Annual Financial Report

P2P GLOBAL INVESTMENTS PLC

Annual Financial Report for the year ended to 31 December 2016

The Directors present the Annual Financial Report of P2P Global Investments plc (the "Company") for the year ended 31 December 2016. A copy of the Company's Annual Report will shortly be available to view and download from the Company's website, www.p2pgi.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 copied from the Annual Report & Accounts:

INTRODUCTION TO THE COMPANY

P2P Global Investments plc (the "Company") is the first UK listed company dedicated to investing in credit assets originated by non-bank lending platforms ("Platforms") and other originators of alternative credit assets globally. At the end of 2016, after three further share issuances since the initial public offering ("IPO") the Company had 84,525,803 ordinary shares in issue at a price of 799p giving a total market capitalisation of £675m. The Company offers its investors the ability to gain diversified, liquid exposure to an otherwise illiquid asset class that has traditionally been the preserve of global banks.

The innovative technology and receptive government policies, combined with stricter regulations of banks, are fuelling the proliferation of online Platforms and the wider alternative finance market. Furthermore, big data analytics and new distribution channels have allowed Platforms and other technology start-ups to compete effectively with traditional banks in credit scoring and origination. These changes are likely to solidify over the next five to ten years. The Company is therefore well positioned to grow with the emerging asset class. It aims to deliver an attractive dividend income and capital growth via exposure to diversified credit assets and selective equity stakes in Platforms.

INVESTMENT OBJECTIVES

The Company's investment objectives are to:

a) Provide shareholders with an attractive level of dividend income and capital growth through exposure to investments in alternative finance and related instruments;

b) Achieve investment diversification across Platforms, geographies, asset classes and credit grades; and

c) Allow shareholders to participate in the equity upside by investing (in aggregate) up to 10% of gross assets in equity or equity linked securities issued by Platforms.

The Company's net asset value ("NAV") as at 31 December 2016 was £851m (cum income) and its market capitalisation was £675m

STRATEGIC REPORT

PERFORMANCE

COMMENTARY

§ The Company achieved positive Net Asset Value ("NAV") returns in every month of 2016, delivering a total NAV return of 4.1% for the ordinary shares.

§ The Company delivered a total of 44.5p of interim dividends relating to the 2016 financial year and paid those in May 2016, August 2016, November 2016 and March 2017.

§ The Company completed the first securitisation of consumer loans originated via a marketplace platform in the EMEA region. The securitisation is backed by UK consumer loans originated via the Zopa platform.

§ The Company's July 2015 C shares converted to ordinary shares on 21 March 2016. The conversion ratio was 0.9888 ordinary shares for every one C share held.

CAPITAL STRUCTURE AS AT 31 DECEMBER 2016 ORDINARY SHARES

CAPITAL STRUCTURE AS AT 31 DECEMBER 2015 ORDINARY SHARES

* Alternative performance measures- see glossary in the Annual Report for detail of calculation

31 December 2015 C share details not included as converted in 2016.

MONTHLY PORTFOLIO COMPOSITION

PERFORMANCE AND DIVIDEND HISTORY

TOP TEN INVESTMENT POSITIONS

Link to graph and tables in relation to the 'Monthly Portfolio Composition', 'Performance and Dividend History' and 'Top Ten Investment Positions':

http://www.rns-pdf.londonstockexchange.com/rns/6993D_-2017-4-28.pdf

CHAIRMAN'S STATEMENT

INTRODUCTION

I am pleased to present P2P Global Investments PLC's (the "Company") third Annual Report, for the year to 31 December 2016.

2016 was a year of significant challenges, both for the Company and its markets. The Board of the Company has announced a review of its investment management arrangements, following a year of disappointing performance both on dividend yield and share price. The Board expects to update Shareholders on the outcome of this review in due course.

INVESTMENT PERFORMANCE AND DIVIDENDS

The Company achieved positive NAV returns in each month of 2016. It delivered a NAV return of 4.1% and paid 44.5p per ordinary share in relation to the 2016 calendar year. However, during 2016, the dividend payment was not fully covered by earnings in the final quarter.

The Investment Manager's report details some of the adverse winds that have buffeted the Company during the past year. These included an increase in costs of funding as US interest rates rose and loan margins increased by some banks due to challenges in some platforms, a significant but temporary rise in cash balances which was in part required due to the uncertainty surrounding Brexit and some rise in default rates due to the "seasoning" of certain loans in the portfolio.

The Investment Manager considers that performance can be improved by diversifying the portfolio away from a concentration in US consumer loans (which were primarily included in the portfolio in the early life of the Company) and towards new and attractively priced opportunities such as secured lending opportunities originated by loan originators in the UK.

SHARE PRICE AND BUYBACKS

The Company's share price total return over the period was -15.97% and the shares have traded at discounts to NAV of between -0.13% and -27.71%. The Board and the Investment Manager have taken action to try to narrow the discount in two key areas as noted below.

The Company has initiated a share buyback programme. In total during 2016, 2% of ordinary shares in issue were repurchased at an average price of 813p, which represents approximately a 19% discount to NAV.

Shareholder communication has also been addressed with a greater degree of transparency in the quarterly newsletter from the Investment Manager. It now contains additional detail on the assets and reviews current issues affecting performance, such as the concept of "seasoning" mentioned above.

MANAGEMENT FEES

The Investment Manager volunteered to reduce its management fee charged on leverage by 0.5% in June 2016 and by another 0.5% in January 2017 (taking the total management fee charged on leverage to zero). This, together with the increment to NAV derived from the increase in the share buy-back programme, flows through to an immediate improvement in returns to Shareholders.

CONCLUSION

The Board remains focused in carrying through its strategy to improve performance, fully recognising its primary duty to safeguard the interests of the Shareholders in the Company as a whole. The first quarter of 2017 has involved a number of meetings of the Board to consider ways to achieve this strategy and the Board intends to continue its work in this regard. The Board welcomes comments from Shareholders. The Board has every confidence that the performance and returns of the Company can be significantly improved.

Stuart Cruickshank

Chairman

28 April 2017

INVESTMENT MANAGER'S REVIEW

SUMMARY

The Investment Manager continued to invest primarily in higher rated loans and continued to use modest leverage to enhance returns for shareholders. Thus far, this strategy has offered an attractive risk-adjusted return relative to investing in higher yielding, riskier loans, evidenced by their relative recent credit performance.

During the year, the Investment Manager has also actively pursued increasing exposure to secured loans and asset backed structures with a view to positioning the Company's portfolio defensively and increasing its diversification. Although there were significant deployment opportunities in the US Consumer sector, the Investment Manager decided against increasing its exposure to US Consumer assets and chose to limit the utilisation of its available funding facilities.

The Investment Manager's core focus remains its fundamental credit analysis of each opportunity regardless of the form of investment or the nature of the originating platform (i.e. whether investing in loans directly or indirectly.)

THE MARKET UPDATE

2016 was a year of significant historical global events. These events have had an impact on financial markets in various ways, including the assets of the Company:

§ Exchange rates: GBP has depreciated 16.3% against USD in 2016 which increased the value of the Company's USD assets, but was fully offset by foreign exchange (FX) positions held to hedge currency risk.

§ Interest rates: A more pronounced divergence of interest rates between GBP and USD has taken place, primarily due to the following events:

1. Brexit vote and subsequent rate cut by the Bank of England

2. US Election results

3. Federal Reserve's rate hikes

These events have contributed to a rise in the cost of USD floating rate debt as well as in the cost of currency hedging (GBP/USD) due to the increased interest rate differential. The Investment Manager maintained a large cash position to protect the Company's portfolio from the effects of large FX movements. This is in line with the Company's investment strategy of hedging all foreign currency exposures where possible. The combination of these events resulted in lower loan income than planned. Cash balances peaked at around 20% of NAV in June.

Despite the turbulence in global markets, both fixed income and equity indices posted gains in 2016. Fixed income yields moved lower globally. Indicators deemed relevant to the Company's loan assets, such as unemployment rates and consumer confidence levels in the UK and US remained relatively firm.

Well publicised problems at some US consumer platforms had a negative impact on funding spreads in the middle of the year but improved towards the year-end. The Company's total cost of borrowing has increased in 2016 as USD Libor has steadily increased during the course of the year.

In the US, the marketplace lending industry witnessed significant changes. The second half of 2016 saw a drop in origination volume from the major platforms in the unsecured consumer lending space as they managed significant internal restructuring. Investors demanded more from marketplace platforms, including increased focus on operations, tighter credit standards, increased rates and improved servicing.

COMPANY PERFORMANCE

The Company delivered 4.45% dividend return on the issue price and 4.1% of NAV growth vs its target return of 6% to 8%. The NAV per share (Cum Income) was 1006.49p as of 31 December 2016.

The Company was challenged by a number of factors in 2016 that had a negative impact on its returns including FX volatility which resulted in a maintenance of a larger than anticipated cash balance, a gradual seasoning of its loan portfolio as well as the diverging interest rate policies between US and UK impacting the value of USD returns going forward.

Despite the challenging environment in 2016, the Company achieved a positive return in every month in the financial year. The Investment Manager continues to pursue new opportunities for achieving robust risk-adjusted returns in the direct lending space.

Gross Yields

Gross yields across the Company's portfolio remained relatively stable in 2016. Whilst there was a small increase in US consumer loan gross yields, the prime segment of UK consumer credit saw slight downward pressure. The Company's portfolio offered a yield pickup vs traditional fixed income markets which have tightened significantly during the year, making yield opportunities in the liquid fixed income space evermore scarce.

Credit Performance

Loans are generally subject to a seasoning effect which is effectively the aging profile of a loan portfolio. Loans have a higher tendency to turn delinquent around the middle of their term. In the early period of the Company's operations, high volumes of new loans contributed to low average delinquencies. As the portfolio ages and reduces its percentage of new loans, delinquencies will naturally rise and then stabilise at an average level.

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The Investment Manager starts impairing a loan as soon as it is 15 days past due. The level of impairment is based on the probability of default depending on the number of days past due, using recent historical rates of default on loan portfolios. In line with current applicable accounting standards the Company does not hold a loan loss reserve for future losses. Therefore, depending on the level of seasoning monthly returns may vary whilst total expected return on the portfolio remains unchanged.

§ US Consumer (55.4% of NAV) - Loan vintages from late 2015 and early 2016 marginally underperformed the Investment Manager's expectations. However, adjustments to the platforms' credit scorecards and small increases in interest rates helped newer vintages deliver more attractive total returns.

§ European Consumer (15.6% of NAV) - Vintage by vintage, loan losses remained stable and within the Investment Manager's expectations. There were gradual improvements in newer vintages of the riskier credit grades, driven by the continued development and implementation of scorecards. At the same time the prime segment saw yield pressure in the region of 20 to 30bps per annum. This was due to increased competition from traditional lenders.

§ Cash balances and liquid bonds accounted for 12.4% of the Company's portfolio at 31 December 2016.

§ European Real Estate (5.1% of NAV) - The Company's portfolio in this asset class had and currently has no delinquent loans. New issuance is attracting similar yields. The Investment Manager intends to increase allocation to this asset class over time.

§ European SME (3.1% of NAV) - The Company's European SME portfolio performance remained within the Investment Manager's expectations. For certain older vintages, recoveries are contributing to an improvement in total return expectations.

Leverage

At the end of 2016, the Company's ordinary share class had a net debt to equity ratio of 82%. The Investment Manager currently has a target gearing ratio between 90% and 110% (net debt to equity) which it expects to achieve over the course of 2017.

The Investment Manager further broadened the Company's funding options by entering into a number of new debt facilities in 2016 including the first UK consumer loan securitisation of marketplace lending loans in September 2016 which resulted in a cheaper cost of funding for the Company.

During the course of 2016, the overall cost of borrowing for the Company was influenced by the following factors:

1 the turbulence in US consumer marketplace lending caused spreads to widen in the first half of 2016 and restricted the Company to access the term markets;

2 a subsequent tightening of credit spreads towards year end, driven by banks and other investors returning to the marketplace. A series of securitisations were placed at tighter spreads, showing that capital markets remain supportive to fund these assets.

Despite short-term turbulence in the first half of 2016, the Company was able to finance at a lower cost of funding in the latter part of 2016 compared to prior years. The Investment Manager intends to further access the securitisation markets and expects the overall cost of funding to decline as market conditions improve.

The Company does not fully hedge all of its interest rate risk and thus has some exposure to movements in interest rates. Whilst GBP Libor remains close to historic lows after the UK base rate cut in Q3 2016, with a relatively flat forward curve, the 1-month USD Libor has increased to 77bps from 42bps at the beginning of 2016, with further hikes possible in 2017.

PORTFOLIO COMPOSITION

As at 31 December 2016, the Company's exposures consisted of small and medium sized enterprises (SMEs), consumer and real estate loans, invoice receivables as well as equity investments in selected platforms and a portfolio of liquid fixed income securities.

The positions outside the 'Top Ten Investment Positions' include individual borrower loans and therefore a full portfolio listing is not set out below. Allocation of the Company's resources is undertaken by the Investment Manager within the portfolio's limits set out in the Investment Policy below.

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EQUITY INVESTMENTS

The Company has a mandate to invest up to 10% of gross assets in the listed or unlisted securities issued by Platforms. As at 31 December 2016, the Company was invested in the equity of 16 Platforms representing 4.32% of NAV. The Investment Manager intends to maintain the percentage of NAV exposed to equity of Platforms around 5%. During 2016, the Company realised one of its equity positions at a profit.

OUTLOOK

The universe of global alternative lending opportunities continues to expand. The Investment Manager believes various specialty finance markets continue to offer attractive investment opportunities as a result of bank deleveraging, regulatory changes and central bank distortions.

With a steeper forward curve in the US and better priced opportunities elsewhere, it is likely that the US consumer loan asset class will further decrease as a percentage of the Company's overall portfolio. Whilst unsecured consumer loans in the UK benefit from lower funding costs (both through base rate and spread), there is some competitive tension in the most prime grade loans in which the Company typically invests. At the same time, new and more attractively priced opportunities are evolving in other parts of the lending market. Secured and unsecured SME lending in the UK and Europe offers an attractive risk return profile, the small balance property backed lending sector remains underserved and non-bank trade finance originators are increasing their reach and ability to scale. The Investment Manager expects growth in these areas of the Company's portfolio.

The Investment Manager believes that economies of scale will continue to play an important role in driving down the cost of funding with larger facilities and enabling it to repeat securitisations achieving lower pricing into the future.

Scale is also paramount when gaining access to, and achieving economies with leading originators. The Company aims to offer that scale to its origination and funding partners.

In an effort to improve returns, the Investment Manager will seek to continue to:

§ Increase the Company's average net yield by:

§ reducing exposure to the tighter priced parts of the market and to underperforming assets

§ increasing exposure to higher net yielding assets without increasing its total portfolio risk

§ investing in assets with attractive cost of funding

§ Access capital markets for flexible term funding and continue to reduce its cost of funding

The global disintermediation of banks continues to drive an exciting structural opportunity, widening the Company's investment universe. Despite a climate of geopolitical uncertainty, the Investment Manager believes that the Company is well positioned to deliver a reliable dividend income.

SUMMARY AND ANNOUNCEMENTS FOR THE YEAR

The financial and business highlights of the Company for 2016 are as follows:

§ Share Buyback Programme (December 16 2016). The Company appointed Liberum Capital Limited to manage the share buy-back programme.

§ Appointment of prime broker (November 11 2016). The Company appointed Deutsche Bank AG acting through its London Branch as a prime broker under the terms of a prime brokerage agreement dated 11 November 2016.

§ FCA Authorisation (November 7 2016). On 28 October 2016 the Company received full authorisation from the FCA for its credit-related regulatory activities.

§ Dividend Announcement (October 27 2016). On the 26 October 2016, the Directors declared an interim dividend of 11p per ordinary share for the three-month period to 30 September 2016.

§ Securitisation of consumer marketplace loans (September 27 2016). The Company completed the first securitisation of consumer loans originated via a marketplace platform in the EMEA region. The securitisation is backed by UK consumer loans originated via the Zopa platform. The bonds were rated by Moody's and Fitch Ratings, and given the ratings of Aa3/AA- on the most senior notes, the highest achieved so far for a marketplace transaction.

§ Dividend Announcement (July 26 2016). The Company declared an interim dividend of 11p per ordinary share for the three-month period to 30 June 2016.

§ Directorate Changes (June 9 2016). The Company announced the appointment of Mahnaz Safa as an independent non-executive director with effect from 10 June 2016.

§ Dividend Announcement (April 21 2016). The Company declared an interim dividend of 11.5p per ordinary share for the three-month period to 31 March 2016.

§ July 2015 C Share Conversion Ratio Announcement (March 17 2016). The net asset values ("NAVs") attributable to the ordinary shares and the C shares as at the Calculation Date, being the close of business on 15 March 2016, were 1007.47p per ordinary share and 996.14p per C share respectively. The Conversion Ratio, as calculated in accordance with the Company's articles of association and the prospectus dated 28 July 2015 (the "Prospectus"), is 0.9888 ordinary shares for every one C share held as at close on the conversion record date of 21 March 2016.

§ Announcement of the Company's Discount Management Policy (March 4 2016).

§ Dividend Announcement (January 28 2016). The Company declared interim dividend of 13.7p per ordinary share and 9.5p per C share for the three month period to 31 December 2015. The total ordinary share dividend declared for the first three quarters of 2015 was 45.5p, bringing the total ordinary share dividends declared for 2015 to 59.2p.

INVESTMENT OBJECTIVE

The Company's investment objective is to provide Shareholders with an attractive level of dividend income and capital growth through exposure to investments in alternative finance and related instruments.

INVESTMENT POLICY

The Company's investment policy was amended pursuant to a resolution passed at the Annual General Meeting held on 9 June 2016 in order to provide increased flexibility for the investment and management of the Company's assets. The new investment policy as adopted at that meeting is as follows:

The Company invests in consumer loans, SME loans, corporate loans, and advances and loans against corporate trade receivables and other assets, which have been originated via Platforms or by other originators including, from time to time, the Company or its affiliates. The Company may also invest in facilities, securities or other interests backed by a portfolio of any of the aforementioned loans, assets or receivables (all of the foregoing, "Credit Assets"). The Company will typically seek to invest in Credit Assets with targeted net annualised returns of 5 to 15 per cent.

The Company invests in Credit Assets directly, via Platforms or by other originators and may also invest in Credit Assets indirectly via other investment funds (including those managed by the Investment Manager, the Sub-Manager or their affiliates) that it deems suitable with a view to enhancing Shareholder returns and providing diversification of the Company's assets. The Company will generally only seek to invest via other investment funds where these enable investments in Credit Assets from Platforms or other originators that the Company either cannot gain direct access to or could only gain direct access to on less favourable terms than an investment via another investment fund. The Company's investments in Credit Assets may be made through subsidiaries of the Company.

The Company may also invest (in aggregate) up to 10 per cent. of Gross Assets (at the time of investment) in the listed or unlisted securities issued by one or more Platforms. This restriction shall not apply to any consideration paid by the Company for the issue to it of any convertible securities by a Platform. However, it will apply to any consideration payable by the Company at the time of exercise of any such convertible securities or any warrants issued by a Platform.

The Company invests across various Platforms, originators, asset classes, geographies (primarily US and Europe) and credit risk bands in order to ensure diversification and to seek to mitigate concentration risks. The following investment limits and restrictions apply to the Company, to ensure that the diversification of the Company's portfolio is maintained and that concentration risk is limited.

PLATFORM RESTRICTIONS

The Company will not invest more than 33 per cent. of Gross Assets via any single Platform or single originator. This limit may be increased to 66 per cent. of Gross Assets via any single Platform or single originator, provided that where this limit is so increased in respect of any Platform or originator, the Company does not invest an amount which is greater than 25 per cent. (by value) of the total loan origination of the preceding calendar year through such Platform or originator.

ASSET CLASS AND GEOGRAPHICAL RESTRICTIONS

No single loan acquired by the Company will have an Expected Average Life of greater than 5 years. No single trade receivable asset acquired by the Company will be for a term longer than 180 days.

The Company will not invest more than 20 per cent. of Gross Assets, at the time of investment, via any single investment fund investing in Credit Assets. The Company will not invest, in aggregate, more than 60 per cent. of Gross Assets, at the time of investment, in other investment funds that invest in Credit Assets.

The Company will not invest more than 10 per cent. 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 per cent. of their gross assets in other listed closed-ended investment funds.

The following apply, in each case at the time of investment by the Company, to both Credit Assets acquired by the Company directly and on a look-through basis to any Credit Assets held by another investment fund in which the Company invests (proportionate to the percentage interest the Company has in such investment fund). It is intended that:

No single consumer loan shall exceed 0.25 per cent. of Gross Assets.

No single SME loan shall exceed 5.0 per cent. of Gross Assets.

No single advance or loan against a trade receivable asset shall exceed 5.0 per cent. of Gross Assets.

No single corporate loan shall exceed 5 per cent. of Gross Assets.

No single facility, security or other interest backed by a portfolio of loans, assets or receivables (excluding any borrowing ring-fenced within any SPV which would be without recourse to the Company) shall exceed 20 per cent. of Gross Assets.

For illustrative purposes only, if the Company acquires a 10 per cent. interest in another investment fund which invests in Credit Assets, at the time of investment in that other investment fund, no single consumer loan held by that investment fund may exceed 2.5 per cent. of Gross Assets.

The following restrictions apply to both Credit Assets acquired by the Company directly and on a look through basis to any Credit Assets held by another investment fund in which the Company invests (proportionate to the percentage interest the Company has in such investment fund):

At least 10 per cent. of Gross Assets will be maintained in consumer Credit Assets, not more than 50 per cent. of Gross Assets will be maintained in SME Credit Assets and not more than 50 per cent. of Gross Assets will be maintained in trade receivable assets.

The Company will maintain at least 10 per cent. of Gross Assets in Credit Assets in Europe and at least 10 per cent. of Gross Assets in Credit Assets in the United States.

OTHER RESTRICTIONS

The Company may invest in cash, cash equivalents and fixed income instruments for cash management purposes and with a view to enhancing returns to Shareholders or mitigating credit exposure. However, the Company will only invest in fixed income instruments of investment grade.

The Company will not invest in CDOs.

Definition

Credit Assets: (i) consumer loans, SME loans, corporate loans, and advances and loans against corporate trade receivables and other assets, which have been originated via Platforms or by other originators including, from time to time, the Company or its affiliates; and (ii) facilities, securities and/or other interests backed by a portfolio of any of the aforementioned loans, assets or receivables. 

BORROWING POLICY

Borrowings may be employed at the level of the Company and at the level of any investee entity (including, without limitation, any other investment fund in which the Company invests or any special purpose vehicle ("SPV") that may be established by the Company in connection with obtaining leverage against any of its assets or any issuer vehicle of facilities, securities or other interests backed by a portfolio of Credit Assets).

The aggregate leverage of the Company and any investee entity (on a look-through basis, proportionate to the percentage interest the Company retains in the most junior tranche of such investee entity) shall not exceed 1.5 times Net Asset Value.

The Company may seek to securitise portfolios of Credit Assets and may establish one or more SPVs in connection with any such securitisation.

The Company may also use SPVs in connection with obtaining leverage against Credit Assets to seek to protect the levered portfolio from group level bankruptcy or financing risks. The Company may also, in connection with seeking such leverage or securitising its loans, seek to assign existing assets to one or more SPVs and/or seek to acquire loans using an SPV. The Company will ensure that any SPV used by it to acquire or receive (by way of assignment or otherwise) any loans to UK consumers shall first obtain any required authorisation from the FCA for consumer credit business.

No material change will be made to the investment policy without the approval of Shareholders by ordinary resolution.

STRATEGY & BUSINESS MODEL

FIRST MOVER ADVANTAGE

The emergence of marketplace lending, originally funded by retail capital as well as other non-bank lenders, is rapidly attracting the interest of professionally managed capital seeking to gain exposure to attractive returns with lower correlation to traditional asset classes. The Company and the Investment Manager pioneered a number of developments within the marketplace and direct lending industry that allowed them to capture a first mover advantage and position themselves well for the growth of the non-bank finance space. Firstly, by introducing permanent, listed capital, the Company allows investors to gain instant, direct exposure to the space whilst maintaining the liquidity advantages of holding shares in a listed entity. Secondly, the Company was one of the first to pioneer a global strategy spread across a number of asset classes, allowing for further diversification compared to strategies focused on single asset classes and single geographies. The Company will look to continue to stay at the forefront of the fast-growing industry with an aim to capture new Platform opportunities, where superior returns can be attained.

CREDIT PROCESS

Despite the market enthusiasm for the process of marketplace lending itself, and the ability of such low cost originators to offer risk-based priced loans to borrowers in a quick and efficient manner, the Investment Manager remains focused on the underlying creditworthiness of the borrowers. The Investment Manager is of the belief that, irrespective of origination source or the convenience of the product to the borrower, credit performance will vary depending on the quality of verification, underwriting, servicing, and the ability to construct diversified portfolios of selective loans. Due diligence on the credit process and overall business of the Platform operators is of primary importance to the Investment Manager and its global team of credit professionals.

STRUCTURING CAPABILITIES

The Investment Manager is focused on assessing opportunities in a variety of forms and structures, ensuring that the direct or indirect exposure subscribed to in each case offers the best risk adjusted returns for investors. Whilst the Investment Manager has executed whole loan purchases of assets and has put in place a variety of such arrangements, it also places significant focus on ensuring debt financing can be sourced in an efficient and low cost way where levered exposure is sought. In other cases, the Investment Manager has partnered up with originators and provided financing that sits senior to the originator's position allowing the Company to benefit from stable income and first loss protection on its capital.

GLOBAL OPPORTUNITIES

To date, successful originators have based their growth and credit performance on a number of characteristics in the markets where they operate including:

§ high quality credit data to enable accurate assessment of creditworthiness and pricing;

§ focus on geographies where oligopolistic credit markets allow traditional lenders to enforce large spreads between deposit rates and borrowing rates; and

§ a focus on types of lending where the overhead cost of traditional lenders bears the biggest weight on gross margin and makes lending unprofitable, unless conducted at high interest rates.

By acknowledging these characteristics, which enable disruptive lenders to offer borrowers a high quality product and their lenders an attractive return for the level of risk they are taking, the Company is seeking opportunities to meet these criteria, in order to extract additional value for shareholders. As non-bank lending becomes more mainstream in certain geographies and asset classes, the Company will look to position itself to take advantage of the next wave of Platforms that repeat these characteristics, in new asset classes and new geographies.

CAPITAL PRESERVATION AND INCOME STABILITY

The Investment Manager is focused on delivering a combination of strong income with relatively low duration and volatility compared to traditional fixed income products. With traditional credit and fixed income products trading at all time low yields with the duration of such securities spanning out to more than 5 years at issuance, the Investment Manager recognises the attractiveness of the private credit sector, particularly in small ticket lending where price competition is less prevalent. The illiquidity premium that is available in the private sector, combined with the short duration nature of these assets, can offer investors a yield pick-up in an otherwise yield-starved market. The diversification across hundreds of thousands of individual credits and the low duration of the overall portfolio should allow the Company to deliver a level of stability in its income and protect the Company from capital losses that may be incurred in longer duration traded instruments.

PRINCIPAL RISKS

The Group is exposed to a number of potential risks and uncertainties which could have a material impact on the Group's financial performance and position and could cause actual results to differ materially from expected and historical results.

The Board has in place a robust process to assess and monitor the risks of the Group. A core element of this is the Group's risk register, which identifies the risks facing the Group and assesses the likelihood and potential impact of each risk, and the quality of the controls operating to mitigate the risk.

The register, its method of preparation and the operation of the key controls in the Investment Manager's systems of internal control are reviewed, and reported to the Board, on a regular basis by the Audit and Valuation Committee. In order to gain a more comprehensive understanding of the Investment Manager's risk management processes and how these apply to the Group's business, the Board periodically receives on-site presentations from the Investment Manager.

The Investment Manager also has responsibility for risk management for the Group. It works with the Board to identify and manage the principal risks and to ensure that the Board can continue to meet its UK corporate governance obligations.

The Board has undertaken a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity. Those principal risks have been described in the table below together with an explanation of how they are managed and mitigated. The Board will continue to assess these risks on an ongoing basis.

VIABILITY STATEMENT

In accordance with provision C.2.2 of the UK Corporate Governance Code, published by the Financial Reporting Council in September 2014 (the "Code"), the Directors have assessed the prospects of the Company over the four year period to the Annual General Meeting ("AGM") in 2021. The Directors believe this period to be appropriate as they will be required by the Articles of Association to put a proposal for the continuation of the Company at that meeting and therefore cannot presume that it will continue to operate as an investment trust thereafter.

In their assessment of the viability of the Company, the Directors have considered each of the Company's principal risks and uncertainties detailed above. The Directors have also considered the Company's revenue and expenditure projections, working capital requirements and the fact that the Company's investments do not comprise readily realisable securities which can be sold to meet funding requirements if necessary.

Based on the Company's current position, the principal risks that it faces and their potential impact on its future development and prospects, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the four year period to the AGM in 2021.

ENVIRONMENTAL, HUMAN RIGHTS, EMPLOYEE, SOCIAL AND COMMUNITY ISSUES

The Company is required, by company law, to provide details of the environmental matters (including the impact of the Company's business on the environment), employee, human rights, social and community issues; including information about any policies it has in relation to these matters and the effectiveness of those policies. The Company does not have any employees nor, as an investment trust, does it have any direct impact on the community or environment and as a result does not maintain specific policies in relation to these matters. In carrying out its investment activities and in relationships with suppliers, the Company aims to conduct itself responsibly, ethically and fairly.

Modern Slavery Act

The Company is not within the scope of the Modern Slavery Act 2015 because it has insufficient turnover and is therefore not obliged to make a human trafficking statement.

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 page 25 of the Annual Report.

On behalf of the Board

Stuart Cruickshank

Chairman

28 April 2017

BOARD OF DIRECTORS

Stuart Cruickshank

Simon King

Michael Cassidy

Mahnaz Safa

GOING CONCERN

Having assessed the principal risks and the other matters discussed in connection with the viability statement, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

The full Annual Report contains the following statements regarding responsibility for the financial statements.

STATEMENT OF DIRECTORS' RESPONSIBILITES

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;

§ 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 Company and the Group 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 Company and the Group 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, confirm that, to the best of their knowledge:

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

§ the Annual 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 P2P Global Investments plc

Stuart Cruickshank

Chairman

28 April 2017

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the year ended 31 December 2016 but is derived from those accounts. Statutory accounts for the year ended 31 December 2016 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 (iii) 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 Accounts on the Company's website at www.p2pgi.com

As at 31 December 2016

The financial statements were approved by the Board of Directors on 28 April 2017 and signed on its behalf by: 

Stuart Cruickshank

Chairman

28 April 2017

See notes to the consolidated financial statements

PARENT COMPANY STATEMENT OF FINANCIAL POSITION

As at 31 December 2016

The financial statements were approved by the Board of Directors on 28 April 2017 and signed on its behalf by: 

Stuart Cruickshank

Chairman

28 April 2017

See notes to the consolidated financial statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2016

The total column of this statement represents the Group's Consolidated 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. There is no other comprehensive income.

See notes to the consolidated financial statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2015

The total column of this statement represents the Group's Consolidated 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. There is no other comprehensive income.

See notes to the consolidated financial statements

CONSOLIDATION AND PARENT COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS

For the year ended 31 December 2016

CONSOLIDATION AND PARENT COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS

For the year ended 31 December 2015

See notes to the consolidated financial statements

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2016

See notes to the consolidated financial statements

PARENT COMPANY CASH FLOW STATEMENT

For the year ended 31 December 2016

See notes to the consolidated financial statements

1. GENERAL INFORMATION

P2P Global Investments plc (the "Company") is a closed-ended investment company incorporated in England and Wales on 6 December 2013 with registered number 8805459. The Company commenced operations on 30 May 2014.

The investment objective of the Company is to provide shareholders with an attractive level of dividend income and capital growth through exposure to investments in alternative finance and related instruments.

The Company's investment manager is MW Eaglewood Europe LLP (the "Investment Manager"). MW Eaglewood Americas LLC, an affiliate of the Investment Manager and an SEC registered investment adviser, has been appointed as sub investment manager (the "Sub-Manager") to the Company. The Investment Manager has, pursuant to the Sub-Management Agreement, delegated certain of its responsibilities and functions, including its discretionary management of the Company's portfolio of credit assets, to the Sub-Manager.

The Investment Manager is authorised as an Alternative Investment Fund Manager ("AIFM") under the Alternative Investment Fund Managers Directive ("AIFMD"). The Company is defined as an Alternative Investment Fund and is subject to the relevant articles of the AIFMD.

The Company invests, directly and indirectly, in consumer loans, small and medium sized enterprises ("SME") loans, advances against corporate trade receivables and/or purchases of corporate trade receivables ("Credit Assets") which have been originated via Platforms. The Company will typically seek to invest in Credit Assets with targeted net annualised returns of 5 to 15%. The Company will seek to purchase Credit Assets directly (via Platforms or via other originators) and may also invest in such assets indirectly via funds, partnerships or special purpose vehicles (including those managed by the Investment Manager, the Sub-Manager or their affiliates) that it deems suitable with a view to enhancing Shareholder returns and providing diversification of the Company's assets.

As at 31 December 2016 the Company had total issued equity in the form of 86,306,803 ordinary shares (31 December 2015: 46,754,919) of which 84,525,803 were outstanding, 1,781,000 were held as treasury shares (31 December 2015: Nil) and Nil were held as C shares (31 December 2015: 40,000,000). These shares are listed on the Premium listing segment of the Official List of the UK Listing Authority and trade on the London Stock Exchange's main market for listed securities.

Citco Fund Services (Ireland) Limited (the "Administrator") has been appointed as the Administrator of the Company. The Administrator is responsible for the Company's general administrative functions, such as the calculation and publication of the Net Asset Value ("NAV") and maintenance of the Company's accounting records.

2. SIGNIFICANT ACCOUNTING POLICIES

a) Basis of preparation

The consolidated financial statements for the Company 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 issued by the International Accounting Standard Committee that remain in effect, to the extent they have been adopted by the European Union. The consolidated financial statements are also in compliance with relevant provisions of the Companies Act 2006 as applicable to companies reporting under IFRS. The accounting policies have been applied consistently year on year.

Consolidation

Subsidiaries are investees controlled by the Company. The Company controls an investee if it is exposed to, or has the rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The Company reassesses whether it has control if there are changes to one or more elements of control. Subsidiaries are valued at fair value which is deemed to be net asset value. The Company does not consider itself to be an investment entity for the purposes of IFRS 10, as it does not hold substantially all of its investments at fair value. Consequently it consolidates its subsidiaries rather than holding at fair value through profit or loss.

As at 31 December 2016 the Company controls three subsidiaries, P2PCL1 PLC, Eaglewood SPV I LP and Marketplace Originated Consumer Assets 2016-1 PLC (together "the Group").

The Company controls P2PCL1 PLC, a limited liability company incorporated in England and Wales, through its ownership of one class A Share which confers control of 100% of the voting rights in that entity.

The Company invests in a special purpose vehicle, Eaglewood SPV I LP (the "SPV" or the "Subsidiary") and at 31 December 2016 is the sole Limited Partner in that SPV. The principal activity of Eaglewood SPV I LP is to invest in alternative finance investments and related instruments, including marketplace loans, which is aligned with the Company's investment objective. The Company's position with regards to the SPV is that of an investor where its maximum loss is restricted to its investment in the vehicle and in return for this receives a quarterly income distribution. Previously the financial statements of the Company did not consolidate the SPV as the Company did not exercise control over its activities, which were instead exercised by the General Partner. It was our judgement that the General Partner had a significant exposure to the SPV through its performance fee arrangements. As the General Partner had the decision making powers and in our judgement was acting as the principal, our determination was that the Group did not have control over the SPV and as a result did not consolidate it as at 31 December 2015.

The parent of the General Partner has undertaken a review of the legal and corporate governance arrangements of the SPV. As a result of that review, on 31 December 2016, the SPV's Limited Partnership Agreement was amended. This included, amongst other alterations, the addition of a clause by which the General Partner of the SPV can be replaced by notice from at least 75% of the Limited Partner interests. Furthermore, the composition of the board of managers of the General Partner was changed. Two of the three representatives from the group of the Investment Manager resigned and, on 22 December 2016, Stuart Cruickshank and an independent non-executive were both appointed to the board as managers.

These changes resulted in the Group determining that the General Partner was then exercising its decision making powers in a capacity as an agent for the Group. Therefore the Group has determined that it controls the SPV and consolidates it from 31 December 2016. Prior year comparatives are not restated. Further details of the impact of this consolidation can be found in Note 3.

The Company also controls Marketplace Originated Consumer Assets 2016-1 PLC ("MOCA") a public limited company incorporated under the Laws of England and Wales. MOCA is a securitisation vehicle for UK consumer loans and operates in a pre-determined manner. The Company is considered to control MOCA by virtue of being its sponsor whilst having exposure to the variable returns of the vehicle through the holding of junior notes issued by it.

All entities within the Group have co-terminous reporting dates.

Intra-group balances and transactions, and any unrealised income and expenses (except for currency transaction gains or losses) arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

Advantage has been taken of the exemption under section 408 of the Companies Act 2006 and accordingly the Company has not presented a Statement of Comprehensive Income for the Company alone. The net profit on ordinary activities after taxation of the Company for the year ended 31 December 2016 was £30,974,511 (2015: £27,533,467).

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. The Directors consider that the Group has adequate financial resources to enable it to continue operations for a period of no less than 12 months from the reporting date. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the consolidated financial statements.

Where presentational guidance set out in the Statement of Recommended Practice ("SORP") for investment trusts issued by the Association of Investment Companies ("AIC") in January 2009 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 Group's presentational and functional currency is Pounds Sterling (£). Pounds Sterling is the denomination of the Company's share capital and the primary economic environment of its shareholders. Foreign currency exposures arising from its investments are hedged back into Pounds Sterling.

(b) Presentation of 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. Net profit on ordinary activities before finance costs and taxation in the revenue column is the measure the Directors believe appropriate in assessing the Group's compliance with certain requirements set out in section 1158 of the Corporation Taxes Act 2010.

In respect of the analysis between revenue and capital items presented within the Consolidated Statement of Comprehensive Income, all expenses and finance costs, which are accounted for on an accruals basis, have been presented as revenue items except those items listed below:

§ expenses are allocated to capital where a direct connection with the maintenance or enhancement of the value of the investments can be demonstrated. Investment management fees and finance costs are allocated to capital in accordance with accounting policy 2(d); and

§ expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment.

The following are presented as capital items:

§ gains and losses on the realisation of investments;

§ increases and decreases in the valuation of investments held at the year-end;

§ realised and unrealised gains and losses on transactions undertaken to hedge an exposure of a capital nature;

§ realised and unrealised exchange differences of a capital nature; and

§ expenses, together with the related taxation effect, allocated to capital in accordance with the above policies.

(c) Income

For financial instruments measured at amortised cost the effective interest rate (EIR) 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 exactly discounts estimated future cash payments or receipts through 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 EIR, the Group estimates cash flows considering all contractual terms of the financial instrument (for example, early redemption penalty charges) but does not consider future credit losses. The calculation includes all fees received and paid and costs borne that are an integral part of the effective interest rate and all other premiums or discounts above or below market rates.

Once a financial asset or a group of similar financial assets becomes impaired, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss and is recognised over the period to which the expected cash flows relate.

Dividend income from investments is taken to the revenue column of the Statement of Comprehensive Income on an ex-dividend basis.

Bank interest and other income receivable are accounted for on an accruals basis.

The increase in the Group's share of the distributable profit in SPV vehicles prior to consolidation was treated as revenue return provided that the underlying assets of the SPV comprised solely of income generating loans, or investments in lending Platforms which themselves generated net interest income.

(d) Expenses, fees and commissions

Fees and commissions not directly attributable to generating a financial instrument are recognised as services are provided, or on the performance of a significant act which means the Group has become contractually obligated to settle those amounts.

The Group currently charges performance fees to revenue return as it is the current expectation that the majority of the Group's return will be generated through revenue rather than capital gains on investments. Investment management fees are allocated between the revenue and capital accounts based on the prospective split of the gross revenue between revenue and capital. The percentage of management expenses allocated to capital is less than 1% of the total. Refer to Note 11 for further details of the management and performance fees.

Gains and losses arising from derivative instruments are credited or charged to the Statement of Comprehensive Income. All other expenses are accounted for on an accruals basis.

(e) Dividends payable to shareholders

Dividends to shareholders are accounted for in the period which they are paid or approved in general meetings. Dividends payable to shareholders are recognised in the 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 Group.

(f) 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 reporting date.

In line with the recommendations of the SORP, 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.

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Investment trusts which have approval as such under section 1158 of the Corporation Taxes Act 2010 are not liable for taxation on capital gains. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax rates that have been enacted or substantively enacted at the reporting date.

Deferred tax is charged or credited in the Consolidated Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

(g) Financial assets and financial liabilities

The Group classifies its financial assets and financial liabilities at inception into the following categories:

(i) Financial assets and financial liabilities at fair value through profit or loss

This category consists of forward foreign exchange contracts, option contracts, money market funds, unlisted equities positions, equities, fixed income securities, investment in other funds and the investment in the SPV for prior year. 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 money market funds, the SPV prior to consolidation and the subsidiaries (other than debt securities issued by them) are carried at fair value. This is determined using the NAV for the units at the balance sheet date as provided by the relevant fund administrator.

Investments in other funds are carried at fair value. This is determined using the NAV for the units at the balance sheet date as provided by the relevant fund administrator.

The unlisted equities are valued at fair value. The fair value is based on primary issuance of stock, secondary market transactions, earnings multiples or third party valuations which are considered representative of the fair value. Gains and losses arising from the changes in the fair values are recognised in the Consolidated Statement of Comprehensive Income.

(ii) 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.

(iii) 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 have expired or where the assets have been transferred and substantially all of the risks and rewards of ownership have been transferred.

(iv) Impairment of financial assets

Assets carried at amortised cost

The Group assesses at each reporting 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;

§ breach of loan covenants or conditions;

§ debt being restructured to reduce the burden on the borrower; or

§ deterioration in value of collateral in the case of secured lending.

The Group assesses whether objective evidence of impairment exists either individually for assets that are separately significant or collectively for assets that are not separately significant. Where there is no indicator of impairment the assets are assessed collectively 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 asset's 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.

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.

SME and consumer loan impairment allowance

The impairment allowance for SME and consumer loan losses that have been incurred but are not separately identified at the reporting date is determined on a collective basis.

For unsecured consumer and SME lending portfolios, the impairment trigger is generally when the balance is one or more payments in arrears. While the trigger is based on the payment performance of an individual loan, the assessment of future cash flows uses historical experience of cohorts of similar portfolios such that the assessment is considered to be collective. Assets are included into a cohort of financial assets with similar risk characteristics and collectively assessed for impairment. The characteristics currently utilised are product type and geographical location, as different borrower behaviours are observed based on these characteristics.

Future cash flows are estimated on the basis of the contractual cash flows and historical loss experience for assets in such a cohort. Historical loss experience is estimated from the roll rate to default and loss given default for historical loans that would or had formed part of such a cohort. These historic loans will be either those previously held by the Group or, where available, the complete historic loan book from the marketplace lending platforms.

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.

Secured real estate loan impairment allowance

Due to their size and nature, the impairment allowance for secured real estate loans is determined on a specific basis.

In assessing objective evidence of a loss event for secured real estate loans, the following key indicators are considered:

§ contractually due payments being in arrears

§ breach of covenants

§ the probability of the borrower entering bankruptcy

§ restructuring of the debt relating to the borrower's financial difficulties ('forbearance')

§ deterioration in value of collateral due to either idiosyncratic events or macroeconomic conditions

Where there is objective evidence of impairment, cash flows are assessed on a case by case basis considering the following factors:

§ aggregate exposure to the customer

§ the viability of the customer's business model and their capacity to trade successfully out of financial difficulties to service debt obligations

§ the amount and timing of expected receipts and recoveries of collateral

§ the extent of other creditors' claims ranking ahead of the Group's

§ the likely deduction of any costs involved in recovery of amounts outstanding

(v) Financial liabilities

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

(vi) Derivatives

Derivatives are entered into to reduce exposures to fluctuations in interest rates, exchange rates, market indices and credit risk 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.

All derivatives are classified as assets where their fair value is positive and liabilities where their 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.

(vii) 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 a 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.

(h) Other receivables

Other receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value as reduced by appropriate allowances for estimated impairment.

(i) Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are short-term, highly liquid investments with a maturity of 3 months or less that are readily convertible to known amounts of cash.

Cash pledged as collateral comprises cash posted to derivative counterparties to mitigate credit risk arising on the mark to market of the underlying derivative position.

(j) Current liabilities

Current liabilities, other than derivatives, are not interest-bearing and are stated at their nominal value.

(k) Shares

Ordinary and treasury 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 redeemable shares divided by the total number of outstanding shares.

Treasury shares have no entitlements to vote and are held by the Company.

(l) Rates of exchange

Transactions in foreign currencies are translated into 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 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 investments held at fair value are included within changes in fair value.

(m) Capital reserves

Capital reserve - arising on investments sold includes:

§ gains/losses on disposal of investments;

§ exchange differences on currency balances and on settlement of loan 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 year end.

All of the above are accounted for in the Statement of Comprehensive Income except the cost of own shares bought back which is accounted for in the Statement of Changes in Shareholders' Funds.

(n) Segmental reporting

The Chief Operating 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, small and medium sized enterprise ("SME") loans, corporate trade receivables and/or advances thereon plus the equity of Platforms.

(o) 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.

Impairment of loans held at amortised cost

The Group's loans and receivables are held at amortised costs less impairments. Impairment is measured as the difference between an asset's carrying amount and the present value of management's estimate of future cash flows discounted at the asset's original effective interest rate.

The Group applies a collective provisioning basis for consumer and SME loans. The impairment trigger for such loans will generally be a payment being more than 15 days in arrears. Key assumptions included in the measurement of impairment are:

§ the roll rate to default as a function of the number of days a payment is past due; and

§ the bucketing of such roll rate data; and

§ the loss given default; and

§ the emergence period in respect of loans and receivables that have not shown objective evidence of an impairment trigger.

These assumptions applied by the Group are initially drawn from the assessment of observed historical data reported by the peer to peer lending platforms which are used by the Group.

The loss given default assumptions are made considering any security posted against a loan, any platform sale agreements for non-performing loans, actual recoveries observed over time on comparable loans, or as determined by the Investment Manager and approved by the Valuation Committee. Such data may be limited to the loans held by the Group or will comprise the entire loanbook of the platform. The historical data is collated, and then applied, by product type and geography. Where a specific platform has materially different risk profile, then those loans will be treated separately based on the historical data in relation to that platform only.

The roll rate data is bucketed into the following categories, 15-30 days late, 31-60 days late, 61-90 days late and 90+ days late. This is on the basis that loans generally pay monthly and therefore each bucket represents an increasing number of missed payments.

Whilst an area of judgement, the Investment Manager continually monitors the performance of the Group's portfolio against these assumptions. The probabilities of roll rate to default and probabilities of loss given default are evaluated using current data to in order to inform the Group's assessment of their continued appropriateness, and where appropriate will be updated to reflect current economic conditions.

The emergence period for loans that have incurred losses that have not yet been reported is mostly relevant for unsecured consumer loans. Given the underlying cause of a default is usually the loss of a borrower's income, it is assumed that the emergence period of an observable impairment trigger will typically be short and weighted towards the shorter periods.

Loans are determined to be in arrears once they are in excess of 15 days overdue. Whilst this represents a judgement by the Group, it has been the Group's experience that loans which are less than 15 days past due are typically late due to operational reasons.

Sensitivity analysis about significant areas of estimation uncertainty and critical judgements in relation to the impairment of loans are described in Note 10.

The secured real estate loans held by the Group, due to their size and nature, are individually assessed for impairment. In calculating the provisions for secured loans, estimates of discounted cash flows are made on the basis of the planned strategy for each loan (such as working out, divestment etc). These estimates are judgemental as they include assumptions for underlying property values and future expected cash flows for income and any development costs. Judgement is also required when assessing the losses incurred but not reported on the secured real estate loans. They have prudent loan to value parameters, with the weighted average being below 70%; i.e. it would require an average reduction of 30% in the value of property collateral for the loans not to be fully covered in case of default.

Valuation of unquoted investments

Estimates and assumptions made in the valuation of unquoted investments and investments for which there is an inactive market may cause material adjustment to the carrying value of those assets and liabilities. These are valued in accordance with the techniques set out in Note 2(g).

Consolidation

Determining whether the Group has control of an entity is generally straightforward based on ownership of the majority of the voting capital. However, in certain instances, this determination will involve significant judgement, particularly in the case of structured entities where voting rights are often not the determining factor in decisions over the relevant activities. This judgement may involve assessing the purpose and design of the entity. It will also often be necessary to consider whether the Group, or another involved party with power over the relevant activities, is acting as a principal in its own right or as an agent on behalf of others.

Eaglewood Fund

The Group has an investment in the Eaglewood Income Fund I LP (the "Eaglewood Fund"), a Delaware limited partnership. As at 31 December 2016, the SPV held 79% of the limited partner interests (2015: 66%).

The Eaglewood Fund makes leveraged investments primarily into loans originated by a marketplace lending platform. Its investment activity is undertaken by the appointed Investment Manager, MW Eaglewood Americas LLC ("the Eaglewood Fund Investment Manager"). The appointment of the Investment Manager is the responsibility of the General Partner ("GP") of the Eaglewood Fund. The GP is an associate of the Eaglewood Fund Investment Manager. The Group has no kick out rights over the GP or the Eaglewood Fund Investment Manager.

The GP has an exposure to the variable returns to the Eaglewood Fund through an arrangement where it collects as a performance allocation a proportion of the increase of the NAV of the Eaglewood Fund subject to a hurdle for each accounting period.

It is our judgement that the GP has a significant exposure to the Eaglewood Fund through its performance fee arrangements. As the GP has power over the decision making powers and in our judgement is acting as principal, our determination is that the Group does not have control over the Eaglewood Fund and as a result does not consolidate it.

The total exposure to the Eaglewood Fund can be found in Note 13.

(p) New standards and amendments to existing standards

Accounting standards effective

IAS 1, 'Disclosure Initiative', effective 1 January 2016. The amendments to IAS 1 provide clarifications on a number of issues including: materiality (an entity should not aggregate or disaggregate information in a manner that obscures useful information), disaggregation and subtotals (line items specified in IAS 1 may need to be disaggregated where this is relevant to an understanding of the entity's financial position of performance), notes (notes do not need to be presented in a particular order), and OCI arising from investments accounted for under the equity method. This amendment does not have any impact on the presentation or performance of the Group.

IFRS 11 'Accounting for Acquisitions of Interests in Joint Operations', effective 1 January 2016.

The amendments to IFRS 11 clarify the accounting for the acquisition of an interest in a joint operation where the activities of the operation constitute a business. They require an investor to apply the principles of business combination accounting when it acquires an interest in a joint operation that constitutes a business. This amendment does not have any impact on the presentation or performance of the Group.

IAS 16 and IAS 38, 'Clarification of Acceptable Methods of Depreciation and Amortisation', effective 1 January 2016. The amendments to IAS 16 and IAS 38 clarify that a revenue-based method of depreciation or amortisation is generally not appropriate. This amendment does not have any impact on the presentation or performance of the Group.

IAS 27, 'Equity method in separate financial statements', effective 1 January 2016. The amendments to IAS 27 allow entities to use the equity method in their separate financial statements to measure investments in subsidiaries, joint ventures and associates. This amendment does not have any impact on the presentation or performance of the Group.

IFRS 10 and IAS 28, 'Sale or contribution of assets between an investor and it's associate or joint venture', effective 1 January 2016. The amendments clarify the accounting treatment for sales or contribution of assets between an investor and its associates or joint ventures. They confirm that the accounting treatment depends on whether the non-monetary assets sold or contributed to an associate or joint venture constitutes a 'business' (as defined in IFRS 3 Business Combinations). This amendment does not have any impact on the presentation or performance of the Group.

IFRS 10, IFRS 12 and IAS 28, 'Investment entities: Applying the consolidation exception', effective 1 January 2016. These amendments clarify that the exception from preparing consolidated financial statements is also available to intermediate parent entities which are subsidiaries of investment entities, an investment entity should consolidate a subsidiary which is not an investment entity and whose main purpose and activity is to provide services in support of the investment entity's investment activities, and entities which are not investment entities but have an interest in an associate or joint venture which is an investment entity have a policy choice when applying the equity method of accounting. The fair value measurement applied by the investment entity associate or joint venture can either be retained, or a consolidation may be performed at the level of the associate or joint venture, which would then unwind the fair value measurement. This amendment does not have any impact on the presentation or performance of the Group.

Accounting standards issued but not yet effective

At the date of this document, the following applicable standards were in issue but not yet effective:

IFRS 15, 'Revenue from contracts with customers', effective 1 January 2018. This is the converged standard on revenue recognition and replaces IAS 11, 'Construction contracts', IAS 18, 'Revenue' and related interpretations. This new standard is not expected to have any significant impact on measurement and presentation.

IFRS 9, 'Financial instruments', effective 1 January 2017 replaces IAS 39 Financial Instruments: Recognition and Measurement. It includes requirements for the classification and measurement of financial instruments, impairment of financial assets and hedge accounting. The principal requirement of IFRS 9 are as follows:

Classification and measurement

The classification of financial assets will be based on the objectives of the Group's business model and the contractual cash flow characteristics of the instruments. Financial assets will then be classified as held at amortised cost, at fair value through other comprehensive income (FVOCI), or at fair value through profit or loss (FVTPL). The changes in this regard from the accounting treatment under IAS 39 are not expected to be significant.

Impairment of financial assets

IFRS 9 changes the basis of recognition of impairment on financial assets from an incurred loss to an expected credit loss (ECL) approach for amortised cost and FVOCI financial assets. This introduces a number of new concepts and changes to the approach to provisioning compared with the current methodology under IAS 39:

§ Expected credit losses are based on an assessment of the probability of default, loss given default and exposure at default, discounted to give a net present value. The estimation of ECL should be unbiased and probability weighted, taking into account all reasonable and supportable information, including forward looking economic assumption and a range of possible outcomes. IFRS 9 has the effect of bringing forward recognition of impairment losses relative to IAS 39 which requires provisions to be recognised only where there is objective evidence of credit impairment.

§ On initial recognition, and for financial assets where there has not been a significant increase in credit risk since the date of advance, IFRS 9 provisions will be made for expected credit default events within the next 12 months.

§ A key requirement of IFRS 9 compared with the existing provision approach under IAS 39 relates to assets where there has been a significant increase in credit risk since the date of origination. Provisions will be made for those assets expected to default at any point over their lifetime reflecting the asset's full expected loss. This change to lifetime loss provisions for significantly credit deteriorated assets is expected to lead to increases in impairment provisions, although the size of the change will depend on a number of factors, including the composition of asset portfolios and the view of the economic outlook at the date of implementation.

§ For assets where there is evidence of credit impairment, provisions will be made under IFRS 9 on the basis of lifetime expected credit losses, taking account of forward looking economic assumptions and a range of possible outcomes. Under IAS 39 provisions are based on the asset's carrying value and the present value of the estimated future cash flows. IAS 39 does not explicitly take account of a range of possible economic outcomes including forecasts of any downturn of the economic cycle.

The Directors are currently evaluating the impact of this standard upon the Group. However, it is noted that measurement will involve increased complexity and judgement including estimation of probabilities of default, loss given default, a range of unbiased future economic scenarios, estimates of exposures at default and assessing increases in credit risk. It is expected to have a material financial impact, but it will not be practical to disclose reliable financial impact estimates until the implementation programme is further advanced.

3. BUSINESS COMBINATION

As at 31 December 2016, the Company gained control of the SPV. This control was gained following an amendment to the constitutional documents of the SPV by which the General Partner could be replaced by consent of at least 75% of the Limited Partners (see Note 2(a) for further details). The SPV is consolidated from this date forward.

The consolidation impacts the presentation of the Consolidated Statement of Financial Position. In the 2015 Annual Report and the comparatives included within this report, the SPV is presented as a single line item contained within Investment assets designated as held at fair value through profit or loss. The current period Consolidated Statement of Financial Position shows the underlying assets and liabilities of SPV as detailed below. There is no impact to the Parent Company Statement of Financial Position.

As the SPV is consolidated from 31 December 2016, its net income during the year is shown on an unconsolidated basis as a single line item (see Note 6). Subsequent to this date, the Consolidated Statement of Comprehensive Income will present the underlying income and expenses of the SPV.

The fair value of the assets and liabilities of the SPV at the date control was gained was as follows:

At the date of acquisition of control, the SPV also had an accrued performance allocation of £4,549,005, attributable as a partnership allocation to the General Partner of the SPV, which on consolidation is treated as a non current liability, as it is considered payable to a third party.

On consolidation, all assets and liabilities, are translated from USD to GBP at the year end rate. The Company's investments held at fair value through profit and loss were reduced by £617,545,998. Prior to consolidation the net asset value of the Company's interest in the SPV were deemed to be the fair value of the investment. Upon consolidation therefore there is no impact to the net asset value of the Company.

4. 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).

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 judgement and is specific to the investment.

Group at 31 December 2016

The following table analyses within the fair value hierarchy the Group's assets and liabilities measured at fair value at 31 December 2016:

The following table presents the movement in the Group's Level 3 positions for the year ended 31 December 2016.

* This reflects the impact of the consolidation of the SPV. Prior year figures do not consolidate the SPV, therefore the investment in the SPV itself is included as a Level 3 opening position. During the year ended 31 December 2016, control was gained of the SPV (refer to Note 2 for details) therefore the closing balance above does not reflect investment in the SPV but instead reflects all the underlying Level 3 positions held by the SPV at year end.

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

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

* A 1% sensitivity to change in price has been presented for fixed income positions to better reflect the perceived uncertainty in the valuation of these positions.

The investments in other funds are valued based on the net asset value as calculated by the funds' administrators at the balance sheet date. The constitutional and offering documentation of each fund sets out the valuation methodology, the applicable generally accepted accounting principles and the frequency, by which its assets are to be valued and the NAV are to be calculated. No adjustments have been determined to be necessary to the NAV as supplied by the administrator as this reflects the fair value of the underlying investments under the relevant valuation methodology. The NAV is the value of all the assets of the funds less their liabilities to creditors (including provisions for such liabilities) determined in accordance with applicable accounting standards. The net asset value of the other funds are sensitive to movements in interest rates due to their investment in fixed rate loans.

The investments in unlisted equities are valued using several different techniques, primarily recent transactions and recent rounds of funding by the investee entities. During the period, a new valuation methodology was utilised, being a price/earnings multiple. The investee company has become profitable and therefore this is deemed an appropriate valuation technique. In addition, a further unlisted equity that was purchased during the period was valued using a milestone analysis. This is due to transformative events occurring subsequent to the last funding rounds.

The investments in fixed income securities included within Level 3 of the above hierarchy are valued based on, if available, recent transactions and otherwise broker quotes.

The Group's Level 2 positions are valued by Citco Fund Services (Ireland) Limited, acting in their capacity as the External Valuer, in accordance with the valuation policy. Fixed income positions are valued using prices from an independent market data provider. Forward foreign exchange contracts are valued using interpolated FX forward points from Bloomberg. The option contracts are valued using yield curves from Bloomberg.

Assets and liabilities not carried at fair value but for which fair value is disclosed

The following table presents the fair value of the Group's assets and liabilities (by class) not measured at fair value through profit and loss at 31 December 2016 but for which fair value is disclosed:

The table below provides details of the loans at amortised cost held by the Group at31 December 2016.

Accumulated impairment included in the Consolidated Statement of Financial Position for the year is reported in impairment of loans.

Group at 31 December 2015

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