PBLT.L Regulatory News (PBLT)

From: TOC Property Backed Lending Trust plc (the "Company")

LEI: 213800EXPWANYN3NEV68

Date: 31 August 2018

Subject: Interim Report

Unaudited statement of results for the six months ended 31 May 2018

Chairman's Statement

I last wrote to you six months ago and am now pleased to present the Company's Interim Report & Financial Statements for the six months ended 31 May 2018.

Results

The net asset value at 31 May 2018 was 97.57 pence per share, down 0.6% from 98.11 pence at 30th November 2017, giving a net asset value total return for the six month period of 3.0% when dividends are taken into account.

The Company continues to focus on lending against quality projects in the North East and regions with the geography of loans split as follows: North East 73%; Essex 17%; and, Norfolk 10%. With signs that the property market is slowing down in London and the South East and an expectation that this could spread to other parts of the United Kingdom the geographical split becomes increasingly important, as do our close relationships with developers.

Dividends

The quarterly dividend was increased to 1.75 pence per share in March 2018 and the Board continues to target 7.0 pence per annum of dividends. Currently that amount is not fully covered by net operating income, but it is our intention to move to a fully covered 7.0 pence per annum dividend in 2019.

Fund raisings

During the period 2.9 million shares were issued and the loan portfolio increased to £23.9m; since the period end a further 1.3 million shares have been issued. Further fund raisings are expected to take place and it is the Company's intention to borrow at conservative levels up to 30% of net assets.

Investments

Since 30th November 2017 elements of three loans have been repaid, with a total value of £2.7m; this included the repayment of the whole of the Commerce Chambers loan of £1.5m. Two existing loan facilities were added to and two new loans made, with an aggregate value of £3.9m. The number of loans with profit share arrangements has increased from three to five. There are positive signs that value is beginning to be generated from such arrangements.

Two of the Company's existing loans (Pendower Hall and Medburn) are to borrowers owned and controlled by the principals who control Tier One, the Company's Investment Adviser. These loans were due for repayment in August 2018 but the Company has received a request from the borrowers to extend the term of the loans and also to increase the size of one of them, Pendower Hall. The Board is considering this request and a further announcement will be made shortly but it is anticipated that any such amendments will require the approval of shareholders. A third loan facility (Charlton Bonds) is to a borrower in which Tier One has a minority 25.1% interest. This loan was also due for repayment in August 2018. The Company has received a request from the borrower to extend the repayment date to enable the final units in the development to be sold to repay the outstanding facility. Again, the Board is considering this request and a further announcement will be made in due course. These three loans are all up to date with interest payments and remain appropriately secured. All three loans were in place prior to the Company's IPO in 2017.

Conclusion

The Company has been in operation for 19 months and is doing what was set out in the January 2017 prospectus. Careful loan selection and a thorough monitoring process are critical to our progress. Our adviser, Tier One, has increased its staff from 12 to 15 over this period and is working closely with the Board. We look to see further steady progress throughout 2018 and into 2019.

Stephen Coe

Chairman

31 August 2018

Investment Adviser's Report

About the Company

TOC Property Backed Lending Trust Plc (the "Company") was launched in January 2017 to provide shareholders with a consistent and stable income and the potential for an attractive total return over the medium to long term while managing downside risk through: (i) a diversified portfolio of fixed rate loans predominantly secured over land and/or property in the UK; and (ii) receiving, in many cases, the benefit of an associated profit share arrangement, usually obtained by acquiring (at nil cost) a minority equity stake in the relevant borrower project development vehicle ("Profit Shares").

These returns are expected to be delivered through the Investment Adviser's focus on high quality and experienced borrowing teams, a robust and tested credit process and the direct origination of deal flow. The Investment Adviser manages downside risk by focusing on secured debt with both collateral and contractual protection, with investments aimed primarily at secured loans.

The Investment Adviser sees huge value in only providing loan facilities to strong, experienced property teams who can evidence that they have the ability to deliver on a project. Often, these teams are led by individuals with a wealth of experience and a background working within large corporate property development businesses and have subsequently decided to launch their own regional based property development offering. All loans are directly originated by the Investment Adviser utilising existing networks and relationships, providing further support to the robust credit process.

To further enhance investor returns, the Investment Adviser intends to assist in negotiating profit share arrangements for the benefit of the Company for approximately 80% of future loan advances. This provides the Company with the opportunity to not only benefit from the interest rate created by the secured loan, but to also benefit from any profit generated by the underlying projects.

The Company typically seeks to originate debt where the effective loan to value ratio of any investment is between 40% and 100% at the time of origination. The Company aims to have a blended LTV across the portfolio of around 75% (based on initial valuations at the time of loan origination) once fully invested.

The Investment Adviser is following the Company's investment policy of allocating funds raised predominantly across three specific areas, with set allocation exposures:

· regional residential housebuilding across the UK with a focus on non-London based property;

· small to medium commercial property development across the UK primarily focusing on small serviced office space, hotel developments and wedding and conference venues; and

· direct sale and leaseback vehicles.

About the Adviser

Tier One Capital Ltd, as Investment Adviser, provides bespoke wealth management and fund management services to high net worth (HNW) private clients, charities and institutions.

Tier One Capital Ltd currently has a team of 15 across offices in London, Lausanne and its head office in Newcastle upon Tyne.

REVIEW OF THE 6 MONTHS TO 31 MAY 2018

The portfolio continues to perform well in the first half of the Company's financial year, posting a NAV total return of 3.0% and paying its second quarterly dividend of 1.75p in line with the 7.0p annual dividend target. While the portfolio's default rate since inception remains at zero, we continue to be mindful of the ongoing challenges our borrowers are facing in a climate of rising interest rates, a weakening housing market and the ever present shadow of Brexit. Where necessary, we intend to increase our monitoring presence of those projects we feel may be most exposed to a slowdown of property prices, and in particular, a slowdown in the time taken to sell a new residential home.

The Company agreed one new facility of £4,525,000 with Thursby Homes (Springs) Ltd in May 2018, of which £1,275,000 has been drawn down. This loan will finance the development of 22 luxury apartments in Low Fell, Gateshead. The loan is at a 10% rate, with security being taken by a senior charge over the freehold of the building, with full planning permission, and the company's bank account. It also has the benefit of a 25.1% profit share for the Company.

There were further deployments of capital in the Marley Hill, The Willows, and Bedlington projects of £925,000, £700,000 and £400,000 respectively.

Following the Watson & Sons exit in October 2017, the second successful exit occurred with the refinance of Quartzec Holdings on 29 January 2018 via traditional finance. The £443,000 loan, at 8%, was provided to support the acquisition of a stable and profitable facility with an established track record in October 2015. The facility predated the formation of the Company and was brought into the Company on the date of listing. Since listing £36,023 of interest was generated representing an IRR of 8.3%. There was a further partial redemption of the Charlton Bonds project, returning £763,800 of capital.

Post period end, on the 29 June 2018 the third successful exit occurred with the refinance of Commerce Chambers. The £1,505,000 loan, at 8%, was provided to support the acquisition and conversion of a commercial property in the centre of Middlesbrough. It comprises small serviced office space, ground floor retail units and a luxury short let apartment. The facility predated the formation of the Company and was brought into the Company on the date of listing. Since listing £168,820 of interest was received, representing an IRR of 8.3%.

Two projects, Fernhill and Bylaugh Hall were extended for a further six months, to facilitate exits and with the additional benefit of increased security. On 28 June 2018 a new facility of £550,000 was made to Dinosauria Ltd, to fund the acquisition of Gateshead Town Hall Old Quarter in Gateshead, Newcastle upon Tyne. This loan is at an 8% rate over five years, with security being taken by a senior charge over the building and the borrower's bank account which will also be required to hold nine months interest cover. The borrower intends to modernise the buildings for use as serviced offices, with a medium-term plan to convert the main town hall into an "edutainment" attraction to be known as The Unnatural History Museum. The project has the benefit of a profit share for the Company.

At 31 May 2018, the Company had 13 live facilities, four of which are a profit share arrangement for the benefit of the Company, with the deployment level sitting at £23,875,700.

Deployment

The portfolio continues to be deployed across residential 50% (30 November 2017: 47%), commercial 37% (30 November 2017: 41%), sale and leaseback 9% (30 November 2017: 11%) and cash 4% (30 November 2017: 1%).

The current average interest rate being achieved on the combined loan book is 8.4% (30 November 2017: 8.3%), with an average loan size having increased from £1.68m at 30 November 2017 to £1.84m at 31 May 2018. This reflects the natural progression of the Company's strategy of providing larger facilities as the AuM of the Company grows, rather than providing a higher volume of lower value loans.

Profit Share Projects

There are currently four Profit Share projects in the portfolio (30 November 2017: three), with a fifth being added post period end.

To date we have not recognised any uplift in the equity value of the four facilities (30 November 2017: £nil), given where we are in the lifecycle of each project. We monitor this as part of our monthly review process and this will be fully reviewed as part of our year end audit.

The first was a £2.3m facility to Ryka Developments Limited (St Hilds), an investment company based in Newcastle upon Tyne. The funds were utilised to acquire a student accommodation building in St Hilds, Durham at a rate of 8% over a 3-year term. The facility has been secured with a first legal charge against the freehold building and the borrower's bank account. The building has full occupancy and the rents are subject to annual review.

The second facility was a £2m facility to Gatsby Homes Limited (Bedlington), a property development company based in Newcastle upon Tyne. The funds are being utilised to develop 14 residential properties to the North of the city, and have been loaned at a rate of 10% by the borrower over a 2-year term. The facility has been secured with a first legal charge against the land, which has full planning permission, and the company's bank account.

The third facility was a £3.265m loan to Bede and Cuthbert Developments Limited (Marley Hill), a company led by two experienced property development consultants. This facility is to be used to develop 20 residential properties 7 miles south west of Newcastle upon Tyne. The facility provides an interest return of 8% over a two-year term, with security being taken by a senior charge over the land, with full planning permission, and the borrower's bank account.

The fourth facility was a £4.525m loan to Thursby Homes Limited (Springs), the second project the Company has supported them on. This facility will be used to develop 22 luxury apartments in Low Fell, Gateshead. The facility provides an interest return of 10% over a two-year term, with security being taken by a senior charge over the freehold of the building, with full planning permission, and the company's bank account.

Pipeline

The Investment Adviser continues to see strong deal flow, reflective of the lack of finance options available to developers in the regions.

Outlook

The Investment Adviser continues to see a greater balance of risk and return by providing loan facilities to high quality and experienced property development teams in the regions, as opposed to central London. The current geographical breakdown of the Company's deployment approach shows approximately 73% (30 November 2017: 72%) of the Company's loans being focused in the North East, reflecting the Investment Adviser's commitment to providing facilities based on a relationship led approach. The North East property market also provides protection against a decline in London property markets, as traditionally the region does not see the boom and bust dynamic created by significantly inflated property prices.

Rightmove house price index for July 2018 shows the average price for a property in the North East at £151,045 with an annual increase in prices of 0.7% and an average time to sell of 70 days. In comparison, the average price for a property in Greater London now stands at £628,458 which is a -1.7% annual change from 2017. Nationally average asking prices at £309,191 have decreased this month by -0.1% and are up 1.4% on annual basis. Additionally, Zoopla data highlights a wide variation in regional house price movement since the start of the year, with the North East showing an increase of 3.3% between January 2018 and July 2018, compared to a 2.5% fall in the South West during the same period.

We also continue to monitor the impact of slowing sales volumes on our investment strategy, and are seeing a wide variation in the speed and level of property movements around the country.

Generally, Rightmove make the observations that the number of properties coming to market has jumped by 8.6% compared to the same month last year, but with no corresponding increase to buyer numbers to soak up new seller influx. The proportion of sellers already on the market that are reducing their asking prices is at the highest at this time of year since 2011, indicating initial over-optimism on price. With the recent interest rate rise, affordability will come under pressure.

Evidence is starting to emerge of a weakening housing market, driven largely by the headwinds of an uncertain economic future from Brexit, a squeeze on household incomes due to rising consumer prices and increased tax levels. The Investment Adviser has seen no slowdown in investment opportunities and potential deal flow, the quality of which has been maintained. This is largely driven by the continued dearth in lending to small regional housebuilders from traditional lenders, a London-centric credit approach from most major lending institutions and a growing reputation in the market for the Company being a solid finance partner for strong, experienced property teams.

The Investment Adviser remains confident of being able to continue to implement the Company's investment policy, and to deliver the level of consistent quarterly income that many UK investors demand.

Ian McElroy

Tier One Capital Limited

31 August 2018

THE INVESTMENT PORTFOLIO AS AT 31 MAY 2018

*Bylaugh Hall was extended after 31 May 2018 and is been shown at its updated position.

**Commerce Chambers was successfully exited on 29 June 2018.

*** Related party

Statement of Principal Risks and Uncertainties

The risks, and the way in which they are managed, are described in more detail under the heading 'Principal Risks and Uncertainties' within the Strategic Report in the Company's Annual Report and Accounts for the year ended 30 November 2017. The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remainder of the Company's financial year.

Statement of Directors' Responsibilities in Respect of the Interim Report

We confirm that to the best of our knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union and gives a true and fair view of the assets, liabilities, financial position and profit of the Company;

· the Chairman's Statement and Investment Adviser's Review (together constituting the Interim Management Report) include a fair review of the information required by the Disclosure and Transparency Rules (DTR) 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;

· the Statement of Principal Risks and Uncertainties above is a fair review of the information required by DTR 4.2.7R; and

· the Chairman's Statement and Investment Adviser's Review together with the condensed set of financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so.

On behalf of the Board

Stephen Coe

Chairman

31 August 2018

Condensed Unaudited Statement of Comprehensive Income

For the six months ending 31 May 2018

The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

There is no other comprehensive income as all income is recorded in the statement above.

Condensed Unaudited Statement of Financial Position

Condensed Unaudited Statement of Changes in Equity

For the six months ending 31 May 2018 (unaudited)

For the year ended 30 November 2017 (audited)

For the six months ending 31 May 2017 (unaudited)

Condensed Unaudited Statement of Cash Flows

For the six months ending 31 May 2018

Notes to the Condensed Financial Statements (Unaudited)

For the six months ending 31 May 2018

1. Interim Results

The condensed financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') and IAS 34 'Interim Financial Reporting' as adopted by the European Union and the accounting policies set out in the statutory accounts of the Company for the year ended 30 November 2017. The condensed financial statements do not include all of the information required for a complete set of IFRS financial statements and should be read in conjunction with the financial statements of the Company for the year ended 30 November 2017, which were prepared under IFRS as adopted by the European Union. There have been no significant changes to management judgements and estimates.

The condensed financial statements have been prepared on the going concern basis. In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting Council. After making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing these financial statements.

2. Investment Manager's and Investment Adviser's Fees

Investment Manager

The Company has appointed R&H Fund Services (Jersey) Limited to act as the Company's alternative investment fund manager (AIFM) for the purposes of AIFMD pursuant to the Investment Management Agreement and accordingly the AIFM is responsible for providing discretionary portfolio management and risk management services to the Company, subject to the overall control and supervision of the Directors. The AIFM is entitled to receive fees from the Company of £15,000 per annum on total assets up to £100 million, or a fee from the Company of £20,000 per annum if total assets are over £100 million. There is a balance of £24,000 accrued for the Investment Manager for the period from launch to 31 May 2018 (Period from incorporation to 30 November 2017: £15,287).

Investment Adviser

The AIFM has appointed Tier One Capital Limited to act as the Company's investment adviser pursuant to which the AIFM has delegated discretionary portfolio management services to the Investment Adviser, subject to the overall control and supervision of the Directors.

The Investment Adviser is entitled to receive from the Company an investment adviser fee which is calculated and paid quarterly in arrears at an annual rate of 0.25 per cent. per annum of the prevailing Net Asset Value if less than £100m; or 0.50 per cent. per annum of the prevailing Net Asset Value if £100m or more. The Investment Adviser has agreed (unless otherwise decided by the Board) to waive its fee until the Net Asset Value is at least £50 million. 

There are no performance fees payable.

3. Earnings per ordinary share

The revenue, capital and total return per ordinary share is based on each of the profit after tax and on 24,997,360 ordinary shares, being the weighted average number of ordinary shares in issue throughout the period.

Earnings for the period to 31 May 2018 should not be taken as a guide to the results for the year to 30 November 2018.

4. Dividends

A second interim dividend for the year ending 30 November 2018, of 1.75 pence per share, was paid on 3 July 2018 to shareholders on the register on 15 June 2018.

5. Investments held at fair value through profit or loss

The Company's investment held at fair value through profit or loss represents its profit share arrangements whereby the Company owns 25.1% of the following companies:

Bede and Cuthberts Development Ltd

Gatsby Homes Ltd

Ryka Developments Ltd

Thursby Homes (Springs) Ltd

The valuation of these interim period and prior period assets requires critical judgement. The projects remain at a very early stage and no equity value could currently be expected to be recovered should they not complete. As the projects move closer to completion, the Board and Investment Adviser will utilise financial and market data to judge the fair value of the profit shares.

IFRS 13 requires the Company to classify its financial instruments held at fair value using a hierarchy that reflects the significance of the inputs used in the valuation methodologies. These are as follows:

· Level 1 - Unadjusted, fully accessible and current quoted prices in active markets for identical assets or liabilities.

· Level 2 - Quoted prices for similar assets or liabilities, or other directly or indirectly observable inputs which exist for the duration of the period of investment.

· Level 3 - External inputs are unobservable. Value is the Directors' best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and on assumptions as to what inputs other market participants would apply in pricing the same or similar instrument.

All investments are considered Level 3. There have been no movements between levels during the period.

6. Loans at amortised cost

The Company's loans are accounted for using the effective interest method. The carrying value of each loan is determined after taking into consideration any requirement for impairment provisions. As at 31 May 2018 the Board agreed, after consideration of the economic climate, the loan to value ratios and prior credit loss experience of the borrowers, that there is no requirement for impairment. No impairment was required in the prior year/period.

7. Share Capital

Of the initial launch issue on 24 January 2017, a loan portfolio of £11,601,000 was received as a consideration for 11,601,000 shares.

On 18 June 2018 a further 1,305,031 shares were issued at 100p.

The ordinary shares are eligible to vote and have the right to participate in either an interest distribution or participate in a capital distribution (on a winding up).

8. Net Asset Value per ordinary share

The net asset value per ordinary share is based on net assets of £24,997,201 (31 May 2017: £20,838,339; 30 November 2017: £22,265,682) and on 25,619,032 ordinary shares (31 May 2017: 21,345,850; 30 November 2017: 22,693,559), being the number of ordinary shares in issue at the period/year end.

9. Related Party

The Directors are considered to be related parties. No Director has an interest in any transactions which are, or were, unusual in their nature or significant to the nature of the Company.

The Directors of the Company received £64k fees for their services during the six months to 31 May 2018 (30 November 2017: £79k; 31 May 2017 £32k) £nil was payable at the period and prior year end; £7.5k was payable as at 31 May 2017.

Stephen Black and Ian McElroy are shareholders and have control of Tier One Capital Ltd. Tier One Capital Ltd received no investment adviser's fee during the period and prior year and £nil was payable at the period and prior year end. Tier One Capital Ltd receive a 20% margin and arrangement fee for all loans it facilitates.

Stephen Black and Ian McElroy are shareholders owning 50% of Inveniam Corporate Finance Ltd to which the Company owes £36k for financial modelling as at 31 May 2018 (30 November 2017: £nil; 31 May 2017 £nil).

There are various related party relationships in place with the borrowers as below:

· Quartztec

Stephen Black and Ian McElroy were directors of Quarztec Holdings Limited. Tier One Capital Investments Ltd owned 25.1% of Quartztec Holdings Limited. The loan amount outstanding as at 31 May 2018 was £nil (30 November 2017: £440k, 31 May 2017: £440k). There were no transactions in relation to loans made during the period (30 November 2017: £440k, 31 May 2017: £nil). Interest due to be received as at 31 May 2018 was £nil (30 November 2017: £6k,

31 May 2017: £6k). Interest received during the period amounted to £6k (30 November 2017: £24k, 31 May 2017: £12k). This project was fully repaid on 29 January 2018.

· Pendower Hall

Stephen Black and Ian McElroy are directors of Pendower Hall Ltd. Pendower Hall Ltd is 100% owned by Inperpetuity Ltd. Inperpetuity Ltd is 100% owned by Stephen Black, Ian McElroy and their respective spouses. The loan amount outstanding as at 31 May 2018 was £1.2m (30 November 2017: £1.2m, 31 May 2017: £1.2m). Transactions in relation to loans made during the period amounted to £nil (30 November 2017: £1.2m, 31 May 2017: £1.2m). Interest due to be received as at 31 May 2018 was £21k (30 November 2017: £21k, 31 May

2017: £21k). Interest received during the period amounted to £61k (30 November 2017: £81k,31 May 2017: £21k).

· Commerce Chambers

Stephen Black and Ian McElroy are directors of Commerce Chambers Ltd. Commerce Chambers Ltd is 100% owned by Inperpetuity Ltd. Inperpetuity Ltd is 100% owned by Stephen Black, Ian McElroy and their respective spouses. The loan amount outstanding as at

31 May 2018 was £1.5m (30 November 2017: £1.5m, 31 May 2017: £1.5m). Transactions in relation to loans made during the period amounted to £nil (30 November 2017: £1.5m, 31 May 2017: £1.5m). Interest due to be received as at 31 May 2018 was £20k (30 November 2017: £20k, 31 May 2017: £20k). Interest received during the period amounted to £60k (30 November 2017: £80k, 31 May 2017: £19k).

· Rare Earth Medburn

Stephen Black and Ian McElroy are directors of Rare Earth Medburn Ltd. Rare Earth Medburn Ltd is 100% owned by Inperpetuity Ltd. Inperpetuity Ltd is 100% owned by Stephen Black, Ian McElroy and their respective spouses. The loan amount outstanding as at 31 May 2018 was £1.6m (30 November 2017: £1.6m, 31 May 2017: £1.5m). Transactions in relation to loans made during the period amounted to £nil (30 November 2017: £1.6m, 31 May 2017: £1.5m). Interest due to be received as at 31 May 2018 was £22k (30 November 2017: £22k, 31 May

2017: £22k). Interest received during the period amounted to £65k (30 November 2017: £80k,

31 May 2017: £17k).

· Thursby Homes (Charlton Bonds)

Tier One Capital Ltd owns 25.1% of Thursby Homes Ltd. T1C Nominees Ltd is a director of Thursby Homes Ltd. T1C Nominees Ltd is owned by Stephen Black and Ian McElroy who are directors. The loan amount outstanding as at 31 May 2018 was £1.2m (30 November 2017: £1.9m, 31 May 2017: £1.9m). Transactions in relation to loans made during the period amounted to £(0.8m) (30 November 2017: £1.9m, 31 May 2017: £1.9m). Interest due to be received as at 31 May 2018 was £27k (30 November 2017: £27k, 31 May 2017: £25k). Interest received during the period amounted to £71k (30 November 2017: £100k, 31 May 2017: £22k).

The following related parties arise due to the opportunity taken to advance the 25.1% profit share contracts where Stephen Black and/or Ian McElroy take a position on the Board of the borrower:

· Ryka Developments

The Company owns 25.1% of the borrower Ryka Developments Ltd. Stephen Black is a director of Ryka Developments Ltd. The loan amount outstanding as at 31 May 2018 was £2.3m (30 November 2017: £2.3m, 31 May 2017: £2.3m). Transactions in relation to loans made during the period amounted to £nil (30 November 2017: £2.3m, 31 May 2017: £2.3m). Interest due to be received as at 31 May 2018 was £31k (30 November 2017: £31k, 31 May 2017: £31k). Interest received during the period amounted to £92k (30 November 2017: £118k, 31 May 2017: £26k).

· Gatsby Homes

The Company owns 25.1% of the borrower Gatsby Homes Ltd. T1C Nominees Ltd is a director of Gatsby Homes Ltd. T1C Nominees Ltd is owned by Stephen Black and Ian McElroy who are directors. The loan amount outstanding as at 31 May 2018 was £1.2m (30 November 2017: £0.8m, 31 May 2017 £nil). Transactions in relation to loans made during the period amounted to £0.4m (30 November 2017: £0.8m, 31 May 2017: £nil). Interest due to be received as at 31 May 2018 was £19k (30 November 2017: £11k, 31 May 2017: £nil). Interest received during the period amounted to £41k (30 November 2017: £21k, 31 May 2017: £nil).

· Bede and Cuthbert Developments

The Company owns 25.1% of the borrower Bede and Cuthbert Developments Ltd. Stephen Black and Ian McElroy are directors of Bede and Cuthbert Developments Ltd. The loan amount outstanding as at 31 May 2018 was £1.9m (30 November 2017: £1.0m, 31 May 2017:

£nil). Transactions in relation to loans made during the period amounted to £0.9m (30 November 2017: £1.0m, 31 May 2017: £nil). Interest due to be received as at 31 May 2018 was £26k (30 November 2017: £9k, 31 May 2017: £nil). Interest received during the period amounted to £43k (30 November 2017: £11k, 31 May 2017: £nil).

· Thursby Homes (Springs)

The Company owns 25.1% of the borrower Thursby Homes (Springs) Ltd. Stephen Black

and Ian McElroy are directors of Thursby Homes (Springs) Ltd. The loan amount outstanding as at 31 May 2018 was £1.3m (30 November 2017: £nil, 31 May 2017: £nil). Transactions in relation to loans made during the period amounted to £1.3m (30 November 2017: £nil, 31 May 2017: £nil). Interest due to be received as at 31 May 2018 was £nil (30 November 2017: £nil, 31 May 2017: £nil). Interest received during the period amounted to £nil (30 November 2017: £nil, 31 May 2017: £nil).

10. Operating Segments

The Board has considered the requirements of IFRS 8 'Operating Segments'. The Board is of the view that the Company is engaged in a single unified business, being the investment of the Company's capital in financial assets comprising loans and joint venture equity contracts and in one geographical area, the United Kingdom, and that therefore the Company has no segments. The Board of Directors, as a whole, has been identified as constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to assess the Company's performance is the total return on the Company's net asset value. As the total return on the Company's net asset value is calculated based on the IFRS net asset value per share as shown at the foot of the Consolidated Statement of Financial Position, the key performance measure is that prepared under IFRS. Therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in the financial statements.

11. Fair Value Measurements

The fair value measurements for assets and liabilities are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used. These different levels have been defined as follows:

· Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement date.

· Level 2 - inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly.

· Level 3 - unobservable inputs for the asset or liability. Value is the Directors' best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation techniques and on assumptions as to what inputs other market participants would apply in pricing the same or similar instrument. All investment properties are included in Level 3.

All investments are considered Level 3. There were no movements of any assets between levels and no transfers into and out of Level 3 during the six months ending 31 May 2018 and the year to 30 November 2017.

12. Post Balance Sheet Events

On 7 June 2018, an interim dividend was declared of 1.75p with an ex-dividend date of 14 June 2018 and a pay date of 3 July 2018.

On 18 June 2018, 1.3m ordinary shares were issued at 100p.

On 27 June 2018, a new loan of £650k was advanced to Dinosauria Limited in relation to a project with Gateshead Town Hall. £100k was repaid on 18 July 2018.

On 29 June 2018, Commerce Chambers Ltd repaid their loan in full with the amount of £1.505m.

13. Interim Report Statement

The Company's auditor, Moore Stephens LLP, has not audited or reviewed the Interim Report to 31 May 2018 pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information'. These are not full statutory accounts in terms of Section 434 of the Companies Act 2006 and are unaudited. Statutory accounts for the year ended 30 November 2017, which received an unqualified audit report and which did not contain a statement under Section 498 of the Companies Act 2006, have been lodged with the Registrar of Companies. No full statutory accounts in respect of any period after 30 November 2017 have been reported on by the Company's auditor or delivered to the Registrar of Companies.