GLIF.L Regulatory News (GLIF)

26 September 2016

GLI Finance Limited

(the "Company" or "GLI")

Unaudited Interim Results for the six month period ended 30 June 2016

Highlights

· Full business strategic review undertaken incorporating review of cost base, capital structure, detailed assessment of equity and loan investments and valuations;

· The Company losses for the period were GBP6.9m (June 2015 profit of GBP5.3m), impacted by GBP13m write downs in investments in underperforming or liquidated platforms following the strategic review;

· Group organised with Three Pillars to improve operational focus and assist reporting our strategy;

· Pillar One - Sancus BMS Group - on a pro forma* like for like basis, increased consolidated revenues from GBP2.7 million in H1 2015 to GBP4.0 million in H1 2016. The period was notable for the consolidation of the Sancus group and its amalgamation with BMS and Platform Black to establish our speciality lending business. We anticipate that the combined business will provide strong cash flows for the Group;

· Pillar Two - Valuations in our prioritised platforms, The Credit Junction, LiftForward, Funding Options and Finexkap increased by GBP5.5m in aggregate. Investments in underperforming or liquidated platforms were written down by GBP13m. We have been very prudent in reorganising this portfolio and we fully expect to see value of this portfolio build materially in future periods;

· Pillar Three - Amberton Asset Management - remains de minimus and we expect to make progress on this pillar in the next 12-18 months;

· Group - As a consequence of the considerable restructuring in the period together with write-downs in Pillar Two, the Net Loss for the period on the GLI Measurement Basis** was GBP10.3m (H1 2015: Net Profit of GBP0.2m).

· As a consequence of making early write downs and recognising losses in underperforming assets, together with raising capital and reorganising Sancus BMS Group, the Companies' balance sheet is significantly strengthened. Nonetheless, during the period the Company Net Asset Value "NAV" per share decreased from 42.73p to 37.07p;

· Company debt to gross asset ratio is 30% (31 December 2015 33%)

· Company Net Assets have increased in the period from GBP98.2m to GBP105.6m and;

· The Company's weighted average cost of debt decreased from 8.6% (year to 31 December 2015) to 6.8% (period to 30 June 2016).

Post period-end

· Ordinary share placing raised GBP7.1m from Somerston Group in August 2016;

· New wholly owned subsidiary, FinTech Ventures Limited ("FVL"), created to hold, initially, the four Prioritised FinTech platforms thereby enabling independent capital raises to support these investments.

· Name change of GLI Alternative Finance Limited Plc to the SME Loan Fund ("SMEF") on 1 September 2016.

Key

*Pro forma basis as described within the CFO report. pro forma

** GLI Measurement Basis is described within the CFO Report.

Patrick Firth, Chairman said:

"The last six months have marked the beginning of a period of significant transformation for GLI Finance. We continue to restructure the business in order to reduce its complexity, remove potential conflicts of interests and optimise our allocation of capital and resource. We have made good progress in establishing the basis for a strong business that is sustainable over the long-term and well positioned to take advantage of significant market opportunities in order to generate value for our shareholders."

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Please note that the Chief Financial Officer's Review is supplemented by charts in a document (the "Supplementary Document") which can be found at the following location: http://www.rns-pdf.londonstockexchange.com/rns/7803K_-2016-9-26.pdf

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Contacts

Enquiries

GLI Finance Limited

Andy Whelan

+44 (0)1534 708900

 Panmure Gordon (Nominated Adviser and Corporate Broker)

Dominic Morley

+44 (0)20 7886 2954

Peter Steel

+44 (0)113 357 1152

Charles Leigh-Pemberton

+44 (0)20 7886 2906

 Instinctif Partners (PR Advisor)

Tim Linacre/Jordan Campbell/Karanjit Sahota

+44 (0)207 457 2020

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

GLI Finance Limited

CHAIRMAN'S STATEMENT

For the period ended 30 June 2016

I am pleased to present the results of GLI Finance Limited ("GLI" or the "Group") for the six-months ended 30 June 2016. As a result of the strategic review announced in January, the past six month period has seen a significant transformation in the underlying shape of our business and following the substantial progress made this year. It has not been an easy six months and the strategy we have been focussing on over the past few years has not materialised as we would have hoped and we have had to make significant write offs and raise additional capital to ensure the business could execute its plans in line with the strategic review. The changes we have made have been tough, however what this does mean is that we have addressed the key risk areas within the portfolio and made significant improvements to the structure of the business. I am excited for the Group's future prospects.

Industry Dynamics

Mastery of the iterative process of matching the risk/return requirements of institutional, high net worth and retail funders with borrowers' expectations has emerged as the critical success factor in our fast-evolving industry. Although sophisticated internet websites remain important, experience is showing that these are not necessarily the differentiating factor, but rather the key ingredient is the model each platform employs to attract funders with their risk/return lending propositions, and matching them with borrowers' requirements. In addition, working capital is critical and we expect many platforms will now be needing to raise additional funds, which dependent upon the effectiveness of their models, may prove to be difficult. As a result of this dynamic, there is evidence of divergence in performance of platforms in the market generally, and across our portfolio in particular.

Despite the emerging trend of direct lending becoming an acceptable part of investors' asset allocations, industry fundraising has been more difficult this year as economies in the developed world deal with a range of macro issues. 'Brexit' in the UK may have a beneficial impact on alternative finance, assuming that banks' risk appetites retract further from SME lending. Time will tell. In the USA, corporate events surrounding Lending Club have provided a further reminder of the importance placed by investors on effective, transparent governance. We expect an ongoing focus on this from regulators, the press and investors. Well resourced funders with strong management teams are likely to be able to meet these challenges. We therefore expect to see well governed platforms with solid funding and niche lending strategies growing strongly.

Business Strategy

During the 2014 and 2015 financial years the Group's strategy was to take advantage of the expected long term growth of the alternative FinTech sector by investing in nascent lending businesses that were perceived to be beneficiaries of the disintermediation of lending by banks to SMEs. As a result, the Company's balance sheet was largely transformed from relatively liquid, income producing assets into a private equity portfolio of early-stage 'capital hungry' lending businesses with significant potential.

The transition has been challenging as the substantial change in risk profile of our assets together with a commensurate increase in the cost of capital gave the Company funding requirements at an inopportune time.

In January this year, the Board tasked our new Chief Executive, Andy Whelan, with conducting a strategic review.

Progress on the Strategic Review

At the start of the year, a number of challenging strategic objectives were set which were directed towards stabilising the Group's funding position, its investment portfolio of platforms operations and more clearly articulating corporate strategy.

Substantial and constructive progress has been made in addressing the findings of this review, although, as expected, earnings are not yet reflecting the results of this progress. The strategic review is now largely complete but shareholders should expect more progress and clarification in the next 6 months.

Highlights of this process have been:

1. Investing in our most cash generative businesses and forming the Sancus BMS Group.

2. Identifying investments which are likely to achieve material capital appreciation for our shareholders where we wish to concentrate our resources. We have termed these 'prioritised platforms'.

3. In contrast, we have materially shrunk the balance sheet by recognising losses on investments which are unlikely to succeed.

4. We have secured funding and reduced our cost of debt.

5. We have reorganised the organisation into 'three pillars' which more clearly define our businesses.

6. We have reduced recurring operational costs.

7. We have invested in senior key personnel through the appointment of Russell Harte as COO and Steve Simpson as CTO

There are still some challenges to meet in the next 6 months which we are presently planning for. Amongst them, we need to extend further the duration of some of our funding. We are also looking to optimise the Group's balance sheet yet further. This task is becoming incrementally easier as the balance sheet is materially de-risked through early recognition of losses this year, Sancus BMS Group is increasing its cash generation and certain of the prioritised platforms are likely to turn profitable this year. Moreover, Sancus BMS Group has recently been successful in funding loan origination through special purpose vehicles, largely funded by the British Business Bank and the Irish Strategic Investment Fund and we expect this sort of funding across the Group to accelerate.

GLI Finance Limited

CHAIRMAN'S STATEMENT (continued)

For the period ended 30 June 2016

Business performance

While our focus has been on the strategic review, our underlying businesses have made very notable progress. Loan growth has been substantial at Sancus BMS Group with cash flow 50% higher than at this point last year on a like for like basis. Our prioritised platforms have also seen significant double digit loan growth in the last year, with many securing institutional funding, thereby reaching important inflection points.

Financial Results

Results for the half year reflect the restructuring of the balance sheet flowing from the strategic review. The Sancus BMS Group has performed profitably. Investments in Prioritised platforms (The Credit Junction, Liftforward, Funding Options and Finexkap) have performed well, increasing in value by GBP5.5m. However, it was necessary to take further write downs on platforms which have not been able to meet investment expectations. This has been the primary cause of the decrease in the Company NAV per share from 42.73p at December 2015 to 37.07p at June 2016.

Capital Management and Dividend Policy

The issue in August 2016 of 23m shares at 31p was another important step in reducing the leverage on the Group's balance sheet and to funding our operations appropriately. Sources of future funding continue to be reviewed.

The Company expects to continue to pay quarterly dividends amounting to 2.5p in respect of the current 2016 financial year. As stated in the August strategic update, dividends going forward will be sustainable and covered by the cash earnings of the business. Further guidance for 2017 dividends will be provided at the end of the year.

Governance, Risk Management and Operations

Effective governance processes both at platform and holding company level continue to be a priority for your Board. This is critical to ensuring that only well-considered risks are taken, and expected returns emerge as planned. At Group level, projects are underway to take a more strategic approach to the assessment, reporting and management of investment risk. Within the platforms themselves, the management of credit and information technology risks are a priority, and the GLI team is providing increased oversight of the management of such risks.

Operationally a number of technology projects are underway, in particular to provide Sancus BMS Group with much-enhanced online functionality.

The Board and I wish to thank Andy and his team for their excellent work and diligence in taking the Group forward through a challenging period.

Changes to the Board 

I would also like to thank both Fred Forni and James Carthew, two of my fellow long standing Board Directors for their support over the years. James and Fred have resigned from the Board with effect from 23 September 2016. Fred has been on the Board over 10 years and has been one of the longest serving Board members. James has decided to step down due to other business commitments and John Whittle, his alternate, will join the Board. We will continue to review the composition of the Board to represent the focus of the Company as a trading business. Somerston Group have the right to appoint a Board member and will consider doing so during 2017. 

Shareholders

I would like to express my appreciation to all our Shareholders who have kept confidence with the Group through what has been a difficult period of change. In particular, Somerston Group has become our most significant Shareholder after underwriting the recent issue of 23m shares. As at 13 September 2016 Somerston Group held 23.5% of the Company's Ordinary Shares.

GLI Finance Limited

CHAIRMAN'S STATEMENT (continued)

For the period ended 30 June 2016

Outlook

I am confident that the new management team under Andy has quickly come to grips with the challenges faced by the Group, and is well advanced with the process of returning the Group to a position where it can create Shareholder value. Sancus BMS Group continues to grow and the second half of 2016 will see the Group recognise the full attributable earnings of the recent Sancus BMS Group acquisitions for the first time. We are positive about the Group's investment in the Prioritised platforms and believe there is reduced risk related to the valuations of platforms still under strategic review.

We expect the economies in which we operate to remain supportive of our businesses for the foreseeable future.

Patrick Firth

Non-Executive Chairman

Date: 23 September 2016

GLI Finance Limited

CHIEF EXECUTIVE OFFICER'S REVIEW

For the period ended 30 June 2016

When I was appointed CEO in late December last year, the Group was fragmented in its structure, complex and lacked clarity of purpose. I commenced a tidying operation and to date we have made good progress towards putting the Group on a solid footing for the future. My primary focus has been on creating a strong and sustainable business, which we expect to deliver considerable shareholder value from its profitable niche lending operations, complemented by a stable portfolio of growing FinTech platforms, both supported by an asset management joint venture.

The Groups financial statements for the period have been prepared in accordance with applicable International Financial reporting Standards ('IFRS'). The commentary in my CEO report and the CFO report, however focuses on our 'GLI Measurement' Basis, which as explained fully in the CFO's report, makes certain adjustments to the key line items prepared under IFRS. We have developed this methodology for presentation of the numbers as, we believe, it helps to provide the reader with a comprehensive understanding of our underlying performance and financial position over the period.

A full reconciliation between the key line items presented on a GLI Measurement Basis and their IFRS equivalents is provided in the CFO's report.

Progress on the Short Term Strategic Goals set in March 2016

We have made good progress in executing on the range of initiatives I set in March 2016, as described below.

GLI Finance Limited

CHIEF EXECUTIVE OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Progress on the Short Term Strategic Goals set in March 2016 (Continued)

Simplifying the Group's structure - GLI's Three Pillars

By establishing and defining GLI Finance's operations into Three Pillars as described below, we have been able to provide clarity to Shareholders and investors and to focus our valuable resources, financial and human, on the parts of the business that offer the most attractive risk/reward opportunities.

Pillar One is the largest of our Three Pillars with the Sancus BMS Group accounting for 55% of Company gross assets.

Pillar Two is our portfolio of largely minority interests in up and coming FinTech and alternative finance businesses and accounts for 24% of Company gross assets. We break this Pillar out further into two categories:

· Prioritised - platforms with significant validation of their business models via third party institutional funding. A total of four platforms initially make up this category which will be transferred to the newly created FinTech Ventures Limited. These account for 15% of Company gross assets equivalent to 63% of this pillar.

· Other FinTech - platforms remaining under review. These account for 9% of Company gross assets.

Pillar Three, AAM, an asset management business jointly owned with Somerston currently has marginal financial impact on the Group, but Amberton has the potential to become a larger pillar over time. AAM currently has SMEF under its management.

The remaining 21% of the Companies Gross assets is held under the management of Group Head Office, being the holding in SMEF, the BMS managed fund and the remaining loans through SME platforms.

GLI Finance Limited

CHIEF EXECUTIVE OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Figure 1- Please see supplementary document

GLI Finance Limited

CHIEF EXECUTIVE OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Pillar Performance Review:

Pillar One (Sancus BMS Group)

During the half year, GLI's investment in Sancus BMS Group increased following the acquisition of Sancus (Gibraltar) Limited ("Sancus Gibraltar") and the remaining stakes in GLIF BMS Holdings Limited ("GBHL") and increasing our interest in Platform Black. Post period-end, we are also pleased to announce that Platform Black has reached an agreement with a consortium of high net worth private investors to provide a GBP50m funding line as well as acquiring a 10% minority Shareholding in this Company.

The Sancus BMS Group operates in "niche" markets with strong sustainable loan origination underwritten by an experienced credit team. We are leveraging the breadth of the groups expertise by bringing them together under a single unified brand.

Sancus BMS already offers several loan products including asset backed lending, secured finance, shorter term cash flow lending and supply chain finance. With a newly integrated group there will be more opportunity for helping borrowers' funding requirements across the entire business generating cross-selling opportunities and better understanding of our borrowers' business. This will assist our risk management processes further. In addition, the technology behind Platform Black, which has always operated through an online platform, is now being developed for use by other parts of the Sancus BMS Group and will become fully operational throughout the Sancus entities by the end of the year.

In an industry which is typically characterised by single product platforms, I am confident that we are building a business which has unique value propositions. The Sancus BMS Group now operates in five jurisdictions: UK, Ireland, Jersey, Guernsey and Gibraltar, with endorsements from the British Business Bank and the Irish Strategic Investment Fund (ISIF) and which will soon have an online lending platform. These businesses are profitable and focus on specific niche lending opportunities. Importantly they do not try and compete with the traditional banks, but sit alongside and complement their services. We believe this is a strong competitive and operational position to be in. We also have an investment in the Sancus Isle of Man, which is performing in line with expectations.

From June 2015 to June 2016, on a comparable basis, loans under management increased from GBP42.3m to GBP78.1m. The Sancus BMS Group presently funds itself through a combination of three sources: SPV funds in which the British Business Bank and the Irish Strategic Investment fund largely invest; A growing network of High Net Worth and institutional investors we term 'co-lenders' to whom we sell our originated and underwritten loans; and on balance sheet lending funded by group working capital. The balance sheet is extremely lean helping to drive return on equity. On-balance sheet lending has decreased from GBP32.7m to GBP25.5m as our growing pool of co-lenders increased their participation in lending activities. We are seeing strong growth in the number of co-lenders (who comprise private clients, HNWIs, family offices and institutions) who are attracted to alternative opportunities for yield enhancement with moderate risk.

Strong loan origination, diligent risk management, and a lean balance sheet will propel our cash return on assets which we believe should gradually be reflected in a higher valuation being attributed to this part of the business which presently represents 55% of total company assets.

This Pillar (excluding Platform Black) remains on course to generate net profit of GBP2.5m for the 2016 financial year.

Pillar Two (FinTech platforms)

The minority stakes in start-up platforms accumulated by the Group during the 2014 and 2015 FinTech "gold rush" were recognised at the time as being high risk, but with the potential for some of these investments to deliver significant returns. Perhaps what was not recognised at the time was the length of time and the funding it might take for these businesses to mature and become profitable. Therefore, although disappointing, it is perhaps inevitable that some platforms have failed, or are underperforming to the point where write downs have been necessary, whereas others continue to show promise, and consequently positive revaluations have been made. It is expected that the investment risk related to this portfolio will remain an ongoing feature for the foreseeable future. However, this Pillar is where we would expect substantial positive surprise.

We have identified 4 platforms which have become the Group's "Prioritised" platforms, as a result of their innovative business models not only attracting investment from GLI, but also from other institutional investors. These are The Credit Junction, LiftForward, Funding Options and Finexkap. During the period we have increased our equity stakes in the Prioritised platforms from GBP7.7m to GBP10.2m. The continuing positive returns from these investments have resulted in a total investment capital return of GBP13.0m, representing a strong 117.4% return on investment since inception.

A new wholly owned subsidiary, FinTech Ventures Limited (FVL) will be used to hold the Group's investments in the Prioritised platforms. We are currently in the process of transferring these investments into FVL. This will support management focus on these investments, facilitate separate performance reporting and, in time, potentially enable separate funding of future capital required to assist the growth in these platforms. Other platform investments may be transferred into this entity.

In terms of other platforms, the Group's equity investment increased by GBP0.75m. This investment related to the outright purchase of FundingKnight Limited following the liquidation of its holding company. We are currently working with its management team to ensure it has a competitive distribution strategy to complement its quality IT platform.

GLI Finance Limited

CHIEF EXECUTIVE OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Despite management's efforts to minimise the loss in value in eight of the less successful platforms, a prudent approach to valuation was adopted, leading to net write downs of GBP6.9m. During the period two platforms were in the process of closing (Raiseworks which was wholly-owned was closed on 24 August 2016 and CrowdShed in which we hold a 32.5% interest, is in orderly wind down), we reduced our interest in and removed our support from a third and post period end we have sold our interests in Proplend for a nominal consideration. Also during the period, Verus 360 an online SME finance provider, ceased operation, resulting in GBP4.5m write-down. I am working closely with the remaining 5 platforms management and boards and will provide further updates in the year end report on their development.

Pillar Three (Amberton)

At the start of the reporting period, GLI Asset Management Limited was a wholly owned subsidiary of GLI Finance. Q1 saw a 50% stake in GLIAM sold to Somerston and the successful change of name and rebranding to Amberton Asset Management ("AAM"). AAM currently has a marginal financial impact on the Group, however it manages a significant portion of the Group's total assets, GBP22.7m, through its mandate to manage The SME Loan Fund plc ("SMEF" or the "Fund") (previously known as GLI Alternative Finance plc).

Financially, the company is not yet profitable, with assets under management of GBP53.4m, compared to an initial target of GBP100 million. The consolidated loss for the period amounted to GBP149k. AAM is pursuing a number of separate lines of business to broaden revenue streams.

In terms of SMEF, the Board of the Fund decided in August 2016 to change its name from GLI Alternative Finance PLC, also changing its listing codes from GLAF:LN to SMEF:LN. From a performance perspective, the first half of 2016 will be remembered for significant market volatility, particularly within the AltFi sector, enhanced by the decision that the UK electorate took to leave the European Union. Confidence in the investment trust sector was also negatively impacted by news of governance issues at Lending Club in the USA, resulting in share prices for the sector trading at a significant discount to net asset value. SMEF also suffered a share price fall which saw the shares trading at a discount to NAV of 11.4% at its low point. This recovered to a discount to NAV of 8.9% at the end of July. During this time the NAV of the Fund remained stable. The Fund continues to provide a low risk exposure within the sector. It remains unleveraged and we understand this stance is likely to continue for the foreseeable future. An EGM in August this year adjusted the investment restrictions to allow greater flexibility in the allocation of capital.

Group Head Office

We have been focused on improving Group governance, treasury, risk management processes and IT functions, whilst carefully managing Group Head Office costs. At the beginning of July, I was delighted to welcome both Russell Harte and Steve Simpson to the team, as Chief Operating Officer and Head of Group IT respectively. Russell brings a vast range of experience in a number of fields whilst Steve has 22 years of experience in IT, most recently as the architect of the successful Platform Black platform.

During the reorganisation period there were assets which did not fit to any pillar and were retained by head office. These included the Group's investment in SMEF and loans to and through platforms. Many of these loans have been written off during the reporting period making a material negative contribution to group profits. There are minimal loans outstanding other than for working capital purposes to Sancus BMS Group. In future we do not envisage the head office results to impact the group results to the same degree as we have seen in this period.

Income generation within SMEF has been in line with expectations with the dividend of 0.55p being paid monthly, equating to a yield 7.48% as at the end of the reporting period.

Capital and cash flow management

The current weighted average cost of debt is 6.8%, which was achieved during the period through the refinancing of a loan from a syndicate of high net worth individuals via the Sancus platform which reduced interest costs on this from 11% to 8.75% (the "Syndicated Loan").

One of my key objectives over the next 6 months is to optimise the group balance sheet and secure long term funding. By recognising losses early and reducing leverage, together with an increasingly profitable Sancus BMS Group, we have de-risked the business significantly and have a foundation for driving returns. Nonetheless a growing lending business needs capital.

The Board and I have assessed the Company's financial position as at 30 June 2016 and after taking into consideration the maturity profile of our debt structure and the various options we have available to us to meet these commitments, we are of the opinion that it is appropriate to prepare these accounts on a going concern basis. The options being considered by the Board include the possible refinance of the loan. In current market conditions, the rate being provided to investors is attractive and therefore the Board considers this could be one likely option. We are however looking to reduce our current debt, so the Board also notes the potential to "tap" the existing ZDPs and/or GLI Bond or the part sale of our holding in the SMEF shares could also repay the debt.

GLI Finance Limited

CHIEF EXECUTIVE OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Capital and cash flow management (continued)

I am working on a solution to improve the Group's debt to equity profile yet further, and I will provide more information during the course of the year as to how these plans develop.

Summary of financial results

The financial results for the period for the Company and the Group prepared in accordance with IFRS are set out in pages 33 to 41. The Group loss for the period was GBP8.4m (June 2015 loss GBP8k) and on a Company basis was GBP6.9m (June 2015 profit GBP5.3m).Results for the first half have been impacted by the write downs we have made and as touched upon at the start of my report, in order to assist in understanding the underlying performance and financial position of the period, we have developed the GLI Measurement basis. I have commented below on the GLI Measurement results presented in the CFO's report.

From a GLI measurement perspective, the loss of GBP10.3m as shown on page 17 largely reflects the results of the strategic review's impact on platform valuations in Pillar Two, with net write-downs incurred over the period of GBP6.9m and GBP6.0m on loan write offs. Also in the period we have incurred capital movements in relation to de-recognition of associates due to the restructuring of the Group, along with incurring GBP0.7m of legal and professional fees and the loss on the fair value on SMEF which we would deem as non-recurring. Adjusting for these items, on a normalised basis profits for the period are GBP5.2m.

In Pillar One, earnings for the period did not include the results of Sancus Gibraltar or the full BMS Finance profits as they were only fully acquired at the end of the period. EBIT on a consolidated basis was GBP1.4m, but on a pro forma basis, including new acquisitions for the full period, EBIT totalled GBP2.0m. We expect profits for Pillar One to steadily increase from the current year comprehensive profit target of GBP2.5m (excluding Platform Black), as it benefits from synergies, cross selling and continued organic growth. Platform Black is anticipated to move from a loss position (H1 2016 GBP0.7m loss) into profit following the recent commitment of a GBP50m funding line from new investors, and other synergies upon joining Sancus BMS Group.

In Pillar Two we have made write-downs where necessary, reflecting our prudent approach to valuations. Net write downs have totalled GBP6.9m. The companies in the Prioritised list of platforms are well placed to continue the growth in value we have seen this period, during which we have recognised a valuation uplift of GBP5.5m.

Amberton's loss amounted to GBP149k.

Group Head Office's results were negatively impacted by the share price decline in SMEF, resulting in an unrealised loss of GBP 2.6m on this asset. We expect this loss to reverse in time as the market price returns to the Fund's net asset value.

We have stated earlier in the year that following GLI's reclassification on AIM as a trading company rather than an investing company, we will in future focus reporting on earnings rather than on NAV. However we note that the Company's NAV is still important and in the CFO report a breakdown of the movements in the period is provided.

Conclusion

Overall I am pleased with the progress the Group has made so far this year, although it has been a testing time for all. We have moved as quickly as possible and I believe that we have achieved a significant transformation in the past 8 months. We have executed on our plan to focus, simplify and rationalise the Group's operations after its rapid expansion over the previous two years. The Group's attention has now firmly shifted to generating sustainable earnings streams from our profitable, niche SME lenders, alongside the FinTech investment portfolio, where we will continue to actively support our Prioritised platforms. By the "venture" nature of the 20 start-up platforms in which GLI took an interest in recent years, there was always a risk that some would not yield a return - however, now that the "losers" have been written down, we consider that over time, the portfolio will provide a material positive return.

By the end of the year I aim to have finished the strategic review I started in December 2015. I have taken all the necessary hard decisions and write downs and, I truly believe, we will have positioned the business for growth, laid the foundations for maximising returns to Shareholders. I will remain focused on executing our strategy, and, consistent with this, maximising value creating opportunities as they arise.

I would like to thank the Board for welcoming me as the Group CEO and for their support over the period. I would also like to thank my Executive Team and staff who have worked extremely hard to achieve our strategic goals. Finally, I would like to thank James and Fred for their support particularly over the past nine months and wish them well in the future.

Andrew Whelan

Chief Executive Officer

Date: 23 September 2016

GLI Finance Limited

CHIEF FINANCIAL OFFICER'S REVIEW

For the period ended 30 June 2016

Introduction

As the Group has transformed considerably over the last three years, we have aimed to improve our approach to disclosure with the introduction of reporting by Pillar, providing transparency of performance at this level. To enable this, we make, as referred to in the CEO report and explained in further detail below, certain adjustments to the key line items prepared under IFRS to arrive at the GLI Management Basis for commentary on these numbers. We have developed this methodology for presentation of the numbers in the CEO and CFO reports as, we believe, it helps provide the reader with a comprehensive understanding of our underlying performance and financial position over the period.

The GLI Measurement Basis

GLI has restructured its business into Three Pillars for the following reasons:-

- to more clearly define the components of the Group's business;

- to focus management on the achievement of value creation targets in each Pillar;

- to clarify how value is created in each area of the Group's business, and,

- to improve the measurement and disclosure of value created in each Pillar.

As the Group's transformation has progressed, it has become increasingly obvious that the application of International Financial Reporting Standards (IFRS) to the Group's business does not necessarily provide a clear understanding of performance and financial position. To address this issue, the Group has developed a hybrid approach to presenting its results, referred to as the GLI Measurement Basis, which is explained in the table below.

It should be noted that the GLI Measurement Basis is only applied to disclosures in the CEO's and CFO's reports. The primary statements are presented in accordance with IFRS. Key reconciliations to IFRS disclosures of Consolidated Comprehensive Income are included below.

GLI Finance Limited

CHIEF FINANCIAL OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

The GLI Measurement Basis (continued)

Significant events over the half year

Significant events in the first half of the year which have had an impact on the results and capital structure are listed below:

· On 5 February 2016 GLI entered into a Share Sale agreement with Golf Investments (part of the Somerston Group of companies) which included:

· Sale of 15m SMEF shares to Golf Investments;

· The sale of 50% of AAM for GBP0.25m;

· Issuing a warrant instrument to Golf Investments to subscribe in cash for up to 32m new Ordinary Shares on the basis below:

· 10,000,000 Warrants at 40 pence per Ordinary Share;

· 10,000,000 Warrants at 45 pence per Ordinary Share; and

· 12,000,000 Warrants at 55 pence per Ordinary Share.

· On 5 February 2016 GLI increased its' stake in Platform Black from 43.9% to 83.7%.

· On 16 February 2016 we announced our strategic goals, including a target to achieve a saving of GBP1.0m in costs on an annualised basis from closure of non-performing subsidiaries, advisory fees and travel. We are on target to achieve these cost savings.

· On 3 March 2016 the sale of 15 million SMEF shares to Golf Investments was completed for a cash consideration of GBP15m which was used to reduce Company debt. GLI now holds 47.94% and Somerston 27.94% of SMEF's issued share capital.

· On 10 March 2016 GLI subscribed for GBP5.0m Platform Black preference shares at an interest rate of 9%.

· On 15 March 2016, the GBP30m syndicated loan facility which was at an interest rate of 11% was repaid and a new facility put in place for GBP14.86m for one year at 8.75%.

· On 20 April 2016, the dividend for Q1 2016 of 0.625 pence per share was declared, following the announcement on 21 December 2015 that the annual dividend would be halved from 5.0 pence per annum to 2.5 pence per annum.

· On 27 April 2016, it was announced, subject to Shareholder approval, that the Company would no longer be classified as an "Investing Company" under the AIM Rules, reflecting the Board's view that the Company now exhibits the characteristics of a trading company. Shareholders approved the change at GLI's AGM on 19 May 2016 and, as a result, the Company is no longer classified as an Investing Company effective 20 May 2016.

GLI Finance Limited

CHIEF FINANCIAL OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Significant events over the half year (continued)

· On 28 June 2016 it was announced that GLI had acquired Funding Knight Limited and two of its operating subsidiaries for a consideration of GBP0.75m.

· GLI committed to providing Funding Knight Limited with at least GBP1.0m of further capital to finance its ongoing operations.

· Funding Knight Holdings Limited ("FKHL") was put into administration and GLI wrote off its holding in the ordinary share capital of GBP2.48m, GBP1.0m in preference shares and loans and accrued interest of GBP0.82m.

· It was confirmed by the administrator of FKHL that GBP0.45m would be repaid to GLI from FKHL in partial settlement of the loan.

· On 30 June 2016 the 100% acquisition of Sancus Gibraltar and GBHL (the Company owned 15.26% and 62.5% respectively before the deal) completed to create Sancus BMS Group. The transaction was completed by:

· The issue of 43,408,360 new Ordinary Shares and GBP10m bond as consideration for Sancus Gibraltar; and

· 11,093,247 shares issued and GBP1.75m cash in payment for GBHL.

· Post period, on 8 July 2016, the Company announced a change of external auditor from Grant Thornton Limited to Deloitte LLP and the change of registrar from Equiniti Investment Solutions to Capita Registrars.

· On 9 August 2016 an update of dividend policy was announced. The Board has resolved to maintain the policy of paying a dividend of not less than 2.5p per annum on a quarterly basis in respect of the 2016 financial year, but from 2017, dividends will only be paid when fully covered by cash earnings. This ensures that the Company has the resources to make the most of its opportunities to create longer term shareholder value, with the objective of providing for the payment of a progressive dividend.

Company Net Asset Value (at fair value) and the GLI Share Price

Figure 2- Please see supplementary document

The Company NAV per share at the end of June 2016 was 37.07p represented a 13.25% decline since December 2015. The share price at 30 June 2016 was 24.88p representing a 32.9% discount to NAV on a fair value basis.

The Net Asset Value of the Company has been negatively impacted by write-downs in its Pillar Two investments, primarily at 31 December 2015 and 30 June 2016. This is further explained later in this report.

GLI Finance Limited

CHIEF FINANCIAL OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Movement in the Company Net Asset Value (at Fair Value)

Figure 3- Please see supplementary document

Net assets increased in the first half of the year by 7.5% from GBP98.24m to GBP105.64m. The main reason for this was due to the issue of new shares as part of the transaction which closed on the 30 June 2016 and the upwards revaluation of the Company's existing holdings in Sancus Gibraltar and GBHL, based on the acquisition prices of GBP13.5m and GBP13.8m respectively.

Pillar Two Prioritised platforms were revalued on the basis of the most recent transaction prices, in line with our valuation policy.

Pillar Two Other FinTech required write-downs of GBP6.9m in equity and GBP6.0m in loans as platforms either underperformed or were closed. Specifically, two platforms were in the process of closing during the period (CrowdShed and Raiseworks), with interests in one (Proplend) being sold post period end and another in the process or being sold or exited. Pillar Two benefited from a GBP2.7m unrealised foreign exchange gain.

We experienced a loss on the carrying value of our investment in SMEF based on the mid-price of this quoted fund falling to 89.75p at 30 June 2016, however there is a potential for upside with the NAV per share at 30 June 2016 at 101.31p.

Company Net Asset Value by Pillar (at fair value)

As set out in the tables below, at June 2016 Company NAV comprises gross assets of :

· Pillar One GBP87.0 (30.52p per share) being a combination of equity and intercompany loans.

· Pillar Two GBP37.66m (13.22p per share) being the fair value of the FinTech platforms.

· Pillar Three, GBP0.45m (0.16p per share) being the net asset value of AAM.

· Group Head Office

o Holding in SMEF shares of GBP22.74m (7.96p per share)

o Loans through platforms and held in BMS managed funds of GBP8.8m (3.08p per share)

o Net Liabilities of GBP50.99m (-17.86p per share) largely made up of the Zero Dividend Preference Shares ("ZDPs"), Bond and the Syndicated Loan.

In comparison to December 2015, the increase in Pillar One was due to the acquisition and revaluation of Sancus Gibraltar and GBHL. Pillar Two has had a minimal movement overall, due to the net effects of write ups, write downs, acquisitions, disposals and new loans made to prioritised platforms. The value held in the SMEF has decreased following the sale of 15 million shares to Somerston at the beginning of the year and a fair value loss on share price of GBP2.6m. The slight increase in loans made to SME's in the period relates to loans made to the BMS managed funds in the period.

GLI Finance Limited

CHIEF FINANCIAL OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Figure 4- Please see supplementary document

Figure 5- Please see supplementary document

Net Profit/(Loss) by Pillar (GLI Measurement Basis)

Figure 6- Please see supplementary document

CHIEF FINANCIAL OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Net Profit/(Loss) Pro forma comparatives by Pillar (GLI Measurement Basis)

Summary

The net loss for the first six months of the year on a GLI Measurement Basis is GBP10.3m and a profit of GBP0.2m on a like for like basis for 2015. This is further explained below.

Pillar One - Sancus BMS Group 

We expect to see further profit growth within this Pillar, which will be reflected in the Group's results next period, partly flowing from the inclusion of the full profits of Sancus Gibraltar which only became attributable to the Group after its full acquisition on 30 June 2016. The GBP0.3m pro forma net profit increase from H1 2015 to H1 2016 was largely driven by increased profits at GBHL as a result of growth in the two BMS funds.

Platform Black is currently the sole loss making entity within Pillar One with an operating loss before financing costs of GBP0.7m in the first half of 2016. We expect to see this position improve in the future as the platform scales through the utilisation of its new funding line and benefits from being part of an integrated larger group.

On an annualised basis operating expenses in H1 2016 were largely in line with FY15. Overall, costs have remained under control as the Pillar's revenue continues to grow. However there have been increases related to building the new Irish BMS fund and Sancus Gibraltar, but this has been offset by cost savings at Platform Black.

Pillar Two - Prioritised Platforms

The Pillar comprises Liftforward, The Credit Junction, Finexkap and Funding Options. We value this pillar on a fair value basis, recognising any revaluations as a measure of performance. This half year we have seen an uplift of GBP5.5m as these platforms have continued to grow and raise external funding, validating a higher Company valuation on which the Board makes their fair value assessment.

The performance of this Pillar has remained strong since it was established - the details of its 117% return based on original investment are set out in the Pillar Two Finance Performance section on page 23.

Pillar Two - Other FinTech

In the period, we recorded GBP13m of write-downs across equity and loan investments in Other FinTech companies. During the period we closed two of our platforms, reduced our interest in and removed our support from a third and post period end we have sold our interests in a fourth platform.

Pillar Three - Amberton

On a consolidated basis, Amberton in total is making a small loss of GBP0.15m as its asset management fees are not yet covering its operating expenses. The widening of the loss compared to H1 2015 is due to Amberton not being operational for the full six months in H1 2015.

GLI Finance Limited

CHIEF FINANCIAL OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Group Head Office

Main components included in Group Head Office are:

· Revenue of GBP2.6m is made up of dividends from SMEF and the BMS managed funds and interest from loans through the platforms.

· A fair value loss of GBP2.6m on the SMEF shares.

· Operating costs of GBP2.65m including GBP1.2m legal and professional costs, of which GBP0.7m arose from non-recurring projects associated with the strategic review.

· Finance costs of GBP2.1m from the following interest bearing instruments:

o GBP14.86m loan facility repayable 15 March 2017 (8.75%), interest paid quarterly;

o GBP10m 5-year Bond (7%) matures 30 June 2021, interest paid half yearly;

o GBP20.7m 2019 ZDPS (5.5%) income entitlement and principal due on expiry 5 December 2019.

Group Head Office net loss has increased from GBP2.0m in H1 2015 to GBP3.8m in 2016. This net GBP1.8m increase is primarily due to the GBP2.6m loss on SMEF (as noted above), higher non-recurring transaction costs associated with the corporate actions (listed above) executed as part of the strategic review, offset by capital adjustments.

Normalised Net Profit (GLI Measurement Basis)

A number of exceptional, non-recurring write downs have been necessary this period. Normalised earnings on the GLI Measurement basis are set out below:

The adjustments made in the 'normalised' column in the table above exclude the deduction of Pillar Two fair value adjustments of GBP13.0m as we currently do not foresee significant write downs in the future, although a level of investment risk remains in the portfolio. The uplift in fair value in Pillar Two of GBP5.5m relates to prioritised platforms. The GBP2.6m fair value write down of the holding in SMEF within Group Head Office has also been excluded in the calculation as we expect the share price to normalise back towards NAV over time as well as the reversal of capital movements in relation to de-recognition of associates and removal of non-recurring expenditure on legal and professional fees of GBP0.7m associated with the restructure have been excluded.

Pillar One Pro forma Financial Performance Report (GLI Measurement Basis)

At 30 June 2016, with the exception of Platform Black at 84%, all of the entities in Pillar One were 100% owned by GLI. Pro forma disclosures set out below been prepared on this basis.

Revenue Analysis

Revenue streams include interest income on balance sheet lending, advisory/management fees, arrangement fees, commitment fees, earn-outs and other fees. By their nature, fees vary with transaction volumes, and the irregular timing of earn-outs, so will generally show some volatility.

Figure 7- Please see supplementary document

Figure 8- Please see supplementary document

GLI Finance Limited

CHIEF FINANCIAL OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Earnings

Figure 9- Please see supplementary document

Pillar One continues to display strong revenue growth with Sancus and GBHL being the main revenue generators in this Pillar at present. On an annualised basis, H1 2016 operating expenses are largely in line with FY15. Overall, costs have remained under control as the Pillar's revenue continues to grow, improving the EBIT margin. Sancus and GBHL are both profitable, with Platform Black looking to benefit from its new GBP50m funding which was committed in July 2016 from external minority investors.

Sancus

www.sancus.com

Sancus provides secured lending to asset rich, cash constrained borrowers while also providing co-lending opportunities to high value clients. The key margin generator within this business is from the underwriting and participation of syndicated loans. Sancus has loaned in total GBP250m since it became fully operational in January 2015. The average loan is GBP2m, duration is 16 months interest rate is 9% and Loan to Value (LTV) is 34% and activities are focused on offshore jurisdictions. Sancus companies lend their own capital in every loan alongside "co-lenders" who advance the majority of funds on each borrowing. There is no set ratio for the deployment of Sancus capital, although a guideline of 5-10% average participation is in place.

Figure 10- Please see supplementary document

The above pro forma graph shows the performance achieved by Sancus Jersey, Sancus Gibraltar and Sancus Guernsey since 2014. All lending and fees related to transactions with GLI have been eliminated. The results of Sancus IOM have not been included due to the Group only holding 2.1% (now 7%).

The total loan book has increased by 24% from GBP49.5m at the end of June 2015 to GBP61.4m at the end of June 2016. The composition of the loan book has shifted in the period with the decrease in Sancus capital reflecting increased co-lender participation, delivering a profitable higher co-lender participation ratio at the end of H2 2016.

Interest income in absolute terms has seen a decrease from H1 2015 to H1 2016 due to lower on-balance sheet lending, although lending margins have been maintained.

In general terms, the Sancus entities have experienced excellent retention rates amongst co-lenders, as they seek both to recycle and deploy additional capital upon maturity of existing loans and availability of new opportunities. With attractive returns and Sancus' track record of a default lower than 0.5% since inception, we continue to witness strong appetite both from existing and potential new co-lenders.

Transaction fees fluctuate from month to month according to loan activity.

At the end of H1 2016, Sancus entities reported a pipeline of GBP50m+ of potential new loans. This, allied with strong demand for co-lender participation, we believe, provides a strong platform for further revenue growth through H2 2016. Sancus will also seek to create new entities in the future and will explore opportunities in expanding the BMS operation into Ireland and the other offshore jurisdictions.

GLI Finance Limited

CHIEF FINANCIAL OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

BMS Finance

www.bms-finance.com

BMS Finance arranges and manages senior secured lending of up to GBP5 million for UK small and medium sized enterprises (SMEs) and up to EUR5 million to Irish SMEs which are at, or approaching, profitability. Lending is structured through two distinct investment funds, one focused in the UK and one in Ireland and have committed capital of GBP60 million and EUR30 million respectively. Investment is locked in until 2024, enabling BMS to match its lending time horizon with capital availability.

The funding for the funds is provided from BMS Finance's own balance sheet, from GLI, through British Business Bank Investments (BBIL), the National Treasury Management Agency (as controller and manager of the Ireland Strategic Investment Fund (ISIF)) and from SMEF, under matched funding agreements. BMS acts as an advisor to both funds.

The pro forma graph below shows the revenue earned by BMS from (1) a return on its own assets invested in either loans or the funds, and (2) the fees it earns for managing the two funds.

Figure 11- Please see supplementary document

The loan book funded by external capital has increased significantly from June 2014 to June 2016, the main drivers being the growth in the UK fund and the launch of the Irish fund. The decrease in BMS deployed capital from GBP13.8m in December 2015 to GBP10.9m at the end of June 2016 arose following the transfer of legacy loans from BMS's balance sheet into the new funds. This enabled BMS to fund its commitments to the funds whilst also generating sufficient liquidity for the partial repayment of BMS's debt facility with GLI.

Total income shows an upwards trend largely in line with the growth of loans under management. Further growth is anticipated as the deployment of the UK and Irish funds progress.

Default rates continue to remain low at less than 0.5% since GLI's initial investment in 2012.

The BMS team's specialist understanding of SMEs, illustrated through its successful 12-year track record in SME lending, together with its long term committed capital, positions it favourably in a market that continues to offer significant opportunities for growing the lending books whilst generating attractive risk adjusted returns. The corporate fund structures in place remain resilient and effective in light of the recent macro environment and associated uncertainty created by the UK's planned exit from membership of the European Union. BMS's focus remains on prudent deployment of funds, beneficial pricing and resilient structuring ensuring that growth of the loan books is not at the expense of deteriorating borrower credit quality and ultimately lower investor returns.

GLI Finance Limited

CHIEF FINANCIAL OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Platform Black

www.platformblack.com

Platform Black is an innovative online business finance marketplace that connects investors to businesses and institutions who are seeking flexible working capital finance solutions. Since inception, Platform Black has raised finance from a wide-range of mainly UK based funders.

Key developments over the last 12 months have included:

- In 2015, the business repositioned its target market into mid corporate supplier and invoice finance solutions.

- In April 2016, GLI subscribed for GBP5m of new preference shares in Platform Black with the funds being used to repay GLI loan facilities and to position the business for further growth.

- In July 2016, a consortium of private investors took a 10% Shareholding in Platform Black Ltd with options to buy a further 20% in the next five years, replacing six minority Shareholders.

- The new Shareholders committed to lend up to GBP50m through the company, thereby providing an opportunity to fund ambitious growth plans in the SME and education sectors.

- Following the July transactions, Sancus BMS Group Ltd's equity stake in Platform Black Ltd was 84.65% (83.93% as at 30 June 2016).

- Platform Black will change its name to Sancus Finance on 31 December 2016.

Figure 12- Please see supplementary document

 As reflected in the performance graph, the business is seeing increasing volumes in its targeted SME finance solutions through its innovative education and supplier finance products. The company's approach has been particularly well received in the university sector where the business provides a working capital solution to fund short term funding needs.

Default rates have remained low despite the volume growth in the business, a reflection of the strong credit focus of the senior management team.

Although transaction volumes have increased in H1 2016, revenue per trade declined slightly at the commencement of the period due to transactions with some exceptionally large university clients bearing a lower transaction fee commensurate with the associated lower risk. Revenues are expected to increase with utilisation of the new funding line.

A healthy pipeline of larger SME transactions is matched by increased interest from funders with appetite for this market sector. They have invested in an enlarged new business team supported by a strong marketing strategy focussed on strategic relationships. In addition, Platform Black is introducing credit insurance onto its loan book. As a consequence, strong growth in revenues is forecast in the next 12 months.

GLI Finance Limited

CHIEF FINANCIAL OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Pillar Two Financial Performance

Figure 13- Please see supplementary document

The Gross Assets (equity and working capital loans) in Priority platforms has increased over the period due to additional investments, a revaluation gain and FX gains (three of these platforms are denominated in EUR or USD).

Other platforms have decreased in value due to significant write-downs partially offset by FX gains. Of the twelve platforms in this category, following the write-downs during the previous two accounting periods, six are now fully written down.

Return on Investment in Pillar Two

As noted earlier, Management assess Pillar Two based on its fair value performance and as such, the ROI is the single most important measure of performance.

Figure 14- Please see supplementary document

The Prioritised platforms have had their business models validated by the involvement of one or more external parties such as investors, platform funders, key partners and regulatory authorities. Although the risk remains that one or more of the platforms might not fulfil their expected potential, management are working closely with these platforms to maximise performance and sustain high ROI rates.

The Other Pillar Two platforms have underperformed. The GBP44.1m of investment made since 2013 is now valued at GBP13m after GBP9.1m of disposals. To address this, the financial performance and outlook of these assets is being intensively reviewed. In the period two platforms (Raiseworks and CrowdShed) have been closed and one sold (Proplend) post period end.

Management expect that H2 2016 and future periods will show less volatility in platform valuation than in H2 2015 and H1 2016. With the strategic review now passing the half-way point, risks have been more clearly identified, measured and valuations adjusted accordingly.

GLI Finance Limited

CHIEF FINANCIAL OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

Pillar Two - Priority FinTech platforms

The Priority FinTech platforms comprise Finexkap, Funding Options, LiftForward and The Credit Junction, with GLI holding 29.8%, 28.9%, 18.4% and 24.4% of the platforms respectively. Further explanation around the activities and performance of each is set out below.

Combined new loans per quarter

Figure 15- Please see supplementary document

Combined loan books

Figure 16- Please see supplementary document

Financial results are considered to be commercially sensitive by associate platforms and as such are not disclosed by individual platform. However, the aggregate loan books and new business volumes have been presented.

The four priority platforms have shown strong new loan origination growing quarter on quarter over the past 10 quarters. The combined new loan volume graph shows a 13% increase from Q1 to Q2 2016 and a 70% increase from H2 2015 to H1 2016.

The aggregate loan exposure has shown growth in H1 2016 of 9% per month on average.

Finexkap

www.finexkap.com

Finexkap offers short-term funding solutions with no volume or timeframe conditions. The service focuses on easy-to-use features - "in just a few clicks" French SMEs can sell their receivables and gain access to working capital financing with competitive advantages compared to traditional factoring services. As of June 2016, Finexkap had originated EUR30m of invoice transactions since inception. Volumes are growing on an exponential basis with year on year growth multiples averaging 2.0 - 2.5x. Demand continues to be strong.

On the funding side, Finexkap is working on two innovative funding partnerships, which if consummated will support future growth at a cheaper financing cost. Partnerships with leading accounting software and e-invoicing platforms which are planned to begin operation in H2 2016 are expected to improve lending demand from higher-credit quality borrowers.

The success of the funding and lending partnerships is key to Finexkap's potential profitability. Based on current projections, profitability is expected to occur late in 2017, or early in 2018.

Funding Options

www.fundingoptions.com

Funding Options uses proprietary funder/borrower "matchmaking" technology to act as a one-stop-shop for business finance. The company has been recommended as one of three platforms for designation by HM Treasury under the Small Business, Enterprise and Employment Act 2015 Bank Referral Scheme. It is Authorised and Regulated by the Financial Conduct Authority as a Credit Broker, Reference number: 727867.

Funding Options has a well-established panel of over 60 funders, which provide funding for its SME lending.

A significant programme of operational change has been delivered, resulting in substantial improvements to unit economics.

Funding Options continues to deliver strong lending growth and remains on plan to achieve profitability in 2017 as market awareness of online solutions for business finance continues to grow, evidenced by the broadening demographic profile of the typical SME customer. Demand for borrowing and availability of funds via alternative lenders both remain strong.

GLI Finance Limited

CHIEF FINANCIAL OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

LiftForward

www.liftforward.com

LiftForward provides manufacturers and distributors with point-of sale software solutions for their small business customers, allowing manufacturers to sell their goods and services as subscription products. LiftForward also supplies the financing, providing a total end-to-end solution.

LiftForward has experienced significant growth over the course of the year to date, more than tripling origination volume year on year. Total originations are likely to top USD100 million during 2016.

LiftForward recently completed its integration with Microsoft's front and back-end systems, allowing customers to complete transactions on Microsoft's website. This partnership provides Microsoft the ability to offer its hardware as subscription and membership services allowing many companies to implement the latest Microsoft equipment for a monthly fee.

Over the course of the next 12 months LiftForward is working towards integrating its subscription management solution into other major manufacturers and distributors.

The Credit Junction

www.thecreditjunction.com

The Credit Junction ("TCJ") is a data-driven asset based lending platform that combines technology and data intelligence with traditional asset-based metrics to help owners of US and Canadian small and midsized businesses grow their companies with fast, flexible and efficient access to working capital.

TCJ has made significant progress, both in short-term milestones and longer-term objectives, across all areas of the business: credit, customer acquisition and product development. Those developments are the basis on which management is building The Credit Junction to be a long-term profitable, scalable and sustainable business.

The Credit Junction platform was launched in Q2 of 2015 and has seen steady growth since inception. The Company surpassed $50 million in Lines of Credit in Q2 of 2016, is seeing on average $250 million in new applications per quarter and continues to see market demand and acceptance of its products.

Management remains keenly focused on credit, controls and its path towards profitability as it prepares for the next stage of growth in 2016 and beyond.

Pillar Two - Other FinTech platforms

As above, aggregate loan book performance has been presented for the eight "Other" Pillar Two platforms which continue to operate.

Combined new loans per quarter

Figure 17- Please see supplementary document

Combined loan books-current months

Figure 18- Please see supplementary document

Other platform loan origination volume for H1 2016 was broadly in line with H2 2015. However, within this number there is some variation at a platform level. Although most of the contributing platforms have outstripped their H2 2015 performance, two have not. One of these platforms, FundingKnight has undergone significant restructuring in the period and management are working towards a return to a growth path. The other platform with a loan origination contraction in H1 2016 is currently being intensely reviewed by GLI, and the Group's investment has been written down to reflect its performance.

GLI Finance Limited

CHIEF FINANCIAL OFFICER'S REVIEW (continued)

For the period ended 30 June 2016

The fair value of the eight platforms in the 'Other' Category is GBP13.1m (31 December 2016 GBP20.9m). The valuation of GLI's investment in these platforms ranges up to GBP4.8m. The Group considers these eight businesses (Finpoint, Funding Knight, MyTripleA, Open Energy Group, Ovamba, Trade River UK and US, and UK Bond Network) to have interesting operating models which hold potential for growth, but we continue to closely monitor the execution of their individual strategies.

The performance of Pillar Three has been disclosed as part of the GLI Measurement Basis table above.

Emma Stubbs

Chief Financial Officer

Date: 23 September 2016

GLI Finance Limited

RISK REPORT

For the period ended 30 June 2016

Principal Risks inherent in the Group's Three Pillar business model

The taking of risk is inherent in the process of value creation. As the essence of the Group's business model is investing in FinTech platforms, which raise funds to lend, it follows that the principal risks the Group has consciously accepted are investment risk, liquidity risk and credit risk. In turn, exposure to investment risk is driven by the strategic, liquidity, indirect credit and operational risks assumed by investee platforms.

The Group has assumed other risks which, based on current assessment, pose lower levels of uncertainty: strategic, market, operational, regulatory compliance, and consequential reputational risk.

Set out below is an analysis of risks by Pillar and the residual exposures on the holding Company balance sheet. In this discussion reference is made to the following risk definitions employed by the Group:

Risk Definitions

1. Investment Risk - the risk that an investment's actual return will be different to that expected. Investment risk primarily arises from the exposure of the Group's investee entities to the risks summarised below:

· Strategic Funding Risk - the risk that investee platforms are not able to raise sufficient funding to fuel their loan growth until they become operationally self-sustaining.

· Strategic Lending Risk - the risk that markets for the lending products of platforms are not sufficiently large to allow revenue growth, or that the offering/pricing is not competitive;

· Strategic Operating Risk - the risk that the platforms' business models are ineffective across the people/process/IT system dimensions is sub-optimal;

· Operating Finance Risk - the risk that platforms will not be able to finance their operating expenditures until they reach break-even in cash flow terms; and,

· Performance Management Risk - the risk that GLI is not in a position to influence, guide or otherwise adequately direct the performance of investee platforms to protect its investment. 

2. Liquidity Risk - the possibility that the Group will be unable to settle obligations timeously.

3. Credit Risk - Direct credit risk is the risk of default on a debt that may arise from a borrower failing to make required payments. Indirect credit risk is defined as the potential impact on the Group of defaults in loans arranged and managed by GLI's subsidiaries and which are funded by clients of that subsidiary. Subsidiaries do not carry direct credit risk in these circumstances, but may be negatively impacted by consequential reputational risk.

4. Strategic Risk - the uncertainties and untapped opportunities embedded in the Group's strategic intent.

5. Market Risk - Market risk is the risk of losses in positions arising from movements in market prices. Market risk includes as sub-definitions: Interest rate risk, including basis risk and foreign exchange risk.

6. Operational risk - the risk of loss arising as a result of inadequate or failed internal processes, people and systems, or from external events (including legal risk).

7. Regulatory Compliance Risk - Regulatory Compliance Risk is defined as the risk of legal or regulatory sanctions, material financial loss as a result of a failure to comply with laws, regulations, rules, related self-regulatory organisation standards, and codes of conduct applicable to the Group's activities.

8. Consequential risks - risks that arise as a consequence of the occurrence of a risk event. Two main categories of such risks are:

· Capital Risk

· Reputational Risk

Risks managed at the Group level

Liquidity risk - Cash flow requirements arise from:

· Investment decisions;

· On-balance sheet lending;

· Operational expenditures;

· Contractual liability maturities, and,

· Distributions to Shareholders.

GLI Finance Limited

RISK REPORT (continued)

For the period ended 30 June 2016

All platforms require loan and working capital funding to grow. Therefore, a close relationship exists between the availability of GLI's investment funding and the growth of the valuations of platforms which have not managed to obtain other funding lines.

The Group's liquidity and cash flow management has been enhanced over the half year and is a focus for the CEO and his executive team.

The contractual timing of the maturity of its liabilities, and the liquidity of its assets, are reflected in the table below:

Fund raising, whether it be debt, equity or through asset sales, either for the Group balance sheet or on behalf of one or other of the platforms, is an ongoing feature of the Group's business, managed by bi-weekly reviews of cash flow forecasts undertaken by a sub-committee of the GLI Executive Committee chaired by the CEO, and overseen by the Board in its quarterly meetings.

Planning is well underway to refinance the Syndicated Loan due on March 2017 (included in the 6 to 12 month category).

GLI Finance Limited

RISK REPORT (continued)

For the period ended 30 June 2016

Market risk

Interest rate and foreign exchange rate risks arise through the normal course of the Group's business, operating as it does across a number of different monetary areas. The Group is also exposed to the quoted price of the SMEF investment.

Although these are relatively insignificant exposures, they are regularly monitored, and the decision not to hedge reviewed from time to time.

Sensitivities to these exposures are set out in the table below.

FX Rates

The Company has transactions in a number of currencies. The table below lists out the rates used for the periods ended 30 June 2016, 31 December 2015, 30 June 2015, 31 December 2014 and 30 June 2014:

Rate of exchange vs. GBP1:00

Legal and Regulatory compliance

As a Guernsey Investment Company traded on the AIM market, the Company is required to comply with the AIM Rules as well as Guernsey Company law. Other key areas of legislation which exist in all jurisdictions in which the Group operates include Company laws, anti-money laundering regulations, data protection requirements and FATCA.

In conjunction with the Nominated Advisor, the Company Secretary monitors statutory requirements to ensure compliance with AIM Rules. The Group regularly consults leading legal firms for advice on the application of regulation, as well as to ensure the quality of contractual arrangements with counter parties.

In the wholly owned operating businesses, dedicated compliance officers, or executives with compliance experience perform and oversee the compliance of processes with local regulations. They operate within policy frameworks laid down at the GLI and Sancus BMS Group levels. A Compliance Committee has recently been established to ensure the continuous improvement of this framework.

The Group now invests in a number of platforms and whilst no platform is in direct competition with any other, this is a consideration when looking at potential new platforms and one which the Company looks to avoid. The Chief Executive Officer or a member of the Executive Team is on the Board of the majority of the platforms in which the Company invests. There are service agreements in place to confirm that any information acquired as a result of being a Director of each platform remains confidential to that platform. No information is shared with other platforms without the knowledge and consent of the relevant platform.

Consequential Risks

Capital Risk - Group Head Office closely monitors and plans to meet ongoing capital requirements.

Reputational Risk - Governance and the risk framework in operation within GLI is designed to avoid significant risk events, and so protect the Group's reputation. Events with potential reputational impacts are managed by the CEO and closely overseen by the Board.

GLI Finance Limited

RISK REPORT (continued)

For the period ended 30 June 2016

Risks inherent in Pillar One

Liquidity risk

Apart from the funding provided by the Group, Sancus BMS Group, relies on institutional, high net worth and some retail funders to meet requirements from borrowers. Funding is arranged before a loan is approved, and funding and loan repayment terms are structured to avoid any liquidity mismatches arising.

The main impact of liquidity risk is that growth may be constrained. As such, building and maintaining relationships with co-lenders and funders is an ongoing priority for management.

Direct and Indirect Credit Risk

The on balance sheet loan book is generally performing well, and loans under management have only 0.3% outside of original credit terms.

Sancus, BMS Finance and Platform Black have developed their credit policies, approval and monitoring processes to be effective for each businesses' different type of lending (property-backed, business cash flow and invoice/supply chain finance respectively.) Limited default experience indicate that the policies and processes are proving effective.

The 0.3% defaults were experienced at Platform Black.

Operational Risk

The operational risks of primary concern in Pillar One are business continuity and IT security risks, particularly where dependence on IT is significant, as in the case of Platform Black.

As the businesses, apart from Platform Black, are relatively simple operationally, reliable business continuity is achieved through offsite hosting and back-up of systems and data by reputable service providers and providing staff with the ability to operate from locations remote to their normal offices.

Platform Black, which is dependent on the 24/7 operation of its website, has robust real time data replication and systems availability. To date this infrastructure has proved to be reliable.

Platform Black also performs periodic penetration testing to ensure security controls built at the time of system implementation remain effective.

Risks inherent in Pillar Two

The Group's objective is to maximise the value of its Pillar Two investments over time. Pillar Two is where the majority of GLI's investment risk has been consolidated.

To limit the exposure to any one platform, an investment limit of 15% of gross assets has been set. The largest exposure to a particular platform that the Group had at period end amounted to 5.47%.

Using the drivers of investment risk as described above, the Group has developed a risk rating for each platform (commercially sensitive and therefore not disclosed). This rating is used to guide the intensity of management attention on platforms and is a key determinant of the decision to continue support for platforms, or not. It is reported to the Board at six monthly Audit and Risk Committee meetings.

GLI Finance Limited

RISK REPORT (continued)

For the period ended 30 June 2016

Risks inherent in Pillar Two (continued)

Liquidity support for platforms receives ongoing attention from management. Understanding the quantum of liquidity required by each platform to allow it to become self-financing from a working capital perspective is a key area receiving management attention.

GLI operates a New Business Committee which considers new/increased investment proposals in platforms. The GLI Executive Committee has also enhanced the process of reviewing platform performance.

Pillar Three

AAM manages its primary risk as an asset manager, namely that of investment underperformance of its fund under management, through the structured due diligence it performs on the platforms which originate loans for the fund. AAM also overview the credit risk on loans before the fund participates therein, and closely monitors the performance of these loans.

Group Head Office

The quoted price of the Group's investment in the SMEF fund is impacted by market sentiment and the underlying credit risks of the loans in the fund. These are risks accepted by the Group, and discussed in performance review meetings with AAM.

The direct credit risk in Group Head Office's portfolio of remaining loans through platforms is analysed as follows:

Loans continue to perform with minimal late capital or income repayments. Only one loan has fallen outside of the current payment terms but this only accounts for 2.4% of our exposure. The remaining direct exposure is yielding an average interest rate of 11.45% p.a.. GLI are putting in place an agreement with Amberton to manage the remaining loan book on behalf of GLI and maintain close monitoring of our exposure.

Russell Harte

Chief Operating Officer

Date: 23 September 2016

INDEPENDENT REVIEW REPORT TO

GLI Finance Limited

We have been engaged by the company to review the condensed set of consolidated and company financial statements in the interim report for the six months ended 30 June 2016 which comprises the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Shareholders' Equity, the Statement of Cash Flows and related notes 1 to 25 for both the Group and Company. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by the Directors. The Directors are responsible for preparing the interim financial report in accordance with the AIM Rules of the London Stock Exchange.

As disclosed in note 2, the annual financial statements of the Group and Company are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six months ended 30 June 2016 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules of the London Stock Exchange.

Deloitte LLP

Chartered Accountants and Statutory Auditor

Guernsey, Channel Islands

Date: 23 September 2016

GLI Finance Limited

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

For the period ended 30 June 2016

* Comparatives have been reclassified in order to more appropriately reflect the nature of the underlying items.

The accompanying notes form an integral part of these financial statements.

GLI Finance Limited

CONDENSED COMPANY STATEMENT OF COMPREHENSIVE INCOME (Unaudited)

For the period ended 30 June 2016

* Comparatives have been reclassified in order to more appropriately reflect the nature of the underlying items.

All of the (loss)/profit for the current and prior periods is attributable to the equity holders of the parent.

The accompanying notes form an integral part of these financial statements.

GLI Finance Limited

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)

As at 30 June 2016

The financial statements were approved by the Board of Directors on 23 September 2016 and were signed on its behalf by:

The accompanying notes form an integral part of these financial statements.

GLI Finance Limited

CONDENSED COMPANY STATEMENT OF FINANCIAL POSITION (Unaudited)

As at 30 June 2016

The financial statements were approved by the Board of Directors on 23 September 2016 and were signed on its behalf by:

The accompanying notes form an integral part of these financial statements.

GLI Finance Limited

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)

For the period ended 30 June 2016

* During the period ended 30 June 2016, the Company made two dividend payments, totalling 1.25 pence per Ordinary Share.

GLI Finance Limited

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)

For the period ended 30 June 2016

** During the period ended 30 June 2015, the Company made two dividend payments, totalling 2.50 pence per Ordinary Share.

The accompanying notes form an integral part of these financial statements.

GLI Finance Limited

CONDENSED COMPANY STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)

For the period ended 30 June 2016

*During the period ended 30 June 2016, the Company made two dividend payments, totalling 1.25 pence per Ordinary Share.

**During the period ended 30 June 2015, the Company made two dividend payments, totalling 2.50 pence per Ordinary Share.