Annual Financial Report

P2P GLOBAL INVESTMENTS PLC

Annual Financial Report for the year ended to 31 December 2018

The Directors are pleased to present the Annual Financial Report of P2P Global Investments plc (the "Company") for the year ended 31 December 2018, 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 information set out below does not constitute the Company's statutory accounts for the year ended 31 December 2018 but is derived from those accounts. Statutory accounts for the year ended 31 December 2018 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.

Strategic Report

Investment Objective

The investment objective of P2P Global Investments plc (the "Company") and its subsidiaries (together, the "Group") is to provide shareholders with an attractive level of dividend income through exposure to investments in alternative finance and related instruments. The Company wants to achieve investment diversification across originators, geographies, loan asset classes and credit grades and allow shareholders to access equity assets that are aligned with the Company's Investment Policy. The policy was updated on 19 December 2017, with the aim of using the Company's revised strategy to capitalise opportunities that present themselves to enhance the Company's returns.

Financial and Operational Highlights

Investment Characteristics

THE COMPANY IS AN INVESTMENT TRUST FOCUSING ON SPECIALIST LENDING

The Group is a listed company in the United Kingdom dedicated to investing in credit assets originated by non-bank lending platforms and other originators of alternative credit assets globally. The Company believes that this asset class has the potential to provide attractive returns for investors on a risk-adjusted basis.

MANAGED BY POLLEN STREET CAPITAL, A DEDICATED INVESTOR IN FINANCIAL

AND BUSINESS SERVICES BUSINESSES

PSC Credit Holdings LLP (the "Investment Manager") serves as the Company's investment manager. The Investment Manager is a member of the Pollen Street Capital group ("PSC"). PSC is an investment management group focussed on investing in financial and business services. The Investment Manager has also appointed a sub Investment Manager ("Sub-Manager"), Pollen Street Capital (US) LLC, an affiliate of the Investment Manager and an SEC registered investment adviser.

LONG-TERM OPPORTUNITY TO DELIVER ATTRACTIVE RETURNS

A large opportunity exists for non-bank capital to earn attractive returns from lending across a broad origination universe, largely as banks retrench to serve mainstream, vanilla markets. The banks' structural re-positioning together with the advancements in data and technology and a change in customer behaviour provide an opportunity for non-bank lenders to offer high quality products to those markets that are not well served by the large banks.

PARTNERING WITH STRONG ORIGINATORS

Specialist players offer attractive products based upon expertise and understanding of particular sectors and target customer groups. These players are often better at servicing specialist markets based upon focus, expertise, efficiency and entrepreneurialism. In many cases, they also share risk by putting their own balance sheet capital at risk. The Investment Manager aims to partner with the highest quality originators in order to access exciting investment opportunities in direct lending assets and, where there is an aligned strategic opportunity, certain minority equity stakes.

6.0 to 8.0 PER CENT PER ORDINARY SHARE PER ANNUM TARGET DIVIDEND, PAYABLE QUARTERLY

The Company targets the payment of dividends which equate to a net yield of 6.0 to 8.0 per cent per ordinary share per annum on the issue price for the Company's IPO placing, payable in quarterly instalments (the "Target Dividend") based upon the average number of non-treasury shares in issue during a given period. Investors should note that the Target Dividend, including its declaration and payment dates, is a target only and not a profit forecast.

How the Business Works

SPECIALIST LENDING PARTNERS

The Investment Manager, on behalf of the Group, actively identifies sub-segments of the consumer, property and small and medium-sized enterprises ("SMEs") lending market that it believes deliver attractive risk adjusted returns. It then targets origination partners through which to originate Credit Assets. The Investment Manager adopts three principles when selecting partners - control, alignment and partnership. It seeks to work with high quality partners with diversity across asset class and geography to build a high quality portfolio with attractive returns with controlled risk.

RIGOROUS CREDIT PROCESS

The Investment Manager has a rigorous investment process to provide a consistent approach to risk-based pricing to ensure the weighted risk adjusted return provides an attractive level of dividend income with an acceptable risk profile for shareholders of the Company. 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. The Investment Manager conducts rigorous due diligence on each origination partner and a continuous program of compliance monitoring and retains tight control of underwriting standards across all partners.

STRUCTURING CAPABILITIES

The Investment Manager is focused on assessing opportunities in a variety of forms and lending structures, that provides significant protection should the credit performance of the underlying assets deteriorate ensuring that the direct or indirect exposure subscribed to in each case offers suitable risk adjusted returns for investors. The exposure may be direct lending to the borrower but 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 first loss protection on its capital. The Investment Manager will assess the best risk-adjusted return in each case. It will also place significant focus on ensuring that debt financing can be sourced in an efficient and low cost way to enhance returns where appropriate.

CAPITAL PRESERVATION AND INCOME STABILITY

The Investment Manager is focused on delivering a combination of strong income with relatively low duration and volatility. The Investment Manager has partnered with high quality originators across target customer groups, asset classes and geography. In that way, the exposure to any single loan asset or market is reduced. This provides strong risk mitigation across the portfolio. The diversification across tens of thousands of individual credit assets and the short 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.

Chairman's Statement

INTRODUCTION

I am pleased to present P2P Global Investments PLC's Annual Report, for the year to 31 December 2018. This is the first annual report since the Group adopted IFRS 9 "Financial Instruments" on 1 January 2018. 2018 has been a period of repositioning with significant progress being made in fundamentally transitioning the portfolio to the target profile of risk and return. As part of this, the investment focus has shifted to more specialist asset classes and building relationships with strong new partners that provide security and attractive risk adjusted yields while the legacy book of predominately unsecured consumer platforms has been placed into run off. There has been significant progress made in this transition with 84 per cent1 of the portfolio at 31 December 2018 now invested in continuing assets and the run off portfolio, predominantly US and UK consumer assets originated before the change in investment manager, down to 16 per cent. This progress has manifested itself with the target net return being achieved in H2 2018, although this was slightly behind what was previously highlighted in the November 2017 Strategy Update.The initial below target net return was driven by lower than expected returns on the portfolio built up by the previous investment manager with significantly below target returns being generated in the year. Whilst the Company has reduced its exposure to these assets they acted as a drag on overall returns particularly in the first half of the year and limited the ability to redeploy capital into more attractive assets. In the first half of the year the Company had to address several one-off legacy items, in particular the liquidation of URICA Limited which resulted in a write down of £6.0 million of the equity position, as well as a write down of a small US position which has further impacted returns.

The Company has reduced its exposure to these assets, as they run off naturally and through portfolio sales, the drag reduces every quarter and the Investment Manager believes these assets will become insignificant to the performance of the overall portfolio during 2019. The continuing portfolio has delivered returns ahead of target as the Investment Manager continues to deliver on their strategy of focusing on proven specialist partners within the UK, rebuilding the US business with a focus on specialist assets while at the same time increasing exposure to Ireland and actively exploring opportunities in Europe.

During the year the Company introduced seven new platforms with five benefiting from structural protection or property backing. In May 2018 the Company successfully securitised a £206.6 million portfolio of Funding Circle loans ("SBOLT 2018)", of which 95 per cent was subsequently sold to manage down the overall exposure to UK SME's.

1 Portfolio based on NAV exposure to investment assets held at amortised cost as a percentage of total NAV before deducting topco debt excluding cash, working capital and equity positions.

INVESTMENT PERFORMANCE AND DIVIDENDS

The Company delivered a Net Asset Value ("NAV") return of 5.21 per cent (2017: 3.03 per cent) and paid dividends of 48.0 pence (2017: 47.0 pence) per ordinary share in relation to the 2018 calendar year. However, as with 2017, for the first three quarters the dividend payments were not fully covered by earnings and the special distributable reserve was utilised, Q4 saw the full dividend covered by revenue reserves. The dividend return was 4.8 per cent (2017: 4.7 per cent).

On 1 January 2018 the Group implemented and transitioned to IFRS 9 "Financial Instruments" with a £19.6 million impact on reserves, equating to 2.68 per cent of year-end NAV. This was driven by the introduction of forward looking expected credit losses for non-credit impaired assets for the first time. The Group's financial reporting under this new accounting standard is described in more detail in Note 2(h). Given the transition to a new accounting policy the relationship between the impairment charge in the prior year and expected credit loss charge in the current year is not directly comparable. The Group experienced expected credit losses of £31.5 million which is 47 per cent lower than the impairment charge in the prior year. Although the two years are not directly comparable, such a big reduction in the charge highlights the improved performance of the portfolio. This is most clearly seen in the US Consumer portfolio which in the prior year had an impairment charge of £39.4 million which reduced to an expected credit loss of £4.5 million in 2018.

The Company continued to increase its exposure during the year to property backed and structured lending where the originator has first loss equity ahead of the Company's exposure. Throughout 2018 the Company continued to build its allocation of these assets, building this part of the portfolio to over 60 per cent of NAV. Strong partnerships continue to develop with secured lenders; Zorin Finance and Castlehaven Finance in Ireland.

The Investment Manager reduced exposure to certain mainstream consumer assets. This was achieved through natural run off and the sale of charged off loan portfolios at a premium to carrying value and a US consumer lending portfolio in December 2018. This created liquidity to invest in more specialist assets in the US that were available in the pipeline.

The Company also refinanced its £200 million term debt facility giving it a more flexible leverage strategy through the introduction of a revolving facility to sit alongside a smaller term facility and the ability to draw down in multiple currencies to align with the underlying assets of the Group and therefore reducing the need for foreign currency hedging.

SHARE PRICE AND BUYBACKS

The Company's share price (at close) was 802.0 pence, representing a discount of 16.8 per cent at 31 December 2018. The shares traded at a discount to NAV in the range of -13.3 per cent to -20.7 per cent during the year. As part of its revised investment strategy, the Company has continued with its share buyback program and during 2018 3,747,148 ordinary shares in issue were repurchased at an average price of 800.4 pence per ordinary share

OUTLOOK

The Board is confident that the revised investment strategy has positioned the Company so that the improved performance of H2 2018 will continue into 2019. We have a clear strategy in place that will need to be protected, refined and extended. The Board will continue to be vigilant on the performance of the Company and will monitor the progress against the uncertainty over Brexit combined with rising consumer debt levels and potential increases in interest rates.

The Board continue to closely monitor the political and economic uncertainty surrounding the terms and timing of Brexit. In addition, were there to be a change of UK Government as a result of a general election, the Group may also face new risks as a result of a change in government policy. Although current market conditions remain benign and the UK economic performance has remained resilient in the last year, the longer-term economic outlook and impact of Brexit and wider global events on our customers and wider markets remain uncertain.

The regulatory framework remains an ever present factor as consumer credit regulation continues to develop, in addition to the regulatory uncertainties associated with Brexit. Developments in these areas have the potential to require changes to the way the industry transacts business, but we welcome oversight which encourages good customer outcomes. We see the new Corporate Governance Code as an opportunity to further enhance our existing stakeholder engagement, ensuring that the business as a whole can continue to develop constructive and considerate relationships with all those with whom we work. We will include details of this in the Annual Report and Financial Statements 2019.

THANK YOU

I would like to thank the staff of our Investment Manager for their efforts in improving the performance of the Company.

I would also like to thank my Board colleagues for their diligence, flexibility and application.

Stuart Cruickshank

Chairman

23 April 2019

Investment Manager's Report

The Company is a UK listed company dedicated to investing in credit assets originated by non-bank lending platforms and other originators of alternative credit assets globally. The Company provides investors with access to lending opportunities which PSC Credit Holdings LLP (the "Investment Manager") believes has potential to provide attractive and consistent risk-adjusted returns throughout the cycle. The Investment Manager is a member of the Pollen Street Capital group ("PSC"). PSC is an investment management group focussed on investing in financial and business services. The Investment Manager has also appointed a sub Investment Manager ("Sub-Manager"), Pollen Street Capital (US), LLC, an affiliate of the Investment Manager and an SEC registered investment adviser.

Attractive returns are delivered through the Investment Manager's focus on high-quality underwriting of borrowers in markets that are underserved by mainstream finance providers. The Company partners with specialist lenders who offer attractive products based upon understanding of particular sectors and target customer groups. These players are often better at servicing these markets based upon focus, expertise, efficiency and entrepreneurialism. In many cases, they also share risk by putting their own balance sheet capital at risk. The Investment Manager aims to partner with the highest quality originators in order to access exciting investment opportunities in direct lending assets and, where there is an aligned strategic opportunity, certain minority equity stakes.

The Investment Manager has significant experience in lending markets, providing the Company with both deep insight to high quality underwriting and access to the Investment Manager's established eco-system, enabling whole of market, high-quality origination flow and portfolio acquisition opportunities.

IFRS 9

On 1 January 2018 the Group transitioned to IFRS 9 and fully implemented a comprehensive program that focused on the key areas of impact, including financial reporting, data, systems and processes. As part of the implementation the Group has reviewed the classification and measurement of financial instruments under the requirements of IFRS 9, developed and validated a set of IFRS 9 models for calculating expected credit losses ("ECL") on the Group's loan portfolios and implemented appropriate internal governance processes.

As well as developing new models, new definitions to estimate the IFRS 9 provision for each of our portfolios have also been created. The significant increase in credit risk and default definitions have been set based on our processes used to measure and monitor credit risk. Our models take into account both the composition of the loan book and the macroeconomic outlook at a given point in time.

Under IFRS 9, impairment losses are recognised in the Company's financial statements on a forward-looking basis, taking into account both the risk profile of the loan book and the macroeconomic outlook at the balance sheet date. This results in earlier recognition of impairment in the Company's financial statements, and consequently a higher balance of impairment on the balance sheet, compared to the incurred loss approach under IAS 39. The Group's financial reporting under this new accounting framework is described in more detail in Note 2(h).

The key initial impact on adoption of IFRS 9 was £19.6 million increase in impairment losses, driven by the introduction of Stage 1 and 2 forward looking ECL for the first time. This represented 1.78 per cent of performing loans and advances at 1 January 2018 and the key driver behind the increase was the consumer portfolio which made up £14.6 million. This was split largely between the US £8.4 million and UK £5.9 million consumer portfolios. There was also a £2.8 million in relation to SME lending. The introduction of IFRS 9 also saw the Real Estate lending take its first ECL allowance with a £2.2 million charge on implementation.

Going forward, the application of IFRS 9 has resulted in earlier recognition of expected credit losses in the Company's Statement of Comprehensive Income, principally as loans move between "stages" due to changes in their credit profile or to reflect changes in the macroeconomic outlook. Overall, while IFRS 9 changes the timing of impairment recognition, it does not in itself result in changes to the cash flows or cash losses of our financial assets. Credit impaired loans (Stage 3) as a proportion of total loans and advances to customers has reduced to 3.64 per cent (1 January 2018: 3.72 per cent), as more the portfolio is transitioned to assets with structural protection and security. Stage 3 ECL allowance as a percentage of Stage 3 drawn balances has reduced to 80 per cent (1 January 2018: 86 per cent).

The Company has elected to utilise the exemption allowing it not to restate comparative information for prior periods with respect to financial information. As prior periods have not been restated, changes in impairment of financial assets in the comparative periods remain in accordance with IAS 39 and are therefore not necessarily comparable to ECL recorded for the current period.

2018 HIGHLIGHTS

The result for the Investment Manager's first full year has seen the Company achieving its target net return consistently during H2 2018, although this is slightly behind the June 2018 target initially highlighted in the November 2017 strategy update. The Company has been able to achieve the target net return as significant progress has been made in transitioning the portfolio to more attractive asset classes and reducing the exposure to the low yielding and volatile legacy assets which have shown continued underperformance.

Although the legacy portfolio continues to run off and has reduced from 48 per cent in December 2017 to 16 per cent1 at 31 December 2018, the returns on the portfolio have been lower than expected. This is driven predominately by the UK Consumer portfolio where the overall net yield is significantly below target and has displayed monthly volatility throughout the year. The total expected credit loss charge excluding stage 1 for the UK Consumer portfolio was £16.1 million and represents 42 per cent of the total charge for the period, this was predominately made up of stage 3 credit impaired assets. The Company is striving to improve the performance of these legacy assets and is optimising the run off. As part of this process the Company successfully sold two charged off portfolios of legacy consumer assets, a small low yielding consumer mortgage portfolio in May 2018 and a US Consumer portfolio in December 2018. However, this legacy portfolio remains a drag on the Company's overall profitability and whilst still material its impact is reducing month on month and the Manager continues to seek to improve performance and accelerate the run off through improving servicing and tactically disposing of loans where possible.

Results in the period have also been significantly impacted by the previously announced write down of the £6.0 million URICA Limited equity position following the business being placed into liquidation on 20th July 2018. The Company provided a revolving credit facility to URICA Europe Limited secured against English and French invoice finance receivables for which URICA Limited acted as servicer. URICA Europe Limited has not been placed into administration and is not part of the URICA Limited group and so it, and its ownership of receivables, remain bankruptcy remote from the insolvency estate of URICA Limited. The receivables are short term in nature and credit insured. The run off of this portfolio is well progressed.

In addition to the above, several one-off smaller items were identified as the Investment Manager implemented a new accounting control process. The Company also incurred a charge for the write down of a small legacy US portfolio.

As the legacy portfolio amortises, the Investment Manager has been reinvesting the available capital into more specialist and secured asset classes which exhibit lower volatility and a better coverage ratio of income to expected credit losses. Initially, the Company focused on peer-to-peer lending, which targets one specific approach to origination mainly in unsecured consumer & SME lending, which accounts for just 0.09 per cent of the UK's total outstanding lending. However, the alternative lending market is much larger than this and strong partnerships are being built among numerous originators with access to a broader market that has the potential to provide attractive returns for investors on a risk-adjusted basis.

1 Portfolio of platforms that the Group has not originated through in 2018 calculated based on NAV exposure to investment assets as a percentage of total NAV before deducting topco debt excluding cash, working capital and equity positions.

2 Legacy portfolio is made up of loans at amortised cost.

The new originations are performing strongly and at the end of December 2018 84 per cent of the portfolio was in continuing assets, up from 52 per cent at the end of 2017. This continuing portfolio is delivering a net yield which is ahead of target. The continuing portfolio consists of SME loans 35 per cent, Real Estate 49 per cent, and Consumer 16 per cent.

Within the continuing portfolio the majority of the Consumer loan exposure is made up of structured loans where the originator has first loss equity ahead of the Company's exposure, with the remainder being unsecured loans in markets that have demonstrated consistent and attractive risk adjusted margins. This portfolio consists of UK, European, US and Australasian exposure. The SME portfolios are domestically focused and reflect the underlying performance of the UK economy and our credit risk appetite. Whilst performance on these loans have been above target there has been some recent deterioration which the Investment Manager is monitoring. Within the Real Estate sector the credit quality remains good with minimal impairments/stressed loans, the impairment charge in the period was a release of £0.5 million and represents only 1.5 per cent of the overall expected credit loss for the period even though real estate lending makes up 49 per cent of the total gross lending. Recognising this is a cyclical sector, appropriate caps are in place to control exposure and business propositions continue to be written in line with a prudent, through the cycle risk appetite with conservative LTVs, good underlying borrowers and proven management teams.

Strong partnerships are continuing to develop across all sectors with seven exciting relationships in the US and UK leading to new lending opportunities in the year. These new partners have highly experienced teams and the deal structures created deliver alignment of interests between both parties so that the arrangements can reach beyond being simply providers of capital but secure long-term relationships. The relationships and expertise created are difficult to replicate and help provide more stable and attractive returns. Within these new partnerships the Investment Manager seeks to be fully involved in the active feedback loop on both the control and input into underwriting decisions, the customer journey, and proactive collections.

During the period the Company also successfully completed its fourth securitisation, Small Business Origination Loan Trust 2018-1 DAC ("SBOLT 2018"). This was a £206.6 million transaction that was collateralised by unsecured loans to SMEs originated through the online lending platform operated by Funding Circle Limited ("Funding Circle"). The transaction reduced the cost of funding, with the senior tranche priced at a margin of 75bps over 1 month LIBOR and offered matched duration funding which will enhance the Company's returns. 95 per cent of this was subsequently sold to manage the overall exposure to UK SME's.

The Investment Manager's policy of a prudent leverage strategy with a steady reduction of the cost and complexity of the facilities has been achieved with a re-financing of the £200 million term debt facility.

The Investment Manager has also built out its accounting infrastructure to ensure a robust control environment. The Investment Manager believes that it has identified all catch-up items from the portfolio following the completed accounting rebuild.

1 Portfolio of platforms that the Group has originated through in 2018 calculated based on NAV exposure to investment assets as a percentage of total NAV before deducting topco debt excluding cash, working capital and equity positions.

2 Continuing portfolio overview is made up of loans at amortised cost. The Investment Manager is acutely aware of the dislocation between the current share price and the underlying value of the portfolio. On this basis the Company continued its share buyback program throughout 2018, with 3,747,148 (2017: 4,690,254) ordinary shares in issue being repurchased at an average price of 800.4 pence per ordinary share (2017: 832.8 pence) which contributed 0.79 per cent (2017: 0.98 per cent) to the NAV return. As well as being accretive to NAV, it is expected to assist in closing the share price's current discount to NAV.

FINANCIAL PERFORMANCE

Gross earnings for the year were £119.2 million (2017: £132.1 million), a decrease of 9.8 per cent on the prior year which was driven by the reduced impact of the legacy portfolio which although has a lower net yield, does contribute a higher gross yield as well as the one-off items mentioned above and a decrease in the net assets of the Company. Total balances of net investment assets have decreased to £994 million at the period end (2017: £1,246 million). Profit for the year after tax was £30.7 million (2017: £17.0 million), an increase of 81 per cent which is reflective of the improved performance of the continuing portfolio which has seen a significant decrease in expected credit losses in the year, compared to the impairment charge in the prior year, particularly in the US consumer portfolio. This translated into basic earnings per share of 39.55 pence (2017: 20.72 pence), and NAV return of 5.21 per cent for the year.

In our initial guidance, we were targeting returns to cover a dividend of at least 15.0 pence per quarter by the end of Q2 2018 or a dividend yield of 6.0 per cent (based on issue price). As shown in the chart below, we have not met these expectations due to the impact of large one off items such as Urica and the continued drag of the run off portfolio. Dividends of 12.0 pence per quarter were paid out in the year and the position has improved with the first three quarters being paid from the special distributable reserve and the last quarter wholly from revenue reserves.

The NAV per share (cumulative of income) is 963.9 pence per ordinary share at 31 December 2018, which, including dividends declared or paid, is equivalent to a NAV return of 20.45 per cent since inception (taking into account 2.49 per cent reduction for the introduction of IFRS 9 on 1 January 2018). Additionally, the share price of the Company at 31 December 2018 was 802.0 pence per share, representing a 16.8 per cent discount to NAV (cumulative of income). We are disappointed that the Group is trading behind its net asset position, and because of that we have maintained the share buyback program. Performance and dividend history which can be seen within the Financial Statements.

OUTLOOK

There exists a substantial opportunity for non-bank capital to earn attractive risk adjusted returns by targeting under-served specialist asset classes with high quality products that meet customer needs. While the performance from the inherited portfolio continues to be more volatile than expected, the Investment Manager has made substantial progress in repositioning the portfolio towards structured and secured assets, a program which will continue into 2019.

To date, there has been minimal impact from the UK referendum vote to leave the European Union. However, looking ahead, the situation will continue to be monitored to address the economic challenges and opportunities that may arise as the long-term effects of Brexit become clearer. In the current more competitive mainstream lending environment it is particularly important to maintain prudence and discipline. In addition, with household borrowing at high levels, and the regulatory framework remaining an ever present factor as consumer credit regulation continues to develop, it is intended to proceed with caution. The Group's business model, combined with its approach to risk, sets it in good stead to find suitable pockets of risk adjusted return. The focus on specialist markets allows us access to enhanced credit performance and allows deployment of the Company's funds in assets which deliver strong returns.

Top Ten Holdings

As at 31 December 2017 the value of the top 10 assets totalled £153,943,044 which equated to 19.49 per cent of net assets.

Business Review

The strategic report on pages 3 to 24 has been prepared to help shareholders assess how the Group and Company works and how it has performed. The strategic report has been prepared in accordance with the requirements of Section 414 A to 414 D of the Companies Act 2006 (the "Act"). The business review section of the strategic report discloses the Group's and Company's key risks and uncertainties as identified by the Board, the key performance indicators used by the Board to measure the Group and Company's performance, the strategies used to implement the Group's and Company's objectives, its environmental, social and ethical policy and future developments.

PRINCIPAL ACTIVITY

The Company carries on business as an investment trust and its principal activity is investing in Credit Assets and Equity Assets, with a view to achieving the Group's investment objective. Investment companies are a way for investors to make a single investment that gives a share in a much larger portfolio. A type of collective investment, they allow investors opportunities to spread risk and diversify in investment opportunities which may not otherwise be easily accessible to them. For more information, please see: http://www.theaic.co.uk/guide-to-investment-companies.

PERFORMANCE REVIEW

The Group's NAV as at 31 December 2018 was £733.4 million (2017: £789.9 million) (cum income). Reduction in NAV was driven by share buybacks and although there was improved underlying performance, the first three quarters of dividend payments during 2018 were not fully covered by earnings and the special distributable reserve was utilised. Profit on ordinary activities after taxation for the year after tax was £30.7 million (2017: £17.0 million).

IMPAIRMENT REVIEW

As prior periods have not been restated, changes in impairment of financial assets in the comparative periods remain in accordance with IAS 39 and are therefore not necessarily comparable to ECL recorded for the current period. On initial recognition IFRS 9 led to a £19.6 million increase in expected credit losses ("ECL"), driven by the introduction of forward looking ECL's for the first time. This represented 1.78 per cent of performing loans and advances at 1 January 2018 and the key driver behind the increase was the consumer portfolio which made up £14.6 million. This was split largely between US £8.4 million and UK £5.9 million consumer portfolios. There was also a £2.8 million impact in relation to SME lending. The introduction of IFRS 9 also saw the Real Estate lending take its first ECL allowance with a £2.2 million charge on implementation.

As at 31 December 2018 the ECL balance was £51.2 million (1 January 2018: £77.9 million). The consumer portfolio makes up over 64 per cent of this total split £16.7 million in the UK, £16.0 million in the US and £2.0 million from other consumer lending. SME lending made up £14.8 million and Real Estate lending £1.7 million. The key driver for the reduction in the ECL is £49.2 million of write offs, with UK consumer portfolios contributing £14.2 million and US consumer £22.6 million. The reduction has also been driven by £13.1 million release from the sale of US and UK consumer portfolios. These releases have been offset by an increase in the ECL charge which was £35.7 million. The key drive of the charge is the Stage 3 provision on defaulted loans, with Consumer US contributing a charge of £18.0 million, Consumer UK £18.2 million and UK SME £10.7 million. These have been offset by releases in Stage 1 and 2 as loans roll through to defaulted status.

STRATEGIC AND INVESTMENT POLICY

In accordance with the Financial Conduct Authority's ("FCA") Listing Rules, material amendments to the Company's investment policy are subject to the approval of the Company's Shareholders. The investment objectives set out below were approved at a general meeting of the Company's Shareholders held on 19 December 2017. The Company's investment objective is to provide shareholders with an attractive level of dividend income and capital growth through investment in the acquisition of:

(i) loans to consumers, loans to SMEs and other counterparties, corporate loans, real estate loans and advances and loans against corporate trade receivables and other assets, together with related investments ("Credit Assets"); and

(ii) equity assets that are aligned with the Company's strategy and that present opportunities to enhance the Company's returns from its investments ("Equity Assets").

The Group may invest in Credit Assets and Equity Assets relating to a broad range of sectors, provided that such investment is in accordance with the Company's investment strategy.

When the Group has incurred borrowings in line with its borrowing policy, the Group will target the payment of dividends which equate to a yield of 6.0 - 8.0 per cent per ordinary share per annum on the issue price for the Company's IPO placing, based upon the average number of non-treasury shares in issue for the period, payable in quarterly instalments (the ''Target Dividend''). Investors should note that the Target Dividend, including its declaration and payment dates, is a target only and not a profit forecast.

The Group believes that certain sub-segments linked to these Credit Assets have the potential to provide attractive returns for investors on a risk-adjusted basis, and that changes in the focus of mainstream lenders together with the implementation of new models that make the best use of data, analytics and technology, provide an opportunity to deliver attractive products to borrowers while generating attractive returns for the Company.

The Group enters into loan origination and service agreements with selected third parties, originators, platforms and partners. The Group and the Investment Manager also actively seek opportunities to acquire portfolios from third parties and make investments in loans to specialist lenders.

ASSET ALLOCATION AND RISK DIVERSIFICATION

Credit Assets invested in by the Group will consist of debt obligations, both secured and unsecured, within a range of sub-sectors selected based on their risk/return characteristics. These sub-categories may include, but are not limited to, personal loans, loans against corporate trade receivables and other assets, as well as loans secured against real estate and investments in loans to specialist lenders to provide structured finance for consumer, SME and other counter party lending.

The Group's investment in Credit Assets encompasses the following investment models:

(i) investment, or acquisition of interests, in Credit Assets, whether offered to the Group by origination platforms that allow non-bank capital to: (a) lend or advance capital to consumers, SME borrowers or corporate borrowers; and/or (b) advance capital against corporate trade receivables ("Platforms") or by other third parties;

(ii) investment, or acquisition of interests, in loans (which may be secured or unsecured) to specialist lenders for the purpose of providing structured finance to those specialist lenders, secured against (amongst other things) granular portfolios of Credit Assets; and

(iii) the acquisition by the Group of interests in portfolios of Credit Assets from third parties.

The Group may undertake such investments directly, or through its subsidiaries or special purpose vehicles ("SPVs"). It is also possible that the Group may use alternative investment structures which achieve comparable commercial results to the investments described above (such as, without limitation, sub-participations in loans, credit-linked securities or fund structures), but which offer enhanced returns for the Group or other efficiencies (such as, without limitation, efficiencies as to origination, funding, servicing or administration of the relevant Credit Assets). Any such use of alternative investment structures will be subject always to the diversification requirements of this investment policy.

The Company may also invest (in aggregate) up to 10.0 per cent of Gross Assets in Equity Assets, calculated, in each case, at the time of acquisition of any relevant Equity Assets based on the consideration payable for those Equity Assets and the aggregate consideration paid for all previous investments in Equity Assets which form part of the Company's investments. 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.

PLATFORM RESTRICTIONS

The Group will not invest more than 33.0 per cent of Gross Assets via any single Platform or single counterparty. This limit may be increased to 66.0 per cent of Gross Assets via any single Platform or single counterparty, provided that where this limit is so increased in respect of any Platform or counterparty, the Group does not invest an amount which is greater than 25.0 per cent (by value) of the total loan origination or investment of the preceding calendar year via such Platform or counterparty.

ASSET CLASS RESTRICTIONS

The Group will invest in Credit Assets originated across various sectors and across credit risk bands to ensure diversification and to seek to mitigate concentration risks. The following investment limits and restrictions apply to the Group to ensure that the diversification of the portfolio is maintained, that concentration risk is limited and that limits are placed on risk associated with borrowings.

The Group will not invest more than 20.0 per cent of Gross Assets, at the time of investment, via any single investment fund investing in Credit Assets. The Group will not invest, in aggregate, more than 60.0 per cent of Gross Assets, at the time of investment, in other investment funds that invest in Credit Assets.

The Group will not invest more than 10.0 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 15.0 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 Group, to both Credit Assets acquired by the Group directly and on a look-through basis to any Credit Assets held by another investment fund which is managed by the Investment Manager, the Sub-Manager or their affiliates in which the Group 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 5.0 per cent of Gross Assets; and

· 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.

At any given time, not more than 50.0 per cent of Gross Assets will be maintained in SME Credit Assets and not more than 50.0 per cent of Gross Assets will be maintained in trade receivable assets (taking into account both Credit Assets acquired by the Group directly and, on a look-through basis, any Credit Assets held by another investment fund managed by the Investment Manager, the Sub-Manager or their affiliates in which the Company invests (proportionate to the percentage interest the Group has in such investment fund)).

OTHER RESTRICTIONS

The Group 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, for cash management purposes the Group will only invest in fixed income instruments of investment grade.

The Group will not invest in collateralised debt obligations.

BORROWING

Borrowings may be employed (through banks or other facilities on a secured or unsecured basis) at the level of the Company and/or at the level of any investee entity (including, without limitation, any other investment fund in which the Company invests or any 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, whether incurred directly or indirectly through a subsidiary or an SPV established by the Company (in each case calculated at the time of drawdown under any facility the Company, subsidiary or SPV has entered into), and any investment fund which is managed by the Investment Manager, the Sub-Manager or their affiliates and in which the Company invests (on a look-through basis, proportionate to the percentage interest the Company retains in the most junior tranche of such investment fund) shall not exceed 1.5 times NAV.

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.

HEDGING

Fluctuations in interest rates are influenced by factors outside the Group's control and can adversely affect the Group's results of operations and profitability in a number of ways. The Group intends to invest in Credit Assets which may be subject to a fixed rate of interest, or a floating rate of interest (which may be linked to base rates or LIBOR). The Group expects that its borrowings will typically be subject to a floating rate of interest. Any mismatches the Group has between the income generated by its Credit Assets, on the one hand, and the liabilities in respect of its borrowings, on the other hand, may be managed, in full or in part, by matching any floating rate borrowings with investments in Credit Assets that are also subject to a floating rate of interest. The Group may use derivative instruments, including interest rate swaps, to reduce its exposure to fluctuations in interest rates.

To the extent that the Group does rely on derivative instruments to hedge interest rate risk, it will be subject to counterparty risk. Any failure by a hedging counterparty of the Company to discharge its obligations could have a material adverse effect on the Company's results, operations and financial condition.

The Group intends to hedge currency exposure between Sterling and any other currency in which the Group's assets may be denominated, including US Dollars and Euros.

The Group will, to the extent it is able to do so on terms that the Investment Manager considers to be commercially acceptable, seek to arrange suitable hedging contracts, such as currency swap agreements, futures contracts, options and forward currency exchange and other derivative contracts (including, but not limited to, interest rate swaps and credit default swaps) in a timely manner and on terms acceptable to the Company.

CASH MANAGEMENT

Whilst it is intended that the Group will be close to fully invested in normal market conditions, the Group may invest surplus capital in cash deposits, cash equivalent instruments and fixed income instruments. While, as noted above, there are restrictions as on the type of instruments that may be held to support cash management activity, there is no restriction on the amount of cash or cash equivalent instruments that the Group may hold and there may be times when it is appropriate for the Group to have a significant cash position instead of being fully or near fully invested. As at 31 December 2018 the Group held 9.4 per cent (2017: 12.1 per cent) of its portfolio in cash.

BUSINESS MODEL

The management of the Group's assets and the Group's administration has been outsourced to third-party service providers, however, the Board implements key elements of the Group's strategy, including the following:

· changes to the Company's capital structure or its status as an investment company, investment trust and a listed public limited company;

· the effectiveness and implementation by the Investment Manager of the investment policy of the Company and the appointment, amendment or removal of the Company's third party service providers;

· an effective system of oversight over the Company's risk management and corporate governance; and

· premium and discount management.

In order to effectively undertake its duties, the Board may seek expert legal advice. It also can call upon the advice of the company secretary.

The Board have acted in a way that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its shareholders as a whole, and in doing so have given regard (amongst other matters) to:

· the likely consequences of any decision in the long term;

· the impact of the company's operations on the community and the environment;

· the desirability of the company maintaining a reputation for high standards of business conduct; and

· the need to act fairly as between members of the company.

PREMIUM/DISCOUNT MANAGEMENT

The Company may seek to address any significant discount to NAV at which its Ordinary Shares may be trading by purchasing its own Ordinary Shares in the market on an ad hoc basis.

The Directors have the authority to make market purchases of up to 14.99 per cent of the Ordinary Shares. The maximum price (exclusive of expenses) which may be paid for an Ordinary Share must not be more than the higher of (i) 5.0 per cent above the average of the mid-market values of the Ordinary Shares for the five Business Days before the purchase is made, or (ii) the higher of the price of the last independent trade and the highest current independent bid for the Ordinary Shares. Ordinary Shares will be repurchased only at prices below the prevailing NAV per Ordinary Share, which should have the effect of increasing the NAV per Ordinary Share for remaining Shareholders. A renewal of the authority to make market purchases will be sought from Shareholders at each AGM of the Company. Purchases of Ordinary Shares will be made within guidelines established from time to time by the Board. Any purchase of Ordinary Shares would be made only out of the available cash resources of the Company. Ordinary Shares purchased by the Company may be held in treasury or cancelled.

Purchases of Ordinary Shares may be made only in accordance with the Company Act 2006 ("the Act"), the Listing Rules and the Disclosure and Transparency Rules.

As part of its revised investment strategy, the Company continued its share buyback program. During 2018, 3,747,148 Ordinary Shares (2017: 4,690,254 Ordinary Shares) were repurchased at an average price of 800.4 pence per ordinary share (2017: 834.0 pence per ordinary share).

CORPORATE AND OPERATIONAL STRUCTURE

Corporate structure

There have been several changes in the structure of the Group in 2018. The Investment Manager further broadened the Company's funding options by entering into several new debt facilities in 2018, including its second SME unsecured lending securitisation in May 2018 which resulted in a cheaper cost of funding for the Company. The Company subsequently sold 95 per cent of its holding in September 2018. Small Business Origination Loan Trust 2018-1 DAC, the entity relating to this facility was consolidated in the financial statements for the period May to September 2018. The Company also incorporated CH Mercury Note Issuer DAC however this was dormant at year end. The Company also controls a number of trusts ("Trusts") through its control of Eaglewood SPV I LP (the "SPV" or the "Subsidiary") and Eaglewood Income Fund I, LP (the "Eaglewood Fund"). The SPV and Eaglewood Fund control a Trust if they are exposed to, or have the rights to, variable returns from their involvement with the Trust and have the ability to affect those returns through its power over the Trust. During the year, the SPV became the sole beneficial owner of two new trusts; PSC 1803 Autoloan Trust and PSC Rocketloans Prime Consumer Loan Trust. During the year the Company also closed four trusts; Certified Loan Warehouse Trust, EW-PFL Financing Trust, EW-PFL Security Trust and Eaglewood Consumer Loan Trust 2014-1.

Operational and portfolio management

The Company has outsourced its operations and portfolio management to various service providers as detailed below:

· PSC Credit Holdings LLP has been appointed as the Company's investment manager and Alternative Investment Fund Manager ("AIFM") for the purposes of the Alternative Investment Fund Managers Directive ("AIFMD");

· Link Asset Services has been appointed to act as the Company's company secretary and registrar;

· Citco Fund Services (Ireland) Limited has been appointed as the Company's administrator and external valuer;

· Citco Custody (UK) Limited has been appointed as the Company's depositary and custodian; and

· Liberum Capital Limited has been appointed to act as the Company's corporate broker and financial adviser.

Alternative Investment Fund Managers Directive

In accordance with the AIFMD, the Company has appointed PSC Credit Holdings LLP (formerly PSC Eaglewood Europe LLP) to act as the Company's AIFM for the purposes of the AIFMD. The AIFM ensures that the Company's assets are valued appropriately in accordance with the relevant regulations and guidance. In addition, on 21 July 2017, the Company appointed Citco Custody (UK) Limited as Depositary who replaced Deutsche Bank Luxemburg, S.A., and Citco Fund Services (Ireland) Limited to provide custody services to the Company as required by the AIFMD.

Donations

The Company made no political or charitable donations during the year under review to organisations either within or outside the EU (2017: none).

Anti-bribery and corruption policy

The Company has no employees or operations but uses the anti-bribery and corruption policy of the Investment Manager, ensuring compliance with all applicable anti-bribery and corruption laws and regulations, including the UK Bribery Act 2010.

Environment, human rights, employee, social and community issues

The Company is required by law to provide details of 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 and the Board is composed of independent non-executive Directors. As an investment trust, the Company does not have any direct impact on the environment. The Company aims to minimise any detrimental effect that its actions may have by adhering to applicable social legislation, and as a result does not maintain specific policies in relation to these matters.

The Company has no operations and therefore no greenhouse gas emissions to report nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013, including those within its underlying investment portfolio.

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 Board is aware of its responsibilities and obligations under the Modern Slavery Act and other relevant legislation relating to the detection and prevention of modern slavery and human trafficking. The Board is committed to implementing and enforcing effective systems and controls that seek to ensure that modern slavery is not taking place anywhere in its business or in its supply chains.

Further details of our compliance with the Modern Slavery Act can be found on our website.

BOARD DIVERSITY

The Board places great emphasis on ensuring that its membership reflects diversity in its broadest sense. A combination of demographics, skills, experience, race, age, gender, educational and professional background and other relevant personal attributes on the Board is important in providing a range of perspectives, insights and challenge needed to support good decision making.

New appointments are made on merit, taking account of the specific skills and experience, independence and knowledge needed to ensure a rounded Board and the diversity benefits each candidate can bring to the overall Board composition.

The Board consists of five non-executive Directors, one of whom is female. The Board seeks to appoint new Directors on the basis of merit as a primary consideration, with the aim of bringing an appropriate range of skills and experience to the Board.

Principal Risks and Uncertainties

The Group is exposed to a number of potential risks and uncertainties which could have a material impact on the Group performance and could cause actual results to differ materially from expected and/or 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 Company 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 on to the Board on a regular basis. 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 day-to-day risk management for the Group and it works with the Board to identify and manage the principal risks facing the Group.

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 below together with an explanation of how they are managed and mitigated. The Board will continue to assess these risks on an ongoing basis.

OPERATIONAL RISKS

Third-Party Service Providers

The Group has no employees and relies on the services provided by third parties. Accordingly, it is dependent on the control systems of third parties such as the Investment Manager, the depositary and the fund administrator, who maintain the Group's assets and accounting records.

In addition, the Group predominantly uses originators and third party servicers to acquire and service loans. Accordingly, it is dependent on the originators' credit underwriting and control systems and collection capabilities.

The security of the Group's assets, dealing procedures, accounting records and adherence to regulatory and legal requirements depend on the effective operation of the systems of the third party service providers.

Failure by any service provider, or originator, to carry out its obligations to the Group in accordance with the terms of its appointment could have a materially adverse effect on the operation of the Group.

The Group is reliant on the Investment Manager's relationships with originators. Should the Investment Manager cease to continue to be investment manager there is a risk that the Group will not be able to successfully pursue its investment management objective and policy.

Resilient IT systems and associated infrastructure are essential for maintaining high service levels to the Group by the originators and other third party service providers. These service levels are at risk from cyber-attack, component failure or unplanned disasters.

Mitigation

The Company has appointed third party service providers who are experienced in their field and have a reputation for high standards of business conduct.

Due diligence is undertaken before contracts are entered into with third party service providers and originators and oversight of the performance of these parties is conducted by the Investment Manager and reported to the Board periodically.

In order to gain a more comprehensive understanding of the Investment Manager's internal processes, controls and risk management, the Board periodically receives on-site presentations from the Investment Manager and periodically reviews the controls reports.

The Board reviews the overall performance of the Investment Manager and all other third party service providers on a regular basis. The Board also considers the business continuity arrangements of the Company's key service providers. The Board reviews arrangements that the Investment Manager has put in place to ensure that back up loan servicers are available and able to take on the Companies loans. The Investment Manager has a robust cyber security and disaster recovery ("DR") policy. The Investment Manager also assess cyber security and DR of the Companies third party service providers and Platforms. The Board regularly reviews these arrangements.

Reliance on key individuals

The Group relies on key individuals at the Investment Manager to identify and select investment opportunities and to manage the day-to-day affairs of the Group. There can be no assurance as to the continued service of these key individuals at the Investment Manager. The departure of key individuals from the Investment Manager without adequate replacement may have a material adverse effect on the Group's business prospects and results of operations. Accordingly, the ability of the Group to achieve its investment objective depends heavily on the experience of the Investment Manager's team, and more generally on the ability of the Investment Manager to attract and retain suitable staff.

Mitigation

The interests of the Investment Manager are closely aligned with the performance of the Group through the management and performance fee structures in place and direct investment by certain key individuals of the Investment Manager. Furthermore, investment decisions are made by a team of professionals, mitigating the impact of a loss of any single key professional within the Investment Manager's organisation. The performance of the Investment Manager in its duties to the Group is subject to ongoing review by the Board on a quarterly basis.

Fluctuations in the market price of Issued Shares

The market price of the Company's shares may fluctuate widely in response to different factors and there can be no assurance that the Company's shares will be repurchased by the Company even if they trade materially below their Net Asset Value. Similarly, the shares may trade at a premium to Net Asset Value whereby the shares can trade on the open market at a price that is higher than the value of the underlying assets. There can be no assurance, express or implied, that shareholders will receive back the amount of their investment in the Company's shares.

Mitigation

The Investment Manager and the Board closely monitor the level of discount or premium at which the Company's shares trade on the open market. The Company may purchase its shares in the market with the intention of enhancing the NAV per ordinary share, however there can be no assurance that any purchases will take place or that any purchases will have the effect of narrowing any discount to NAV at which the Company's ordinary shares may trade.

In the first instance, the Company's Board and Investment Manager believe the best defence against the share price trading at a discount to NAV is an attractive dividend policy, with quarterly distributions driven from the pursuit of attractive risk adjusted returns in Credit Assets and Equity Assets.

With regard to repurchasing shares, the Board may use its discretion during periods of market dislocation to opportunistically buyback shares where it believes such a purchase would be accretive over and above the long term attractions of investing in further loan and equity portfolios and it is in the best long term interest of all shareholders to do so.

INVESTMENTS

Achievement of the Investment Objective

There can be no assurance that the Investment Manager will be successful in implementing the Group's investment objective.

Mitigation

The Group's investment decisions are delegated to the Investment Manager. Performance of the Company against its investment objectives is closely monitored on an ongoing basis by the Investment Manager and is reviewed in detail at each Board meeting by its members. In the event it is required, any action required to mitigate underperformance is taken as deemed appropriate by the Investment Manager.

The Board has set investment restrictions and guidelines which the Investment Manager monitors and reports on quarterly to the Board. The Board also receives from the Investment Manager a quarterly explanation of portfolio allocation decisions, large exposures, leverage levels and any changes in leverage and the rationale for the composition of the investment portfolio.

Borrowing

The Group may use borrowings in connection with its investment activities including, where the Investment Manager believes that it is in the interests of shareholders to do so, for the purposes of seeking to enhance investment returns. Such borrowings may subject the Group to interest rate risk and additional losses if the value of its investments fall. Whilst the use of borrowings should enhance the Net Asset Value of the Company's shares when the value of the Company's underlying assets is rising, it will have the opposite effect where the underlying asset value is falling. In addition, in the event that the Company's income falls for whatever reason, the use of borrowings will increase the impact of such a fall on the Company's return and accordingly will have an adverse effect on the Company's ability to pay dividends to shareholders.

Mitigation

The Investment Manager and the Board closely monitors the level of gearing of the Group. The Group has a maximum limitation on borrowings of 1.5 times of NAV (calculated at the time of draw down) which the Investment Manager may affect at its discretion when conditions and opportunities exist to enhance investment returns.

Exposure to Credit Risk

As a lender to small businesses, property lenders and individuals, the Group is exposed to credit losses if customers or counterparties are unable to repay loans and outstanding interest and fees or through fraud. The Group is expected to invest a significant proportion of its assets in Credit Assets which, by their nature, are exposed to credit risk and may be impacted by adverse economic and market conditions, including through higher impairment charges, increased capital losses and reduced opportunities for the Group to invest in Credit Assets. Additionally, competition could serve to reduce yields and lower the volume of loans generated by the Group.

Mitigation

The Group will invest in a granular portfolio of assets across various originators, asset classes, geographies (primarily Europe and United States), levels of collateral and credit bands in order to ensure diversification and to seek to mitigate concentration risks.

Origination rates and performance of the underlying assets of the Group are closely monitored on an ongoing basis by the Investment Manager and the Board and are reviewed in detail at each Board meeting.

The Group has focused on increasing its exposure to structured lending and lending with asset backing, which both mitigate the credit risk through the provision of collateral.

Interest Rate Risk

The Group invests in Credit Assets which may be subject to a fixed rate of interest, or a floating rate of interest (which may be linked to base rates or LIBOR) and expects that its borrowings will be typically subject to a floating rate of interest. Any mismatches the Group has between the income generated by its Credit Assets, on the one hand, and the liabilities in respect of its borrowings, on the other hand, may subject the Group to interest rate risk.

Mitigation

Interest rate risk exposures may be managed, in part, by matching any floating rate borrowings with investments in Credit Assets that are also subject to a floating rate of interest. The Group may use derivative instruments, including interest rate swaps, to reduce its exposure to fluctuations in interest rates, however some unmatched risk may remain.

Following the recommendations of the Financial Stability Board, a fundamental review and reform of the major interest rates benchmarks, including Interbank offered rate ("Ibors"), are underway across the world's largest financial markets. In some cases, the reform will include replacing interest rate benchmarks with alternative risk-free rates ('RFRs'). This replacement process is at different stages, and is progressing at different speeds, across several major currencies. There is therefore uncertainty as to the basis, method and timing of transition and their implications on the participants in the financial markets. Until there is market acceptance on the form of alternative RFRs for different products, the legal mechanisms to effect transition cannot be confirmed, and the impact cannot be determined nor any associated costs accounted for. Going forward the Group needs to assess the potential effects of these ibor replacements and has the intention of minimising disruption through appropriate mitigating actions.

Foreign Exchange Rate Risk

Brexit has been a driver for exchange rate volatility and the devaluation of Sterling. The Group's policy is to hedge exchange rate risk where appropriate. This in turn can create liquidity risk due to potential large cash margin calls.

Mitigation

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

Liquidity of Investments

The Group may invest in Equity Assets that are aligned with the Group's strategy and that present opportunities to enhance the Company's return on its investments. Such Equity Assets are likely to be predominantly in the form of unquoted equity securities. Investments in unquoted equity securities, by their nature, involve a higher degree of valuation and performance uncertainties and liquidity risks than investments in listed securities and therefore may be more difficult to realise.

Mitigation

The Group has established investment restrictions on the extent to which it can invest in Equity Assets, such that no more than 10.0 per cent of the net proceeds of any placing are invested in Equity Assets. Compliance with these restrictions is monitored by the Investment Manager on an ongoing basis and by the Board quarterly.

REGULATIONS

The Group is subject to extensive laws, regulations, corporate governance practice and disclosure requirements, administrative actions and policies in each jurisdiction in which it operates. Many of these have been introduced or amended recently and are subject to further material changes, which may increase compliance and conduct risks. The Group expects government and regulatory intervention in the financial services industry to remain high for the foreseeable future.

Tax

Any changes in the Company's tax status or in taxation legislation could affect the value of investments held by the Group, affect the Company's ability to provide returns to shareholders and the tax treatment for shareholders of their investments in the Company.

Mitigation

The Company intends at all times to conduct its affairs so as to enable it to qualify as an investment trust for the purposes of Chapter 4 of Part 24 of the Corporation Tax Act 2010. Both the Board and the Investment Manager are aware of the requirements which are to be fulfilled in any accounting period for the Company to maintain its investment trust status. The conditions required to satisfy the investment trust criteria are monitored by the compliance function of the Investment Manager.

Breach of Applicable Legislative Obligations

The Group and its third-party service providers are subject to various legislative and regulatory regimes, including, but not limited to, the Consumer Credit Act and the Data Protection Act. Any breach of applicable legislative and/or regulatory obligations could have a negative impact on the Company and impact returns to shareholders.

Mitigation

The Group engages only with third-party service providers which hold the appropriate regulatory approvals for the function they are to perform and can demonstrate that they can adhere to the regulatory standards required of them. Each appointment is governed by agreements which contain the ability to terminate each of these counterparties with limited notice should they continually or materially breach any of their legislative obligations, or their obligations to the Group more broadly.

APPROVAL

The Strategic Report was approved by the Board of Directors on 23 April 2019 and signed on its behalf by:

Stuart Cruickshank

Chairman

Directors' Report

Board of Directors

The directors of the company who were in office during the year and up to the date of signing the financial statements were:

Statutory Information

The Directors of P2P Global Investments plc (Reg: 08805459) present their report and audited financial statements of the Company and its subsidiaries (together, the "Group") for the year ended 31 December 2018.

DIRECTORS

The Directors in office at the date of this report are shown on the previous two pages.

Directors Remuneration and Interests

The remuneration and beneficial interests of the Directors in the securities of the Company are set out in the Directors' Remuneration Report on pages 42 to 45.

DIVIDENDS

No final dividend is being recommended. The Company's policy is to pay dividends on a quarterly basis, as set out in the Company's prospectus dated 30 June 2015. The dividends paid or payable in respect of the year ended 31 December 2018 are set out in Note 23 to the financial statements. A reconciliation of movements in reserves is presented in the Consolidated and Parent Company Statement of Changes in Shareholders' Funds on pages 61 and 62 of the financial statements. The Company may make distributions from the revenue reserve, the special distributable reserve and from realised capital gains.

GOING CONCERN

The Directors have reviewed the financial projections of the Group from the date of this report, which shows that the Group will be able to generate sufficient cash flows in order to meet its liabilities as they fall due and for the foreseeable future. Accordingly, the Directors are satisfied that the going concern basis remains appropriate for the preparation of the financial statements. The Group also has detailed policies and processes for managing the risks, set out in the Strategic Report on pages 3 to 24.

VIABILITY STATEMENT

In accordance with provision C.2.2 of the UK Corporate Governance Code, published by the Financial Reporting Council in April 2016 (the "Code"), the Directors have assessed the prospects of the Group over the three-year period to the AGM in 2022. Although they will be required by the Articles of Association to put a proposal for the continuation of the Group at the 2021 AGM, based on the current position, performance and prospects of the Group they have no reason to believe that shareholders will vote against continuation. This is, however, a key assumption. The Directors also note that, even if there was to be a vote against continuation at the 2021 AGM, the Group would be likely to continue to operate for at least a year thereafter, due to the Group's investments not comprising readily realisable securities.

In their assessment of the viability of the Group, the Directors have considered each of the Group's principal risks and uncertainties and mitigating factors are detailed on pages 21 to 24. The Directors have also considered the Group's revenue and expenditure projections, working capital requirements and (as noted above) the fact that the Group's investments do not comprise readily realisable securities which can be sold to meet funding requirements if necessary. Analysis has also focused on the risks in delivery of the business model and a series of projections have been considered changing funding levels, origination volumes and the performance of the assets acquired.

Based on the Group'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 Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period to the AGM in 2022.

AUDIT INFORMATION

As required by section 418 of the Companies Act 2006, the Directors who held office at the date of the Annual Report confirm that, so far as they are aware, there is no relevant audit information of which the Company's Auditors is unaware; and each Director has taken all the steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company's Auditors are aware of that information.

AUDITORS

The Company's independent auditors, PricewaterhouseCoopers LLP ("PwC") have indicated their willingness to continue in office as Auditor of the Company for the forthcoming financial year, and resolutions for their re-appointment and for the Audit Committee to determine their remuneration will be proposed at the forthcoming AGM.

The Audit Committee has carefully considered the auditors' appointment, as required in accordance with its terms of reference, and, having regard to its effectiveness and the services it has provided the Company during the year under review, has recommended to the Board that the independent auditors be appointed at the forthcoming 2019 AGM. In reaching its decision, the Audit Committee considered the points detailed on page 39 of the Audit Committee's report.

FINANCIAL RISK MANAGEMENT

The principal risks and the Company's policies for managing these risks are set out in Note 9 to the financial statements and pages 21 to 24 of the Strategic Report.

SUBSEQUENT EVENT

An interim dividend of 12.0p per Ordinary Share was declared by the Board on 4 February 2019 in respect of the three-month period to 31 December 2018, which was paid on 27 March 2019 to shareholders on the register as of 15 February 2019.

The Company continued its share buyback program in 2019 and as at 18 April 2019, 11,210,186 shares are held in treasury.

On 10 April 2019 the Company successfully completed its fifth securitisation, Small Business Origination Loan Trust 2019-1 DAC ("SBOLT 2019"). This transaction is collateralised by unsecured loans to SMEs originated through the online lending platform operated by Funding Circle Limited ("Funding Circle").

POLITICAL DONATIONS

The Group made no political donations during the year to organisations either within or outside of the EU (2017: None).

GREENHOUSE GAS EMISSIONS

The Group has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013, including those within its underlying investment portfolio.

REQUIREMENTS OF THE LISTING RULES

Listing Rule 9.8.4 requires the Group to include specified information in a single identifiable section of the Annual Report or a cross reference table indicating where the information is set out.

Listing Rule

CORPORATE GOVERNANCE

The Corporate Governance Statement on pages 30 to 37 forms part of the Report of the Directors.

ARTICLES OF ASSOCIATION

Any amendments to the Company's Articles of Association must be made by special resolution passed at a general meeting.

ANNUAL GENERAL MEETING

The AGM will be held on 6 June 2019 and explanations of the business proposed at the AGM will be contained in the Notice of the AGM, which is being posted to shareholders with this Annual Report.

GENERAL MEETING

The Board may convene a general meeting of the shareholder at whatever time it deems necessary or when such a meeting is required under applicable laws or regulations. Under the principles of the AIC Code of Corporate Governance (the "AIC Code") notice of that general meeting should be sent to shareholders 14 days in advance.

By order of the BoardLink Company Matters LimitedCompany Secretary

23 April 2019

Corporate Governance Statement

STATEMENT OF COMPLIANCE

This Corporate Governance Statement explains how the Board has sought to protect shareholders' interest by protecting and enhancing shareholder value. The Board has considered the principles and recommendations of the AIC Code of Corporate Governance (the "AIC Code") by reference to the AIC Corporate Governance Guide for Investment Companies (the "AIC Guide") which is available at www.theaic.co.uk.

The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code issued by the Financial Reporting Council ("FRC") in April 2016 and applicable for the year under review (the "UK Code"), as well as setting out additional principles and recommendations on issues that are of specific relevance to investment trusts.

The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the Corporate Governance Code), provides better information to shareholders.

The AIC Code of Corporate Governance

The FRC, the UK's independent regulator for corporate reporting and governance responsible for the Corporate Governance Code, has endorsed the AIC Code and the AIC Guide. The terms of the FRC's endorsement mean that AIC members who report against the AIC Code and the AIC Guide meet fully their obligations under the UK Code and the related disclosure requirements contained in the Listing Rules. The UK Code is available on the FRC website www.frc.org.uk.

The Company has complied with the recommendations of the AIC Code and the relevant provisions of the Corporate Governance Code, except as set out below:

The role of the Chief Executive

For the reasons set out in the AIC Guide, and as explained in the UK Code, the Board considers that the post of Chief Executive is not relevant for the Company, being an externally managed investment company.

Executive Directors' Remuneration

As the Board has no executive Directors, it is not required to comply with the principles of the AIC Code in respect of executive Directors' remuneration.

Internal Audit Function

The Group delegates all of its day-to-day operations to third parties and has no employees. These third parties have their own internal audit function and the Board has therefore determined that there is no need for the Group to have its own internal audit function, but this is reviewed on an annual basis. The Directors consider semi-annually the principal risks relating to the operations of the Group. Such a review includes the consideration of whether the Company's third parties have adequate internal controls in place.

Chairman's Membership of the Audit Committee

Stuart Cruickshank is also a member of the Audit Committee. The Board believes that it is appropriate for Mr Cruickshank to be a member of the Audit Committee, given the size of the Board and Mr Cruickshank's relevant financial experience. The Board is also satisfied that the combined knowledge and experience of its members within the Company's sector enable the Committee to exercise its duties effectively.

ROLE OF THE BOARD AND ITS COMMITTEES

The Board is responsible for the effective stewardship of the Company's affairs, including corporate strategy, corporate governance, risk assessment and overall investment policy. It provides overall leadership, sets out the strategic aims of the Company and ensures that the necessary resources are in place for the Company to meet its objective and fulfil its obligations to shareholders within a framework of high standards of corporate governance and effective internal controls.

Composition of the Board

During the year to 31 December 2018, the Board consisted of five independent non-executive Directors. Biographies of the Directors are provided on pages 25 to 26 and demonstrate the wide range of skills and experience each Director brings to the Board.

Each Director has a signed letter of appointment to formalise the terms of their engagement as a Director and are appointed for an initial three-year term. In the case of all Directors, with the exception of Mahnaz Safa who was appointed in 2016 and David Fisher who was appointed in 2018, the letters of appointment expired in 2017. The appointments of Stuart Cruickshank, Michael Cassidy and Simon King were renewed for a further three-year term period. The Board believes that a stable Board composition is fundamental to run the Company properly. The Board has not stipulated a maximum term of any directorship.

Copies of the letters of appointment are available on request from the Company Secretary and will be available at the Annual General Meeting ("AGM").

No individuals other than the Committee chairman and its members are entitled to be present at Committee meetings unless invited to attend by its members. The Board has a formal schedule of matters specifically reserved to it to ensure effective control of strategic, financial, operational and compliance issues.

There is an agreed procedure for Directors to take independent professional advice if necessary and at the Company's expense. This is in addition to the access to Link Company Matters Limited as Company Secretary for advice.

The rules concerning the appointment and replacement of Directors are contained in the Company's Articles of Association (the "Articles") and the Companies Act 2006 (the "Act").

The Company has taken out Directors' and Officers' Liability Insurance at what is considered to be an appropriate limit of liability, such cover is to be maintained for the full term of each Director's appointment. Save for such indemnity provisions in the Company's Articles and in the Directors' letters of appointment, there are no qualifying third-party indemnity provisions in force.

Board Operation

The Board holds formal meetings on a quarterly basis and additional ad-hoc meetings are held when necessary. Attendance at the quarterly Board and committee meetings is displayed in the table on page 32 under the heading "Meetings".

COMMITTEES

The Board has delegated certain responsibilities to its Audit, Management Engagement, Nomination, Remuneration, Risk and Insider Committees. Given the size and nature of the Board it is felt appropriate and practical that all Directors are members of the Committees. The Board has established formal terms of reference for each of its Committees which are available on the Company website, www.p2pgi.com or upon request from the Company Secretary.

An outline of the remit of each of the Audit, Management Engagement, Nomination, Remuneration, and Risk Committees and their activities during the year are set out on pages 38 to 47. A brief overview of the Insider Committee is set out below.

Insider Committee

The Insider Committee was formed by the Board following the introduction of the Market Abuse Regulations in July 2016 and has responsibility for identifying price sensitive information and determining on a timely basis the disclosure treatment of such information.

The Insider Committee is chaired by Stuart Cruickshank.

The Chairman and Senior Independent Director

The Chairman, Stuart Cruickshank, is considered by his fellow Board members to be independent and to have no conflicting relationships. He considers himself to have sufficient time to commit to the Company's affairs.

Simon King is the Senior Independent Director of the Company providing an alternative channel for shareholder communications and leading the annual evaluation of the Chairman by the Independent Directors.

Independence of Directors

The Board has reviewed the independence of each Director in accordance with the guidance set out under principle 2 of the AIC Code and corresponding AIC guide. Each of the Directors is considered to be independent and free from any business or other relationship that could materially interfere with the exercise of their independent judgement. There are no relationships or circumstances relating to the Company that are likely to affect their judgement.

Care will be taken at all times to ensure that the Board is composed of members who, as a whole, have the required knowledge, abilities, and expert experience to properly fulfil their role and are sufficiently independent.

Meetings

The Board of Directors meets at least six times a year and more often if required. The table below sets out the Directors' attendance at scheduled Board and Committee meetings during the year to 31 December 2018.

1 David Fisher appointed to the Board 19 April 2018

* Audit Committee was formerly called the Audit & Valuation Committee (4 April 2018).

** Risk Committee formed on 5 September 2018.

A Sub-Committee of the Board was established to approve the annual and the half yearly financial statements.

Board Performance Evaluation

The Directors are aware of the need to continually monitor and improve performance and recognise this can be achieved through regular Board evaluation, which provides a valuable feedback mechanism for improving Board effectiveness. In addition to regular discussions in the course of Board meetings, a formal performance evaluation of the Board, its Committees and the Chairman was carried out during the year.

The Company engaged Condign, a specialist consultancy firm which is independent of the Company and its Investment Manager, during the year to undertake an evaluation of the performance of the Board of Directors, its Committees and the Chairman.

Condign engaged with the Senior Independent Director to set the context for the evaluation and to tailor the content to the specific circumstances of the Company. A representative from Codign conducted interviews with each Director together with representatives from the Investment Manager and the Company Secretary.

The results of the performance evaluation process were reported to and discussed by both the Nomination Committee and the Board.

It was noted that a number of other recommendations and matters had been made which will be considered by the Board during the course of the forthcoming financial year. The internal board performance evaluation for 2019 will follow up on the recommendations made to ensure that progress is assessed and measured.

Director Induction

The Board, or the Investment Manager upon request of the Board, shall offer induction training to new Directors about the Company, its key service providers, the Directors' duties and obligations and other matters as may be relevant from time to time.

Appointment and Re-election of Directors

In accordance with the provisions of the Company's Articles, the Directors are required to retire at the first Annual General Meeting following their appointment and thereafter, at each Annual General Meeting, each Director will retire and, if appropriate, seek re-election after each three years' service.

Beyond these requirements, the Board has agreed a policy whereby all Directors will seek annual re-election at the Company's Annual General Meeting, in line with the recommendations of the AIC Code. In accordance with this policy, all the Directors who served during the year will stand for re-election at the forthcoming AGM. The Board considers that, following the board performance evaluations conducted during 2018, all of the current Directors contribute effectively to the operation of the Board and the strategy of the Company. The Board therefore believes that it is in the best interests of shareholders that each of the Directors is re-elected.

BOARD RESPONSIBILITIES AND RELATIONSHIP WITH THE INVESTMENT

MANAGER

The Board is responsible for the determination of the Company's investment policy and strategy and has overall responsibility for the Company's activities, including the review of investment activity and performance and the control and supervision of all suppliers of services to the Company including the Investment Manager. The Board is also responsible for the Company's system of internal and financial controls and for ensuring that commercial risks and financing needs are properly considered and that the obligations of a public limited company are adhered to.

To assist the Board in the day-to-day operations of the Company, arrangements have been put in place to delegate authority for the performance of day-to-day operations of the Company to the Investment Manager and other third-party service providers.

The Investment Manager is responsible for the discretionary management of the Company's portfolio of investments and the changes made to the Investment Management Agreement better enable the Investment Manager to implement the revised Investment Policy approved by shareholders at the general meeting of the company held on 19 December 2017. On 30 October 2018, the Investment Manager changed its name from PSC Eaglewood Europe LLP to PSC Credit Holdings LLP. The Investment Manager was appointed to manage the Company's investment portfolio within guidelines set by the Board. The Investment Manager is in frequent contact with the Board and supplies the Directors with regular updates on the Company's activities and detailed reports at each Board meeting.

The existing sub-management agreement, pursuant to which the Investment Manager has delegated certain of its responsibilities and functions to Pollen Street capital (US) LLC, continues in force.

Details of the investment management fees are set out in Note 13 to the financial statements.

The Board keeps the performance of the Investment Manager under continual review and it is the opinion of the Directors that the continuing appointment of the Investment Manager is in the interests of the shareholders as a whole.

CONFLICTS OF INTEREST

The Company's Articles provide that the Directors may authorise any actual or potential conflict of interest that a Director may have, with or without imposing any conditions that they consider appropriate on the Director. Directors are not able to vote in respect of any contract, arrangement or transaction in which they have a material interest and, in such circumstances, they are not counted in the quorum. A process has been developed to identify any of the Directors' potential or actual conflicts of interest. This includes each Director completing a detailed conflict of interest questionnaire. The matters disclosed in the questionnaires are reviewed by the Board following the Directors' appointments and annually thereafter and, if considered appropriate, authorised in accordance with the Act and the Articles. There were no actual or potential conflicts of interest which were required to be authorised by the Board during the period under review.

STEWARDSHIP RESPONSIBILITIES AND THE USE OF VOTING RIGHTS

Pursuant to its Investment Policy, the Company may invest (in aggregate) up to 10.0 per cent of gross assets (at the time of investment) in the listed or unquoted securities issued by one or more Platforms.

The Investment Manager, in the absence of explicit instruction from the Board, is empowered to exercise discretion in the use of the Company's voting rights. The UK Stewardship Code (the "Stewardship Code") applies on a 'comply or explain' basis. Although the Investment Manager broadly supports the objectives of the Code, it has determined that it will not commit to the Code's principles because the investment strategies it employs do not generally involve listed equities. In the event of a material change to any investment strategy such that the Stewardship Code's principles become relevant, the Investment Manager will reconsider its commitment to the Stewardship Code.

COMPANY SECRETARY

The Board has direct access to the advice and services of the Company Secretary, Link Company Matters Limited, which is responsible for ensuring that the Board and Committee procedures are followed and that applicable regulations are complied with.

SHARE CAPITAL & SHAREHOLDERS

As at 31 December 2018, there were 86,306,803 ordinary shares of £0.01 each in issue, of which 10,218,402 were held by the Company as treasury shares. Therefore, the total number of voting rights in the Company at the year-end was 76,088,401. The share capital and rights attaching to the shares are set out in Note 22 to the financial statements.

There is a total of 86,306,803 ordinary shares of £0.01 each in issue as of 18 April 2019, of which 11,210,186 ordinary shares were held by the Company as treasury shares.

Purchase of Own Shares

At the Annual General Meeting ("AGM") held on 8 June 2018, the Directors were granted the authority to buyback up to 11,735,994 ordinary shares, representing 14.99 per cent of the ordinary shares in issue as at the date of the notice. As part of its discount management strategy to opportunistically buyback shares where it believes such a purchase would be accretive over and above the long term attractions of investing in its loan and equity portfolios and is in the best long term interest of all shareholders to do so, the Board utilised the authority granted at the AGM 2017 to buyback shares. The Company appointed Liberum Capital Limited ("Liberum") to manage the share buyback program (the "Program"). During the term of the Program, Liberum are authorised to independently of and without influence of the Company, effect purchases of ordinary shares from time to time, within certain pre-agreed parameters. Further details on the Company's Discount Management Policy are contained on the Company's website, www.p2pgi.com.

Since the authority granted at the 2018 AGM on 8 June 2018, the Company has bought back 1,751,727 ordinary shares at an average price of 795.7 pence per ordinary share. At 31 December 2018, the unused authority to buyback ordinary shares as granted by shareholders at the Company's 2019 AGM, was therefore 9,984,267 ordinary shares. The nominal value of ordinary shares repurchased during this period was £17,517.27, being 2.03 per cent of the issued ordinary share capital at 31 December 2018. In total for the period from 1 January 2018 up to and including 31 December 2018, the Company bought back 3,747,148. The nominal value of these ordinary shares repurchased during the year was £37,471.48 being 4.3 per cent of the issued ordinary share capital at 31 December 2018. Further information on the buybacks undertaken during the year can be found in Note 22 to the financial statements.

From 31 December 2018 to 18 April 2019, the Company has repurchased a further 991,784 ordinary shares to hold in treasury, with a nominal value of £0.01 and being 1.1 per cent of the issued ordinary share capital at 31 December 2018. The total consideration for these repurchases was £8,076,493. The Company has repurchased further shares through to the date of this report under the terms of the Program.

The buybacks described above were utilised both to manage the share price discount to NAV and to be accretive for shareholders. The average price paid was approximately a 20.4 per cent discount to year end NAV. The impact of the buyback activity for the year ended 31 December 2018 was an enhancement of 7.45 pence to NAV per ordinary share and 1.9 pence to earnings per ordinary share.

The existing authority to buyback ordinary shares will expire at the forthcoming AGM in 2019, when a resolution for its renewal will be proposed.

Under Rule 9 of the City Code on Takeovers and Mergers (the "Code"), to which the Company is subject, when:

1. a person acquires an interest in shares which (taken together with shares in which he and persons acting in concert (as defined in the Code) with him are interested) carry 30.0 per cent or more of the voting rights of a company subject to the Code; or

2. any person who, together with persons acting in concert with him, is interested in shares which in aggregate carry not less than 30.0 per cent of the voting rights of a company subject to the Code, but does not hold shares carrying more than 50.0 per cent of the voting rights of the company, and such person, or any persons acting in concert with him, acquires an interest in any shares which increase the percentage of shares carrying voting rights in which he is interested, that person together with the persons acting in concert with him, is normally required to extend offers in cash, at the highest price paid by him (or any persons acting in concert with him) for shares in the company within the preceding 12 months, to the holders of any class of equity share capital whether voting or non-voting and also to the holders of any other class of transferable securities carrying voting rights.

Rule 37 of the Code states that when a company redeems or purchases its own voting shares, any resulting increase in the percentage of shares carrying voting rights in which a person or group of persons acting in concert is interested will be treated as an acquisition for the purposes of Rule 9. However, Note 1 to Rule 37.1 states that a person who comes to exceed the limits in Rule 9.1 in consequence of a company's redemption or purchase of its own shares will not normally incur an obligation to make a mandatory offer unless that person is a director, or the relationship of the person with any one or more of the directors is such that the person is, or is presumed to be, acting in concert with any of the directors. A person who has appointed a representative to the Board of the company, and investment managers of investment trusts, will be treated for these purposes as a director.

The Panel on Takeovers and Mergers (the "Panel") must be consulted in advance in any case where Rule 9 of the Code might be relevant. The Company has consulted with the Panel in relation to its buyback program and, following discussions during February 2017, the Panel confirmed on an ex-parte basis that the funds managed by Invesco Asset Management Limited ("Invesco") would not be obliged to make a mandatory offer for the Company under Rule 9 of the Code in the event of an increase to Invesco's percentage shareholding in the Company caused by repurchases by the Company of its own shares.

Share Issues

At the AGM held on 8 June 2018, the Directors were granted the authority to allot ordinary shares up to an aggregate nominal value of £78,292.16, representing approximately 10.0 per cent of the issued ordinary share capital at the time. No shares have been issued under this authority. The Directors will seek approval to renew this authority at the Company's Annual General Meeting to be held on 6 June 2019.

There are no restrictions concerning the transfer of securities in the Company or on voting rights; no special rights with regard to control attached to securities; no agreements between holders of securities regarding their transfer known to the Company; and no agreements which the Company is party to that might affect its control following a successful takeover bid.

Substantial Shareholdings

The Company has been informed of the following notifiable interests of 3 per cent or more in the Company's voting rights as at 31 December 2018:

RELATIONS WITH SHAREHOLDERS

All shareholders have the opportunity to attend and vote, in person or by proxy, at the AGM. The Notice of the AGM, which has been sent out with this Annual Report, contains separate resolutions in respect of each substantive issue.

Shareholders are encouraged to attend the AGM and to participate in proceedings. The Chairman of the Board and the Directors, together with representatives of the Investment Manager, will be available to answer shareholders' questions at the AGM.

The Investment Manager holds regular discussions with major shareholders, the feedback from which is provided to and greatly valued by the Board. The Directors are available to enter into dialogue and correspondence with shareholders regarding the progress and performance of the Company. The section of this report, entitled 'Shareholder Information', is intended to provide information which would be useful to shareholders. General enquiries about the Company should be directed to the Company Secretary.

INTERNAL CONTROL REVIEW

The Board is responsible for ensuring the maintenance of a robust system of internal control and risk management and for reviewing the effectiveness of the Company's overall internal control arrangements and processes following recommendations from the Risk Committee.

The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company and for reviewing the effectiveness of the Company's system of internal controls including financial, operational, compliance and risk management. The Company has established a risk register consisting of the key risks and controls in place to mitigate those risks. This risk register provides a basis for the Audit Committee and the Board to regularly monitor the effective operation of the controls and to update the register when new risks are identified.

The Board has reviewed the effectiveness of the Investment Manager's, Administrator's and the Depository's system of internal control and risk management to ensure the safekeeping and accurate valuation on the Group's assets. For the year under review, the Board has not identified any significant failings or weaknesses in the internal control systems.

Risk is inherent in the Company's activities, but it is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. The Company is exposed to market risk (which includes currency risk, interest rate risk and other price risk), credit risk and liquidity risk arising from the financial instruments held by the Company. These risks are further disclosed in Note 9 to the financial statements.

As the Company has no employees, it does not have a whistleblowing policy and procedure in place. The Audit Committee reviews the whistleblowing procedures of the Investment Manager to ensure that the concerns of their staff may be raised in a confidential manner.

The following are the key components which the Company has in place to provide effective internal control:

· The Board has agreed clearly defined investment criteria and Platform restrictions, which specify levels of authority and exposure limits. The Investment Manager regularly reports to the Board on compliance with these criteria;

· The Board has a procedure to ensure that the Company can continue to be approved as an investment company by complying with sections 1158/1159 of the Corporation Tax Act 2010;

· The Investment Manager and Administrator prepare forecasts and management accounts, covering investment activities and financial matters, which allow the Board to assess the Company's activities and review its performance;

· Contractual arrangements with the Investment Manager and other third-party service providers are in place which specifically define their roles and responsibilities to the Company;

· The services and controls of the Investment Manager and other third-party service providers are subject to review by the Management Engagement Committee on an ongoing basis. Regular reports are provided to the Board by the Administrator and the Depositary; and

· The Investment Manager's Management Committee and compliance departments continually review all of the Investment Manager's controls and procedures and report to the Audit Committee.

The system of internal control and risk management is designed to meet the Company's particular needs and the risks to which it is exposed. The Board recognises that these control systems can only be designed to manage, rather than eliminate, the risk of failure to achieve business objectives and to provide reasonable, but not absolute, assurance against material misstatement or loss.

ALTERNATIVE INVESTMENT FUND MANAGEMENT DIRECTIVE DISCLOSURE

Quantitative remuneration disclosure

In accordance with 3.3.5 (5) of the FCA's Investment Funds Sourcebook ("FUND") and in accordance with FCA Finalised guidance - General guidance on the AIFM Remuneration Code (SYSC 19B) ("the Guidelines"), dated January 2014, the total remuneration paid by Group companies which include the AIFM during the year was £19.3 million, split £11.0 million into variable and £8.3 million in fixed remuneration. During the year, the average number of beneficiaries at the Group which includes the AIFM were 60 and the aggregate amount of remuneration paid in relation to the Senior Management of the firm was £6.3 million. Fixed remuneration is amounts paid as salaries. Variable remuneration is amounts paid under bonus arrangements and distributions. The AIFM does not consider that any individual member of staff of the AIFM has the ability to materially impact the risk profile of the Company.

Other disclosures

The AIFMD requires that the AIFM ensures that certain other matters are actioned and or reported to investors. Each of these is set out below.

· Provision and content of an Annual Report (FUND 3.3.2 and 3.3.5). The publication of the Annual Report and audited financial statements of the Group satisfies these requirements.

· Material change of information. The AIFMD requires certain information to be made available to investors in the Company before they invest and requires that material changes to this information be disclosed in the Annual Report.

Periodic disclosure (FUND 3.2.5 and 3.2.6)

There are no assets subject to special arrangements due to their illiquid nature and no new arrangements for the managing of the liquidity of the Group.

There is no change to the arrangements, as set out in the prospectus, for managing the Group's liquidity.

The current risk profile of the Group is set out in the Strategic Report: Principal Risks and Uncertainties on pages 21 to 24 and in note 9 Financial instruments and associated risks.

The Company is permitted to be leveraged and the table below sets out the current maximum permitted and actual leverage under the gross and commitment method in accordance with Annex IV Article 8 of the AIFMD.

In accordance with the prospectus the actual leverage employed by the Group as a percentage of NAV was 51.5 per cent. The Group has a maximum limit of 1.5 times of NAV in aggregate (calculated at the time of draw down under any facility that the Group has entered into) as detailed in the Company's prospectuses dated 30 May 2014, 29 January 2015 and 28 July 2015. There have been no breaches of the permitted leverage limits within the reporting period and no changes to maximum level of leverage employed by the Group.

Other matters

The Investment Manager can confirm that required reporting to the FCA has been undertaken in accordance with FUND 3.4.

By order of the Board

Link Company Matters Limited

Company Secretary

23 April 2019

Report of the Audit Committee

As Chairman of the Audit Committee I am pleased to present the Audit Committee report for the year ended 31 December 2018.

SUMMARY

The Committee operates within a clearly defined Terms of Reference, a copy of which is available from the Company's website. 4 April 2018, the Committee changed its name from the Audit and Valuation Committee and also updated its terms of reference to remove its duties and responsibilities in relation to risk management. These matters are now the responsibility of the newly formed Risk Committee.

MEMBERSHIP OF THE AUDIT COMMITTEE

The Audit Committee comprises all Directors, is chaired by Michael Cassidy and meets at least twice a year. The AIC Code stipulates that the Chairman of the Company should not be a member of the Audit Committee. However, given the size of the Board and Mr Cruickshank's relevant financial experience, it is considered appropriate that he is a member of the Audit Committee. The Board is also satisfied that the combined knowledge and experience of its members within the Company's sector enable the Committee to exercise its duties effectively. Representatives of the Auditors, PricewaterhouseCoopers LLP ('PwC') also attend meetings of the Committee at least twice a year.

THE ROLE OF THE AUDIT COMMITTEE

The primary role of the Audit Committee is to monitor the integrity of the financial statements of the Company, keep under review the internal controls, manage the relationship with the external auditor and monitor the external audit process including the independence and objectivity of the external auditor.

MATTERS CONSIDERED IN THE YEAR

The Audit Committee met twice during the year under review and during those meetings it has:

· reviewed the internal controls and risk management systems of the Company and its third-party service providers;

· considered the requirement for an internal audit function;

· considered the prospects for the Company and concluded on the viability of the Company over the three-year period to the AGM in 2022;

· monitored the Investment Manager's implementation of IFRS 9;

· oversaw the competitive tender of the Group's external auditor appointment;

· approved the audit plan with the Auditors, including the principal areas of focus and the Auditors' fees;

· reviewed the Group's Audited Annual Report and Financial Statements for the year ended 31 December 2018 and advised the Board accordingly;

· reviewed the Group's half-year financial statements for the period ended 30 June 2018 and advised the Board accordingly;

· met with the Auditor without the presence of the Investment Manager;

· reviewed the Whistleblowing Policy of the Investment Manager; and

· reviewed the Auditor's appointment and independence and considered their re-appointment.

A number of similar matters will be considered again during 2019 as set out in the pre-determined schedule of items for discussion during the year.

INTERNAL AUDIT

The Board has considered the need for an internal audit function and it has decided that the systems and procedures employed by the Investment Manager and the other third-party providers in relation to the Company give sufficient assurance that a sound system of internal control, which safeguards the Company's assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary. The requirement, however, will regularly be re-visited in accordance with the Committee's terms of reference.

AUDIT FEES AND NON-AUDIT SERVICES

The breakdown of fees between audit services and non-audit services for the year ended 31 December 2018 are provided in Note 13 of the financial statements. The fees for the non-audit service work carried out by PwC were 7 per cent of the audit fee and related to assurance services in relation to the Group. The Committee considered that engaging PwC to provide these services was in the best interests of the Company due to their expertise and their knowledge and understanding of the business. To maintain the external auditor's independence and objectivity, an independent partner was appointed to lead on these services.

EXTERNAL AUDIT

The Committee monitors the Company's relationship with the Auditor and has discussed and considered their independence and objectivity. The Committee is satisfied that PwC are independent considering the term of appointment to date and have been reassured that no conflicts arose during the year and will continue to monitor this position.

The Audit Committee has met with the audit partner and reviewed and assessed PwC's performance to date. The review has involved an examination of the auditor's remuneration, the quality of its work including the quality of the audit report, the quality of the audit partner and audit team, the expertise of the audit firm and the resources available to it, the identification of audit risk, the planning and execution of the audit and the terms of engagement. Following completion of the external audit, the Committee obtains feedback on the conduct of the audit. The Auditor is also invited to attend Committee meetings and also meets with the Committee and its Chairman without the presence of the Investment Manager.

During the year, the Board undertook a competitive tender process for the external audit contract; with the process overseen by the Audit Committee. PwC were invited to take part in the tender and following completion of the tender process were re-appointed with the result of the tender process announced to the market.

The Committee recommends to the Board that, subject to shareholders' approval at the 2019 AGM, PwC be re-appointed as the Auditor for the Company.

The Company has complied throughout 2018 with the provisions of The Statutory Audit Services Order 2014, issued by the Competition and Markets Authority.

SIGNIFICANT AREAS CONSIDERED BY THE AUDIT COMMITTEE

After discussion with the Investment Manager and the Auditors, the Committee determined that the key risks in relation to the Company's financial statements and how they were addressed were:

For and on behalf of the Audit Committee

Michael Cassidy

Audit Committee Chairman

23 April 2019

Risk Committee Report

Full details of the number of committee meetings and attendance by individual committee members can be found on page 32.

THE ROLE OF THE RISK COMMITTEE

The Risk Committee comprises all Directors and is chaired by David Fisher. The Board is ultimately responsible for the risk management of the Company. It seeks to achieve an appropriate balance between mitigating risk and generating attractive risk-adjusted returns for shareholders. Integrity and responsibility are embedded in the Company's approach to risk management. The review of the Company' risk management system was previously undertaken by the Company's Audit Committee.

MATTERS CONSIDERED IN THE YEAR

The Risk Committee was formed on 5 September 2018 and has met once in November 2018. A summary of the duties of the Risk Committee are:

· review the internal controls and risk management systems of the Company and its third party service providers;

· to assess the principal risks of the Company and how they are managed and mitigated;

· receive and review risk related management information;

· monitoring of the Company's risk appetite;

· review the policies and process for identifying and assessing business risks and the management of those risks by the Company;

· receive regular reports from key service providers on their own controls; and

to monitor and ensure adherence to best practice in corporate governance.

Risk management

· During the year the committee reviewed and updated the risk matrix, where appropriate, to reflect the Company's key risks and considered risk related matters.

For and on behalf of the Risk Committee

David Fisher

Risk Committee Chairman

23 April 2019

Directors' Remuneration Report

The Directors' Remuneration Report for the year ended 31 December 2018 has been prepared in accordance with Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2008 (as amended). An ordinary resolution for the approval of the Directors' Remuneration Report will be put to shareholders at the forthcoming Annual General Meeting.

Full details of the number of committee meetings and attendance by individual committee members can be found on page 32.

STATEMENT FROM THE CHAIRMAN OF THE REMUNERATION COMMITTEE

Remuneration Committee

The Remuneration Committee is chaired by Mahnaz Safa and consists of all the Directors. It is the responsibility of the Committee to determine the remuneration of each Director and to consider the skills, competence and independence of candidates in the context of the overall Board composition and to nominate candidates to the Board. No Director is involved in deciding their own remuneration.

During the year under review, the Committee met once and reviewed and considered:

· market remuneration trends against a comparison of its peer group;

· the size, composition and structure of the Board, time commitment required of the Directors and the leadership and succession needs of the Company; and

· the level of the Directors' fees.

The Board have also considered and agreed upon a formal policy for the approval of Directors' expenses.

VOTING AT ANNUAL GENERAL MEETING

The Directors' Remuneration Report for the year ended 31 December 2018 was approved by shareholders at the Annual General Meeting held on 15 June 2018. The votes cast by proxy were as follows:

DIRECTORS' REMUNERATION POLICY

The Remuneration Policy set out below was approved at the Annual General Meeting held on 15 June 2018 and will apply until it is put to shareholders for renewal at intervals of not more than three years, or the Remuneration Policy is varied, in which event shareholder approval for the new Remuneration Policy will be sought.

The Company has no employees other than its Directors who are all non-executives. When deciding the level of fees the Committee considers the amount of time expected to be spent on the Company's affairs and each Director's associated responsibilities to the Company. It also takes into account the remuneration of Directors of other investment companies of similar size and/or mandate and gives due regard to the limits set out in the Company's Articles of Association, which prohibits the total aggregate annual fees payable to the Directors in respect of any financial year to exceed £500,000.

The Directors do not participate in any discussions relating to their own fee which is determined by the Board.

Directors are not eligible for bonuses, share options or long-term incentives schemes or other performance-related benefits. There are no pension arrangements in place for the Directors of the Company. No Director has a service contract with the Company and as such is not entitled to compensation payments upon termination of their appointment or loss of office.

Under the Articles of Association, if any Director is called upon to perform extra or special services of any kind, he or she is entitled to receive such sum as the Board may think fit for expenses, and also such remuneration as the Board may think fit, either as a fixed sum or as a percentage of profits or otherwise, and such remuneration may, as the Board shall determine, be either in addition to or in substitution for any other remuneration he or she may be entitled to receive.

Directors are also entitled to receive all expenses properly incurred by them in attending general meetings or separate meetings of the holders of any class of shares or meetings of the Board or Committees of the Board or otherwise in or with a view to the performance of their duties.

Fees of any new Director appointed will be on the above basis. Fees payable in respect of subsequent periods will be determined following an annual review. Any views expressed by shareholders on the fees being paid to Directors would be taken into consideration by the Board.

TOTAL REMUNERATION PAID TO EACH DIRECTOR (AUDITED)

The Directors who served during the year earned the following remuneration set out in the table below. There has been a significant reduction on the prior year charge given extra remuneration in relation to the work carried out in selecting a new Investment Manager in 2017. The highest paid director for the year was Stuart Cruickshank £49,000 (2017: Michael Cassidy £96,000).

*David Fisher was appointed 19 April 2018

The table below sets out a breakdown of Director's remuneration for 2018

RELATIVE IMPORTANCE OF SPEND ON PAY

The table below shows the total amount paid out in remuneration and distribution to shareholders for the financial years 2018 and 2017.

* This figure includes the interim dividends to 31 March 2018, 30 June 2018, 30 September 2018 and 31 December 2018 which were paid to ordinary shareholders on 18 June 2018, 19 September 2018, 19 December 2018 and 27 March 2019 respectively.

** This figure includes the interim dividends to 31 March 2017, 30 June 2017, 30 September 2017 and 31 December 2017 which were paid to ordinary shareholders on 26 May 2017, 25 August 2017, 24 November 2017 and 16 March 2018 respectively.

DIRECTORS' SERVICE CONTRACTS

No Director has a service contract with the Company and as such is not entitled to compensation payments upon termination of their appointment or loss of office.

A letter of appointment was issued to the Directors at the beginning of their term of office which details their initial three-year appointment, subject to retirement by rotation in accordance with the Company's Articles of Association.

ADVISORS TO THE REMUNERATION COMMITTEE

The Board has not sought the advice or service by any outside person in respect of its consideration of the Directors' remuneration.

DIRECTORS' INTERESTS (AUDITED)

There is no requirement under the Company's Articles of Association or letters of appointment for Directors to hold shares in the Company. The interests of the Directors (who served during the year) in the shares of the Company, at the end of the year under review were as follows:

There have been no other changes to the Directors' share interests between 31 December 2018 and the date of this report.

Key external developments 

The Committee is mindful of the forthcoming changes to the Corporate Governance Code, which will become effective for the Company from January 2019.

The responsibilities and roles undertaken by the Committee already encompass much of the revised Code; however, during the course of the last year the Committee has undertaken a review of what additional steps need to be taken, with particular focus on how we effectively maintain and, where appropriate, extend engagement with all colleagues and across all other stakeholders.

On behalf of the BoardMahnaz SafaChairman of the Remuneration Committee

23 April 2019Nomination Committee Report

Full details of the number of committee meetings and attendance by individual committee members can be found on page 32.

New appointments will be identified against the requirements of the Company's business and the need to have a balanced Board with the best range of skills and experience to complement existing Directors. Appointments will be made on merit, taking into account the benefits of diversity, including gender.

The Board acknowledges the benefits of greater diversity, including gender diversity and remains committed to ensuring that the Company's directors bring a wide range of skills, knowledge, experience, backgrounds and perspectives. The Board decided it would not be appropriate to set targets as all appointments must be made on merit. It established the following measurable objectives for achieving diversity on the Board:

· All Board appointments will be made on merit, in the context of the skills, knowledge and experience that are needed for the Board to be effective;

· Long lists of potential non-executive directors should include diverse candidates of appropriate merit; and

· Only engage executive search firms who have signed up to the voluntary Code of Conduct on gender diversity and best practice.

MEMBERSHIP AND ROLE OF THE NOMINATION COMMITTEE

The Nomination Committee is chaired by Stuart Cruickshank and consists of all the Directors. The Board is satisfied that the combined knowledge and experience of its members enables the Committee to exercise its duties effectively. The Committee is primarily responsible for keeping the composition of the Board under review and to lead the process for appointments to the Board and its Committees. It is also responsible for keeping the structure, size and composition of the Board under regular review, and for making recommendations to the Board with regard to any changes necessary. The Committee also considers succession planning for the Board, taking into account the skills and expertise that will be needed on the Board in the future.

RECRUITMENT OF DIRECTORS

During 2017, the Company engaged the services of an independent external executive search consultancy, Lomond Consulting ("Lomond"), which has no other relationship with the Company, to assist in the recruitment process for the appointment of an Independent Non-Executive Director on the Board following a review of the size and complexity of the business which the Directors agreed that fifth director was required.

The Committee considered the Company's Diversity Policy together with the desired expertise and background of potential candidates to complement the skills already on the Board during its recruitment process. Lomond were also requested to consider gender and ethnicity when conducting their search. From an initial list of candidates put forward by Lomond, and meeting the criteria agreed by the Committee, a short list of candidates was drawn up based on their level of relevant experience. The candidates on the shortlist were invited to meet with the Chairman and other members of the Board and as a result of those discussions, Mr Fisher was considered to be the most suitable candidate and was subsequently appointed to the Board on 19 April 2018.

DIVERSITY POLICY

During 2017, the Board approved and adopted the diversity policy. The policy acknowledges the importance of diversity, including gender diversity, for the Company. The Board acknowledges the benefits of greater diversity, including gender diversity and remains committed to ensuring that the Company's directors bring a wide range of skills, knowledge, experience, backgrounds and perspectives.

On behalf of the Board

Stuart CruickshankChairman of the Nomination Committee

23 April 2019

Management Engagement Committee Report

MEMBERSHIP AND ROLE OF THE COMMITTEE

All of the Directors are members of the Committee and the Board is satisfied that the combined knowledge and experience of its members enables the Committee to exercise its duties effectively.

Full details of the number of committee meetings and attendance by individual committee members can be found on page 32.

The Management Engagement Committee is primarily responsible for reviewing the appropriateness of the continuing appointment of the Investment Manager, ensuring the terms and conditions of the Investment Manager's continuing appointment align with the investment policy and investment objective of the Company.

PERFORMANCE OF INVESTMENT MANAGER

The Committee keeps under review the performance of the Investment Manager and the level and terms of the management fee. Following a formal review carried out by the Committee in April 2018, the Directors agreed that the continuing appointment of the Investment Manager on the terms agreed is in the interests of shareholders as a whole.

On behalf of the Board

Simon KingChairman of the Management Engagement Committee

23 April 2019

Statement of Directors' Responsibilities

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, for the Group and Parent Company financial statements, subject to any material departures disclosed and explained in the financial statements; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group 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 position and performance, business model and strategy.

Each of the Directors, confirm that, to the best of their knowledge:

· the Group and Company 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 plcSigned on behalf of the Board by

Stuart Cruickshank

Chairman

23 April 2019

Financial Statements

Consolidated Statement of Financial Position

AS AT 31 DECEMBER 2018

The financial statements on pages 57 to 127 were approved by the Board of Directors on 23 April 2019 and signed on its behalf by:

Stuart Cruickshank

Chairman

23 April 2019

Company Statement of Financial Position

AS AT YEAR ENDED 31 DECEMBER 2018

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 profit on ordinary activities after taxation of the Company for the year ended 31 December 2018 was £30,726,730 (2017: £16,984,946).

The financial statements on pages 57 to 127 were approved by the Board of Directors on 23 April 2019 and signed on its behalf by:

Stuart CruickshankChairman23 April 2019

Consolidated Statement of Comprehensive Income 2018

FOR THE YEAR ENDED 31 DECEMBER 2018

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.

Consolidated Statement of Comprehensive Income 2017

FOR THE YEAR ENDED 31 DECEMBER 2017

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.

Consolidated Statement of Changes in Shareholders' Funds

FOR THE YEAR ENDED 31 DECEMBER 2018

FOR THE YEAR ENDED 31 DECEMBER 2017

Company Statement of Changes in Shareholders' Funds

FOR THE YEAR ENDED 31 DECEMBER 2018

FOR THE YEAR ENDED 31 DECEMBER 2017

Consolidated Cash Flow Statement

FOR THE YEAR ENDED 31 DECEMBER 2018

Company Cash Flow Statement

FOR THE YEAR ENDED 31 DECEMBER 2018

Notes to the Consolidated Financial Statements

1. GENERAL INFORMATION

P2P Global Investments plc (the "Company") is a closed-ended investment company incorporated in The United Kingdom on 6 December 2013 with registered number 8805459. The Company is a publicly listed company and 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 PSC Credit Holdings LLP (the "Investment Manager"). The Investment Manager changed its name from PSC Eaglewood Europe LLP on 30 October 2018. Pollen Street Capital (US) LLC, an affiliate of the Investment Manager and an SEC registered investment adviser, was appointed as sub investment manager (the "Sub-Manager") to the Company. The Sub-Manager changed its name from PSC Eaglewood Americas LLC on 11 May 2018. The Investment Manager has, pursuant to the Sub-Management Agreement, delegated certain of its responsibilities and functions, including those in relation to 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 per cent. 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 2018, the Company had total issued equity in the form of 86,306,803 ordinary shares (2017: 86,306,803) of which 76,088,401 (2017: 79,835,549) were outstanding and 10,218,402 (2017: 6,471,254) were held as treasury shares. 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 and consolidation

The consolidated financial statements for the Company are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU"). They comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and International Financial Reporting Committee, including interpretations issued by the IFRS Interpretations Committee and interpretations issued by the International Accounting Standard Committee ("IASC") that remain in effect, to the extent they have been adopted by the EU. The consolidated financial statements are also in compliance with relevant provisions of the Companies Act 2006 as applicable to companies reporting under IFRS. Except for new accounting policies introduced by IFRS 9 which are explained in more detail in Note 2(h), the accounting policies have been applied consistently year on year.

Where presentational guidance set out in the Statement of Recommended Practice ("SORP") for investment trusts issued by the Association of Investment Companies ("AIC") in July 2018 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.

Accounting standards effective

IFRS 15 Revenue from Contracts with Customers

The objective of IFRS 15 is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. The standard has been applied in the Company's annual report as the standard became effective for any periods beginning on or after 1 January 2018.

The adoption and interpretation of this standard has not had a material impact on the financial statements, given the nature of the Company's business with revenue predominantly from interest and movements in fair value.

Accounting standards issued but not yet effective

IFRS 16 Leases

IFRS 16 establishes principles for the recognition, measurement, presentation and disclosure of leases, with the objective of ensuring that lessees and lessors provide relevant information that faithfully represents those transactions. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor, IAS 17. IFRS 16 was issued in January 2016 and applies to annual reporting periods beginning on or after 1 January 2019.

The Directors do not anticipate that the adoption of this standard and interpretations will have a material impact on the financial statements, given the nature of the Company's business being that it has no leases.

IFRS 17 Insurance Contract

IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts. This information gives a basis for users of financial statements to assess the effect that insurance contracts have on the entity's financial position, financial performance and cash flows. IFRS 17 was issued in May 2017 and applies to annual reporting periods beginning on or after 1 January 2021.

The Directors do not anticipate that the adoption of this standard and interpretations will have a material impact on the financial statements, given the nature of the Company's business being that it has no insurance contracts.

IFRS 3 Amendments regarding the definition of a business

The IASB has issued 'Definition of a Business (Amendments to IFRS 3)' aimed at resolving the difficulties that arise when an entity determines whether it has acquired a business or a group of assets. The amendments are effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020.

Other future developments include the IASB undertaking a comprehensive review of existing IFRSs. The Company will consider the financial impact of these new standards as they are finalised.

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. 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 treating its subsidiaries as investments at fair value through profit or loss. At the Company level, the Company's investments in its subsidiaries are measured at fair value which is represented as net asset value.

Associates are entities over which the Group has significant influence, but does not control, generally accompanied by a shareholding of between 20 per cent and 50 per cent of the voting rights.

No associates are presented on the Statement of Financial Position using the equity accounting method as the Group elects to hold such investments at fair value through profit and loss. This treatment is permitted by International Accounting Standard ("IAS") 28 Investment in Associates and Joint Ventures, which also permits investments held by entities that are venture capital organisations, mutual funds or similar entities to be excluded from its measurement methodology requirements where those investments are designated, upon initial recognition, as at fair value through profit or loss and accounted for in accordance with IFRS 9 Financial Instruments. Changes in fair value of associates are recognised in the Statement of Comprehensive Income in the period in which the change occurs.

The disclosures required by Section 409 of the Companies Act 2006 for associated undertakings are included in Note 19 to the financial statements.

As at 31 December 2018, the Company controls seven legal entities listed below as well as nine Trusts which are subsidiaries that the Company controls (together "the Group").

During 2018, the Company controlled two legal entities listed below as well as four Trusts which were subsidiaries that the Company controlled at some point in the year, however were not controlled at year end.

The Company invests in a special purpose vehicle, Eaglewood SPV I LP (the "SPV") and at 31 December 2018 is the sole Limited Partner in that SPV and controls it. 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.

The Company controls Eaglewood Income Fund I, LP (the "Eaglewood Fund"), a Delaware limited partnership established on 3 February 2012, through the control of the SPV. As at 31 December 2018, the SPV is the sole limited partner in the Eaglewood Fund. The Eaglewood Fund is an open ended private investment fund, offering monthly subscriptions and quarterly redemptions, with 90 days' notice. The Eaglewood Fund is managed by the Investment Manager, Pollen Street Capital (US), LLP. It employs a strategy that primarily involves leveraged investment in monthly amortising unsecured US consumer loans originated by a single Platform with terms of three to five years.

During the prior period the GP undertook a complete review of the Eaglewood Fund investment strategy, in light of its continued underperformance. This review concluded that the structure of the Eaglewood Fund was no longer appropriate to meet the original objectives of the investors and it was considered to be in the best interest of the investors to make compulsory redemptions. It was determined that the Eaglewood Fund structure could continue to be utilised to purchase platform loans on behalf of the Company, and therefore, all investors other than the SPV were redeemed on 30 September 2017. As a result of these structural changes, the SPV became the sole investor in the Eaglewood Fund, effective as of 1 October 2017. By virtue of the Company being the sole limited partner of the SPV, these structural changes were assessed to result in the Company gaining control of Eaglewood Fund. On this basis, the Eaglewood Fund was consolidated from 1 October 2017.

The Company controls Marketplace Originated Consumer Assets 2016-1 PLC ("MOCA 2016"), a public limited company incorporated under the Law of England and Wales. MOCA 2016 is a securitisation vehicle for UK consumer loans and operates in a pre-determined manner. The Company is considered to control MOCA 2016 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.

The Company also controls P2P BL-2 Limited ("P2P BL-2"), a private limited company incorporated with limited liability under the Law of England and Wales. The Company is considered to control P2P BL-2 by virtue of being its sponsor while having exposure to the variable returns of the vehicle through the holding of junior note issued by it. P2P BL-2 was incorporated in March 2017.

The Company also controls P2P BL-3 PLC ("P2P BL-3"), a public limited company incorporated with limited liability under the Law of England and Wales. The Company is considered to control P2P BL-3 by virtue of being its sponsor while having exposure to the variable returns of the vehicle through the holding of junior note issued by it. P2P BL-3 was incorporated in June 2017.

The Company also controls Marketplace Originated Consumer Assets 2017-1 PLC ("MOCA 2017") a public limited company incorporated under the Law of England and Wales. MOCA 2017 is a securitisation vehicle for UK consumer loans and operates in a pre-determined manner. The Company is considered to control MOCA 2017 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. MOCA 2017 was incorporated in November 2017.

For part of the period under review the Company controlled Small Business Origination Loan Trust 2018-1 DAC ("SBOLT 2018") a public limited company incorporated in Ireland, SBOLT 2018 is a securitisation vehicle for unsecured loans made to small and medium-sized enterprises ("SMEs") incorporated in the UK and operates in a pre-determined manner. The Company was considered to control SBOLT 2018 from May 2018 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. SBOLT 2018 was incorporated in May 2018. In September 2018 the Company sold 95 per cent of its holding in the junior notes, and with that SBOLT 2018 was deconsolidated.

The Company controls CH Mercury Note Issuer DAC (CH) a public limited company incorporated in Ireland, CH is a special purpose vehicle however it is currently inactive.

The Company also controls a number of trusts ("Trusts") through its control of the SPV and the Eaglewood Fund. The SPV and the Eaglewood Fund control a Trust if they are exposed to, or have the rights to, variable returns from their involvement with the Trust and have the ability to affect those returns through its power over the Trust. As at 31 December 2018, the SPV is the sole beneficial owner of EW-PFL Trust, SPV I Loan Trust, Payoff Consumer Loan Trust, PSC 1803 Autoloan Trust and PSC Rocketloans Prime Consumer Loan Trust while the Eaglewood Fund is the sole beneficial owner of Eaglewood Consumer Loan Trust 2014-1 ("CLT 2014") and Eaglewood LC Trust. During the year the Company also closed four trusts; Certified Loan Warehouse Trust, EW-PFL Financing Trust, EW-PFL Security Trust and CLT 2014.

During the period, P2PCL1 PLC, a limited liability company incorporated in England and Wales, was liquidated. The Company previously controlled this subsidiary through its ownership of one class A Share which conferred control of 100 per cent of the voting rights in that entity. The SPV is also a beneficial owner and holds a controlling interest in BFCL Trust. During the year a certificate of cancellation of trusts was filed with the state of Delaware for EW-PFL Financing Trust, CLT 2014, EW-PFL Security Trust and Certificated Loan Warehouse Trust which the SPV was previously the sole beneficial owner.

All entities within the Group have co-terminus 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.

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 and the Company have adequate financial resources to enable them 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 Group and Company financial statements.

(b) Foreign currency

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.

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, including loans at amortised cost, 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.

(c) Presentation of Consolidated Statement of Comprehensive Income

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

(d) 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 EIR 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 EIR and all other premiums or discounts above or below market rates.

Once a financial asset or a group of similar financial assets becomes credit 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 Consolidated Statement of Comprehensive Income on an ex-dividend basis.

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

Fair value gains and losses arising from derivative instruments are credited or charged to the Consolidated Statement of Comprehensive Income.

(e) Expenses

Expenses are recognised on an accruals basis. The basis of calculation for the investment management and performance fees is set out in Note 13 to the financial statements.

(f) Dividends payable to shareholders

Dividends to shareholders are accounted for in the period in which the ex-dividend date falls. Dividends payable to shareholders are recognised in the Consolidated Statement of Changes in Equity on the ex-dividend date. Only revenue reserves and those from the special distributable reserve will be distributed.

(g) Taxation

The tax currently payable is based on the taxable profit for the year. Taxable profit differs from 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.

(h) Financial assets and financial liabilities

(i) Financial assets

Classification and measurement

Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Group becomes a party to the contractual provisions of the instrument. The Group shall offset financial assets and financial liabilities if it has a legally enforceable right to set off the recognised amounts and interests and intends to settle on a net basis. Financial assets and liabilities are derecognised when the Group settles its obligations relating to the instrument.

From 1 January 2018 IFRS 9 contains a new classification and measurement approach for debt instruments that replaces most of the guidance in IAS 39. This includes amended guidance for the classification and measurement of financial assets by introducing a fair value through other comprehensive income category for certain debt instruments. IFRS 9 introduces a principle-based approach and applies one classification approach for all types of debt instruments. For Debt Instruments, two criteria are used to determine how they should be classified and measured: (a) the entity's business model (i.e. how an entity manages its debt instruments in order to generate cash flows by collecting contractual cash flows, selling debt instruments or both); and (b) the contractual cash flow characteristics of the financial asset (i.e. whether the contractual cash flows are solely payments of principal and interest).

A debt instrument is measured at amortised cost if it meets both of the following conditions and is not designated as at fair value through profit and loss ("FVTPL"): (a) it is held within a business model whose objective is to hold assets to collect contractual cash flows; and (b) its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The carrying amount of these assets is adjusted by any expected credit loss allowance recognised and measured as described further in this note. A debt instrument is measured at fair value through other comprehensive income ("FVOCI") if it meets both of the following conditions and is not designated as at FVTPL: (a) it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and (b) its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Movements in the carrying amount are taken through the Other Comprehensive Income ("OCI"), except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the investments amortised cost which is recognised in the Consolidated Statement of Comprehensive Income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to the Consolidated Statement of Comprehensive Income and recognised in 'Income'. Interest income from these financial assets is included in 'Income' using the effective interest rate method ("EIRM").

The EIRM is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate ("EIR") is the rate that exactly discounts estimated future cash flows 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. When calculating the effective interest rate, the Company takes into account all contractual terms of the financial instrument, for example prepayment options, but does not consider future credit losses. The calculation includes all fees paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Fees and commissions which are not considered integral to the EIRM and deposit interest income are recognised on an accruals basis when the service has been provided or received.

Equity instruments are measured at FVTPL, unless they are not held for trading purposes, in which case an irrevocable election can be made on initial recognition to measure them at FVOCI with no subsequent reclassification to the Consolidated Statement of Comprehensive Income. This election is made on an investment by investment basis. Equity instruments are instruments that meet the definition of equity from the issuer's perspective; that is, instruments that do not contain a contractual obligation to pay and that evidence a residual interest in the issuer's net assets. Examples of equity instruments include basic ordinary shares.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. Financial assets measured at FVTPL are recognised in the Consolidated Statement of Financial Position at their fair value. Fair value gains and losses together with interest coupons and dividend income are recognised in the income statement within net trading income in the period in which they occur. The fair values of assets and liabilities traded in active markets are based on current bid and offer prices respectively. If the market is not active the Group establishes a fair value by using valuation techniques. In addition, on initial recognition the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. Refer to Note 2(h)(ii) for further details on financial liabilities.

Business model assessment

The Group has made an assessment of the objective of the business model in which a financial asset is held at a portfolio level in order to generate cash flows because this best reflects the way the business is managed and information is provided to the Investment Manager. That is, whether the Group's objective is solely to collect the contractual cash flows from the assets or is to collect both the contractual cash flows and cash flows arising from the sale of assets. If neither of these are applicable, then the financial assets are classified as part of the other business model and measured at FVTPL.

The information considered by the Group in determining the business model includes:

· The stated policies and objectives for the portfolio and the operation of those policies in practice, including whether the strategy focuses on earning contractual interest revenue, maintaining a particular interest rate profile, matching duration of the financial assets to the duration of the liabilities that are funding those assets or realising cash flows through the sale of assets;

· Past experience on how the cash flows for these assets were collected;

· How the performance of the portfolio is evaluated and reported to the Board;

· The risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; and

· The frequency, volume and timing of sales in prior periods, the reasons for such sales and expectations about future sales activity. However, information about sales activity is not considered in isolation, but as part of an overall assessment of how the Investment Manager's stated objective for managing the financial assets is achieved and how cash flows are realised.

Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition. 'Interest' is defined as consideration for the time value of money, for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a reasonable profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the contractual terms of the instrument are considered to see if the contractual cash flows are consistent with a basic lending arrangement. In making the assessment, the following features are considered:

· Contingent events that would change the amount and timing of cash flows;

· Leverage features;

· Prepayment and extension terms;

· Terms that limit the Group's claim to cash flows from specified assets e.g. non-recourse asset arrangements; and

· Features that modify consideration for the time value of money, e.g. periodic reset of interest rates.

The Group reclassifies debt investments when and only when its business model for managing those assets changes. The reclassification that has taken place forms the start of the first reporting period following the change. Such changes are expected to be very infrequent.

Deemed loans

The deemed loans are a non-derivative financial liability with fixed or determinable repayments that are not quoted in an active market. Deemed loans in relation to the Company relate to loans originated by the Company and subsequently securitised in a special purpose entity to reduce the cost of borrowing. Although the loans are no longer legally owned by the Company, the Company maintains the economic benefit of the underlying assets and therefore does not meet the criteria to derecognise. Derecognition cannot be achieved by merely transferring the legal title of a financial asset to another party. The substance of the arrangement must be assessed in order to determine whether an entity has transferred the economic exposure associated with the rights inherent in the asset.

Loans and related transaction costs are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the EIRM. IAS makes it clear that assets should only appear on one statement of financial position. IFRS require a reporting entity, as part of the derecognition assessment, to consider whether the transfer includes a transfer to a consolidated subsidiary. The practical application of the IFRS 9 derecognition requirements can be complex and require a significant degree of professional judgement to be applied. Derecognition cannot be achieved by merely transferring the legal title to a financial asset to another party. The substance of the arrangement must be assessed in order to determine whether an entity has transferred the economic exposure associated with the rights inherent in the asset (i.e., its risks and rewards) and, in some cases, control of those rights.

In the case of the Company, it has not met the requirements of derecognition in relation to the deemed loans given the economic exposure associated with the rights inherent in the assets (i.e., its risks and rewards), have been retained. As such the Company fails to meet the requirements for derecognition and continues to recognise the financial assets and as such has a deemed loans liability to the to the securitised special purpose entities.

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.

Impairment

The impairment charge in the consolidated statement of comprehensive income includes the change in expected credit losses which are recognised for loans and advances to customers, other financial assets held at amortised cost and certain loan commitments.

IFRS 9 applies a single impairment model to all financial instruments subject to impairment testing while IAS 39 had different models for different financial instruments. Impairment losses are recognised on initial recognition, and at each subsequent reporting period, even if the loss has not yet been incurred. In addition to past events and current conditions where there has been a change in credit risk, reasonable and supportable forecasts affecting collectability are also considered when determining the amount of impairment in accordance with IFRS 9. The impairment requirements under IFRS 9 are significantly different from those under IAS 39. The followings highlights the key differences between the two standards.

The IAS 39 incurred loss model delays the recognition of credit losses until there is objective evidence of impairment. Impairment is based on only past trigger events, and current conditions are considered when determining the amount of impairment (i.e., the effects of future credit loss events cannot be considered, even when they are expected).

At initial recognition, allowance is made for expected credit losses resulting from default events that are possible within the next 12 months (12-month expected credit losses). In the event of a significant increase in credit risk, allowance (or provision) is made for expected credit losses resulting from all possible default events over the expected life of the financial instrument (lifetime expected credit losses). Financial assets where 12-month expected credit losses are recognised are considered to be Stage 1; financial assets which are considered to have experienced a significant increase in credit risk are in Stage 2; and financial assets which have defaulted or are otherwise considered to be credit impaired are allocated to Stage 3.

The measurement of expected credit losses is primarily based on the product of the instrument's probability of default ("PD"), loss given default ("LGD"), and exposure at default ("EAD"), taking into account the value of any collateral held or other mitigants of loss and including the impact of discounting using the EIR.

· The PD represents the likelihood of a borrower defaulting on its financial obligation, either over the next 12 months ("12M PD"), or over the remaining lifetime ("Lifetime PD") of the obligation.

· EAD is based on the amounts the Group expects to be owed at the time of default, over the next 12 months ("12M EAD") or over the remaining lifetime ("Lifetime EAD"). For example, for a revolving commitment, the Group includes the current drawn balance plus any further amount that is expected to be drawn up to the current contractual limit by the time of default, should it occur.

· LGD represents the Group's expectation of the extent of loss on a defaulted exposure. LGD varies by type of counterparty, type and seniority of claim and availability of collateral or other credit support. LGD is expressed as a percentage loss per unit of exposure at the time of default. LGD is calculated on a 12-month or lifetime basis, where 12-month LGD is the percentage of loss expected to be made if the default occurs in the next 12 months and Lifetime LGD is the percentage of loss expected to be made if the default occurs over the remaining expected lifetime of the loan.

The estimated credit loss ("ECL") is determined by projecting the PD, LGD, and EAD for each future month and for each individual exposure or collective segment. These three components are multiplied together and adjusted for the likelihood of survival (i.e. the exposure has not prepaid or defaulted in an earlier month). This effectively calculates an ECL for each future month, which is then discounted back to the reporting date and summed. The discount rate used in the ECL calculation is the original EIR or an approximation thereof.

The Lifetime PD is developed by applying a maturity profile to the current 12M PD. The maturity profile looks at how defaults develop on a portfolio from the point of initial recognition throughout the lifetime of the loans. The maturity profile is based on historical observed data and is assumed to be the same across all assets within a portfolio and credit grade band. This is supported by historical analysis.

The 12-month and lifetime EADs are determined based on the expected payment profile, which varies by product type.

· For revolving products, the exposure at default is predicted by taking current drawn balance and adding a "credit conversion factor" which allows for the expected drawdown of the remaining limit by the time of default. These assumptions vary by product type and current limit utilisation band, based on analysis of the Group's recent default data;

· The 12-month and lifetime LGDs are determined based on the factors which impact the recoveries made post default. These vary by product type;

· For secured products, this is primarily based on collateral type and projected collateral values, historical discounts to market/book values due to forced sales, time to repossession and recovery costs observed; and

· For unsecured products, LGD's are typically set at product level due to the limited differentiation in recoveries achieved across different borrowers. These LGD's are influenced by collection strategies, including contracted debt sales and price.

The main difference between Stage 1 and Stage 2 is the respective PD horizon. Stage 1 estimates use a maximum of a 12-month PD, while Stage 2 estimates use a lifetime PD. The main difference between Stage 2 and Stage 3 is Stage 3 is effectively the point at which there has been a default event. For financial assets in stage 3, entities continue to recognise lifetime ECL but they now recognise interest income on a net basis. This means that interest income is calculated based on the gross carrying amount of the financial asset less ECL.

Movements between Stage 1 and Stage 2 are based on whether an instrument's credit risk as at the reporting date has increased significantly relative to the date it was initially recognised. Where the credit risk subsequently improves such that it no longer represents a significant increase in credit risk since origination, the asset is transferred back to Stage 1.

In assessing whether a borrower has a significant increase in credit risk the following indicators are considered:

· Unsecured

- Short-term forbearance; and

- Extension of terms granted.

· Structured and Property

- Significant increase in credit spread;

- Significant adverse changes in business, financial and/or economic conditions in which the borrower operates;

- Actual or expected forbearance or restructuring;

- Actual or expected significant adverse change in operating results of the borrower;

- Significant change in collateral value (secured facilities only) which is expected to increase the risk of default; and

- Early signs of cashflow/liquidity problems such as delay in servicing of trade creditors.

However, unless identified at an earlier stage, the credit risk of financial assets is deemed to have increased significantly when more than 30 days past due.

Movements between Stage 2 and Stage 3 are based on whether financial assets are credit-impaired as at the reporting date. Assets can move in both directions through the stages of the impairment model.

In assessing whether a borrower is credit impaired the following qualitative indicators are considered:

· Unsecured

- Long-term forbearance;

- Borrower deceased; and

- Borrower insolvent.

· Structured and Property

- Borrower in breach of financial covenants;

- Concessions have been made by the lender relating to the borrower's financial difficulty;

- Significant adverse changes in business, financial or economic conditions on which the borrower operates; and

- Long-term forbearance or restructuring.

In assessing whether a borrower is credit impaired the following quantitative indicator is considered:

- The remaining lifetime PD at the reporting date has increased, compared to the residual lifetime PD expected at the reporting date when the exposure was first recognised.

The criteria for determining whether credit risk has increased significantly varies by portfolio and includes a backstop based on delinquency. IFRS 9 contains a rebuttable presumption that default occurs no later than when a payment is 90 days past due. The Group uses this 90 day backstop for all its non-real estate and non-structured lending as these assets typically show low recovery rates past this point. For structured and real-estate lending the key identifiable presumption for default occurring is a breach of covenant or another event of default (e.g. deterioration in underlying assets or corporate) and this is analysed on a case by case basis.

These criteria has been applied to all financial instruments held at amortised cost and are consistent with the definition of default used for internal credit risk management purposes. The default definition has been applied consistently to model the PD, EAD and LGD throughout the Group's expected credit loss calculations. Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to reflect changes in circumstances.

The measurement of expected credit losses for each stage and the assessment of significant increases in credit risk considers information about past events and current conditions as well as reasonable and supportable forward-looking information. A 'Base case' view of the future direction of relevant economic variables and a representative range of other possible forecasts scenarios have been developed. The process has involved developing two additional economic scenarios and considering the relative probabilities of each outcome.

The Base case represents a most likely outcome and is aligned with information used for other purposes, such as strategic planning and budgeting. The number of scenarios and their attributes are reassessed at each reporting date. At 31 December 2018, all the portfolios of the Group use one positive, more optimistic and one downside, more pessimistic outcome. The scenario weightings are determined by a combination of statistical analysis and expert credit judgement, taking account of the range of possible outcomes each chosen scenario is representative of.

The estimation and application of forward-looking information requires significant judgement. PD, LGD and EAD inputs used to estimate Stage 1 and Stage 2 credit loss allowances, are modelled based on the macroeconomic variables (or changes in macroeconomic variables) that are most closely correlated with credit losses in the relevant portfolio. The Group has utilised macroeconomic scenarios prepared and provided by Oxford Economics.

Oxford Economics combines two decades of forecast errors with the quantitative assessment of the current and future risks facing the global and domestic economy to produce robust forward-looking distributions for the economy. Oxford Economics construct three alternative scenarios at specific percentile points in the distribution. In any distribution, the probability of a given discrete scenario is close to zero. Therefore, scenario probabilities represent the probability of that scenario or similar scenarios occurring. In effect, a given scenario represents the average of a broader bucket of similar severity scenarios and the probability reflects the width of that bucket. Given that it is known where the IFRS 9 scenarios sit in the distribution (the percentiles), their probability (the width of the bucket of similar scenarios) will depend on how many scenarios are chosen. Scenario probabilities must add up to 100 per cent so the more scenarios chosen, the smaller the section of the distribution, or bucket, each scenario represents and therefore the smaller the probability. This allows the probabilities to be calculated according to whichever subset of scenarios chosen to use in the ECL calculation. The scenarios are generated at the year-end and are only updated during the year if economic conditions change significantly. The Base case is given a 40 per cent weighting and the downside and upside a 30 per cent weighting each. These weightings specifically relate to the period 1 January 2018 to 31 December 2018.

As with any economic forecasts, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different to those projected. The Group considers these forecasts to represent its best estimate of the possible outcomes and has analysed the non-linearities and asymmetries within the Group's different portfolios to establish that the chosen scenarios are appropriately representative of the range of possible scenarios.

Other forward-looking considerations not otherwise incorporated within the above scenarios, such as the impact of any regulatory, legislative or political changes, have also been considered, but are not deemed to have a material impact and therefore no adjustment has been made to the ECL for such factors. This is reviewed and monitored for appropriateness on an annual basis. The impact of the downside scenario can be seen on page 113.

Write offs

The Group is not in possession of personal identifiable information on borrowers and therefore generally restricts itself to writing off on the basis of observed payment records (or lack thereof). The assumption is that even after a loan has been placed into default, there will likely be ongoing collections efforts. Also, any sales to debt collection agencies typically take some time to execute. Therefore, an unsecured consumer loan is normally written off when 120 days have elapsed without a payment being made, and the loan has been in a defaulted state throughout this period. Unsecured SME loans often have a lengthier legal process before collections can be made from any guarantors, so such a loan is written off when 240 days have elapsed without a payment being made, and the loan has been in a defaulted state throughout this period. Secured loans are written off when the proceeds from realising any available collateral have been received or where there is no realistic prospect of recovery and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off decrease the amount of impairment losses recorded in the Consolidated Statement of Comprehensive Income.

When the Group becomes aware of special circumstances that make any further collections unlikely (such as fraud, insolvency, or deceased with no known executors or next of kin), a decision may be made to write off a loan earlier than after the periods indicated above.

Collateral and other credit enhancements

The Group employs a range of policies to mitigate credit risk. The most common of these is accepting collateral for funds advanced.

The Group has internal policies of the acceptability of specific classes of collateral or credit risk mitigation.

The Group prepares a valuation of the collateral obtained as part of the loan origination process. This assessment is reviewed periodically. The principal collateral types for loans and advances are:

· Mortgages over residential properties;

· Margin agreement for derivatives, for which the Group has also entered into master netting agreements;

· Charges over business assets such as premises, inventory and accounts receivable; and

· Charges over financial instruments such as debt securities and equities.

Longer-term finance and lending to corporate entities are generally secured; revolving individual credit facilities are generally unsecured.

Collateral held as security for financial assets other than loans and advances depends on the nature of the instrument. Derivatives are also collateralised.

The Group's policies regarding obtaining collateral have not significantly changed during the reporting period and there has been a focus on increasing the quality and quantity of the collateral held by the Group.

The Group closely monitors collateral held for financial assets considered to be credit-impaired, as it becomes more likely that the Group will take possession of collateral to mitigate potential credit losses.

Modification of financial assets

The Group sometimes modifies the terms or loans provided to customers due to commercial renegotiations, or for distressed loans, with a view to maximising recovery.

Such restructuring activities include extended payment term arrangements, payment holidays and payment forgiveness. Restructuring policies and practice are based on indicators or criteria which, in the judgement of management, indicate that payment will most likely continue. These policies are kept under continuous review. Restructuring is most commonly applied to term loans.

The risk of default of such assets after modification is assessed at the reporting date and compared with the risk under the original terms at initial recognition, when the modification is not substantial and so does not result in derecognition of the original assets. The Group monitors the subsequent performance of modified assets. The Group may determine that the credit risk has significantly improved after restructuring, so that the credit loss Stage the asset sits in is reduced.

Modification of loans

The Group sometimes renegotiates or otherwise modifies the contractual cash flows of loans to customers. When this happens, the Group assesses whether or not the new terms are substantially different to the original terms. The Group does this by considering, among others, the following factors:

· If the borrower is in financial difficulty, whether the modification merely reduces the contractual cash flows to amounts the borrower is expected to be able to pay;

· Whether any substantial new terms are introduced, such as a profit share/equity-based return that substantially affects the risk profile of the loan;

· Significant extension of the loan term when the borrower is not in financial difficulty;

· Significant change in the interest rate;

· Change in the currency the loan is denominated in; and

· Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the loan.

If the terms are substantially different, the Group derecognises the original financial asset and recognises a 'New' asset at fair value and recalculates a new EIR for the asset. The date of renegotiation is consequently considered to be the date of initial recognition for impairment calculation purposes, including for the purpose of determining whether a significant increase in credit risk has occurred. However, the Group also assesses whether the new financial asset recognised is deemed to be credit-impaired at initial recognition, especially in circumstances where the renegotiation was driven by the debtor being unable to make the originally agreed payments. Differences in the carrying amounts are also recognised in the Consolidated Statement of Comprehensive Income as a gain or loss on derecognition.

If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Group recalculates the gross carrying amount based on the revised cash flows of the financial asset and recognises a modification gain or loss in the Consolidated Statement of Comprehensive Income. The new gross carrying amount is recalculated by discounting the modified cash flows at the original EIR (or credit-adjusted EIR for purchased or originated credit-impaired financial assets).

Derecognition other than a modification

Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or when they have been transferred and either (i) the Group transfers substantially all the risks and rewards of ownership, or (ii) the Group has not retained control.

The Group enters into transactions where it retains the contractual rights to receive cash flows from assets but assumes a contractual obligation to pay those cash flows to other entities and transfers substantially all of the risks and rewards. These transactions are accounted for as 'pass through' transfers that result in derecognition if the Group:

· Has no obligation to make payments unless it collects equivalent amounts from the assets;

· Is prohibited from selling or pledging the assets; and

· Has an obligation to remit any cash it collects from the assets without material delay.

Collateral (shares and bonds) furnished by the Group under standard repurchase agreements and securities lending and borrowing transactions are not derecognised because the Group retains substantially all the risks and rewards on the basis of the predetermined repurchase price, and the criteria for derecognition are therefore not met. This also applies to certain securitisation transactions in which the Group retains a subordinated residual interest.

(ii) Financial liabilities

Classification and subsequent measurement

In both the current year and prior year, financial liabilities are classified and subsequently measured at amortised cost, except for:

· Financial liabilities at fair value through profit or loss: this classification is applied to derivatives, financial liabilities held for trading (e.g. short positions in the trading booking) and other financial liabilities designated as such at initial recognition. Gains or losses on financial liabilities designated at fair value through profit or loss are presented partially in other comprehensive income (the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability, which is determined as the amount that is not attributable to change in market conditions that give rise to market risk) and partially profit or loss (the remaining amount of change in the fair value of the liability). This is unless such a presentation would create, or enlarge, an accounting mismatch, in which case the gains and losses attributable to changes in the credit risk of the liability are also presented in the Consolidated Statement of Comprehensive Income. There were none in the year ended 31 December 2018;

· Financial liabilities arising from the transfer of financial assets which did not qualify for derecognition, whereby a financial liability is recognised for the consideration received for the transfer. In subsequent periods, the Group recognises any expense incurred on the financial liability; and

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

Modification of a financial liability

The Group sometimes renegotiates or otherwise modifies the contractual cash flows of its financial liabilities. When this happens, the Group assesses whether or not the new terms are substantially different to the original terms. The Group does this by considering, among others, the following factors:

· Whether the modification merely reduces the contractual cash flows;

· Whether any substantial new terms are introduced that substantially affects the risk profile of the liability;

· Significant extension of the term;

· Significant change in the interest rate;

· Change in the currency the liability is denominated in; and

· Insertion of collateral, other security or credit enhancements that significantly affect the credit risk associated with the liability.

If the terms are substantially different, the Group derecognises the original financial liability and recognises a 'New' liability at fair value and recalculates a new EIR for the liability. If the terms are not substantially different, the renegotiation or modification does not result in derecognition, and the Group recalculates the gross carrying amount based on the revised cash flows of the financial liability and recognises a modification gain or loss in the Consolidated Statement of Comprehensive Income.

(iii) 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.

(iv) Comparative financial year ended 31 December 2017

(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 in the Eaglewood Fund in the 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 Eaglewood Fund 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.

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 EIR 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.

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 EIR. 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

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'); and

· 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; and

· 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.

(i) 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 estimated credit losses for irrecoverable amounts (if any). Given their short-term nature a lifetime ECL is not deemed material as expected life is less than a month.

(j) 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 and are subject to insignificant changes in fair value.

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.

(k) Current liabilities

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

(l) 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, legal fees, accounting and other professional advisers, printing costs and stamp duties.

The Group's equity NAV per unit is calculated by dividing the equity less 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.

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

(n) Segmental reporting

The Board and Investment Manager consider investment activity in Credit Assets and selected Equity Assets as the single operating segment of the Group, being the sole purpose for its existence. No other activities are performed. Whilst visibility over originations, portfolios, structured facilities and equity assets is afforded at an operational level, all are considered 'routes to market' for acquiring interests in credit assets, and thus act merely as indicators of the key drivers of financial performance and position of the Group. The four routes to market are not determinants of resource allocations, rather each investment opportunity is considered on its own merits. Additionally, there are no segment managers directly accountable for the individual routes to market. The Directors are of the opinion that the Group is engaged in a single segment of business.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of financial statements in conformity with IFRS adopted in the EU requires the Group to make judgements and estimates that affect the application of accounting policies and the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. UK company law and IFRS require the Directors, in preparing the Group's consolidated financial statements, to select suitable accounting policies, apply them consistently and make judgements and estimates that are reasonable. The Group's estimates and assumptions are based on historical experience and expectations of future events and are reviewed on an ongoing basis. Although these estimates are based on the Directors' best knowledge of the amount, actual results may differ ultimately from those estimates.

The areas requiring a higher degree of judgement or complexity and areas where assumptions and estimates are significant to the financial statements, are in relation to EIR, expected credit losses and investments at fair value through profit or loss. These are detailed below.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

ECL allowance for financial assets measured at amortised cost (estimate)

The calculation of the Group's ECL allowances and provisions against loan commitments and guarantees under IFRS 9 is highly complex and involves the use of a significant degree of judgement and estimation. This includes the formulation and incorporation of multiple forward-looking economic conditions into ECL to meet the measurement objective of IFRS 9. The most significant areas are set out below.

Definition of default

The PD of an exposure, both over a 12-month period and over its lifetime, is a key input to the measurement of the ECL allowance. Default has occurred when there is evidence that the customer is experiencing significant financial difficulty which is likely to affect the ability to repay amounts due. The definition of default adopted by the Group is described on page 76. The Group has not rebutted the presumption in IFRS 9 that default occurs no later than when a payment is 90 days past due except for structured or real estate instruments. The definition has been rebutted in these cases given the underlying collateral available to the Group.

The lifetime of an exposure

To derive the PDs necessary to calculate the ECL allowance it is necessary to estimate the expected life of each financial instrument. A range of approaches has been adopted across different product groupings including the full contractual life and taking into account behavioural factors such as early repayments and refinancing. The Group has defined the lifetime for each product by analysing the time taken for all losses to be observed and for a material proportion of the assets to fully resolve through either closure or write-off.

Significant increase in credit risk ('SICR')

Assets are transferred from Stage 1 to Stage 2 when there has been an SICR since initial recognition. As described further above, the Group uses a quantitative test together with qualitative indicators and a backstop of 30 days past due for determining whether there has been a SICR for all instruments that are not structured, or real-estate backed. The setting of precise SICR thresholds for when an asset displays a SICR combined with risk indicators requires judgement. The use of different SICR thresholds may have a material impact upon the size of the ECL allowance.

Forward looking information

 The measurement of ECL's is required to reflect an unbiased probability-weighted range of possible future outcomes. In order to do this the Group uses a model to project a number of key variables to generate future economic scenarios. These are ranked according to severity of loss and three economic scenarios have been selected to represent an unbiased and full loss distribution. They represent a 'most likely outcome' (the Base case scenario) and two, less likely, 'outer' scenarios, referred to as the 'Upside' and 'Downside' scenarios. These scenarios are used to produce a weighted average PD for each product grouping which is used to determine stage allocation and calculate the related ECL allowance. This weighting scheme is deemed appropriate for the computation of unbiased ECL. Key scenario assumptions are set using the average of forecasts from external economists, Oxford Economics, helping to ensure the IFRS 9 scenarios are unbiased and maximise the use of independent information. Using externally available forecast distributions helps ensure independence in scenario construction. While key economic variables are set with reference to external distributional forecasts, we also align the overall narrative of the scenarios to the macroeconomic risks faced by the Group.

The choice of alternative scenarios and probability weighting is a combination of quantitative analysis and judgemental assessments, designed to ensure that the full range of possible outcomes and material non-linearity are captured. Paths for the two outer scenarios are benchmarked to the Base scenario and reflect the economic risk assessment. Scenario probabilities reflect management judgement and are informed by data analysis of past recessions, transitions in and out of recession, and the current economic outlook. The key assumptions made, and the accompanying paths, represent our 'best estimate' of a scenario at a specified probability. Suitable narratives are developed for the Central scenario and the paths of the two outer scenarios. Using three scenarios will be insufficient in certain economic environments. Additional analysis may be requested at management's discretion, including the production of extra scenarios. We anticipate there will be only limited instances when the standard approach will not apply. The Base case, Upside and Downside scenarios are generated annually and are only updated during the year if economic conditions change significantly.

The Group's UK mild Upside scenario sees UK GDP growth average 3 per cent over the next few years, something that has been achieved since the mid-2000s driven by a relaxation of fiscal austerity combined with a significant shift toward a soft Brexit, where the UK opts to remain a member of the single market. Consequently, unemployment falls back to around 3 per cent and productivity growth rises. The benign probability of default and loss given default mean that loan losses are likely to remain well below long run averages.

The Group's UK Downside scenario sees the UK enter recession in mid-2019. GDP falls by less than 1 per cent, making it very mild by historical standards. Unemployment rises to 6 per cent by the start of 2021. As a result, wage growth slows and inflation falls quickly back below target. Interest rates remain at 0.25 per cent until the third quarter of 2021, but increased unemployment introduces forced sellers into the property market and house prices fall.

Given the economic uncertainty created by Brexit and the challenges facing economic forecasters in this environment, there is a concern that this distribution did not adequately represent downside risks for the UK. The high level of economic uncertainty that prevailed at the end of 2018, including the lack of progress in agreeing a clear plan for an exit from the EU and the uncertain performance of the UK economy after an exit, a fourth scenario was also run at the balance sheet date called the 'Brexit' scenario. This was not included within the final scenario weightings over the 'Downside' case as it was less severe than this given the 'Brexit' scenario only focused on a UK downturn whereas the 'Downside' scenario includes a wider more severe global recession. Given the global breadth of the 'Downside' scenario the impact of using a 100 per cent weighting of the 'Brexit' scenario would have led to a lower ECL for the year.

Please see Note 12 for sensitivity analysis.

Valuation of unquoted investments (estimate)

The valuation of unquoted investments and investments for which there is an inactive market is a key area of judgement and 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(h). The unquoted equity assets are valued on periodic basis using techniques including a market approach, costs approach and/or income approach. The valuation process is collaborative, involving the finance and investment functions within the Investment Manager with the final valuations being reviewed by the Audit Committee. The specific techniques used typically include earnings multiples, discounted cash flow analysis, the value of recent transactions, and, where appropriate, industry rules of thumb. The valuations often reflect a synthesis of a number of different approaches in determining the final fair value estimate. The individual approach for each investment will vary depending on relevant factors that a market participant would take into account in pricing the asset. These might include the specific industry dynamics, the company's stage of development, profitability, growth prospects or risk as well as the rights associated with the particular security. Please see Note 5 for sensitivity analysis.

Consolidation (judgement)

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 such as MOCA 2016 and MOCA 2017 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.

4. CHANGES IN ACCOUNTING POLICIES

Set out on pages 71 to 79 are disclosures relating to the impact of the adoption of IFRS 9 on the Group. Further details of the specific IFRS 9 accounting policies applied in the current period (as well as the previous IAS 39 accounting policies applied in the comparative period) are described in more detail in Note 2(h). The new requirements have been applied by adjusting the Consolidated Statement of Financial Position on 1 January 2018, the date of initial application, with no restatement of comparative period financial information. The Group has elected not to provide comparative information for periods before the date of initial application of IFRS 9 and therefore all comparative information for the Group was based on the classification of its financial assets and financial liabilities at inception under IAS 39. Consequently, for notes disclosures, the consequential amendments to IFRS 7 disclosures have also only been applied to the current period. The comparative period notes disclosures repeat those disclosures made in the prior period.

(a) Classification and measurement of financial instruments

The Group has applied IFRS 9 which includes three principal classification categories for financial assets which must be designated at initial recognition. Financial assets are measured at fair value through profit and loss ("FVTPL"), FVOCI or amortised cost based on the nature of the cash flows of the assets and an entity's business model. These categories replace the existing IAS 39 classifications of FVTPL, available for sale ("AFS"), loans and receivables, and held-to-maturity.

For financial liabilities, most of the pre-existing requirements for classification and measurement previously included in IAS 39 were carried forward unchanged into IFRS 9.

The measurement category and the carrying amount of financial assets and liabilities of the Group in accordance with IAS 39 and IFRS 9 at 1 January 2018 are compared as follows: