Half-year Report

Pollen Street Secured Lending plc

Half Year Report and unaudited Condensed Financial

Statements for the six months ended 30 June 2020

Copies of the Half Year Report can be obtained from the following website:

https://www.pollenstreetsecuredlending.com/investor-information

Investment Objective

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

Financial and Operational Highlights

1 NET ASSET VALUE (CUM INCOME): includes 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): is 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): the closing mid-market share price at period end.

5 INTERIM DIVIDENDS: dividends relating to 6 months to June 2020 were paid in May 2020 and are due to be paid in October 2020, dividends relating to 2019 financial year were paid in June 2019, September 2019, December 2019 and March 2020. Dividends relating to 6 months to June 2019 were paid in May 2019 and August 2019.

6 PREMIUM/(DISCOUNT): the amount by which the price per share 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 ANNUAL NAV PER SHARE RETURN: is calculated from the monthly returns in the period, which are calculated as Net Asset Value (Cum Income) at the end of the month, plus dividends declared during the month, divided by NAV (Cum Income) calculated on a per share basis at the start of the month and the actual number of days in the year divided by actual number of days in the month.

8 ITD: inception to date - excludes issue costs.

9 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.

10 CONTINUING PORTFOLIO: portfolio of Platforms that the Group has originated through in 2018, 2019 and 2020 calculated based on NAV exposure to investment assets as a percentage of total NAV before deducting topco debt, excluding cash, working capital and equity positions.

11 LEGACY PORTFOLIO: portfolio of Platforms that the Group has not originated through in 2018, 2019 and 2020 (predominately Consumer Platforms) calculated based on NAV exposure to investment assets as a percentage of total NAV before deducting topco debt excluding cash, working capital and equity positions.

Chairman's Statement

INTRODUCTION

I am pleased to present Pollen Street Secured Lending plc's half yearly financial report, which covers the period from 1 January 2020 to 30 June 2020.

The first half of 2020 has been a period of considerable uncertainty for the Group, with the economic and market impact of the COVID-19 pandemic and the ongoing processes relating to the possible cash offer from Waterfall Asset Management LLC ("WAM") and the change of the Group's investment manager.

During this period the Board has taken care to oversee a conservative approach to portfolio management, implemented by the Investment Manager, and to maximise the alternatives available to shareholders. We believe this strategy has served shareholders well in challenging circumstances.

INVESTMENT PERFORMANCE AND DIVIDENDS

Interest income on Credit Assets at amortised cost for the first six months of the year was £43.6 million (H1 2019: £50.0 million). The Credit Assets have reduced to £837.2 million (H1 2019: £1,001.8 million) as the Company has deleveraged. The charge for credit impairment loss provision under IFRS 9 was £14.5 million (H1 2019: £11.3 million), an increase of 28 per cent. The increase is attributable to a change to the economic outlook in addition to forbearance following the onset of COVID-19. The Company paid dividends of 24.0 pence (H1 2019: 24.0 pence) per ordinary share in relation to the first half of 2020. The dividend return was 4.8 per cent (2018: 4.8 per cent) on the original issue price.

The portfolio continues to perform well with significant cash collection and a reduction in the number of loans in forbearance plans. In the US portfolio, we have seen a significant reduction in the number of loans in payment plans as the economy has started to reopen. The UK portfolio is starting to see the early signs of a similar trend with loans that went into a 3-month payment plan in March coming to an end in June with the majority of customers indicating that they would like to go back onto full contractual payments.

SHARE PRICE AND BUYBACKS

The share price of the Company at 30 June 2020 was 730 pence per share. The NAV per share (cumulative of income) is 948 pence per ordinary share representing a 23.0 per cent discount to NAV (cumulative of income). Throughout the first half of 2020, share buy backs accounted for 514,278 ordinary shares (H1 2019: 1,172,033) which were repurchased into treasury at an average price of 719 pence per ordinary share (H1 2019: 820 pence).

RISK MANAGEMENT AND OVERSIGHT

The Board plays a key role in supporting and challenging the Group's long-term strategic planning. This includes a rigorous assessment of both the risks and opportunities presented by the evolving market environment and considering the interests of key stakeholders. The oversight is exercised through the board's committee structure and further information is provided in each Board committee report in the Annual Report and Financial Statements.

OUTLOOK

As announced in the Group's most recent update to the market on 8 September 2020 it is expected that transition of the Group's investment management contract to WAM will be completed as soon as practicable. Discussions regarding a possible cash offer by WAM are also ongoing.

Since 30 June the Group has continued to reduce leverage and increase its liquidity. This pattern is expected to continue in the light of continued market uncertainty resulting from the COVID-19 pandemic and pending the change of investment manager.

If a cash offer for the Group is not completed the Board expects to recommend to shareholders that the Group's investment policy is changed to provide for a controlled run-off of the Group's assets and return of capital to shareholders. Any change of investment policy will be subject to shareholder approval.

Simon King

Chairman

30 September 2020

Investment Manager's Report

The Investment Manager is a member of the Pollen Street Capital Group ("PSC"). PSC is an independent asset manager with private equity and credit strategies. PSC was formed in 2013 and possesses a strong and consistent track record within the financial and business services sectors.

PSC has significant experience in lending markets. It works with the specialty finance market, which the Investment Manager believes is underserved by the banking industry, capital markets and more generalist credit funds. The strategy is supported by changes in the focus of mainstream lenders together with the implementation of new models that utilise data, analytics and technology more effectively. It provides an opportunity to generate attractive returns to investors whilst maintaining a prudent approach to risk.

The Investment Manager partners with the highest quality originators in order to access exciting credit opportunities with a focus on asset backed investments. In addition, where there is an aligned strategic opportunity, certain minority equity stakes are held.

The Investment Manager provides the Group with access to an established network of specialist lenders, market leading underwriting capabilities and strategic insight into the optimal collection strategy. The relationship with the platforms extends beyond PSC being simply providers of access to capital. PSC leverages its expertise to enable the platforms it partners with to outperform across all stages of the credit cycle. The relationships and expertise created are difficult to replicate and help provide more stable and attractive returns. The Investment Manager is deeply involved in the underwriting decisions, the customer journey, and collections.

FINANCIAL HIGHLIGHTS

The Coronavirus pandemic ("COVID-19") has disrupted much of the global economy, leading governments to introduce a wide range of stimulus programmes, the majority of which are unprecedented. Over this period, the Investment Manager has focused on prudently managing the existing assets, deleveraging the portfolio and increasing liquidity.

Interest income on Credit Assets at amortised cost for the first six months of the year was £43.6 million (H1 2019: £50.0 million). The main driver of the 12.8 per cent reduction in interest income was a 16.3 per cent reduction in Credit Assets to £837.2 million (H1 2019: £1,001.8 million) as the Investment Manager has deleveraged the Group. The reductions in assets was offset by an increase in yield as the portfolio has been transitioned to higher yielding assets.

There was a £7.4 million net loss (H1 2019: £0.2 million gain) for the period from the legacy Equity Assets held at fair value through profit and loss. The equity investments made by the previous investment manager primarily consist of investments in marketplace lenders in the UK, US and Australasia. These business models were challenged going into the COVID-19 pandemic with many of them yet to reach profitability and therefore reliant on equity support to continue to operate. The current macro environment has heightened the stress on the business models. PSC has proactively sought to exit these positions where possible and has reduced the portfolio from £34.4 million to £15.2 million since September 2017. The write down mainly relates to two positions: Ratesetter and Payoff. The Investment Manager also reached agreement to sell PSSL's stake in another UK platform in the period for £1.6 million, at only a modest discount to the carrying value.

The charge for credit impairment loss provision under IFRS 9 was £14.5 million (H1 2019: £11.3 million), an increase of 28 per cent. The increase is attributable to expected credited loss as opposed to realised losses. Under IFRS 9, the Company calculates the provision charge using forward looking estimates that are based on a range of economic scenarios. The economic outlook has materially changed following the onset of the COVID-19. The Investment Manager has updated its estimate of expected credit losses to reflect the latest available forecasts for the economy produced by Oxford Economics, giving rise to an initial charge of £2.0 million in March 2020 and a further £1.6 million in June 2020 when these were finalised. In addition to this the Investment Manager has prudently built additional provision coverage on loans that are on forbearance and payment plans in line with Bank of England and regulatory guidance.

Expenses for the period were £3.3 million (H2 2019: £1.3 million). The increase is mainly attributable to costs associated with the dispute between the Investment Manager and the Group and the possible offer from Waterfall Asset Management LLC. The profit after tax for the period closed at £4.1 million (H1 2018: £16.4 million).

PORTFOLIO

Since the onset of the COVID-19 crisis the Investment Manager has prudently been focusing on cash collections. The portfolio remains highly diversified across two types of facilities, structured loans and whole loans, and three sectors, consumer, property and SME.

The portfolio continues to perform well with significant cash collection and a reduction in the number of loans in forbearance plans. In the US portfolio, we have seen a significant reduction in the number of loans in payment plans as the economy has started to reopen. The loans in payment plans for the two largest consumer portfolios has reduced in aggregate by more than 50% with the subsequent payment performance being strong. The UK portfolio is starting to see the early signs of a similar trend with loans that went into a 3-month payment plan in March coming to an end in June with the majority of customers indicating that they would like to go back onto full contractual payments.

The SME sector is seeing significant refinancing of loans from the government schemes, which is leading to high cash collections across this portfolio. The Real Estate sector is seeing a strong refinancing market driven by competition in the mortgage market and the early signs that the sales market is starting to pick up. This is likely to drive strong cash collections over the coming months.

GEARING

The Company has reduced the Net Investment Assets from a high of £957 million at 31 January 2020 to £865 million at 30 June 2020, and consequently de-levered the Company.

Cash generated by the Company in the period has been used to reduce the outstanding net debt from £281.6 million to £198.6 million from 31 January 2020 to 30 June 2020. Consequently, the net debt to equity ratio decreased from 38.9 per cent to 28.3 per cent over the same period.

SHARE PRICE AND BUYBACKS

The share price of the Company at 30 June 2020 was 730 pence per share. The NAV per share (cumulative of income) was 948 pence per ordinary share representing a 23.0 per cent discount to NAV (cumulative of income). The Investment Manager has reduced net debt to create capacity to materially increase share buy backs. As at 30 June 2020 there was £95.5 million (H1 2020: £50.7 million) of cash and cash equivalents on the balance sheet ready to be returned to shareholders. Throughout the first half of 2020, share buy backs reduced to 514,278 ordinary shares (H1 2019: 1,172,033) being repurchased at an average price of 719 pence per ordinary share (H1 2019: 820 pence).

OUTLOOK

The portfolio has performed well to date with strong cash collections and underlying returns demonstrating the resilience of the portfolio. The majority of the portfolio benefits from asset backing: 72 per cent of the continuing portfolio at 30 June 2020 benefits from either platform first loss equity, as is the case with the structured loan portfolio, or security over real estate. The Group is well diversified with the underlying loan portfolios being highly granular with low concentration risk.

The Investment Manager continues to have faith in the strength of the asset class despite these unprecedented conditions. The asset class requires active management. It is critical that this continues to ensure this performance is maintained. This is particularly relevant in the post-COVID environment.

Top Ten Holdings

As at 30 June 2020 the value of the top 10 assets totalled £278.2 million which equated to 40 per cent of net assets.

Portfolio Composition

1 Continuing and legacy portfolios, excluding bond and equity positions

INTERIM MANAGEMENT REPORT AND RESPONSIBILITY STATEMENT

Interim Management Report

The important events that have occurred during the period under review, the key factors influencing the financial statements and the principal factors that could impact the remaining six months of the financial period are set out in the Chairman's statement and the Investment Manager's reports.

Principal Risks and Uncertainties

The principal risks faced by the Company can be divided into various areas as follows:

• Operational Risks

• Third party service providers

• Reliance on key individuals

• Fluctuations in the market price of issued shares

• Investment Risks

• Achievement of the Investment Objective

• Borrowing

• Exposure to Credit Risk

• Interest Rate Risk

• Foreign Exchange Rate Risk

• Liquidity of Investments

• Regulatory Risks

• Tax

• Breach of Applicable Legislative Obligations

• Emerging Risks

The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 31 December 2019. A detailed explanation can be found in the Strategic Report on pages 23 to 27 and in note 8 on pages 105 to 69 of the Annual Report and Financial Statements which are available on the website at:

https://www.pollenstreetsecuredlending.com/media/10264/2019-annual-report-and-accounts-final-unsigned.pdf

The Board has reviewed the principal risks and uncertainties of the Company as part of the review of this half year financial report. The Board notes the following updates to the relevant disclosure in the 2019 report and accounts.

Operational Risk

On 25 February 2020, the Group served 12 months to terminate the investment management agreement with Pollen Street Capital. The Company is seeking alternative service providers and has announced Waterfall Asset Management LLP as the intended successor to PSC as investment manager. The volume of change might elevate the operational risk to which the Company is exposed. The Risk Committee is actively overseeing this risk.

COVID-19

The Company's exposure to credit risk has increased as a result of the COVID-19 situation, as disclosed in the Annual Report and Financial Statements. Since this report was published, the COVID-19 crisis has evolved with various regulatory and government announcements on the matter. The performance of the portfolio through the COVID-19 crisis demonstrates the resilience of the strategy that PSC has implemented for the Company. However, there are no comparable recent events that may provide guidance as to the ultimate effect of the spread of COVID-19 and its effect on the global economy. As a result, the ultimate impact of the outbreak is highly uncertain and cannot be forecast accurately. The risk is being mitigated by careful management of the portfolio.

Related Party Disclosure and Transactions with the Investment Manager

Pollen Street Capital (US) LLC, as Investment Manager, is a related party to the Company. The management fee due to the Investment Manager for the period is disclosed in the consolidated statement of comprehensive income and in note 8.

The Directors of the Company are related parties. Fees paid to Directors are included in other expenses in the consolidated statement of comprehensive income.

Going concern

In the 2019 report and accounts, the Directors of the Company considered the potential consequences of the possible offer by Waterfall Asset Management LLP ("Waterfall") and the continuation vote were conditions that indicated the existence of a material uncertainty which may cast significant doubt about the Group's and Company's plans or ability to continue as a going concern. The Directors' have considered:

1. The further extension of the Waterfall proposed bid timetable from 8 September 2020 for a further 28 days together with the ongoing support of the largest shareholder for this process, and

2. The arrangements with respect to Waterfall entering into an advisory role with the Company and potentially becoming Investment Manager of the Company referred to in the announcement on 14 August 2020

as part of preparing this half yearly financial report and believe the material uncertainty remains. Notwithstanding this uncertainty, the Directors are satisfied that the going concern basis remains appropriate for the preparation of the Financial Statements. The Group Financial Statements do not include the adjustments that would result if the Group was no longer to be considered a going concern.

Responsibility Statement of the Directors

The Directors confirm that to the best of their knowledge:

- the unaudited consolidated financial statements have been prepared in accordance with FRS 104 (Interim Financial Reporting) and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

- this Interim management report and the condensed set of financial statements include a fair review of the information required by:

a. DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the six months ended 30 June 2020 and their impact on the consolidated financial statements; and a description of the principal risks and uncertainties for the remaining six months of the period; and

b. DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place during the six months ended 30 June 2020 and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions that could do so.

The Half Year Report and unaudited financial statements were approved by the Board of Directors on 30 September 2020 and the above responsibility statement was signed on its behalf by:

Chairman

30 September 2020

Financial Statements

Consolidated Financial Statement of Financial Position

AS AT 30 JUNE 2020

*the Consolidated Statement of Financial Position as at 30 June 2019 has been re-presented to make it easier to compare to 2020. There have been no changes to the basis on which the items are estimated or measured. See note 25 of the Annual Report and Financial Statements for further detail.

The financial statements were approved by the Board of Directors on 30 September 2020 and signed on its behalf by:

Chairman

30 September 2020

Consolidated Statement of Comprehensive Income

FOR THE PERIOD ENDED 30 JUNE 2020 (UNAUDITED)

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

Consolidated Statement of Comprehensive Income (Continued)

FOR THE PERIOD ENDED 30 JUNE 2019 (UNAUDITED) (RE-PRESENTED)*

\* The Consolidated Statement of Comprehensive Income for the period ended 30 June 2019 has been re-presented to make it easier to compare to 2020. There have been no changes to the basis on which the items are estimated or measured. See note 25 of the 2019 Annual Report and Financial Statements for further detail.

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

Consolidated Statement of Comprehensive Income (Continued)

FOR THE YEAR ENDED 31 DECEMBER 2019 (AUDITED)

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 PERIOD FROM 1 JANUARY 2020 TO 30 JUNE 2020 (UNAUDITED)

FOR THE PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019 (UNAUDITED)

Consolidated Statement of Changes in Shareholders' Funds (Continued)

FOR THE YEAR ENDED 31 DECEMBER 2019 (AUDITED)

Notes to the Consolidated Financial Statements

1. GENERAL INFORMATION

Pollen Street Secured Lending plc (the "Company") is a closed-ended investment company incorporated in the United Kingdom on 6 December 2013 with registered number 8805459. The Company is a publicly listed company and commenced operations on 30 May 2014.

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

The Company's investment manager is PSC Credit Holdings LLP (the "Investment Manager"). Pollen Street Capital (US) LLC, an affiliate of the Investment Manager and an SEC registered investment adviser, was appointed as sub investment manager (the "Sub-Manager") to the Company. The Investment Manager has, pursuant to the Sub- Management Agreement, delegated certain of its responsibilities and functions, including those in relation to its discretionary management of the Company's portfolio of credit assets, to the Sub-Manager.

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

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

As at 30 June 2020, the Company had total issued equity in the form of 86,306,803 ordinary shares (30 June 2019: 86,306,803, 31 December 2019: 86,306,803) of which 73,888,011 (30 June 2019: 74,916,368, 31 December 2019: 74,402,289) were outstanding and 12,418,792 (30 June 2019: 11,390,435, 31 December 2019: 11,904,514) were held as treasury shares. These shares are listed on the Premium listing segment of the Official List of the UK Listing Authority and trade on the London Stock Exchange's main market for listed securities.

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

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The Company's financial statements are prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting ("IAS 34"). They comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and International Financial Reporting Committee ("IFRC"), 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 financial statements are also in compliance with relevant provisions of the Companies Act 2006 as applicable to companies reporting under IAS 34. The results for the half year ended 30 June 2020 constitute non-statutory accounts within the meaning of Section 435 of the Companies Act 2006 and have not been audited by the Company's Auditor. They do not include all financial information required for full annual financial statements. The latest published accounts which have been delivered to the Registrar of companies are for the year ended 31 December 2019; the report of the Auditor thereon was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006. The comparative figures for the year ended 31 December 2019 have been extracted from those accounts.

The financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the valuation of investments at fair value. The Directors consider that the Group and Company has adequate financial resources to enable it to continue operations for a period no less than 12 months from the reporting date. Accordingly, the Directors believe that it is appropriate to adopt the going concern basis in preparing the Group's and Company's financial statements.

The principal accounting policies adopted by the Company are consistent with those set out on pages 74 - 92 of the Annual Report and Financial Statements 2019. 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 financial statements on a basis compliant with the recommendations of the SORP.

(b) Consolidation

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

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

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

The disclosures required by Section 409 of the Companies Act 2006 for associated undertakings are included in Note 13 to the financial statements.

As at 30 June 2020, the Company controls four legal entities listed below as well as nine Trusts which are subsidiaries that the Company controls (together "the Group").

The Company invests in a special purpose vehicle, Eaglewood SPV I LP (the "SPV") and at 30 June 2020 is the sole Limited Partner in that SPV and controls it. The principal activity of Eaglewood SPV I LP is to invest in alternative finance investments and related instruments, including marketplace loans, which is aligned with the Company's investment objective. The Company's position with regards to the SPV is that of an investor where its maximum loss is restricted to its investment in the vehicle and in return for this receives a quarterly income distribution.

The Company controls Eaglewood Income Fund I, LP (the "Eaglewood Fund"), a Delaware limited partnership established on 3 February 2012, through the control of the SPV. As at 30 June 2020, the SPV is the sole limited partner in the Eaglewood Fund. The Eaglewood Fund is an open-ended private investment fund, offering monthly subscriptions and quarterly redemptions, with 90 days' notice. The Eaglewood Fund is managed by the Investment Manager, Pollen Street Capital (US), LLP. It employs a strategy that primarily involves leveraged investment in monthly amortising unsecured US consumer loans originated by a single Platform with terms of three to five years.

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 Small Business Origination Loan Trust 2019-1 DAC ("SBOLT 2019") a public limited company incorporated in Ireland, SBOLT 2019 is a securitisation vehicle for unsecured loans made to small and medium-sized enterprises ("SMEs") incorporated in the UK and operates in a pre-determined manner. The Company is considered to control SBOLT 2019 from April 2019 by virtue of being its sponsor whilst having exposure to the variable returns of the vehicle through the holding of junior notes issued by it. SBOLT 2019 was incorporated in April 2019.

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 30 June 2020, the SPV is the sole beneficial owner of EW-PFL Trust, SPV I Loan Trust, Payoff Consumer Loan Trust, PSC 1803 Autoloan Trust, PSC 2018F Loan Trust and PSC Rocketloans Prime Consumer Loan Trust while the Eaglewood Fund is the sole beneficial owner of Eaglewood LC 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.

(c) Critical accounting estimates and judgements

The preparation of the half yearly report requires management to make estimates and assumptions that affect the reported income and expense, assets and liabilities and disclosure of contingencies at the date of the half yearly report. Although these estimates and assumptions are based on the management's best judgement at that date, actual results may differ from these estimates.

The economic outlook has materially changed following the onset of the COVID-19. The estimate of expected credit losses has been updated to reflect the forecasts for the economy produced by Oxford Economics during June 2020. In addition to this there are additional provisions included on loans that are in forbearance and payment plans, in line with Bank of England and regulatory guidance.

There have been no other significant changes in the basis upon which estimates have been determined compared to that applied at 31 December 2019.

All values are rounded to the nearest thousand pounds unless otherwise indicated.

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.

Level 3 investment in a 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 unquoted 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 30 June 2020:

The following table presents the movement in the Group's Level 3 positions for the period ended 30 June 2020.

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

Quantitative information regarding the unobservable inputs for the Group's Level 3 positions as at 30 June 2020 is given below:

4. INCOME AND GAINS ON INVESTMENTS

*  Loss on foreign exchange also includes fair value movements on derivatives taken out to economically hedge fair value exposures.

** Loss on foreign exchange also includes fair value movements on derivatives taken out to economically hedge fair value exposures.

5. EARNINGS PER SHARE

Basic earnings per share is calculated using the number of shares held at year end, excluding the number of shares purchased by the Company and held as treasury shares.

The Company has not issued any shares or other instruments that are considered to have dilutive potential.

6. FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS

Management of risk

The Group's financial instruments may comprise:

· Loans

· Listed and unquoted equities and investment funds held in accordance with the Group's investment objective and policies;

· Derivative instruments which could include forward currency contracts and options; and

· Cash, liquid resources and short term debtors and creditors that arise from its operations.

The risks identified by IFRS 7 arising from the Group's financial instruments are market risk (which comprises market price risk, interest rate risk and foreign currency risk), liquidity risk, credit risk and operational risk.

The sensitivity analysis in this note is used by management to measure the Group's exposure to these risks. The Board reviews and agrees policies for managing each of these risks, which are summarised below. These policies have remained unchanged since the beginning of the accounting period.

The investment objective and operating environment of the Subsidiaries are consistent with that of the Company. Therefore the risks and uncertainties detailed below are applicable to both the Company and the Group.

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

Market risk

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

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

Market price risk

Price risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting similar financial instruments traded in the market. Local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issue, recessions, or other events could have a significant impact on the Group and market prices of its investments. The Group is exposed to price risk primarily through its exposure from investments in money market funds, fixed income products and equities. Refer to Note 4 for further details on the sensitivity of the Group's Level 3 investments to price risk.

The value of certain investments held by the Group is determined by market forces and there is accordingly a risk that market prices can change in a way that is adverse to the Group's performance. COVID-19 has caused disruption to businesses and economic activity which has been reflected in recent fluctuations in global stock markets. There are no comparable recent events which may provide guidance as to the effect of the spread of COVID-19 and a potential pandemic, and, as a result, the ultimate impact of the COVID-19 outbreak or a similar health epidemic is highly uncertain and subject to change. The Group has adopted a number of investment restrictions which are set out in the prospectus which limit the exposure of the Group to market risk.

Interest rate risk

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

The Group is exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows.

Loans held by the Group at amortised cost, with a fixed interest rate, are not exposed to interest rate changes. Fixed income securities with fixed interest rates are exposed to fair value interest rate risk. As at 30 June 2020 the Group had 3.0 per cent (30 June 2019: 2.6 per cent, 31 December 2019: nil per cent) of the total assets with a fixed interest rate.

Financial instruments with a floating interest rate that resets as market rates change are exposed to cash flow interest rate risk. At 30 June 2020 the Group had 9.71 per cent (30 June 2019: 4.41 per cent, 31 December 2019: 6.81 per cent) of total assets classified as cash and cash equivalents and Nil per cent (30 June 2019: 0.5 per cent, 31 December 2019: Nil per cent) of fixed income securities with floating interest rates. At 30 June 2020, if interest rates had increased/decreased by 1 per cent with all other variables held constant, the change in the value of future expected interest cash flows of these assets would have been £1.0 million (30 June 2019: £0.7 million, 31 December 2019: £0.7 million). 1 per cent is considered to be a reasonably possible movement in interest rates.

The Group has entered into various credit facilities which are subject to a variable interest rate. As at 30 June 2020 the Group had £Nil (30 June 2019: £0.4 million, 31 December 2019: £0.4 million) drawn down under these facilities. Please see Note 10 for further details.

The Group does not intend to hedge interest rate risk on a regular basis. However, certain transactions have floating-rate liabilities and fixed-rate loans. The interest rate exposure of these may be hedged, taking into consideration amongst other things the cost of hedging and the general interest rate environment.

Currency risk

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

The assets of the Group are invested in Credit Assets and other investments including unquoted equities which are denominated in US Dollars, Euros, Pounds Sterling and other currencies. Accordingly, the value of such assets may be affected favourably or unfavourably by fluctuations in currency rates. The Group hedges currency exposure between Pounds Sterling and any other currency in which the Group's assets may be denominated, in particular US Dollars and Euros.

Concentration of foreign currency exposure

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-GBP 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.

The below table presents the net exposure to foreign currency at 30 June 2020. The table includes forward foreign exchange contracts at their notional exposure value and excludes all GBP assets and liabilities recorded on the Consolidated Statement of Financial Position.

If the GBP exchange rate simultaneously increased/decreased by 10 per cent against the above currencies, the impact on profit would be an increase/decrease of £0.3 million. 10 per cent is considered to be a reasonably possible movement in foreign exchange rates. The total GBP exposure as at 30 June 2020 is £437.4 million.

The below table presents the net exposure to foreign currency at 30 June 2019. The table includes forward foreign exchange contracts at their notional exposure value and excludes all GBP assets and liabilities recorded on the Consolidated Statement of Financial Position.

If the GBP exchange rate simultaneously increased/decreased by 10 per cent against the above currencies, the impact on profit would be an increase/decrease of £0.4 million. 10 per cent is considered to be a reasonably possible movement in foreign exchange rates. The total GBP exposure as at 30 June 2019 is £353.8 million.

The below table presents the net exposure to foreign currency at 31 December 2019. The table includes forward foreign exchange contracts at their notional exposure value and excludes all GBP assets and liabilities recorded on the Consolidated Statement of Financial Position.

If the GBP exchange rate simultaneously increased/decreased by 10 per cent against the above currencies, the impact on profit would be an increase/decrease of £0.4 million. 10 per cent is considered to be a reasonably possible movement in foreign exchange rates. The total GBP exposure as of 31 December 2019 is £408.4 million.

Liquidity risk

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

The Investment Manager manages the Group's liquidity risk actively including monitoring of amortising cash flows, monitoring of debt requirements and monitoring and forecasting of cash flows.

Financial liabilities consisting of forward foreign exchange contracts, dividends and interest payable, and accrued expenses and other liabilities are all due within three months.

The liquidity profile of the Group's borrowings is detailed in Note 10.

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Group's credit risks arise principally through exposures to loans acquired by the Group, which are subject to risk of borrower default and disclosed as loans held at amortised cost on the Statement of Financial Position. The ability of the Group to earn revenue is completely dependent upon payments being made by the borrower of the loan acquired by the Group.

Consumer loans are typically unsecured obligations of borrowers. They are not secured by any collateral, not guaranteed or insured by any third party and not backed by governmental authority in any way. Secured consumer loans will be secured against collateral. SME loans are typically not secured against collateral but are backed by personal guarantees of the business' director(s). Real estate loans and structured facilities are secured against collateral. The Group must rely on the collection efforts of the Platforms and their designated collection agencies and has no direct recourse against borrower members.

The Manager undertakes the primary credit risk assessment when originating loans or receivables. It also conducts due diligence on an ongoing basis and monitors the performance of acquired loans and the entire platform loan book if available.

As at 30 June 2020, the Group has not directly originated any loans that do not involve Platforms.

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

Loans at amortised cost

The table below provides details of the loans at amortised cost held by the Group at 30 June 2020.

The financial assets recorded in each stage have the following characteristics:

The following tables analyse loans by type of exposure and geography and represent the concentration of exposures on which credit risk is managed as at 30 June 2020.

Collateral held as security for financial assets

Consumer loans are typically unsecured obligations of borrowers. They are not secured by any collateral, not guaranteed or insured by any third party and not backed by any governmental authority in any way. SME Loans are typically not secured against collateral but are backed by personal guarantees of the business' director(s).

The Group originates real estate loans through platforms and also has a portfolio of structured facilities and bonds totalling £97,559,000 that are classed as real estate. The originated loans through platforms are secured against collateral as follows:

Maximum credit exposure loan commitments

The Company has provided credit facilities that are undrawn as at 30 June 2020. These primarily relate to secured real estate loans. The undrawn balance as at 30 June 2020 was £304.4 million (30 June 2019: £236.0 million, 31 December 2019: £419.0 million).

Platform restrictions

The Group will not invest more than 33 per cent of gross assets via any single Platform. This limit may be increased to 66 per cent of Gross Assets via any single Platform, provided that where this limit is so increased in respect of any Platform the Group does not invest an amount which is greater than 25 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 Company 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 Company 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 Company will not invest more than 20 per cent of gross assets, at the time of investment, via any single investment fund investing in Credit Assets. The Group will not invest, in aggregate, more than 60 per cent of gross assets, at the time of investment, in other investment funds that invest in Credit Assets.

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

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

· No single consumer loan shall exceed 0.25 per cent of gross assets;

· No single SME loan shall exceed 5.0 per cent of gross assets;

· No single advance or loan against a trade receivable asset shall exceed 5.0 per cent of gross assets;

· No single corporate loan shall exceed 5 per cent of gross assets; and

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

At any given time, not more than 50 per cent of Gross Assets will be maintained in SME Credit Assets and not more than 50 per cent of Gross Assets will be maintained in trade receivable assets (taking into account both Credit Assets acquired by the Company 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 Company has in such investment fund)).

Other restrictions

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

The Company will not invest in collateralised debt obligations ("CDOs"). CDO's are pooled debt obligations where pooled assets serve as collateral.

The Group's maximum exposure to credit risk (not taking into account the value of any collateral or other security held) in the event that counterparties fail to perform their obligations as at 30 June 2020, 30 June 2019 and 31 December 2019 in relation to each class of recognised financial assets, is the carrying amount of those assets as indicated in the Consolidated Statement of Financial Position.

7. EXPECTED CREDIT LOSS ALLOWANCE OF INVESTMENTS AT AMORTISED COST

Under the expected credit loss model of IFRS 9 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.