Annual Financial Report

VPC Specialty Lending Invest. PLC

28 April 2023

 

28 April 2023

VPC SPECIALTY LENDING INVESTMENTS PLC

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

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2022

The Board of Directors (the "Board") of VPC Specialty Lending Investments PLC (ticker: VSL) present the Company's Annual Financial Report for the year ended 31 December 2022 (the "Annual Report").

ABOUT

VPC Specialty Lending Investments PLC (the "Company" or "VSL") provides asset-backed lending solutions to emerging and established businesses ("Portfolio Companies") with the goal of building long-term, sustainable income generation. VSL focuses on providing capital to vital segments of the economy, which for regulatory and structural reasons are underserved by the traditional banking industry. Among others, these segments include small business lending, working capital products, consumer finance and real estate. VSL offers shareholders access to a diversified portfolio of opportunistic credit investments originated by non-bank lenders with a focus on the rapidly developing technology-enabled lending sector.

The Company's investing activities are undertaken by Victory Park Capital Advisors, LLC (the "Investment Manager" or "VPC"). VPC is an established private capital manager headquartered in the United States with a global presence. VPC identifies and finances emerging and established businesses globally and seeks to provide the Company with attractive yields on its portfolio of credit investments. VPC offers a differentiated private lending approach by financing Portfolio Companies through asset-backed delayed draw term loans, which is referred to as "Asset Backed Lending," designed to limit downside risk while providing shareholders with strong income returns. Through rigorous due diligence and credit monitoring by the Investment Manager, the Company generates stable income with significant downside protection.

The Annual Report includes the results of the Company (also referred to as the "Parent Company") and its consolidated subsidiaries (together the "Group"). The Company (No. 9385218) was admitted to the premium listing segment of the Official List of the Financial Conduct Authority ("FCA") (the "Official List") and to trading on the London Stock Exchange's main market for listed securities (the "Main Market") on 17 March 2015, raising £200 million by completing a placing and offer for subscription (the "Issue"). The Company raised a further £183 million via a C Share issue on 2 October 2015. The C Shares were converted into Ordinary Shares and were admitted to the Official List and to trading on the Main Market on 4 March 2016.

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

The 2023 Annual General Meeting will be held in June 2023. A copy of the Notice of the Company's 2023 Annual General Meeting will be published and made available in due course.

Printed copies of the Annual Report and Notice of the Company's 2023 Annual General Meeting will be posted or made available to the Company's shareholders.

A copy of the  Annual Report will be submitted shortly to the National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/a/nsm/nationalstoragemechanism and will also available on the Company's website at https://vpcspecialtylending.com/

The following text is extracted from the Annual Report and Financial Statements of the Company for the year ended 31 December 2022. All page numbers below refer to the Annual Report on the Company's website.

SUMMARY AND HIGHLIGHTS FOR THE YEAR

The financial and business highlights for the year ended 31 December 2022 are as follows:

v January 2022: Dave Inc., a banking app on a mission to build products that level the financial playing field reported the closing of its previously announced business combination with VPC Impact Acquisition Holdings III, Inc.. On 5 January 2022, the combined company began trading under the NASDAQ ticker symbol: "DAVE".

v January 2022: The Company partially exited its equity investment in Kueski, Inc., realising a gain on the sale of $4.37 million, which was included in the NAV of the Company on 31 December 2021.

v January 2022: On 17 January 2022, one of the Company's privately held investments, Beforepay, closed its IPO and began trading on the Australian Stock Exchange under the ticker "B4P".

v February 2022: The Company declared its 16th consecutive dividend of 2.00 pence per share for the three months to 31 December 2021.

v March 2022: VPC Impact Acquisition Holdings II (NASDAQ: VPCB) ("VPCB"), a special purpose acquisition company sponsored by VPC Impact Acquisition Holdings Sponsor II, LLC, an affiliate of Victory Park Capital and FinAccel, the parent company of Kredivo, the leading AI-enabled digital consumer credit platform in Southeast Asia, announced the mutual termination of their previously announced business combination agreement. 

v June 2022: The Company declared its 17th consecutive dividend of 2.00p per share for the three months to 31 March 2022.

v July 2022: The Company invested in one new asset backed investment, Loyal Foundry Holdings, Inc. ("Loyal Foundry"). Loyal Foundry is a leading global platform of non-gaming mobile apps.

v August 2022: ZeroFox Inc., a VPC portfolio company and an enterprise software-as-a-service leader in external cybersecurity reported the closing of its previously announced business combination with L&F Acquisition Corp ("L&F"), a special purpose acquisition company, and ID Experts Holdings Inc. ("IDX"). On 4 August 2022, the combined company began trading under the NASDAQ ticker symbol: "ZFOX".

v August 2022: The Company declared its 18th consecutive dividend of 2.00p per share for the three months to 30 June 2022.

v November 2022: The Company declared its 19th consecutive dividend of 2.00p per share for the three months to 30 September 2022.

v December 2022: After further consultation with its major Shareholders, the Board determined that it would be in the Company's best interests and Shareholders to put forward formal proposals to Shareholders for a managed wind-down of the Company instead of the 25% Exit Opportunity. A circular with further details will be published shortly.

SUBSEQUENT EVENTS

Since the year ended 31 December 2022:

v February 2023: The Company declared its 20th consecutive dividend of 2.00p per share for the three months to 31 December 2022.

TOP TEN POSITIONS

The table below provides a summary of the top ten exposures of the Group, net of gearing, as at 31 December 2022. The summary includes a look-through of the Group's investments in VPC Synthesis, L.P. and VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. to illustrate the exposure to underlying Portfolio Companies as it is a requirement of the investment policy (set out on pages 130 and 131) to consider the application of the restrictions in this policy on a look-through basis.

INVESTMENT		COUNTRY		INVESTMENT TYPE	EXPOSURE
Deinde Group, LLC	United States		Asset Backed Lending			11.76%
Deinde Group, LLC ("Integra") is an early-stage online provider of unsecured consumer loans to nonprime borrowers. Integra was founded in March 2014 by Arthur Tretyak (CEO) and is led by a team of seasoned consumer finance and risk analytics executives. The company is headquartered in Chicago, IL, and is owned by its management team and employees.
Caribbean Financial Group Holdings, L.P.	Latin America		Asset Backed Lending			9.28%
Caribbean Financial Group Holdings, L.P. ("CFG") is the largest non-bank provider of unsecured consumer installment loans to the Caribbean market, operating primarily in the western and southern Caribbean. CFG was founded in 1979, operates over 70 store branches across eight Caribbean and Latin American countries, and has its most significant operations in Panama, Colombia, and Trinidad & Tobago. CFG's product offering includes loan sizes ranging from $200 to $13,000, loan terms up to 84 months with no prepayment penalties, and fully amortizing simple interest loans with equal monthly payments and rates based on underwriting customers' ability to pay.
Applied Data Finance, LLC	United States		Asset Backed Lending			8.74%
Applied Data Finance, LLC provides credit to non-prime and near-prime consumers in select states across the U.S. The company is headquartered in San Diego, with offices in New York, in addition to an IT and call center support in Chennai, India. Financings are in the form of installment loans and range up to $5,000.
Perch HQ, LLC	United States		Asset Backed Lending			7.55%
Perch HQ, LLC ("Perch") is a technology-enabled platform that seeks to acquire and operate a diverse portfolio of e-commerce assets on retail marketplaces. The company aims to acquire underlying brands and drive value through post-acquisition brand initiatives, including pricing strategy, advertising strategy, cost savings, supply chain efficiencies, and general Amazon account management optimization. The company was founded in October 2019 by Chris Bell, former Head of Custom Supply Chain at Wayfair and principal at Bain & Company.
Razor Group GMBH	Germany		Asset Backed Lending			6.58%
Razor Group GmbH ("Razor") is a technology driven consumer goods platform that acquires and operates a diverse portfolio of branded Amazon third-party seller ("TPS") assets primarily in Europe. Razor targets brands with €100K - €3.5 million of seller's discretionary earnings ("Asset-Level EBITDA") to be acquired at purchase multiples of 1.5x - 5.0x TTM Asset-Level EBITDA.
FinanceApp AG	Switzerland		Equity Investment			6.19%
FinanceApp AG ("WeFox") is a software application providing a hybrid technology and an in-person alternative to the modern insurance broker. The company operates in Switzerland and Germany, acting as an intermediary between major insurance providers and individual consumers. WeFox creates an innovative marketplace for the insurance industry, digitizing the management of consumer and broker insurance portfolios and aggregating data via one secure, easy-to-use platform. Customer users can view their insurance agreements on their smartphones or computers, allowing them to review policies and premium pricing, submit claims, and receive superior customer service support all through the WeFox platform.
FinAccel Pte Ltd	Singapore		Asset Backed Lending			5.65%
FinAccel Pte Ltd ("FinAccel") provides underbanked Indonesian consumers with a digital credit platform (d/b/a Kredivo) to finance e-commerce purchases, pay bills and secure personal loans at competitive interest rates. The Kredivo platform allows users to secure 30-day "interest-free" point-of-sale loans to finance small ticket e-commerce purchases up to $200. Eligible Kredivo users are also offered interest-bearing point-of-sale installment loans to finance larger e-commerce transactions up to $2,200. Kredivo operates as a digital credit card and the underlying transaction engine with a dedicated checkout embedded into over 250 e-commerce merchant websites and a mobile application that facilitates direct merchant purchases.
Heyday Technologies, Inc.	United States		Asset Backed Lending			4.30%
Heyday Technologies, Inc. ("Heyday") is a tech enabled platform that seeks to acquire and aggregate a diverse portfolio of retail assets which are sold primarily via e-commerce marketplaces. Heyday primarily targets Amazon Marketplace third-party sellers ("TPS"). The company aims to acquire underlying brands/seller at 2-5x earnings, and drive value through post-acquisition brand management initiatives and underlying multiple expansion. Heyday aims to differentiate itself from other TPS aggregators in the novel ecosystem by investing heavily and early in its technology and analytics capabilities thereby allowing the company to easily identify and optimize operating improvements within its portfolio at scale.
Elevate Credit, Inc.	United States		Asset Backed Lending			3.18%
Elevate Credit, Inc. ("Elevate") is a lender of unsecured short-term cash advances and installment loans to individuals primarily through the internet. Elevate provides consumers with access to responsible and transparent credit options within the non-prime lending industry. Elevate currently offers and/or supports the following products: U.S. installment loans (Rise), lines of credit (Elastic) and credit cards (Today Card).
Heyday Technologies, Inc.	United States		Equity Investment			3.11%
Heyday Technologies, Inc. ("Heyday") is a tech enabled platform that seeks to acquire and aggregate a diverse portfolio of retail assets which are sold primarily via e-commerce marketplaces. Heyday primarily targets Amazon Marketplace third-party sellers ("TPS"). The company aims to acquire underlying brands/seller at 2-5x earnings, and drive value through post-acquisition brand management initiatives and underlying multiple expansion. Heyday aims to differentiate itself from other TPS aggregators in the novel ecosystem by investing heavily and early in its technology and analytics capabilities thereby allowing the company to easily identify and optimize operating improvements within its portfolio at scale.

ENQUIRIES

For further information, please contact:

Victory Park Capital Gordon Watson Sora Monachino	via Jefferies or Winterflood (below) [e-mail]
Jefferies International Limited	Tel: [phone]
Stuart Klein
Gaudi le Roux
Winterflood Securities Limited	Tel: [phone]
Joe Winkley
Neil Morgan Montfort Communications Matthew Jervois Gay Collins	Tel: [phone] [e-mail]
Link Company Matters Limited (Company Secretary)	Tel: [phone] Email: [e-mail]

STRATEGIC REPORT

CHAIRMAN'S STATEMENT

In last year's Chairman's Statement, I noted that while 2021 was a year of exceptional progress and strong returns for its shareholders, as 2022 unfolded, there was much to feel apprehensive about. In the event, although the threat of COVID-19 faded somewhat, Russia's invasion of Ukraine was a geopolitical event that indeed had broader implications for the global economy. It was also a year when central banks attempted to counter rising inflation with a program of interest rate hikes that affected businesses and consumers. These factors all contributed to a turbulent economic and geopolitical backdrop, and also impacted the performance and the longer-term prospects of the VPC Specialty Lending Investments PLC ("VSL" or the "Company") itself. Despite economic and geopolitical turbulence and uncertainty, the Company's core asset backed lending business continued to perform in line with expectations; however, the equity and publicly traded investments experienced continued unrealised losses. Nonetheless the Board will propose to shareholders that the Company change its investment policy to one providing for the orderly winding down of the Company - more detail on which the Board expects will be published shortly after certain regulatory approvals are received. 

In light of the recent situation with Silicon Valley Bank ("SVB") and Signature Bank ("SB"), the Company has reviewed all portfolio company exposure and overall indirect exposure is considered to be low. As at 27 April 2023, there is no exposure to SB and minor exposure to SVB, as all impacted portfolio companies with meaningful balances at SVB, were able to transfer almost all of their deposits out of the bank. Small deposit amounts may remain at SVB to pay out expenses as balances wind down and/or new accounts are opened.

To note, the Group, Company and the Investment Manager do not have a direct banking relationship with SVB or SB.

2022 HIGHLIGHTS

v Gross Revenue Return of 12.63% offset by Gross Capital Return of -15.13% for the year;

v Total Net Asset Value (NAV) return of -6.97% for the year and 56.91% from inception-to-date;

v Total Shareholder return of -1.19% for the year and 38.69% from inception-to-date;

v Strong performance of the asset backed lending investments with revenue returns of 10.70%; and

v The Company declared its 20th consecutive quarterly dividend of 2.00p per share for the three-month period to December 2022 in February 2023.

THE COMPANY'S BUSINESS

It was a year of significantly different investment performance between the debt and equity portfolios. However, credit performance was resilient. For the twelve months to the end of December 2022, the NAV per share of the Company decreased -6.97% on a total return basis, comprising a NAV per share reduction from 114.14p to 98.19p, plus the 8.00p of dividends paid in 2022. During the year, the traded share price fell from 92.20p to 83.10p. Dividends paid during the year were in line with the dividend of 8.00p per year set out in the IPO Prospectus ("the Target Dividend") and fully covered by the revenue returns. Paying dividends in line with the Target Dividend continues to be the near-term target of the Company.

During the year, the weighted average coupon on the Company's asset backed investments increased to 14.65% at 31 December 2022 from 10.41% at 31 December 2021 as the Company saw a rise in short-term interest rates.

As we announced on 22 December 2022, the commitment the Board made to Shareholders in 2020 (the "25% Exit Opportunity") was to offer Shareholders an Exit Opportunity for up to 25% of the shares in issue following the June 2023 Annual General Meeting, should the shares continue to trade at an average discount greater than 5% over the first quarter of 2023. Three measures of future performance were put in place in 2020, with the intention of offering the 25% Exit Opportunity in the event that all three measures could not be met.

Various steps were taken from 2020 through 2022 to find a solution that would reduce the discount to NAV. While some of those Shareholder-focused initiatives (including meetings with existing, new, and potential Shareholders) bore some fruit, the discount to NAV nonetheless remained stubbornly wide.

In 2022, while it was understood by the Board that two of the three measures of future performance would be achieved, the Board and its advisers believed that the third measure of reducing the discount to NAV would not be met. Further, the Board and its advisers took the view that the 25% Exit Opportunity alone would not have a lasting impact on the discount and that it might have a potentially detrimental impact on the Company's Shareholders. If the 25% Exit Opportunity was realised, the Company would shrink in size, resulting in the Company's shares potentially becoming less liquid and the ratio of fees and other costs potentially increasing as a proportion of NAV. After further consultation with its major Shareholders, the Board announced on 22 December 2022 that it would be in the best interests of the Company and Shareholders to put forward formal proposals to Shareholders for a managed wind-down of the entire Company instead of the 25% Exit Opportunity.

The Company expects shortly to issue a circular inviting shareholders to vote on two resolutions - the first to approve revisions to the investment policy of the Company so that the Company's assets can be realised in an orderly manner in order to provide a managed exit over time for all Shareholders; and the second (to be voted on by independent shareholders) to approve proposed amendments to the terms of the Investment Management Agreement between the Company and the Investment Manager, principally concerning the way in which the Investment Manager is remunerated. The purpose of this is to reflect the change in the Company's investment objective and policy and to better align the interests of the Shareholders and the Investment Manager. The resolution relating to the Investment Management Agreement will be voted on by independent shareholders only because it is a related party transaction under the Listing Rules.  Full details will be contained in the Circular, but the Board, who have been so advised by its advisors, feels that the proposal is both fair and reasonable as far as shareholders are concerned and incentivises the Manager to undertake the winding up process efficiently and in a way that optimises value and decreases risk for shareholders.

THE COMPANY'S IMPACT

The Investment Manager continues to operate and invest responsibly, ethically, and fairly, and the Board remains committed to reviewing the Investment Manager's Environmental, Social and Governance ("ESG") policy. If during the course of an investment, VPC becomes aware of any material ESG risks, such ESG risks are documented in an Investment Committee memorandum and presented to the Investment Committee for review. VPC develops an action plan to address such risks as applicable. In addition, the Investment Manager continues to be a signatory of the United Nations Principles for Responsible Investment ("PRI"), the leading global network for investors committed to integrating ESG considerations into long-term investment decision-making.

OPERATIONAL RESILIENCE

There were a few consistent themes observed across the broader market throughout 2022: asset backed security spreads widened, both interest rates and inflation rose, equity markets were volatile, and there were lower transaction volumes for new capital raising. In the financial technology sector, the theme was a strong shift of investor interest and valuation from growth to profitability. To that end, many Portfolio Companies that overbuilt for growth in 2021 have enacted varying degrees of headcount reductions and other cost-cutting initiatives. The Board is aware that such cost-cutting initiatives can introduce elements of operational risk for the portfolio companies and this is being closely watched.

The Board believes risk management will remain a critical function throughout the wind-down process. The Investment Manager is committed to promoting a culture of proactive risk management and controls across its portfolio of investments. VPC has itself developed a culture of risk management. A team of 20 Risk and Operations professionals assess and monitor Portfolio Companies and related activities on a daily, weekly, or monthly basis using proprietary, technology-driven analytic tools. VPC's combination of deep credit and structuring expertise, the ability to navigate uncertain market conditions, and an adherence to consistent risk management will assist the Investment Manager to stay disciplined during the proposed wind-down process.

OUTLOOK

At the time of writing, fears of a U.S. recession and the COVID-19 global pandemic have somewhat abated, and there are encouraging signs that any recession may be mild. The Investment Manager expects modest origination activity may persist through much of 2023 and mergers will continue to gain popularity across the e-commerce space. VPC and its Portfolio Companies remain focused on mitigating external credit risks and managing downside protection in legacy assets. More details on the outlook for the Company can be found on page 17 of the Investment Manager's Report.

In the wake of the collapse of SVB, the Board expects that there will be many lessons learned in the market served by SVB. The Investment Manager will continue to employ prudent risk management practices and encourage its portfolio managers to be thoughtful about their risk exposure.

Finally, the Board wants to thank all Shareholders for their continued support as it works towards a successful wind-down of the Company. We will update you on our progress in our monthly reports.

Graeme Proudfoot

Chair

27 April 2023

INVESTMENT MANAGER'S REPORT

ABOUT VPC

The Company's investment manager is Victory Park Capital Advisors, LLC ("VPC", the "Firm", or the "Investment Manager"), an SEC-registered, established private capital manager. The Investment Manager was founded in 2007 and is headquartered in Chicago, Illinois, with additional resources in New York, Los Angeles, San Francisco, and London. VPC provides custom financing solutions across the private capital spectrum, focusing on asset-rich companies with significant corporate governance and a strong growth trajectory. VPC invests in both emerging and established businesses across various industries in the U.S. and abroad that often cannot access traditional sources of capital.

As of 31 December 2022, the Investment Manager had invested approximately $9.1 billion across more than 200 investments since inception. Additionally, throughout its history, VPC has developed a significant culture of risk management. A team of 20 Risk & Operations professionals proactively assess and monitor Portfolio Companies and related activities on a daily, weekly, or monthly basis using proprietary, technology-driven analytic tools. Further, while investment returns are important, VPC places great significance on the <1%cumulative principal loss since inception. VPC believes strong return and risk metrics result from a combination of deep credit and structuring expertise, the ability to navigate uncertain market conditions, and a significant adherence to risk management.

The Investment Manager was founded by Richard Levy and Brendan Carroll, who have worked together for more than two decades across multiple credit cycles and market environments. As of December 31, 2022, VPC employs 53 professionals across its Investment, Risk & Operations, Legal, and Investor Relations teams. For more information, please visit www.victoryparkcapital.com.

ESTABLISHED CREDIT MANAGER v Founded prior to the global financial crisis in 2007 by Richard Levy and Brendan Carroll v VPC has long-standing experience investing opportunistically amidst volatility and market complexities v Headquartered in Chicago with resources in New York, Los Angeles, San Francisco, and London v Investment Manager of the Company since its IPO in 2015 PRIVATE CREDIT SOLUTIONS v Private credit specialist with a focus on capital preservation across multiple market environments v Lender to both established and emerging businesses across various industries in the U.S. and abroad v Extensive experience lending to companies across the credit spectrum DEVELOPED RISK MANAGEMENT CULTURE & PROCESS v Deeply embedded risk culture v VPC leverages proprietary risk tools and analytics to drive underwriting and portfolio management decisions v Customised monitoring and reporting process allows for granular analysis across multiple dimensions

STRATEGY AND BUSINESS MODEL

PROTECTIVE DEAL STRUCTURING

The Company's investments are typically structured as delayed draw, floating rate, and senior-secured term loans with significant credit enhancements. Portfolio Companies draw capital over time, subject to availability under their borrowing base, covenant compliance and underlying collateral performance. Utilising this structure provides added transparency into capital deployment as Portfolio Companies provide notice to VPC of present and expected future funding requests on the debt facilities. In addition, given the delayed draw structure, the at-risk capital on day one is typically not fully funded and grows over the life of an investment. VPC is able to monitor performance and become more familiar with the business and collateral prior to lending additional capital. Structuring floating-rate loans has allowed VPC to benefit from the meaningful increase in spread as rates have risen in recent quarters. Additionally, VPC is predominantly the agent and sole lender in the transaction. Alternatively, in a syndicated transaction, there may be misalignment among lenders due to varying interests, leading to an inability to manage risk appropriately. As the agent and sole lender, VPC can better maximise value for Shareholders. Lastly, VPC's loans are typically shorter in duration (two to five years), which is generally attractive for borrowers looking for near-term solutions and beneficial for VPC to mitigate risk further.   

As one of the pioneers of financial services lending, VPC has structuring expertise and long-standing industry relationships, enabling it to secure preferential capacity to lock up attractive, long-term economics through structured facility upsizes with meaningful over-collateralization. VPC lends against a narrowly defined and dynamic collateral pool, which reduces adverse selection risk. Collateral is tested regularly to help avoid deterioration of the collateralised assets. If needed, VPC can foreclose on collateral and control the liquidation of assets to protect its investments and minimise losses. With the collateralised nature of the underlying investments within the Company's portfolio, under most scenarios, even with a default on the instrument, the Company would expect to recover most or all the investment. This robust structuring, monitoring and collateralization has allowed the Company to minimize credit losses and record minimal expected credit losses as required by IFRS 9.

VPC's investments typically also include meaningful credit enhancements including first loss equity subordination, robust covenant packages, extensive reporting requirements and monitoring, corporate guarantees, first lien priority, and transparency and control over cash. VPC is able to 'control cash' by ring-fencing the collateral in a blocked account or special purpose vehicle ("SPV"). VPC also structures a right of first refusal ("ROFR") for most credit investments, allowing for control of the refinancing processes and ultimately creating an additional captive sourcing funnel for the investment portfolio. Lastly, VPC's loans are secured against liens and equity pledges on the corporate entity or collateral, further providing multiple avenues of structural protection.

VPC is further able to support the growth of its Portfolio Companies, as it has the flexibility to invest with small and large Portfolio Companies alike and to continue to finance a Portfolio Company as it grows in size. Each additional draw request from a Portfolio Company requires an Investment Committee meeting, where the Investment Team is responsible for presenting a detailed update on the Portfolio Company and the rationale behind the funding before it is approved. As in all transactions, unanimous consent from the Investment Committee must be given prior to any new funding being released. VPC believes this feature uniquely positions the Firm to grow alongside its Portfolio Companies and effectively mitigates risk as fundings are thoughtfully paced out in line with performance.

HIGHLY SELECTIVE DEAL SOURCING

VPC has a cultivated sourcing network powered by investment professionals across the U.S. and London, creating a wide funnel of investment opportunities. Additionally, VPC has a local presence in five major cities in the U.S. and U.K., providing real-time "boots on the ground" for investment opportunities. The Investment Manager leverages an internal database to target attractive businesses and undertakes extensive outreach with management teams to diligence new investment opportunities. The network includes investment banks, business brokers, restructuring firms, private equity managers, venture capital firms, and law and accounting firms. Furthermore, VPC has long-standing relationships with Portfolio Company management teams, industry professionals, and experts in various sectors that bolster its access to transactions. When positioned as a premier financing solution, the Investment Manager's executive board adds credibility and further provides VPC with a differentiated sourcing channel. Together, these efforts result in a robust pipeline of new investment opportunities built through trusted relationships, industry knowledge, and reliable partnerships.

More than 80% of the Firm's deal flow is sourced directly. This highlights the strength of VCP's relationships and its reputation as a flexible financing solutions provider. Notably, VPC only invests in approximately 1% of its deal flow which exemplifies its high barrier to entry. 

BEST-IN-CLASS RISK MANAGEMENT

VPC's significant emphasis on risk management is the backbone of its investing ethos. As discussed above, VPC has 20 dedicated Risk & Operations professionals that proactively monitor Portfolio Companies daily, weekly, or monthly, utilising sophisticated, technology-driven analytics tools. VPC leverages iLevel and Tableau, which have been customised for VPC's high-touch approach to risk management, to enhance further its ability to assess, manage and monitor risk and trends on a real-time basis.

At VPC, risk management is closely involved throughout the life cycle of an investment, from underwriting and structuring to monitoring and, ultimately, maturity. VPC has a well-established Risk Team, which is an objective, independent function that reports directly to the Investment Committee. The Senior Risk Team meets with the Executive Team twice-weekly to discuss any material risk issues and key initiatives. More broadly, the Investment Committee meets two to three times a week to collectively address and manage potential risks as appropriate. Additionally, the Risk Team will often travel on-site to meet with Portfolio Companies throughout the duration of the investment to ensure key metrics are being met and collateral performance is in line with expectations.

To bolster VPC's risk management efforts further, reputable third-party consultants may be used to assess specific, industry-related risks. Industry publications such as 2nd Order Solutions white papers are regularly reviewed for broader credit market trends that may influence VPC's investments. As a result of this best-in-class adherence to risk, VPC is proud to report a cumulative net principal loss of less than 1% since inception. After considering any post-default recoveries, the less than 1% net loss1 represents the net principal shortfall on both completed and active investments. VPC places great significance on its institutional infrastructure and risk management process to structure, execute, monitor, and manage risk within the portfolio.

[1] Loss Ratio reflects the cumulative net principal loss over the full life of each investment as a percentage of cumulate gross invested capital for the VPC Credit Strategies. VPC's historical track record data is tracked based on net loss rather than default and recovery ratios. VPC requires an executed NDA before further sharing additional information around potential defaults and recoveries, as well as historical examples of investments where a workout or liquidation was warranted. As mentioned above, VPC's historical loss ratio is minimal, at less than 1.00% since 2007. For active investments, any unrealised value is determined based on the fair market value of the outstanding investment.

REVIEW OF 2022 PERFORMANCE

The Company completed the year with a total NAV return of -6.97%, a gross revenue return of 12.63% and a gross capital return of -15.13%. The Company's revenue return remained in line with expectations, thereby supporting the 8.00p per year dividend yield for Shareholders as set out in the IPO Prospectus ("the Target Dividend"). In February 2023, the Company declared its twentieth consecutive quarterly dividend payment of 2.00p per share for the three months to 31 December 2022, and the dividend was paid to Shareholders in March 2023. During the year, the weighted average coupon on the Company's asset backed investments increased to 14.65% at 31 December 2022 from 10.41%.

2022 was characterized by economic and geopolitical turbulence and uncertainty, including fears surrounding the COVID-19 global pandemic, Russia's invasion of Ukraine, and central banks' attempts to counter rising inflation with interest rate hikes. For example, in January 2022, the Fed Funds rate was 0%-0.25%. By the end of the year, after seven rate increases from the US Federal Reserve, it stood at 4.25%-4.5%, its highest level in 15 years, with the promise of further hikes in 2023.

Despite economic and geopolitical turbulence and uncertainty, the Company's core loan business continued to perform in line with expectations, benefiting from the rising short-term interest rate environment throughout 2022 and further illustrating the power of variable rate loans. The Company's core asset backed lending business represented approximately 67% of the total investment portfolio at year-end and continued to perform in line with expectations.

The Company's equity interests derive from its core lending business and provide it with equity participation without contributing equity risk capital. The mark down of equity prices during the year, specifically within the financial technology and e-commerce sectors, impacted the value of the Company's equity holdings and contributed to the negative total NAV return. Unrealised losses were also driven by the decrease in value of the Company's holdings in publicly traded investments. However, the unrealised losses on investments were due to Company investments being marked to publicly-traded prices, driven generally by the weaker market environment, rather than specific issues with underlying Portfolio Companies. Therefore, VPC does not view these mark downs as an indicator of concern to the underlying Portfolio Companies and are confident the lending to these businesses remains well secured. 

VPC's long-standing reputation and relationships with Portfolio Company management teams, industry professionals and experts continued to facilitate a differentiated deal pipeline. The Company was able to take advantage of market dislocation and closed four new asset backed investments during the year on attractive terms, which may not have been available to VPC in prior periods.

Overall, 2022 demonstrated the merit of VPC's approach to structured credit lending to technology-enabled businesses and a strong culture of risk management, which has proven particularly important during a volatile year. VPC has made additional investments in human capital throughout the year as it continues to grow, hiring 18 individuals across its front office, Operations, and Investor Relations teams, a testament to VPC's growth ambitions, its reputation, and standing within the investment management industry.

INVESTMENTS

To meet the Company's investment objectives within pre-defined portfolio limits, capital was allocated across several Portfolio Companies, focusing on portfolio-level diversification. As of 31 December 2022, the Company's investments were diversified across 48 different Portfolio Companies across the U.S., UK, Europe, Australia, Asia, and Latin America and the Company had exposure to 24 Portfolio Companies through asset backed loans.

VPC believes that its short-duration, non-correlated asset-intensive investments provide insulation across volatile environments, particularly during times of uncertainty (e.g., the Great Financial Crisis, ongoing impacts from the COVID-19 pandemic, etc.), and the Firm is equipped with an institutional risk infrastructure and independent risk management process focused on downside protection. Conversely and more prominently, the equity portfolio experienced continued unrealised negative returns, generally driven by the normalisation of equity instrument returns, ongoing volatile market conditions, and lower recent equity raises by comparable companies within the financial technology and e-commerce sectors. Lastly, unrealised losses were driven by the decrease in value of the Company's publicly traded investments.

GEARING AND CAPITAL MARKETS

The Company selectively employs gearing to enhance returns generated by the underlying credit assets. Gearing is structured to limit the borrowings to individual SPVs holding the assets to ensure the gearing providers have no recourse to the Company. Given the breadth of VPC's portfolio, the Company has a distinct competitive advantage in securing these gearing facilities at attractive rates. During the year, the Look-Through Gearing Ratio remained relatively consistent. Having started the year at 0.34x, it ended the year at 0.35x, as VPC continued to take a conservative approach to liquidity and risk management with the gearing facilities.

The Company's level of gearing may increase as a result of further drawdowns to honour commitments to funds under existing contractual arrangements, revaluations of the portfolio or realisation of assets at less than their carrying value. An increased level of gearing would increase Shareholders' exposure to realisation values.

ESG INVESTMENT CONSIDERATIONS

VPC has a long history of commitment to Environmental, Social and Governance ("ESG") considerations as part of its investment process and firm-wide operations. In 2018, VPC launched a partnership with the International Finance Corporation ("IFC"), the private sector arm of the World Bank, to provide credit to businesses in emerging markets. Since the initial policy in 2018, the policy and processes around how VPC integrates ESG into its investment strategies and firm operations have expanded in scope and sophistication.

VPC's ESG policy is considered in all investment decisions. Part of the policy involves clearly defining what the Company will and will not invest in, as specific industries and business practices are not supported. Another important piece of the ESG programme involves understanding the risks and potential risks related to ESG, and identifying, mitigating and remediating any issues. Perhaps most importantly, the ESG policy creates accountability throughout the organisation and across Portfolio Companies.

VPC approaches ESG holistically to understand the full range of potential ESG risks for any given investment. For each investment underwritten, the applicable ESG factors are identified and mapped out with a due diligence plan to understand the relevant risks and mitigants related to those factors. With fintech investments, the Investment Manager focuses on the "Social" aspects of ESG, as those typically have the most significant overall impact on the business. VPC looks to invest in fintech companies that support financial inclusion and positively impact customers and other stakeholders. That means having products that are transparent and structured in a way that is fair to customers and promotes financial health. It also means having proper controls and systems to safeguard against harmful tactics or business practices.

As VPC has expanded into new investment categories, this frequently means re-evaluating ESG factors and risks in those specific areas. It is VPC's responsibility to educate itself about the key issues relating to any potential investment. VPC must set appropriate standards in these areas and discuss  issues with all relevant partners.

As part of VPC's standard risk management process, it actively monitors Portfolio Companies across all dimensions, including ESG. It has frequent touchpoints with Portfolio Companies and receives extensive reporting to identify potential issues. It also holds weekly Investment Committee meetings to discuss any potential concerns and how to address or remediate them. Equally important, VPC regularly engages with Portfolio Companies to understand how they are thinking about ESG-related issues and to share best practices. Given that VPC works with many early-stage, high growth companies, it aims to act as a resource to Portfolio Companies as they grow and develop their ESG practices over time.

In August 2021, VPC announced it had become a signatory of the United Nations-supported Principles for Responsible Investment ("PRI"), further demonstrating its commitment to integrating ESG considerations into its investment decision making processes. PRI is the pre-eminent institution advocating for ESG issues to be at the forefront of investment decision making and VPC is proud to be a signatory. This demonstrates that VPC takes its responsibility to drive positive impact, both within the financial services industry and in society, very seriously and that it is committed to responsible investing for the long term. 

Lastly, the Investment Manager is committed to maintaining a culture of good governance, as well as policies and procedures to assist with all aspects of diversity, as the Company's activities benefit from a wide range of skills, knowledge, experience, backgrounds, and perspectives. VPC formally published its DEI Policy in October 2021 and prioritised Diversity, Equity and Inclusion (DEI) goals for recruitment in Q3 of 2021 to diversify points of view and idea generation. To this end, VPC set formal goals of increasing the female population by 20% and ethnic diversity by 200% within the next five years. To date, VPC has exceeded those goals by increasing the female and ethnically diverse population by 64% and 500%, respectively.

OUTLOOK

As noted above, the Company completed the year with a total NAV return of -6.97%, a gross revenue return of 12.63% and a gross capital return of -15.13%. It was a bifurcated year regarding investment performance, with credit performance remaining resilient. Importantly, the Company's revenue return remained in line with expectations, thereby supporting the dividend yield for Shareholders.

Many of the Investment Manager's peers and Portfolio Companies have not seen interest rates at these levels before, and rates are expected to continue trending up from here. In 2023, VPC expects equity valuations will be flat or down, an environment that encourages companies to be measured on valuation expectations. As such, Portfolio Companies are de-prioritising growth and instead working to reduce operating expenses to extend cash runway and/or generate free cash flow.

In specific credit market sectors in which the Company is invested, the Investment Manager market and risk commentary is as follows:

v Consumer: In the consumer space, consumer credit has exhibited signs of softening across multiple asset classes; however, metrics remain largely within historical norms and mirror those of 2019. Inflation continues to be a primary driver of pressure on consumers, particularly those in the lower income brackets. The Investment Manager is starting to see early indications of cracks in the strong employment environment and   some segments of the economy are showing more significant weakness, such as subprime and lower income bands and certain geographic regions.

v E-Commerce: In E-Commerce, while many of the supply chain challenges from early 2022 have eased, inflation and rising rates has put pressure on margins. Additionally, many retail and e-commerce companies are facing inventory challenges. Generally, higher prices are not fully offsetting the pressure on margins, and reductions in force have been commonplace as E-Commerce growth normalises to more historic run-rate levels.

In response to the market outlook, VPC and its Portfolio Companies remain focused on mitigating exogenous credit risks and managing downside protection in legacy assets. As noted above, VPC believes that its short-duration, non-correlated asset-intensive investments provide insulation across volatile environments, particularly during times of uncertainty, and the Firm is equipped with an institutional risk infrastructure and independent risk management process focused on downside protection The Investment Manager will look to manage the wind-down effectively with the near-term goal to maintain the Company's dividend target, and to manage the portfolio in accordance with VPC's institutionalised policies and procedures and towards maximising returns to shareholders.

Victory Park Capital Advisors, LLC

Investment Manager

27 April 2023

BUSINESS MODEL

COMPANY STATUS

The Company is registered as a public limited company under the Companies Act 2006 and is an investment company under Section 833 of the Companies Act 2006. It is a member of the Association of Investment Companies ("AIC").

The Company was incorporated on 12 January 2015 and commenced its operations on 17 March 2015.

The Company has been approved as an investment trust under Sections 1158/1159 of the Corporation Tax Act 2010. The Directors are of the opinion, under advice, that the Company continues to conduct its affairs as an Approved Investment Trust under the Investment Trust (Approved Company) (Tax) Regulations 2011.

Under the Investment Management Agreement ("IMA") dated 26 February 2015 between the Company and the Investment Manager, the Investment Manager is appointed to act as investment manager and Alternative Investment Fund Manager ("AIFM") of the Company with responsibility for portfolio management and risk management of the Company's investments.

PURPOSE

The Company's defined purpose is to deliver its Investment Objective. Board culture promotes strong governance and long-term investment, mindful of the interests of all stakeholders. The Board believes that, as an investment company with no employees, this is best achieved by working in partnership with its appointed Investment Manager.

INVESTMENT OBJECTIVE

The Company provides asset- backed lending solutions to emerging and established businesses with the goal of building long-term, sustainable income generation. The Company focuses on providing capital to vital segments of the economy, which for regulatory and structural reasons are underserved by the traditional banking industry. Among others, these segments include small business lending, working capital products, consumer finance and real estate.  The Company offers shareholders access to a diversified portfolio of opportunistic credit investments originated by non-bank lenders with a focus on the rapidly developing technology-enabled lending sector. Through rigorous diligence and credit monitoring, the Company generates stable income with significant downside protection.

As previously disclosed, the Board determined that it would be in the best interests of the Company and its shareholders to put forward formal proposals for a managed wind-down of the Company. Upon a successful vote at the general meeting on the proposals put forth by the Board, the updated investment objective of the Company will be to conduct an orderly realisation of the assets of the Company and be effected in a manner that seeks to achieve a balance between returning cash to Shareholders promptly and maximising value.

INVESTMENT POLICY

The Company seeks to achieve its investment objectives by investing in opportunities in the financial services market through portfolio companies and other lending related opportunities.

The Company invests directly or indirectly into available opportunities, including by making investments in, or acquiring interests held by, third-party funds (including those managed by the Investment Manager or its affiliates).

Direct investments include consumer loans, SME loans, advances against corporate trade receivables and/or purchases of corporate trade receivables originated by portfolio companies ("Debt Instruments"). Such Debt Instruments may be subordinated in nature, or may be second lien, mezzanine or unsecured loans.

Indirect investments include investments in portfolio companies (or in structures set up by portfolio companies) through the provision of senior secured floating rate credit facilities ("Credit Facilities"), equity or other instruments. Additionally, the Company's investments in Debt Instruments and Credit Facilities are made through subsidiaries of the Company or through partnerships in order to achieve bankruptcy remoteness from the platform itself, providing an extra layer of credit protection.

The Company may also invest in other financial services related opportunities through a combination of debt facilities, equity or other instruments.

The Company may also invest (in aggregate) up to 10% of its Gross Assets (at the time of investment) in listed or unlisted securities (including equity and convertible securities or any warrants) issued by one or more of its portfolio companies or financial services entities.

The Company invests across several portfolio companies, asset classes, geographies (primarily US, UK, Europe, Australia, Asia and Latin America) and credit bands in order to create a diversified portfolio and thereby mitigates concentration risks.

Borrowing policy

Borrowings may be employed at the level of the Company and at the level of any investee entity (including any other investment fund in which the Company invests or any special purpose vehicle ("SPV") that may be established by the Company in connection with obtaining gearing against any of its assets).

The Company may, in connection with seeking such gearing or securitising its loans, seek to assign existing assets to one or more SPVs and/or seek to acquire loans using an SPV.

The Company may establish SPVs in connection with obtaining gearing against any of its assets or in connection with the securitisation of its loans (as set out further below). It intends to use SPVs for these purposes to seek to protect the geared portfolio from group level bankruptcy or financing risks.

The aggregate gearing of the Company and any investee entity (on a look-through basis, including borrowing through securitisation using SPVs) shall not exceed 1.5 times its NAV (1.5x).

As is customary in financing transactions of this nature, the particular SPV will be the borrower and the Company may from time to time be required to guarantee or indemnify a third-party lender for losses incurred as a result of certain "bad boy" acts of the SPV or the Company, typically including fraud or wilful misrepresentation or causing the SPV voluntarily to file for bankruptcy protection. Any such arrangement will be treated as 'non-recourse' with respect to the Company provided that any such obligation of the Company shall not extend to guaranteeing or indemnifying ordinary portfolio losses or the value of the collateral provided by the SPV.

Management Arrangements

The Company has an independent Board of Directors which has appointed Victory Park Capital Advisors, LLC ("VPC"), the Company's Investment Manager, as Alternative Investment Fund Manager ("AIFM") under the terms of an Investment Management Agreement ("IMA") dated 26 February 2015. The IMA is reviewed annually by the Board and may be terminated by six-months' notice from either party subject to the provisions for earlier termination as stipulated therein.

The Company's investing activities have been delegated by the Directors to VPC. VPC has significant expertise in the sector and enables the Company to identify unique investment opportunities to add to the Portfolio. It has made investments and commitments across several financial services Portfolio Companies, spanning multiple geographies, products and structures, and is continuing to deploy capital into existing and new Portfolio Companies.

Details of the Investment Management fee and performance fees payable to VPC during the period are set out in note 10 on pages 88 and 89.

PERFORMANCE MANAGEMENT

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

A full description of performance is contained in the Investment Manager's Report, commencing on page 10.

NAV AND TOTAL RETURN

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

At each meeting, the Board receives reports detailing the Company's NAV and total return performance, portfolio composition and related analyses.

DIVIDEND YIELD

The Company intends to distribute at least 85% of its distributable income earned in each financial year by way of dividends.

GEARING RATIO

The aggregate gearing of the Company and any investee entity (on a look-through basis, including borrowing through securitisation using SPVs) shall not exceed 1.5 times its NAV (1.5x). The Board and Investment Manager monitor the look-through gearing ratio to ensure it is in line with the investment policy.

SHARE PRICE PREMIUM/DISCOUNT

As a closed-ended listed investment trust, the Company's share price can and does deviate from its NAV. This results in either a premium or a discount to NAV. This is another component of the long-term shareholder return. The Board continually monitors the Company's premium or discount to NAV and has the ability to issue or buy back shares to limit the volatility of the share price discount or premium. For more information on the Company's authorities in relation to its share capital, see page 104.

EXPENSES

The Board is conscious of the impact of expenses on returns and seeks to minimise expenses while ensuring that the Company receives good service from its suppliers. The industry-wide measure for investment trusts is the ongoing charges ratio. This seeks to quantify the on-going costs of running the Company. The ongoing charges ratio for 2022 was 1.99%, compared to 1.79% for 2021. This measures the annual normal on-going costs of an investment trust, excluding performance fees, one-off expenses and dealing costs, as a percentage of the average shareholders' funds.

PRINCIPAL RISKS

The Company is exposed to risks that are monitored and actively managed to meet its investment objectives. These include market risks related to interest rates, currencies and general availability of financing as well as credit and liquidity risks given the nature of the instruments in which the Company invests. In addition, the underlying Portfolio Companies are exposed to operational and regulatory risks as this part of the financial services sector remains relatively nascent.

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

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

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

This system assists the Board in determining the nature and extent of the risks it is willing to take in achieving its strategic objectives. Both the principal and emerging risks and the monitoring system are subject to a robust assessment at least annually. The last review by the Board took place in February 2023. Although the Board believes that it has a robust framework of internal controls in place, it can provide only reasonable, and not absolute, assurance against material financial misstatement or loss and is designed to manage, not eliminate, risk.

Below is a summary of the principal and emerging risks and uncertainties faced by the Company and the Group, which have remained unchanged throughout the year, and actions taken by the Board and, where appropriate, its Committees, to manage and mitigate these risks and uncertainties. Principal risks include liquidity risk, credit risk, financing risk, portfolio company risk, regulatory risk and market risk. Business continuity risk, climate risk and geopolitical risk are all considered to be emerging risks. The non-financial risks comprise of regulatory risk, business continuity risk and geopolitical risk and the financial risks comprise of liquidity risk, credit risk, financing risk, market risk and portfolio company risk. These are set out below:

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.

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

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

The Group is also exposed to liquidity risk with respect to the requirement to pay margin cash to collateralise forward foreign exchange contracts used for currency hedging purposes.

MITIGATION

The Investment Manager manages the Group's liquidity risk by investing primarily in a diverse portfolio of assets. As at 31 December 2022, 53% of the loans had a stated maturity date of less than a year.

In general, the weighted average maturity profile of the Group's assets was lower than or equal to the term of the Group's corresponding debt facilities which thereby reduced liquidity risk. Refer to Note 6 of the financial statements for the maturity profile of the Group's assets and liabilities.

The Board and the Investment Manager review the investment portfolio to ensure it is in line with the investment policy, including restrictions, as outlined on pages 130 and 131. The Board reviews cash flow forecasts to ensure the group can meet its liabilities as they fall due.

The Group continuously monitors fluctuations in currency rates. The Group performs stress tests and liquidity projections to determine how much cash should be held back to meet potential future obligations to settle margin calls arising from foreign exchange hedging.

The gearing facility has helped the Group reduce cash drag associated with the currency hedging portfolio, while also allowing the Group to meet its liabilities as they fall due.

The Investment Manager monitors the cash balances of the Group daily to ensure that all ongoing expenses can be paid as they come due.

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. The ability of the Group to earn revenue is completely dependent upon payments being made by the borrower, such as adverse movements in financial markets.

MITIGATION

There is inherent credit risk in the Group's investments in credit assets. However, this is typically mitigated by the significant first loss protection provided by the Portfolio Company under the Asset Backed Lending Model and the excess spread generated by the underlying assets under both models.

The Investment Manager performs a robust analysis during the underwriting process for all new investments of the Group and monitors the eligibility of the collateral at least monthly of the current assets in the Group's portfolio. This process also includes due diligence performed by a third-party reviewer during the underwriting process and subsequent reviews at least once per year for the Group's Portfolio Companies.

The Group will invest across several Portfolio Companies, asset classes, geographies (primarily US, UK, Europe, Australia, Asia and Latin America) and credit bands to ensure diversification and to seek to mitigate concentration risks.

The Investment Manager did not see new payment defaults during the year and the Group has received all contractual payments through the date of this report.

The Board and the Investment Manager review the investment portfolio to ensure it is in line with the investment policy, including restrictions, as outlined on pages 130 and 131. The Investment Manager monitors performance and underwriting on an ongoing basis.

FINANCING RISK

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

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

MITIGATION

This risk is mitigated by limiting borrowings to ring-fenced SPVs without recourse to the Group and employing gearing in a disciplined manner.

The Group has maintained a level of gearing throughout the year significantly below the limit stipulated in the Prospectus as the Group is primarily invested in the Asset Backed Lending Model.

The Board and the Investment Manager review the investment portfolio to ensure it is in line with the investment policy, including investment restrictions, as outlined on pages 130 and 131.

MARKET RISK

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

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

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

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

The Group is exposed to risks related to the reference rate reform and replacement of benchmark interest rates such as GBP LIBOR and other interbank offered rates. There remains some uncertainty around the timing and precise nature of these changes.

MITIGATION

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

Exposure to interest rate risk is limited as the underlying credit assets are typically fully amortising with a maximum maturity of five years. Furthermore, generally the Group's Credit Facilities include a floating interest rate component to the Portfolio Companies to account for an increase in interest rate risk and they also have a set floor in the instance that interest rates were to drop.

The Group mitigates its exposure to currency risk by hedging exposure between Pound Sterling and any other currencies in which a significant portion of the Group's assets may be denominated.

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

The Investment Manager continues to monitor the potential impact of a discontinuation of LIBOR rates on the Company's investments, based on the expectation that reference rates will be evaluated and replaced timely for investments with a variable rate component. On November 30, 2020, the LIBOR administrator proposed extending the publication of the overnight and the one-, three-, six- and 12- month USD LIBOR settings through June 30, 2023, when many existing contracts that reference LIBOR will have expired. Accordingly, it is difficult to predict the full impact of the transition until new reference rates and fallbacks are commercially accepted.

PORTFOLIO COMPANY RISK

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

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

MITIGATION

VPC has negotiated a significant number of proprietary capital deployment agreements with its existing asset backed lending partners each of which typically ensures the ability to deploy capital on attractive terms for several years.

In addition, VPC is one of the largest investors in the specialty lending sector and therefore enjoys timely information and good access to emerging Portfolio Company opportunities. VPC has a team of investment and operational professionals which ensures that deployment opportunities with new and existing Portfolio Companies can be executed rapidly while minimising operational risk.

VPC's pipeline of deployment opportunities remains strong with both existing and new asset backed lending Portfolio Companies.

REGULATORY RISK

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

The Association of Investment Companies (AIC) is becoming increasingly focused on ensuring ESG measures are implemented within investment companies.

In order to continue to qualify as an investment trust, the Company must comply with the requirements of Section 1158 of the Corporation Tax Act 2010.

MITIGATION

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

The Company continues to review its ESG stance to ensure that it promotes the values and commitment of the Company. All decisions taken are made with due consideration to the long-term sustainability and impact on stakeholders.

The Company has procedures to monitor the status of its compliance with the relevant requirements to maintain its Investment Trust status, including receiving and reviewing information and reporting from the Company Secretary and other service providers as appropriate.

CLIMATE RISK

The world is facing unprecedented challenges in the face of climate change and growing inequality. The FSB Task Force on Climate-related Financial Disclosures (TCFD) has developed climate-related financial risk disclosures for companies to provide information to investors, lenders, insurers, and other stakeholders.

MITIGATION

The Investment Manager has performed an initial high-level materiality assessment of climate risk across its investment portfolio and is developing a comprehensive action plan for both the Company and Group. No material impact on the financial statements has been identified from the risks arising from climate change through the work performed by the Investment Manager from this initial assessment.

The Investment Manager is reviewing the core disclosure elements of the TCFD reporting framework. As an investment trust, the Company is not required to provide information in compliance with TCFD.

GEOPOLITICAL RISK

The Group is subject to risks associated with unforeseen geopolitical events, including war, terrorist attacks, natural disasters, and ongoing pandemics, which could create economic, financial, and business disruptions.

MITIGATION

The Investment Manager has a dedicated risk committee comprised of senior leadership and key principals. This committee works with each individual portfolio investment team to develop a coordinated risk response across the entire portfolio. The Investment Manager also increased the frequency of portfolio company data collection and reporting.

Discussion on the Group's risk management and internal controls is on page 120.

CULTURE

The Directors agree that establishing and maintaining a healthy corporate culture among the Board and in its interaction with the Investment Manager, shareholders and other stakeholders will support the delivery on its purpose, values, and strategy. The Board is encouraged to lead by example and exemplify the Company's culture of openness, debate and integrity through ongoing dialogue and engagement with its service providers, principally the Investment Manager.

The Board strives to ensure that its culture is in line with the Company's purpose, values, and strategy. The Company has several policies and procedures in place to assist with maintaining a culture of good governance including those relating to diversity, Directors' conflicts of interest and Directors' dealings in the Company's shares. The Board assesses and monitors compliance with these policies as well as the general culture of the Board through Board meetings and during the annual evaluation process which is undertaken by each Director (for more information see the performance evaluation section on page 112).

The Board seeks to appoint the best possible service providers and evaluates their remit, performance, and cost effectiveness on a regular basis as described on page 111. The Board considers the culture of the Investment Manager and other service providers, including their policies, practices, and behaviour, through regular reporting from these stakeholders and during the annual review of the performance and continuing appointment of all service providers to ensure there is an alignment in the long-term objectives. The Investment Manager and other service providers appointment are reviewed annually to ensure these objectives are met.

EMPLOYEES, HUMAN RIGHTS, SOCIAL AND COMMUNITY ISSUES

The Board recognises the requirement under the Companies Act 2006 to detail information about human rights, employees, and community issues, including information about any policies it has in relation to these matters and the effectiveness of these policies. These requirements do not apply to the Company as it has no employees, all the Directors are non-executive, and it has outsourced all its functions to third party service providers. The Company has therefore not reported further in respect of these provisions but does expect its service providers and portfolio companies to respect these requirements.

BOARD DIVERSITY

As at 31 December 2022, the Board of Directors of the Company comprised of four male Directors and one female Director. As at the date of this report the Board composition remains unchanged. The Board acknowledges the benefits of diversity, including gender diversity, and remains committed to ensuring that the Company's Directors bring a wide range of skills, knowledge, experience, backgrounds and perspectives. Further details of the Company's diversity policy are set out on page 115.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) ISSUES

The Company has no employees, property or activities other than investments, so its direct environmental impact is minimal. In carrying out its activities, and in its relationships, the Company aims to conduct itself responsibly, ethically and fairly. Directors are mindful of their own carbon footprints if they are required to travel on Company business.

The Board is comprised entirely of non-executive Directors and the day-to-day management of the Company's business is delegated to the Investment Manager. The Investment Manager aims to be a responsible investor and believes it is important to invest in companies that act responsibly in respect of environmental, ethical and social issues.

The Company has no internal 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. However, the AIC is encouraging all member companies to demonstrate how they are factoring ESG issues into their business practices. The company continues to monitor the guidance published by the AIC and works towards the drafting of its ESG policy. The business remains conscious of its business decisions and the Board, supported by its service providers and Investment Manager consider the long-term impact of all decisions and challenge appropriately.

STREAMLINED ENERGY AND CARBON REPORTING (SECR)

The Company has no employees or property, and it does not combust any fuel or operate any facility thus is taking the exemption. It does not, therefore, have any 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. Additionally, there are no annual emissions from the purchase of electricity, heat, steam or cooling by the Company for its own use.

APPROVAL

This Strategic Report has been approved by the Board of Directors and signed on its behalf by:

Graeme Proudfoot

Chair

27 April 2023

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the year ended 31 December 2022 but is derived from those accounts. Statutory accounts for the year ended 31 December 2022 will be delivered to the Registrar of Companies in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (ii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditors' report can be found in the Company's full Annual Report and Financial Statements on the Company's website at https://vpcspecialtylending.com/.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2022
		31 DECEMBER 2022	31 DECEMBER 2021
	NOTES	£	£
Assets
Cash and cash equivalents	7	15,538,602	6,300,572
Cash posted as collateral	7	2,222,734	4,133,588
Derivative financial assets	3,4	1,081,849	2,069,698
Interest receivable		5,848,979	4,708,481
Dividend and distribution receivable		4,735	3,996
Other assets and prepaid expenses		2,190,718	2,877,815
Loans at amortised cost	3,9	220,225,329	279,339,002
Investment assets designated as held at fair value through profit or loss	3	130,870,709	141,797,222
Total assets		377,983,655	441,230,374
Liabilities
Management fee payable	10	97,785	155,399
Performance fee payable	10	-	12,913,280
Derivative financial liabilities	3,4	3,283,142	1,508,675
Deferred income		41,201	174,603
Other liabilities and accrued expenses		1,815,268	1,550,415
Due to broker		4,848,569	-
Notes payable	8	94,669,284	107,267,260
Total liabilities		104,755,249	123,569,632
Total assets less total liabilities		273,228,406	317,660,742
Capital and reserves
Called-up share capital		20,300,000	20,300,000
Share premium account		161,040,000	161,040,000
Other distributable reserve	14	112,779,146	112,779,146
Capital reserve		(48,473,649)	1,667,026
Revenue reserve		26,369,664	20,615,367
Currency translation reserve		1,213,245	1,213,245
Total equity attributable to shareholders of the Parent Company		273,228,406	317,614,784
Non-controlling interests	18	-	45,958
Total equity		273,228,406	317,660,742
Net Asset Value per Ordinary Share	12	98.19p	114.14p

The financial statements on pages 40 to 99 were approved by the Board of Directors on 27 April 2023 and signed on its behalf by:

Graeme Proudfoot

Chair

27 April 2023

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2022
		REVENUE	CAPITAL	TOTAL
	NOTES	£	£	£
Revenue
Net gain (loss) on investments	5	-	(42,614,991)	(42,614,991)
Foreign exchange gain (loss)		-	(1,552,676)	(1,552,676)
Interest income	5	33,917,279	-	33,917,279
Other income	5	7,418,009	-	7,418,009
Total return		41,335,288	(44,167,667)	(2,832,379)
Expenses
Management fee	10	3,840,270	-	3,840,270
Performance fee	10	-	-	-
Credit impairment losses	9	-	5,956,807	5,956,807
Other expenses	10	2,432,132	-	2,432,132
Total operating expenses		6,272,402	5,956,807	12,229,209
Finance costs		7,046,478	-	7,046,478
Net return on ordinary activities before taxation		28,016,408	(50,124,474)	(22,108,066)
Taxation on ordinary activities	11	-	-	-
Net return on ordinary activities after taxation		28,016,408	(50,124,474)	(22,108,066)
Attributable to:
Equity shareholders		28,016,408	(50,140,675)	(22,124,267)
Non-controlling interests	18	-	16,201	16,201
Return per Ordinary Share (basic and diluted)	13	10.07	(18.02)	(7.95)
Other comprehensive income
Currency translation differences		-	-	-
Total comprehensive income		28,016,408	(50,124,474)	(22,108,066)
Attributable to:
Equity shareholders		28,016,408	(50,140,675)	(22,124,267)
Non-controlling interests	18	-	16,201	16,201

The total column of this statement represents the Group's statement of comprehensive income, prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. 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. Amounts in Other comprehensive income may be reclassified to profit or loss in future periods.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2021
		REVENUE	CAPITAL	TOTAL
	NOTES	£	£	£
Revenue
Net gain (loss) on investments	5	-	67,114,995	67,114,995
Foreign exchange gain (loss)		-	(2,049,374)	(2,049,374)
Interest income	5	33,158,150	-	33,158,150
Other income	5	4,419,620	-	4,419,620
Total return		37,577,770	65,065,621	102,643,391
Expenses
Management fee	10	3,802,097	-	3,802,097
Performance fee	10	3,733,910	9,179,370	12,913,280
Credit impairment losses	9	-	3,636,142	3,636,142
Other expenses	10	3,212,166	159,909	3,372,075
Total operating expenses		10,748,173	12,975,421	23,723,594
Finance costs		5,706,429	-	5,706,429
Net return on ordinary activities before taxation		21,123,168	52,090,200	73,213,368
Taxation on ordinary activities	11	-	-	-
Net return on ordinary activities after taxation		21,123,168	52,090,200	73,213,368
Attributable to:
Equity shareholders		21,123,168	52,060,604	73,183,772
Non-controlling interests	18	-	29,596	29,596
Return per Ordinary Share (basic and diluted)	13	7.55	18.62	26.17
Other comprehensive income
Currency translation differences		-	(11,496)	(11,496)
Total comprehensive income		21,123,168	52,078,704	73,201,872
Attributable to:
Equity shareholders		21,123,168	52,052,083	73,175,251
Non-controlling interests	18	-	26,621	26,621

The total column of this statement represents the Group's statement of comprehensive income, prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. 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. Amounts in Other comprehensive income may be reclassified to profit or loss in future periods.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2022
	CALLED UP	SHARE	OTHER			CURRENCY	TOTAL	NON-
	SHARE	PREMIUM	DISTRIBUTABLE	CAPITAL	REVENUE	TRANSLATION	SHAREHOLDERS'	CONTROLLING	TOTAL
	CAPITAL	ACCOUNT	RESERVE	RESERVE	RESERVE	RESERVE	EQUITY	INTERESTS	EQUITY
	£	£	£	£	£	£	£	£	£
Opening balance at 1 January 2022	20,300,000	161,040,000	112,779,146	1,667,026	20,615,367	1,213,245	317,614,784	45,958	317,660,742
Amounts paid on buyback of Ordinary Shares	-	-	-	-	-	-	-	-	-
Contributions by non-controlling interests	-	-	-	-	-	-	-	-	-
Distributions to non-controlling interests	-	-	-	-	-	-	-	(62,159)	(62,159)
Return on ordinary activities after taxation	-	-	-	(50,140,675)	28,016,408	-	(22,124,267)	16,201	(22,108,066)
Dividends declared and paid	-	-	-	-	(22,262,111)	-	(22,262,111)	-	(22,262,11)
Other comprehensive income					-	-	-	-	-
Currency translation differences	-	-	-	-	-	-	-	-	-
Closing balance at 31 December 2022	20,300,000	161,040,000	112,779,146	(48,473,649)	26,369,664	1,213,245	273,228,406	-	273,228,406

The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies ("AIC").

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
	CALLED UP	SHARE	OTHER			CURRENCY	TOTAL	NON-
	SHARE	PREMIUM	DISTRIBUTABLE	CAPITAL	REVENUE	TRANSLATION	SHAREHOLDERS'	CONTROLLING	TOTAL
	CAPITAL	ACCOUNT	RESERVE	RESERVE	RESERVE	RESERVE	EQUITY	INTERESTS	EQUITY
	£	£	£	£	£	£	£	£	£
Opening balance at 1 January 2021	20,300,000	161,040,000	116,520,960	(50,393,578)	21,847,960	1,221,766	270,537,108	19,337	270,556,445
Amounts paid on buyback of Ordinary Shares	-	-	(3,741,814)	-	-	-	(3,741,814)	-	(3,741,814)
Contributions by non-controlling interests	-	-	-	-	-	-	-	-	-
Distributions to non-controlling interests	-	-	-	-	-	-	-	-	-
Return on ordinary activities after taxation	-	-	-	52,060,604	21,123,168	-	73,183,772	29,596	73,213,368
Dividends declared and paid	-	-	-	-	(22,355,761)	-	(22,355,761)	-	(22,355,761)
Other comprehensive income
Currency translation differences	-	-	-	-	-	(8,521)	(8,521)	(2,975)	(11,496)
Closing balance at 31 December 2021	20,300,000	161,040,000	112,779,146	1,667,026	20,615,367	1,213,245	317,614,784	45,958	317,660,742

The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies ("AIC").

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
		31 DECEMBER 2022	RESTATED 31 DECEMBER 2021
	NOTES	£	£
Cash flows from operating activities:
Total comprehensive income		(22,108,066)	73,201,872
Adjustments for:
--   Interest income		(33,917,279)	(33,158,150)
--   Dividend and distribution income	5	(7,418,009)	(4,419,620)
--   Finance costs		7,046,478	5,706,429
--   Exchange (gains) losses		1,552,676	2,049,374
Total		(54,844,200)	43,379,905
Loss (gain) on investment assets designated as held at fair value through profit or loss		20,298,529	(67,354,436)
Gain on derivative financial instruments		(35,736,991)	(6,131,547)
Increase in other assets and prepaid expenses		687,097	(1,988,667)
(Decrease) increase in performance fee payable		(12,913,280)	63,158
(Decrease) increase in management fee payable		(57,614)	8,873,195
Decrease in deferred income		(133,402)	(78,800)
Increase in due to broker		4,848,569	-
(Decrease) increase in accrued expenses and other liabilities		58,599	250,148
Interest received		32,776,781	32,062,716
Purchase of loans		(33,762,744)	(129,180,445)
Redemption or sale of loans		123,524,905	145,742,133
Impairment of loans		5,956,807	3,636,142
Net cash inflow from operating activities		50,703,055	29,273,502
Cash flows from investing activities:
Investment income received		7,417,270	4,419,436
Purchase of investment assets designated as held at fair value through profit or loss		(30,034,376)	(51,430,977)
Sale of investment assets designated as held at fair value through profit or loss		20,662,359	30,929,189
Increase (decrease) of cash posted as collateral		1,910,854	(2,993,588)
Net cash outflow from investing activities		(43,893)	(19,075,940)
Cash flows from financing activities:
Dividends distributed		(22,262,111)	(22,355,761)
Treasury shares repurchased		-	(3,741,814)
Distributions to non-controlling interests		(62,159)	-
Proceeds from note payable		11,874,530	179,944,080
Repayment of note payable		(37,295,732)	(158,764,003)
Finance costs paid		(6,840,222)	(5,739,082)
Net cash outflow from financing activities		(54,585,694)	(10,656,580)
Net change in cash and cash equivalents		(3,926,531)	(459,018)
Exchange gains on cash and cash equivalents		13,164,561	343,562
Cash and cash equivalents at the beginning of year		6,300,572	6,416,028
Cash and cash equivalents at the end of year	7	15,538,602	6,300,572

PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
		31 DECEMBER 2022	31 DECEMBER 2021
	NOTES	£	£
Assets
Cash and cash equivalents	7	14,640,647	4,301,574
Cash posted as collateral	7	2,222,734	4,133,588
Derivative financial assets	3,4	1,081,849	2,069,698
Interest receivable		5,848,979	4,298,886
Other current assets and prepaid expenses		3,015,560	2,881,811
Investments in subsidiaries	17	233,951,844	303,174,979
Investment assets designated as held at fair value through profit or loss	3	22,474,910	12,531,090
Total assets		283,236,523	333,391,626
Liabilities
Management fee payable	10	97,785	155,399
Due to broker		4,848,569	-
Derivative financial liabilities	3,4	3,283,142	1,508,675
Deferred income		41,201	174,603
Performance fee payable	10	-	12,913,280
Other liabilities and accrued expenses		1,737,420	1,024,885
Total liabilities		10,008,117	15,776,842
Total assets less total liabilities		273,228,406	317,614,784
Equity attributable to Shareholders of the Company
Called-up share capital	14	20,300,000	20,300,000
Share premium account	14	161,040,000	161,040,000
Other distributable reserve	14	112,779,146	112,779,146
Capital reserve		(47,260,404)	2,880,271
Revenue reserve		26,369,664	20,615,367
Total equity		273,228,406	317,614,784
Net return on ordinary activities after taxation		(22,124,267)	73,175,251

The financial statements on pages 48 to 99 were approved by the Board of Directors on 27 April 2023 and signed on its behalf by:

Graeme Proudfoot

Chair

27 April 2023

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2022
	Called Up Share Capital	Share Premium	Other Distributable Reserve	Capital Reserve	Revenue Reserve	Total
	£	£	£	£	£	£
Opening balance at 1 January 2022	20,300,000	161,040,000	112,779,146	2,880,271	20,615,367	317,614,784
Amounts paid on repurchase of Ordinary Shares	-	-	-	-	-	-
Return on ordinary activities after taxation	-	-	-	(50,140,675)	28,016,408	(22,124,267)
Dividends declared and paid	-	-	-	-	(22,262,111)	(22,262,111)

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2021
	Called Up Share Capital	Share Premium	Other Distributable Reserve	Capital Reserve	Revenue Reserve	Total
	£	£	£	£	£	£
Opening balance at 1 January 2021	20,300,000	161,040,000	116,520,960	(49,171,812)	21,847,960	270,537,108
Amounts paid on repurchase of Ordinary Shares	-	-	(3,741,814)	-	-	(3,741,814)
Return on ordinary activities after taxation	-	-	-	52,052,083	21,123,168	73,175,251
Dividends declared and paid	-	-	-	-	(22,355,761)	(22,355,761)
Closing balance at 31 December 2021	20,300,000	161,040,000	112,779,146	2,880,271	20,615,367	317,614,784

PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
		31 DECEMBER 2022	31 DECEMBER 2021
	NOTES	£	£
Cash flows from operating activities:
Net return on ordinary activities after taxation		(22,124,267)	73,175,251
Adjustments for:
--   Interest income		(34,288,810)	(31,871,341)
--   Exchange (gains) losses		1,552,676	2,049,374
Total		(54,860,401)	43,353,284
Unrealised loss (gain) on investment assets designated as held at fair value through profit or loss		(6,815,010)	(7,141,907)
Unrealised loss (gain) on investments in subsidiaries		47,763,004	(52,213,993)
Gain on derivative financial instruments		(35,736,991)	(6,131,547)
Increase in other assets and prepaid expenses		(133,010)	(1,992,663)
(Decrease) increase in management fee payable		(57,614)	63,158
Increase in due to broker		4,848,569	-
Decrease in deferred income		(133,402)	(78,800)
(Decrease) increase in performance fee payable		(12,913,280)	8,873,195
Increase in accrued expenses and other liabilities		96,684	233,894
Net cash outflow from operating activities		(57,941,451)	(15,035,379)
Cash flows from investing activities:
Interest received		33,353,829	30,746,141
Purchase of investment assets designated as held at fair value through profit or loss		(3,556,974)	(19,086,855)
Sale of investment assets designated as held at fair value through profit or loss		428,164	16,220,038
Purchase of investments in subsidiaries		(48,397,941)	(29,910,829)
Sales of investment in subsidiaries		106,463,368	45,377,842
Cash posted as collateral		1,910,854	(2,993,588)
Net cash inflow from investing activities		90,201,300	40,352,749
Cash flows from financing activities:
Treasury Shares repurchased		-	(3,741,814)
Dividends paid		(22,262,111)	(22,355,761)
Net cash outflow from financing activities		(22,262,111)	(26,097,575)
Net change in cash and cash equivalents		9,997,738	(780,205)
Exchange gains on cash and cash equivalents		341,335	343,562
Cash and cash equivalents at the beginning of the year		4,301,574	4,738,217
Cash and cash equivalents at the end of the year	7	14,640,647	4,301,574

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2022

1.   GENERAL INFORMATION

VPC Specialty Lending Investments PLC (the "Parent Company") with its subsidiaries (together "the Group") is focused on asset-backed lending to emerging and established businesses with the goal of building long-term, sustainable income generation. The Group focuses on providing capital to vital segments of the economy that are underserved by the traditional banking industry, including small businesses, working capital products, consumer finance and real estate, among others. The Group executes this strategy by identifying investment opportunities across various industries and geographies to offer shareholders access to a diversified portfolio of opportunistic credit investments originated by non-bank lenders with a focus on the rapidly developing technology-enabled lending sector. The Parent Company, which is limited by shares, was incorporated and domiciled in England and Wales on 12 January 2015 with registered number 9385218. The Parent Company commenced its operations on 17 March 2015 and intends to carry on business as an investment trust within the meaning of Chapter 4 of Part 24 of the Corporation Tax Act 2010.

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

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

As at 31 December 2022, the Parent Company had equity in the form of 382,615,665 Ordinary Shares, 278,276,392 Ordinary Shares in issue and 104,339,273 Ordinary Shares in Treasury (31 December 2021: 382,615,665 Ordinary Shares, 278,276,392 Ordinary Shares in issue and 104,339,273 Ordinary Shares in Treasury). The Ordinary Shares are listed on the premium 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 Administration (Cayman Islands) Limited (the "Administrator") is the administrator of the Group. The Administrator is responsible for the Group's general administrative functions, such as the calculation and publication of the Net Asset Value ("NAV") and maintenance of the Group's accounting records.

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

2.   SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies followed by the Group are set out below and have been applied consistently in both the current and prior year:

Basis of preparation

The consolidated financial statements present the financial performance of the Group and Company for the year ended 31 December 2022. These statements have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies under those standards. They comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and International Financial Reporting Committee, including interpretations issued by the IFRS Interpretations Committee and interpretations issued by the International Accounting Standard Committee ("IASC") that remain in effect. The financial statements have been prepared on a going concern basis and under the historical cost convention modified by the revaluation to a fair value basis for certain financial instruments as specified in the accounting policies below.

The Directors have reviewed the financial projections of the Group and Company from the date of this report, which shows that the Group and Company will be able to generate sufficient cash flows in order to meet its liabilities as they fall due. In assessing the Group's and Company's ability to continue as a going concern, the Directors have considered the Company's investment objective, risk management policies, capital management, the nature of its portfolio and expenditure projections.

Additionally, the Directors have considered the risks arising of reduced asset values and have considered the impact of the proposed winddown. The Investment Manager has also performed a range of stress tests and demonstrated to the Directors that even in an adverse scenario of depressed markets that the Group could still generate sufficient funds to meet its liabilities over the next twelve months. The Directors believe that the Group has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future being a period of at least twelve months from the date of this report.

Based on their assessment and considerations above, the Directors have concluded that the financial statements of the Group and Company should continue to be prepared on a going concern basis and the financial statements have been prepared accordingly.

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 and updated in October 2019 with consequential amendments is consistent with the requirements of IFRS, the Directors have sought to prepare the consolidated financial statements on a basis compliant with the recommendations of the SORP.

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

Restatement of Consolidated Statement of Cash Flows

The presentation of cash flows related to notes payable within the Consolidated Statement of Cash Flows has been restated to report proceeds and repayments on a gross basis, which were previously reported on a net basis.  Below is the impact of this change on the Consolidated Statement of Cash Flows:

	31 DECEMBER 2021	RESTATED 31 DECEMBER 2021
	£	£
(Decrease) increase in note payable	21,180,077	-
Proceeds from note payable	-	179,944,080
Repayment of note payable	-	(158,764,003)

Basis of consolidation

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

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

Investments in subsidiaries

The Parent Company's investments in its subsidiaries are measured at fair value which is determined with reference to the underlying NAV of the subsidiary. The NAV of the subsidiaries are used as a best estimate of fair value through profit or loss. The NAV is the value of all the assets of the subsidiary less its liabilities to creditors (including provisions for such liabilities) determined in accordance with applicable accounting standards, which represents fair value based on the Company's assessment.

Presentation of Consolidated Statement of Comprehensive Income

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

The Directors have taken advantage of the exemption under Section 408 of the Companies Act 2006 and accordingly have not presented a separate Parent Company statement of comprehensive income. The net loss on ordinary activities after taxation of the Parent Company was £(22,124,267) (31 December 2021: £73,175,251).

Income

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

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

Dividend income from investments is taken to the revenue account on an ex-dividend basis. Bank interest and other income receivable is accounted for on an effective interest basis. Dividend income from investments is reflected in Other income on the Statement of Comprehensive Income. Further disclosure can be found in Note 5.

Distributions from investments in funds are accounted for on an accrual basis as of the date the Group is entitled to the distribution. The income is treated as revenue return provided that the underlying assets of the investments comprise solely income generating loans, or investments in lending platforms which themselves generate net interest income. Distributions from investments in funds is reflected in Other income on the Statement of Comprehensive Income. Further disclosure can be found in Note 5.

Interest income from Investment assets designated as held at fair value through profit or loss are reflected in other income on the Statement of Comprehensive Income. Further disclosure can be found in Note 5.

In the instance where the retained earnings of the Parent Company's investment in a subsidiary are negative, all income from that investment is allocated to the capital reserve for both the Group and the Parent Company.

Finance costs

Finance costs are recognised using the effective interest rate method. The Group currently charges all finance costs to either revenue or capital based on retained earnings of the investment that generates the fees from the perspective of the Parent Company.

Expenses

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

The Group currently charges all expenses, including investment management fees and performance fees, to either revenue or capital based on the retained earnings of the investment that generates the fees from the perspective of the Parent Company.

At 31 December 2022, no management fees (31 December 2021: £nil) have been charged to the capital return of the Group or the Parent Company. At 31 December 2022, no performance fees (31 December 2021: £9,179,370) have been charged to the capital return of the Group and Parent Company relating to the net return on ordinary activities after taxation allocated to the capital return. Refer to Note 10 for further details of the management and performance fees.

All expenses are accounted for on an accruals basis.

Dividends payable to Shareholders

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

Taxation

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

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

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

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

Financial assets and financial liabilities

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

IFRS 9 contains a classification and measurement approach for financial assets that reflects the business model in which assets are managed and their cash flow characteristics. IFRS 9 contains a principal-based approach and applies one classification approach for all types of financial assets. For Debt Instruments, two criteria are used to determine how financial assets should be classified and measured:

v 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

v The contractual cash flow characteristics of the financial asset (i.e., whether the contractual cash flows are solely payments of principal and interest).

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at fair value through profit or loss ("FVTPL"):

v It is held within a business model whose objective is to hold assets to collect contractual cash flows; and

v Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The carrying amount of these assets is adjusted by any expected credit loss allowance recognised and measured as described further in this note.

A financial asset is measured at fair value through other comprehensive income ("FVOCI") if it meets both of the following conditions and is not designated as at FVTPL:

v It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and

v Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Movements in the carrying amount are taken through the Other Comprehensive Income ("OCI"), except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the investments amortised cost which is recognised in the Consolidated Statement of Comprehensive Income. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to the Consolidated Statement of Comprehensive Income and recognised in Income. Interest income from these financial assets in included in Income using the effective interest rate method ("ERIM").

Equity instruments are measured at FVTPL, unless they are not held for trading purposes, in which case an irrevocable election can be made on initial recognition to measure them at FVOCI with no subsequent reclassification to the Consolidated Statement of Comprehensive Income. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. Financial assets measured at FVTPL are recognised in the Consolidated Statement of Financial Position at their fair value. Fair value gains and losses, together with interest coupons and dividend income, are recognised in the Consolidated Statement of Comprehensive Income within net trading income in the period in which they occur. The fair values of assets and liabilities traded in active markets are based on current bid and offer prices respectively. If the market is not active, the Group establishes a fair value by using valuation techniques. In addition, on initial recognition, the 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.

There are no positions measured at FVOCI in the current or prior year.

Business model assessment

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

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

v 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;

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

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

v 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

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

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

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

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

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

v Prepayment and extension terms;

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

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

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

Expected credit loss allowance for financial assets measured at amortised cost

The Credit impairment losses in the Consolidated Statement of Comprehensive Income includes the change in expected credit losses which are recognised for loans and advances to customers, other financial assets held at amortised cost and certain loan commitments.

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

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

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

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

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

The estimated credit loss ("ECL") is determined by projecting the PD, LGD, and EAD for each future month and for each individual exposure. Movements between Stage 1 and Stage 2 are based on whether an instrument's credit risk as at the reporting date has increased significantly relative to the date it was initially recognised. Where the credit risk subsequently improves such that it no longer represents a significant increase in credit risk since origination, the asset is transferred back to Stage 1.

General expectations with regards to expected losses on loans are assessed based on an analysis of loan collateral and credit enhancement. Impairments are recognised once a loan is deemed to have a non-trivial likelihood of facing a material loss. The expected credit loss allowance reflects the increasing likelihood of loss as collateral and credit enhancement become diminished or impaired. The adequacy of credit enhancement is typically based on the actual contractual terms of the investment, including such provisions as collateral eligibility, advance rate and/or loan to value ratio.  The value and cash flows of the collateral are determined based on all available historical performance data on the specific asset pool being assessed, including historical loss performance data and forward-looking information, supplemented by additional sources as needed. Unless identified at an earlier stage, the credit risk of financial assets is deemed to have increased significantly when more than 30 days past due. The Group does not rebut the presumption in IFRS 9 that all financial assets that are more than 30 days past due have experienced a significant increase in credit risk. The assessment as to when a financial asset has experienced a significant increase in the probability of default requires the application of management judgement.

In addition, the Group considers a financial instrument to have experienced a significant increase in credit risk when one of the following have occurred:

v Significant increase in credit spread;

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

v Actual or expected forbearance or restructuring;

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

v Significant change in collateral value which is expected to increase the risk of default; or

v Early signs of cashflow or liquidity problems.

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

The criteria for determining whether credit risk has increased significantly will vary by portfolio and will include a backstop based on delinquency. IFRS 9 contains a rebuttable presumption that default occurs no later than when a payment is 90 days past due which the Group does not rebut. A loan is normally written off, either partially or in full, when there is no realistic prospect of recovery (as a result of the customer's insolvency, ceasing to trade or other reason) and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off decrease the amount of impairment losses recorded. The Company assesses at each reporting date whether there is objective evidence that a loan or group of loans is impaired. In performing such analysis, the Company assesses the probability of default based on the level of collateral and credit enhancement and on the number of days past due, using recent historical rates of default on loan portfolios with credit risk characteristics similar to those of the Company or past history if sufficient data is available to demonstrate a reliable loss profile. 

Inputs into the assessment of whether a financial instrument is in default and their significance 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 is used.

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, including 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 number of scenarios used and their attributes are reassessed at each reporting date by investment. The scenario weightings are determined by a combination of statistical analysis and expert credit judgement, taking account of the range of possible outcomes each chosen scenario is representative of. These scenarios are informed by data from the Federal Reserve regarding the probability of a recession in the US over the subsequent 12-month period.

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

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

Collateral and other credit enhancements

The Group employs a range of policies to mitigate credit risk. The most common of these is accepting collateral for funds advanced. The Group has internal policies of the acceptability of specific classes of collateral or credit risk mitigation.

Modification of financial assets

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

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

The risk of default of such assets after modification is assessed at the reporting date and compared with the risk under the original terms at initial recognition, when the modification is not substantial and so does not result in derecognition of the original assets. The Group monitors the subsequent performance of modified assets. The Group may determine that the credit risk has significantly improved after restructuring, so that the assets are moved from Stage 3 or Stage 2.

Modification of terms is not an indicator of a change in risk.

Modification of loans

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

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

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

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

v Significant change in the interest rate;

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

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

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

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

During the year, no investments were modified per the Group's policy. During the prior year, three investments were modified per the Group's policy. The Group performed the analysis mentioned above on the investments modified in 2021 and determined that the modification did not result in a substantial change to the terms of the loans and derecognition was not required.  The modification of the loans in the prior year did not result in any gains or losses recognised as a result of the modification of the loans as the carrying value of the loans was the same before and after the modification.

Derecognition other than a modification

Financial assets, or a portion thereof, are derecognised when the contractual rights to receive the cash flows from the assets have expired, or when they have been transferred and either (i) the Group transfers substantially all the risks and rewards of ownership, or (ii) the Group neither transfers nor retains substantially all the risks and rewards of ownership and the Group has not retained control.

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

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

v Is prohibited from selling or pledging the assets; and

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

Collateral furnished by the Group under standard repurchase agreements and securities lending and borrowing transactions are not derecognised because the Group retains substantially all the risks and rewards on the basis of the predetermined repurchase price, and the criteria for derecognition are therefore not met.

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

This category consists of forward foreign exchange contracts, common equity, preferred stock, warrants and investments in funds.

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

Investments in funds are carried at fair value through profit or loss and designated as such at inception. This is valued for the units at the balance sheet date based on the NAV where it is assessed that NAV equates to fair value.

Common equity, preferred stock and warrants are valued using a variety of techniques. These techniques include market comparables, discounted cash flows, yield analysis, and transaction prices. Refer to Note 3.

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

Loans at amortised cost

Loans at amortised cost are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans are recognised when the funds are advanced to borrowers and are carried at amortised cost using the effective interest rate method less provisions for impairment.

Purchases and sales of financial assets

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

Fair value estimation

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

Financial liabilities

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

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

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

Derivatives

Derivatives are entered into to reduce exposures to fluctuations in interest rates, exchange rates, market indices and credit risks and are not used for speculative purposes. The Parent Company entered into forward foreign currency exchange contracts as a hedge against exchange rate fluctuations for investments in Portfolio Companies denominated in foreign currencies. A forward foreign currency exchange contract is an agreement between two parties to purchase or sell a specified quantity of a currency at or before a specified date in the future. Forward contracts are typically traded in the OTC markets and all details of the contract are negotiated between the counterparties to the agreement. Accordingly, the forward contracts are valued at the forward rate by reference to the contracts traded in the OTC markets and are classified as Level 2 in the fair value hierarchy.

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

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

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

Offsetting financial instruments

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

Investments in funds

Investments in funds are measured at fair value through profit or loss. The NAV of the fund is used as a best estimate of fair value through profit or loss. 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, which represents fair value based on the Company's assessment. Refer to Note 3 and Note 19 for further information.

Equity securities

Equity securities are measured at fair value. These securities are considered either Level 1, 2, or 3 investments. Further details of the valuation of equity securities are included in Note 3. Equity securities consist of common and preferred stock, warrants and convertible note investments.

Other receivables

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

Cash and cash equivalents

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

Deferred income

The Group and Parent Company defer draw fees received from investments and the deferred fees amortise into income on a straight-line basis over the life of the loan, which approximates the effective interest rate method.

Other liabilities

Other liabilities and accrued expenses are not interest-bearing and are stated at their nominal values. Due to their short-term nature this is determined to be equivalent to their fair value.

Share Capital

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

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

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

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

Foreign exchange

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

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

Capital reserves

Capital reserve - arising on investments sold includes:

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

v exchange differences on currency balances;

v cost of own shares bought back; and

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

Capital reserve - arising on investments held includes:

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

v increases and decreases in the IFRS 9 reserve of investments held at the year-end; and

v investments in subsidiaries by the Parent Company where retained earnings is negative.

In the instance where the retained earnings of the Parent Company's investment in a subsidiary are negative, all income and expenses from that investment are allocated to the capital reserve for both the Group and the Parent Company.

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

Revenue reserves

The revenue reserve represents the accumulated revenue profits retained by the Group. The Group makes interest distributions from the revenue reserve to Shareholders.

Segmental reporting

The chief operating decision maker is the Board of Directors. The Directors are of the opinion that the Group is engaged in a single segment of business, being the investment of the Group's capital in financial assets comprising consumer loans, SME loans, corporate trade receivables and/or advances thereon. The Board focuses on the overall return from these assets irrespective of the structure through which the investment is made.

Critical accounting estimates

The preparation of financial statements in conformity with international accounting standards requires the Group 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 or complexity and areas where assumptions and estimates are significant to the financial statements, are in relation to expected credit losses and investments at fair value through profit or loss. These are detailed below.

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

Measurement of the expected credit loss allowance

The calculation of the Group's ECL allowances and provisions against loan commitments and guarantees under IFRS 9 is highly complex and involves the use of significant judgement and estimation. The investment manager proactively monitors and reviews the Company's investments monthly related to expected credit losses and IFRS 9. Specific models are developed for each underlying investment and the results are discussed on an ongoing basis as new information is received. A review is first performed to identify what stage the Company's investments are in and the appropriate analysis is then performed. This includes the formulation and incorporation of multiple forward-looking economic conditions into ECL to meet the measurement objective of IFRS 9. The most significant estimates that are discussed below are considered to be the effect of potential future economic scenarios, collateral cash flows, and probability of default. These estimates vary on an investment-by-investment basis and may not be applicable to all investments held in the portfolio.

Base case and stress case cash flow methodology under IFRS 9

Each loan in the Group's investment portfolio is analysed to assess the likelihood of the Group incurring any loss either (i) in the normal course of events, or (ii) in a stress scenario. Given that these positions are typically secured by specific collateral and often further secured by guarantees from the operating business, the analysis looks at the impacts on both the specific collateral, as well as any obligations of the operating business to understand how the Group's investment would fair in each scenario.  The collateral performance assumptions for each transaction are established using all available historical performance data on the specific asset pool being assessed, including historical loss performance data and forward-looking information, supplemented by additional sources as needed.

Base case

To establish the base case model, a representative portfolio is established based on the specific nature of the underlying collateral. The expected cash flows are assessed based on the relevant collateral parameters which will vary based on the specific asset class being assessed. In certain instances the collateral cash flows may entail the presumed sale of collateral assets to third parties based on expected market values. Cash flow and market assumptions are based on a combination of (1) historical collateral data, (2) management forecasts, (3) proxy data from comparable assets or businesses, and (4) judgement from the investment professionals based on general research and knowledge.

The model is then burdened with the following costs: (1) servicing costs which broadly reflect the expected costs of either (i) engaging a backup servicer to wind down the portfolio, or (ii) of operating the business through a liquidation; (2) upfront liquidation costs to reflect potential expenses associated with moving into liquidation; and (3) ongoing liquidation costs to reflect incremental costs born to oversee the liquidation.

The last input component is the terms of the Group's investment, which includes the applicable advance rate and interest rate which are based on the prevailing terms and circumstances of the facility.

The representative portfolio is deemed to reflect the most reliable and relevant information available about the portfolio attributes and expected performance. As part of the ongoing investment monitoring and risk management process, the Investment Manager is monitoring performance on the underlying collateral on a monthly basis to identify whether performance indicators are trending positively or negatively, and how much cushion exists compared to contractual covenant trigger levels. Any such changes would be reviewed to determine whether an adjustment is required to the model assumptions.

Stress case

Once the Base Case scenario is established, one or more "Stress Case" scenarios are created for each transaction. The Stress Case is established by stressing the inputs that are most directly tied to outcomes to an extent consistent with a severe recession or comparably severe deterioration in the investment position. The primary driver of collateral value for many asset classes is the loss rates on the underlying receivables as these have the most direct impact on liquidation outcomes. For other asset classes it may include revenue yields, market values, or other economic variables. Certain variables with less significant impacts on the cash flow outcomes may be held constant to enhance model explanatory power. Stress variables may be adjusted to reflect the fact that stress will emerge (and dissipate) over a period of time rather than having an immediate and constant impact.

2008 Recession Loss Scalars by Asset and Population
	Subprime & Deep Subprime Vintage Score below 601	Near Prime Vintage Score 601-660	Prime Vintage Score above 660
Student Loan	0%	10%	8%
Retail	17%	10%	3%
Personal Loan	16%	41%	108%
Auto	24%	54%	88%
Credit Card	43%	71%	132%

Source: Assessing Performance of Consumer Lending Assets through Macroeconomic Shocks, Second Order Solutions (June 2019)

The most heavily represented populations in the Group's borrower portfolios are personal loans (or amortising instalment loans). As seen in the above table, default rates on these loans increased by 1.16x-2.08x. Each portfolio was assessed based on the applicable stress factor range based on the product and borrower population. 

IFRS 9 calls for an assessment of the probability of default over the upcoming 12 months, and thus the Investment Manager provides a view of the probability of such a severe scenario occurring in the next 12 months for each of the investments which are at risk of incurring a loss (as some of the variables will vary between investments). Typically, the Investment Manager reviews macroeconomic data to assess the probability of a recession or stress scenario over a forward looking 12-month horizon. Such information may be supplemented with additional investment level or macroeconomic information to determine the appropriate probabilities of stress (most commonly any such adjustments would be to apply additional likelihood of stress).  In certain instances, the assessed impairment reserves are constant across all scenarios, this most commonly occurs when the assessed impairment reserves are zero. In these instances, there shall be no need to assess probability weightings as it would not impact the overall analysis. Once the model has been run at the stressed scenario, if the cash flows continue to support the payment of an investment's principal and interest, the portfolio is deemed to have adequate coverage. If there is a shortfall in principal payments, a further assessment is done to note whether there are any excluded variables that need to be considered in determining the need for reserves on the position, including taking into account other additional credit enhancements provided in each deal (i.e., corporate guarantees, etc.). Such assessment would consider the likelihood of a scenario that could pose a loss and the expected magnitude of such loss in order to determine the appropriate reserve level.

For asset backed investments, two of the primary drivers of the impairment analysis are the underlying collateral cash flows and the probability of default which is defined as the likelihood of an economic recession in the upcoming 12-month period. Regarding the underlying collateral cash flows, these may vary based on various underlying drivers depending on asset class (such as loss rates for financial assets and asset revenue and margin for ecommerce assets).  For financial assets, loss rates are stressed to 110%-210% of base case as part of the impairment analysis and the impacts of those stresses are reflected in the impairment amounts on a probability weighted basis. For ecommerce assets, revenue and margins are stressed, on average, by 18% and 10%, respectively, over the forecast period. 

Establishing Impairment Reserves

Once the model has been run at the stressed scenario, if the cash flows continue to support the payment of all principal and interest after the burdens of servicing and liquidation costs, the portfolio is deemed to have adequate coverage based solely on direct collateral. If there is a shortfall in principal payments, a further assessment is done to note whether there are any excluded variables that need to be considered in determining the need for reserves on the position, including other additional credit enhancements provided in each deal (i.e., corporate guarantees, boot collateral, etc.). Such assessment would consider the likelihood of a scenario that could pose a loss or impairment and the expected magnitude of such loss in order to determine the appropriate reserve level.

IFRS 9 calls for an assessment of the probability of default over the upcoming 12 months, and thus the Investment Manager will also provide a view of the probability of such a severe scenario occurring in the next 12 months for each of the investments which are at risk of incurring a loss (as some of the variables will vary between investments). The Investment Manager reviews macroeconomic data and central bank indicators to assess the probability of a recession or stress scenario over a forward looking 12-month horizon. Such information may be supplemented with additional investment level or macroeconomic information to determine the appropriate probabilities of stress (most commonly any such adjustments would be to apply additional likelihood of stress). In certain instances, the assessed impairment reserves are constant across all scenarios, this most commonly occurs when the assessed impairment reserves are zero. In these instances there shall be no need to assess probability weightings as it would not impact the overall analysis.

The Group  has established impairment reserves by applying a weighting of 46% to the base case scenario and 54% to the stress case scenario as at 31 December 2022. If the stress case scenario weighting was increased by 10% to 65% the impact on the increase to expected credit losses as at 31 December 2022 is not material. In 2021, the weighting was 100% to the stress scenario.

The cumulative loss rates ranged from 9% to 50%. If the cumulative loss rates in the stress scenario were increased by 10%, the impact on the increase to expected credit losses as at 31 December 2022 is not material.

The probability of default percentages ranged from 3% to 23%. If the probability of default percentages were increased by 10%, the impact on the increase to the expected credit losses as at 31 December 2022 is not material.

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. 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. Changes in fair value of all investments held at fair value are recognised in the Consolidated Statement of Comprehensive Income as a capital item. On disposal, realised gains and losses are also recognised in the Consolidated 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 Consolidated Financial Statements. The ultimate sale price of investments may not be the same as fair value. Refer to Note 3.

Critical accounting judgments

Judgement is required to determine whether the Parent Company exercises control over its investee entities and whether they should be consolidated. Control is achieved where the Parent Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. The Parent Company controls an investee entity when the Parent Company is exposed to, or has rights to, variable returns from its investment and has the ability to affect those returns through its power over the entity. At each reporting date, an assessment is undertaken of investee entities to determine control. In the intervening period, assessments are undertaken where circumstances change that may give rise to a change in the control assessment. These include when an investment is made into a new entity, or an amendment to existing entity documentation or processes. When assessing whether the Parent Company has the power to affect its variable returns, and therefore control investee entities, an assessment is undertaken of the Parent Company's ability to influence the relevant activities of the investee entity. These activities include considering the ability to appoint or remove key management or the manager, which party has decision making powers over the entity and whether the manager of an entity is acting as principal or agent. The assessment undertaken for entities considers the Parent Company's level of investment into the entity and its intended long-term holding in the entity and there may be instances where the Parent Company owns less than 51% of an investee entity but that entity is consolidated. Further details of the Parent Company's subsidiaries are included in Note 17.

The Group's investments in associates all consist of limited partner interest in funds. There are no significant restrictions between investors with joint control or significant influence over the associates listed above on the ability of the associates to transfer funds to any party in the form of cash dividends or to repay loans or advances made by the Group. Further details of the Parent Company's associates are included in Note 19.

Accounting standards issued but not yet effective or not material to the Group

At the date of authorisation of these financial statements, the following standards and interpretations, which have not been applied in these financial statements, were in issue.

IFRS 17 'Insurance Contracts' establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts. This information gives a basis for users of financial statements to assess the effect that insurance contracts have on the entity's financial position, financial performance and cash flows. IFRS 17 was issued in May 2017 and applies to annual reporting periods beginning on or after 1 January 2023. The Directors do not anticipate that the adoption of this standard and interpretations will have a material impact on the financial statements, given the nature of the Group's business being that it has no insurance contracts.

The narrow-scope amendments to IAS 1 Presentation of Financial Statements clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the entity or events after the reporting date (e.g., the receipt of a waver or a breach of covenant). The amendments also clarify what IAS 1 means when it refers to the 'settlement' of a liability. The amendments could affect the classification of liabilities, particularly for entities that previously considered management's intentions to determine classification and for some liabilities that can be converted into equity. They must be applied retrospectively in accordance with the normal requirements in IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. In May 2020, the IASB issued an Exposure Draft proposing to defer the effective date of the amendments to 1 January 2023.

Accounting standards effective in the year

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

3.   FAIR VALUE MEASUREMENT

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

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

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

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

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

Valuation of investments in funds

The Group's investments in funds are subject to the terms and conditions of the respective fund's offering documentation. The investments in funds are primarily valued based on the latest available financial information. The Investment Manager reviews the details of the reported information obtained from the funds and considers: (i) the valuation of the fund's underlying investments; (ii) the value date of the NAV provided; (iii) cash flows (calls/distributions) since the latest value date; and (iv) the basis of accounting and, in instances where the basis of accounting is other than fair value, fair valuation information provided by the funds. If necessary, adjustments to the NAV are made to the funds to obtain the best estimate of fair value. The funds in which the Group invests are close-ended and unquoted. No adjustments have been determined to be necessary to the NAV as provided as at 31 December 2022 as this reflects fair value under the relevant valuation methodology. The NAV is provided to investors only and is not made publicly available.

Valuation of equity securities

Fair value is determined based on the Group's valuation methodology, which is either determined using market comparables, discounted cash flow models or recent transactions. 

Under the Enterprise Valuation Waterfall Analysis, the Group estimates the fair value of a portfolio company using traditional valuation methodologies including market, income, and cost approaches, as well as other applicable industry-specific approaches and then waterfall the enterprise value over the portfolio company's securities in order of their preference relative to one another. Some or all the traditional valuation methodologies are weighted based on the individual circumstances of the portfolio company to determine an estimate of the enterprise value. The traditional valuation methodologies consist of valuation estimates based on: valuations of comparable public companies, recent sales of private and public comparable companies, discounting the forecasted cash flows of the portfolio company, estimating the liquidation or collateral value of the portfolio company's assets, third-party valuations of the portfolio company or its assets, considering offers from third-parties to buy the portfolio company, estimating the value to potential strategic buyers and considering the value of recent investments in the equity securities of the portfolio company. To determine the enterprise value of a portfolio company, its historical and projected financial results, as well as other factors that may impact value, such as exposure to litigation, loss of significant customers or other contingencies are considered. This financial and other information is generally obtained from the Group's portfolio companies, and in most cases represents unaudited, projected, or pro-forma financial information.

In using a valuation methodology based on the discounting of forecasted cash flows of the portfolio company, significant judgment is required in the development of an appropriate discount rate to be applied to the forecasted cash flows. When applicable, a weighted average cost of capital approach is used to derive a discount rate that takes into account i) the risk-free rate ii) the cost of debt for creditworthiness and iii) the cost of equity for performance risk. The three inputs to the discount rate are based on third-party market studies, portfolio company interest rates, and an overall understanding of the inherent risk in the cash flows. The remaining assumptions incorporated in the valuation methodologies used to estimate the enterprise value consist primarily of unobservable Level 3 inputs, including management assumptions based on judgment. For example, from time to time, a portfolio company has exposure to potential or actual litigation. In evaluating the impact on the valuation for such items, the amount that a market participant would consider in estimating fair value is considered. These estimates are highly subjective, based on the Group's assessment of the potential outcome(s) and the related impact on the fair value of such potential outcome(s). A change in these assumptions could have a material impact on the determination of fair value.

In using a valuation methodology based on comparable public companies or sales of private or public comparable companies, significant judgment is required in the application of discounts or premiums to the prices of comparable companies for factors such as size, marketability and relative performance. Related to the use of private company transactions, when a portfolio company closes on new equity, the new round's implied valuation is used in valuing the equity investment. The use of an equity round includes gaining an understanding of the resulting rights between equity classes, and when applicable, a discount related to rights and preference differences is applied to the implied valuation. In addition, when a portfolio company has significant reason to believe an equity round is closing in the near future, a weighted-probability approach with the applicable discounts may be used. Under the yield analysis approach, expected future cash flows are discounted back using a discount rate. The discount rate used incorporates market-based yields for similar credits to the public market and the underlying risk of the individual credit.

Due to the inherent uncertainty of determining the fair value of Level 3 assets that do not have a readily available market value, the fair value of the assets may differ significantly from the values that would have been used had a ready market existed for such assets and may differ materially from the values that may ultimately be received or settled. Further, such assets are generally subject to legal and other restrictions or otherwise are less liquid than publicly traded instruments. If the Group were required to liquidate a portfolio investment in a forced or liquidation sale, the Group may realise significantly less than the value at which such investment had previously been recorded.

The selection of appropriate valuation techniques may be affected by the availability of relevant inputs as well as the relative reliability of the inputs. In some cases, one valuation technique may provide the best indication of fair value while in other circumstances, multiple valuation techniques may be appropriate. The results of the application of the various techniques may not be equally representative of fair value, due to factors such as assumptions made in the valuation.

In some situations, the Group may determine it appropriate to evaluate and weigh the results to develop a range of possible values, with the fair value based on the Group's assessment of the most representative point within the range.

Investments may be classified as Level 2 when market information becomes available, yet the investment is not traded in an active market and/or the investment is subject to transfer restrictions, or the valuation is adjusted to reflect illiquidity and/or non-transferability.

The Group, at times, may hold Level 1 investments and will use the available market quotes to value the investments. As noted above, these investments may include an illiquid period in which the investment does not have the ability to trade and will be classified as Level 2.

Valuation of derivative instruments

Forward contracts are typically traded in the over-the-counter ("OTC") markets and all details of the contract are negotiated between the counterparties to the agreement. Accordingly, the forward contracts are valued at the forward rate by reference to the contracts traded in the OTC markets and are classified as Level 2 in the fair value hierarchy. The change in the value of the forward contracts during the year is recognized as foreign exchange gain/(loss) on the Consolidated Statement of Comprehensive Income. When the contract is closed, the Group recognizes the difference between the value of the contract at the time it was entered and the value at the time it was closed as foreign exchange gain/(loss).

Fair value disclosures

The following table analyses the fair value hierarchy of the Group's assets and liabilities measured at fair value at 31 December 2022:

INVESTMENT ASSETS DESIGNATED	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
AS HELD AT FAIR VALUE	£	£	£	£
Investments in funds	22,474,910	-	-	22,474,910
Common stock	17,661,510	4,080,425	491,852	13,089,233
Preferred stock	52,310,062	-	-	52,310,062
Warrant	13,902,427	-	-	13,902,427
Convertible debt	24,521,800	-	-	24,521,800
Total	130,870,709	4,080,425	491,852	126,298,432

DERIVATIVE FINANCIAL ASSETS	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Forward foreign exchange contracts	1,081,849	-	1,081,849	-
Total	1,081,849	-	1,081,849	-

DERIVATIVE FINANCIAL LIABILITIES	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Forward foreign exchange contracts	3,283,142	-	3,283,142	-
Total	3,283,142	-	3,283,142	-

The following table analyses the fair value hierarchy of the Group's assets and liabilities measured at fair value at 31 December 2021:

INVESTMENT ASSETS DESIGNATED	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
AS HELD AT FAIR VALUE	£	£	£	£
Investments in funds	12,531,090	-	-	12,531,090
Common stock	49,501,940	11,992,005	21,201,450	16,308,485
Preferred stock	38,090,065	-	-	38,090,065
Warrant	20,984,976	-	1,120,366	19,864,610
Convertible debt	20,689,151	-	-	20,689,151
Total	141,797,222	11,992,005	22,321,816	107,483,401

DERIVATIVE FINANCIAL ASSETS	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Forward foreign exchange contracts	2,069,698	-	2,069,698	-
Total	2,069,698	-	2,069,698	-

DERIVATIVE FINANCIAL LIABILITIES	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Forward foreign exchange contracts	1,508,675	-	1,508,675	-
Total	1,508,675	-	1,508,675	-

The following table analyses the fair value hierarchy of the Parent Company's assets and liabilities measured at fair value at 31 December 2022:

INVESTMENT ASSETS DESIGNATED	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
AS HELD AT FAIR VALUE	£	£	£	£
Investments in funds	22,474,910	-	-	22,474,910
Total	22,474,910	-	-	22,474,910

DERIVATIVE FINANCIAL ASSETS	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Forward foreign exchange contracts	1,081,849	-	1,081,849	-
Total	1,081,849	-	1,081,849	-

DERIVATIVE FINANCIAL LIABILITIES	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Forward foreign exchange contracts	3,283,142	-	3,283,142	-
Total	3,283,142	-	3,283,142	-

The following table analyses the fair value hierarchy of the Parent Company's assets and liabilities measured at fair value at 31 December 2021:

INVESTMENT ASSETS DESIGNATED	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
AS HELD AT FAIR VALUE	£	£	£	£
Investments in funds	12,531,090	-	-	12,531,090
Total	12,531,090	-	-	12,531,090

DERIVATIVE FINANCIAL ASSETS	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Forward foreign exchange contracts	2,069,698	-	2,069,698	-
Total	2,069,698	-	2,069,698	-

DERIVATIVE FINANCIAL LIABILITIES	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Forward foreign exchange contracts	1,508,675	-	1,508,675	-
Total	1,508,675	-	1,508,675	-

There were transfers into Level 3 fair value measurements of $4,485,316 and $nil for the Group during the year ended 31 December 2022 and 31 December 2021, respectively. There were no transfers into and out of Level 3 fair value measurements for the Parent Company during the years ended 31 December 2022 and 31 December 2021.

The following table presents the movement in Level 3 positions for the year ended 31 December 2022 for the Group:

		TOTAL	INVESTMENTS IN FUNDS	COMMON STOCK	PREFERRED STOCK	WARRANT	CONVERTIBLE DEBT
		£	£	£	£	£	£
Beginning balance, 1 January 2022		107,483,401	12,531,090	16,308,485	38,090,065	19,864,610	20,689,151
Purchases		30,030,596	3,556,974	6,607,765	6,511,747	2,602,645	10,751,465
Sales		(18,624,490)	(428,164)	(10,801,119)	(687,454)	(1,124,097)	(5,583,656)
Transfer In (Out)		4,485,316	-	4,485,316	-	-	-
Net change in unrealised gains (losses)		2,923,609	6,815,010	(3,511,214)	8,395,704	(7,440,731)	(1,335,160)
Ending balance, 31 December 2022		126,298,432	22,474,910	13,089,233	52,310,062	13,902,427	24,521,800

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

The following table presents the movement in Level 3 positions for the year ended 31 December 2021 for the Group:

		TOTAL	INVESTMENTS IN FUNDS	COMMON STOCK	PREFERRED STOCK	WARRANT	CONVERTIBLE DEBT
		£	£	£	£	£	£
Beginning balance, 1 January 2021		48,463,617	2,522,367	11,072,305	19,771,889	4,996,048	10,101,008
Purchases		45,439,031	19,086,855	7,661,428	2,250,450	5,338,445	11,101,853
Sales		(25,600,304)	(16,220,038)	(4,899,071)	(1,275,157)	(2,656,064)	(549,974)
Net change in unrealised gains (losses)		39,181,057	7,141,906	2,473,823	17,342,883	12,186,181	36,264
Ending balance, 31 December 2021		107,483,401	12,531,090	16,308,485	38,090,065	19,864,610	20,689,151

The following table presents the movement in Level 3 positions for the period ended 31 December 2022 for the Parent Company:

	INVESTMENTS
	IN FUNDS
	£
Beginning balance, 1 January 2022	12,531,090
Purchases	3,556,974
Sales	(428,164)
Net change in unrealised foreign exchange gains (losses)	-
Net change in unrealised gains (losses)	6,815,010
Ending balance, 31 December 2022	22,474,910

The following table presents the movement in Level 3 positions for the period ended 31 December 2021 for the Parent Company:

	INVESTMENTS
	IN FUNDS
	£
Beginning balance, 1 January 2021	2,522,367
Purchases	19,086,855
Sales	(16,220,038)
Net change in unrealised foreign exchange gains (losses)	(5,567,642)
Net change in unrealised gains (losses)	12,709,548
Ending balance, 31 December 2021	12,531,090

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

Quantitative information regarding the unobservable inputs for Level 3 positions as at 31 December 2022 is given below:

DESCRIPTION	FAIR VALUE AT 31 DECEMBER 2022 £	VALUATION TECHNIQUE	UNOBSERVABLE INPUT	RANGE
Common stock	5,274,594	Discounted Cash Flows & Multiples	Discount Rate	20.0%
			Price to Book	1.1x
			Price to Earnings	5.7x
			Private Company Discount	10.0%
	261,649	Public Stock Price	N/A	N/A
	1,693,212	Transaction Price	Cost Basis of Investment	N/A
	4,815,023	Transaction Price/Recent Round Price	Deal Execution Risk Discount	20.0%
			Recent Round Price per Share	$34.86
			Illiquidity Discount	30.0%
	1,044,755	Net Asset Value SPV	N/A	N/A
Convertible debt	1,716,747	Probability Weighting	Recent Round Price per Share	€6,036
			Rights & Preferences Discount	20.0%
	9,933,062	PV of Expected Proceeds/Discounted	Discount Rate	23.0%
		Cash Flows	Annual Free Cash Flow Growth Rate	3.0%
			Expected Proceeds Discount Rate Range	16.0%
			Expected Proceeds Value	$24.9M
	9,800,393	Transaction Price	Cost Basis of Investment	N/A
	1,156,323	Transaction Price/Recent Round Price	Recent Round Price per Share	$3.41 - $5.56
			Rights & Preferences Discount	20.0%
	1,915,276	Yield Analysis	Market Yield	13.8 % - 17.1%
Preferred stock	52,310,062	Transaction Price/Recent Round Price	Rights & Preferences Discount	20.0%
			Recent Round Price per Share	$0.30 - €92.17
			Price per Share	€8.79
			Market Risk Discount	5.0% - 20.0%
			Illiquidity Discount	20.0%
Investments in funds	22,474,910	Net Asset Value	N/A	N/A
Warrants	610,074	Black Scholes	Price Per Share	$0.57 - $5.56
			Rights & Preferences Discount	0.0% - 20.0%
			Risk Free Rate	4.41%
			Term	1.5 - 3.0 years
			Volatility	22.3% - 40.0%
			Market Risk Discount	20.0%
	43,562	Black Scholes/Recent Transaction Price	Illiquidity Discount	0.27% - 7.64%
			Risk Free Rate	3.99%
			Term	4.0 - 4.6 years
			Volatility	25.0% - 40.0%
	13,248,791	Transaction Price/Recent Round Price	Deal Execution Risk Discount	20.0%
			Recent Round Price per Share	$3.30 - $34.86
			Price per Share	$1.43 - €6,036
			Rights & Preferences Discount	20.0% - 40.0%
			Risk Free Rate	4.41%
			Term	1.3 - 2.0 years
			Volatility	40.0%
			Market Risk Discount	5.0% - 20.0%
Total	126,298,432

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

If the illiquidity discount of the convertible debt valued based on discounted cash flows increased / decreased by 10% it would have resulted in an increase / decrease to the total value of those securities of £1,899,353 which would affect the Net gain / (loss) on investments within the capital return column of the Consolidated Statement of Comprehensive Income.

If the illiquidity discount of the preferred stock valued based on discounted cash flows increased / decreased by 10% it would have resulted in an increase / decrease to the total value of those securities of £6,276,925 which would affect the Net gain / (loss) on investments within the capital return column of the Consolidated Statement of Comprehensive Income.

If the volatility rate used for the warrants valued based on a Black Scholes increased / decreased by 10% it would have resulted in an increase / decrease to the total value of those equity securities of £1,042,220which would affect the Net gain / (loss) on investments within the capital return column of the Consolidated Statement of Comprehensive Income.

If the price of all the investment assets held at period end, including individually those mentioned above, had increased / decreased by 10% it would have resulted in an increase / decrease in the total value the investments in funds and equity securities of £12,526,169 (31 December 2021: £10,600,644) which would affect the Net gain / (loss) on investments within the capital return column of the Consolidated Statement of Comprehensive Income.

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 not measured at fair value through profit and loss at 31 December 2022 but for which fair value is disclosed. In using a valuation methodology based on the discounting of forecasted cash flows of the Portfolio Company, significant judgment is required in the development of an appropriate discount rate to be applied to the forecasted cash flows. In determining the fair value of loans and advances to customers, the expected future cash flows are discounted back using a discount rate. The discount rate used incorporates market-based yields for similar credits in the public market and the underlying risk of the individual credit.

	CARRYING                  VALUE	FAIR MARKET                  VALUE
	£	£
Assets
Loans	220,225,329	224,705,680
Total	220,225,329	224,705,680

For all other assets and liabilities not carried at fair value, the carrying value is a reasonable approximation of fair value.

The following table presents the fair value of the Group's assets and liabilities not measured at fair value through profit and loss at 31 December 2021 but for which fair value is disclosed. The carrying value has been used where it is a reasonable approximation of fair value:

	CARRYING                  VALUE	FAIR MARKET                  VALUE
	£	£
Assets
Loans	279,339,002	279,339,002
Total	279,339,002	279,339,002

For all other assets and liabilities not carried at fair value, the carrying value is a reasonable approximation of fair value.

4.   DERIVATIVES

Typically, derivative contracts serve as components of the Group's investment strategy and are utilised primarily to structure and hedge investments to enhance performance and reduce risk to the Group. In 2022 and 2021, the Group did not designate any derivatives as hedges for hedge accounting purposes as described under IFRS 9. Derivative instruments are also used for trading purposes where the Investment Manager believes this would be more effective than investing directly in the underlying financial instruments. The only derivative contracts that the Group currently holds or issues are forward foreign exchange contracts.

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

Forward contracts

Forward contracts entered into represent a firm commitment to buy or sell an underlying asset, or currency at a specified value and point in time based upon an agreed or contracted quantity. The realised/unrealised gain or loss is equal to the difference between the value of the contract at the onset and the value of the contract at settlement date/year end date and is included in the Consolidated Statement of Comprehensive Income. Notional contract amounts of derivatives indicate the nominal value of transactions outstanding as of the balance sheet date and do not represent the amounts at risk.

As at 31 December 2022, the following forward foreign exchange contracts were included in the Group's Consolidated Statement of Financial Position at fair value through profit or loss and the Parent Company's Statement of Financial Position at fair value through profit or loss and all have a maturity of less than three months from 31 December 2022:

		Fair Value	Fair Value
As at 31 December 2022	Notional (£)	Assets (£)	Liabilities (£)
Foreign Exchange Rate Contracts	693,888,170	1,081,849	(3,283,142)

As at 31 December 2021, the following forward foreign exchange contracts were included in the Group's Consolidated Statement of Financial Position at fair value through profit or loss and the Parent Company's Statement of Financial Position at fair value through profit or loss and all have a maturity of less than three months from 31 December 2021:

		Fair Value	Fair Value
As at 31 December 2021	Notional (£)	Assets (£)	Liabilities (£)
Foreign Exchange Rate Contracts	334,162,068	2,069,698	(1,508,675)

The following tables provide information on the financial impact of netting for instruments subject to an enforceable master netting arrangement or similar agreement at 31 December 2022 for both the Parent Company and the Group:

	GROSS AMOUNTS OF RECOGNISED FINANCIAL ASSETS	GROSS AMOUNTS OF FINANCIAL LIABILITIES TO BE SET-OFF IN THE STATEMENT OF FINANCIAL POSITION	NET AMOUNTS OF RECOGNISED ASSETS PRESENTED IN THE STATEMENT OF FINANCIAL POSITION	RELATED AMOUNTS NOT ELIGIBLE TO BE SET-OFF IN THE STATEMENT OF FINANCIAL POSITION
				FINANCIAL INSTRUMENTS	COLLATERAL RECEIVED	NET AMOUNT
As at 31 December 2022	£	£	£	£	£	£
Foreign Exchange Rate Contracts	12,068,610	(10,986,761)	1,081,849	-	-	1,081,849
Total	12,068,610	(10,986,761)	1,081,849			1,081,849

	GROSS AMOUNTS OF RECOGNISED FINANCIAL LIABILITIES	GROSS AMOUNTS OF FINANCIAL ASSETS TO BE SET-OFF IN THE STATEMENT OF FINANCIAL POSITION	NET AMOUNTS OF RECOGNISED LIABILITIES PRESENTED IN THE STATEMENT OF FINANCIAL POSITION	RELATED AMOUNTS NOT ELIGIBLE TO BE SET-OFF IN THE STATEMENT OF FINANCIAL POSITION
				FINANCIAL INSTRUMENTS	COLLATERAL RECEIVED	NET AMOUNT
As at 31 December 2022	£	£	£	£	£	£
Foreign Exchange Rate Contracts	14,269,903	(10,986,761)	3,283,142	-	-	3,283,142
Total	14,269,903	(10,986,761)	3,283,142			3,283,142

The following tables provide information on the financial impact of netting for instruments subject to an enforceable master netting arrangement or similar agreement at 31 December 2021 for both the Parent Company and the Group:

	GROSS AMOUNTS OF RECOGNISED FINANCIAL ASSETS	GROSS AMOUNTS OF FINANCIAL LIABILITIES TO BE SET-OFF IN THE STATEMENT OF FINANCIAL POSITION	NET AMOUNTS OF RECOGNISED ASSETS PRESENTED IN THE STATEMENT OF FINANCIAL POSITION	RELATED AMOUNTS NOT ELIGIBLE TO BE SET-OFF IN THE STATEMENT OF FINANCIAL POSITION
				FINANCIAL INSTRUMENTS	COLLATERAL RECEIVED	NET AMOUNT
As at 31 December 2021	£	£	£	£	£	£
Foreign Exchange Rate Contracts	3,193,548	(1,123,850)	2,069,698	-	-	2,069,698
Total	3,193,548	(1,123,850)	2,069,698			2,069,698

	GROSS AMOUNTS OF RECOGNISED FINANCIAL ASSETS	GROSS AMOUNTS OF FINANCIAL ASSETS TO BE SET-OFF IN THE STATEMENT OF FINANCIAL POSITION	NET AMOUNTS OF RECOGNISED LIABILITIES PRESENTED IN THE STATEMENT OF FINANCIAL POSITION	RELATED AMOUNTS NOT ELIGIBLE TO BE SET-OFF IN THE STATEMENT OF FINANCIAL POSITION
				FINANCIAL INSTRUMENTS	COLLATERAL RECEIVED	NET AMOUNT
As at 31 December 2021	£	£	£	£	£	£
Foreign Exchange Rate Contracts	2,632,525	(1,123,850)	1,508,675	-	-	1,508,675
Total	2,632,525	(1,123,850)	1,508,675			1,508,675

5.   INCOME AND GAINS ON INVESTMENTS AND LOANS

Interest income in the amount of £33,917,279 (31 December 2021: £33,158,150) has been allocated to revenue and £nil (31 December 2021: £nil) has been allocated to capital in line with the Group's policy as set out in Note 2.

	31 DECEMBER                            2022	31 DECEMBER                            2021
	£	£
Other Income
Distributable income from investments in funds	6,294,501	1,265,158
Interest income from investment assets designated as held at fair value through profit or loss	288,503	2,088,723
Other income	835,005	1,065,739
Total	7,418,009	4,419,620

	31 DECEMBER                            2022	31 DECEMBER                            2021
	£	£
Net gains (losses) on investments
Realised loss on sale of investments	(1,924,340)	(239,441)
Unrealised gains on investment in funds	(377,775)	7,141,906
Unrealised (loss) gains on equity securities	(40,312,876)	60,212,530
Total	(42,614,991)	67,114,995

The Group received £20,662,359 from investments held at fair market value sold during the year. The cost of these investments sold were £22,586,699. These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments.

6.   FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS

Introduction

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

Risk management structure

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

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

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

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

Market risk (incorporating price, interest rate and currency risks)

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.

Market price risk

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

Interest rate risk

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

The Group is exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Due to the nature of the investments at 31 December 2022, the Group has limited exposure to variations in interest rates as the key components of interest rates are fixed and determinable or variable based on the size of the loan.

While the Group is exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows, the downside exposure of the Group is limited at 31 December 2022 due to the fixed rate nature of the investments or interest rate floors that are in place on most of the Group's variable interest rate loans. The interest rate floors that are in place on most of the Group's variable interest rate loans reduces the potential impact that a decrease in rates would have on the Group's investments.

As at 31 December 2022, if interest rates had increased by 1%, with all other variables held constant, the change in 12 months of future cash flows on the current investment portfolio, including both interest income and expense, would have been £814,989 (31 December 2021: 480,654). As at 31 December 2022, if interest rates had decreased by 1%, with all other variables held constant, the change in 12 months of future cash flows on the current investment portfolio, including both interest income and expense, would be £(814,989) (31 December 2021: £nil) due to the floors in place on the Group's investments. 

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

                Effect of IBOR reform

Following the financial crisis, the reform and replacement of benchmark interest rates such as LIBOR and other inter-bank offered rates ('IBORs') has become a priority for global regulators. There remains some uncertainty around the timing and precise nature of these changes.

The effect of a discontinuation of the above has had little impact to the Group as the underlying financial instruments have little to no exposure to any reference rates that are yet to transition apart for USD LIBOR at the portfolio company level. It is difficult to predict the full impact of the transition away from USD LIBOR until new reference rates and fallbacks are commercially accepted. Any USD LIBOR rates to which the Group is exposed will cease or become non-representative immediately after 30 June 2023.

The following table contains details of all of the financial instruments that the Group holds at 31 December 2022 which reference LIBOR and have not yet transitioned to an alternative interest rate benchmark.

As at 31 December 2022	ASSETS	LIABILITIES
Assets and liabilities exposed to USD LIBOR	£	£
Loans at amortised cost	168,736,615	-
Notes Payable	-	94,669,284
Total exposure	168,736,615	94,669,284

As at 31 December 2021	ASSETS	LIABILITIES
Assets and liabilities exposed to USD LIBOR	£	£
Loans at amortised cost	261,955,830	-
Notes Payable	-	107,267,260
Total exposure	261,955,830	107,267,260

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 as at 31 December 2022 were invested in assets which were denominated in US Dollar, Euro, Australian Dollar, Pound Sterling and other currencies. Accordingly, the value of such assets may be affected favourably or unfavourably by fluctuations in currency rates. The Group hedges currency exposure between Pound Sterling and any other currency in which the Group's assets may be denominated, in particular US Dollars, Australian Dollars, and Euros.

The Group continuously monitors for fluctuations in currency rates. The Group performs stress tests and liquidity projections to determine how much cash should be held back to meet potential future obligations to settle margin calls arising from foreign exchange hedging.

Micro and small cap company investing risk

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

Gearing and borrowing risk

Whilst the use of borrowings by the Group should enhance the net asset value of an investment when the value of an investment's underlying assets is rising, it will, however, have the opposite effect where the underlying asset value is falling. In addition, in the event that an investment's income falls for whatever reason, the use of borrowings will increase the impact of such a fall on the net revenue of the Group's investment and accordingly will have an adverse effect on the ability of the investment to make distributions to the Group. This risk is mitigated by limiting borrowings to ring-fenced Special-Purpose Vehicles ("SPVs") without recourse to the Group and employing gearing in a disciplined manner.

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 Parent Company and Group's non-Pound Sterling denominated investments. The Investment Manager re-examines the currency exposure on a regular basis in each currency and manages the Parent Company's currency exposure in accordance with market expectations.

The below table presents the net exposure to foreign currency at 31 December 2022. The table includes forward foreign exchange contracts at their notional exposure value and excludes all GBP assets and liabilities recorded on the Group's Consolidated Statement of Financial Position. If the GBP exchange rate simultaneously increased/decreased by 10% against the below currencies, the impact on profit would be an increase/decrease of £1,189,960. 10% is considered to be a reasonably possible movement in foreign exchange rates. The table above includes the exposure of the non-consolidated interest investment in the Group.

	ASSETS	LIABILITIES	FORWARD CONTRACTS	NET EXPOSURE
	31 DECEMBER	31 DECEMBER	31 DECEMBER	31 DECEMBER
	2022	2022	2022	2022
	£	£	£	£
Euro	9,456,293	-	15,395,790	(5,939,497)
US Dollar	341,615,281	(94,669,284)	239,923,214	7,022,783
Swiss Francs	10,649,047	-	-	10,649,047
Australian Dollars	167,266	-	-	167,266

The below table presents the net exposure to foreign currency at 31 December 2021. The table includes forward foreign exchange contracts at their notional exposure value and excludes all GBP assets and liabilities recorded on the Group's Consolidated Statement of Financial Position.

	ASSETS	LIABILITIES	FORWARD CONTRACTS	NET EXPOSURE
	31 DECEMBER	31 DECEMBER	31 DECEMBER	31 DECEMBER
	2021	2021	2021	2021
	£	£	£	£
Euro	8,010,560	-	10,656,310	(2,645,750)
US Dollar	402,708,565	(107,267,260)	320,884,955	(25,443,650)
Swiss Francs	10,238,876	-	-	10,238,876
Australian Dollars	2,591,233	-	2,620,803	(29,570)

The table below presents the net exposure to foreign currency at 31 December 2022. The table includes forward foreign exchange contracts at their notional exposure value and excludes all GBP assets and liabilities recorded on the Parent Company's Statement of Financial Position.

	ASSETS	LIABILITIES	FORWARD CONTRACTS	NET EXPOSURE
	31 DECEMBER	31 DECEMBER	31 DECEMBER	31 DECEMBER
	2022	2022	2022	2022
	£	£	£	£
Euro	9,456,293	-	15,395,790	(5,939,497)
US Dollar	246,945,997	-	239,923,214	7,022,783
Swiss Francs	10,649,047	-	-	10,649,047
Australian Dollars	167,266	-	-	167,266

If the GBP exchange rate simultaneously increased/decreased by 10% against the above currencies, the impact on profit would be an increase/decrease of £1,189,960. 10% is considered to be a reasonably possible movement in foreign exchange rates.

The table below presents the net exposure to foreign currency at 31 December 2021. The table includes forward foreign exchange contracts at their notional exposure value and excludes all GBP assets and liabilities recorded on the Parent Company's Statement of Financial Position.

	ASSETS	LIABILITIES	FORWARD CONTRACTS	NET EXPOSURE
	31 DECEMBER	31 DECEMBER	31 DECEMBER	31 DECEMBER
	2021	2021	2021	2021
	£	£	£	£
Euro	8,010,560	-	10,656,310	(2,645,750)
US Dollar	295,395,347	-	320,884,955	(25,489,608)
Swiss Francs	10,238,876	-	-	10,238,876
Australian Dollars	2,591,233	-	2,620,803	(29,570)

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 maturities of the non-current financial liabilities are disclosed in Note 8. The following tables show the contractual maturity of the financial assets and financial liabilities of the Group as at 31 December 2022:

	WITHIN ONE YEAR	ONE TO FIVE YEARS	OVER FIVE YEARS	TOTAL
	£	£	£	£
Assets
Loans	142,426,534	77,798,795	-	220,225,329
Cash and cash equivalents	15,538,602	-	-	15,538,602
Cash posted as collateral	2,222,734	-	-	2,222,734
Interest receivable	5,848,979	-	-	5,848,979
Dividend receivable	4,735	-	-	4,735
Other assets and prepaid expenses	2,190,718	-	-	2,190,718
Total	168,232,302	77,798,795	-	246,031,097

	WITHIN ONE YEAR	ONE TO FIVE YEARS	OVER FIVE YEARS	TOTAL
	£	£	£	£
Liabilities
Notes payable	-	94,669,284	-	94,669,284
Management fee payable	97,785	-	-	97,785
Performance fee payable	-	-	-	-
Deferred income	41,201	-	-	41,201
Due to broker	4,848,569	-	-	4,848,569
Other liabilities and accrued expenses	1,753,109	-	-	1,753,109
Total	6,740,664	94,669,284	-	101,409,948

The following tables show the contractual maturity of the financial assets and financial liabilities of the Group as at 31 December 2021:

	WITHIN ONE YEAR	ONE TO FIVE YEARS	OVER FIVE YEARS	TOTAL
	£	£	£	£
Assets
Loans	29,270,006	250,068,996	-	279,339,002
Cash and cash equivalents	6,300,572	-	-	6,300,572
Cash posted as collateral	4,133,588	-	-	4,133,588
Interest receivable	4,708,481	-	-	4,708,481
Dividend receivable	3,996	-	-	3,996
Other assets and prepaid expenses	2,877,815	-	-	2,877,815
Total	47,294,458	250,068,996	-	297,363,454

	WITHIN ONE YEAR	ONE TO FIVE YEARS	OVER FIVE YEARS	TOTAL
	£	£	£	£
Liabilities
Notes payable	-	19,834,365	87,432,895	107,267,260
Management fee payable	155,399	-	-	155,399
Performance fee payable	12,913,280	-	-	12,913,280
Deferred income	174,603	-	-	174,603
Other liabilities and accrued expenses	1,550,415	-	-	1,550,415
Total	14,793,697	19,834,365	87,432,895	122,060,957

The Investment Manager manages the Group's liquidity risk by investing primarily in a diverse portfolio of assets. At 31 December 2022, the Group had investments in 48 Portfolio Companies (31 December 2021: 48 Portfolio Companies). At 31 December 2022, 65% of the loans had a stated maturity date of less than a year (31 December 2021: 10%).

The Group and Parent Company continuously monitor for fluctuation in currency rates. The Parent Company performs stress tests and liquidity projections to determine how much cash should be held back to meet potential future obligations to settle margin calls arising from foreign exchange hedging.

As at 31 December 2022, £15.6 million (31 December 2021: £19.8 million) of the Group's liabilities relating to principal and interest payments are tied directly to the performance of investment assets that mature on or near the same date as the investment liability. The amounts above represent the values as at 31 December 2022 and do not project cash flows until maturity of the investment liabilities.

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. The ability of the Group to earn revenue is completely dependent upon payments being made by the borrower, such as adverse movements in investment markets.

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

Under the Asset Backed Lending Model, the Group provides a floating rate credit facility to the portfolio company via an SPV, which retains Debt Instruments that are originated by the portfolio company. The debt financing is typically arranged in the form of a senior secured facility and the portfolio company injects junior capital in the SPV, which provides significant first loss protection to the Group and excess spread. The Group's asset backed investments are loans to SPVs that are capitalised and actively managed by the portfolio companies in their capacity as both the owner and managing partner of the SPVs and the SPVs are not considered structured entities under IFRS 12. Refer to page 11 for further details on the structuring of the lending investments of the Group.

There are no loans past due which are not impaired. Refer to Note 9.

Credit quality

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

INTERNAL GRADE	FINTECH                                           £	eCOMMERCE                                           £	LEGAL FINANCE                                           £	TOTAL                31 DECEMBER 2022                                           £
Stage 1
A - 1	35,552,643	12,444,752	-	47,997,395
A - 2	101,982,526	23,312,077	-	125,294,603
B	19,550,356	4,058,917	9,148,556	32,757,829
C	-	-	-	-
Total	157,085,525	39,815,746	9,148,556	206,049,827
Stage 2
A - 1	-	-	-	-
A - 2	-	18,607,769	-	18,607,769
B	-	-	-	-
C	-	-	-	-
Total	-	18,607,769	-	18,607,769
Stage 3
A - 1	-	-	-	-
A - 2	-	-	-	-
B	-	-	-	-
C	11,952,754	-	-	11,952,754
Total	11,952,754	-	-	11,952,754

INTERNAL GRADE	UNITED STATES £	LATIN AMERICA £	EUROPE £	ASIA £	TOTAL          31 DECEMBER 2022 £
Stage 1
A - 1	47,997,395	-	-	-	47,997,395
A - 2	72,452,114	30,513,572	15,049,798	7,279,119	125,294,603
B	17,413,809	-	4,058,917	11,285,103	32,757,829
C	-	-	-	-	-
Total	137,863,318	30,513,572	19,108,715	18,564,222	206,049,827
Stage 2
A - 1	-	-	-	-	-
A - 2	18,607,769	-	-	-	18,607,769
B	-	-	-	-	-
C	-	-	-	-	-
Total	18,607,769	-	-	-	18,607,769

Stage 3
A - 1	-	-	-	-	-
A - 2	-	-	-	-	-
B	-	-	-	-	-
C	-	-	11,952,754	-	11,952,754
Total	-	-	11,952,754	-	11,952,754

INTERNAL GRADE	FINTECH £	eCOMMERCE £	LEGAL FINANCE £	TOTAL                31 DECEMBER                                    2021
Stage 1
A - 1	42,399,368	15,229,645	-	57,629,013
A - 2	144,483,270	49,803,839	4,216,832	198,503,941
B	9,917,622	3,470,478	8,182,974	21,571,074
C	-	-	-	-
Total	196,800,260	68,503,962	12,399,806	277,704,028
Stage 2
A - 1	-	-	-	-
A - 2	-	-	-	-
B	-	-	-	-
C	-	-	-	-
Total	-	-	-	-
Stage 3
A - 1	-	-	-	-
A - 2	-	-	-	-
B	-	-	-	-
C	14,098,947	-	-	14,098,947
Total	14,098,947	-	-	14,098,947

INTERNAL GRADE	UNITED STATES	LATIN AMERICA £	EUROPE £	ASIA £	TOTAL        31 DECEMBER                           2021
Stage 1
A - 1	57,629,013	-	-	-	57,629,013
A - 2	123,954,264	48,352,882	13,417,801	12,778,994	198,503,941
B	18,100,596	-	3,470,478	-	21,571,074
C	-	-	-	-	-
Total	199,683,873	48,352,882	16,888,279	12,778,994	277,704,028
Stage 2
A - 1	-	-	-	-	-
A - 2	-	-	-	-	-
B	-	-	-	-	-
C	-	-	-	-	-
Total	-	-	-	-	-
Stage 3
A - 1	-	-	-	-	-
A - 2	-	-	-	-	-
B	-	-	-	-	-
C	-	-	14,098,947	-	14,098,947
Total	-	-	14,098,947	-	14,098,947
INTERNAL GRADE	DEFINITION
A - 1	Asset backed loans structured with credit enhancement and strong operating liquidity positions
A - 2	High credit quality borrowers or asset backed loans structured with credit enhancement
B	High credit quality borrowers with some indicators of credit risk or asset backed loans with limited structural credit enhancement
C	Borrowers with elevated levels of credit risk

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

Portfolio Company restrictions

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

Asset class restrictions

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

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

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

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

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

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

Other restrictions

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

Maximum credit exposure

The carrying value of the Group's loan investments represents the maximum credit exposure of the Group.

7.   CASH AND CASH EQUIVALENTS

	GROUP	GROUP	PARENT COMPANY	PARENT COMPANY
	31 DECEMBER	31 DECEMBER	31 DECEMBER	31 DECEMBER
	2022	2021	2022	2021
	£	£	£	£
Cash held at bank	15,538,602	6,300,572	14,640,647	4,301,574
Total	15,538,602	6,300,572	14,640,647	4,301,574

The Parent Company has posted cash collateral of £1,140,000 as at 31 December 2022 (31 December 2021: £3,010,000) with Goldman Sachs and cash of £1,082,734 (31 December 2021: £1,123,927) with Morgan Stanley in relation to the outstanding derivatives. A portion of the Cash and cash equivalents balance is held as collateral for an underlying loan and the balance is also reflected as a liability under Due to broker on the Consolidated and Parent Company Statement of Financial Position.

Below are the credit ratings of the banks where the Parent Company and Group hold cash as at 31 December 2022 from Moody's:

BANK	RATING
Northern Trust	A2
Goldman Sachs	A2
Morgan Stanley	A1
Keybank	A1
Wells Fargo	A1
Bank of America	A2

8.   NOTES PAYABLE

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

Notes payable is inclusive of unrealised foreign exchange losses of £12.8 and £4.6 million as of December 31, 2022 and 2021, respectively. Due to cash settlements the occurred during the period in a foreign currency and translated into GBP, these previously unrealised losses have been realised in cash in the period during which the purchase/sale had occurred.

The table below provides details of the outstanding debt of the Group at 31 December 2022:

	INTEREST RATE	OUTSTANDING PRINCIPAL
31 DECEMBER 2022		£	MATURITY
Credit Facility 03-2021	3.95% + 1M LIBOR	79,010,738	1 March 2027
Total		79,010,738

The table below provides details of the outstanding debt of the Group at 31 December 2021:

	INTEREST RATE	OUTSTANDING PRINCIPAL
31 DECEMBER 2021		£	MATURITY
Credit Facility 03-2021	3.95% + 1M LIBOR	87,432,895	1 March 2027
Total		87,432,895

The Group entered into contractual obligations with a third party to structurally subordinate a portion of principal directly attributable to an existing loan facility. The Group is obligated to pay a commitment fee and interest to the third party on the obligation as interest is paid on the underlying loan facility. In the event of a default on the loan facility, the third party has first-out participation rights on the accrued and unpaid interest as well as the principal balance of the note.

The table below provides details of the outstanding first-out participation liabilities of the Group at 31 December 2022:

		OUTSTANDING PRINCIPAL
31 DECEMBER 2022		£	MATURITY
First-Out Participation 04-2019		15,658,546	1 January 2024
Total		15,658,546

The table below provides details of the outstanding first-out participation liabilities of the Group at 31 December 2021:

		OUTSTANDING PRINCIPAL
31 DECEMBER 2021		£	MATURITY
First-Out Participation 03-2017		18,181,601	1 January 2024
First-Out Participation 04-2019		1,652,764	1 January 2024
Total		19,834,365

The table below provides the movement of the notes payable and securities sold under agreements to repurchase for the year ended 31 December 2022 for the Group.

	NOTES
	PAYABLE
	£
Beginning balance, 1 January 2022	107,267,260
Purchases	11,874,530
Sales	(37,295,732)
Net change in unrealised foreign exchange gains	12,823,226
Ending balance, 31 December 2022	94,669,284

The table below provides the movement of the notes payable and securities sold under agreements to repurchase for the year ended 31 December 2021 for the Group.

	NOTES
	PAYABLE
	£
Beginning balance, 1 January 2021	86,087,183
Purchases	179,944,080
Sales	(163,403,782)
Net change in unrealised foreign exchange gains (losses)	4,639,779
Ending balance, 31 December 2021	107,267,260

9.   IMPAIRMENT OF FINANCIAL ASSETS AT AMORTISED COST

The table below provides details of the investments at amortised cost held by the Group as at 31 December 2022 under IFRS 9:

	COST BEFORE ECL	ECL	CARRYING VALUE
	£	£	£
Loans at amortised cost	236,610,350	16,385,021	220,225,329
Total	236,610,350	16,385,021	220,225,329

During the year ended 31 December 2022, £2,035,759 of loans were written off, all of which were previously fully reserved.

The table below provides details of the investments at amortised cost held by the Group as at 31 December 2021 under IFRS 9:

	COST BEFORE ECL	ECL	CARRYING VALUE
	£	£	£
Loans at amortised cost	291,802,975	12,463,973	279,339,002
Total	291,802,975	12,463,973	279,339,002

During the year ended 31 December 2021, no loans were written off.

The Parent Company does not hold any loans.

Credit impairment losses

The credit impairment losses of the Group for the year ended 31 December 2022 comprises of the following under IFRS 9:

	CREDIT IMPAIRMENT LOSSES
	31 DECEMBER 2022
		£
Change in expected credit losses		5,956,807
Currency translation on expected credit losses		-
Credit impairment losses		5,956,807

The impairment charge of the Group for the year ended 31 December 2021 comprises of the following under IFRS 9:

	CREDIT IMPAIRMENT LOSSES
	31 DECEMBER 2021
		£
Loans recovered		(358,867)
Change in expected credit losses		3,974,814
Currency translation on expected credit losses		20,195
Credit impairment losses		3,636,142

Impairment of loans written off

Impairment charges of loans written off (recovered) of £2,035,759 (31 December 2021: £(358,867)) have been recorded in the Group's Consolidated Statement of Financial Position and are included in credit impairment losses on the Consolidated Statement of Comprehensive Income. All loans written off in 2022 were previously fully reserved.

Provision for expected credit losses

As at 31 December 2022, the Group has created a reserve provision on the outstanding principal of the Group's loans of £16,385,021 (31 December 2021: £12,463,973), which have been recorded in the Group's Consolidated Statement of Financial Position and are included in Credit impairment losses on the Consolidated Statement of Comprehensive Income.

The allowance for expected credit losses comprised the following during 2022:

	31 DECEMBER                            2022
	£
Beginning balance 1 January 2022	12,463,973
Change in expected credit losses or equivalent	5,956,807
Loan written off	(2,035,759)
Ending balance 31 December 2022	16,385,021

The allowance for expected credit losses comprised the following during 2021:

	31 DECEMBER                            2021
	£
Beginning balance 1 January 2021	8,489,159
Change in expected credit losses or equivalent	3,974,814
Ending balance 31 December 2021	12,463,973

Below is a breakout of the provision for expected credit losses by stage of the ECL model as at 31 December 2022:

INTERNAL GRADE		FINTECH £	eCOMMERCE £	LEGAL FINANCE £	31 DECEMBER                            2022                                   £
Stage 1		2,917,873	802,799	149,505	3,870,177
Stage 2		-	562,090	-	562,090
Stage 3		11,952,754	-	-	11,952,754
Expected credit losses		14,870,627	1,364,889	149,505	16,385,021

INTERNAL GRADE	UNITED STATES £	LATIN AMERICA £	EUROPE £	ASIA £	31 DECEMBER                            2022                                   £
Stage 1	3,870,177	-	-	-	3,870,177
Stage 2	562,090	-	-	-	562,090
Stage 3	-	-	11,952,754	-	11,952,754
Expected credit losses	4,432,267	-	11,952,754	-	16,385,021

Below is a breakout of the provision for expected credit losses by stage of the ECL model as at 31 December 2021:

INTERNAL GRADE		FINTECH £	eCOMMERCE £	LEGAL FINANCE £	31 DECEMBER                            2021                                   £
Stage 1		-	-	-	-
Stage 2		-	-	-	-
Stage 3		12,463,973	-	-	12,463,973
Expected credit losses		12,463,973	-	-	12,463,973

INTERNAL GRADE	UNITED STATES £	LATIN AMERICA £	EUROPE £	ASIA £	31 DECEMBER                            2021                                   £
Stage 1	-	-	-	-	-
Stage 2	-	-	-	-	-
Stage 3	-	-	12,463,973	-	12,463,973
Expected credit losses	-	-	12,463,973	-	12,463,973

The breakout of the gross value of loans by stage of the ECL model as at 31 December 2022 and 31 December 2021 can be found in footnote 6. During the year, one investment was moved from Stage 1 to Stage 2 and during the prior year, one investment was moved from Stage 2 to Stage 3. All write-offs (recoveries) during the current and prior year were on assets that were considered Stage 3.

10.  FEES AND EXPENSES

Investment management fees

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

The management fee is payable in Pound Sterling monthly in arrears and is at the rate of 1/12 of 1.0% per month of NAV (the "Management Fee"). For the period from Admission until the date on which 90% of the net proceeds of the Issue have been invested or committed for investment (other than in Cash Instruments), the value attributable to any Cash Instruments of the Group held for investment purposes will be excluded from the calculation of NAV for the purposes of determining the Management Fee. The management fee expense of the group for the year is £3,840,270 (31 December 2021: £3,802,097), of which £97,785 (31 December 2021: £155,399) was payable as at 31 December 2022.

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

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

Performance fees

The performance fee is calculated by reference to the movements in the Adjusted Net Asset Value since the end of the Calculation Period in respect of which a performance fee was last earned or Admission if no performance fee has yet been earned. The payment of any performance fees to the Investment Manager will be conditional on the Parent Company achieving at least a 5.0% per annum total return for shareholders relative to a 30 April 2017 High Water Mark.

The performance fee will be calculated in respect of each 12 month period starting on 1 January and ending on 31 December in each calendar year (a "Calculation Period") and provided further that if at the end of what would otherwise be a Calculation Period no performance fee has been earned in respect of that period, the Calculation Period shall carry on for the next 12 month period and shall be deemed to be the same Calculation Period and this process shall continue until a performance fee is next earned at the end of the relevant period. The performance fee expense for the year is £nil (31 December 2021: £12,913,280), of which none (31 December 2021: £12,913,280) was payable as at 31 December 2022.

The performance fee will be equal to the lower of (i) in each case as at the end of the Calculation Period, an amount equal to (a) Adjusted Net Asset Value minus the Adjusted Hurdle Value, minus (b) the aggregate of all Performance Fees paid to the Manager in respect of all previous Calculation Periods; and (ii) the amount by which (a) 15% of the total increase in the Adjusted Net Asset Value since the Net Asset Value as at 30 April 2017 (being the aggregate of the increase in the Adjusted Net Asset Value in the relevant Calculation Period and in each previous Calculation Period) exceeds (b) the aggregate of all Performance Fees paid to the Manager in respect of all previous Calculation Periods. In the foregoing calculation, the Adjusted Net Asset Value will be adjusted for any increases or decreases in the Net Asset Value attributable to the issue or repurchase of any Ordinary Shares in order to calculate the total increase in the Net Asset Value attributable to the performance of the Parent Company.

"Adjusted Net Asset Value" means the Net Asset Value plus (a) the aggregate amount of any dividends paid or distributions made in respect of any Ordinary Shares and (b) the aggregate amount of any dividends or distributions accrued but unpaid in respect of any Ordinary Shares, plus the amount of any Performance Fees both paid and accrued but unpaid, in each case after the Effective Date and without duplication. "Adjusted Hurdle Value" means the Net Asset Value as at 30 April 2017 adjusted for any increases or decreases in the Net Asset Value attributable to the issue or repurchase of any Ordinary Shares increasing at an uncompounded rate equal to the Hurdle. The "Hurdle" means a 5% per annum total return for shareholders.

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

Administration

The Group has entered into an administration agreement with Citco Fund Administration (Cayman Islands) Limited. The Group pays to the Administrator an annual administration fee based on the Parent Company's net assets subject to a monthly minimum charge.

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

Secretary

Under the terms of the Company Secretarial Agreement, Link Group is entitled to an annual fee of £75,000 (exclusive of VAT and disbursements). All Secretary fees are included in other expenses on the Consolidated Statement of Comprehensive Income.

Registrar

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

Custodian

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

Auditors' remuneration

For the year ended 31 December 2022, the remuneration for work carried out by PricewaterhouseCoopers LLP, the statutory auditors, was as follows:

	31 DECEMBER                            2022	31 DECEMBER                            2021
	£	£
Fees charged by PricewaterhouseCoopers LLP:
v the audit of the Parent Company and Consolidated Financial Statements; and	375,000	317,000
v the audit of the Company's subsidiaries.	-	22,300

Amounts are included in other expenses on the Consolidated Statement of Comprehensive Income and are exclusive of VAT. There were no non-audit services provided by PricewaterhouseCoopers LLP during the year.

11.  TAXATION ON ORDINARY ACTIVITIES

Investment trust status

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

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

The following table presents the tax chargeable on the Group for the period ended 31 December 2022:

	REVENUE                                   £	CAPITAL                                   £	TOTAL                                   £
Net return on ordinary activities before taxation	28,016,408	(50,124,474)	(22,108,066)
Tax at the standard UK corporation tax rate of 19.00%	5,323,118	-	5,323,118
Effects of:
Non-taxable income	(5,323,118)	-	(5,323,118)
Capital items exempt from corporation tax	-	-	-
Total tax charge	-	-	-

The following table presents the tax chargeable on the Group for the period ended 31 December 2021:

	REVENUE                                   £	CAPITAL                                   £	TOTAL                                   £
Net return on ordinary activities before taxation	21,123,168	52,090,200	73,213,368
Tax at the standard UK corporation tax rate of 19.00%	4,013,402	9,897,138	13,910,540
Effects of:
Non-taxable income	(4,013,402)	-	(4,013,402)
Capital items exempt from corporation tax	-	(9,897,138)	(9,897,138)
Total tax charge	-	-	-

Overseas taxation

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

12.  NET ASSET VALUE PER ORDINARY SHARE

	AS AT 31 DECEMBER	AS AT 31 DECEMBER
	2022	2021
	£	£
Net assets attributable to Shareholders of the Parent Company	273,228,406	317,614,784
Ordinary Shares in issue (excluding Treasury Shares)	278,276,392	278,276,392
Net asset value per Ordinary Share	98.19p	114.14p

13.  RETURN PER ORDINARY SHARE

Basic earnings per share is calculated using the weighted average number of shares in issue during the year, excluding the average number of Ordinary Shares purchased by the Parent Company and held as Treasury Shares.

	AS AT 31 DECEMBER	AS AT 31 DECEMBER
	2022	2021
	£	£
(Loss) profit for the year	(22,124,267)	73,183,772
Average number of Ordinary Shares in issue during the year (excluding Treasury Shares)	278,276,392	279,617,119
Earnings per Share (basic and diluted)	(7.95)p	26.17p

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

14.  SHAREHOLDERS' CAPITAL

Set out below is the issued share capital of the Company as at 31 December 2022. All shares issued are fully paid with none not fully paid:

	NOMINAL VALUE	NUMBER OF SHARES
	£
Ordinary Shares in issue (excluding Treasury Shares)	0.01	278,276,392

Set out below is the issued share capital of the Company as at 31 December 2021. All shares issued are fully paid with none not fully paid:

	NOMINAL VALUE	NUMBER OF SHARES
	£
Ordinary Shares in issue (excluding Treasury Shares)	0.01	278,276,392

Rights attaching to the Ordinary Shares

The holders of the Ordinary Shares are entitled to receive, and to participate in, any dividends declared in relation to the Ordinary Shares. The holders of the Ordinary Shares shall be entitled to all the Parent Company's remaining net assets after taking into account any net assets attributable to other share classes in issue. The Shares shall carry the right to receive notice of, attend and vote at general meetings of the Parent Company. The consent of the holders of Shares will be required for the variation of any rights attached to the Ordinary Shares. The net return per Ordinary Share is calculated by dividing the net return on ordinary activities after taxation by the number of shares in issue.

Voting rights

Subject to any rights or restrictions attached to any shares, on a show of hands every shareholder present in person has one vote and every proxy present who has been duly appointed by a shareholder entitled to vote has one vote, and on a poll, every shareholder (whether present in person or by proxy) has one vote for every share of which he is the holder. A shareholder entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses the same way. In the case of joint holders, the vote of the senior who tenders a vote shall be accepted to the exclusion of the vote of the other joint holders, and seniority shall be determined by the order in which the names of the holders stand in the Register.

No shareholder shall have any right to vote at any general meeting or at any separate meeting of the holders of any class of shares, either in person or by proxy, in respect of any share held by him unless all amounts presently payable by him in respect of that share have been paid.

Variation of Rights & Distribution on Winding Up

Subject to the provisions of the Act as amended and every other statute for the time being in force concerning companies and affecting the Parent Company (the "Statutes"), if at any time the share capital of the Parent Company is divided into different classes of shares, the rights attached to any class may be varied either with the consent in writing of the holders of three-quarters in nominal value of the issued shares of that class or with the sanction of an extraordinary resolution passed at a separate meeting of the holders of the shares of that class (but not otherwise) and may be so varied either whilst the Parent Company is a going concern or during or in contemplation of a winding-up.

At every such separate general meeting the necessary quorum shall be at least two persons holding or representing by proxy at least one-third in nominal value of the issued shares of the class in question (but at any adjourned meeting any holder of shares of the class present in person or by proxy shall be a quorum), any holder of shares of the class present in person or by proxy may demand a poll and every such holder shall on a poll have one vote for every share of the class held by him. Where the rights of some only of the shares of any class are to be varied, the foregoing provisions apply as if each group of shares of the class differently treated formed a separate class whose rights are to be varied.

The Parent Company has no fixed life but, pursuant to the Articles, an ordinary resolution for the continuation of the Parent Company will be proposed at the annual general meeting of the Parent Company to be held in 2025 and, if passed, every five years thereafter. Upon any such resolution, not being passed, proposals will be put forward within three months after the date of the resolution to the effect that the Parent Company be wound up, liquidated, reconstructed or unitised.

If the Parent Company is wound up, the liquidator may divide among the shareholders in specie the whole or any part of the assets of the Parent Company and for that purpose may value any assets and determine how the division shall be carried out as between the shareholders or different classes of shareholders.

The table below shows the movement in shares through 31 December 2022:

FOR THE YEAR FROM 1 JANUARY 2022	SHARES IN ISSUE AT THE BEGINNING OF THE PERIOD	SHARES REPURCHASED	SHARES IN ISSUE AT THE END OF THE PERIOD
TO 31 DECEMBER 2022
Ordinary Shares	278,276,392	-	278,276,392

The table below shows the movement in shares through 31 December 2021:

	SHARES IN ISSUE AT THE BEGINNING OF THE PERIOD	SHARES REPURCHASED	SHARES IN ISSUE AT THE END OF THE PERIOD
FOR THE YEAR FROM 1 JANUARY 2021
TO 31 DECEMBER 2021
Ordinary Shares	282,647,364	(4,370,972)	278,276,392

Share buyback programme

All Ordinary Shares bought back through the share buyback programme are held in treasury as at 31 December 2022. There were no share buybacks in 2022.

Details of the share buyback program during the year ended 31 December 2021 as follows:

	ORDINARY	AVERAGE	LOWEST	HIGHEST	TOTAL
	SHARES	PRICE PER	PRICE PER	PRICE PER	TREASURY
DATE OF PURCHASE	PURCHASED	SHARE	SHARE	SHARE	SHARES
January 2021	-	0.00p	0.00p	0.00p	99,968,301
February 2021	583,465	88.25p	86.65p	88.99p	100,551,766
March 2021	1,587,507	84.01p	82.61p	89.77p	102,139,273
April 2021	550,000	85.56p	85.39p	85.80p	102,689,273
May 2021	600,000	85.63p	85.00p	86.20p	103,289,273
June 2021	1,050,000	84.07p	83.48p	84.07p	104,339,273
July 2021	-	0.00p	0.00p	0.00p	104,339,273
August 2021	-	0.00p	0.00p	0.00p	104,339,273
September 2021	-	0.00p	0.00p	0.00p	104,339,273
October 2021	-	0.00p	0.00p	0.00p	104,339,273
November 2021	-	0.00p	0.00p	0.00p	104,339,273
December 2021	-	0.00p	0.00p	0.00p	104,339,273

Other distributable reserve

During 2022, the Company declared and paid dividends of £nil (2021: £nil) from the other distributable reserve. Further, the cost of the buyback of Ordinary Shares as detailed above was funded by the other distributable reserve of £nil (2021: £3,741,814). The closing balance in the other distributable reserve remains at £112,779,146 (31 December 2021: £112,779,146).

15.  DIVIDENDS PER SHARE

The following table summarises the amounts recognised as distributions to equity shareholders in the period:

	31 DECEMBER	31 DECEMBER
	2022	2021
	£	£
2020 interim dividend of 2.00 pence per Ordinary Share paid on 1 April 2021	-	5,638,178
2021 interim dividend of 2.00 pence per Ordinary Share paid on 24 June 2021	-	5,586,527
2021 interim dividend of 2.00 pence per Ordinary Share paid on 23 September 2021	-	5,565,528
2021 interim dividend of 2.00 pence per Ordinary Share paid on 23 December 2021	-	5,565,528
2021 interim dividend of 2.00 pence per Ordinary Share paid on 31 March 2022	5,565,527	-
2022 interim dividend of 2.00 pence per Ordinary Share paid on 21 July 2022	5,565,528	-
2022 interim dividend of 2.00 pence per Ordinary Share paid on 6 October 2022	5,565,528	-
2022 interim dividend of 2.00 pence per Ordinary Share paid on 29 December 2022	5,565,528	-
Total	22,262,111	22,355,761

An interim dividend of 2.00 pence per Ordinary Share, equalling £5,565,528, was declared by the Board on 22 February 2023 in respect of the period to 31 December 2022, was paid to shareholders on 30 March 2022. The interim dividend has not been included as a liability in these financial statements in accordance with International Accounting Standard 10: Events After the Balance Sheet Date.

16.  RELATED PARTY TRANSACTIONS

Each of the Directors is entitled to receive a fee from the Parent Company at such rate as may be determined in accordance with the Articles. Save for the Chair of the Board, the fees are £33,000 for each Director per annum. The Chair's fee is £55,000 per annum. The chair of the Audit and Valuation Committee may also receive additional fees for acting as the chairman of such a committee. The current fee for serving as the chair of the Audit and Valuation Committee is £5,500 per annum.

All the Directors are also entitled to be paid all reasonable expenses properly incurred by them in attending general meetings, board or committee meetings or otherwise in connection with the performance of their duties. The Board may determine that additional remuneration may be paid, from time to time, to any one or more Directors in the event such Director or Directors are requested by the Board to perform extra or special services on behalf of the Parent Company.

At 31 December 2022, £269,183 (31 December 2021: £193,200) was paid to the Directors and £13,042 (31 December 2021: £nil) was owed for services performed.

As at 31 December 2022 and 31 December 2021, the Directors' interests in the Parent Company's Shares were as follows:

		31 DECEMBER                            2022	31 DECEMBER                            2021
Oliver Grundy	Ordinary Shares	30,000	30,000
Mark Katzenellenbogen	Ordinary Shares	215,000	215,000
Elizabeth Passey	Ordinary Shares	10,000	10,000
Clive Peggram	Ordinary Shares	333,240	333,240
Graeme Proudfoot	Ordinary Shares	130,000	130,000

Investment management fees for the year ended 31 December 2022 are payable by the Parent Company to the Investment Manager and these are presented on the Consolidated Statement of Comprehensive Income. Details of investment management fees and performance fees payable during the year are disclosed in Note 10.

During 2022, as part of an amendment to its management agreement, the Investment Manager continued to purchase Ordinary Shares of the Parent Company with 20% of its monthly management fee. The Ordinary Shares were purchased at the prevailing market price. As at 31 December 2022, the Investment Manager has purchased 706,659 (31 December 2021: 4,496,991) Ordinary Shares.

As at 31 December 2022, Partners and Principals of the Investment Manager held 510,000 (31 December 2021: 510,000) Shares in the Parent Company.

The Group has invested in VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. The Investment Manager of the Parent Company also acts as manager to VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. The principal activity of VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. is to invest in alternative finance investments and related instruments with a view to achieving the Parent Company's investment objective. As at 31 December 2022 the Group owned 26% (31 December 2021: 26%) of VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. and the value of the Group's investment in VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. was £1,231,984 (31 December 2021: £1,640,256).

The Group has invested in VPC Synthesis, L.P. The Investment Manager of the Parent Company also acts as manager to VPC Synthesis, L.P. The principal activity of VPC Synthesis, L.P. is to invest in alternative finance investments and related instruments with a view to achieving the Parent Company's investment objective. As at 31 December 2022 the Group owned 4% (31 December 2021: 4%) of VPC Synthesis, L.P. and the value of the Group's investment in VPC Synthesis, L.P. was £21,242,926 (31 December 2021: £10,890,834).

The Investment Manager may pay directly various expenses that are attributable to the Group. These expenses are allocated to and reimbursed by the Group to the Investment Manager as outlined in the Management Agreement. Any excess expense previously allocated to and paid by the Group to the Investment Manager will be reimbursed to the Group by the Investment Manager. At 31 December 2022, none (31 December 2021: £23,697) was due to the Investment Manager and is included in the Accrued expenses and other liabilities balance on the Consolidated Statement of Financial Position.

17.  SUBSIDIARIES

NAME	PRINCIPAL ACTIVITY	COUNTRY OF INCORPORATION	NATURE OF INVESTMENT	PERCENTAGE OWNERSHIP AS AT 31 DECEMBER 2022	PERCENTAGE OWNERSHIP AS AT 31 DECEMBER 2021
VPC Specialty Lending Investments Intermediate, L.P.	Investment vehicle	USA	Limited partner interest	Sole limited partner	Sole limited partner
VPC Specialty Lending Investments Intermediate Holdings, L.P.	Investment vehicle	USA	Limited partner interest	Sole limited partner	Sole limited partner
VPC Specialty Lending Investments Intermediate GP, LLC	General partner	USA	Membership interest	Sole member	Sole member
Fore London, L.P.	Investment vehicle	UK	Limited partner interest	Sole limited partner	Sole limited partner
Fore London GP, LLC	General partner	USA	Membership interest	Sole member	Sole member
Duxbury Court I, L.P.	Investment vehicle	USA	Limited partner interest	95%	95%
Duxbury Court I GP, LLC	General partner	USA	Membership interest	95%	95%
Drexel I, L.P.	Investment vehicle	USA	Limited partner interest	52%	52%
Drexel I GP, LLC	General partner	USA	Membership interest	52%	52%

The subsidiaries listed above as investment vehicles are consolidated by the Group and there is no activity to consolidate within the subsidiaries listed as general partners.

NAME	REGISTERED ADDRESS
VPC Specialty Lending Investments Intermediate, L.P.	150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
VPC Specialty Lending Investments Intermediate Holdings, L.P.	150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
VPC Specialty Lending Investments Intermediate GP, LLC	150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
Fore London, L.P.	6th Floor, 65 Gresham Street, London, EC2V 7NQ United Kingdom
Fore London GP, LLC	150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
Duxbury Court I, L.P.	150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
Duxbury Court I GP, LLC	150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
Drexel I, L.P.	150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
Drexel I GP, LLC	150 North Riverside Plaza, Suite 5200, Chicago, IL 60606

The table below illustrates the movement of the investment in subsidiaries of the Parent Company in 2022:

	INVESTMENTS
	IN SUBSIDIARIES
	£
Beginning balance, 1 January 2022	303,174,979
Purchases	48,397,941
Sales	(106,463,368)
Change in fair value of investments in subsidiaries	(11,157,708)
Ending balance, 31 December 2022	233,951,844

The table below illustrates the movement of the investment in subsidiaries of the Parent Company in 2021:

	INVESTMENTS
	IN SUBSIDIARIES
	£
Beginning balance, 1 January 2021	257,491,532
Purchases	29,910,829
Sales	(45,377,842)
Change in fair value of investments in subsidiaries	61,150,460
Ending balance, 31 December 2021	303,174,979

18.  NON-CONTROLLING INTERESTS

The non-controlling interests arises from investments in limited partnerships considered to be controlled subsidiaries into which there are other investors. The value of the non-controlling interests represents the portion of the NAV of the controlled subsidiaries attributable to the other investors. As at 31 December 2022, the portion of the NAV attributable to non-controlling interests investments totaled £nil (31 December 2021: £45,958). In the Consolidated Statement of Comprehensive Income, the amount attributable to non-controlling interests represents the increase in the fair value of the investment in the period.

The following entities have been consolidated which have non-controlling interests as at 31 December 2022:

	PRINCIPAL PLACE OF	PROPORTION OF OWNERSHIP INTERESTS HELD BY NON- CONTROLLING INTERESTS AS AT 31 DECEMBER	PROFIT OR LOSS OF SUBSIDIARY ALLOCATED TO NON- CONTROLLING INTERESTS DURING THE PERIOD ENDED 31 DECEMBER 2022	ACCUMULATED NON- CONTROLLING INTERESTS IN SUBSIDIARY AS AT 31 DECEMBER 2022
NAME OF SUBSIDIARY	BUSINESS	2022	£	£
Drexel I, L.P.	USA	47%	21,809	-
Duxbury Court I, L.P.	USA	5%	(5,608)	-
Totals			16,201	-

		31 DECEMBER
	SUMMARISED FINANCIAL	2022
NAME OF SUBSIDIARY	INFORMATION FOR SUBSIDIARY	£
Drexel I, L.P.	Distributions to non-controlling interests	42,315
	Profit/(loss) of subsidiary for period ended 31 December 2022	41,681
	Assets as at 31 December 2022	104,584
	Liabilities as at 31 December 2022	104,584
Duxbury Court I, L.P.	Distributions to non-controlling interests	19,844
	Profit/(loss) of subsidiary for period ended 31 December 2022	80,558
	Assets as at 31 December 2022	630,907
	Liabilities as at 31 December 2022	630,907

The following entities have been consolidated which have non-controlling interests as at 31 December 2021:

	PRINCIPAL PLACE OF BUSINESS	PROPORTION OF OWNERSHIP INTERESTS HELD BY NON- CONTROLLING INTERESTS AS AT 31 DECEMBER	PROFIT OR LOSS OF SUBSIDIARY ALLOCATED TO NON- CONTROLLING INTERESTS DURING THE PERIOD ENDED 31 DECEMBER 2021	ACCUMULATED NON- CONTROLLING INTERESTS IN SUBSIDIARY AS AT 31 DECEMBER 2021
NAME OF SUBSIDIARY		2021	£	£
Drexel I, L.P.	USA	47%	14,468	20,506
Duxbury Court I, L.P.	USA	5%	15,128	25,452
Totals			29,596	45,958

		31 DECEMBER
	SUMMARISED FINANCIAL	2021
NAME OF SUBSIDIARY	INFORMATION FOR SUBSIDIARY	£
Drexel I, L.P.	Distributions to non-controlling interests	-
	Profit/(loss) of subsidiary for period ended 31 December 2021	31,707
	Assets as at 31 December 2021	81,028
	Liabilities as at 31 December 2021	36,960
Duxbury Court I, L.P.	Distributions to non-controlling interests	-
	Profit/(loss) of subsidiary for period ended 31 December 2021	32,424
	Assets as at 31 December 2021	527,330
	Liabilities as at 31 December 2021	36,960

19.  INVESTMENTS IN FUNDS

The Group has been determined to exercise significant influence in relation to certain of its in funds and other entities, as such these investments are considered to be associates for accounting purposes and represent interests in unconsolidated structured entities. The following additional information is therefore provided as required by IFRS 12, Disclosure of Interests in Other Entities:

NAME OF ASSOCIATE	PRINCIPAL PLACE  OF  BUSINESS	PRINCIPAL ACTIVITY	PROPORTION OF OWNERSHIP INTERESTS HELD	BASIS OF VALUATION	FAIR VALUE OF INTEREST AS AT 31 DECEMBER                      2022                             £	MAXIMUM   EXPOSURE TO        LOSS AS AT 31 DECEMBER                      2022                             £
VPC Offshore Unleveraged Private Debt Fund Feeder, L.P.	Cayman Islands	Investment fund	26%	Designated as held at fair value through profit or loss - using NAV	1,231,984	1,231,984
VPC Synthesis, L.P.	USA	Investment fund	4%	Designated as held at fair value through profit or loss - using NAV	21,242,926	21,242,926

NAME OF ASSOCIATE	SUMMARISED FINANCIAL INFORMATION FOR ASSOCIATE	31 DECEMBER 2022                                   £
VPC Offshore Unleveraged	Profit/(loss) of associate for period ended 31 December 2022	(436,363)
Private Debt Fund Feeder, L.P.	Assets as at 31 December 2022	3,115,627
	Liabilities at 31 December 2022	110,043
VPC Synthesis, L.P.	Profit/(loss) of associate for period ended 31 December 2022	23,848,843
	Assets as at 31 December 2022	430,198,842
	Liabilities at 31 December 2022	340,919,367

NAME OF ASSOCIATE	PRINCIPAL PLACE OF BUSINESS	PRINCIPAL ACTIVITY	PROPORTION OF OWNERSHIP INTERESTS HELD	BASIS OF VALUATION	FAIR VALUE OF INTEREST AS AT 31 DECEMBER                      2021                             £	MAXIMUM   EXPOSURE TO        LOSS AS AT 31 DECEMBER                      2021                             £
VPC Offshore Unleveraged Private Debt Fund Feeder, L.P.	Cayman Islands	Investment fund	26%	Designated as held at fair value through profit or loss - using NAV	1,640,256	1,640,256
VPC Synthesis, L.P.	USA	Investment fund	4%	Designated as held at fair value through profit or loss - using NAV	10,890,834	10,890,834

NAME OF ASSOCIATE	SUMMARISED FINANCIAL INFORMATION FOR ASSOCIATE	31 DECEMBER 2021                                   £
VPC Offshore Unleveraged	Profit/(loss) of associate for period ended 31 December 2021	1,151,744
Private Debt Fund Feeder, L.P.	Assets as at 31 December 2021	4,431,392
	Liabilities at 31 December 2021	157,672
VPC Synthesis, L.P.	Profit/(loss) of associate for period ended 31 December 2021	5,838,471
	Assets as at 31 December 2021	283,302,763
	Liabilities at 31 December 2021	237,818,787

The Group's investments in associates all consist of limited partner interest in funds. There are no significant restrictions between investors with joint control or significant influence over the associates listed above on the ability of the associates to transfer funds to any party in the form of cash dividends or to repay loans or advances made by the Group.

20.  SUBSEQUENT EVENTS AFTER THE REPORTING PERIOD

The Company declared a dividend of 2.00 pence per Ordinary Share, equalling £2,565,528 for the three-month period ended 31 December 2022 and paid the dividend on 30 March 2023.

There were no other significant events subsequent to the year end.

APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS

The Annual report and Financial Statements were approved and authorised for issue by the Directors on 27 April 2023.

GOVERNANCE

Responsibility for Financial Statements and Going Concern Statement

The Directors have reviewed the financial projections of the Group and Company from the date of this report, which shows that the Group and Company will be able to generate sufficient cash flows in order to meet its liabilities as they fall due. In assessing the Group's and Company's ability to continue as a going concern, the Directors have considered the Company's investment objective, risk management policies capital management, the monthly NAV and the nature of its portfolio and expenditure projections. 

Additionally, the Directors have considered the risks arising of reduced asset values, adverse economic conditions and the impact of the proposed managed winddown. The Investment Manager has performed a range of stress tests and demonstrated to the Directors that even in an adverse scenario of depressed markets that the Group could still generate sufficient funds to meet its liabilities over the next twelve months in scenarios where the proposed winddown is approved and not approved by shareholders. The Directors believe that the Group has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future being a period of at least twelve months from the date of this report. 

Based on their assessment and considerations above, the Directors have concluded that the financial statements of the Group and Company should continue to be prepared on a going concern basis.

Viability Statement

In accordance with provision 31 of the UK Corporate Governance Code, published by the Financial Reporting Council in July 2018, and as part of an ongoing programme of risk assessment, the Directors have assessed the prospects of the Company, to the extent that they are able, over a three-year period from 31 December 2022. The Directors have chosen a three-year period as this is viewed as sufficiently long term to provide shareholders with a meaningful view, without extending the period so far into the future as to undermine the exercise. Additionally, the asset backed investments held by the Group have maturities that extend beyond three years allowing for the investment cash flows, recycling of investments and expenditures commitments of the Group to be reasonably forecasted over this timeframe.

The three-year review considers the Group's cash flow, cash distributions and other key financial ratios over the period. The three-year review also makes certain assumptions about the normal level of expenditure likely to occur and considers the impact on the financing facilities of the Group.

Furthermore, the three-year review period to 31 December 2025 was modelled considering the impact of the proposed winddown. After being so advised by Winterflood and Jefferies, the Directors considered a number of factors in determining unanimously that shareholders should vote in favour of the amendment to the investment policy and has engaged in discussions with a number of shareholders and its advisers in reaching that conclusion, in addition to having considered the recent performance of the Company. Based on this assessment the Directors have made the assumption that the vote will pass, however recognise that the outcome of the vote is not yet known and therefore creates some uncertainty.

As a part of this review, the Directors reviewed a series of stress test scenarios carried out by the Investment Manager which assumed a significant fall in income and asset levels, delay in repayment of the asset backed lending facilities, and various assumptions on the equity investment portfolio, including the impacts to the Group's financing facilities and were satisfied with the result of this analysis. Additionally, the Directors reviewed models where the proposed managed winddown vote does not pass.

In making this assessment on the viability of the Group, the Directors have also taken into consideration each of the principal risks and uncertainties on pages 21 to 24, their mitigants and the impact these might have on the business model, future performance, solvency and liquidity. Both the principal risks and the monitoring system are subject to a robust assessment at least annually.

In addition, the Directors considered the Company's current financial position and prospects, the composition of the investment portfolio, the level of outstanding capital commitments, the term structure and availability of borrowings and the ongoing costs of the business. As part of the approach, due consideration has been given to the uncertainty inherent in financial forecasts and, where applicable, as described above reasonable sensitivities have been applied to the investment portfolio in stress situations.

All the analysis above indicates that due to the stability and cash generating nature of the investment portfolio throughout the managed winddown of the Company, specifically the asset backed lending investments, the Group would be able to withstand the impacts outlined above. Based on the robust assessment of the principal risks, prospects and viability of the Group, the Board confirms that they have reasonable expectation that the Group will be able to continue operation and meet its liabilities as they fall due over the three-year period to 31 December 2025.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group and the company financial statements in accordance with UK-adopted international accounting standards.

Under company law, 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 the financial statements, the directors are required to:

v select suitable accounting policies and then apply them consistently;

v state whether applicable UK-adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

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

v prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue in business.

The directors are responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are also responsible for keeping adequate accounting records that are sufficient to show and explain the group's and company's transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006.

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.

DIRECTORS' CONFIRMATIONS

The directors consider that the Annual Report and the financial statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's and Company's position and performance, business model and strategy.

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

v the group and company financial statements, which have been prepared in accordance with UK-adopted international accounting standards, give a true and fair view of the assets, liabilities and financial position of the group and company, and of the loss of the group; and

v the Strategic Report and Directors' Report includes a fair review of the development and performance of the business and the position of the group and company, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board:

Graeme Proudfoot

Chair

27 April 2023

SHAREHOLDER INFORMATION

INVESTMENT OBJECTIVE

The Company provides asset- backed lending solutions to emerging and established businesses with the goal of building long-term, sustainable income generation. The Company focuses on providing capital to vital segments of the economy, which for regulatory and structural reasons are underserved by the traditional banking industry. Among others, these segments include small business lending, working capital products, consumer finance and real estate. The Company offers shareholders access to a diversified portfolio of opportunistic credit investments originated by non-bank lenders with a focus on the rapidly developing technology-enabled lending sector. Through rigorous diligence and credit monitoring, the Company generates stable income with significant downside protection.

As previously disclosed, the Board determined that it would be in the best interests of the Company and its shareholders to put forward formal proposals for a managed wind-down of the Company. Upon a successful vote at the general meeting on the proposals put forth by the Board, the updated investment objective of the Company will be to conduct an orderly realisation of the assets of the Company and be effected in a manner that seeks to achieve a balance between returning cash to Shareholders promptly and maximising value.

INVESTMENT POLICY

The Company seeks to achieve its investment objectives by investing in opportunities in the financial services market through portfolio companies and other lending related opportunities.

The Company invests directly or indirectly into available opportunities, including by making investments in, or acquiring interests held by, third-party funds (including those managed by the Investment Manager or its affiliates).

Direct investments include consumer loans, SME loans, advances against corporate trade receivables and/or purchases of corporate trade receivables originated by portfolio companies ("Debt Instruments"). Such Debt Instruments may be subordinated in nature, or may be second lien, mezzanine or unsecured loans.

Indirect investments include investments in portfolio companies (or in structures set up by portfolio companies) through the provision of senior secured floating rate credit facilities ("Credit Facilities"), equity or other instruments. Additionally, the Company's investments in Debt Instruments and Credit Facilities are made through subsidiaries of the Company or through partnerships in order to achieve bankruptcy remoteness from the platform itself, providing an extra layer of credit protection.

The Company may also invest in other financial services related opportunities through a combination of debt facilities, equity or other instruments.

The Company may also invest (in aggregate) up to 10% of its Gross Assets (at the time of investment) in listed or unlisted securities (including equity and convertible securities or any warrants) issued by one or more of its portfolio companies or financial services entities.

The Company invests across several portfolio companies, asset classes, geographies (primarily US, UK, Europe, Australia, Asia and Latin America) and credit bands in order to create a diversified portfolio and thereby mitigates concentration risks.

INVESTMENT RESTRICTIONS

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

PLATFORM RESTRICTIONS

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

ASSET CLASS RESTRICTIONS

Single loans acquired by the Company will typically be for a term no longer than five years.

The Company will not invest more than 20% of its Gross Assets, at the time of investment, via any single investment fund investing in Debt Instruments and Credit Facilities. In any event, the Company will not invest, in aggregate, more than 60% of its Gross Assets, at the time of investment, in investment funds that invest in Debt Instruments and Credit Facilities.

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

The following restrictions apply, in each case at the time of investment by the Company, to both Debt Instruments acquired by the Company via wholly-owned SPVs or partially-owned SPVs on a proportionate basis under the Marketplace Model, on a look-through basis under the Asset Backed Lending Model and to any Debt Instruments held by another investment fund in which the Company invests:

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

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

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

OTHER RESTRICTIONS

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

Where appropriate, the Company will ensure that any SPV used by it to acquire or receive (by way of assignment or otherwise) any loans to UK consumers shall first obtain the appropriate authorisation from the FCA for consumer credit business.

BORROWING POLICY

Borrowings may be employed at the level of the Company and at the level of any investee entity (including any other investment fund in which the Company invests or any SPV that may be established by the Company in connection with obtaining gearing against any of its assets).

The Company may, in connection with seeking such gearing or securitising its loans, seek to assign existing assets to one or more SPVs and/or seek to acquire loans using an SPV.

The Company may establish SPVs in connection with obtaining gearing against any of its assets or in connection with the securitisation of its loans (as set out further below). It intends to use SPVs for these purposes to seek to protect the geared portfolio from group level bankruptcy or financing risks.

The aggregate leverage of the Company and any investee entity (on a look-through basis, including borrowing through securitisation using SPVs) shall not exceed 1.5 times its NAV (1.5x).

As is customary in financing transactions of this nature, the particular SPV will be the borrower and the Company may from time to time be required to guarantee or indemnify a third-party lender for losses incurred as a result of certain "bad boy" acts of the SPV or the Company, typically including fraud or wilful misrepresentation or causing the SPV voluntarily to file for bankruptcy protection. Any such arrangement will be treated as 'non-recourse' with respect to the Company provided that any such obligation of the Company shall not extend to guaranteeing or indemnifying Ordinary portfolio losses or the value of the collateral provided by the SPV.

SHARE REGISTER ENQUIRIES

For shareholder enquiries, please contact the Company's registrar, Link Group on [phone].

Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate. Lines are open between 09:00 - 17:30, Monday to Friday (excluding public holidays in England and Wales).

SHARE CAPITAL AND NET ASSET VALUE INFORMATION

Ordinary £0.01 Shares	278,276,392
SEDOL Number	BVG6X43
ISIN Number	GB00BVG6X439

SHARE PRICES

The Company's shares are listed on the London Stock Exchange.

ANNUAL AND HALF-YEARLY REPORTS

Copies of the Annual and Half-Yearly Reports are available from the Investment Manager on and are available on the Company's website http://vpcspecialtylending.com.

PROVISIONAL FINANCIAL CALENDAR

June 2023	Annual General Meeting
30 June 2023	Half-year End
July 2023	Payment of interim dividend to 31 March 2022
September 2023	Announcement of half-yearly results
October 2023	Payment of interim dividend to 30 June 2022
December 2023	Payment of interim dividend to 30 September 2022
31 December 2023	Year End

DIVIDENDS

The following table summarises the amounts recognised as distributions to equity shareholders relating to 2022:

	£
2022 interim dividend of 2.00 pence per Ordinary Share paid on 21 July 2022	5,565,527
2022 interim dividend of 2.00 pence per Ordinary Share paid on 6 October 2022	5,565,528
2022 interim dividend of 2.00 pence per Ordinary Share paid on 29 December 2022	5,565,528
2022 interim dividend of 2.00 pence per Ordinary Share paid on 30 March 2023	5,565,528
Total	22,262,111

DEFINITIONS OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES

The Group uses the terms and alternative performance measures below to present a measure of profitability which is aligned with the requirements of the investors and potential investors, to draw out meaningful subtotals of revenues and earnings and to provide additional information not required for disclosure under accounting standards to assist users of the financial statements in gauging the profit levels of the Group. Alternative performance measures are used to improve the comparability of information between reporting periods, either by adjusting for uncontrollable or one-off factors which impact upon IFRS measures or, by aggregating measures, to aid the user understand the activity taking place. The Strategic Report includes both statutory and adjusted measures, the latter of which, reflects the underlying performance of the business and provides a more meaningful comparison of how the business is managed. APMs are not considered to be a substitute for IFRS measures but provide additional insight on the performance of the business. All terms and performance measures relate to past performance:

Discount to NAV - Calculated as the difference in the NAV (Cum Income) per Ordinary Share and the Ordinary Share price divided by the NAV Cum (Income) per Ordinary Share.

Dividend Yield on Average NAV - Calculated as the dividends declared during 2022 divided by the average Net Asset Value (Cum Income) of the Company for the year.

Gross Returns - The gross revenue and gross capital returns represent the return on shareholder's funds per share on investments of the Company before operating and other expenses of the Company.

Look-Through Gearing Ratio - The aggregate gearing of the Company and any investee entity (on a look through basis, including borrowing through securitisations using SPVs) shall not exceed 1.50 times its NAV (1.5x).

NAV (Cum Income) or NAV or Net Asset Value - The value of assets of the Company less liabilities determined in accordance with the accounting principles adopted by the Company.

NAV (Cum Income) Return - The theoretical total return on shareholders' funds per share reflecting the change in NAV assuming that dividends paid to shareholders were reinvested at NAV at the time dividend was announced.

	2022 Calculation	2021 Calculation	Inception to Date Calculation
(A) Closing NAV (Cum Income) per share	98.19p	114.14p	98.19p
(B) Opening NAV (Cum Income) per share	114.14p	95.72p	98.00p
(C) Dividends declared and paid	8.00p	8.00p	55.59p
D = (A - B + C) / B	-6.97%	27.60%	56.91p

NAV per Share (Cum Income) - The NAV (Cum Income) divided by the number of shares in issue.

Net Returns - Represents the return on shareholder's funds per share on investments of the Company after operating and other expenses of the Company.

Ongoing Charges Ratio - Ongoing charges represents the management fee and all other operating expenses, excluding finance costs, transaction costs and any performance fee payable, expressed as a percentage of the average net asset values during the year.

	2022 Calculation	2021 Calculation
(A) Ongoing Charges	£5,911,749	£5,460,145
(B) Average Net Asset Value	£296,360,140	£304,231,779
C = A / B	1.99%	1.79%

Premium/(Discount) to NAV (Cum Income) - The amount by which the share price of the Company is either higher (at a premium) or lower (at a discount) than the NAV per Share (Cum Income), expressed as a percentage of the NAV per share.

Share Price - Closing share price at month end (excluding dividends reinvested).

Total Shareholder Return - Calculated as the change in the traded share price from 31 December 2022 to 31 December 2021 plus the dividends declared in 2022 divided by the traded share price as at 31 December 2021.

	2022 Calculation	2021 Calculation	Inception to Date Calculation
(A) Closing Ordinary Share price	83.10p	92.20p	83.10p
(B) Opening Ordinary Share price	92.20p	78.70p	100.00p
(C) Dividends declared and paid	8.00p	8.00p	55.59p
D = (A - B + C) / B	-1.19%	27.32%	38.69%

Trailing Twelve Month Dividend Yield - Calculated as the total dividends declared over the last twelve months as at 31 December 2022 divided by the 31 December 2022 closing share price.

CONTACT DETAILS OF THE ADVISERS

Directors	Oliver Grundy Mark Katzenellenbogen Elizabeth Passey Clive Peggram Graeme Proudfoot all of the registered office below
Registered Office	6th Floor 65 Gresham Street London EC2V 7NQ United Kingdom
Company Number	9385218
Website Address	https://vpcspecialtylending.com
Corporate Brokers	Jefferies International Limited 100 Bishpsgate London EC2N 4JL United Kingdom Winterflood Securities Limited Cannon Bridge House 25 Dowgate Hill London EC4R 2GA
Investment Manager and AIFM	Victory Park Capital Advisors, LLC 150 North Riverside Plaza, Suite 5200 Chicago IL 60606 United States
Company Secretary	Link Company Matters Limited Beaufort House 51 New North Road Exeter EX4 4EP United Kingdom
Administrator	Citco Fund Administration (Cayman Islands) Limited 3 Second Street, Harborside Plaza 10, 6th Floor Jersey City NJ 07302 United States
Registrar	Link Group Central Square 29 Wellington Street Leeds LS1 4DL United Kingdom
PR Advisor	Montfort Communications Chelsea Harbour 109 Harbour Yard London SW10 0XD United Kingdom
Custodians	Merrill Lynch, Pierce, Fenner & Smith Incorporated 101 California Street San Francisco CA 94111 United States
English Legal Adviser to the Company	Stephenson Harwood LLP 1 Finsbury Circus London EC2M 7SH United Kingdom
Independent Auditors	PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT United Kingdom

ENDS

LEI: 549300UPEXC5DQB81P34

 

END