3.125p per share, consistent with our full year target dividend of 6.25p, resulting in a total NAV return[1] of 6.9%.

During March 2020, the COVID-19 pandemic induced a sharp downturn in markets generally, including a hard sell-off in non-investment grade debt. Simultaneously, key oil-producing nations launched a price war, which put extreme pressure on the oil price. Regrettably, this meant that we ended March 2020 with NAV per share² down by 9.1% over the month, closing at 96.69p. Encouragingly, during the six-month period ended 30 September 2020, the spread widening observed across the portfolio during the second half of March 2020 reversed materially, with several of the Company's investments performing better than expected throughout the lockdown. The increase in the Company's NAV during the period is mainly attributed to the positive market movements observed as markets recovered and economic activity resumed. These positive market movements contributed to a 3.21p per share increase in asset valuations.

Over the first six months of the financial year, the Company's share price rebounded to 104.4p from 94.0p after paying dividends of 3.125p, producing a total share price return² of 14.4%. Throughout the period, the Company's shares reverted to trading at a premium to NAV with the shares trading at 4.2% premium to NAV² as at 30 September 2020 relative to a 2.8% discount² as at 31 March 2020. This increase in share price signals strong investor confidence in the Company's investment proposition and its resilience to market volatility.

Response to COVID-19 and Portfolio Performance

For the first six months of the financial year, the Investment Adviser continued rebalancing the portfolio in favour of more defensive sectors, including telecommunications, utilities, renewables, and accommodation, which has helped mitigate some of the spread widening across the portfolio. By focusing on these defensive sectors, and shifting the portfolio significantly towards higher credit quality assets, we believe that the Company is well positioned to weather future economic uncertainty.

We were also fortunate that we entered the current crisis with a robust balance sheet, primarily due to our most recent £300 million capital raise, which closed on 3 March 2020. The excess proceeds of the capital raise after debt repayment eliminated the need for substantial additional borrowings under our RCF, even after funding new loans that were in settlement.

During the period, the Company achieved the following:

·      Allocated greater resources to the monitoring of all loans in its portfolio;

·      Entered into dialogue with three distressed borrowers at an early stage, one of which led to a consensual restructuring of the business, which is discussed in more detail in the Investment Adviser's report;

·      Deployed funds in new loans at a more measured pace focusing on stronger credits within our investment universe;

·      Retained its dividend target of 6.25p per annum for 2020/21 in the expectation that this should be fully covered (net of expenses and interest costs) by the cash yield on our portfolio; and

·      Funded opportunistic attractively priced secondary market opportunities which emerged as a result of the increased market volatility that was observed earlier this year.

Since the decline in NAV and our share price in March 2020, the performance of loans and bonds in our portfolio over the period ended 30 September 2020 has resulted in the reversal of some of the unrealised losses that were incurred earlier this year and a noticeable pick up in year-on-year yields.

The overall portfolio yield to maturity[2] decreased from 12.0% at the end of March 2020 to 10.2% at 30 September 2020, primarily as a result of asset valuation mark-ups as spreads continued to tighten throughout the period and several assets performed better than expected. The percentage of payment-in-kind ("PIK") income increased since year end from c. 10% of all interest income in March 2020 to 17.7% in November 2020, as several borrowers made temporary PIK requests in order to better manage their liquidity during the pandemic. This deferred income for the Company will be realised as loans repay, and in general the Company receives economic compensation for allowing borrowers to defer interest - for example fees or an increased interest rate. In spite of this increase in PIK income, the portfolio continues to be highly cash generative and has been increasing in credit quality, as mentioned previously.

Environmental, Social and Governance ("ESG") 2020

One other area of focus throughout 2020 has been the issue of climate change and carbonisation of the World's atmosphere, which has become a greater concern even over the relatively short period since our IPO. It naturally impacts our credit assessment processes but, more importantly, it also impacts the way we believe our capital should be deployed. Accordingly, at the beginning of 2019, our Investment Adviser signed up to the United Nations Principles of Responsible Investment and has been implementing a comprehensive ESG screening programme ("ESG 2020") across the existing portfolio and all new investments.

In general, our investment portfolio has strong environmental credentials, with a meaningful allocation to renewable energy and related sectors such as electricity grid stabilisation and even highly specialised ships needed for the maintenance of offshore windfarms. I am pleased to report that the Investment Adviser has achieved all of the goals set by the Company in relation to the adoption and implementation of a comprehensive ESG programme, as a result of which the ESG score of the portfolio is on a long-term and sustainable upward trend.

Closing

I would like to close this year's statement by thanking my fellow Board members, the Investment Adviser, Investment Manager, our Broker, our Independent Advisers, and all other critical service providers that have adapted extremely well to an unprecedented period of disruption resulting from the combination of COVID-19 and the sharp decline in oil prices. The improved economic outlook as a result of the imminent roll-out of a vaccine increases the Board's confidence that the Company will, over the long term, continue to deliver an attractive risk-adjusted return with a relatively low correlation to the broader financial markets.

Thank you for your commitment and support.

Robert Jennings

Chairman

4 December 2020

INVESTMENT ADVISER'S REPORT

The Investment Adviser's Objectives for the Year

Over the first half of the financial year, Sequoia Investment Management Company Limited ("Sequoia" or the "Investment Adviser") has had a number of objectives for the Company:

Capital Raised and Share Performance

The Company has not completed any capital raises during the first half of this financial year. During the period, and in light of the uncertainty and disruption caused by COVID-19, the Investment Adviser focused on the enhanced monitoring of existing portfolio investments and deploying the proceeds of the March 2020 capital raise. As at 30 September 2020, the Fund had cash of £82.6m and the Company had drawn £80.5m on its £280 million Revolving Credit Facility. The Fund also had undrawn commitments to existing investments collectively valued at £18.3m.

As at 30 September 2020, the Company had 1,656,353,931 Ordinary Shares in issue. The closing Share price on that day was 104.4p per Share, implying a market capitalisation for the Company of approximately £1.7 billion, compared to £1.5 billion a year previously.

NAV and Fund Performance

Over the first half of this financial year, the Company's NAV per share[5] increased from 96.69p per share to 100.17p per share, driven by the following effects:

During the period, the spread widening across the portfolio during the second half of March 2020 continued its reversal, with several of the Company's investments performing better than expected throughout the lockdown. The increase in the Company's NAV during the period is mainly attributed to the positive market movements observed as markets recovered and economic activity resumed. These positive market movements contributed to a 3.21p increase in asset valuations. The Company also reaffirmed its dividend target and paid 3.125p in dividends during the last six months in accordance with its target.

In addition, the Investment Adviser continued its enhanced monitoring of the performance of three of the Company's investments that have been adversely affected to varying degrees by COVID-19 and the steep decline in the price of oil. These assets accounted for a 1.54p reduction in the NAV per share⁷ when marked to market in March 2020. Updates on these investments are included later on in this report.

Economic infrastructure is a diverse and highly cash-generative asset class

It is worth taking a moment to provide important context to the effect of COVID-19 on the Company's portfolio and on the economic infrastructure debt asset class as a whole.

Economic infrastructure debt is a robust asset class typically characterised by high barriers-to-entry and relatively stable cashflows and includes sectors such as Transportation, Utilities, Power, Telecommunications and Renewables. Economic infrastructure is often supported by physical assets, long-term concessions or licenses to operate infrastructure assets and these companies frequently operate within a regulated framework. This is especially true in the cases of the Utilities, Telecommunications and parts of the Power sector.

A characteristic common to economic infrastructure sectors is that revenues are derived from demand, usage or volume. This means that the project's revenues are linked to utilisation of the assets, such as a toll road, where revenues are dependent or partially dependent upon traffic volumes. This is in contrast to social infrastructure, such as schools and hospitals, which are often compensated for the physical asset simply being available for use.

To mitigate demand risk, economic infrastructure projects are typically less highly geared than social infrastructure and have higher equity buffers, more conservative credit ratios, stronger loan covenants, and higher levels of asset backing for lenders. Economic infrastructure also provides higher returns than social infrastructure and is a much larger market.

These characteristics of economic infrastructure - stable cashflows, high barriers-to-entry, physical assets, equity buffers and lower gearing - all form the bedrock upon which SEQI's investment opportunities are based and analysed. This is not expected to change, regardless of what is going on in the markets, because these core features of economic infrastructure all contribute to strong fundamentals that are critical for weathering storms.

Nevertheless, economic infrastructure debt is not immune to market volatility and there are certain actions we have taken, some of which were well before the COVID-19 outbreak. These actions have helped position the portfolio defensively for a potential downturn, which we have discussed with many of you over the last year.

The market environment during the period

Although we did see some volatility in the market environment at the start of the period, the Company has operated in a relatively calm environment overall during the last six months. Lending margins and bond spreads have tightened since the spread widening in the corporate bond and loan markets in the first quarter of 2020 that was triggered by two extraordinary market forces: the COVID-19 pandemic and an oil supply glut resulting from tensions between the US, Russia, and Saudi Arabia. In the early part of the period, the Company took advantage of the COVID-19 market sell-off to enhance returns by topping up several of its existing secondary positions that were not materially affected by the pandemic but were trading at attractive prices due to spreads widening.

Primary market issuance in the infrastructure loan markets has been relatively strong with deal volumes totalling US$304 billion during H1 2020, of which US$151 billion has been financed by debt.^[7] In addition, there were significant amounts of debt issued and traded in the bond markets as a result of the accommodative global policy responses to the pandemic. We therefore believe that the Company's opportunity to deploy capital is exceedingly large as we expect those trends to extend beyond the pandemic.

Diversified and cash-generative portfolio

The Company started employing sensible late-cycle strategies in 2019 and has continued to do so throughout 2020. These strategies included keeping a large portion of the portfolio in defensive sectors, keeping a strong allocation in senior compared to mezzanine debt, and maintaining the portfolio's credit quality. We put these strategies into place over a year ago, because we expected a slowdown in the economy, as the business cycles in the US and the UK reached their 10^th year in the second half of 2019.

·      We have 45% of the portfolio in defensive sectors. These include Telecommunications, Accommodation, Utilities, and Renewables which are viewed as defensive because they provide essential services, often operate within a regulated framework and have high barriers-to-entry.

·      Our Accommodation sector, which stands at 10% of the portfolio, is less exposed to COVID-19 than one may expect, because we have no exposure to the higher risk subsectors within Accommodation such as old age care and acute hospitals.

·      We have 53% of the portfolio in senior and 47% in mezzanine as opposed to more of a 50-50 blend, to position the portfolio better for a slow growth environment.

·      We have maintained the credit quality of the portfolio over the last twelve months while still achieving our target yield. We have continued our policy, instituted shortly after SEQI's launch in March 2015, not to invest in highly speculative loans or bonds that would be rated CCC or lower, if they were rated.

The Company's investment portfolio is therefore diversified by borrower, jurisdiction, sector and sub-sector, with strict investment limits in place to ensure that this remains the case. The chart below shows portfolio sectors and sub-sectors on 30 September 2020:

Geographically, the Company invests in stable low-risk jurisdictions. Under the terms of its investment criteria, the Company is limited to investment-grade countries, and has chosen to pursue selected opportunities in Spain, but not in Portugal or Italy, where in addition to the obvious economic challenges, infrastructure projects have also been exposed to regulatory and legal risks. The Company has been focused on the United States, Canada, Australia, the UK, and Northern and Western Europe.

The Company focuses predominantly on private debt, which on 30 September 2020 represented approximately 93% of its portfolio (compared to 88% a year previously). This is because, typically, private debt enjoys an illiquidity premium: i.e. a higher yield than a liquid bond with otherwise similar characteristics. Since the Fund's main investment strategy is "buy and hold", it makes sense to capture this illiquidity premium. Sequoia's research indicates that infrastructure private debt instruments yield approximately 1% more than public, rated bonds. However, in some cases, bonds can also be an attractive investment for three reasons. Firstly, some bonds are "private placements" which, whilst in bond format, have an attractive yield that is comparable to loans. Secondly, some sectors, such as US utility companies, predominantly borrow through the bond markets, and therefore having an allocation to bonds can improve the diversification of the portfolio. Thirdly, having some liquid assets in the portfolio enables the Company to take advantage of future alternative opportunities and can also be used to satisfy the Company's potential tender obligations.

The Company remains committed to limiting exposure to greenfield construction risk in the portfolio. Whilst up to 20% of the NAV can consist of lending to such projects, the actual exposure to assets in construction on 30 September 2020 was 11.6% of the portfolio. Sequoia is careful to select projects where it believes the Company is well compensated for taking a moderate level of construction risk, and where the underlying strength of the borrower's business or project mitigates the risk.

Credit monitoring

Across the range of sectors in which we invest, the outlook for some remains largely unaffected though the situation remains fluid and dependent on the length and severity of impact on the economy of continued COVID-19 lockdowns. These relatively unaffected sectors include renewable energy, data centres, mobile phone cell towers, smart metering, specialised health care, US power, specialist shipping and residential infrastructure. Other sectors, however, such as transportation, transportation assets and midstream oil & gas, have greater exposure to COVID-19 and low oil prices, and have required close monitoring and communication with the borrowers in the last six months.

There are three specific investments which we identified at 31 March 2020 as potentially likely to be adversely affected and indeed one of them was restructured in July 2020. These investments were very closely monitored throughout the period and the key developments are summarised below.

1. US midstream

An investment in the senior and holdco loans of a US midstream business, based in the Permian basin. These loans are equal to 2.9% of the Company's portfolio value. This business is still in its ramp-up phase, and capex overruns and the fall in the oil price left it with short-term liquidity concerns. The Investment Adviser, together with the other lenders to the business, appointed third-party consultants to advise on a range of scenarios. It was concluded that a consensual restructuring of the business was the optimal solution to manage the immediate liquidity shortfall, exercise control over the company's operations and preserve value for the lenders. As a result of the restructuring that closed in July 2020, the existing opco and holdco debt was cancelled and replaced by a combination of new debt, preferred shares, common shares and warrants, as well as participations in two joint ventures. Sequoia expects upside should crude oil prices and activity in the Permian basin recover materially.

2. Swedish refinery

A loan backed by a Swedish business that owns two oil refineries, as well as some downstream assets. This loan is equal to 2.3% of the Company's portfolio value. The business suffered a liquidity shock when the decline in the price of oil reduced the amount of inventory financing it could draw, coupled with margin calls on its commodity hedging book. However, the company's liquidity has materially improved with the recovery of crude oil prices from approximately US$20 a barrel to approximately US$40 a barrel, and the Investment Adviser expects that the loan will continue to be serviced. In return for granting the borrower various short-term covenant waivers, the Company received enhanced economics on its loan.

3. German CHP Plant and logistics business

A loan backed by a German Combined Heat and Power plant that provides heat (in the form of steam) to industrial companies in the automotive sector, as well as selling electricity to the grid. This loan is approximately 3.0% of the Company's portfolio value. During the COVID-19 pandemic, the German automotive industry almost completely shut down and the key off-takers to the plant were operating at minimum utilisation rates - however activity has subsequently begun to increase. In addition, the company is at risk of potential litigation by the grid operator due to not having paid surcharges from which the company claims it was exempt. The Investment Adviser is closely following the situation and maintains continuous contact with management and shareholders. It is likely that the key off-takers will be eligible for different forms of government support, but the specific details remain unclear.

In addition to the three investments identified above, there are, of course, other borrowers that have experienced difficult trading conditions over the last six months. In some cases, these borrowers have seen either a full or partial recovery as COVID-19 restrictions have been lifted, but unfortunately there are some sectors, such as aviation, where a full recovery may take much longer. The Investment Advisor continues to pay close attention to its borrowers in these sectors.

For the most part, though, the portfolio has performed well over the past six months, which has been a period of extreme disruption in the global economy. In many cases, the recent decline in business activity is completely unprecedented. However, over this period the Company's NAV has grown by almost 3.5p per share, after paying dividends. This is the result of improving credit markets, combined with the robust overall performance of the portfolio.

Origination activities                

The Company's strategy is to invest in both the primary and secondary debt markets. Sequoia believes that this combination delivers a number of benefits: participating in the primary markets allows the Company to generate upfront lending fees and to structure investments to meet its own requirements; and buying investments in the secondary markets can permit the rapid deployment of capital into seasoned assets with a proven track record. As the Company grows in size, Sequoia expects to source an increasing number of opportunities from the primary market.

Primary market origination

The primary loan markets are an increasingly important opportunity for the Company. The Investment Adviser has sourced bilateral loans and participated in "club" deals, where a small number of lenders join together. The Company has also participated in more widely-syndicated infrastructure loans. Primary market loans often have favourable economics because the Company, as lender, benefits from upfront lending fees. As the Company has grown, primary market investment activity has grown to surpass secondary market investments, with 82% of the portfolio comprising primary investments as at 30 September 2020.

Secondary market origination

Some of the Company's investments continue to be acquired from banks or other lenders in the secondary markets. This has enabled a relatively rapid deployment of capital, since primary market transactions in infrastructure debt can often take a considerable time to execute. In addition, secondary market loans have performance history that permits credit analysis on actual results rather than financial forecasts. Research^[8] shows that infrastructure loans improve in credit quality over time so secondary loans in many cases have improved in credit quality from the time of their initial origination.

Strengthening the team at Sequoia Investment Management Company

During the first six months of the financial year, a number of growth initiatives at the Investment Adviser have taken place to ensure there are ample resources to devote to all monitoring and new origination activities.

To support the enhanced monitoring during the ongoing COVID-19 pandemic while also deploying capital into the Company's pipeline of investments, the Investment Adviser has grown the investment team and is currently interviewing candidates to expand the team further.

Strong pipeline of opportunities

Sequoia continues to monitor the global response to the COVID-19 pandemic as well as the primary and secondary effects of historically volatile oil prices. As the world slowly emerges from lockdowns, Sequoia believes the Company is particularly well-positioned to continue deploying capital into its strong pipeline of mostly private debt infrastructure lending opportunities. Sequoia has witnessed a steady stream of infrastructure debt opportunities emerge during recent months as the market environment stabilises and reverts to pre-COVID-19 levels.

In terms of the pipeline, Sequoia is especially excited about potential investments in the renewables, accommodation and TMT (Telecommunications, Media and Technology) sectors where the current portfolio is arguably underweight, lending opportunities are often attractive and additional investments into these sectors would be desirable. Investments in these sectors will also provide additional stability should market conditions deteriorate further.

Overall, the opportunity for the Company in economic infrastructure debt remains strong and the asset class continues to be under-invested and attractive. It is in times of market stress that economic infrastructure exhibits itself as a strong and resilient asset class, and Sequoia remains optimistic about the prospects for growing the Company while maintaining its track record of sourcing suitable high quality investments and delivering to Shareholders a total return of 7-8% over the long term.

Sequoia Investment Management Company Limited

4 December 2020

PRINCIPAL RISKS AND UNCERTAINTIES

The Board has established a Risk Committee, which is responsible for reviewing the Company's overall risks and monitoring the risk control activity designed to mitigate these risks. The Risk Committee has carried out a robust assessment of the principal risks facing the Company, including those that would threaten the Company's business model, future performance, solvency or liquidity. The Board has appointed International Fund Management Limited ("IFML" or the "Investment Manager") as the Alternative Investment Fund Manager ("AIFM") to the Company. IFML is also responsible for providing risk management services compliant with that defined in the Alternative Investment Fund Managers Directive ("AIFMD") and as deemed appropriate by the Board.

Under the instruction of the Risk Committee, IFML is responsible for the implementation of a risk management policy and ensuring that appropriate risk mitigation processes are in place; for monitoring risk exposure; preparing quarterly risk reports to the Risk Committee; and otherwise reporting on an ad hoc basis to the Board as necessary.

Since their appointment on 30 January 2018, Tim Drayson and Kate Thurman, independent consultants to the Company, have provided guidance to the Board on the overall approach to risk management across the Company's portfolio. Part of their focus has been to assist the Investment Manager in scrutinising certain of the Investment Adviser's credit evaluations.

Anurag Gupta's appointment as Chief Risk Officer of the Investment Adviser in February 2020 provides additional oversight and resource to the Company's risk management function and the due diligence process employed by the Investment Adviser.

The principal risks associated with the Company are as follows:

Market risk

The value of the investments made and intended to be made by the Company will change from time to time according to a variety of factors, including the performance of the underlying borrowers, expected and unexpected movements in interest rates, exchange rates, inflation and bond ratings and general market pricing of similar investments will all impact the Company and its Net Asset Value.

Credit risk

Borrowers in respect of loans or bonds in which the Group has invested may default on their obligations. Such default may adversely affect the income received by the Company and the value of the Company's assets.

Liquidity risk

Infrastructure debt investments in loan form are not likely to be publicly traded or freely marketable, and debt investments in bond form may have limited or no secondary market liquidity. Such investments may consequently be difficult to value or sell and therefore the price that is achievable for the investments might be lower than their valuation.

Counterparty risk

Counterparty risk can arise through the Company's exposure to particular counterparties for executing transactions and the risk that the counterparties will not meet their contractual obligations.

Leverage risk

Leverage risk arises where the Company takes on additional risk because of the leverage of exposures, along with the specific potential for loss arising from a leverage counterparty being granted a charge over assets. The Board monitors the level of leverage on an ongoing basis as well as the credit ratings of any counterparties.

Compliance & regulatory risk

Compliance and regulatory risk can arise where processes and procedures are not followed correctly or where incorrect judgement causes the Company to be unable to meet its objectives or obligation, exposing the Company to the risk of loss, sanction or action by Shareholders, counterparties or regulators. The Investment Adviser and the Administrator monitor compliance with regulatory requirements and the Administrator presents a report at quarterly Board meetings.

Operational risk

This is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This can include, but is not limited to, internal/external fraud, business disruption and system failures, data entry errors and damage to physical assets.

Political and economic risk

The Risk Committee continues to review risks as they relate to Brexit and the impact of Brexit on the above risks.

Emerging risks

The Board is constantly alert to the identification of any emerging risks, in discussion with the Investment Manager and the Investment Adviser. The Board will then assess the likelihood and impact of any such emerging risks, and will discuss and agree appropriate strategies to mitigate and/or manage the identified risks. Emerging risks are managed through discussion of their likelihood and impact at each quarterly Board meeting. Should an emerging risk be determined to have any potential impact on the Company, appropriate mitigating measures and controls are agreed.

The emergence of the COVID-19 pandemic, and its ongoing effects, have presented a significant emerging risk to markets globally, and prompt action was taken by the Board and its key advisers in March 2020 to assess in full the potential impact to the Company from the resulting exceptional market volatility and widening of spreads. During the period the Company has continued to operate effectively and maintain its enhanced monitoring of the global response to the COVID-19 pandemic as well as the primary and secondary effects of historically low oil prices.

These risks, and the way in which they are managed, are described in more detail in note 5 to the Company's Annual Financial Statements for the year ended 31 March 2020. The Company's principal risks and uncertainties have not changed materially since the date of that Report and are not expected to change materially for the remainder of the Company's financial year.

Going Concern

The Company has been incorporated with an unlimited life. In accordance with the Company's Articles of Incorporation, the Directors were required to propose an ordinary resolution (the "Continuation Resolution") on or before 3 September 2016 that the Company continues as a registered closed-ended collective investment scheme, and to propose further Continuation Resolutions within every three years thereafter. Should a Continuation Resolution not be passed, the Directors are required, within six months, to put forward proposals for the reconstruction or reorganisation of the Company to the Shareholders for their approval. These proposals may or may not involve winding up the Company and, accordingly, failure to pass a Continuation Resolution will not necessarily result in the winding up of the Company.

The Directors have considered the possibility that the next Continuation Resolution, to be proposed at the 2021 AGM, may not be passed by Shareholders, however they noted the overwhelming majority vote in favour of the Continuation Resolutions passed in May 2016 and August 2018, the consistently strong appetite for the Company's investment proposition, evidenced by a number of successful share issues, and that the Company's shares have, apart from a period from late March to early April 2020, consistently traded at a premium since launch.

The Directors have reviewed the Company's holdings in cash and cash equivalents and investments, including a consideration of the revaluation losses arising on certain investments as a result of the COVID-19 pandemic. Partly as a result of the Company's large capital raise in early March 2020, its balance sheet was exceptionally strong when the consequences of COVID-19 impacted on financial markets, with a very low level of gearing. Moreover, the losses that were incurred at the prior year end - which have already begun to reverse, and should continue to do so as the investments mature and their valuations accrete to par - were unrealised, and therefore have no direct effect on the solvency of the business. The risk of realised losses arising through loans defaulting is limited to a few specific investments, representing a small proportion of the Company's investment portfolio. The Directors also note that the reductions in the valuation of investments as a result of COVID-19 have had no impact on the interest income cashflow of the Company or its ability to pay its target dividend.

As a result of this review, the Directors have concluded that it is appropriate to adopt the going concern basis in preparing the Interim Financial Statements as the Company, despite the effects of the COVID-19 pandemic, retains a strong balance sheet and adequate financial resources to meet its liabilities as they fall due. 

BOARD OF DIRECTORS

The Directors of the Company, all of whom are non-executive and independent, are as follows:

Robert Jennings, CBE (Chairman)

Robert Jennings is a resident of the United Kingdom and qualified as a Chartered Accountant in 1979. He has over 30 years' experience in the infrastructure sector. Mr Jennings was a managing director of UBS Investment Bank and was joint head of the Bank's Infrastructure Group until 2007. He has twice acted as a special senior adviser to HM Treasury; in 2001/02 during Railtrack's administration and again in 2007/08 in relation to Crossrail.

Mr Jennings served as one of the Department for Transport appointed non-executives on the Board of Crossrail, and was Chair of Southern Water until February 2017. He was appointed to the Board of 3i Infrastructure plc in a non-executive role with effect from 1 February 2018, which is ongoing. In June 2019, he became one of the founding directors of Chapter Zero, whose aim is to provide non-executive directors and other parties a forum by which they can conveniently access guidance on carbonisation, climate change and the role of boards in responding to these challenges, having been a member of its executive steering committee since November 2018.

Sandra Platts (Senior Independent Director)

Sandra Platts is a resident of Guernsey and holds a Masters in Business Administration. Mrs Platts joined Kleinwort Benson (CI) Ltd in 1986 and was appointed to the board in 1992. She undertook the role of Chief Operating Officer for the Channel Islands business and in 2000 for the Kleinwort Benson Private Bank Group - UK and Channel Islands. In January 2007, she was appointed to the position of Managing Director of the Guernsey Branch of Kleinwort Benson and led strategic change programmes as part of her role as Group Chief Operating Officer. Mrs Platts also held directorships on the strategic holding board of the KB Group, as well as sitting on the Bank, Trust Company and Operational Boards. She resigned from these boards in 2010. Mrs Platts is a non‑executive director of NB Global Monthly Income Fund Limited and UK Commercial Property REIT (both listed on the Main Market of the London Stock Exchange) and Investec Bank (Channel Islands) Limited, plus a number of other investment companies. She is a member of the Institute of Directors.

Jan Pethick

Jan Pethick is a resident of the United Kingdom and has over 35 years' experience in the debt sector. Mr Pethick was Chair of Merrill Lynch International Debt Capital Markets for 10 years, from 2000 to 2010. He had previously been Head of Global Debt Origination at Dresdner Kleinwort Benson which had acquired the credit research boutique, Luthy Baillie which he had co‑founded in 1990. Prior to that, he worked for 12 years at Lehman Brothers where he was a member of the Executive Management Committee in Europe. Mr Pethick currently serves as Chair of Troy Asset Management and was an independent member of the Supervisory Board of Moody's Investor Services Europe.

Jonathan (Jon) Bridel

Jon Bridel is a resident of Guernsey. Mr Bridel is currently a non‑executive director of a number of London-listed investment funds. Mr Bridel was previously Managing Director of Royal Bank of Canada's investment businesses in the Channel Islands.

After qualifying as a Chartered Accountant in 1987, Mr Bridel worked with Price Waterhouse Corporate Finance in London. He subsequently held senior positions in banking, credit and corporate finance, investment management and private international businesses where he was Chief Financial Officer.

Mr Bridel holds a Master of Business Administration (Dunelm) and also holds qualifications from the Institute of Chartered Accountants in England and Wales, where he is a Fellow, the Chartered Institute of Marketing, where he is a Chartered Marketer, and the Australian Institute of Company Directors. He is also a Chartered Director and Fellow of the Institute of Directors and is a Chartered Fellow of the Chartered Institute for Securities and Investment.

INDEPENDENT CONSULTANTS

The independent consultants to the Company are as follows:

Tim Drayson

Tim Drayson has over thirty years' experience in the US and European debt capital markets. He was most recently Global Head of Corporate Sales & Deputy Head of the European Corporate Debt Platform at BNP Paribas and had been a member of the Fixed Income Transaction Approval Committee, screening complex transactions and interacting with the bank's credit committee. He joined BNP Paribas as Global Head of Securitization in 2005, with responsibility for managing all origination and structuring teams, including infrastructure. Prior to joining BNP Paribas, Tim held senior roles at Morgan Stanley in London as Head of Securitized Products Distribution and Paine Webber in New York.

Kate Thurman

Kate Thurman is a highly experienced and respected credit market professional having spent over 30 years identifying and analysing credit risk in bond and loan instruments for institutional portfolios. Kate has broad experience across industry sectors, credit grades, legal structures and jurisdictions, having special expertise in the assessment of quantitative and qualitative credit factors and downside risks. She is a former board and audit committee member of Colne Housing Society, a not-for-profit Housing Association with 3,000 units under management and ca. £150 million of commercial debt. Her former executive career included senior roles in Asset Management and Investment Banking organisations.

THE SEQUOIA INVESTMENT MANAGEMENT COMPANY TEAM

Sequoia Investment Management Company Limited ("Sequoia") is an experienced investment adviser, which has acted as Investment Adviser to the Company from its inception. Sequoia's management team and Investment Committee are as follows:

Randall Sandstrom, Director and CEO/CIO

28 years of experience in the international and domestic credit markets and infrastructure debt markets.

Has managed global high yield and investment grade bonds, leveraged loans, ABS and money market securities.

Board of Directors, LCF Rothschild and MD of Structured Finance. Former CEO/CIO, Eiger Capital.

Head of Euro Credit Market Strategy, Morgan Stanley. Institutional Investors "All-American" senior Industrial Credit Analyst, CS First Boston (energy and transportation). Has worked in London, New York and Tokyo.

Steve Cook, Director and Head of Portfolio Management

19 years of infrastructure experience.

European Head of Whole Business Securitisation and CMBS and Co-Head of Infrastructure Finance at UBS.

Head of European Corporate Securitisation at Morgan Stanley with lending and balance sheet responsibility.

Wide variety of infrastructure projects in the UK and across Europe as a lender, arranger and adviser.

Dolf Kohnhorst, Director and Co-Head of Infrastructure Debt

36 years of experience in investment banking, debt capital markets and project finance commercial lending.

Head of Société Générale's Financial Institutions Group covering UK, Irish, Benelux and Scandinavian banks, insurance companies, pension funds and investment management companies.

16 years at Morgan Stanley heading Benelux and Scandinavian sales teams and DCM Structured Solutions Group.

Commercial lending to shipping, construction and project finance sectors.

Greg Taylor, Director and Co-Head of Infrastructure Debt

More than 30 years of infrastructure experience.

Head of Infrastructure Finance at Merrill Lynch and Co-Head of Infrastructure Finance at UBS.

Developed Moody's methodology for rating regulated infrastructure companies.

Broad perspective as bond arranger, direct lender, credit analyst and financial adviser to both borrowers and public sector. Includes lending in Europe, the UK, North America and Latin America.

Anurag Gupta, Chief Risk Officer

Over 20 years of experience in project finance, infrastructure investment and appraisal, risk management, M&A and financial advisory.

Extensive transactional experience across infrastructure sectors such as transportation, power and utilities, renewables, TMT and social infrastructure.

Former KPMG in Canada Infrastructure Advisory Partner and Global Sector Head of Power within the KPMG Global Infrastructure Practice; previous infrastructure industry roles in both public and private sectors in multiple geographies.

MBA (Tulane University, USA), Bachelors in Mechanical Engineering (Engineering Council, UK) and BSc (Calcutta University, India).