SCRF.L Regulatory News (SCRF)

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Guernsey, 17 June 2016

Funding Circle SME Income Fund Limited

Agreement with the European Investment Bank,Dividend Declarationand Possible Capital Raising

Agreement with European Investment Bank

· Further to the Company's announcement on 18 March 2016, the Board is pleased to announce that the Company has now entered into a formal agreement with Funding Circle Limited and the European Investment Bank ("EIB"). The EIB will provide a £100 million loan to advance credit to UK SME loans via the Funding Circle marketplace. The Company will contribute £25 million to the joint enterprise with the EIB.

· The transaction is expected to significantly contribute to the Company achieving its target return of 8-9% per annum, once the EIB loan has been fully invested.

· The Company also welcomes the opportunity to work alongside the EIB to help satisfy one of their key goals of increasing lending to the real economy by utilising an efficient transmission mechanism for stimulating lending to SME borrowers in the UK through a non-bank source of funding.

Dividend Declaration

· The Company today declares its maiden dividend of 1.00 pence per share payable to ordinary shareholders in July 2016. This payment exceeds the 0.75 pence expected at IPO, due to the strong cash flows from the Company's portfolio of Credit Assets.

· The Company reconfirms its intention to pay subsequent quarterly dividends at a rate of 1.5 pence to 1.75 pence, which represents a prospective dividend yield of approximately 6-7% based on the current share price, and to grow the dividend in line with prevailing market conditions.

Possible Capital Raising

· As the Company approaches 90 per cent. of its net IPO proceeds invested, it also announces that it is considering a potential future capital raise, mostly likely in the form of C shares. Any raise will be subject to prevailing market conditions.

CONTACTS

Richard Boleat, Chairman+44 (0) 1534 615 656Richard.Boleat@fcincomefund.com

Secretary and AdministratorSanne Group (Guernsey) LimitedFundingCircle@sannegroup.com+44 (0) 1481 739810

Corporate BrokersGoldman Sachs InternationalDaniel Martin

Chris Emmerson+44 (0) 20 7774 1000

Numis SecuritiesNathan Brown+44 (0) 20 7260 1000n.brown@numis.com

Website www.fcincomefund.com

FURTHER INFORMATION

Capitalised terms used in this announcement shall have the meaning given to them in the Company's prospectus dated 12 November 2015 (the "Prospectus") (unless the context otherwise requires).

A. Transaction with European Investment Bank

In exercise of the Company's powers to make indirect investments, and as contemplated in the Prospectus, the Company has agreed to participate in a £125,000,000 structured finance transaction (the "Transaction") with the EIB. The Company is participating as a junior noteholder in a new structure into which EIB will provide senior finance.

EIB will advance a senior, floating rate loan of £100,000,000 (the "Senior Loan") to a special purpose vehicle (the "SPV"). Subject to there being no prior event of default or acceleration or enforcement event ("Acceleration Event"), the Senior Loan may be drawn down over a period of 18 months. Interest shall accrue on the Senior Loan at a floating rate equal to LIBOR (as defined in the finance contract setting out terms of the Senior Loan (the "Finance Contract")) plus a spread) per annum, and is payable monthly (during the drawdown period under the Senior Loan (the "Availability Period")) and quarterly (following the Availability Period) in accordance with the terms of the documents relating to the Transaction (the "Transaction Documents"). Advances made under the Senior Loan, to the extent not already pre-paid or repaid under the Finance Contract, shall be repaid in full on 16 June 2023. Any amounts drawn down under the Senior Loan but not applied to fund Credit Assets (as described below) within 18 months after entering into the Senior Loan (or, if earlier, the occurrence of an Acceleration Event or the breach of certain SME loan delinquency triggers) shall be repaid on the next following payment date.

The Company has subscribed for £25,000,000 Class B junior fixed-rate notes (the "Class B Notes") issued by the SPV. Interest shall accrue on the Class B Notes at a fixed rate of 20 per cent. per annum and is payable monthly during the Availability Period and thereafter on a quarterly basis in accordance with the terms of the Transaction Documents. Unless previously redeemed, purchased or cancelled, the Class B Notes shall be redeemed in full at their principal amount on 16 June 2023.

The SPV was incorporated in the Republic of Ireland as a designated activity company limited by shares for the purpose of acquiring and investing in Credit Assets as described below. It is not an Affiliate of the Company.

Advances under the Senior Loan and the proceeds of the issue of the Class B Notes will be used by the SPV to fund Credit Assets originated through the marketplace loan origination platform operated in the UK by Funding Circle UK (the "UK Marketplace") that satisfy certain concentration limits and eligibility criteria.

As contemplated in the Prospectus, in respect of indirect investment in Credit Assets more generally, the Company and IrishCo have agreed, through the Transaction, to invest in Credit Assets initially funded or held by IrishCo. Accordingly, in consideration of the Company's subscription for the Class B Notes, IrishCo has transferred certain sterling denominated Credit Assets which satisfy the concentration limits and eligibility criteria referred to above, with a value (based on the aggregate outstanding amount of principal and accrued but unpaid interest in respect of such Credit Assets), and taken together with a small balance of cash to be transferred by the Company to the SPV, of £25,000,000.

In approving the Company's and IrishCo's participation in this indirect investment, the Board and the IrishCo Board have satisfied themselves that the terms of the Transaction are such that this indirect investment will not result in a breach, on a "look-through" basis, of the Investment Policy or any Portfolio Limits.

Accordingly, as this indirect investment in Credit Assets is to be made alongside a third party participant (EIB), the Investment Policy and any Portfolio Limits will be applied to the relevant indirect investments on a pro rata basis, proportionate to the Company's indirect interest in the underlying Credit Assets.

Whilst the borrowing or leverage by the SPV does not count towards the borrowing limits applicable to the Company (as the SPV is neither an Affiliate nor a Near Affiliate of the Company), the Board has required that such borrowing or leverage limits are applied indirectly, so that the Company will only hold such principal amount of Class B Notes so as to maintain the aggregate borrowing or leverage of the Company on a "look-through" basis at below 50 per cent. Accordingly, if insufficient additional capital were to be raised pursuant to the Placing Programme, the Company will seek to promptly dispose of part of the Class B Notes or the economic interests therein to third party investors, so as to comply with such limit.

The risk and return profile of the Company's investment in (unlevered) Credit Assets will differ from that of the investment in the Class B Notes, which are highly levered.

In addition, the maximum aggregate percentage (by number) of Credit Assets originated on the UK Marketplace which can be randomly allocated to the Company (in respect of the Ordinary Shares and any future C Share issue) and to the SPV, when measured over each calendar quarter, will be less than 49 per cent..

The Company believes that the Transaction will significantly contribute to the Company achieving its target returns of 8-9 per cent. per annum once the Senior Loan has been fully invested.

Funding Circle has not acted on behalf of the Company or IrishCo in respect of the arrangement or management of the Transaction, nor has it advised on the Transaction. Funding Circle will be acting solely in the capacity of servicer of those Credit Assets which are transferred from IrishCo to the SPV and those which are funded by advances under the Senior Loan.

Further information relating to the Class B Notes and the rights and priorities between EIB and the holders of the Class B Notes is set out a supplementary prospectus relating to the Company which is supplemental to the Prospectus and which is expected to be issued on 20 June 2016.

B. DIVIDEND DECLARATION

The Board has declared a dividend of 1.00p per ordinary share in respect of the quarter to 30 June 2016.

The dividend will be payable on 29 July 2016 to shareholders on the register as at the close of business on 1 July 2016 (the record date) and the corresponding Ex-Dividend Date will be 30 June 2016.

This maiden dividend exceeds the 0.75 pence expected at IPO, due to strong cash flows from the Company's portfolio of Credit Assets.

The Company reconfirms its intention to pay subsequent quarterly dividends at a rate of 1.5 pence to 1.75 pence, which represents a prospective dividend yield of approximately 6% to 7% based on the current share price, and to grow the dividend in line with prevailing market conditions.

C. POSSIBLE CAPITAL RAISE

Following the IPO in November 2015, the Company has been investing the proceeds raised, in accordance with its Investment Policy, across the Funding Circle platforms. The Company is expected to have invested over 90 per cent. of the net proceeds of the IPO in the next few weeks. As the proceeds are substantially invested, the Company is considering an additional capital raise. Whilst no decisions have been made, it is likely that any equity raise would be in the form of C shares. Any raise will be subject to prevailing market conditions.

ABOUT FUNDING CIRCLE SME INCOME FUND

The Company is a registered closed-ended collective investment scheme registered pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended and the Registered Collective Investment Scheme Rules 2015 issued by the Guernsey Financial Services Commission (''GFSC'').

The Company's investment objective is to provide shareholders with a sustainable and attractive level of dividend income, primarily by way of investment in Credit Assets as defined in the Company's Prospectus.

IMPORTANT NOTICES

This announcement contains "forward-looking" statements, beliefs or opinions. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the control of the Company and all of which are based on its directors' current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "projects", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events, assumptions or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the Board or the Company with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business concerning, amongst other things, the financial performance, liquidity, prospects, growth and strategies of the Company. These forward-looking statements and other statements contained in this announcement regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Company. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. The forward-looking statements contained in this announcement speak only as of the date of this announcement. Nothing in this announcement is, or should be relied on as, a promise or representation as to the future. The Company disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in its expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules or the Disclosure Rules and Transparency Rules of the FCA. No statement in this announcement is intended as a forecast or profit estimate.

Neither this announcement nor any copy of it may be made or transmitted into the United States of America (including its territories or possessions, any state of the United States of America and the District of Columbia) (the "United States"), or distributed, directly or indirectly, in the United States or to US Persons (as such term is defined in Regulation S under the US Securities Act of 1933, as amended (the "Securities Act"). Neither this announcement nor any copy of it may be taken or transmitted directly or indirectly into Australia, Canada, Japan or South Africa or to any persons in any of those jurisdictions, except in compliance with applicable securities laws. Any failure to comply with this restriction may constitute a violation of United States, Australian, Canadian, Japanese or South African securities laws. The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions. This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for securities in the United States, Australia, Canada, Japan or South Africa or in any jurisdiction to whom or in which such offer or solicitation is unlawful.

Any securities mentioned in this announcement have not been and will not registered under the Securities Act, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.

This announcement has been issued by and is the sole responsibility of the Company. Each of Goldman Sachs International ("Goldman Sachs") and Numis Securities Limited ("Numis") (together the "Brokers") and their respective affiliates expressly disclaim any obligation or undertaking to update, review or revise any forward-looking statements contained in this announcement whether as a result of new information, future developments or otherwise.

Apart from the responsibilities and liabilities, if any, which may be imposed on the Brokers under a regulatory regime of any jurisdiction and where exclusion of liability under the relevant regulatory regime would be illegal, void or unenforceable, none of the Brokers or any of their respective affiliates accepts any responsibility whatsoever for, or makes any representation or warranty, express or implied, as to the contents of this announcement or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company or any issue of securities mentioned in this announcement, nothing in this announcement will be relied upon as a promise or representation in this respect, whether or not to the past or future. Each of the Brokers and their respective affiliates accordingly disclaims all and any responsibility or liability, whether arising in tort, contract or otherwise (save as referred to above) in respect of this announcement or any such statement.