Investec view: 3iN’s portfolio performed strongly and delivered a return of 13.7% over the year. All assets delivered positive returns, notably Infinis (+14.7%), Joulz (+23.0%) and Valorem (+30.7%). However, this return was diluted by the material cash balance held throughout the year and the NAV total return was 9.2%, although in line with its target return of 8% to 10% over the medium-term. The total shareholder return over the year was 23.8%. This time last year, the investment manager applied higher discount rates (up to 1%) to almost all portfolio companies to reflect the general uncertainty around the economic impact of the pandemic, inflation, power prices and oil prices. Encouragingly, given the greater visibility on cashflows, these discount rate premia have now been fully or partially removed in this valuation (the highest remaining premium is 0.5%) and the overall discount rate has reduced to 10.8% from 11.2%. Following the year end, the company deployed c.€182m to acquire a 60% stake in DNS:NET, an independent telecommunications provider in Germany. We think this is an exciting investment, given the growth potential of the digital infrastructure sector and we note that the management team have had previous success in this sector with the Wireless Infrastructure Group (WIG) which generated an IRR of 27% following its sale in 2019. This acquisition also represents 3iN’s first sizable transaction in Germany. We note that the company still has excess cash to deploy. Following the acquisition of DNS:NET and payment of the final dividend, current cash on hand, including the deferred proceeds from the WIG sale, due in December 2021 will amount to c.£358m (15% of NAV). Cash drag impacted returns during the financial year and the challenge now for the company is to again reach full investment. The company has continued with its progressive dividend policy and has increased its target by 6.6% to 10.45p/share, and this equates to a current yield of 3.5%. We think that the combination of an attractive yield, a strong balance sheet, and an interesting portfolio of economic infrastructure assets providing attractive absolute and relative returns represents a compelling investment proposition. We remain comfortable with our Buy recommendation. Continued overleaf