Secured Income Fund : financial statements 30 06 22

Secured Income Fund plc

(Registered number 09682883)

Annual Report and Financial Statements

For the year ended 30 June 2022

Secured Income Fund plc
Contents
	Page
Strategic Report
Key Points	2
Overview and Investment Strategy	2
Chairman's Statement	4
Investment Report	7
Company Analytics as at 30 June 2022	12
Principal Risks and Uncertainties	13
Environment, Employee, Social and Community Issues	15
Gender Diversity	15
Key Performance Indicators	16
Promoting the Success of the Company	17
Governance
Board of Directors	18
Directors' Report	19
Statement of Directors' Responsibilities	24
Corporate Governance Report	25
Audit and Valuation Committee Report	29
Directors' Remuneration Report	32
Regulatory Disclosures	36
Independent Auditor's Report	37
Financial Statements
Statement of Comprehensive Income	42
Statement of Changes in Equity	43
Statement of Financial Position	44
Statement of Cash Flows	45
Notes to the Financial Statements	46
Annual General Meeting
Notice of Annual General Meeting	72
Form of Proxy	75
Directors and Advisers	78

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Secured Income Fund plc

Strategic Report

Key Points

	30 June 2022	30 June 2021
Net assets [1]	£10,916,000	£19,106,000
NAV per Ordinary Share	20.73p	36.28p
Share price	12.00p	42.50p
(Discount)/premium to NAV	(42.1)%	17.1%
Loss for the year	£(554,000)	£(11,017,000)
Dividend per share declared in respect of the year	0.75p [2]	8.50p
B Share issue and redemption per Ordinary Share declared in respect of the year	14.50p	19.50p
Total return per Ordinary Share (based on NAV) [3]	-2.9%	-25.6%
Total return per Ordinary Share (based on share price) [3]	-37.6%	-7.8%
Ordinary Shares in issue	52,660,350	52,660,350

1. In addition to the Ordinary Shares in issue, 1 Management Share of £1 is in issue (2021: 1) (see note 20).
2. On 2 September 2022, the Board declared a dividend of 0.75p per Ordinary Share for the year ended 30 June 2022, which is to be paid on 7 October 2022. It is the Board's intention that the Company will pay sufficient dividends each financial year to maintain investment trust status under the Corporation Tax Act 2010 for so long as the Company remains listed.
3. Total return per Ordinary Share has been calculated by comparing the NAV or share price, as applicable, at the start of the year with the NAV or share price, as applicable, plus dividends and B Share redemptions paid, at the year end.

Strategic Report

Overview and Investment Strategy

General information

Secured Income Fund plc (the "Company", "Fund" or "SIF") was incorporated in England and Wales under the Companies Act 2006 on 13 July 2015 with registered number 09682883. It is an investment company, as defined in s833 of the Companies Act 2006. Its shares were admitted to trading on the London Stock Exchange Specialist Fund Segment on 23 September 2015 ("Admission").

Investment objective and policy

The Company is managed with the intention of realising all remaining assets in the Portfolio in a prudent manner consistent with the principles of good investment management and with a view to returning cash to Shareholders in an orderly manner.

The Company pursues its investment objective by effecting an orderly realisation of its assets in a manner that seeks to achieve a balance between maximising the value received from those assets and making timely returns of capital to Shareholders. This process might include sales of individual assets, mainly structured as loans, or running off the Portfolio in accordance with the existing terms of the assets, or a combination of both.

As part of the realisation process, the Company may also exchange existing debt instruments for equity securities where, in the opinion of the Board, the Company is unlikely to be able to otherwise realise such debt instruments or will only be able to realise them at a material discount to the outstanding principal balance of that debt instrument.

The Company has ceased to make any new investments or to undertake capital expenditure except where, in the opinion of both the Board and the Investment Manager (or, where relevant, the Investment Manager's successors):

• the investment is a follow-on investment made in connection with an existing asset in order to comply with the Company's pre-existing obligations; or
• failure to make the follow-on investment may result in a breach of contract or applicable law or regulation by the Company; or
• the investment is considered necessary to protect or enhance the value of any existing investments or to facilitate orderly disposals.

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Secured Income Fund plc

Strategic Report

Overview and Investment Strategy (continued)

Investment objective and policy (continued)

Any cash received by the Company as part of the realisation process prior to its distribution to Shareholders is held by the Company as cash on deposit and/or as cash equivalents.

The Company will not undertake new borrowing.

Any material change to the investment policy would require Shareholder approval.

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Secured Income Fund plc

Strategic Report

Chairman's Statement

Introduction

I am pleased to provide Shareholders with my Chairman's Statement, covering the financial year from 1 July 2021 to 30 June 2022. Over the reporting period, Secured Income Fund plc (the "Company") has continued to focus on returning capital to Shareholders efficiently and in a timely manner. Since the wind down proposals were adopted on 17 September 2020, the Company has maintained regular distributions to Shareholders and has returned £22.4 million (equivalent to 42.5p per Ordinary Share) through a combination of dividends and a B Share Scheme.

Performance

For the reporting year ended 30 June 2022, the Company suffered a net loss of £0.6 million and loss per Ordinary Share of 1.05p (compared to a loss of £11.0 million and loss per Ordinary Share of 20.92p for the year ended 30 June 2021). The Company's NAV at 30 June 2022 was £10.9 million (20.73p (cum income) per Ordinary Share) compared to £19.1 million (36.28p per Ordinary Share) as at 30 June 2021. £7.6 million of the £8.2 million reduction in the NAV in the period related to the B Share distributions of £7.6 million, with the remainder being attributable to the net loss of £0.6 million.

During the reporting period, the IFRS 9 provision across some of the direct loans has been increased further. Ongoing monitoring of the Film Production Financing portfolio has highlighted further deterioration of the expected cash flows. This portfolio remains heavily impacted by the changes in operating practises resulting from the Covid-19 pandemic. The Company has engaged third party specialists in the hope of maximising returns for Shareholders for the remaining film portfolio.

Furthermore, there continues to be a delay in receiving the full principal repayment from the SME loan company as they have yet to secure a refinance of the facility. However, the Company has successfully negotiated monthly capital repayments, which commenced in February 2022, and remains in regular dialogue with the Borrower to assess the ongoing position.

Further information about the status of the remaining loans along with the respective assigned provisions is provided within the Investment Report.

During the reporting period, the Company traded at an average discount to NAV of 20.9%.

No foreign exchange hedging has been employed during the reporting period. Non-Sterling cash balances are converted into Sterling at the earliest opportunity. A table showing the FX exposure in the portfolio as at 30 June 2022 has been included in note 23.

The portfolio exposure by maturity, geography, type and currency are presented in the Company Analytics on page 12.

Corporate Activity

The Company has focused on the expeditious return of capital to investors. Costs have been monitored carefully and no new underwriting commitments were made in the period.

As part of its ongoing management of the Company's running costs, a Special Resolution was proposed and approved at the Company's General Meeting held on 16 December 2021. Once the Company's NAV falls below £7 million, the Board will notify the London Stock Exchange of its intention to cancel the Company's admission to trading on the Specialist Fund Segment of the Main Market (the "Cancellation of Trading").

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