Vpc Specialty Regulatory News (VSL)

27 April 2016

VPC SPECIALTY LENDING INVESTMENTS PLC

(the "Company" or "Parent Company" with its subsidiaries (together) the "Group")

Annual Financial Report for the period ended 31 December 2015

The Board of Directors (the "Board") of VPC Specialty Lending Investments PLC (ticker: VSL) present the Company's Annual Financial Report for the period from incorporation on 12 January 2015 to 31 December 2015.

VPC Specialty Lending Investments PLC is a UK listed investment trust investing in opportunities in the alternative lending market through specialty lending platforms ("Platforms") globally and other related opportunities. This includes investing in assets originated by Platforms as well as through floating rate senior secured credit facilities ("Credit Facilities"), equity or other instruments. The Company enables its investors to access an illiquid asset class and earn an attractive risk adjusted return through a diversified, liquid vehicle traded on the Main Market.

The Company's investing activities have been delegated by the Directors to Victory Park Capital Advisors, LLC (the "Investment Manager").

Financial and operational highlights

The Company was admitted to the premium listing segment of the Official List of the UK Listing Authority (the "Official List") and to trading on the London Stock Exchange's main market for listed securities (the "Main Market") on 17 March 2015, raising £200 million by completing a placing and offer for subscription (the "Issue"). The Company raised a further £183 million via a C Share issue on 2 October 2015. Subsequent to the period ended 31 December 2015, the C Shares were converted into Ordinary Shares and were admitted to the Official List and to trading on the Main Market on 4 March 2016. As at 31 December 2015, the Company fully deployed the capital raised from the Ordinary Shares and 76% of the capital raised via the C Shares.

In addition to generating an NAV return of 5.80% for the Ordinary Shares and 1.78% for the C Shares, the Company distributed cumulative dividends of 4.79 pence per Ordinary Share and 1.07 pence per C Share to shareholders.

· May 2015: announced closing of a £100 million credit facility with a top 10 global bank to leverage Funding Circle UK loans.

· June 2015: announced a credit facility and equity investment in Behalf, Inc.

· July 2015: announced substantially fully invested net IPO proceeds within four months of listing, well ahead of the target of six months stated at IPO. The Company announced closing a $150 million credit facility to leverage Avant, Inc. loans.

· August 2015: declared its inaugural dividend of 0.90 pence per Ordinary Share. The Company announced closing a $125 million credit facility to leverage Prosper Marketplace, Inc. loans.

· September 2015: announced that it has raised gross proceeds of £183 million following the issue of C Shares.

· October 2015: announced the rapid deployment of capital from the C Share placing with approximately 44% of net proceeds invested.

· November 2015: declared an interim dividend of 1.89 pence per Ordinary Share for the three-month period to 30 September 2015. The Investment Manager announced the closing of a $175 million securitisation supported by a pool of Avant loans. The Company announced a credit facility and equity investment in zipMoney Limited, its first in Australia.

· December 2015: announced the rapid deployment of capital from the C Share placing with approximately 76% of net proceeds invested.

Post balance sheet highlights

Since the period end, the Company has:

· declared a dividend of 2.00 pence per Ordinary Share for the three-month period ended 31 December 2015 and 1.07 pence per C Share for the period from 2 October 2015 to 31 December 2015;

· announced in January that it has substantially invested the initial C Share proceeds and completed the conversion of the C Shares into new Ordinary Shares on 4 March 2016 based on the conversion ratio calculated as at 31 January 2016;

· completed its second securitisation successfully on 26 February 2016; and

· announced an initial investment pursuant to the Investment Manager's $100 million balance sheet model commitment to LoanMart, a leading provider of auto title loans in the US.

Andrew Adcock, Chairman of VPC Specialty Lending Investments PLC, commented:

"In 2015, the industry experienced significant growth in loan originations and securitisations, driven by borrower demand and increased availability of lending capital from institutional investors. Online lenders have attractive margins and highly scalable models, combined with low overheads, all of which should provide a competitive advantage for future growth.

The Investment Manager continued to generate proprietary deal flow for the Company, reflected by the strong pipeline of investment opportunities. I believe that the Investment Manager's experience in the specialty lending sector utilising both the Balance Sheet Model and the Marketplace Model combined with a diversified capital base makes it uniquely positioned to partner with Platforms globally. The Board believes that over the next year, the specialty lending sector will continue to grow and reaffirm its position as a sustainable and growing alternative to the traditional banking model. Looking ahead, we are keen to selectively expand our footprint globally and take advantage of opportunities in new markets which shall enable the Company to maintain its competitive advantage."

FOR FURTHER INFORMATION, PLEASE CONTACT:

ABOUT:

VPC Specialty Lending Investments PLC invests in opportunities within the specialty lending market primarily through online lending platforms. The Company intends to generate an attractive total return for shareholders consisting of distributable income and capital growth via investments in a diverse portfolio of various platforms, asset classes, geographies (primarily U.S., U.K., Australia and Europe) and credit bands.

Since 2010, the Company's investment manager, Victory Park Capital, has been actively involved in the specialty lending marketplace and has made more than $4.4 billion of investments and commitments across a number of financial technology platforms, multiple geographies (U.S., U.K., Australia and Europe), products (consumer and business) and structures (whole loans and senior credit facilities).

Further information on VPC Specialty Lending Investments PLC is available at http://vpcspecialtylending.com .

A copy of the Company's Annual Report will shortly be available to view and download from the Company's website, http://vpcspecialtylending.com. Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into or forms part of this announcement.

The following text is extracted from the Annual Report and Financial Statements of the Company for the period ended 31 December 2015.

STRATEGIC REPORT

CHAIRMAN'S STATEMENT

I am pleased to present my first annual report as Chairman of the Company, covering the period from 12 January 2015 (date of incorporation) to 31 December 2015. Following its listing on the Main Market of the London Stock Exchange, the Company executed its capital deployment target by 22 July 2015, well ahead of the stated target at IPO. Furthermore, the Company successfully raised incremental capital through the issue of C Shares on 2 October 2015. The Company has declared cumulative dividends of 4.79 pence per Ordinary Share and 1.07 pence per C Share, and generated a total NAV per share return of 5.80% during the trading period on the Ordinary Shares and 1.78% on the C Shares.

The Ordinary Shares gradually traded to a premium, reaching a peak of 104.5 pence by the end of July 2015. Despite the credit performance of the underlying loans continuing to meet expectations, both the Ordinary Shares and C Shares (together the "Shares") traded down during the latter part of the trading period, in part, owing to greater market volatility combined with some negative sentiment regarding the sector. Following the C Share conversion in March, the trading performance of the Ordinary Shares has improved to some extent. The Board will continue to monitor the situation closely and will consider the potential for introducing share buy-backs if the Company's share price rating does not improve materially further in the near term. Overall, I firmly believe that the Company is well positioned to meet its investment objective to generate attractive returns via dividend income and capital growth.

INVESTMENTS

The Company's investments are diversified across 21 Platforms originating consumer and small business loans. Furthermore, these Platforms have divergent lending strategies and are spread across the globe, including the US, UK, Europe and Australia. Existing Platform investments made by the Investment Manager enabled the Company to substantially invest the initial proceeds within four months of the IPO. The Investment Manager added new Platforms during the period, which has helped the Company invest 76% of the subsequent C Share issue as at 31 December 2015. The Company has equity exposure to 14 Platforms through equity securities or convertible notes, which the Investment Manager believes has the potential to generate significant capital growth for our shareholders. The Company continues to expand new Platform opportunities, to develop further portfolio diversification by type and geography and thereby strengthen the Company's strategic objectives.

COSTS

The Company's annualised ratio of ongoing charges for the period stands at 1.63% which is largely attributable to administration, advisory, legal, professional and other set up costs incurred in establishing new Platform partnerships. The Company will be seeking to replicate many of its agreements/structures when establishing future Platform relationships.

MARKET OUTLOOK

The Board believes that over the next year, the specialty lending sector will continue to grow and reaffirm its position as a sustainable and growing alternative to the traditional banking model. The sector's growth in prominence and scale is driven in a large part by:

· regulatory and other restraints imposing restrictions on the traditional high street banking model which in turn has significantly reduced the availability of credit to the market. The impact of the above has been felt in both the traditional banking client base but more forcefully amongst non-bank institutions and individuals;

· a cultural shift in the way millennials wish to interact with their financial institutions; and

· continuous improvements and technological advantages driven by the continuing growth of online Platforms which are advancing the underwriting process and reducing cost whilst providing a much friendlier user interface and experience for the borrower.

In 2015, the industry experienced significant growth in loan originations and securitisations, driven by borrower demand and increased availability of lending capital from institutional investors. Online lenders have attractive margins and highly scalable models, combined with low overheads, all of which should provide a competitive advantage for future growth.

The Investment Manager continued to generate proprietary deal flow for the Company, reflected by the strong pipeline of investment opportunities. I believe that the Investment Manager's experience in the specialty lending sector utilising both the Balance Sheet Model and the Marketplace Model (both as outlined on page 10 of the Annual Report) combined with a diversified capital base makes it uniquely positioned to partner with Platforms globally. Looking ahead, we are keen to selectively expand our footprint globally and take advantage of opportunities in new markets which shall enable the Company to maintain its competitive advantage.

Andrew Adcock

Chairman

27 April 2016

This annual report for the period from incorporation on 12 January 2015 to 31 December 2015 (the "Annual Report") includes the results of the Company (also referred to as the "Parent Company") and its consolidated subsidiaries (together the "Group").

INVESTMENT OBJECTIVES

The Company's investment objectives are to:

(i) generate an attractive total return for shareholders consisting of distributable income and capital growth through investments in specialty lending opportunities;

(ii) achieve portfolio diversification across Platforms, geographies, borrower types, credit quality, loan structures and investment models; and

(iii) enable our shareholders to benefit from equity upside through exposure to equity or equity-linked securities issued by Platforms.

The Company's Net Asset Value (the "NAV") as at 31 December 2015 was £384.3 million (cum income). Of this, £201.8 million is represented by the NAV of the Ordinary Shares and £182.5 million is represented by the NAV of the C Shares.

The Company provides senior credit facilities to Platforms via a wholly-owned special purpose vehicle ("SPV") of the Platform.

The Company also invests in credit assets originated by Platforms via bankruptcy remote SPVs which are typically funded with equity capital. This structure enables the Company to mitigate Platform credit risk and procure non-recourse leverage which is ring-fenced within the SPV.

INVESTMENT MANAGER'S REPORT

SUMMARY

As at 31 December 2015, the Company had fully deployed the capital raised through the IPO and 76% of the net proceeds of the C Share issue. The Company invested the capital via 21 Platforms and has equity exposure to 14 Platforms.

COMPANY PERFORMANCE

From inception to 31 December 2015, the Company generated an NAV return of 5.80% for the Ordinary Shares and 1.78% for the C Shares and paid total dividends of 2.79 pence per Ordinary Share.

The Investment Manager successfully implemented its strategy of deploying capital across a diverse range of Platforms, geographies, borrower types, credit quality and investment models.

The performance of the Company's underlying credit assets has been strong, benefiting from the stringent underwriting processes employed by the respective Platforms and a largely benign credit environment.

INVESTMENTS

The Company invests directly and/or indirectly into available opportunities, including by making investments in, or acquiring interests held by funds managed by the Investment Manager. Direct investments include consumer loans, small and medium enterprise ("SME") loans and advances against corporate trade receivables originated by Platforms ("Debt Instruments"). Indirect investments include investments in Platforms (or in structures set up by Platforms) through the provision of credit facilities ("Credit Facilities"), equity or other instruments.

The Investment Manager allocates capital across different Platforms to meet the Company's investment objectives within the pre-defined portfolio limits with a focus on portfolio level diversification. The Company's investments are diversified across hundreds of thousands of consumer and small business loans originated by 21 different Platforms, including companies supporting the specialty lending market, across the US, UK, Europe and Australia. As part of these investments, the Company has equity exposure to 14 Platforms through equity securities or convertible notes.

As at 31 December 2015, consumer exposure accounted for 60% of the invested Ordinary Share portfolio and 67% of the invested C Share portfolio, while SME exposure accounted for 40% and 33% of the Ordinary and C Share portfolio, respectively. Investments in US Platforms accounted for 75% of the invested Ordinary Share portfolio and 69% of the invested C Share portfolio, with the remainder being predominantly UK-based debt instruments.

ORDINARY SHARE PORTFOLIO COMPOSITION (AS AT 31 DECEMBER 2015) 

C-SHARE PORTFOLIO COMPOSITION (AS AT 31 DECEMBER 2015)

1 Restricted Cash reflects cash held in underlying private fund investments that is not available for direct investment by the Company.

2 Calculations using gross asset exposure and not reduced for gearing. Excludes cash.

LEVERAGE

The Investment Manager closed separate credit facilities with banks to leverage Debt Instruments originated by Avant, Funding Circle and Prosper during the trading period. In addition, the Investment Manager successfully closed a £118 million securitisation supported by a pool of Avant loans in November 2015.

As at 31 December 2015, the look through leverage ratio was 0.44x for the Ordinary Shares and 0.43x for the C Shares.

MARKET UPDATE

Since the 2008 recession, the supply of consumer credit for non-prime borrowers remains constrained. An estimated 56% of consumers in the US have non-prime credit scores (defined as less than 700) leaving them without access to financing at prime rates3. As a result, there is a large and growing population of US consumers with reduced access to traditional consumer credit; in 2013, approximately 50.9 million adults, lived in underbanked households in the US4.

Lending to SMEs has declined significantly over the past decade with the share of small business loans at banks in the US declining from 40% in 2005 to 25% by March 20155. The landscape is similar in the UK, with total outstanding borrowing facilities from banks to SMEs reduced from £106.1 billion in 2011 to £96.6 billion as of December 20156.

In 2015, the specialty lending sector benefitted from a combination of ongoing regulatory and structural changes affecting banks as well as positive macro factors such as low interest rates and falling unemployment. Loan origination volumes increased substantially in the various markets with growth in consumer loans outpacing SME loans, both in the US and the UK.

As the specialty lending sector continues to grow and become more established, banks have become involved in the space by providing leverage facilities to large institutional investors and establishing lending partnerships with the Platforms. This has culminated in a number of public market securitisations being successfully closed in 2015, including one by the Investment Manager which is supported by a pool of consumer loans originated by Avant, Inc.

3 Corporation for Enterprise Development - Assets and Opportunity Scorecard (January 2015).

4 2013 FDIC National Survey of Unbanked and Underbanked Households (October 2014).

5 FDIC Quarterly Banking Profile (March 2015).

6 British Bankers Association: SME Statistics (December 2015).

OUTLOOK

Despite the continued growth, the specialty lending sector remains a small part of the overall global credit market, allowing for significant continued market penetration in the coming years. This supports and underpins the sector's long term sustainability.

The securitisation market will be an important driver for growth of the industry as the majority of capital comes from institutional investors that require leverage in order to meet their target returns. In the event that the securitisation market becomes inactive, the Company is well positioned to continue to generate attractive returns for shareholders due to the Investment Manager's position in the specialty lending sector and the attractive yield on the Credit Facilities.

The Company will continue to pursue opportunities for leverage facilities that the Investment Manager believes will enhance the risk adjusted return to shareholders. Given the breadth of the Investment Manager's portfolio, access to other significant pools of capital dedicated to investing in the specialty lending sector and relationships with banks, it believes it has a distinct competitive advantage in securing these leverage facilities and completing further potential securitisations.

At the end of 2015, the US Federal Reserve finally began to raise interest rates. Although this move was highly anticipated by the markets, it is likely to have a material impact on the global credit markets and the specialty lending sector. The Company's portfolio is well positioned to navigate through a rising interest rate environment as the portfolio is balanced between fixed and floating rate credit assets. Furthermore, the portfolio benefits from a low duration due to the majority of the underlying Debt Instruments being fully amortising and with a maximum term of five years.

The Investment Manager continues to see a strong pipeline of investment opportunities within the specialty lending sector, with capacity available from both existing and new Platforms. Furthermore, the Investment Manager will continue to pursue new opportunities that can generate an attractive risk-adjusted return for shareholders and offer further diversification to the portfolio. This combined with the highly proprietary nature of its relationships with Platforms should enable the Investment Manager to continue to maintain its first mover advantage and capture further new opportunities.

SUMMARY AND HIGHLIGHTS FOR THE PERIOD

In the financial period ended 31 December 2015, the Company successfully placed 200,000,000 Ordinary Shares and 183,000,000 C Shares at an issue price of £1.00 each through the IPO and the subsequent issuance of C Shares, respectively. As at 31 December 2015, the Company fully deployed the capital raised from the Ordinary Shares and 76% of the capital raised via the C Shares.

In addition to generating an NAV return of 5.80% for the Ordinary Shares and 1.78% for the C Shares, the Company distributed cumulative dividends of 4.79 pence per Ordinary Share and 1.07 pence per C Share to shareholders.

Victory Park Capital Advisors, LLC

Investment Manager

27 April 2016

STRATEGY AND BUSINESS MODEL

EARLY ADOPTER ADVANTAGE

Although specialty lenders have operated successfully since the early 2000s, the sector has grown in prominence in the past few years, attracting interest from institutional investors. This has been due to a confluence of regulatory challenges for banks, increased use of technology by Platforms and a low interest rate environment. The Investment Manager has been involved in the sector since 2010 and has made more than $4.1 billion of investments and commitments across various Platforms, spanning multiple geographies, products and structures, and is continuing to deploy capital into existing and new Platforms.

The Investment Manager has experience in direct lending, purchasing whole loans and selectively investing in equity or equity-like instruments as well as having extensive knowledge of market participants and the complex regulatory requirements needed to operate within the sector. Having access to other significant pools of capital dedicated to investing in the specialty lending sector enables the Investment Manager to obtain leverage facilities on attractive terms and complete securitisations. These are significant advantages for the Company as it navigates through a rapidly developing sector and is well positioned to capture new opportunities.

UNIQUE PROPOSITION

The Investment Manager operates its business using two primary structures for providing debt capital to Platforms, known as the "Balance Sheet Model" and the "Marketplace Model". The Investment Manager utilises both of these models to achieve the investment objectives of the Company.

The Balance Sheet Model is where the Company provides a floating rate Credit Facility to the Platform via an SPV, which retains Debt Instruments that are originated by the Platform. The debt financing is typically arranged in the form of a senior secured facility and the Platform injects junior capital in the SPV, which provides significant first loss protection to the Company.

In the Marketplace Model, an SPV is formed by the Company to purchase Debt Instruments originated by the Platform. The Company funds the SPV with equity capital and typically uses a leverage facility from a global bank to enhance the risk-adjusted return for shareholders. All interest payments are for the account of the SPV and the SPV bears the loss for any defaulted loans.

PROPRIETARY SOURCING AND STRUCTURING

The Company has exposure to a number of proprietary investments in Platforms with attractive risk/reward characteristics that other investors in the sector are typically unable to access. This is due to the Investment Manager's extensive sourcing network, having executed transactions partnering with more than 35 leading financial and venture capital sponsors in the specialty lending sector.

The Investment Manager also leverages its relationships with Platforms and financial sponsors to secure significant lending capacity and negotiate attractive equity kickers as well as mitigate prepayment and interest rate risks.

PORTFOLIO MANAGEMENT

With a strong focus on capital preservation, the Investment Manager structures its investments in a risk-averse manner to protect the Company from the various risks and augments this with a comprehensive risk management framework. This involves a rigorous, hands-on approach to post-investment monitoring and actively assesses portfolio risk and performance. Assessing the balance of expected returns with inherent risks is an integral part of the Investment Manager's investment strategy and drives all aspects of portfolio construction. The Company believes that this approach and focus shall be a key driver in meeting its investment objectives, particularly in a more challenging credit environment.

LEVERAGE AND CAPITAL MARKETS

The Company selectively employs leverage to enhance returns generated by the underlying credit assets. This is structured to limit the borrowings to individual SPVs that hold the assets and the leverage providers have no recourse to the Company. The Company seeks to use securitisation in order to improve overall profitability by lowering the cost of financing and further diversify its portfolio using the same amount of equity capital.

As the marketplace lending industry continues to grow and become more established, the Investment Manager has been approached by multiple large global banks to offer the Company attractive leverage facilities. Given the breadth of the Investment Manager's portfolio, the Company believes that it has a distinct competitive advantage in securing these leverage facilities at attractive rates. 

PERFORMANCE MANAGEMENT

The Board uses the following KPIs to help assess progress against the Company's objectives. Further comments on these KPIs are contained in the Chairman's Statement and Investment Manager's Report sections of the Strategic Report respectively.

NAV AND TOTAL RETURN

The Directors regard the Company's NAV return as a key component to delivering value to shareholders over the long term. Furthermore, the Board believes that in accordance with the Company's objective, total return (which includes dividends) is the best measure for long term shareholder value.

At each meeting, the Board receives reports detailing the Company's NAV and total return performance, portfolio composition and related analyses. A full description of performance and the investments is contained in the Investment Manager's Report, commencing on page 6 of the Annual Report. The Board continues to target returns of 10% annually and dividends of 8.00p per annum.

DIVIDEND YIELD

The Company intends to distribute at least 85% of its distributable income earned in each financial year by way of dividends. Including the distribution made in March 2016, which related to the three-month period ended 31 December 2015, the Company has distributed 100% of its distributable income earned through the period ended 31 December 2015.

LEVERAGE RATIO

As at 31 December 2015, the look through leverage ratio was 0.44x for the Ordinary Shares and 0.43x for the C Shares. As disclosed in the investment policy starting on page 77 of the Annual Report, the aggregate leverage of the Company and any investee entity (on a look-through basis, including borrowing through securitisation using SPVs) shall not exceed 1.5 times its Net Asset Value. The Investment Manager monitors the look through leverage ratio to ensure it is in line with the investment policy.

SHARE PRICE PREMIUM/DISCOUNT

As a closed-ended listed investment trust, the Company's share price can and does deviate from its NAV. This results in either a premium or a discount, which is another component of the long term shareholder return. The Board continually monitors the Company's premium or discount and has the ability to issue or buy back shares with a view to limiting the volatility of the share price discount or premium. For more information on the Company's authorities in relation to its share capital, see pages 17 and 18 of the Annual Report.

During the trading period, the Ordinary Shares moved in a range of an 8.5% discount to a premium of 5.8% while the C Shares moved in a range of a discount of 0% to 8.9%. No shares were bought back in the period ended 31 December 2015.

EXPENSES

The Board is conscious of the impact of expenses on returns and seeks to minimise expenses while ensuring that the Company receives strong service. The industry wide measure for investment trusts is the ongoing charges ratio, which seeks to quantify the ongoing costs of running the Company. This measures the annual normal ongoing costs of an investment trust, excluding performance fees, one-off expenses and dealing costs, as a percentage of the average shareholders' funds.

PRINCIPAL RISKS

Given that the Company operates globally, it is exposed to risks that are monitored and actively managed to meet its investment objectives. These include market risks related to interest rates, currencies and general availability of financing as well as credit and liquidity risks given the nature of the instruments in which the Company invests. In addition, the underlying Platforms are exposed to operational and regulatory risks as the specialty lending sector remains a nascent one.

The Directors are ultimately responsible for identifying and controlling risks. Day to day management of the risks arising from the financial instruments held by the Group has been delegated to the Investment Manager of the Company.

The Investment Manager regularly reviews the investment portfolio and industry developments to ensure that any events which impact the Group are identified and considered. This also ensures that any risks affecting the investment portfolio are identified and mitigated to the fullest extent possible.

The Board is responsible for the Company's system of risk management and internal control and for reviewing its effectiveness. The Board has adopted a detailed matrix of principal risks affecting the Company's business as an investment trust and has established associated policies and processes designed to manage and, where possible, mitigate those risks, which are monitored by the Audit and Valuation Committee on an ongoing basis.

This system assists the Board in determining the nature and extent of the risks it is willing to take in achieving its strategic objectives. Both the principal risks and the monitoring system are subject to a robust review at least annually. The last review by the Board took place in April 2016.

Although the Board believes that it has a robust framework of internal control in place this can provide only reasonable, and not absolute, assurance against material financial misstatement or loss and is designed to manage, not eliminate, risk.

A summary of the principal risks and uncertainties faced by the Company which have remained unchanged throughout the year, and actions taken by the Board and, where appropriate, its Committees, to manage and mitigate these risks and uncertainties, is set out below:

CREDIT RISK

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

The Company's credit risks arise principally through exposures to loans acquired by the Group, which are subject to risk of borrower default. The ability of the Company to earn revenue is completely dependent upon payments being made by the borrower of the loan acquired by the Company through a Platform. The Company (as a lender member) will receive payments under any loans it acquires through a Platform only if the corresponding borrower through that Platform (borrower member) makes payments on the loan.

Consumer loans are unsecured obligations of borrower members. They are not secured by any collateral, not guaranteed or insured by any third party and not backed by any governmental authority in any way. The Platforms and their designated third party collection agencies may be limited in their ability to collect on loans.

Small business loans are typically secured by either a blanket lien on business assets, specific collateral and/or a personal guarantee from the proprietor. The Platforms and their designated third party collection agencies have various channels of recourse against the relevant collateral which will depend on the specific circumstance of the loan.

MITIGATION

There is inherent credit risk in the Company's investments in credit assets through the two primary structures. However, this is typically mitigated by the significant first loss protection provided by the Platform under the Balance Sheet Model and the excess spread generated by the underlying assets under both models.

The Company will invest across various Platforms, asset classes, geographies (primarily United States and Europe) and credit bands in order to ensure diversification and to seek to mitigate concentration risks.

The Board and the Investment Manager review the investment portfolio to ensure it is in line with the investment policy, including restrictions, as outlined on pages 77 and 78 of the Annual Report.

FINANCING RISK

The Company uses leverage to enhance returns generated by the underlying credit assets and is exposed to the availability of financing at acceptable terms as well as interest rate expenses and other related costs.

MITIGATION

This risk is mitigated by limiting borrowings to ring-fenced SPVs without recourse to the Company and employing

leverage in a disciplined manner.

The Board and the Investment Manager review the investment portfolio to ensure it is in line with the investment policy, including restrictions, as outlined on pages 77 and 78 of the Annual Report.

LIQUIDTY RISK

Liquidity risk is defined as the risk that the Company may not be able to settle or meet its obligations on time or at a reasonable price.

The Company may invest in the listed or unlisted equity of any Platform. Investments in unlisted equity, by their nature, involve a higher degree of valuation and performance uncertainties and liquidity risks than investments in listed securities and therefore may be more difficult to realise.

In the event of adverse economic conditions in which it would be preferable for the Company to sell certain of its assets, the Company may not be able to sell a sufficient proportion of its portfolio as a result of liquidity constraints. In such circumstances, the overall returns to the Company from its investments may be adversely affected.

MITIGATION

The Investment Manager manages the Group's liquidity risk by investing primarily in a diverse portfolio of assets. At 31 December 2015, 2% of the loans have a stated maturity date of less than a year. The Group has no loans with a maturity date of more than five years.

The Board and the Investment Manager review the investment portfolio to ensure it is in line with the investment policy, including restrictions, as outlined on pages 77 and 78 of the Annual Report.

MARKET RISK

Market risk is the risk of loss arising from movements in observable market variables such as foreign exchange rates, equity prices and interest rates. The Group is exposed to market risk primarily through its Financial Instruments.

The Group is exposed to price risk arising from the investments held by the Group for which prices in the future are uncertain. The investments in funds are exposed to market price risk. Refer to Note 3 for further details on the sensitivity of the Group's Level 3 investments to price risk.

Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments.

Currency risk is the risk that the value of net assets will fluctuate due to changes in foreign exchange rates. Relevant risk variables are generally movements in the exchange rates of non-functional currencies in which the Group holds financial assets and liabilities.

MITIGATION

The Company has a diversified investment portfolio which significantly reduces the exposure to individual asset price risk. Detailed portfolio valuations and exposure analysis are prepared monthly and form the basis for the ongoing risk management and investment decisions. In addition, regular scenario analysis is undertaken to assess likely downside risks and sensitivity to broad market changes, as well as assessing the underlying correlations amongst the separate asset classes.

Exposure to interest risk is limited as the underlying credit assets are typically fully amortising with a maximum maturity of five years. Furthermore, the Company's Credit Facilities charge a floating interest rate to the Platforms.

The Company mitigates its exposure to currency risk by hedging exposure between Pound Sterling and any other currency in which the Company's assets may be denominated.

The Board reviews the price, interest and currency risk with the Investment Manager to ensure that exposure to these risks is appropriately mitigated.

PLATFORM RISK

The current market in which the Company participates is competitive and rapidly changing. There is a risk that the Company will not be able to deploy its capital, re-invest capital and interest of the proceeds of any future capital raisings in a timely or efficient manner given the increased demand for suitable investments.

The Company may face increasing competition for access to investments as the alternative finance industry continues to evolve. The Company may face competition from other institutional lenders such as fund vehicles and commercial banks that are substantially larger and have considerably greater financial, technical and marketing resources than the Company. Other institutional sources of capital may enter the market in both the UK, US and other geographies.

MITIGATION

Although the Company is exposed to Platform credit risk using the Balance Sheet Model, this risk is typically mitigated by any losses being first borne by the Platforms, in addition to the Platform and its subsidiaries providing guarantees and collateral. Under both Models, the Company has the ability to transfer loan servicing to another servicer should the Platform fail to honour its obligations under the servicing agreement. Furthermore, the use of bankruptcy remote SPVs to hold the credit assets limits Platform risk as the SPV is typically directly entitled to all principal and interest payments due from the underlying borrower.

The Investment Manager monitors the Platform credit risk consistently to ensure that the Platforms are honouring their obligations under the servicing agreement and presents their findings (when applicable) to the Board.

REGULATORY RISK

As an investment trust, the Company's operations are subject to wide ranging regulations. The financial services sector continues to experience significant regulatory change at national and international levels. Failure to act in accordance with these regulations could cause fines, censure or other losses including taxation or reputational loss.

MITIGATION

The Company provides debt capital to Platforms, which typically have to comply with various state and national level regulations. This includes operating under interim permission from the FCA in the UK as well as consumer lending and collections licenses in some US states. This risk is limited via detailed upfront due diligence of Platforms' regulatory environments performed by the Investment Manager on behalf of the Board.

ENVIRONMENT, HUMAN RIGHTS, EMPLOYEE, SOCIAL AND COMMUNITY ISSUES

The Board recognises the requirement of the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 to provide details about environmental matters, employees, human rights, social and community issues, including information about any policies it has in relation to these matters and the effectiveness of these polices. As an investment trust, the Company does not have any employees, and most of its activities are performed by other outside organisations. In light of this, the Board considers that the Company does not have a direct impact on the community or environment and, as a result, does not maintain specific policies in relation to these matters. However, in carrying out its investment activities and in relationships with suppliers, the Company aims to conduct itself responsibly, ethically and fairly.

GENDER DIVERSITY

The Board of Directors of the Company comprises three male Directors and one female Director. Further information in relation to the Board's policy on diversity can be found on pages 21 and 26 of the Annual Report.

The Strategic Report was approved by the Board of Directors on 27 April 2016 and signed on its behalf by:

Andrew Adcock

Chairman

27 April 2016

RESPONSIBILITY FOR ACCOUNTS AND GOING CONCERN STATEMENT

As discussed in Note 6 to the financial statements, the Directors have reviewed the financial projections of the Company from the date of this report, which shows that the Company will be able to generate sufficient cash flows in order to meet its liabilities as they fall due. Accordingly, the Directors are satisfied that the going concern basis remains appropriate for the preparation of the financial statements. The Group also has detailed policies and processes for managing these risks on pages 11 to 13 of the Annual Report.

VIABILITY STATEMENT

In accordance with provision C2.2.2 of the UK Corporate Governance Code, published by the Financial Reporting Council in September 2014, and as part of an ongoing programme of risk assessment, the Directors have assessed the prospects of the Company, to the extent that they are able, over a three-year period. As the Company is a long-term investor, the Directors have chosen a three-year period as this is viewed as sufficiently long term to provide shareholders with a meaningful view, without extending the period so far into the future as to undermine the exercise. This period is also deemed appropriate since the Company's Articles of Association (the "Articles") require an ordinary resolution for continuation of the Company to be proposed at the Company's Annual General Meeting in 2020.

The Directors confirm that they have a reasonable expectation that the Company will continue to operate and meet its liabilities as they fall due for the next three years. In making this assessment, the Directors have taken into consideration each of the principal risks and uncertainties on pages 11 to 13 of the Annual Report, their mitigants and the impact these might have on the business model, future performance, solvency and liquidity. In addition, the Directors considered the Company's current financial position and prospects, the composition of the investment portfolio (including the significant holdings of liquidity and realisable securities), the level of outstanding capital commitments, the term structure and availability of borrowings and the ongoing costs of the business. As part of the approach, due consideration has been given to the uncertainty inherent in financial forecasts and, where applicable, reasonable sensitivities have been applied to the investment portfolio in stress situations.

The main risk to the Company's continuation is shareholder dissatisfaction through failure to meet the Company's investment objective, through poor investment performance or through the investment policy not being appropriate in prevailing market conditions. The Board has given this particular consideration when assessing the longer term viability of the Company.

Performance and demand for the Company's shares are not things that can be forecast, but there are no current indications that either or both of these may falter materially over the next three years so as to affect the Company's viability.

Based on the foregoing analysis, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Annual Report contains the following statement regarding responsibility for the preparation of the Annual Report, Directors' Remuneration Report and financial statements included therein.

The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group and Parent Company financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Parent Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and accounting estimates that are reasonable and prudent;

· state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Parent Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and the Parent Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors consider that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess a company's performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Directors' Report confirm that, to the best of their knowledge:

· the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

· the Strategic Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board

Andrew Adcock

Chairman

27 April 2016

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the period ended 31 December 2015 but is derived from those accounts. Statutory accounts for the period ended 31 December 2015 will be delivered to the Registrar Of Companies in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (ii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' report can be found in the Company's full Annual Report and Financial Statements on the Company's website at http://vpcspecialtylending.com/.

FINANCIAL STATEMENTS

Signed on behalf of the Board of Directors by:

Andrew Adcock

Chairman

27 April 2016

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The total column of this statement represents the Group's statement of comprehensive income, prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies ("AIC"). All items in the above Statement derive from continuing operations.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD FROM 12 JANUARY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015

\* The High Court of Justice Chancery Division approved the cancellation of the amount standing to the credit of the "Share Premium" account of the Company on 17 September 2015 of £194,000,000. As a result, this amount was transferred to the "Other Distributable Reserve" account.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM 12 JANUARY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015

Signed on behalf of the Board of Directors by:

Andrew Adcock

Chairman

27 April 2016

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD FROM 12 JANUARY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015

\* The High Court of Justice Chancery Division approved the cancellation of the amount standing to the credit of the "Share Premium" account of the Company on 17 September 2015 of £194,000,000. As a result, this amount was transferred to the "Other Distributable Reserve" account.

PARENT COMPANY STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM 12 JANUARY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD FROM 12 JANUARY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015

1. GENERAL INFORMATION

The investment objective of VPC Specialty Lending Investments PLC (the "Parent Company") with its subsidiaries (together "the Group") is to generate an attractive total return for shareholders consisting of distributable income and capital growth through investments in specialty lending opportunities. The Parent Company was incorporated in England and Wales on 12 January 2015 with registered number 9385218. The Parent Company commenced its operations on 17 March 2015 and intends to carry on business as an investment trust within the meaning of Chapter 4 of Part 24 of the Corporation Tax Act 2010.

The Group's investment manager is Victory Park Capital Advisors, LLC (the "Investment Manager"), a US Securities and Exchange Commission registered investment adviser. The Investment Manager also acts as the Alternative Investment Fund Manager of the Group under the Alternative Investment Fund Managers Directive ("AIFMD"). The Parent Company is defined as an Alternative Investment Fund and is subject to the relevant articles of the AIFMD.

The Group will invest directly or indirectly into available opportunities, including by making investments in, or acquiring interests held by, third party funds (including those managed by the Investment Manager or its affiliates). Direct investments may include consumer loans, SME loans, advances against corporate trade receivables and/or purchases of corporate trade receivables ("Debt Instruments") originated by platforms which engage with and directly lend to borrowers ("Platforms"). Such Debt Instruments may be subordinated in nature, or may be second lien, mezzanine or unsecured loans. Indirect investments may include investments in Platforms (or in structures set up by Platforms) through the provision of credit facilities ("Credit Facilities"), equity or other instruments. Additionally, the Group's investments in Debt Instruments and Credit Facilities may be made through subsidiaries of the Company or through partnerships or other structures. The Group may also invest in other specialty lending related opportunities through any combination of debt facilities, equity or other instruments.

The Company's shares were admitted to the Official List of the UK Listing Authority with a premium listing on 17 March 2015. On the same day, trading of the shares commenced on the London Stock Exchange. As at 31 December 2015, the Company held equity in the form of 200,000,000 Ordinary Shares and 183,000,000 C Shares.

Northern Trust Hedge Fund Services LLC (the "Administrator") has been appointed as the administrator of the Group. The Administrator is responsible for the Group's general administrative functions, such as the calculation and publication of the Net Asset Value ("NAV") and maintenance of the Group's accounting records.

For any terms not herein defined, refer to Part X of the IPO Prospectus. The Parent Company's IPO Prospectus dated 26 February 2015, available on the Parent Company's website, http://vpcspecialtylending.com/.

2. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies followed by the Group are set out below:

Basis of preparation

The consolidated financial statements present the financial performance of the Group for the period from 12 January 2015 (date of incorporation) to 31 December 2015. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). They comprise standards and interpretations approved by the International Accounting Standards Board and International Financial Reporting Committee, interpretations approved by the International Accounting Standard Committee that remain in effect, to the extent they have been adopted by the European Union. The financial statements are also in compliance with relevant provisions of the Companies Act 2006 as applicable to companies reporting under IFRS.

The consolidated financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the valuation of investments and derivative financial instruments at fair value. Having assessed the principal risks, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the consolidated financial statements. The principal accounting policies adopted are set out below.

Where presentational guidance set out in the Statement of Recommended Practice ("SORP") for investment trusts issued by the Association of Investment Companies ("AIC") in November 2014 is consistent with the requirements of IFRS, the Directors have sought to prepare the consolidated financial statements on a basis compliant with the recommendations of the SORP.

The Parent Company and Group's presentational currency is Pound Sterling (£). Pound Sterling is also the functional currency because it is the currency of the Parent Company's share capital and the currency which is most relevant to the majority of the Parent Company's Shareholders. The Group enters into forward currency Pound Sterling hedges where operating activity is transacted in a currency other than the functional currency.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Parent Company and its subsidiaries. Control is achieved where the Parent Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The Parent Company controls an entity when the Parent Company is exposed to, or has rights to, variable returns from its investment and has the ability to affect those returns through its power over the entity. All intra-group transactions, balances, income and expenses are eliminated in consolidation. The accounting policies of the subsidiaries have been applied on a consistent basis to ensure consistency with the policies adopted by the Parent Company.

Subsidiaries of the Parent Company, where applicable, have been consolidated on a line by line basis as the Parent Company does not meet the definition of an investment entity under IFRS 10 because it does not measure and evaluate the performance of all of its investments on the fair value basis of accounting. The period ends for the subsidiaries are consistent with the Company.

Presentation of Consolidated Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company and in accordance with the guidance set out by the AIC, supplementary information which analyses the Consolidated Statement of Comprehensive Income between items of revenue and capital nature has been presented alongside the Consolidated Statement of Comprehensive Income.

The Directors have taken advantage of the exemption under Section 408 of the Companies Act 2006 and accordingly have not presented a separate Parent Company statement of comprehensive income. The net return on ordinary activities after taxation of the Parent Company was £5,649,016.

Income

For financial instruments measured at amortised cost, the effective interest rate method is used to measure the carrying value of a financial asset or liability and to allocate associated interest income or expense over the relevant period. The effective interest rate is the rate that discounts estimated future cash payments or receipts over the expected life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset or financial liability.

In calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument but does not consider expected credit losses. The calculation includes all fees received and paid, costs borne that are an integral part of the effective interest rate and all other premiums or discounts above or below market rates.

Dividend income from investments is taken to the revenue account on an ex-dividend basis.

Bank interest and other income receivable is accounted for on an effective interest basis.

Distributions from investments in funds are accounted for on an accrual basis as of the date the Group is entitled to the distribution. The income is treated as revenue return provided that the underlying assets of the investments comprise solely income generating loans, or investments in lending platforms which themselves generate net interest income.

Expenses and finance costs

Expenses and finance costs not directly attributable to generating a financial instrument are recognised as services are received, or on the performance of a significant act which means the Group have become contractually obligated to settle those amounts.

The Group currently charges investment management fees and performance fees to either revenue or capital return based on the classification of the investment that generates the fees. The current expectation is that the majority of the Group's return will be generated through revenue rather than capital gains on investments. At 31 December 2015, management fees of £29,072 have been charged to the capital return of the Group. No management or performance fees were charged to capital at the Parent Company. Refer to Note 10 for further details of the management and performance fees.

All expenses are accounted for on an accruals basis.

Dividends payable to Shareholders

Dividends payable to Shareholders are recognised in the Consolidated Statement of Changes in Equity when they are paid, or have been approved by Shareholders in the case of a final dividend and become a liability to the Parent Company.

Taxation

The tax currently payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the Consolidated Statement of Financial Position date.

In line with the recommendations of SORP for investment trusts issued by the AIC, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Consolidated Statement of Comprehensive Income is the "marginal basis".

Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Consolidated Statement of Comprehensive Income, then no tax relief is transferred to the capital return column.

Investment trusts which have approval as such under section 1158 of the Corporation Taxes Act 2010 are not liable for taxation on capital gains.

Financial assets and financial liabilities

The Group classifies its financial assets and financial liabilities in one of the following categories below. The classification depends on the purpose for which the financial assets and liabilities were acquired. The classification of financial assets and liabilities are determined at initial recognition:

Financial assets and financial liabilities designated as held at fair value through profit or loss

This category consists of forward foreign exchange contracts and investments in funds.

Assets and liabilities in this category are carried at fair value. The fair values of derivative instruments are estimated using discounted cash flow models using yield curves that are based on observable market data or are based on valuations obtained from counterparties.

Investments in funds are carried at fair value through profit or loss and designated as such at inception. This is determined using the NAV for the units at the balance sheet date.

Gains and losses arising from the changes in the fair values are recognised in the Consolidated Statement of Comprehensive Income.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Group's loan assets are classified as loans and receivables.

Loans are recognised when the funds are advanced to borrowers. Loans and receivables are carried at amortised cost using the effective interest rate method less provisions for impairment.

Purchases and sales of financial assets

Purchases and sales of financial assets are accounted for at trade date. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

Fair value estimation

The determination of fair value of investments requires the use of accounting estimates and assumptions that could cause material adjustment to the carrying value of those investments.

Impairment of financial assets

Financial Assets carried at amortised cost

The Group assesses at each balance sheet date whether, as a result of one or more events that occurred after initial recognition, there is objective evidence that a financial asset or group of financial assets is impaired. Evidence of impairment may include:

· indications that the borrower or group of borrowers is experiencing significant financial difficulty;

· default or delinquency in interest or principal payments; or

· debt being restructured to reduce the burden on the borrower.

The Group assesses whether objective evidence of impairment exists either individually for assets that are separately significant or individually or collectively for assets that are not separately significant.

If there is no objective evidence of impairment for an individually assessed asset it is included in a group of assets with similar credit risk characteristics and collectively assessed for impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the asset's original effective interest rate. The resultant provisions are deducted from the appropriate asset values in the Consolidated Statement of Financial Position.

The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any differences between loss estimates and actual loss experience.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the provision is adjusted and the amount of the reversal is recognised in the Consolidated Statement of Comprehensive Income.

Where a loan is not recoverable, it is written off against the related provision for loan impairment once all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off are reflected against the impairment losses recorded in the Consolidated Statement of Comprehensive Income.

Key estimates and assumptions in impairment of financial assets

The assessment of impairment of the financial assets held at amortised cost requires the use of accounting estimates and assumptions that could cause material adjustment to the carrying value of those investments. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group.

Financial liabilities

Borrowings, deposits, debt securities in issue and subordinated liabilities, if any, are recognised initially at fair value, being the issue proceeds net of premiums, discounts and transaction costs incurred.

All borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is adjusted for the amortisation of any premiums, discounts and transaction costs. The amortisation is recognised in interest expense and similar charges using the effective interest rate method.

Financial liabilities are derecognised when the obligation is discharged, cancelled or has expired.

Derivatives

Derivatives are entered into to reduce exposures to fluctuations in interest rates, exchange rates, market indices and credit risks and are not used for speculative purposes.

Derivatives are carried at fair value with movements in fair values recorded in the Consolidated Statement of Comprehensive Income. Derivative financial instruments are valued using discounted cash flow models using yield curves that are based on observable market data or are based on valuations obtained from counterparties.

Gains and losses arising from derivative instruments are credited or charged to the Consolidated Statement of Comprehensive Income. Gains and losses of a revenue nature are reflected in the revenue column and gains/(loss) of a capital nature are reflected in the capital column. Gains and losses on forward foreign exchange contracts are reflected in foreign exchange gain / (loss) in the Consolidated Statement of Comprehensive Income.

All derivatives are classified as assets where the fair value is positive and liabilities where the fair value is negative. Where there is the legal ability and intention to settle net, then the derivative is classified as a net asset or liability, as appropriate.

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the Consolidated Statement of Financial Position if, and only if, there is currently enforceable legal right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise an asset and settle the liability simultaneously.

Investments in funds

Investments in funds are measured at fair value through profit or loss. Refer to Note 18 for further information.

Equity securities

Equity securities are measured at fair value through recent transaction prices. These securities are not traded in an active market and thus are considered Level 3 investments.

Other receivables

Other receivables do not carry interest and are short-term in nature and are accordingly recognised at fair value as reduced by appropriate allowances for estimated irrecoverable amounts.

Cash and cash equivalents

Cash comprises of cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments with a maturity of 90 days or less that readily convertible to known amounts of cash.

Current liabilities

Current liabilities, other than derivatives, are not interest-bearing and are stated at their nominal values. Due to their short term nature this is determined to be equivalent to their fair value.

Shares

Both the Ordinary Shares and C Shares (together the "Shares") are classified as equity. The costs of issuing or acquiring equity are recognised in equity (net of any related income tax benefit), as a reduction of equity on the condition that these are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

The costs of an equity transaction that is abandoned are recognised as an expense. Those costs might include registration and other regulatory fees, amounts paid to legal, accounting and other professional advisers, printing costs and stamp duties.

The Group's equity NAV per unit is calculated by dividing the equity - net assets attributable to the holder of Shares by the total number of outstanding shares.

Foreign exchange

Transactions in foreign currencies are translated into Pound Sterling at the rate of exchange ruling on the date of each transaction. Monetary assets, liabilities and equity investments in foreign currencies at the Consolidated Statement of Financial Position date are translated into Pound Sterling at the rates of exchange ruling on that date. Profits or losses on exchange, together with differences arising on the translation of foreign currency assets or liabilities, are taken to the capital return column of the Consolidated Statement of Comprehensive Income. Foreign exchange gains and losses arising on investment assets including loans are included within Net gain/(loss) on investments within the capital return column of the Consolidated Statement of Comprehensive Income.

The assets and liabilities of the Group's foreign operations are translated using the exchange rates prevailing at the reporting date. Income and expense items are translated using the average exchange rates during the period. Exchange differences arising from the translation of foreign operations are taken directly as currency translation differences through the Consolidated Statement of Comprehensive Income.

Capital reserves

Capital reserve - arising on investments sold includes:

· gains/losses on disposal of investments and the related foreign exchange differences;

· exchange differences on currency balances;

· cost of own shares bought back; and

· other capital charges and credits charged to this account in accordance with the accounting policies above.

Capital reserve - arising on investments held includes:

· increases and decreases in the valuation of investments held at the period end; and

· subsidiaries where the investment by the Group is in a capital loss position.

All of the above are accounted for in the Consolidated Statement of Comprehensive Income except the cost of own shares bought back, if applicable, which would be accounted for in the Consolidated Statement of Changes in Equity.

Segmental reporting

The decision maker is the Board of Directors. The Directors are of the opinion that the Group is engaged in a single segment of business, being the investment of the Group's capital in financial assets comprising consumer loans, SME loans, corporate trade receivables and/or advances thereon.

Critical accounting estimates and assumptions

Estimates and assumptions used in preparing the consolidated financial statements are reviewed on an ongoing basis and are based on historical experience and various other factors that are believed to be reasonable under the circumstances.

The results of these estimates and assumptions form the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources.

Estimates and assumptions made in the valuation of unquoted investments and investments for which there is no active market may cause material adjustment to the carrying value of those assets and liabilities. These are valued in accordance with the techniques set out above.

Information about significant areas of estimation uncertainty and critical judgments in relation to the impairment of investments are described in Note 9.

Judgement is required to determine whether the Parent Company exercises control over its investee entities and whether they should be consolidated. Control is achieved where the Parent Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The Parent Company controls an investee entity when the Parent Company is exposed to, or has rights to, variable returns from its investment and has the ability to affect those returns through its power over the entity. At each reporting date an assessment is undertaken of investee entities to determine control. In the intervening period assessments are undertaken where circumstances change that may give rise to a change in the control assessment. These include when an investment is made into a new entity, or an amendment to existing entity documentation or processes. When assessing whether the Parent Company has the power to affect its variable returns, and therefore control investee entities, an assessment is undertaken of the Parent Company's ability to influence the relevant activities of the investee entity. These activities include considering the ability to appoint or remove key management or the manager, which party has decision making powers over the entity and whether the manager of an entity is acting as principal or agent. The assessment undertaken for entities considers the Parent Company's level of investment into the entity and its intended long-term holding in the entity. Further details of the Parent Company's subsidiaries are included in Note 16.

The following new standards are not applicable to this financial information but may have an impact when they become effective:

IFRS 9, 'Financial Instruments', introduces new requirements for classification and measurement, impairment and hedge accounting. This standard is effective from 1 January 2018. The adoption of IFRS 9 results in an impairment model that is more forward looking than that which is currently in place under IAS 39. In the longer term it is expected that the adoption of the standard will increase the total level of impairment allowance as financial assets will be assessed for impairment at least to the extent that an impairment is expected to arise within the following 12 month period and this impairment amount recognised within the financial statements.

IFRS 15, 'Revenue from Contracts with Customers', requires revenue to be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring services to a customer. This standard is effective from 1 January 2018. The adoption of this standard is not expected to have a significant impact on the Group's financial statements.

Both IFRS 9 and IFRS 15 are subject to endorsement from the European Union. The Directors are assessing the impact of the above standards on the Group's future consolidated financial information.

3. FAIR VALUE MEASUREMENT

Financial instruments measured and reported at fair value are classified and disclosed in one of the following fair value hierarchy levels based on the significance of the inputs used in measuring its fair value:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets and liabilities;

Level 2 - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and

Level 3 - Pricing inputs for the asset or liability that are not based on observable market data (unobservable inputs).

An investment is always categorised as Level 1, 2 or 3 in its entirety. In certain cases, the fair value measurement for an investment may use a number of different inputs that fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and is specific to the investment.

The Group's investments in funds are subject to the terms and conditions of the respective fund are offering documentation. The investments in funds are primarily valued based on the latest available financial information. The Investment Manager reviews the details of the reported information obtained from the funds and considers: (i) the valuation of the fund's underlying investments; (ii) the value date of the NAV provided; (iii) cash flows (calls/distributions) since the latest value date; and (iv) the basis of accounting and, in instances where the basis of accounting is other than fair value, fair valuation information provided by the funds. If necessary, adjustments to the NAV are made to the funds to obtain the best estimate of fair value. The funds in which the Group invests are close-ended and unquoted. The NAV is provided to investors only and is not made publically available.

The following table analyses the fair value hierarchy of the Group's assets and liabilities measured at fair value at 31 December 2015:

The Group's equity securities investments are valued at recent transaction prices. As these equity securities are not traded in an active market, they are categorised as Level 3 investment assets.

The following table analyses the fair value hierarchy of the Parent Company's assets and liabilities measured at fair value at 31 December 2015:

There were no movements between Level 1 and Level 2 fair value measurements during the period ended 31 December 2015 and no transfers into and out of Level 3 fair value measurements for either the Parent Company or the Group.

The following table presents the movement in Level 3 positions for the period for the Group:

The following table presents the movement in Level 3 positions for the period for the Parent Company:

The net change in unrealised gains is recognised within gains on investments in the Consolidated Statement of Comprehensive Income.

Quantitative information regarding the unobservable inputs for Level 3 positions is given below:

The Investments in funds consist of investments in Larkdale III, L.P. and VPC Offshore Unleveraged Private Debt Fund, L.P. These are valued based on the NAV as calculated at the balance sheet date. No adjustments have been deemed necessary to the NAV as it reflects the fair value of the underlying investments, as such no specific unobservable inputs have been identified. The NAVs are sensitive to movements in interest rates due to the funds' underlying investment in loans.

The following table presents the fair value of the Group's assets and liabilities not measured at fair value through profit and loss at 31 December 2015 but for which fair value is disclosed. The carrying value has been used where it is a reasonable approximation of fair value:

The following table presents the fair value of the Parent Company's assets and liabilities not measured at fair value through profit and loss at 31 December 2015 but for which fair value is disclosed. The carrying value has been used where it is a reasonable approximation of fair value:

The table below provides details of the investments at amortised cost held by the Group for the period ended 31 December 2015:

Refer to Note 9 for further details regarding the impairment charges of the loans of the Group. The Parent Company does not hold any loans.

4. DERIVATIVES

Typically, derivative contracts serve as components of the Group's investment strategy and are utilised primarily to structure and hedge investments to enhance performance and reduce risk to the Group (the Group currently does not designate any derivatives as hedges for hedge accounting purposes as described under IAS 39). Derivative instruments are also used for trading purposes where the Investment Manager believes this would be more effective than investing directly in the underlying financial instruments. The only derivative contracts that the Group currently holds or issues are forward foreign exchange contracts.

The Group measures its derivative instruments on a fair value basis. See Note 2 for the valuation policy for financial instruments.

Forward contracts entered into represent a firm commitment to buy or sell an underlying asset, or currency at a specified value and point in time based upon an agreed or contracted quantity. The realised/unrealised gain or loss is equal to the difference between the value of the contract at the onset and the value of the contract at settlement date/year end date and is included in the Consolidated Statement of Comprehensive Income.

As of 31 December 2015, the following forward foreign exchange contracts were included in the Group's Consolidated Statement of Financial Position at fair value through profit or loss and the Parent Company's Statement of Financial Position at fair value through profit or loss:

The following tables provide information on the financial impact of netting for instruments subject to an enforceable master netting arrangement or similar agreement at 31 December 2015 for both the Parent Company and the Group:

5. INCOME AND GAINS ON INVESTMENTS AND LOANS

6. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS

Risk is inherent in the Group's activities but it is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. The Group is exposed to market risk (which includes currency risk, interest rate risk and other price risk), credit risk and liquidity risk arising from the financial instruments held by the Group.

The Directors are ultimately responsible for identifying and controlling risks. Day to day management of the risk arising from the financial instruments held by the Group has been delegated to Victory Park Capital Advisors, LLC as Investment Manager to the Parent Company and the Group.

The Investment Manager regularly reviews the investment portfolio and industry developments to ensure that any events which impact the Group are identified and considered. This also ensures that any risks affecting the investment portfolio are identified and mitigated to the fullest extent possible.

The Group has no employees and the Directors have all been appointed on a Non-Executive basis. Whilst the Group has taken all reasonable steps to establish and maintain adequate procedures, systems and controls to enable it to comply with its obligations, the Group is reliant upon the performance of third party service providers for its executive function. In particular, the Investment Manager, the Custodian, the Administrator and the Registrar will be performing services which are integral to the operation of the Group. Failure by any service provider to carry out its obligations to the Group in accordance with the terms of its appointment could have a materially detrimental impact on the operation of the Group.

The principal risks and uncertainties that could have a material impact on the Group's performance have not changed from those set out in detail on pages 14 to 24 of the Parent Company's IPO Prospectus.

In seeking to implement the investment objectives of the Parent Company while limiting risk, the Parent Company and the Group are subject to the investment limits restrictions set out in the Credit Risk section of this note.

Market risk is the risk of loss arising from movements in observable market variables such as foreign exchange rates, equity prices and interest rates. The Group is exposed to market risk primarily through its Financial Instruments.

The Group is exposed to price risk arising from the investments held by the Group for which prices in the future are uncertain. The investment in funds are exposed to market price risk. Refer to Note 3 for further details on the sensitivity of the Group's Level 3 investments to price risk.

Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments.

The Group is exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Due to the nature of the investments at 31 December 2015, the Group has limited exposure to variations in interest rates as all current interest rates are fixed and determinable or variable based on the size of the loan.

While the Group is exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows, the downside exposure is limited at 31 December 2015 due to the fixed rate nature of the investments or interest rate floors that are in place on any variable interest rate loans.

The Group does not intend to hedge interest rate risk on a regular basis. However, where it enters floating rate liabilities against fixed-rate loans, it may at its sole discretion seek to hedge out the interest rate exposure, taking into consideration amongst other things the cost of hedging and the general interest rate environment.

Currency risk is the risk that the value of net assets will fluctuate due to changes in foreign exchange rates. Relevant risk variables are generally movements in the exchange rates of non-functional currencies in which the Group holds financial assets and liabilities.

The assets of the Group as of 31 December 2015 are invested in assets which are denominated in US Dollars, Euros, Pound Sterling and other currencies. Accordingly, the value of such assets may be affected favourably or unfavourably by fluctuations in currency rates. The Group hedges currency exposure between Pound Sterling and any other currency in which the Group's assets may be denominated, in particular US Dollars and Euros.

The Group will generally invest with companies that are small, not widely known and not widely held. Small companies tend to be more vulnerable to adverse developments than larger companies and may have little or no track records. Small companies may have limited product lines, markets, or financial resources, and may depend on less seasoned management. Their securities may trade infrequently and in limited volumes. It may take a relatively long period of time to accumulate an investment in a particular issue in order to minimise the effect of purchases on market price. Similarly, it could be difficult to dispose of such investments on a timely basis without adversely affecting market prices. As a result, the prices of these securities may fluctuate more than the prices of larger, more widely traded companies. Also, there may be less publicly available information about small companies or less market interest in their securities compared to larger companies, and it may take longer for the prices of these securities to reflect the full value of their issuers' earnings potential or assets.

Whilst the use of borrowings by the Group should enhance the net asset value of an investment when the value of an investment's underlying assets is rising, it will, however, have the opposite effect where the underlying asset value is falling. In addition, in the event that an investment's income falls for whatever reason, the use of borrowings will increase the impact of such a fall on the net revenue of the Group's investment and accordingly will have an adverse effect on the ability of the investment to make distributions to the Group.

The Investment Manager monitors the fluctuations in foreign currency exchange rates and may use forward foreign exchange contracts to hedge the currency exposure of the Parent Company and Group's non GBP denominated investments. The Investment Manager re-examines the currency exposure on a regular basis in each currency and manages the Parent Company's currency exposure in accordance with market expectations.

The below table presents the net exposure to foreign currency at 31 December 2015. The table includes forward foreign exchange contracts at their notional exposure value and excludes all GBP assets and liabilities recorded on the Group's Consolidated Statement of Financial Position.

If the GBP exchange rate simultaneously increased/decreased by 5% against the above currencies, the impact on profit would be an increase/decrease of £5,807,844. 5% is considered to be a reasonably possible movement in foreign exchange rates. The table above includes the exposure of the non-consolidated interest investment in the Group.

The table below presents the net exposure to foreign currency at 31 December 2015. The table includes forward foreign exchange contracts at their notional exposure value and excludes all GBP assets and liabilities recorded on the Parent Company's Statement of Financial Position.

If the GBP exchange rate simultaneously increased/decreased by 5% against the above currencies, the impact on profit would be an increase/decrease of £137,404. 5% is considered to be a reasonably possible movement in foreign exchange rates.

Liquidity risk is defined as the risk that the Group may not be able to settle or meet its obligations on time or at a reasonable price. Ordinary Shares are not redeemable at the holder's option.

The maturities of the non-current financial liabilities are disclosed in Note 8.

Current financial liabilities consisting of fees payable, accrued expenses and other liabilities are all due within three months.

The Investment Manager manages the Group's liquidity risk by investing primarily in a diverse portfolio of assets. At 31 December 2015, 2% of the loans have a stated maturity date of less than a year. The Group has no loans with a maturity date of more than five years.

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

The Group's credit risks arise principally through exposures to loans acquired by the Group, which are subject to risk of borrower default. The ability of the Group to earn revenue is completely dependent upon payments being made by the borrower of the loan acquired by the Group through a Platform. The Group (as a lender member) will receive payments under any loans it acquires through a Platform only if the corresponding borrower through that Platform (borrower member) makes payments on the loan.

Consumer loans are unsecured obligations of borrower members. They are not secured by any collateral, not guaranteed or insured by any third party and not backed by any governmental authority in any way. The Platforms and their designated third party collection agencies may be limited in their ability to collect on loans.

The Group will invest across various Platforms, asset classes, geographies (primarily United States and Europe) and credit bands in order to ensure diversification and to seek to mitigate concentration risks.

The credit quality of loans is assessed through the evaluation of various factors, including (but not limited to) credit scores, payment data, collateral and other information. Set out below is the analysis of the Group's loan investments by grade:

The following investment limits and restrictions shall apply to the Group, to ensure that the diversification of the Group's portfolio is maintained and that concentration risk is limited:

The Group does not intend to invest more than 20% of its Gross Assets in Debt Instruments (net of any gearing ring-fenced within any special purpose vehicle which would be without recourse to the Group), originated by, and/or Credit Facilities and equity instruments in, any single Platform, calculated at the time of investment. All such aggregate exposure to any single Platform (including investments via a special purpose vehicle) will always be subject to an absolute maximum, calculated at the time of investment, of 25% of the Group's Gross Assets.

The Group does not intend to acquire Debt Instruments for a term longer than five years. The Group will not invest more than 20% of its Gross Assets, at the time of investment, via any single investment fund investing in Debt Instruments and Credit Facilities. In any event, the Group will not invest, in aggregate, more than 60% of its Gross Assets, at the time of investment, in investment funds that invest in Debt Instruments and Credit Facilities.

The Group will not invest more than 10% of its Gross Assets, at the time of investment, in other listed closed-ended investment funds, whether managed by the Investment Manager or not, except that this restriction shall not apply to investments in listed closed-ended investment funds which themselves have stated investment policies to invest no more than 15% of their gross assets in other listed closed-ended investment funds.

The following restrictions apply, in each case at the time of investment by the Group, to both Debt Instruments acquired by the Group via wholly-owned special purpose vehicles or partially-owned special purpose vehicles on a proportionate basis under the Marketplace Model, as well as on a look-through basis under the Balance Sheet Model and to any Debt Instruments held by another investment fund in which the Group invests:

· No single consumer loan acquired by the Group shall exceed 0.25% of its Gross Assets.

· No single SME loan acquired by the Group shall exceed 5.0% of its Gross Assets. For the avoidance of doubt, Credit Facilities entered into directly with Platforms are not considered SME loans.

· No single trade receivable asset acquired by the Group shall exceed 5.0% of its Gross Assets.

The Group's un-invested or surplus capital or assets may be invested in Cash Instruments for cash management purposes and with a view to enhancing returns to Shareholders or mitigating credit exposure.

7. CASH AND CASH EQUIVALENTS

The Parent Company has posted cash of £8,480,000 of collateral as at 31 December 2015 with Goldman Sachs in relation to the outstanding derivative financial liabilities.

8. NOTES PAYABLE

The Group entered into contractual obligations with third parties to structurally subordinate a portion of the principal directly attributable to existing investments. The cash flows received by the Group from the underlying investments are used to pay the lender principal, interest, and draw fees based upon the stated terms of the Credit Facility. Unless due to a fraudulent act, as defined by the Credit Facilities, none of the Group's other investment assets can be used to satisfy the obligations of the Credit Facilities in the event that those obligations cannot be met by the subsidiaries. Each subsidiary with a Credit Facility is a bankruptcy remote entity. The table below provides details of the outstanding debt of the Group at 31 December 2015:

On 7 May 2015, one of the Parent Company's wholly owned subsidiaries entered into a credit facility ("Credit Facility 05-2015") for a maximum commitment amount of £100,000,000. As at 31 December 2015, £58,110,000 of the credit facility was undrawn.

On 31 July 2015, one of the Parent Company's subsidiaries entered into a credit facility ("Credit Facility 07-2015") for a maximum commitment amount of $150,000,000. As at 31 December 2015, $28,138,154 of the credit facility was undrawn.

On 21 August 2015, one of the Parent Company's subsidiaries entered into a credit facility ("Credit Facility 08-2015") for a maximum commitment amount of $125,000,000. As at 31 December 2015, $71,500,000 of the credit facility was undrawn.

The Group entered into a contractual obligation with a third party to structurally subordinate a portion of principal directly attributable to an existing loan facility. The Group is obligated to pay a commitment fee and interest to the third party on the obligation as interest is paid on the underlying loan facility. In the event of a default on the loan facility, the third party has first-out participation rights on the accrued and unpaid interest as well as the principal balance of the note. The maturity date of the existing loan facility on which leverage has been obtained is 30 January 2018 and the outstanding principal at 31 December is £5,743,329.

9. IMPAIRMENT OF FINANCIAL ASSETS AT AMORTISED COST

A financial asset is past due when the counterparty has failed to make a payment when contractually due. The Group assesses at each reporting date whether there is objective evidence that a loan or group of loans, classified as loans at amortised cost, is impaired. In performing such analysis, the Group assesses the probability of default based on the number of days past due, using recent historical rates of default on loan portfolios with credit risk characteristics similar to those of the Group.

Loans are judged for impairment primarily based on payment delinquency. General expectations with regards to expected losses on loans at a given level of delinquency were assessed based on historical roll rates on the loans purchased by the Group. Impairments are recognised once a loan was deemed to have a non-trivial likelihood of facing a material loss. The Group has created a loan loss reserve to reflect the increasing likelihood of loss as loans progress to more advanced stages of delinquency as well as the increasing expected loss as loans become more delinquent. As at 31 December 2015, the Group has created a reserve provision on the outstanding principal of the Group's loans of £7,120,117, which is included in impairment charges on the Consolidated Statement of Comprehensive Income.

10. FEES AND EXPENSES

Under the terms of the Management Agreement, the Investment Manager is entitled to a management fee and a performance fee together with reimbursement of reasonable expenses incurred by it in the performance of its duties.

The management fee is payable in Pound Sterling monthly in arrears and is at the rate of 1/12 of 1.0% per month of NAV (the "Management Fee"). For the period from Admission until the date on which 90% of the net proceeds of the Issue have been invested or committed for investment (other than in Cash Instruments), the value attributable to any Cash Instruments of the Group held for investment purposes will be excluded from the calculation of NAV for the purposes of determining the Management Fee.

The Investment Manager shall not charge a management fee twice. Accordingly, if at any time the Group invests in or through any other investment fund or special purpose vehicle and a management fee or advisory fee is charged to such investment fund or special purpose vehicle by the Investment Manager or any of its affiliates, the Investment Manger agrees to either (at the option of the Investment Manager): (i) waive such management fee or advisory fee due to the Investment Manager or any of its affiliates in respect of such investment fund or special purpose vehicle, other than the fees charged by the Investment Manager under the Management Agreement; or (ii) charge the relevant fee to the relevant investment fund or special purpose vehicle, subject to the cap set out in the paragraph below, and ensure that the value of such investment shall be excluded from the calculation of the NAV for the purposes of determining the Management Fee payable pursuant to the above. The management fee expense for the period is £2,158,389, of which £836,541 was payable as of 31 December 2015.

Notwithstanding the above, where such investment fund or special purpose vehicle employs leverage from third parties and the Investment Manager or any of its affiliates is entitled to charge it a fee based on gross assets in respect of such investment, the Investment Manager may not charge a fee greater than 1.0% per annum of gross assets in respect of any investment made by the Parent Company or any member of the Group.

The performance fee is calculated by reference to the movements in the Adjusted NAV (as defined below) since the end of the Calculation Period in respect of which a performance fee was last earned or Admission if no performance fee has yet been earned (the "High Water Mark").

The performance fee will be calculated in respect of each 12 month period starting on 1 January and ending on 31 December in each calendar year (a "Calculation Period"), save that the first Calculation Period shall be the period commencing on Admission and ending on 31 December 2015 and provided further that if at the end of what would otherwise be a Calculation Period no performance fee has been earned in respect of that period, the Calculation Period shall carry on for the next 12 month period and shall be deemed to be the same Calculation Period and this process shall continue until a performance fee is next earned at the end of the relevant period.

The performance fee will be a sum equal to 15%. of such amount (if positive) and will only be payable if the Adjusted NAV at the end of a Calculation Period exceeds the High Water Mark. The performance fee shall be payable to the Investment Manager in arrears within 30 calendar days of the end of the relevant Calculation Period. "Adjusted Net Value" means the NAV adjusted for: (i) any increases or decreases in NAV arising from issues or repurchases of Ordinary Shares during the relevant Calculation Period; (ii) adding back the aggregate amount of any dividends or distributions (for which no adjustment has already been made under (i)) made by the Parent Company at any time during the relevant Calculation Period; and (iii) before deduction for any accrued performance fees.

The Investment Manager shall not charge a performance fee twice. Accordingly, if at any time the Group invests in or through any other investment fund, special purpose vehicle or managed account arrangement and a performance fee or carried interest is charged to such investment fund, special purpose vehicle or managed account arrangement by the Investment Manager or any of its affiliates, the Investment Manager agrees to (and shall procure that all of its relevant affiliates shall) either (at the option of the Investment Manager): (i) waive such performance fee or carried interest suffered by the Group by virtue of the Investment Manager's (or such relevant affiliate's/affiliates') management of (or advisory role in respect of) such investment fund, special purpose vehicle or managed account, other than the fees charged by the Investment Manager under the Management Agreement; or (ii) calculate the performance fee as above, except that in making such calculation the NAV (as of the date of the High Water Mark) and the Adjusted NAV (as of the NAV calculation date) shall not include the value of any assets invested in any other investment fund, special purpose vehicle or managed account arrangement that is charged a performance fee or carried interest by the Investment Manager or any of its affiliates (and such performance fee or carried interest is not waived with respect to the Group). The performance fee expense for the period is £1,301,904.

Certain loans purchased by the Group through a Platform are subject to a performance fee that the seller may be entitled to receive from the Group with respect to the performance of the loans. This fee may be due to the Platform 12 months after the purchase of the loans from the Platform. At 31 December 2015, the amount the Group has recognised is £2,909,078 and it is included in other liabilities and accrued expenses on the Consolidated Statement of Financial Position and in other expenses on the Consolidated Statement of Comprehensive Income.

The Group has entered into an administration agreement with Northern Trust Hedge Fund Services LLC. The Group pays to the Administrator an annual administration fee based on the Parent Company's net assets subject to a monthly minimum charge.

The Administrator shall also be entitled to be repaid all of its reasonable out-of-pocket expenses incurred on behalf of the Group. All Administrator fees are included in other expenses on the Consolidated Statement of Comprehensive Income.

Under the terms of the Company Secretarial Agreement, Capita Registrars Limited is entitled to an annual fee of £50,000 (exclusive of VAT and disbursements). All Secretary fees are included in other expenses on the Consolidated Statement of Comprehensive Income.

Under the terms of the Registrar Agreement, the Registrar is entitled to an annual maintenance fee of £1.25 per Shareholder account per annum, subject to a minimum fee of £2,500 per annum (exclusive of VAT). All Registrar fees are included in other expenses on the Consolidated Statement of Comprehensive Income.

Under the terms of the Custodian Agreement, Merrill Lynch, Pierce, Fenner & Smith Incorporated is entitled to be paid a fee of between US$180 and US$500 per annum per holding of securities in an entity. In addition, the Custodian is entitled to be paid fees up to US$300 per account per annum and other incidental fees. All Custodian fees are included in other expenses on the Consolidated Statement of Comprehensive Income.

For the period ended 31 December 2015, the remuneration for work carried out for the by the statutory auditors, PricewaterhouseCoopers LLP was as follows:

Amounts are included in other expenses on the Consolidated Statement of Comprehensive Income.

11. TAXATION

It is the intention of the Directors to conduct the affairs of the Group so as to satisfy the conditions for approval as an investment trust under section 1158 of the Corporation Taxes Act 2010. As an investment trust the Parent Company is exempt from corporation tax on capital gains made on investments. Although interest income received would ordinarily be subject to corporation tax, the Parent Company will receive relief from corporation tax relief to the extent that interest distributions are made to shareholders. It is the intention of the Parent Company to make sufficient interest distributions so that no corporation tax liability will arise in the Parent Company.

Any change in the Group's tax status or in taxation legislation generally could affect the value of the investments held by the Group, affect the Group's ability to provide returns to Shareholders, lead to the loss of investment trust status or alter the post- tax returns to Shareholders.

The following table presents the tax chargeable on the Group for the period ended 31 December 2015:

The Parent Company and Group may be subject to taxation under the tax rules of the jurisdictions in which they invest, including by way of withholding of tax from interest and other income receipts. Although the Parent Company and Group will endeavour to minimise any such taxes this may affect the level of returns to Shareholders of the Parent Company.

12. NET ASSET VALUE PER ORDINARY SHARE