Annual Financial Report

P2P GLOBAL INVESTMENTS PLC

Annual Financial Report for the year ended to 31 December 2017

The Directors present the Annual Financial Report of P2P Global Investments plc (the "Company") for the year ended 31 December 2017, a copy of the Company's Annual Report will shortly be available to view and download from the Company's website, www.p2pgi.com. Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into or forms part of this announcement.

The following text is copied from the Annual Report & Accounts:

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 and capital growth 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 that was updated on 19 December 2017, with the aim of using the Company's revised strategy and opportunities that present themselves to enhance the Company's returns.

FINANCIAL AND OPERATIONAL HIGHLIGHTS

(1) NET ASSET VALUE (CUM INCOME): will include all income not yet moved to reserves (both revenue and capital income), less the value of (i) any dividends paid in respect of that income and (ii) any dividends in respect of that income which have been declared and marked ex dividend but not yet paid.

(2) NET ASSET VALUE (EX INCOME): will be the NAV (Cum Income) excluding net income (both revenue and capital income) that is yet to be transferred to reserves as described below. For this purpose net income will comprise all income not yet moved to reserves (both revenue and capital income), less the value of (i) any dividends paid in respect of that income and (ii) any dividends in respect of that income which have been declared and marked ex dividend but not yet paid. Any income in respect of a financial year, which is intended to remain undistributed will be moved to reserves on the first business day of the immediately following year, meaning that each figure for NAV (Ex-Income) reported during a financial year will equate to the NAV (Cum Income) less undistributed income which has not been moved to reserves.

(3) MARKET CAPITALISATION: the closing mid-market share price multiplied by the number of shares outstanding at month end.

(4) SHARE PRICE (AT CLOSE): closing mid-market share price at month end (excluding dividends reinvested).

(5) INTERIM DIVIDENDS: dividends relating to 2017 financial year were paid in May 2017, August 2017, November 2017 and March 2018. Dividends relating to 2016 financial year were paid in May 2016, August 2016, November 2016 and March 2017.

(6) PREMIUM/(DISCOUNT): the amount by which the price per share of an investment trust is either higher (at a premium) or lower (at a discount) than the net asset value per share (cum income), expressed as a percentage of the net asset value per share.

(7) TOTAL NAV PER SHARE RETURN: is calculated as Net Asset Value (Cum Income) at the end of the year, plus dividends declared during the year, divided by NAV (Cum Income) calculated on a per share basis at the start of the year.

(8) FUNDING SPREAD: the cost of leverage is the cost the Company pays to service its debt obligations. This is calculated by using the weighted average of the spreads that exceeds the prevailing applicable LIBOR on the individual underlying debt divided by the average debt exposure. The company funds itself via USD and GBP at their respective LIBORs.

(9) SECURED LENDING: is calculated as the amount of assets with granular underlying collateral or structural protection over the total assets of the Company.

(10) ONGOING CHARGES RATIO: is calculated as a percentage of annualised ongoing charge over average reported Net Asset Value. Ongoing charges are those expenses of a type which are likely to recur in the foreseeable future. The Annualised Ongoing Charge is calculated using the Association of Investment Companies recommended methodology.

INVESTMENT CHARACTERISTICS

THE COMPANY IS AN INVESTMENT TRUST FOCUSING ON SPECIALIST LENDING

The Group 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 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 Eaglewood Europe 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"), PSC Eaglewood Americas 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% PER ORDINARY SHARE PER ANNUM TARGET DIVIDEND, PAYABLE QUARTERLY

The Company targets the payment of dividends which equate to a yield of 6.0% 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 net 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 programme 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 structures, ensuring that the direct or indirect exposure subscribed to in each case offers a 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 hundreds 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

2017 was a year of change. Very early in the year the Board identified that the Company was not meeting its stated investment objectives. The Board elected to take decisive action and instigated a review of the service provided by MW Eaglewood Europe LLP ("MWE"), the incumbent investment manager. The Board conducted a detailed and robust review process in the first half of 2017. The Board concluded the process by selecting a joint proposal by the existing investment manager and Pollen Street Capital Limited ("Pollen Street") for the continued management of the assets of the Company, with MWE being renamed PSC Eaglewood Europe LLP. The outcome was considered the optimal solution to retaining the experience and knowledge of the existing investment manager and introducing a revised investment strategy to improve the performance of the Company. Pollen Street and MWE subsequently merged in September 2017.

REVIEW OF THE INVESTMENT MANAGER

Following the announcement of a review of the investment manager on 4 April 2017, the Board announced the outcome of its review process in May 2017.

The process was extensive and involved an assessment of prospective investment managers from the United States, Europe and the United Kingdom. The decision to choose the innovative joint offering by MWE and Pollen Street was underpinned by the chance to combine a deep knowledge and understanding of the assets of the incumbent investment manager, with the fresh approach to investment that was proposed by Pollen Street.

The Board concluded that the combined offering created a stronger investment manager and the existing investment management contract has been largely preserved. The terms of remuneration of the new Investment Manager were renegotiated (effective from 1 January 2018) pursuant to the revised terms, the 1.0 per cent management fee permanently moved to being charged on a net NAV after originally being introduced on 1 January 2017 and a 5.0 per cent return hurdle being introduced before the performance fee becomes payable.

The Group now benefits from the combined capabilities, people, expertise, technology and relationships of both MWE and Pollen Street with access to a broader origination base which provides a more substantial pipeline of attractive opportunities, and following the passing of a resolution at the general meeting of the Company on 19 December 2017 an updated Investment Policy was approved to enable the Company to deliver these opportunities.

The metric underpinning the Pollen Street offering was the proposal that the Company would target the payment of dividends which equate to a yield of 6.0 per cent per ordinary share per annum on the issue price for the Company's IPO placing, payable in quarterly instalments based upon the average number of shares in issue during a given period. The Company has now communicated that it is progressively transitioning the portfolio into more attractive specialist assets with a quarterly dividend of no less than 12.0 pence per ordinary share in the meantime.

INVESTMENT PERFORMANCE AND DIVIDENDS

The Company delivered a NAV return of 3.03 per cent (2016: 4.10 per cent) and paid dividends of 47.0 pence (2016: 44.5 pence) per ordinary share in relation to the 2017 calendar year. However, as with 2016, the dividend payments were not fully covered by earnings and the special distributable reserve was utilised. The dividend return was 4.7 per cent (2016: 45 per cent).

The Company also significantly increased its exposure to high quality SME lending during the year and continued throughout 2017 to build its allocation to secured lending assets, building this part of the portfolio to 23.8 per cent of NAV. Strong partnerships are steadily building with secured lenders; Zorin Finance and Castlehaven Finance in Ireland.

The Investment Manager reduced exposure of the portfolio to certain mainstream US assets through natural runoff and a significant sale of assets in October 2017. This resulted in a material write down but created significant liquidity to invest in better performing assets that were available in the pipeline.

Having faced an increase in the cost of the Company's borrowing in 2016, particularly in the US, the Investment Manager succeeded in bringing the Company's overall cost of leverage down through refinancing, securitisations and repositioning from 2.60 per cent to 1.90 per cent over the relevant Libor rate by the end of 2017. Additionally, the foreign exchange volatility of 2016 that led to increased cash being held, reduced in 2017, and the Company has continued to further optimise its deployment and cash management.

The Board endorsed a cohesive strategy to improve the performance of the Company which was communicated to the market in Q4 2017. The Board believes the new combined Investment Manager has made a good start in repositioning the portfolio and looks forward to working closely with the investment manager in 2018 and thereafter.

SHARE PRICE AND BUYBACKS

The Company's share price traded at a discount of -17.62 per cent at the end of 2017. The shares traded at discounts to NAV of between -9.60 per cent and -23.69 per cent during the year.

A part of its revised investment strategy, the Company committed to an invigorated and substantial share buyback programme. During 2017, 4,690,254 ordinary shares in issue were repurchased at an average price of 834.0 pence per ordinary share.

OUTLOOK

The Board is optimistic that the changes put into place during 2017 have positioned the Company to see improved performance in 2018. The new investment strategy is gathering traction and is on course as I write this statement. The Board will continue to be vigilant on the performance of the Company and will monitor the progress of the new investment strategy.

The Board continue to closely monitor the political and economic uncertainty created by Brexit. Although current market conditions remain benign, the longer-term economic outlook and impact of Brexit on our customers and wider markets remain uncertain.

The regulatory framework remains an ever present factor as consumer credit regulation continues to develop. 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.

THANK YOU

I would like to thank the staff of our Investment Manager for their efforts to improve the performance of the Company. There is much to do in 2018, but we have started with a positive outlook.

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

Stuart Cruickshank

Chairman

26 April 2018

INVESTMENT MANAGER'S REPORT

2017 HIGHLIGHTS

During the year, the Investment Manager sought to adjust the Group asset mix with the aim of providing improved performance to its shareholders. The poor performance of certain US consumer loans continued due to elevated impairment levels throughout the year.

As such, the Investment Manager actively sought to reduce exposure to these assets through run off and the sale of certain assets in October 2017. US consumer loans have reduced from 55.0 per cent to 22.8 per cent of the Group's portfolio over the last 12 months and the Investment Manager has focussed on increasing its exposure to secured lending, which has increased from 5.1 per cent to 23.8 per cent of the Group's portfolio over the last 12 months with significant progress being made by Zorin Finance and Castlehaven Finance partnerships. The strategy going forward is to increase the Group's exposure to this class of asset.

While we are pleased with the progress made in originating high quality assets in line with the strategy outlined in November 2017 and the fact that the returns generated by those assets are stable and in excess of those required to deliver the target returns, the performance of the historic portfolio continues to be more volatile than we would like. Throughout 2017 we noted that certain US consumer assets were not performing in line with target, following the disposal of certain of these assets, the performance of the remaining assets has stabilised. Against this, certain UK consumer assets have demonstrated more volatile performance in recent months. We remain confident that the opportunity is highly attractive and we are executing in line with our plan, however, we remain subject to one-off events until the inherited portfolio is managed to the desired weighting.

In addition to successfully re-positioning the portfolio, the Company has refinanced several existing debt facilities and successfully completed the further securitisation of UK consumer loans. This has allowed the Company to bring its cost of leverage down from 2.6 per cent in 2016 to 1.9 per cent over the relevant Libor in 2017, therefore increasing the available returns for shareholders.

The new combined Investment Manager, is now fully integrated, and the Group has benefited from significant experience in specialist lending, which has provided the Company with both deep insight to high quality underwriting and access to the Investment Manager's established network of relationships enabling whole of market, high-quality origination flow and portfolio acquisition opportunities. The Investment Manager's highly seasoned credit specialists have extensive experience in investing and managing a range of financial asset classes. It can bring its technologically enabled, in-house developed systems to enable high speed execution and scalability of transactions.

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 commenced an invigorated share buyback programme in December 2017. As well as being accretive to NAV, it is expected to assist in closing the share price's current discount to NAV.

As a result of a change to the legal and corporate governance arrangements of Eaglewood SPV I LP (the "SPV") as stated in the prior year's accounts, the SPV was consolidated from 31 December 2016. Due to the date of consolidation, the profit relating to the SPV investment was netted in Income in the Consolidated Statement of Comprehensive Income in the prior year, and did not reflect the gross income and expenses. For 2017, the gross income and expense numbers have been reflected in the Consolidated Statement of Comprehensive Income, resulting in a significant increase in the income, investment management fee and impairments when compared to the prior year.

INVESTMENT THESIS

During 2017 the Investment Manager continued to see a flow of opportunities created by continued re-positioning of the traditional larger banks and lenders into mainstream vanilla markets. Banks are increasingly seeing their competitive advantage, particularly on small specialist loans, impaired due to the heavy cost structure that they operate within. These challenges have seen banks repositioning themselves into simplified markets where their competitive advantage can be gained in large scale commodity markets where cost of capital is the key differentiator. This results in a growing sector of the economy being underserved by traditional banks.

While banks are repositioning, alternative lending models have been facilitated by the development of improved access to data and increased transparency. This has led to a levelling of the playing field between banks in terms of information access. This has facilitated strong risk modelling and large datasets to evaluate the creditworthiness and default probability of borrowers, which in turn has permitted high quality entrepreneurial technology leaders to benefit from lower infrastructure costs compared to traditional brick-and-mortar bank.

The Investment Manager believes that these dynamics provide an opportunity for them to utilise its data and technology capability to enable it to compete in a cost effective way. Having significantly increased the breadth and depth of its team, infrastructure, global reach and specialist knowledge, the Investment Manager has focused those capabilities on fundamental credit analysis. It applies a robust risk management framework and a rigorous analysis of the market, sector and each opportunity in order to actively identify and select the highest quality originators.

The Investment Manager further believes that through their differentiated approach and by targeting verticals that require specialist understanding, more detailed underwriting, or where the vertical pre-selects higher quality borrowers, attractive risk-adjusted returns can be delivered with low volatility throughout the cycle.

MARKET OPPORTUNITY

Initially, the Group 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 now being built with several originators with access to a broader market that has the potential to provide attractive returns for investors on a risk-adjusted basis.

INVESTMENT STRATEGY

The Investment Manager seeks to allocate capital to markets with attractive, through the cycle returns, with the aim to proactively adjust as the global economic environment changes. It seeks to partner with highly experienced teams to ensure deal structures deliver alignment of interests between both parties so that the arrangements can reach beyond being simply providers of capital but secure long-term partnerships. These partnerships and expertise are more difficult to replicate and help provide more stable and attractive returns.

Increasingly the Investment Manager looks for deal structures that provide downside protection through either structural protection or seasoned collateral and seek to be fully involved in the active feedback loop on both the control and input into underwriting decisions the customer journey, including proactive collections.

ASSET ALLOCATION

The Investment Manager seeks a combination of active originations and a strong risk management framework to ensure continued improved performance for the Group's shareholders. Each asset class and originator is robustly assessed to select high quality stable performance. The Group is in the process of increasing its exposure to specialist and secured assets as it uses the network of the new combined Investment Manager to actively identify and select the highest quality originators. The aim is to provide sector expertise and create a partnership with the originators so that more than just capital can be provided. Running concurrently with active origination is a three stage investment approval process for all new assets and originators so that a consistent framework to assess relative value across asset classes and originators is adopted.

LEVERAGE STRATEGY

The Investment Manager intends to adopt a prudent leverage strategy with a disciplined and controlled approach. Going forward the intention is to diversify and stabilise the source of funding with the focus on delivering return from asset yield and enhancing returns through leverage. A key aspect of this strategy will seek a steady reduction of the cost and complexity of the facilities.

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 secured assets, a programme which will continue into 2018.

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 it access to enhanced credit performance, and allows deployment of the Company's funds in assets which deliver strong returns.

The Company is in good shape to smoothly implement the new General Data Protection Regulation ("GDPR") which will soon replace the current EU Data Protection Directive.

On 1 January 2018 the Group implemented and transitioned to IFRS 9 with the impact equating to 2.5 per cent of year-end NAV. This was a key focus of the Investment Manager with the bulk of the testing and modelling implementation taking place in 2017.

TOP TEN HOLDINGS

PORTFOLIO COMPOSITION

Portfolio Composition as at 31 December 2017 (Net Asset Value Basis*) Ordinary Shares

* Each asset class percentage is calculated as: (Gross Assets invested in asset class - Debt attributed to or drawn against asset class)/Net Asset Value

BUSINESS REVIEW

The strategic report on pages 1 to 22 of the Annual Report 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 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 (both as defined below), with a view to achieving the Company'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 Net Asset Value ("NAV") as at 31 December 2017 was £789.9 million (2016: £850.7 million) (cum income). Reduction in NAV was driven by share buy backs and modest underlying performance meaning dividend payments during 2017 were not fully covered by earnings and the special distributable reserve was utilised. Profit for the year after tax was £17.0 million (2016: 31.0 million).

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 small and medium-sized enterprises ("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 Company 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 wholesale 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 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 20.0 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 Company 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 2017 the Group held 12.1 per cent of its portfolio in cash and money markets.

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 has oversight of 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 committed to an invigorated and substantial share buyback programme. During 2017, 4,690,254 Ordinary Shares were repurchased at an average price of 834.0 pence per ordinary share.

CORPORATE AND OPERATIONAL STRUCTURE

Corporate structure

There have been a number of changes in the structure of the Group in 2017. The Investment Manager further broadened the Company's funding options by entering into a number of new debt facilities in 2017, including its second UK consumer loan securitisation of marketplace lending loans in October 2017 which resulted in a cheaper cost of funding for the Company. The entities relating to these facilities have been consolidated in the accounts. The Company has also consolidated Eaglewood Income Fund I, LP (the "Eaglewood Fund"), a Delaware limited partnership established on 3 February 2012, through the control of Eaglewood SPV I LP (the "SPV"). Previously the financial statements of the Group did not consolidate the Eaglewood Fund as the Group did not exercise control over its activities, which were instead exercised by the General Partner ("GP") of the Eaglewood Fund. During 2017, as a result of a GP review of the Eaglewood Fund investment strategy, all investors except the SPV were redeemed. By virtue of the Company being the sole limited partner of the SPV, these structural changes have been assessed to result in the Company gaining control of Eaglewood Fund. On this basis, Eaglewood Fund has been consolidated from 1 October 2017.

Operational and portfolio management

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

- PSC Eaglewood Europe 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;

- 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 Eaglewood Europe LLP (formerly MW 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 (2016: 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 Company is not within the scope of the Modern Slavery Act 2015 because it has insufficient turnover and is therefore not obliged to make a human trafficking statement.

BOARD DIVERSITY

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. Further information in relation to the Board's policy on diversity can be found in the Nomination Committee Report on page 43 of the Annual Report

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

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.

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 Issue 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 buy back 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. Following the merger between MWE and Pollen Street, the Investment Manager announced it was restarting its share buy-back programme in December 2017, which had ceased at the end of September 2017.

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. Such action was undertaken by the Board when it instigated a process to replace the incumbent investment manager in April 2017.

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 are unable to repay loans and outstanding interest and fees. 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.

Interest Rate Risk

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) 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.

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 unlisted equity securities. Investments in unlisted 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

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 26 April 2018 and signed on its behalf by:

Stuart Cruickshank

Chairman

DIRECTORS

The Directors in office at the date of this report are: Stuart Cruickshank, Michael Cassidy, Simon King, Mahnaz Safa and David Fisher

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 2017 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 page 58 to 59 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 18 to 22 of the Annual Report.

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 AGM in 2021. The Directors believe this period to be appropriate as they will be required by the Articles of Association to put a proposal for the continuation of the Group at that meeting and therefore cannot presume that it will continue to operate as an investment trust thereafter.

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

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 2021.

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 Auditor 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 Auditor is aware of that information.

AUDITOR

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 and Valuation Committee to determine their remuneration will be proposed at the forthcoming AGM.

The Audit and Valuation Committee has carefully considered the auditor's 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 2018 AGM. In reaching its decision, the Audit and Valuation Committee considered the points detailed on page 37 of the Annual Report.

FINANCIAL RISK MANAGEMENT

The principal risks and the Group policies for managing these risks are set out in Note 9 to the financial statements and pages 18 to 22 of the Annual Report.

SUBSEQUENT EVENTS

The Company intends to continue the share buy back programme in 2018 and as at 23 April 2018, 8,014,646 shares are held in treasury.

An interim dividend of 12.0p per Ordinary Share was declared by the Board on 26 January 2018 in respect of the three month period to 31 December 2017, which was paid on 16 March 2018 to shareholders on the register as of 8 February 2018.

P2PCL1 plc started the liquidation process subsequent to 31 December 2017 and the Deed of Termination is dated 3 March 2018. P2PCL1 is a limited liability company incorporated in England and Wales and was controlled by the Company through its analysis of one Class A Share which conferred the company 100 per cent of the voting rights in that entity.

POLITICAL DONATIONS

The Group made no political donations during the year to organisations either within or outside of the EU (2016: 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.

THE ANNUAL GENERAL MEETING

The AGM will be on 8 June 2018 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 the Annual Report.

GENERAL MEETING

The Board may convene a general meeting of shareholders at whatever time it deems necessary or when such a meeting is required under applicable laws or regulations. A general meeting of shareholders was held on 19 December 2017 to enable the Company and its Investment Manager to obtain approval to implement an updated investment strategy with a focus on investment in a broader range of attractive, specialist assets. Under the principles of the AIC Code of Corporate Governance (the "AIC Code") notice of that general meeting was sent to shareholders 14 days in advance.

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 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 Company and of the profit or loss of the Group for that period.

In preparing these financial statements, the Directors are required to:

- select suitable accounting policies and then apply them consistently;

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

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

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

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

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

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

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

For and on behalf of P2P Global Investments plc

Signed on behalf of the Board by

Stuart Cruickshank

Chairman

26 April 2018

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the year ended 31 December 2017 but is derived from those accounts. Statutory accounts for the year ended 31 December 2017 will be delivered to the Registrar of Companies in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' report can be found in the Company's full Annual Report and Accounts on the Company's website at www.p2pgi.com

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2017

The financial statements were approved by the Board of Directors on 26 April 2018 and signed on its behalf by:

Stuart Cruickshank, Chairman

26 April 2018

COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2017

Advantage has been taken of the exemption under section 408 of the Companies Act 2006 and accordingly the Company has not presented a Statement of Comprehensive Income for the Company alone. The net profit on ordinary activities after taxation of the Company for the year ended 31 December 2017 was £16,984,946 (2016: 30,974,511).

* Figures have been restated. Refer to Note 4 for details.

The financial statements were approved by the Board of Directors on 26 April 2018 and signed on its behalf by:

Stuart Cruickshank, Chairman

26 April 2018

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

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

FOR THE YEAR ENDED 31 DECEMBER 2016

The total column of this statement represents the Group's Consolidated Statement of Comprehensive Income, prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies ("AIC"). All items in the above Statement derive from continuing operations. There is no other comprehensive income.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS

FOR THE YEAR ENDED 31 DECEMBER 2017

FOR THE YEAR ENDED 31 DECEMBER 2016

COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' FUNDS

FOR THE YEAR ENDED 31 DECEMBER 2017

FOR THE YEAR ENDED 31 DECEMBER 2016

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2017

COMPANY CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER 2017

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2017

1. GENERAL INFORMATION

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

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

The Company's investment manager is PSC Eaglewood Europe LLP (the "Investment Manager"). The Investment Manager changed its name from MW Eaglewood Europe LLP after the merger between MW Eaglewood and Pollen Street Capital Limited on 15 September 2017. PSC Eaglewood Americas LLC, an affiliate of the Investment Manager and an SEC registered investment adviser, has been appointed as sub investment manager (the "Sub-Manager") to the Company. The Sub-Manager changed its name from MW Eaglewood Americas LLC after the merger between MW Eaglewood and Pollen Street Capital Limited on 15 September 2017. The Investment Manager has, pursuant to the Sub-Management Agreement, delegated certain of its responsibilities and functions, including its discretionary management of the Company's portfolio of credit assets, to the Sub-Manager.

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

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

As at 31 December 2017 the Company had total issued equity in the form of 86,306,803 ordinary shares (31 December 2016: 86,306,803) of which 79,835,549 were outstanding (31 December 2016: 84,525,803), and 6,471,254 were held as treasury shares (31 December 2016: 1,781,000). These shares are listed on the Premium listing segment of the Official List of the UK Listing Authority and trade on the London Stock Exchange's main market for listed securities.

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

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation and consolidation

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

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

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 valued at fair value which is represented as net asset value. Subsidiaries are valued 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% and 50% of the voting rights.

No associates are presented on the Statement of Financial Position as the Group elects to hold such investments at fair value through profit and loss. This treatment is permitted by International Accounting Standards ("IAS") 28 Investment in Associates and Joint Ventures, which permits investments held by entities that are venture capital organizations, 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 IAS 39 Financial Instruments: Recognition and Measurement. 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 2017, the Company controls eight legal entities listed below as well as nine Trusts which are subsidiaries that the Company controls (together "the Group").

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

The Company invests in a special purpose vehicle, Eaglewood SPV I LP (the "SPV" or the "Subsidiary") and at 31 December 2017 is the sole Limited Partner in that SPV. The principal activity of Eaglewood SPV I LP is to invest in alternative finance investments and related instruments, including marketplace loans, which is aligned with the Company's investment objective. The Company's position with regards to the SPV is that of an investor where its maximum loss is restricted to its investment in the vehicle and in return for this, it receives a quarterly income distribution. Prior to 31 December 2016 the financial statements of the Company did not consolidate the SPV as the Company did not exercise control over its activities, which were instead exercised by the General Partner.

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

These changes resulted in the Group determining that the General Partner was then exercising its decision making powers in a capacity as an agent for the Group. Therefore the Group determined that it controlled the SPV and consolidated it from 31 December 2016.

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 2017, 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, PSC Eaglewood Americas LLC. 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.

Previously the financial statements of the Group did not consolidate the Eaglewood Fund as the Group did not exercise control over its activities, which were instead exercised by the GP of the Eaglewood Fund. It was the Directors' judgement that the GP had a significant exposure to the variable returns of the Eaglewood Fund through its performance fee arrangements. As the GP had the decision making powers and in the Directors' judgement was acting as the principal, the Directors' determination was that the Group did not have control over the Eaglewood Fund and as a result did not consolidate it as at 31 December 2016. As at 31 December 2016, the SPV held 79 per cent. of the limited partner interests.

During the period the GP has undertaken 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 the 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 have been assessed to result in the Company gaining control of Eaglewood Fund. On this basis, the Eaglewood Fund has been consolidated from 1 October 2017. Further details of the impact of this consolidation can be found in Note 3

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.

The Company also controls Greenwood I Limited ("Greenwood") a limited company incorporated under the Law of England and Wales. The principal activity of Greenwood is to invest in secured consumer loans originated by a single platform. The Company employs Greenwood as a vehicle to invest indirectly in the loans originated through the platform, by providing financing to Greenwood. As at 31 December 2017, the Company is the sole investor of Greenwood.

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 2017, the SPV is the sole beneficial owner of Certified Loan Warehouse Trust, EW-PFL Trust, SPV I Loan Trust, Payoff Consumer Loan Trust, EW-PFL Security Trust and EW-PFL Financing Trust while the Eaglewood Fund is the sole beneficial owner of Eaglewood Consumer Loan Trust 2014-1 and Eaglewood LC Trust. The SPV is also a beneficial owner and holds a controlling interest in BFCL Trust.

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 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.

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. Investment management fees and finance costs are allocated to capital in accordance with accounting policy 2(d); and

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

The following are presented as capital items:

- gains and losses on the realisation of investments;

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

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

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

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

(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 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.

(e) Expenses, fees and commissions

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

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

(f) Dividends payable to shareholders

Dividends to shareholders are accounted for in the period which they are paid or approved in general meetings. Dividends payable to shareholders are recognised in the Consolidated Statement of Changes in Equity when they are paid, or have been approved by shareholders in the case of a final dividend and become a liability to the Group.

(g) Taxation

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

In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented against capital returns in the supplementary information in the Consolidated Statement of Comprehensive Income is the "marginal basis". Under this basis, if taxable income is capable of being offset entirely by expenses presented in the revenue return column of the Consolidated Statement of Comprehensive Income, then no tax relief is transferred to the capital return column.

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

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

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

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

(h) Financial assets and financial liabilities

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

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

This category consists of forward foreign exchange contracts, option contracts, money market funds, unlisted equities positions, equities, fixed income securities, investment in other funds and 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) 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 Group relate to loans originated by the Group and subsequently securitised in an SPV 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 EIR method. 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 IAS 39 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 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 recognises the financial assets as deemed loans to the securitised SPVs

(iv) 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.

(v) 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 and secured 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.

Write offs

The Group is not in possession of personal identifying 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. This policy was implemented in 2017. 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.

(vi) Financial liabilities

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

(vii) 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.

(viii) 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 appropriate allowances for estimated impairment.

(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.

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 their 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.

(o) Critical accounting estimates and judgements

The preparation of financial statements in conformity with IFRS adopted in the EU requires the Company to make judgements, estimates and assumptions 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. 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 concern the impairment policy for loans at amortised cost and the basis for consolidation, while assumptions and estimates are significant in relation to the valuation of unquoted investments and the impairment of loans at amortised cost. These areas are significant to the financial statements and are described 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.

Impairment of loans held at amortised cost

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

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

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

· the bucketing of such roll rate data;

· the loss given default; and

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

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

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

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

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

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

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

Sensitivity analysis about significant areas of estimation uncertainty and critical judgements in relation to the impairment of loans are described in Note 12.

The secured real estate loans held by the Group, due to their size and nature, are individually assessed for impairment. In calculating the provisions for secured loans, estimates of discounted cash flows are made on the basis of the planned strategy for each loan (such as working out, divestment etc.). These estimates are judgemental as they include assumptions for underlying property values and estimated future expected cash flows for income and any development costs.

For secured real estate loans there is no impairment at year end (2016: £Nil), however significant judgement is required when assessing the losses incurred but not reported on these loans. In general these loans have low loan to value ("LTV") parameters, with the weighted average being below 70 per cent. It would therefore require an average reduction greater than 30 per cent. in the value of property collateral for the loans not to be fully covered in case of default. With the implementation of IFRS 9 an expected credit loss treatment is used and is modelled based on the original LTV adjusted for property price drops under various macro scenarios as well as taking into account completion risk, sale costs, impaired collateral and forced sale discounts. IFRS 9 also requires assuming maximum drawdown on available lines, therefore exposure at default ("EAD") is the current outstanding balance plus any amount still to be drawn. Given the move to an expected credit loss model under IFRS 9 a provision will be booked for secured real estate loans for 1 January 2018.

Valuation of unquoted investments

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 Board's Audit and Valuation 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.

Increases or decreases in any of the inputs in isolation may result in higher or lower fair value measurements. Changes in fair value of all investments held at fair value are recognised in the Statement of Comprehensive Income as a capital item. On disposal, realised gains and losses are also recognised in the Statement of Comprehensive Income as a capital item. Transaction costs are included within gains or losses on investments held at fair value, although any related interest income, dividend income and finance costs are disclosed separately in the financial statements. Sensitivity analysis has been included in Note 5.

Consolidation

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

(p) New standards and amendments to existing standards

Accounting standards effective

Amendments to IAS 7, "Statement of cash flows", effective 1 January 2017. These amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes. Please refer to Note 15 for further details.

Accounting standards issued but not yet effective

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

IFRS 15, 'Revenue from contracts with customers', effective 1 January 2018. This is the converged standard on revenue recognition and replaces IAS 11, 'Construction contracts', IAS 18, 'Revenue' and related interpretations. The new standards only impact is expected to be on the presentation of the 31 December 2018 financial results given that interest on fair value loans will no longer be able to be presented through interest income but Fair Value Through Profit and Loss (FVTPL).

IFRS 9 "Financial Instruments", brings together the classification and measurement, impairment and hedge accounting phases of the IASB project to replace IAS 39, and is effective for annual periods beginning on or after 1 January 2018. The key elements of the standard are as follows:

Classification and measurement

IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics. IFRS 9 introduces a principal based approach and applies one classification approach for all types of financial assets. Two criteria are used to determine how financial assets should be classified and measured: (a) the entity's business model (i.e. how an entity manages its financial assets in order to generate cash flows by collecting contractual cash flows, selling financial assets 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).

IFRS 9 includes three principal classification categories for financial assets which must be designated at initial recognition. Financial assets are measured at fair value through profit or loss ("FVTPL"), fair value through other comprehensive income ("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 fair value through profit and loss ("FVTPL"), available for sale ("AFS"), loans and receivables, and held-to-maturity.

A financial asset is measured at amortised cost 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 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.

A financial asset is measured at 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.

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 profit or loss. This election is made on an investment by investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. In addition, on initial recognition the Company 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.

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.

Business model assessment

The Company will make an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to the Investment Manager.

The information that will be considered 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;

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

· 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 cashflows 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 will be considered. This will include assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making the assessment the following features will be considered:

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

· Leverage features;

· Prepayment and extension terms;

· Terms that limit the Company'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.

Impairment

The incurred loss model under IAS 39 is replaced with a new expected loss model. Impairment provisions are driven by changes in credit risk of instruments, with a provision for lifetime expected credit losses recognised where the risk of default of an instrument has increased significantly since initial recognition. Risk of default and expected credit losses must incorporate forward-looking and macroeconomic information.

Under IFRS 9, credit loss allowances will be measured on each reporting date according to a three-stage expected credit loss impairment model:

· Stage 1 - from initial recognition of a financial asset to the date on which the asset has experienced a significant increase in credit risk relative to its initial recognition, a loss allowance is recognised equal to the credit losses expected to result from defaults occurring over the next 12 months.

· Stage 2 - Following a significant increase in credit risk relative to the initial recognition of the financial asset, a loss allowance is recognised equal to the credit losses expected over the remaining lifetime of the asset.

· Stage 3 - When a financial asset is considered to be credit-impaired, a loss allowance equal to full lifetime expected credit losses will be recognised. Interest revenue is calculated based on the carrying amount of the asset, net of the loss allowance, rather than on its gross carrying amount.

Stage 1 and Stage 2 effectively replace the collectively-assessed allowance for loans not yet identified as impaired recorded under IAS 39, while Stage 3 effectively replaces the individually and collectively assessed allowances for impaired loans. Under IFRS 9, the population of financial assets and corresponding allowances disclosed as Stage 3 will not necessarily correspond to the amounts of financial assets currently disclosed as impaired in accordance with IAS 39. Consistent with IAS 39, loans are written off when there is no realistic probability of recovery.

Given all financial assets within the scope of the IFRS 9 impairment model will be assessed for at least 12-months of expected credit losses, and the population of financial assets to which full lifetime expected credit losses applies is larger than the population of impaired loans for which there is objective evidence of impairment in accordance with IAS 39, loss allowances will be higher under IFRS 9 relative to IAS 39.

Changes in the required credit loss allowance, including the impact of movements between Stage 1 and Stage 2, will be recorded in profit or loss. The impact of moving between 12 month and lifetime expected credit losses and the application of forward looking information, means provisions are expected to be more volatile under IFRS 9 than IAS 39.

The measurement of expected credit losses will primarily be based on the product of the instrument's probability of default ("PD"), loss given default ("LGD"), and exposure at default ("EAD"), discounted to the reporting date. The main difference between Stage 1 and Stage 2 is the respective PD horizon. Stage 1 estimates will use a maximum of a 12-month PD while Stage 2 estimates will use a lifetime PD. Stage 3 estimates will continue to leverage existing processes for estimating losses on impaired loans, however, these processes will be updated to reflect the requirements of IFRS 9, including the requirement to consider multiple forward-looking scenarios.

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. Movements between Stage 2 and Stage 3 are based on whether financial assets are credit-impaired as at the reporting date. The determination of credit-impairment under IFRS 9 will be similar to the individual assessment of financial assets for objective evidence of impairment under IAS 39. Assets can move in both directions through the stages of the impairment model.

In assessing whether a borrower is credit impaired the following indicators will be considered:

· Qualitative; e.g. breaches of covenant;

· Quantitative; e.g. overdue status; and

· Based on data developed internally and obtained from external sources.

Inputs into the assessment of whether a financial instrument is in default and their significant may vary over time to reflect changes in circumstances.

Under IFRS 9, when determining whether the credit risk (i.e. the risk of default) on a financial instrument has increased significantly since initial recognition, reasonable and supportable information that is relevant and available without undue cost or effort, including both quantitative and qualitative information and analysis based on historical experience, credit assessment and forward looking information.

The criteria for determining whether credit risk has increased significantly will vary by portfolio and will include a backstop based on delinquency.

The measurement of expected credit losses for each stage and the assessment of significant increases in credit risk must consider 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. The process will involve developing two or more additional economic scenarios and considering the relative probabilities of each outcome.

The base case will represent a most likely outcome and be aligned with information used for other purposes, such as strategic planning and budgeting. The other scenarios will represent more optimistic and more pessimistic outcomes.

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 Bank of England macroeconomic scenarios as well as baseline upside and downside economic scenarios have been used in the expected credit loss calculation by the Group.

Hedge accounting

The new requirements align hedge accounting more closely with risk management. The revised standard also establishes a more principles-based approach to hedge accounting.

To manage the transition to IFRS 9, the Investment Manager implemented a comprehensive program that focuses on key areas of impact, including financial reporting, data, systems and processes. Throughout the project, the Investment Manager has provided updates to the Audit and Valuation Committee, to ensure escalation of key issues and risks. As part of the implementation of IFRS 9 the Investment Manager 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 on the Group and Company's loan portfolios; and

· implement internal governance processes which are appropriate for IFRS 9.

The new classification and measurement and impairment requirements will be applied by adjusting theConsolidated Statement of Financial Position on 1 January 2018, the date of initial application, with no restatement of comparative period financial information. Based on current estimates, the adoption of IFRS 9 is expected to result in a reduction to reserves as at 31 December 2017 of approximately £19.6 million, net of taxes. Please see table below for impact upon type of exposure. The impact is primarily attributable to increases in the allowance for credit losses under the new impairment requirements. We continue to monitor and validate certain elements of the impairment models and assumptions underpinning the estimates provided above. We expect some additional volatility in impairment charges under IFRS 9 when compared to the current IAS 39 impairment model due to the forward looking nature of expected credit losses.

3. BUSINESS COMBINATION

As of 1 October 2017, the Company gained control of the Eaglewood Fund, by virtue of being the sole limited partner of the SPV and the SPV becoming the sole limited partner in the Eaglewood Fund. This control was gained after the SPV became the sole investor of the Eaglewood Fund following a structural review undertaken by the general partner. The Eaglewood Fund was consolidated as at 1 October 2017 following the compulsory redemption of the other investors, driven by the general partner, in light of the underperformance. (see Note 2(a) for further details).

The Consolidated Statement of Financial Position shows the underlying assets and liabilities of the Eaglewood Fund. The consolidation impacts the presentation of the Consolidated Statement of Financial Position. In the 2016 Annual Report and the comparatives included within this report, the Eaglewood Fund is presented as a single line item contained within Investment assets designated as held at fair value through profit or loss. Previously the financial statements of the Group did not consolidate the Eaglewood Fund as the Group did not exercise control over its activities, which was instead exercised by the General Partner ("GP") of the Eaglewood Fund. It was the Directors' judgement that the GP had a significant exposure to the variable returns of the Eaglewood Fund through its performance fee arrangements. As the GP had the decision making powers and in the Directors' judgement was acting as the principal, the Directors' determination was that the Group did not have control over the Eaglewood Fund and as a result did not consolidate it as at 31 December 2016. The consolidation of the Eaglewood Fund has had no impact on the Company Statement of Financial Position.

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

On consolidation, all assets and liabilities are translated from USD to GBP at the closing rate of 30 September 2017. Given that the Company's investment was held at fair value through profit and loss, upon consolidation there was no impact to the NAV of the Group and the Company.

The net income of the Eaglewood Fund was consolidated for the period from 1 October 2017 to 31 December 2017. The Consolidated Statement of Comprehensive Income presents the underlying income and expenses of the Eaglewood Fund as detailed below. There is no impact to the Company Statement of Comprehensive Income.

On consolidation, all income and expenses are translated from USD to GBP at the average rate of the year.

At the start of the year, the Eaglewood Fund was the primary beneficiary of EW-LC Trust ("LC Trust"), MW-EW Financing Trust I ("EW Financing Trust"), Eaglewood Warehouse Trust I ("Warehouse I"), Eaglewood Warehouse Trust II ("Warehouse II") and Eaglewood Consumer Loan Trust 2014-1 ("ECLT").

In October 2017, the SPV became the sole investor and thus, consolidation of the Eaglewood Fund took place. Upon consolidation, the loan investments held by Warehouse I and Warehouse II were transferred to EW Financing Trust and the ineligible loan investments to LC Trust and ECLT. To obtain the funding, EW Financing Trust issued asset backed notes ("Notes"). The residual portion of the Notes ("Residual Note") was retained by the Eaglewood Fund and the senior tranche of the Notes ("Senior Note") is held by a bank, representing 76 per cent of the interest. The Eaglewood Fund subsequently sold 75 per cent of the Residual Note to an external investor and retained 25 per cent of the Residual Note. This Residual Note is held at the fair value of expected future cash flows. As at 31 December 2017, the Eaglewood Fund consolidates ECLT and LC Trusts. The EW Financing Trust is treated as an associate.

4. RESTATEMENT OF COMPARATIVE INFORMATION

In the prior year, the Company Statement of Financial Position did not reflect the individual loans held by P2PCL1 PLC and MOCA 2016. The loans were originated in P2PGI and then sold to the SPEs, whereon the loans were derecognised. Prior year comparatives have been restated to address these loan investments. IAS 39 requires that an entity evaluates whether, and to what extent, a financial asset is derecognised. 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 as it has not transferred the economic exposure associated with the rights inherent in the assets (i.e., its risks and rewards) and therefore continues to recognise the financial assets transferred. Therefore, it is required to recognise the financial assets transferred and there is a restatement of 2016 to reflect the derecognition of loans carried at amortised cost and recognition of deemed loans. The disclosure below show the impact of the Company's Statement of Financial Position and Statement of Consolidated Cashflow. There was no impact on the Consolidated Statement of Financial Position.

The investment in debt securities at amortised cost has been reduced by £34,047,662 to eliminate the Company's investment in P2PCL1 PLC and MOCA 2016. Loans at amortised cost have been increased by £147,577,863 to reflect the underlying loans held by P2PCL1 PLC and MOCA 2016. The deemed loans within non-current liabilities have been increased by £113,530,201 to reflect the offsetting liability arising from the above adjustment.

The Company Cash Flow Statement has been restated to remove gains, losses and cashflows resulting from the Company's holdings in P2PCL1 PLC and MOCA 2016 as follows: the unrealised loss on investment assets is reduced by £2,721,052, realised gain on investment assets is reduced by £2,414,102, the purchase of investments is reduced by £79,775,781 and the sale of investments is reduced by £47,444,462. The purchase of loans has increased by £147,577,863 and the cash receipt for deemed loans has increased by £113,530,201 to reflect the cashflows relating to the deemed loans.

5. FAIR VALUE MEASUREMENT

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

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

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

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

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

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

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

The investments in unlisted equities are valued using several different techniques, primarily recent transactions and recent rounds of funding by the investee entities.

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

The following table analyses within the fair value hierarchy the Group's assets and liabilities measured at fair value at 31 December 2017:

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

The following table presents the movement in the Group's Level 3 positions for the year ended 31 December 2017.

* This reflects the impact of the consolidation of the Eaglewood Fund. Prior year figures do not consolidate the Eaglewood Fund, therefore the investment in the Eaglewood Fund itself is included as a Level 3 opening position. During the year ended 31 December 2017 control was gained of the Eaglewood Fund (refer to Note 3 for details) therefore the closing balance above does not reflect investment in the Eaglewood Fund but instead reflects all the underlying Level 3 positions held by the Eaglewood Fund at year end.

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

* This reflects the impact of the consolidation of the SPV. 2015 figures did not consolidate the SPV, therefore the investment in the SPV itself is included as a Level 3 opening position. During the year ended 31 December 2016, control was gained of the SPV (refer to Note 2 for details) therefore the closing balance above does not reflect investment in the SPV but instead reflects all the underlying Level 3 positions held by the SPV at year end.

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

Quantitative information regarding the unobservable inputs for the Group's Level 3 positions as at 31 December 2017 is given below:

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

The following table presents the fair value of the Group's assets and liabilities (by class) not measured at fair value through profit and loss at 31 December 2017 but for which fair value is disclosed:

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