SQN SECURED INCOME FUND PLC. (Registered number ) ANNUAL REPORT AND FINANCIAL STATEMENTS

SQN SECURED INCOME FUND PLC (formerly The SME Loa Fud plc) (Registered umber 09682883) ANNUAL REPORT AND FINANCIAL STATEMENTS For the year eded 30 Jue 2017

CONTENTS Page Strategic Report Highlights 3 Overview ad Ivestmet Strategy 4 Chairma s Statemet 6 Ivestmet Maager s Report 8 Compay Aalytics as at 30 Jue 2017 10 Pricipal Risks 11 Eviromet, Employee, Social ad Commuity Issues 12 Geder Diversity 12 Key Performace Idicators 13 Goverace Board of Directors 14 Directors Report 15 Statemet of Directors Resposibilities 21 Corporate Goverace Report 22 Audit ad Valuatio Committee Report 25 Directors Remueratio Report 27 Regulatory Disclosures 30 Idepedet Auditor s Report 31 Fiacial Statemets Statemet of Comprehesive Icome 34 Statemet of Chages i Equity 35 Statemet of Fiacial Positio 36 Statemet of Cash Flows 37 Notes to the Fiacial Statemets 38 Aual Geeral Meetig Notice of Aual Geeral Meetig 56 Directors ad Advisers ibc

STRATEGIC REPORT HIGHLIGHTS 30 JUNE 2017 NET ASSETS [1] 52,048,000 (30 Jue 2016: 53,400,000) DIVIDEND PER SHARE DECLARED IN RESPECT OF THE PERIOD [2] 6.375p (30 Jue 2016: 4.95p) NAV PER ORDINARY SHARE 98.74p (30 Jue 2016:101.31p) TOTAL RETURN PER ORDINARY SHARE (BASED ON NAV) +4.6% (30 Jue 2016: +7.1%) SHARE PRICE 97.75p (30 Jue 2016: 89.75p) TOTAL RETURN PER ORDINARY SHARE (BASED ON SHARE PRICE) +16.0% (30 Jue 2016: -6.5%) DISCOUNT TO NAV 1.0% (30 Jue 2016: 11.4%) ORDINARY SHARES IN ISSUE 52,660,350 (30 Jue 2016: 52,660,350) PROFIT FOR THE YEAR 2,440,000 (30 Jue 2016: 3,655,000) [1] I additio to the Ordiary Shares i issue, 50,000 Maagemet Shares of 1 each are i issue (see ote 21). [2] Oly 5.33p of the 6.375p per Ordiary Share divideds declared out of the profits for the year eded 30 Jue 2017 had bee deducted from the 30 Jue 2017 NAV as the twetieth ad twety first divideds of 0.525p per Ordiary Share each had ot bee provided for at 30 Jue 2017 as, i accordace with IFRS, they were ot deemed to be liabilities of the Compay at that date. O 21 August 2017, the Compay declared a divided of 0.525p per Ordiary Share for the period from 1 July 2017 to 31 July 2017. This divided will be paid o 29 September 2017. SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS 3

STRATEGIC REPORT OVERVIEW AND INVESTMENT STRATEGY Geeral iformatio SQN Secured Icome Fud plc (the Compay or SSIF ) was icorporated i Eglad ad Wales uder the Compaies Act 2006 o 13 July 2015 with registered umber 09682883. It is a ivestmet compay, as defied i s833 of the Compaies Act 2006. Its shares were listed o the Lodo Stock Exchage Specialist Fud Segmet o 23 September 2015 ( Admissio ). O 28 April 2017, the Compay chaged its ame from The SME Loa Fud plc to SQN Secured Icome Fud plc. I order to reflect the ew ame of the Compay, the ticker for the Ordiary Shares was chaged to SSIF, with effect from 2 May 2017. Followig the passig of resolutios at a geeral meetig held o 27 April 2017, the ivestmet objective ad ivestmet policy was chaged to the followig: Ivestmet objective The ivestmet objective of the Compay is to provide Shareholders with attractive risk adjusted returs, pricipally i the form of regular, sustaiable divideds, through ivestmet predomiatly i a rage of secured loas ad other secured loa-based istrumets origiated through a variety of chaels ad diversified by way of asset class, geography ad duratio. Ivestmet policy The Compay iteds to achieve its ivestmet objective by ivestig i a rage of secured loa assets maily through wholesale secured ledig opportuities, secured trade ad receivable fiace ad other collateralised ledig opportuities. Loa assets will iclude both direct loas as well as other istrumets with loa-based ivestmet characteristics (for example, but ot limited to, bods, loa participatios, sydicated loas, structured otes, collateralised obligatios or hybrid securities) ad may iclude (subject to the limit set out below) other types of ivestmet (for example, equity or reveue- or profit-liked istrumets). The Compay may make ivestmets through alterative ledig platforms that preset suitable ivestmet opportuities idetified by the Maager. The Compay will seek to esure that diversificatio of its portfolio is maitaied, with the aim of spreadig ivestmet risk. Geography The Compay will ivest i loa assets i a broad rage of jurisdictios (although weighted towards the UK, Cotietal Europe ad North America) i order to build a global portfolio of loa assets. Asset classes The Compay will ivest i a wide rage of loa assets, icludig: short-term ledig such as ivoice ad supply chai fiacig; mid-term ledig such as trade or short-term bridge fiace; ad log-term ledig such as the provisio of fixed term loas with stadard coveats ad subject to mothly or quarterly iterest paymets. Duratio The Compay will hold a portfolio of loas ad other loa-based istrumets with a rage of duratios to maturity. This is iteded to provide the Compay with both a liquid pool of assets ready for realisatio, as well as a reliable stream of loger-term icome. Security The Compay will seek to ivest i loa assets with a rage of differet types of security. Typically, such security will be over a rage of assets, icludig, but ot limited to, property, itellectual property, tax credits, receivables, future icome streams, pledges of shares or other specific assets, owership of special purpose vehicles, persoal or group compay guaratees or via credit isurace, or a combiatio of these. Loa assets will be usecured oly i the case of short-term ledig or ivestmet, where the perceived level of risk i respect of the particular asset is low give the quality of the couterparty, credit assessmet ad desig of the credit cotract. Sector The Compay will be idifferet to sector whe allocatig fuds for ivestmet ad, istead, will adhere to the ivestmet restrictios which apply to the Compay s loa portfolio as a whole i order to spread ivestmet risk. 4 SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS

STRATEGIC REPORT OVERVIEW AND INVESTMENT STRATEGY (CONTINUED) Ivestmet restrictios The followig ivestmet restrictios (calculated based o the Compay s gross assets at the time of ivestmet or, if earlier, the date o which the Compay commits to makig the relevat ivestmet) i respect of the deploymet of the Compay s capital have bee established i pursuit of its aim to maitai a diversified ivestmet portfolio ad thus mitigate cocetratio risks: Geography Miimum exposure to loa assets ivested i UK 60% Miimum exposure to loa assets i other jurisdictios aroud the world 20% Duratio Miimum exposure to loa assets with a duratio of less tha 18 moths 10% Maximum exposure to loa assets with a duratio of more tha 36 moths 50% Maximum sigle ivestmet 10% Maximum exposure to a sigle borrower or group 10% Maximum exposure to loa assets sourced through a sigle alterative ledig platform or other third party origiator 25% Maximum exposure to ay idividual wholesale loa arragemet 25% Maximum exposure to workig capital loas to alterative ledig platforms 5% Maximum exposure to loa asset which are either sterlig-deomiated or hedged back to sterlig 15% Maximum exposure to usecured loa assets 25% Maximum exposure to assets (excludig cash ad cash-equivalet ivestmets) which are ot loas or ivestmets with loa-based ivestmet characteristics 10% The Compay will ot ivest i other listed closed-ed ivestmet fuds. Borrowig The Compay (icludig, for this purpose, ay special purpose vehicles that may be established by the Compay i coectio with obtaiig leverage agaist ay of its assets) may employ borrowigs (through bak or other facilities) of up to 35% of the Compay s et asset value (calculated at the time of draw dow), which icludes, o a look-through basis, borrowigs of ay ivestee etity. Hedgig The Compay iteds, to the extet it is able to do so o terms that the Maager cosiders to be commercially acceptable, to seek to arrage suitable hedgig cotracts, such as currecy swap agreemets, futures cotracts, optios ad forward currecy exchage ad other derivative cotracts (icludig, but ot limited to, iterest rate swaps ad credit default swaps) with the sole itetio of hedgig the Compay s o- Sterlig currecy exposure back to Sterlig. Cash maagemet The Compay s u-ivested or surplus capital or assets may be ivested i cash or cash equivalets (icludig govermet or public securities (as defied i the rules of the FCA), moey market istrumets, bods, commercial paper or other debt obligatios with baks or other couterparties havig a sigle A (or equivalet) or higher credit ratig as determied by ay iteratioally recogised ratig agecy selected by the Board (which may or may ot be registered i the EU)). There is o limit o the amout of cash or cash equivalets that the Compay may hold. Chages to the ivestmet policy No material chage will be made to the ivestmet policy without the approval of Shareholders by ordiary resolutio. SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS 5

STRATEGIC REPORT CHAIRMAN S STATEMENT Itroductio SQN Secured Icome Fud plc is a ivestmet compay listed o the LSE ad domiciled i the UK. It ivests o a secured basis i ad through small ad medium sized compaies i the UK ad the rest of the world usig fudametal credit skills. I am pleased to update Shareholders with my secod Chairma s statemet, coverig the period uder review from 1 July 2016 to 30 Jue 2017. Over the last year, the Compay has udergoe sigificat chage, followig a strategic review. These chages iclude diversifyig the Shareholder base through a successful secodary placig of the Ordiary Shares previously held by GLI Fiace Limited, the appoitmet of SQN Capital Maagemet, LLC ad its UK subsidiary, SQN Asset Maagemet Limited, (together SQN ), as maager of the Compay from 1 April 2017, a chage of ame ad chages to the Compay's ivestmet objective ad policy/strategy. Uder SQN s stewardship, the Compay has bee re-eergised with the commecemet of a direct ledig programme. Performace ad Markets Durig the early part of the reportig period, despite cotiuig to make platform ivestmets, the Board ackowledged that divided icome would ot be able to meet our previous expectatios. I April 2017, after the appoitmet of SQN as maager, we took steps to adjust the divided policy for a short period whilst amedmets were made to the portfolio. By the ed of the reportig period, SQN had made progress i rebalacig the portfolio ad committig the surplus cash with the majority of ivestmets beig direct rather tha via platforms, ad with sufficiet earigs from iterest paymets to support a regular divided paymet of 6.25p for the curret fiacial year. For the reportig period eded 30 Jue 2017, the Compay geerated a et profit of 2.4 millio ad earigs per Ordiary Share of 4.63p. The Compay s NAV at 30 Jue 2017 was 52.0 millio ad NAV per ordiary share 98.74p (cum icome) compared with 53.4 millio ad 101.31p as at 30 Jue 2016. The total retur for the reportig period was 4.6%. Foreig exchage exposure o the 21.4% of o-sterlig assets, as a percetage of total assets, was fully hedged ad ay liquidity calls arisig from the hedgig strategy are cosidered maageable withi the Compay s cash flow. Corporate Activity O 1 April 2017, maagemet of the ivestmet portfolio was trasferred to SQN. Details of SQN s strog credetials for performig this role are icluded i the Ivestmet Maager s report. I cojuctio with the chages to the Compay s ivestmet maagemet arragemets, our corporate broker also completed a successful secodary placig of the Ordiary Shares previously owed by GLI Fiace Limited (represetig 48% of the issued share capital) substatially with ew ivestors. At a geeral meetig held o 27 April 2017, the ivestmet objective ad the policy of the Compay were adjusted to allow for greater cocetratio of ivestmets i quality, secured direct loas. I additio, the Board was authorised to allot up to 250 millio Ordiary Shares ad/or C Shares pursuat to a share issuace programme. This share issuace programme will eable the Compay to raise additioal capital promptly, eablig it to take advatage of ew ivestmet opportuities, thereby expadig ad diversifyig its ivestmet portfolio. I tur, a icrease i the market capitalisatio of the Compay should help to improve secodary market liquidity i the Ordiary Shares ad attract a larger, more diversified Shareholder base. The Compay will be required to publish a prospectus before it ca issue Shares pursuat to ay Share Issuace Programme. SQN committed to achievig a umber of milestoes (see Ivestmet Maager s report) followig their appoitmet ad I am pleased to report that these have bee achieved. This leaves the Compay at the ed of this reportig period with a solid foudatio o which to support future capital raisigs. Strategic Review Followig its appoitmet i April 2017 SQN completed a thorough strategic review of the Compay s platform ivestmets, resultig i a ratioalisatio of platform-origiated or related ivestmets. At the time of SQN s appoitmet, approximately 31% of the Compay s assets were i cash with the remaider already ivested via platforms ad through workig capital loas to platforms. Followig the review, a decisio was take by your Board, i cojuctio with the Maager, to cease makig workig capital loas to platforms ad to reduce the umber of platforms through which the Compay coducts busiess. The selectio of preferred platforms has bee made after a i-depth aalysis of their credit processes ad sector prefereces, with a focus o diversificatio, best i class ad trasparecy. The Compay is cofidet that relatioships with these remaiig platforms are strog ad will cotiue to provide cosistet attractive deal flow. I the future, the Compay expects the percetage of the Compay s portfolio represeted by platform-origiated loas to reduce i favour of direct ledig. However, as the Compay grows, it will cotiue to allocate to platforms meaigfully. 6 SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS

STRATEGIC REPORT CHAIRMAN S STATEMENT (CONTINUED) Earigs ad Divideds Divideds per Ordiary Share declared i respect of the reportig period were 6.375p (see ote 5). The Compay elected to desigate all divideds for the year eded 30 Jue 2017 as iterest distributios to its Shareholders. I doig so, the Compay took advatage of UK tax treatmet by streamig icome from iterest-bearig ivestmets ito divideds that will be taxed i the hads of Shareholders as iterest icome. The Compay iteds to distribute at least 85% of its distributable icome by way of divideds o a mothly basis. Durig ay year the Compay may retai some of the distributable icome to smooth future divided flows. The Compay expects to achieve its aual divided target of 6.25p, risig to at least 7.00p from July 2018, ad a total retur target of at least 8.0%. Discout From the commecemet of the reportig period ad util the aoucemet of SQN s appoitmet ad the secodary placig of the Ordiary Shares held by GLI Fiace Limited o 8 March 2017, the Compay traded at a average discout to NAV of 6.9%. Sice the, this discout has closed materially. Give the substatial improvemet i outlook for the performace of the Compay ad the radical chages udertake, it is hoped that this discout will cotiue to arrow. Chage of Name With effect from 28 April 2017, further to the appoitmet of SQN as the Compay s maager ad the chage of focus to direct loas, it was cosidered appropriate to chage the ame of the Compay from The SME Loa Fud plc to SQN Secured Icome Fud plc. The ticker for the Ordiary Shares chaged from SMEF LN to SSIF LN o 2 May 2017. Board of Directors I am pleased to report that, after the chages made to the Board i the last reportig period, its compositio has remaied stable ad o chages were made durig the curret reportig period. The Board has made good progress i egagig with the ew maagemet team ad have established regular commuicatios i lie with goverace guidelies. As the Board expects the size of the Compay to icrease substatially over the comig years it has decided to appoit a additioal director. A idepedet search firm has bee employed to fid a suitable idividual. Outlook The Board has made sigificat progress towards both improvig corporate goverace ad the Compay s iteral cotrol processes. Ratioalisatio of platform ivestmets ad icreased secured direct ledig have also bee addressed. Meawhile the outlook for direct ledig opportuities remais very promisig ad the Compay has a abudat pipelie of ivestmet opportuities to cosider over the comig moths. After a period of turbulece, I aticipate that followig the appoitmet of SQN as our Ivestmet Maager, the Compay will ow fulfil its madate of deliverig stable icome ad a healthy risk-adjusted total retur. RICHARD HILLS Chairma 8 September 2017 SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS 7

STRATEGIC REPORT INVESTMENT MANAGER S REPORT Itroductio Welcome to the first Ivestmet Maager s report uder the stewardship of SQN Asset Maagemet Limited ( SQN AM ). We assumed resposibility for this madate o 1 April 2017 ad I am delighted to report that we have already made meaigful progress. We are cofidet that after a thorough strategic review ad makig our first few ivestmets, the outlook for the Compay is good. SQN Secured Icome Fud plc is a ivestmet compay listed o the LSE ad domiciled i the UK. It ivests o a secured basis i ad through small ad medium sized compaies i the UK ad the rest of the world usig fudametal credit skills. SQN is a credit fud maager with a successful track record i maagig assets withi a ivestmet compay structure havig lauched the SQN Asset Fiace Fud i July 2014. The SQN Group has a total of circa 750 millio of assets uder maagemet ad has a core competecy i credit maagemet ad we are suitably resourced to deliver icome ad total retur i lie with expectatios. Most sigificatly, we retai our ow origiatio team withi the SQN Group which eables us to build a good pipelie of ew ivestmet opportuities. We have offices i the UK ad the US. The additio of SQN Secured Icome Fud plc uder the SQN umbrella is a perfect complemet to the existig strategies maaged by SQN, all focused o secured, credit-drive ivestmets with security provided by uderlyig assets. Deal flow for SQN Secured Icome Fud plc is a atural progressio of the existig SQN busiess lies which has historically bee captured by etities with limited UK-focused capacity. SQN Secured Icome Fud plc ow provides the opportuity to target these ivestmets that we believe will produce above market, risk-adjusted returs ad regular icome. I the short widow sice our appoitmet: Daw Kedall was appoited as maagig director of SQN AM. Amberto Asset Maagemet Limited ( Amberto ) was appoited as sub-maager to esure cotiuity of relatioships ad smooth trasitio. A review of the platforms has bee completed with solid platforms retaied. Performace of remaiig platforms has improved. The remaiig cash of 31% of the portfolio has bee ivested uder the Compay s revised madate, focussed o direct ivestmets. A ew busiess pricig structure has bee created at rates betwee 9.5% ad 11.5%, sufficiet to icrease overall portfolio yield to meet the retur targets. The majority of cash has bee committed with a healthy pipelie of ew opportuities supportig a future capital raise. With the itroductio of direct ledig to the Compay s portfolio, a ehaced risk maagemet regime has bee itroduced. SQN AM s ivestmet approach recogises the sigificace of strog processes ad a robust goverace regime ad, accordigly, each drawdow requires a triple lock sig off from its legal, credit ad portfolio maagemet teams. This is i additio to the extesive portfolio maagemet ad platform relatioship capabilities SQN AM iherited withi Amberto. With the revisio of the ivestmet objective ad policy of the Compay, we have pursued ivestmets i four core areas: secured trade fiace, receivable fiace, wholesale ledig ad secured commercial opportuities, icludig developmet loas ad commercial property i growth sectors. As is cosistet with other SQN AM programmes, we aim to avoid cosumer credit exposure. We cosider this to be a prudet approach that reduces risk of correlated performace with ay macro-ecoomic headwids. At the time of SQN AM s appoitmet, approximately a third of the Compay s assets were i cash with the remaider ivested via platforms ad through workig capital loas to platforms. Followig a review, a decisio was take to cease makig workig capital loas to platforms ad to reduce the umber of platforms through which the Compay coducts busiess. The selectio of preferred platforms was made after a i-depth aalysis of their credit processes, sector prefereces ad pricig structures, with a emphasis o diversificatio, best i class ad trasparecy. The Compay is cofidet that relatioships with these remaiig platforms are strog ad will cotiue to provide good loa deal flow. I the future, the percetage of the Compay s portfolio represeted by platform-origiated loas is expected to reduce i favour of direct ivestmets. However, it is iteded that platform-origiated loas will cotiue to be a importat part of the portfolio ad, as the Compay grows, should be of a meaigful size i the market. Available cash has bee primarily deployed ito direct ledig opportuities origiated by SQN AM. The ature of these direct ivestmets is diverse ad provides high levels of security with regard to coveat provisio. Each loa has bee established makig use of SQN AM s extesive etwork of idustry cotacts ad all loas have bee exteded at rates of iterest commesurate with exceedig the Compay s target returs (a target aual divided of 6.25p per share for the curret fiacial year, icreasig to at least 7.00p per share with effect from July 2018, ad a target aual retur of at least 8%). Most pleasig is that loas are with busiesses where the Compay expects to urture log term relatioships as they grow. 8 SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS

STRATEGIC REPORT INVESTMENT MANAGER S REPORT (CONTINUED) I additio to targetig higher average yields, the ivestmets made sice the chage of maager have also bee of a loger duratio keepig capital at work ad reducig reivestmet risk ad drag. As at July 2017, a little more tha 35% of the portfolio positios had ivestmet terms of three years or loger with just uder 20% betwee oe ad two years. The curret average term is less tha two years but is targeted to icrease ow that the restrictive provisios i the operatig documets have bee revised ad ow allow for cocetratios of more tha 2.5% for ay sigle exposure. We believe, give the high-touch ature of direct ivestmets ad the extesive due diligece performed, appropriate diversificatio ca be achieved with a average trasactio size of circa 5% of the value of the Compay. Ivestmet Outlook Aual borrowig by UK SMEs is 75 billio ad is used to fud various thigs icludig busiess expasio, purchase of premises, fixed assets or capital expese to develop ew products ad markets. As reported by the Bak of Eglad ad the British Bakers Associatio this demad is ulikely to dimiish give the cotractio of total bak ledig to this segmet of circa 15% over the last five years (2011 189 billio v 2016 164 billio). High Street leders (six baks) ow more tha 70% of this curret ledig pool. Challeger baks have filled some of the void, icreasig their loa exposure by 31.5% over the same period. However, their target market is differet to ours their typical customers ted to be either much smaller or much larger. This represets a sigificat gap i the market for the Compay, as our preferred pool is providig flexible ad sesible fiacig to busiesses with 5-20 millio turover per year. We cosider that we are well placed, whe compared with our peers, to make material positive progress i this market. DAWN KENDALL Maagig Director SQN Asset Maagemet Limited 8 September 2017 SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS 9

STRATEGIC REPORT COMPANY ANALYTICS as at 30 Jue 2017 PORTFOLIO BY MATURITY BAND PORTFOLIO BY GEOGRAPHY 40 35 32.6% 36.7% 80 70 68.5% 30 60 25 20 19.7% 50 40 15 10 5 0 11.0% 0 to 6 moths 6 moths to 18 moths 18 moths to 3 years >3 years 30 20 10 0 UK 10.0% Offshore Britai* 12.5% *Offshore Britai, Chael Islads, Gibraltar & Isle of Ma US 8.9% Europe ASSET ALLOCATION SECURED VS NON-SECURED SME Loa 58.6% Property 4.9% Reewable Eergy 3.7% IT Fiace 4.9% Accrued Icome 1.3% Cash 26.6% Platform/Workig Cap 0% Ivoice Fiace 0% Secured loas 73.4% Cash 26.6% No-secured loas 0% FUND YIELD VS BENCHMARK INTEREST RATES PORTFOLIO BY CURRENCY ALLOCATION 10 8 6 4 4.87% 6.37% 120 100 80 60 40 99.6% 2 0 0.25% BoE Bak Rate 1.15% 10 Year UK Gilt yield Fud yield post TER Gross fud yield 20 0 0.1% 0.2% GBP EUR USD All data source: Amberto Asset Maagemet Limited 10 SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS

STRATEGIC REPORT PRINCIPAL RISKS Risk is iheret i the Compay s activities, but it is maaged through a ogoig process of idetifyig ad assessig risks ad esurig that appropriate cotrols are i place. The key risks faced by the Compay, alog with cotrols employed to mitigate those risks, are set out below. Macroecoomic risk Adverse macroecoomic coditios may have a material adverse effect o the Compay s yield o ivestmets, default rate ad cash flows. The Board ad the Ivestmet Maager keep abreast of market treds ad iformatio to try to prepare for ay adverse impact. The Compay s assets are diversified by geography, asset class, ad duratio, thereby reducig the impact that macroecoomic risk may have o the overall portfolio. Iterest rate risk arises from the possibility that chages i iterest rates will affect future cash flows ad/or fair values of the Compay s ivestmets. Exposure to iterest rate risk is limited by the use of fixed rate iterest o the majority of the Compay s loas, thereby givig security over future loa iterest cash flows. Currecy risk is the risk that chages i foreig exchage rates will impact future profits ad et assets. Currecy risk is mitigated to a certai extet through the use of forward foreig exchage cotracts to hedge movemets i foreig currecy exchage rates. Credit risk The Compay ivests i a rage of secured loa assets maily through wholesale secured ledig opportuities, secured trade ad receivable fiace ad other collateralised ledig opportuities. Prior to the chage i Ivestmet Objective, which was approved at the geeral meetig held o 27 April 2017, the Compay ivested i a rage of loas origiated pricipally through ivestee platforms with which the Sub-Ivestmet Adviser is familiar. Sice the appoitmet of the ew Ivestmet Maager ad the chage i the Ivestig Policy, the Compay has also icreased its exposure to direct loas. Sigificat due diligece is udertake o the borrowers of these loas ad security take to cover the loas ad to mitigate the credit risk o such loas. The key factor i uderwritig secured loas is the predictability of cash flow to allow the borrower to perform as per the terms of the cotract. The Compay has ivestmet restrictios i place. Therefore, as metioed above, the Compay s assets are diversified by geography, asset class, ad duratio, thereby reducig the impact that ivestmet risk may have o the overall portfolio. The credit risk associated with the ivestmets is reduced ot oly by diversificatio but also by the use of security. Despite the use of security, credit risk is ot reduced etirely ad so the Ivestmet Maager ad Sub-Ivestmet Adviser moitor the recoverability of the loas (o a idividual loa basis) each moth ad impairs loas where appropriate. Platform risk The Compay is depedet o platforms, for that reducig part of the loa portfolio origiated through platforms, to operate the loa portfolio (to brig ew loas to the Compay s attetio; to effectively moitor those loas; ad to pay ad receive moies as ecessary). If a platform were o loger able to operate effectively this could put at risk loas made with/through such a platform ad icrease credit risk. The Ivestmet Maager ad Sub-Ivestmet Adviser udertake due diligece o all the platforms ad part of this work is to cofirm that the platforms have disaster recovery policies i place whereby a third party admiistrator would step i to maage the loas i the evet the platform could o loger do so. If such a evet were to occur, the Compay s approach would vary depedig o the platform ad the circumstaces, ad would be determied by the Board after discussio with the Ivestmet Maager, Sub-Ivestmet Adviser ad other advisers. Regulatory risk The Compay s operatios are subject to wide ragig regulatios, which cotiue to evolve ad chage. Failure to comply with these regulatios could result i losses ad damage to the Compay s reputatio. The Compay employs third party service providers to esure that regulatios are complied with. Reputatioal risk The Compay has bee icorporated with a ulimited life. However, i the evet that the Ordiary Shares have bee tradig at a discout to NAV of greater tha 10% for three cosecutive moths (calculated o a rollig three mothly average of daily umbers), the Compay shall covee a geeral meetig to propose a cotiuatio resolutio. If such a cotiuatio resolutio is ot passed, the Board will draw up proposals for the widig-up or recostructio of the Compay for submissio to Shareholders. Ay adverse impact o the Compay s reputatio would likely result i a fall i its share price, thereby icreasig the possibility of a cotiuatio vote beig proposed. Details of the premium/discout of the share price to NAV are disclosed o page 13. SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS 11

STRATEGIC REPORT ENVIRONMENT, EMPLOYEE, SOCIAL AND COMMUNITY ISSUES As a ivestmet compay, the Compay does ot have ay employees or physical property, ad most of its activities are performed by other orgaisatios. Therefore, the Compay does ot combust fuel ad does ot have ay greehouse gas emissios to report from its operatios, or does it have resposibility for ay other emissios producig sources uder the Compaies Act 2006 (Strategic Report ad Directors Report) Regulatios 2013. The Board believes that the Compay does ot have a direct impact o the commuity or eviromet ad, as a result, does ot maitai policies i relatio to these matters. GENDER DIVERSITY The Board of Directors of the Compay curretly comprises three male Directors. Further iformatio i relatio to the Board s policy o diversity ca be foud i the Directors Remueratio Report o page 29. 12 SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS

STRATEGIC REPORT KEY PERFORMANCE INDICATORS The Board uses the followig key performace idicators ( KPIs ) to help to assess the Compay s performace agaist its objectives. Further iformatio o the Compay s performace is provided i the Chairma s Statemet ad the Ivestmet Maager s Report. Divided yield The Compay distributes at least 85% of its distributable icome by way of divideds o a mothly basis. Durig ay year the Compay may retai some of the distributable icome ad use these to smooth future divided flows. Followig discussios with the Ivestmet Maager regardig the aticipated returs from the Compay s portfolio (both i the shorter ad loger terms), the Compay rebased its aual divided target to 6.25p per Share, icreasig to at least 7.00p per Share with effect from July 2018. The mothly divided at the ew rate of 0.525p per Share was first paid i Jue 2017. Over the loger term, the Compay will be targetig a aual et asset value total retur of at least 8%. The Compay has (to date) aouced divideds of 3,356,000 (6.375p per Ordiary Share) for the year eded 30 Jue 2017, beig 86.0% of distributable icome for the year (see Notes 5 ad 22 for further details). To esure the tax efficiet streamig of qualifyig iterest icome, the Compay may aouce a additioal divided out of the profits for the year eded 2017, oce the tax advisers have fialised the tax computatios. NAV ad total retur The Directors regard the Compay s NAV as a key compoet to deliverig value to Shareholders, but believe that total retur (which icludes divideds) is the best measure for shareholder value. Details of the NAV ad total retur are disclosed o pages 3 ad 49. Premium/discout of share price to NAV The Board regularly moitors the premium/discout of the price of the Ordiary Shares to the NAV per share. As metioed i Pricipal Risks above, i the evet that the Ordiary Shares have bee tradig at a daily discout to NAV of greater tha 10% for three cosecutive moths (calculated o a rollig three mothly average of daily umbers), the Board will covee a geeral meetig to propose a cotiuatio resolutio. If such a cotiuatio resolutio is ot passed, the Board will draw up proposals for the widig-up or recostructio of the Compay for submissio to Shareholders. The adoptio of the ew Articles of Associatio which iclude, amogst other thigs, a provisio for the cotiuatio resolutio (by way of a ordiary resolutio) if the Compay s et assets at 31 December 2019 are less tha 250 millio. At 30 Jue 2017 the shares were tradig at 97.75p, a 1.00% discout to NAV. However, the three moth average share price was a 1.12% discout to NAV. RICHARD HILLS Chairma 8 September 2017 SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS 13

GOVERNANCE BOARD OF DIRECTORS Richard Hills (No-executive Chairma) Richard has substatial ivestmet experiece, havig held seior positios at major fud maagemet houses ad a umber of o-executive directorships at ivestmet compaies, both public ad private, coverig all the major asset classes. Richard has also built ad successfully sold his ow ivestmet maagemet compay ad has bee ivolved i a umber of start-up situatios icludig FairFX, the iovative prepaid currecy card provider. He is curretly Chairma of Strategic Equity Capital plc ad a director of JP Morga Icome & Capital Trust plc ad Hederso Iteratioal Icome Trust plc. David Steveso (No-executive) David is a fiacial jouralist ad commetator for a umber of leadig publicatios icludig The Fiacial Times (the Adveturous Ivestor), Ivestmet Week (The Cotraria), Moey Week ad the Ivestors Chroicle. He is also executive director of the world s leadig alterative fiace ews ad evets services www.altfi.com, which focuses o coverig major treds i marketplace ledig, crowd fudig ad workig capital provisio for small to medium sized eterprises. David is also the author of a umber of books o ivestmet icludig the bestsellig book o ETFs ad their use withi portfolios i Europe for the Fiacial Times. Before foudig www.altfi.com, David was a director at successful corporate commuicatios busiess The Rocket Sciece Group ad before that a seior producer i busiess ad sciece i BBC TV. Ke Hille (No-executive) Ke has held a umber of seior bakig roles throughout his career; icludig seior corporate director at RBS, maagig director for Scotlad ad Norther Irelad at Aglo Irish Bak ad, util 2009, head of commercial ad corporate bakig for Scotlad at Bak of Irelad. Ke has a broad experiece of o-executive ad cosultacy roles withi fiacial services ad other sectors, icludig director ad chairma of a fiacial services busiess which specialises i the provisio of bridgig loas. 14 SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS

GOVERNANCE DIRECTORS REPORT The Directors of the Compay are pleased to preset their report ad audited Fiacial Statemets for the year eded 30 Jue 2017. The Compay was icorporated o 13 July 2015 ad was lauched o 23 September 2015, followig a successful listig o the Specialist Fud Segmet of the Mai Market of the LSE, with gross proceeds raised of 52.7 millio ( 51.7 millio et of issue costs), the iitial seed portfolio of 40.3 millio was combied with cash raised of 12.4 millio. The Compay is a ivestmet compay as defied i s833 of the Compaies Act 2006. Pricipal activity The pricipal activity of the Compay is to provide Shareholders with attractive risk adjusted returs, pricipally i the form of regular, sustaiable divideds, through ivestmet predomiatly i a rage of secured loas ad other secured loa-based istrumets origiated through a variety of chaels ad diversified by way of asset class, geography ad duratio. Corporate developmets Durig 2016 the Board became aware of ivestors cocers regardig the potetial coflicts of iterest betwee the Compay, Amberto Asset Maagemet Limited ( Amberto ) ad GLI Fiace Limited ( GLIF ), the Compay s relative small size ad the illiquidity i the Ordiary Shares i the secodary market ad cocluded that such cocers would impede the Compay's ability to grow through further share issues. The followig actio was take to address these cocers. Chage of Ivestmet Objective, Ivestmet Maagers ad Compay Name ad Secodary Placig of Ordiary Shares O 21 February 2017, the Directors aouced that the Compay was i discussios regardig a umber of proposals which were, iter alia, iteded to: Address Shareholders' cocers regardig coflicts of iterest betwee the Compay, the Compay's the ivestmet maager, Amberto ad the Compay's the largest Shareholder ad holder of 50% of the shares i Amberto, GLIF; Diversify the Compay s shareholder base through a secodary placig of the Ordiary Shares held by GLIF ad, as a result, improve liquidity i the Compay s Ordiary Shares i the secodary market (the Secodary Placig ); Provide the Compay with access to a broader rage of ivestmet maagemet skills through the appoitmet of SQN Capital Maagemet, LLC ( SQN US ) as the Compay s Ivestmet Maager; ad Ehace the prospect of icreasig the size of the Compay through share issues i due course. The Compay aouced o 8 March 2017 that a Secodary Placig was to complete o 10 March 2017 ad SQN US, together with its UK subsidiary SQN Asset Maagemet Limited ( SQN UK ), were appoited as the Compay s ew Ivestmet Maager, ad SQN US were appoited as the Compay ew Alterative Ivestmet Fud Maager pursuat to the AIFMD, with effect from 1 April 2017. As a first step towards addressig ivestors cocers, the Compay ad GLIF agreed the chages to the Compay s ivestmet maagemet arragemets (referred to below) ad GLIF agreed to sell its holdig of 25,270,763 Ordiary Shares (represetig 48% of the Compay s issued share capital) through the Secodary Placig, which was co-ordiated by Cator Fitzgerald Europe. The demad, pricipally from ew ivestors (both istitutioal ad wealth maagers), to participate i the Secodary Placig sigificatly exceeded the umber of Ordiary Shares available. The ew Ivestmet Maager (through SQN UK) participated i the Secodary Placig ad acquired 3,300,000 Ordiary Shares, represetig 6.3% of the Compay s issued share capital. The Secodary Placig, which completed o 10 March 2017, has broadeed the Shareholder base sigificatly ad has already led to a material improvemet i the market liquidity of the Ordiary Shares ad a arrowig of the discout at which the Ordiary Shares are tradig relative to their et asset value. SQN US ad SQN UK were appoited as Ivestmet Maager to the Compay with effect from 1 April 2017. I cojuctio with this appoitmet, SQN US appoited Amberto as its Sub-Ivestmet Adviser with effect from 1 April 2017 i relatio to the Compay s existig portfolio of loas origiated by or through the Ivestee platforms. The Board believes that the appoitmet of SQN US ad SQN UK as Ivestmet Maager provides the Compay with access to a broader rage of ivestmet maagemet skills. Therefore, o 5 April 2017 the Board proposed to make certai chages to the Compay s ivestmet objective ad ivestmet policy (details of which are set out below) so that the Compay could beefit from this broader rage of skills ad cotiue to provide attractive returs to Shareholders. Followig discussios with the Ivestmet Maager regardig the aticipated returs from the Compay s portfolio (both i the shorter ad loger terms), the Compay rebased its aual divided target to 6.25p per Share, icreasig to at least 7.00p per Share with effect from July 2018. The mothly divided at the ew rate of 0.525p per Share was first paid i Jue 2017. Over the loger term, the Compay will be targetig a aual et asset value total retur of at least 8%. 1 1 This is a target oly, ot a forecast, based o a umber of assumptios which may ot materialise. There ca be o guaratee that this target will be met ad this should ot be take as a idicatio of the Compay s expected or actual future results. SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS 15

GOVERNANCE DIRECTORS REPORT (CONTINUED) Havig reviewed the operatio of the Compay s discretioary six-mothly redemptio facility for up to 20% of its issued share capital at a redemptio price equal to 99.5% of the et asset value per Ordiary Share ad, i particular, the eed to build up cash balaces i advace of a redemptio date i order to be able to satisfy redemptio requests, the Directors cocluded that the redemptio facility was a iefficiet ad iflexible structure that was ot well-suited to the less liquid assets i which the Compay ivests. Accordigly, the Directors used their discretio ad decided ot to implemet the first potetial redemptio opportuity at 31 March 2017 ad proposed that the Compay adopt the ew Articles of Associatio, which remove the provisios relatig to the six-mothly redemptio facility. The Directors recogise the importace to Shareholders of icreasig the size of the Compay i order to icrease the liquidity of its Ordiary Shares i the secodary market. The Directors believe that the Compay s prospects for issuig further Shares i due course have bee ehaced sigificatly by the Secodary Placig ad the appoitmet of SQN US ad SQN UK as Ivestmet Maager ad were further ehaced whe Shareholders approved the followig at the geeral meetig held o 27 April 2017: The proposed chages to the ivestmet objective ad ivestmet policy; Authority for the Compay to create a share issuace programme for up to 250 millio Ordiary Shares ad/or C Shares. Subject to publicatio of a prospectus by the Compay, the share issuace programme may be implemeted by way of a series of placigs ad tap issues ad, potetially, ope offers, offers for subscriptio ad/or itermediaries offers; ad The adoptio of the ew Articles of Associatio which iclude, amogst other thigs, a provisio for a cotiuatio resolutio (by way of a ordiary resolutio) if the Compay s et assets at 31 December 2019 are less tha 250 millio. At the 27 April 2017 geeral meetig, several chages were approved by Shareholders to the Compay s ivestmet restrictios (calculated based o the Compay s gross assets at the time of ivestmet) to reflect the proposed broader focus of its ivestmet policy: Revised Prior Ivestmet Restrictio Ivestmet Policy Ivestmet Policy Geography Exposure to UK loa assets Miimum of 60% Maximum of 70% Miimum exposure to o-uk loa assets 20% 30% Duratio to maturity Miimum exposure to loa assets with duratio of less tha 6 moths Noe 20% Maximum exposure to loa assets with duratio of 6-18 moths ad 18-36 moths Noe 40% i each case Maximum exposure to loa assets with duratio of more tha 36 moths 50% 40% Maximum sigle ivestmet 10% 2.5% Maximum exposure to sigle borrower or group 10% Noe Maximum exposure to loa assets sourced through sigle alterative ledig platform or other third party origiator 25% Noe Maximum exposure to ay idividual wholesale loa arragemet 25% Noe Maximum exposure to loa assets which are either sterlig-deomiated or hedged back to sterlig 15% Noe Maximum exposure to usecured loa assets 25% 50% Maximum exposure to assets (excludig cash ad cash-equivalet ivestmets) which are ot loas or ivestmets with loa-based ivestmet characteristics 10% Noe Results ad Divideds The results of the Compay for the year are show o page 34. Further details, icludig details of future developmets, are provided i the Chairma s Statemet ad Ivestmet Maager s Report. The Compay distributes at least 85% of its distributable icome by way of divideds o a mothly basis. Durig ay year, the Compay may retai some of the distributable icome i a subsequet moth to that i which it arises i order to smooth divided amouts or for the purposes of efficiet cash maagemet. The Compay elected to desigate all of the divideds for the year eded 30 Jue 2017 as iterest distributios to its Shareholders. I doig so, the Compay took advatage of UK tax treatmet by streamig icome from iterest-bearig ivestmets ito divideds that will be taxed i the hads of Shareholders as iterest icome. 16 SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS

GOVERNANCE DIRECTORS REPORT (CONTINUED) Results ad Divideds (cotiued) The Compay has (to date) aouced divideds of 6.375p per Ordiary Share out of the profits for the year eded 30 Jue 2017, of which 5.33p per Ordiary Share were provided for i these fiacial statemets. I accordace with IFRS, divideds are oly provided for whe they become a cotractual liability of the Compay. Therefore, durig the year a total of 3,792,000 was icurred i respect of divideds, oe of which was outstadig at the reportig date, but the twetieth ad twety first divideds of 276,000 each had ot bee provided for at 30 Jue 2017 as, i accordace with IFRS, they were ot deemed to be liabilities of the Compay at that date. The Directors do ot recommed the paymet of a fial divided for the fiacial year. Net Assets At 30 Jue 2017, the Compay had et assets of 52,048,000 (2016: 53,400,000). Goig Cocer After udertakig prudet ad robust equiries, ad assessig all data relatig to the Compay s liquidity, the Directors have a reasoable expectatio that the Compay has adequate resources to cotiue i operatioal existece for the foreseeable future ad do ot cosider there to be ay threat to the goig cocer status of the Compay. For this reaso, they have adopted the goig cocer basis i preparig the Fiacial Statemets. The Directors have assessed the prospects of the Compay over the three year period to 30 Jue 2020. The Directors believe this period to be appropriate as ay forecast beyod three years would likely produce figures that were too ucertai to be meaigful. I their assessmet of the viability of the Compay, the Directors have cosidered the Compay s pricipal risks ad ucertaities together with the Compay s icome ad expediture projectios ad sesitivity aalyses were ru to model the fiacial impact of chages i plausible impairmet rates. The Directors also oted the relatively liquid ature of the Compay s portfolio which could be utilised to meet fudig requiremets, if ecessary. The Compay has processes for moitorig operatig costs, share price discout, the Ivestmet Maager s compliace with the ivestmet objective ad policy, asset allocatio, the portfolio risk profile, couterparty exposure, liquidity risk, foreig exchage risk ad fiacial cotrols. Based o the above evaluatio, the Directors cocluded that there is a reasoable expectatio that the Compay will be able to cotiue i operatio ad meet its liabilities as they fall due over the three year period to 30 Jue 2020. Litigatio So far as the Directors are aware, o litigatio or claim of material importace is pedig or threateed agaist the Compay. Iteral Cotrol ad Fiacial Reportig The Board is resposible for establishig ad maitaiig the Compay s system of iteral cotrol. Iteral cotrol systems are desiged to meet the particular eeds of the Compay ad the risks to which it is exposed, ad, by their very ature, provide reasoable, but ot absolute, assurace agaist material misstatemet or loss. The key procedures which have bee established to provide effective iteral cotrols are as follows: The Admiistrator is resposible for the provisio of admiistratio ad compay secretarial duties; The duties of ivestmet maagemet ad accoutig are segregated. The procedures are desiged to complemet oe aother; The Directors of the Compay clearly defie the duties ad resposibilities of their agets ad advisers i the terms of their cotracts; ad The Board reviews fiacial iformatio produced by the Compay s Ivestmet Maager ad the Admiistrator o a regular basis. The Compay does ot have a iteral audit departmet. All of the Compay s maagemet fuctios are delegated to third parties ad it is therefore felt that there is o eed for the Compay to have a iteral audit fuctio. The iteral cotrol systems are desiged to meet the Compay s particular eeds ad the risks to which it is exposed. Accordigly, the iteral cotrol systems are desiged to maage rather tha elimiate the risk of failure to achieve busiess objectives ad, by their ature, ca oly provide reasoable ad ot absolute assurace agaist misstatemet ad loss. SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS 17

GOVERNANCE DIRECTORS REPORT (CONTINUED) Iteral Cotrol ad Fiacial Reportig (cotiued) The Board has cosidered the FRC guidace o risk maagemet, iteral cotrol ad related fiacial ad busiess reportig dated September 2014 that applies from 1 October 2014. The Board is resposible for esurig the maiteace of a robust system of iteral cotrol ad risk maagemet ad for reviewig the effectiveess of the Compay s overall iteral cotrol arragemets ad processes followig recommedatios from the Audit ad Valuatio Committee. The appoitmet of SQN US as the Alterative Ivestmet Fud Maager uder the Alterative Ivestmet Fud Maagers Directive meas that it is resposible for operatig the Compay s iteral system of cotrol ad for iitially reviewig its effectiveess. Such systems are however desiged to miimise the risk ad ot etirely elimiate risk; they ca provide oly reasoable ad ot absolute assurace agaist material misstatemet or loss. Fiacial Risk Profile The Compay s fiacial istrumets comprise loas, bods with loa type characteristics, ivestmets at fair value through profit or loss, cash ad cash equivalets, other receivables ad other payables that arise directly from the Compay s operatios. The mai risks are market risk (comprisig price risk, foreig currecy risk ad iterest rate risk), credit risk ad liquidity risk. Further details are give i Note 24 to the fiacial statemets. The pricipal risks faced by the Compay are outlied o pages 11 ad 12. Material Cotracts The Compay s material cotracts are with: SQN Asset Maagemet Limited, which acts as joit Ivestmet Maager; SQN Capital Maagemet, LLC, which acts as joit Ivestmet Maager ad AIFM; Cator Fitzgerald Europe, which acts as Broker; Elysium Fud Maagemet Limited ( Elysium ), which acts as Admiistrator ad Compay Secretary; Butterfield Bak (Guersey) Limited, which acts as Baker; ad Capita Asset Services, which acts as Registrar. I additio, Amberto Asset Maagemet Limited, which acts as Sub-Ivestmet Adviser, ad util 31 March 2017 acted as the ivestmet maager, provides ivestmet advisory services to the Compay uder a cotract with the Ivestmet Maager. Taxatio The Compay is exempt from UK corporatio tax o its chargeable gais as it satisfies the coditios for approval as a ivestmet trust. The Compay is, however, liable to UK corporatio tax o its icome. However, the Compay has elected to take advatage of modified UK tax treatmet i respect of its qualifyig iterest icome i order to deduct all, or part, of the amout it distributes to Shareholders as divideds as a iterest distributio. Durig the year, 5,000 was icurred i respect of taxatio, beig tax charged o the balace of the 2016 taxable icome ot distributed by way of divided (see Note 12 for further details). Capital structure ad share issues The Compay has 52,660,350 Ordiary Shares (of 1 pece each) i issue, together with 50,000 Maagemet Shares (of 1 each) at 1 each. Substatial shareholdigs Util March 2017, GLI Fiace Limited held 25,270,763 Ordiary Shares (47.99% of the Ordiary Shares i issue). O 10 March 2017, the Secodary Placig of these shares was successfully completed (see page 15). 18 SQN Secured Icome Fud plc ANNUAL REPORT AND FINANCIAL STATEMENTS