Annual Financial Report

RNS Number : 3020M

VPC Specialty Lending Invest. PLC

27 April 2018

VPC SPECIALTY LENDING INVESTMENTS PLC

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

Annual Financial Report for the period ended 31 December 2017

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 2017.

VPC Specialty Lending Investments PLC is a UK listed investment trust investing in opportunities in the alternative lending market through specialty lending platforms ("Portfolio Companies") globally and other related opportunities. This includes investing in assets originated by Portfolio Companies as well as through floating rate senior secured credit facilities ("Credit Facilities"), equity or other instruments. The Company enables its investors to access an illiquid asset class and earn an attractive risk adjusted return through a diversified, liquid vehicle traded on the Main Market.

The Company's investing activities have been delegated by the Directors to Victory Park Capital Advisors, LLC (the "Investment Manager" or "VPC").

	ORDINARY SHARES AS AT 31 DECEMBER 2017	ORDINARY SHARES AS AT 31 DECEMBER 2016
Total Net Assets attributable to equity shareholders of the Parent Company (on a consolidated basis)	£ 339,401,017	£ 363,057,307
Net Asset Value per share	91.68p	95.26p
Share price	78.00p	78.75p
Discount to Net Asset Value	-14.92%	-17.33%
Total Shareholder Return (based on share price)¹	7.30%	-9.79%
Total Net Asset Value Return²	3.07%	0.85%
Revenue Return	8.23%	6.00%
Dividends per Ordinary Share	6.80p	6.00p
New shares issued (in the period)³	-	182,615,665
Shares repurchased (in the period)	(10,927,718)	(1,500,000)

1. Based on a share price of 100 pence. Includes dividends paid during the year.

2. Net of issue costs.

3. On 4 March 2016 the Company's 183,000,000 C Shares were converted into 182,615,655 Ordinary Shares.

SUMMARY AND HIGHLIGHTS FOR THE PERIOD

As at 31 December 2017, the Company had deployed 92% of its NAV (with its cash holding of 8% temporarily elevated due to the recent sale of the Prosper marketplace loan portfolio). During 2017, The Company generated an NAV return of 3.07% for the Ordinary Shares and distributed dividends of 6.50 pence per Ordinary Share relating to the income earned during the year ended 31 December 2017.

The financial and business highlights for the year ended 31 December 2017 are as follows:

v January 2017: announced initial investments into Cognical, Inc. and Kueski, Inc., two new balance sheet investments.

v February 2017: announced initial investment into iZettle Capital AB, a new balance sheet investment.

v March 2017: announced a dividend of 1.50 pence per Ordinary Share for the three-month period to 31 December 2016.

v April 2017: announced conversion of the Company's convertible debt investment in Elevate Credit, Inc. ("Elevate") to stock as a part of Elevate's IPO.

v May 2017: announced a dividend of 1.50 pence per Ordinary Share for the three-month period to 31 March 2017.

v May 2017: announced the sale of the majority of the Company's Funding Circle USA, Inc. and Upstart Network, Inc. marketplace loan portfolios.

v May 2017: announced a performance fee hurdle of five per cent. per annum in respect of the performance fees payable to the Investment Manager relative to a 30 April 2017 High Water Mark.

v June 2017: announced initial investments into Bread Financial and Community Choice Financial, Inc., two new balance sheet investments.

v July 2017: announced sale and realisation of income from the partial sale of zipMoney Limited common stock.

v August 2017: announced a dividend of 1.50 pence per Ordinary Share for the three-month period to 30 June 2017.

v October 2017: announced the sale of the majority of the Company's Avant, Inc. marketplace loan investment.

v November 2017: announced a dividend of 1.70 pence per share for the three-month period to 30 September 2017.

v November 2017: announced initial investment in Oakam Ltd. and full repayment of the zipMoney balance sheet investment.

v December 2017: announced the sale of the Company's Prosper Marketplace, Inc. marketplace loan portfolio.

v December 2017: announced initial investments into Branch International, Ltd. and NCP Holdings, L.P., two new balance sheet investments.

SUBSEQUENT EVENTS

Since the year ended 31 December 2017:

v In February 2018, the Company made new balance sheet investments into Konfio Ltd. and was refinanced from its balance sheet investment into Kreditech Holding SSL GmbH.

v In March 2018, the Company was repaid the majority of its balance sheet exposure to The Credit Junction, Inc. ("TCJ"). The Company received a paydown of 3.11% of the Company's NAV as at 28 February 2018 and retains an exposure of 0.37% of NAV which it expects will be repaid in the coming months.

v In March 2018, the Company declared a dividend of 1.80 pence per Ordinary Share relating to the three-month period ending 31 December 2017.

v From 1 January 2018 to 27 April 2018 a total of 3,371,050 shares had been repurchased at an average price of 78.85 pence per Ordinary Share under the buyback programme.

FOR FURTHER INFORMATION, PLEASE CONTACT:

Victory Park Capital Brendan Carroll (Senior Partner and Co-Founder) Gordon Watson (Partner, Investment Manager)	via MHP (below)

Jefferies International Limited	Tel: +44 20 7029 8000
Gary Gould
Andrew Morris

MHP (PR Adviser)	Tel: +44 20 3128 8100
Tim Rowntree Kelsey Traynor	Email: vpc@mhpc.com

ABOUT:

VPC Specialty Lending Investments PLC (the "Company" or "VSL", Company No. 9385218) is a U.K. listed investment trust investing in opportunities in the specialty lending market through senior secured balance sheet facilities ("Portfolio Companies"). This includes investing in assets originated by Portfolio Companies as well as through floating rate senior secured credit facilities ("Credit Facilities"), equity or other instruments. Investing in VSL gives shareholders access to a diversified portfolio of high-growth financial technology companies, focused on the rapidly developing online lending sector.

The Company's investing activities have been delegated by the Directors to Victory Park Capital Advisors, LLC (the "Investment Manager" or "VPC"). VPC has great 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 various financial services Portfolio Companies, spanning multiple geographies, products and structures, and is continuing to deploy capital into existing and new Portfolio Companies.

This annual report for the year to 31 December 2017 (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 was admitted to the premium listing segment of the Official List of the U.K. Listing Authority (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. The Company provides its investors access to an illiquid asset class and is committed to generating attractive risk-adjusted return through a diversified, liquid vehicle traded on the premium segment of the Main Market.

A summary of the principal terms of the Investment Manager's appointment can be found in the Company's full Annual Report and Financial Statements and a statement relating to their continuing appointment can also be found in the Company's full Annual Report and Financial Statements. The investment policy can be found below. Founded in 2007 and headquartered in Chicago, VPC is an SEC-registered investment adviser that has been actively involved in the financial services marketplace since 2010.

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

A copy of the Company's Annual Report will shortly be available to view and download from the Company's website, https://vpcspecialtylending.com. Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into or forms part of this announcement.

The following text is extracted from the Annual Report and Financial Statements of the Company for the year ended 31 December 2017.

STRATEGIC REPORT

CHAIRMAN'S STATEMENT

I am pleased to present VPC Specialty Lending Investments PLC's Annual Report, for the year ended 31 December 2017. The total NAV per share return for the Company was 3.07% for the year compared to 0.95% in 2016 and the Total Shareholder Return (based on share price)¹ was 7.30% for the year compared to -9.79% in 2016. The Company declared dividends of 6.80 pence per Ordinary Share relating to the returns of the Company for the year ended 31 December 2017 and delivered a dividend yield of 7.24%⁴ on the average Ordinary Share NAV for the year.

During 2017, the Investment Manager successfully reallocated the majority of capital from marketplace lending assets to balance sheet investments. The Company has generated strong risk-adjusted returns across its balance sheet facilities with an average annualised return on invested capital of the balance sheet investments of 14.25%⁵. In addition, the Company increased diversification by completing initial investments in nine new balance sheet investments during the year and at year end the number of balance sheet deals stood at 24.

The Company also announced the modification of performance fees to include an annual hurdle rate of 5%, effective beginning 1 May 2017. The Company believes the modification serves to more closely align the incentives of the Investment Manager with the interests of the Company's shareholders.

The Company's Ordinary Share price was steady during 2017, closing the year near the same price it began. Despite the strong dividend yield, the shares continue to trade at a discount to NAV. As a result, the share buyback program continued to purchase shares on the open market, purchasing a total of 10,927,718 shares during the year. In addition, the Investment Manager continued its practice of using 20% of management fees to purchase shares, resulting in an additional 903,869 shares purchased throughout the year.

During the year, the Company delivered a below target total NAV return, but made significant progress by driving revenue returns higher, ending the year with a fourth quarter record revenue return of 2.63%. Given the trajectory and the strong condition of the portfolio, I look forward to continued gains and a stronger total return in 2018.

1. Based on a share price of 100 pence. Includes dividends paid during the year.

4. This return denotes an average return calculated by the dividends paid divided by the average Net Asset Value (Cum Income) of the Company for the period. This is an Alternative Performance Measure as defined below.

5. This return denotes an average return calculated by dividing the income earned on the balance sheet investments for the period by the average capital invested in balance sheet loans each month in the period. This return includes limited gearing on the balance sheet portfolio. This is an Alternative Performance Measure as defined below.

INVESTMENTS

Similar to 2016, the performance of the Company's investment portfolio was sharply polarised throughout the year. The balance sheet portfolio continued to generate strong returns, with an average annualised return on invested capital of the balance sheet investments of 14.25%⁵. These investments benefit from excess spread, first loss protection and full security and covenant packages. There have been no major credit issues across the portfolio and operational performance remains strong.

During the year, the Company executed on several transactions that accelerated the disposal of the marketplace lending portfolios, which now represent a minimal portion of the portfolio. The Company disposed of 16.97%⁶ of the Company's NAV through these portfolio sales, resulting in a non-recurring capital loss of 1.27%⁷. The Avant, Inc ("Avant") residuals have continued to underperform and create a drag on performance, a disappointing result given the other positive developments across the portfolio. As at 31 December 2017 the combined exposure to marketplace loans and securitisations has seen no systemic signs of deteriorating across the underlying consumer and small business loans that support the balances sheet loans.

At the beginning of 2017, the Company had a Look-Through Leverage Ratio of 0.63x. This gradually declined over the course of the year down to 0.17x as at 31 December 2017. The Company's balance sheet investments are on average less geared than its marketplace and securitisation investments. The reallocation of capital into balance sheet investments over the course of the year has had a positive impact on the financial performance of the Company and the Group. Whilst the Group's loans at amortised cost have decreased to £306 million from £470 million, the notes payable and impairment charges have also decreased to £44 million from £186 million and to £15 million from £41 million respectively while the net Revenue Return of the Company has increased to £29 million from £23 million.

I am particularly encouraged by the progress the Investment Manager has made in sourcing and executing on new high-quality deals which will drive the returns for the Company in the coming years. The strategy of partnering with the best entrepreneurs who have the strongest equity backing has continued to pay dividends as the quality of executed deals has remained very high. Two portfolio companies had their Initial Public Offerings during 2017 and others are exploring the opportunity to do so in the coming year, which I think speaks to the strength of the underlying performance. Looking forward, the Company has a record number of 24 balance sheet deals and Victory Park has significant unfunded capacity on existing terms, providing attractive investment opportunities for the Company, so I am confident the Company will continue to have ample reinvestment opportunities in the future.

6. Represents the percentage of NAV comprised by the loans sold prior to the sale of loans calculated off the NAV of the Company the month each individual sale was completed.

7. The loss on each portfolio sale is calculated off the NAV of the Company the month each individual sale was completed. The impact to the Company for the year ended 31 December 2017 was £4,437,504. This is an Alternative Performance Measure as defined below.

COSTS

The Company's annualised ratio of ongoing charges for the calendar year 2017 stands at 1.35% (approximately even with 1.30% in 2016) which comprises of management fees, advisory, legal, professional and other operating costs of the Company. Expenses incurred at any investment fund or special purpose vehicle that the Company invests in are excluded from the ongoing charges calculation of the Company.

SHARE PRICE DISCOUNT MANAGEMENT POLICY

During the year, the Company continued to implement the share buyback programme in light of the significant disparity between the Company's share price and its NAV. During 2017, a total of 10,927,718 shares were bought back at an average price of 78.44 pence per share, accounting for 2.86% of the total issued shares of the Company.

The Board continually monitors the share buyback programme as well as the Company's premium or discount 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 the full Annual Report and Accounts.

IFRS 9

IFRS 9 was adopted by the Group on 1 January 2018 and will be implemented in the financial statements for the year ending 31 December 2018. The adoption of IFRS 9 will reduce the Group's net assets at 1 January 2018 by 1.11% of the Group's NAV. The impact of the new accounting pronouncement can be found in Note 2 of the financial statements.

MARKET OUTLOOK

As 2017 ended, investor sentiment towards online lending was improving, evidenced by over $7.8 billion in consumer loan marketplace lending asset backed securities issuance, a 71% increase over 2016⁸. After 2016 saw a significant drop in U.S. online consumer loan origination, sparked by the data quality and corporate governance issues at Lending Club, 2017 saw a significant recovery in volume as most of the major issuers saw a consistent uptick in originations throughout the year. Although SoFi experienced management problems of its own in 2017, the company, nevertheless, was a large contributor to volume growth throughout the year. Marcus, the online consumer loan platform of Goldman Sachs, announced in September 2017 that it had exceeded $1 billion in loan originations⁹.

In the U.K., 2017 saw over £2.9 billion in peer-to-peer loans facilitated¹⁰, relatively flat from 2016. As with last year, this volume was heavily weighted towards the second half of the year after lending volumes initially dipped in the second quarter. Accordingly, in the fourth quarter of 2017, origination volumes were growing sequentially in both the U.S. and U.K.

The political and macroeconomic outlook continues to appear generally positive for lenders under the new administration in the U.S. The tax cut signed at the end of 2017 should give a significant boost to both business and consumers. The regulatory environment is expected to improve for marketplace lending as the Consumer Financial Protection Bureau ("CFPB") rolls back plans for increased oversight, and the current administration focuses on reducing regulations applicable to lenders. On the other hand, individual states may become more proactive at protecting consumers, which can lead to a complicated environment for lenders. In the U.K., banks reduced the availability of unsecured consumer credit in each quarter of 2017 and intend to continue tightening standards into 2018⁸. The FCA has yet to publish its post-implementation review of peer-to-peer lending, which was expected in 2017 as the snap election, Brexit and other issues took priority during the year.

Further rate increases, which are expected in the U.S. during the year, will continue to translate into increased income for the Company due to the floating rate balance sheet investments and the short duration of the marketplace loan assets. As at 31 December 2017, the Company reported an unlevered weighted average yield on the balance sheet investments of 13.29%¹¹ in the monthly newsletter. The increase in LIBOR from the prevailing rates from 31 December 2016 to 31 December 2017 accounted for an increase in 0.40% of the unlevered weighted average yield. As interest rates continue to increase, the Company's continued focus on balance sheet deals, with first loss protection and significant excess spread, provides insulation from any potential deterioration in currently benign credit conditions.

The long term structural growth drivers for online lending remain intact. Loan volumes should continue to increase as banks continue to scale back the availability of consumer credit, while established online lenders continue to grow, build scale and newer companies establish a presence. The availability of credit information outside banks continues to improve and, through continued technological innovation, online lenders can profitably lend to these under-served SMEs and consumers. Online lenders continue to innovate and provide a better user experience to borrowers. Anticipated regulatory crackdowns in both the U.S. and the U.K. have not materialised. These growth drivers are likely to sustain the continued progress and development of the online lending sector for many years to come. The Company remains well positioned to capture the resulting income opportunity due to its Investment Manager's experience and technical expertise.

8. Source: KBRA "2017 Consumer Loan Marketplace Lending Year in Review and 2018 Outlook".

9. Source: Peer-to-Peer Finance Association (P2PFA).

10. Source: Bank of England.

11. This return denotes an average return calculated by dividing the income earned on balance sheet investments for the period by the average capital invested in balance sheet loans each month in the period. The return excludes gearing. This is an Alternative Performance Measure as defined below.

Andrew Adcock

Chairman

27 April 2018

INVESTMENT OBJECTIVES

The Company's investment objectives are to:

(i) generate an attractive total return for shareholders consisting of distributable income and capital growth through investments in specialty lending opportunities;

(ii) achieve portfolio diversification across Portfolio Companies, geographies, borrower types, credit quality, loan structures and investment models; and

(iii) enable our shareholders to benefit from equity upside through exposure to equity or equity-linked securities issued by Platforms.

The Company's reported Net Asset Value (the "NAV") as at 31 December 2017 was £339.4 million (cum income).

TOP TEN POSITIONS

The table below provides a summary of the top ten positions of the Group, excluding equity exposure, as at 31 December 2017. The summary includes a look-through of the Group's investment in 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 below) to consider the application of the restrictions in this policy on a look-through basis. All balance sheet investments (excluding convertible notes) are disclosed as loans at amortised cost in accordance with the International Financial Reporting Standards within the Statement of Financial Position. There has been a continued, deliberate and significant shift to balance sheet assets throughout 2017. At the end of 2017, the top ten positions contain all balance sheet investments compared to six of the top ten at the end of 2016.

INVESTMENT	COUNTRY	INVESTMENT TYPE	PERCENTAGE OF NAV
Elevate Credit, Inc.	United States	Balance Sheet	15.04%
Borro Ltd.	United Kingdom	Balance Sheet	8.38%
Applied Data Finance, LLC	United States	Balance Sheet	6.25%
Community Choice Financial, Inc.	United States	Balance Sheet	5.70%
iZettle Capital AB	Sweden	Balance Sheet	5.14%
Wheels Financial Group, LLC	United States	Balance Sheet	5.12%
Avant, Inc. - Balance Sheet	United States	Balance Sheet	4.30%
Oakam Ltd.	United Kingdom	Balance Sheet	4.18%
LendUp, Inc.	United States	Balance Sheet	4.06%
The Credit Junction, Inc.	United States	Balance Sheet	3.95%

The table below provides a summary of the top ten positions of the Group, excluding equity exposure, as at 31 December 2016. The summary includes a look-through of the Group's investment in VPC Offshore Unleveraged Private Debt Fund Feeder, L.P.

INVESTMENT	COUNTRY	INVESTMENT TYPE	PERCENTAGE OF NAV
Borro Ltd.	United Kingdom	Balance Sheet	10.93%
Avant, Inc. - Marketplace Loans	United States	Marketplace	10.76%
Elevate Credit, Inc.	United States	Balance Sheet	7.40%
zipMoney Limited	Australia	Balance Sheet	6.21%
Wheels Financial Group, LLC	United States	Balance Sheet	5.92%
Funding Circle US, Inc.	United States	Marketplace	5.80%
Prosper Marketplace, Inc.	United States	Marketplace	5.69%
Avant, Inc. - Balance Sheet	United States	Balance Sheet	5.65%
Avant, Inc. - Securitisation Residuals	United States	Securitisation Residuals	5.21%
The Credit Junction, Inc.	United States	Balance Sheet	3.74%

INVESTMENT MANAGER'S REPORT

SUMMARY

During the year, the Company has made a great deal of progress and have now successfully completed most of the Group's portfolio transition into balance sheet investments from marketplace loans, which as at 31 December 2017 represented 79% of the portfolio and had a gross return on invested capital (ROIC) of 14.25%⁵. However, total NAV return for 2017 was 3.07%, which was below the target return levels, but largely due to one-time losses from portfolio sales and drag from the remaining securitisation residuals. Victory Park ended the year on a strong note having completed nine new balance sheet deals and exiting two deals that matured in November and December. Looking forward, The Company has a record number of 24 balance sheet deals and Victory Park has significant unfunded capacity on existing terms, providing attractive investment opportunities for the Company.

As a firm Victory Park has continued to invest heavily in both investment and operational resources to support the Company's growth as one of the largest and most active financial technology investors globally. Additionally, we expanded our relationships into new products and geographies to help foster innovation and growth in the financial technology ecosystem. We are committed to producing strong risk-adjusted returns by partnering with the best management teams and sponsors in the industry, while at the same time focusing on downside protection from credit losses through rigorous analysis and portfolio monitoring.

Overall, 2017 was an encouraging year for the Company, during which it invested in new transactions and expanded the existing portfolio. Although the total return was not satisfactory, we feel that we have a strong portfolio that will drive higher returns in 2018. The marketplace loans and securitisations have proved to perform poorly, but we are proud to have successfully transitioned out of the majority of the portfolio's marketplace loan facilities and into what we believe, are more superior balance sheet investments. As it stands today, the Company has the strongest credit portfolio since inception and we look forward to improved performance throughout 2018 and beyond.

VPC Firm Update

The Victory Park team continues to grow as we hire new talent to strengthen our operations and investment teams, led by two senior additions to the financial services team. Troy Jamison joined as the new Chief Risk Officer and Todd Kushman as Principal and Head of Capital Markets.

Troy Jamison joined in October with over 20 years of experience in risk management, most recently at Second Order Solutions, a boutique credit advisory firm that we have worked with extensively. Prior to that he had a long career as a senior risk officer at Capital One, the largest issuer of non-prime credit cards in the United States. Troy and his team operate in a parallel function to the deal teams and do both quantitative and qualitative work to analyse loan pools and credit data to flag any issues to our Investment Committee. He will also oversee our platform audit process to coordinate our third party operational and financial audits which we perform annually on every portfolio company.

Todd Kushman joined us in December from Torrey Pointe Capital where he was a partner and chief operating officer. Prior to that role, he was a managing director at Cerberus Capital Management, where he centralised the firm's interest rate hedging program across all investment strategies and executed strategic financings. Todd will help with new product development and in identifying financing opportunities to support the firm's investment products. Additionally, he will assist VSL in finding more attractive and lower cost credit facilities.

Finally, Victory Park celebrated its 10th anniversary and relocated its Chicago headquarters to 150 North Riverside Plaza, Suite 5200, Chicago, Illinois 60606. The new office space compliments our offices in New York and Los Angeles, and allows our team to grow for years to come.

COMPANY PERFORMANCE

NAV (Cum Income) Return Analysis

During the year, the Company generated a NAV return of 3.07% for the Ordinary Shares and declared dividends relating to the period totalled 6.80 pence per Ordinary Share (up from 6.00 pence per Ordinary Share in 2016). The NAV per share (Cum Income) at year end 2017 was 91.68 pence per Ordinary Share.

The Company generated gross revenue returns of 9.93% as a percentage of NAV in 2017, of which 9.39% was derived from balance sheet investments and 0.54% from marketplace investments. Expenses were -1.70% for a net revenue return of 8.23%. Capital returns contributed -5.16%, comprised of -2.90% from marketplace investments, -2.10% from securitisation residuals, 0.13% from equity investments and -0.29% from other capital returns, for a net total return of 3.07%.

Other Selected Return Statistics

Below are selected return statistics for the Company in addition to the return analysis disclosed above.

ROIC of balance sheet investments	14.25%⁵
Non-recurring capital return on portfolio sales	-1.27%⁷
NAV of marketplace loan portfolios sold	16.97%⁶

6. Represents the percentage of NAV comprised by the loans sold prior to the sale of loans calculated off the NAV of the Company the month each individual sale was completed.

INVESTMENTS

The Company invests directly and/or indirectly into available opportunities, including investments in funds managed by the Investment Manager. Direct investments include consumer loans, SME loans and advances against corporate trade receivables originated by Portfolio Companies ("Debt Instruments"). Indirect investments 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.

We allocate capital across different Portfolio Companies to meet the Company's investment objectives within the pre-defined portfolio limits and with a focus on portfolio level diversification. As at 31 December 2017, the Company's investments were diversified across hundreds of thousands of consumer and small business loans originated by 29 different Portfolio Companies, including companies supporting the financial services market across the U.S., U.K., Europe and Australia. Capital was provided to 24 Portfolio Companies via balance sheet investments. As part of its investment portfolio, the Company also had exposure to 24 Portfolio Companies through equity securities or convertible notes as at 31 December 2017.

We continue to implement our strategy of deploying capital across a broad range of Portfolio Companies with diversity of geographies, borrower types and credit quality. As at 31 December 2017, consumer exposure accounted for 81% of the investment portfolio, while SME exposure accounted for 19%. Investments in U.S. Portfolio Companies accounted for 79% of the investment portfolio, with U.K. Portfolio Companies accounting for a further 8% of the portfolio, and European Portfolio Companies and other at 13%.

During 2017, the Group's portfolio of balance sheet investments continued to generate strong risk-adjusted returns. These investments benefit from first loss protection and excess spread, which provides downside protection in the case of increased credit losses. The credit metrics on the underlying loans have continued to show strong performance across the portfolio with no signs of immediate macro weakness. Furthermore, the pipeline of available balance sheet investment opportunities is the strongest since inception.

Geographic Diversification

While the Company's investments are concentrated within the U.S., we continue to leverage our extensive sponsor network to build our international exposure and we expect this trend to continue over time. Furthermore, we are evaluating unique opportunities to partner with leading entrepreneurs in emerging markets. We have closed a total of eight financial services investments outside the U.S. and UK, and we are in final diligence with two companies which we expect to close in the near term. Throughout the year, the Company expanded its exposure to Mexico, Continental Europe, Kenya, Canada and Scandinavia. We expect to grow our international business over the next several years to supplement our existing exposure.

Major Equity Funding Updates

During the year, several of the Company's portfolio companies announced new equity fundraisings led by renowned equity sponsors. The equity raised supplements our debt facilities and fosters growth. In addition, there are three investments not disclosed publicly by our portfolio companies.

v Over the course of the year, two of our Portfolio Companies completed their Initial Public Offerings, Elevate Credit, Inc. and Curo Financial Technologies Corp are now listed U.S. companies. The new capital raised will help support the rapid portfolio growth for both companies in conjunction with our current debt facilities.

v Branch International, Inc. announced a $25.0 million Series B equity round, led by Trinity Ventures, to support portfolio growth and geographic expansion.

v iZettle Capital AB announced its fifth round of equity funding for a total of €40.0 million, led by the Swedish National Pension Fund and existing investors.

v Cognical, Inc. announced a $10.0 million equity fundraising, led by Curo Financial Technologies Corp, another one of our Portfolio Companies

v Bread Finance announced a $26.0 million Series B equity round led by Menlo Ventures.

v Applied Data Finance, LLC raised $18.0 million from Red Point Partners.

PORTFOLIO COMPOSITION (AS AT 31 DECEMBER 2017)

Gross Asset Allocation¹²	(%)	NAV (Cum Income) Allocation¹²	(%)	Investment Exposure Borrower Type (%)¹³	(%)	Investment Exposure Geography¹³	(%)
Marketplace Loans	4	Marketplace Loans	3	Consumer	81	United States	79
Balance Sheet	79	Balance Sheet	79	SME	19	United Kingdom	8
Cash	7	Cash	8			Other	13
Securitisation Residuals	4	Securitisation Residuals	3
Equity	6	Equity	7

12. Percentages calculated on a look-through basis to the Company's investee entities and SPVs.

13. Calculations using gross asset exposure and not reduced for gearing. Excludes cash.

GEARING

At the beginning of 2017, the Company had a Look-Through Leverage Ratio of 0.63x. This gradually declined over the course of the year down to 0.17x as at 31 December 2017. This was driven mainly by the sales of marketplace loans during the year. The Company's balance sheet investments are on average less geared than its marketplace and securitisation investments, as shown below. The reallocation of capital into balance sheet investments over the course of the year has tended to lower the Company's overall gearing.

The Company continues to explore sourcing a corporate gearing facility which would provide more flexibility with respect to leverage and reduce the potential cash drag impact associated with the Company's currency hedging.

MARKET UPDATE

AVAILABILITY OF CREDIT

Since the 2008 recession, the supply of credit to many SMEs and non-prime consumer borrowers has remained constrained. An estimated 46% of consumers in the U.S. have non-prime credit scores (defined as FICO scores below 720) leaving them without access to financing at prime rates¹⁵. As a result, there is a large and growing population of U.S. consumers with reduced access to traditional consumer credit; the 2016 FDIC survey showed that approximately 66.7 million adults, lived in unbanked and underbanked households in the U.S.¹⁶

Lending to SMEs has declined significantly over the past few years in the U.K., with the total outstanding borrowing facilities from banks to SMEs reduced from £103.7 billion at the end of 2011 to £91 billion as of December 2017.¹⁷

However, overall macro-economic conditions in the U.S. and U.K. have been favourable for credit quality, with low unemployment and positive economic growth.

At a macro level, credit assets have generally performed strongly as might be expected given the favourable underlying economic conditions. By way of illustration, credit card charge-offs are below their long term historical averages in both the U.S. and U.K.

The credit performance of the loans financed by the Company's balance sheet positions has been consistent with this generally benign credit environment.

15. Source: CFPB Consumer Credit Card Market Report 2017

16. Source: FDIC National Survey of Unbanked and Underbanked Households (October 2016).

17. Source: UK Finance - SME Finance Update Q4 2017.

VOLUME GROWTH

Based on publicly available data, online lending volumes appear to remain on a growth trend despite some short-term volatility. In the U.S., 2016 volume growth was negatively impacted in the second quarter by corporate governance issues at Lending Club although sequential growth resumed in the fourth quarter of 2016 and carried into 2017. In the U.K., growth of online lending volumes slowed in the second quarter of 2017 but rebounded in the second half of 2017.

DEVELOPMENTS IN SECURITISATION MARKET

Securitisation issuance for online lending continued to grow in 2017, indicating increasing institutional appetite for credit assets with first loss protection, backed by loans originated online.

OUTLOOK

Macro Update

Heading into 2018, VPC is taking a very cautious approach to credit given the long economic expansion in the U.S. and a loosening corporate credit environment. While we have seen no immediate signs of credit stress across our portfolio, there are pockets of credit weakness in the broader economy. Both prime credit cards and non-prime auto loans have recently displayed stress with rising delinquency rates and increased charge-offs. However, the recent tax overhaul in the U.S. should provide some relief to the consumer and wage growth. Last year represented the strongest economic growth in the U.S. since before the financial crisis. In particular, wage growth seems to be the focus of the Federal Reserve, which led them to raise short-term interest rates three times during 2017. Given our balance sheet facilities are floating rate, the investments are not directly affected, but instead benefit from rising rates. However, the rate differential with the U.K. has widened, and in return this has subsequently increased our hedging costs throughout 2017 causing a 0.54% NAV loss on foreign exchange. The overall effect is largely neutral for the Company, since hedging costs are offset by more interest income earned in U.S. dollars.

Market Opportunity

Despite continued growth, the online lending sector is still only a small part of the global Consumer and SME credit market, leaving scope for significant future market share gains. The market has seen significant growth over the last ten years. Given the breadth and depth of the market, financial technology lending remains an attractive sector for investments. The financial technology industry is still developing and covers a broad range of financial segments beyond pure lending. Most financial technology focused companies need significant balance sheet capacity to scale, which uniquely positions VPC as a strategically preferred investor.

Regulatory environment

The regulatory environment in the U.S. has generally become more favourable in the past year with respect to financial services. Following the November 2017 resignation of Richard Cordray, the first director of the CFPB, President Trump appointed Office of Management and Budget Director Mick Mulvaney to step into the role as the CFPB's Acting Director (pursuant to federal law, this appointment is limited to 210 days, which means Mulvaney's appointment will expire on or about June 22, 2018; he can continue to serve until a nominee is confirmed by the Senate if President Trump announces such nominee prior to this expiration date). As of the time of this publication, President Trump has not announced a candidate to take over as director of the CFPB on a permanent basis for the statutorily-prescribed 5-year term, but any candidate will need to be confirmed by the U.S. Senate.

In terms of the operation of the CFPB, Acting Director Mulvaney has signalled that the agency will consider the business impact of its rules through a greater reliance on quantitative analysis and will approach its regulatory mandate in accordance with its statutory jurisdiction and scope. Additionally, Mr. Mulvaney recently issued a statement regarding actions that could be taken to increase the accountability of the CFPB, and included recommendations that the CFPB be funded through Congressional appropriations and that any "major" CFPB rules be approved by the U.S. Congress.

In connection with the financial technology charter proposed by the Office of the Comptroller of the Currency in December 2016, the new, Trump-appointed Comptroller has provided general support for the concept. The agency is not yet accepting applications for this type of charter, but the Comptroller's recognition that such a charter will assist in the provision of financial products and services to consumers unserved or underserved by traditional banks demonstrates that these potential new delivery mechanisms are supported by federal banking agency leaders. On a related note, President Trump's pick to chair the Federal Deposit Insurance Corporation, Jelena McWilliams, has indicated support for processing and approving "industrial loan company charters," a type of financial institution that can be owned by non-bank companies and accept deposits. A moratorium on the issuance of such charters expired in 2013, although no new ILC charters have been issued since the expiration.

Impact on the Group of rising rates

The Group's portfolio is well positioned for a rising rate environment as substantially all of its balance sheet investments contain a floating rate interest component. During 2017, The U.S. Federal reserve raised short term interest rates three times, with the benchmark rate ending the year at 1.50%, up from 0.75% on 1 January 2017. As at 31 December 2017, 79% of NAV was allocated to balance sheet investments, which typically generate floating rate income. The marketplace loan portfolio and securitization residuals received fixed rate income, which accounts for 6% of NAV, has a remaining weighted average life of only 14 months enabling capital to be reinvested at floating rates relatively quickly. Rising portfolio interest as U.S. Libor has moved higher was partially offset during the year by increased currency hedging costs as rates in the U.S. and the U.K. have diverged.

Pipeline and execution

As of March 2018, we VPC, the Investment Manager, had committed and invested capital across 45 companies in the financial services sector and we continue to see a strong pipeline of high quality balance sheet investment opportunities. With capacity available from both existing and new Portfolio Companies, we will continue to pursue opportunities that can generate an attractive risk-adjusted return for shareholders and offer further diversification to the portfolio. In addition, we continue to expand our team, now comprised of 45 investment and operational professionals, ensuring best in class experience and technical expertise to maximise these opportunities.

Victory Park Capital Advisors, LLC

Investment Manager

27 April 2018

STRATEGY AND BUSINESS MODEL

DIFFERENTIATED PROPOSITION

During 2017, the Investment Manager has continued to transition the assets of the Company to the "Balance Sheet Model" for providing debt capital to Portfolio Companies (see descriptions below) from the marketplace loan model. Under the Balance Sheet Model, the Company provides a floating rate Credit Facility to the Portfolio Company via a Special-Purpose Vehicle ("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 Company and excess spread, which provides downside protection versus marketplace loans.

As a pioneer of financial services lending, VPC has structuring expertise and relationships, enabling it to secure preferential capacity to lock up attractive, long-term economics through structured facility upsizes and rights of first refusal. VPC primarily invests in financial services companies through delayed draw warehouse facilities.

EARLY ADOPTER ADVANTAGE

Although financial services lenders have operated successfully for decades, the sector has grown in prominence in the past few years, attracting interest from institutional investors. This has been due to a confluence of regulatory challenges for banks, increased use of technology by Portfolio Companies and a low interest rate environment. The Investment Manager has been an active investor in the sector since 2010 and has made investments and commitments across 45 Portfolio Companies, spanning multiple geographies, products and structures, and is continuing to deploy capital into existing and new Portfolio Companies.

The Investment Manager has experience in direct lending, purchasing marketplace loans and selectively investing in equity or equity-like instruments as well as having extensive knowledge of market participants and the complex regulatory requirements needed to operate within the sector. Having access to other significant pools of capital dedicated to investing in the financial services sector enables the Investment Manager to obtain gearing facilities on attractive terms. These are significant advantages for the Company as it navigates through a rapidly growing sector and it is well positioned to capture new opportunities.

PROPRIETARY SOURCING AND STRUCTURING

The Company has exposure to several proprietary investments in Portfolio Companies with attractive risk/reward characteristics that other investors in the sector are typically unable to access. We believe this is due to the Investment Manager's long experience in the sector as an early participant with an extensive sourcing network, having executed transactions partnering with more than 40 leading financial and venture capital sponsors in the specialty lending sector.

The Investment Manager also leverages its relationships with Portfolio Companies and financial sponsors to secure significant lending capacity and negotiate attractive equity kickers as well as mitigate prepayment and interest rate risks. The rapid growth of capital deployed in this sector since 2010 has also generated positive network effects and helps ensure that the Investment Manager has a first look at opportunities developing in the sector.

PORTFOLIO MANAGEMENT

With a strong focus on capital preservation, the Investment Manager structures its investments to minimise risk for the Company and augments this with a comprehensive risk management framework. This involves a rigorous, hands-on approach to post-investment monitoring of portfolio risk and performance. Assessing the balance of expected returns with inherent risks is an integral part of the Investment Manager's investment strategy and drives all aspects of portfolio construction. We believe that this approach and focus are a key driver in meeting the Company's investment objectives, particularly in a potentially more challenging future credit environment.

GEARING AND CAPITAL MARKETS

The Company selectively employs gearing to enhance returns generated by the underlying credit assets. This is structured to limit the borrowings to individual SPVs that hold the assets and the gearing providers have no recourse to the Company. Historically, the Company has used the securitisation market to lower its cost of financing.

As the online lending industry continues to grow and become more established, the Investment Manager has been approached by multiple large global banks to offer the Company attractive gearing facilities. Given the breadth of the Investment Manager's portfolio, we believe the Company has a distinct competitive advantage in securing these gearing facilities at attractive rates

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 of the Strategic Report respectively.

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. A full description of performance and the investments is contained in the Investment Manager's Report, above.

DIVIDEND YIELD

The Company intends to distribute at least 85% of its distributable income earned in each financial year by way of dividends. Including the distribution made in April 2018, which related to the three-month period ended 31 December 2017 the Company has distributed 88% of its distributable income earned through the year ended 31 December 2017.

GEARING RATIO

As at 31 December 2017, the look-through gearing ratio was 0.17x for the Company. As disclosed in the investment policy below, 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. The Investment Manager monitors 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, which is another component of the long-term shareholder return. The Board continually monitors the Company's premium or discount 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 can be found in the Company's full Annual Report and Financial Statements.

During the trading period, the Ordinary Shares moved in a range of -11.8 per cent. to -22.4 per cent. discount. During the year, the Company continued the buyback programme in light of the significant disparity between the Company's share price and its NAV. During 2017 a total of 10,927,718 shares were bought back at an average price of 78.44 pence per share.

EXPENSES

The Board is conscious of the impact of expenses on returns and seeks to minimise expenses while ensuring that the Company receives strong service. The industry-wide measure for investment trusts is the ongoing charges ratio, which seeks to quantify the ongoing costs of running the Company. The ongoing charges ratio for 2017 was 1.35%, which is consistent with 1.30% in 2016 as referenced above. This measures the annual normal ongoing costs of an investment trust, excluding performance fees, one-off expenses and dealing costs, as a percentage of the average shareholders' funds.

PRINCIPAL RISKS

Given that the Company operates globally, it 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 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 ensure 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, which are monitored by the Audit and Valuation Committee on an ongoing basis.

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 risks and the monitoring system are subject to a robust review at least annually. The last review by the Board took place in February 2018.

Although the Board believes that it has a robust framework of internal control in place this can provide only reasonable, and not absolute, assurance against material financial misstatement or loss and is designed to manage, not eliminate, risk.

A summary of the principal risks and uncertainties faced by 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, is set out below:

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 of the loan acquired by the Group through a Portfolio Company. The Group (as a lender member) will receive payments under any loans it acquires through a Portfolio Company only if the corresponding borrower through that Portfolio Company (borrower member) makes payments on the loan.

Consumer loans are unsecured obligations of borrower members. They are not secured by any collateral, not guaranteed or insured by any third party and not backed by any governmental authority in any way. The Portfolio Companies and their designated third-party collection agencies may be limited in their ability to collect on loans.

Small business loans are typically secured by either a blanket lien on business assets, specific collateral and/or a personal guarantee from the proprietor. The Portfolio Companies and their designated third-party collection agencies have various channels of recourse against the relevant collateral which will depend on the specific circumstance of the loan.

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 Balance Sheet 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.

The Group will invest across various Portfolio Companies, asset classes, geographies (primarily the U.S. and Europe) and credit bands to ensure diversification and to seek to mitigate concentration risks.

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

FINANCING RISK

Financing risk is 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, 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 significantly reduced the gearing to 0.17x through the year as the marketplace loan portfolios were sold and subsequently reinvested into balance sheet investments.

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

LIQUIDTY 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 Company 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. At 31 December 2017, 1% of the loans have a stated maturity date of less than a year. The Group has no loans with a maturity date of more than five years.

In general, the weighted average maturity profile of the Group's assets is lower than or equal to the term of the Group's corresponding debt facilities which reduces liquidity risk.

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

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

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 Company is exposed to price risk arising from the investments held by the Company 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 Company'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 Company holds financial assets and liabilities.

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

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

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 Company. Other institutional sources of capital may enter the market in both the U.K., U.S. and other geographies.

MITIGATION

VPC has negotiated a significant number of proprietary capital deployment agreements with its existing balance sheet 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 45 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 balance sheet 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.

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 U.K. as well as consumer lending and collections licenses in some U.S. 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 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.

The Directors have also considered Brexit's current and potential impact on the Group. Whilst the portfolio of the Group may not be facing any significant risk, the Group itself faces some uncertainty leading up to Brexit with regards to potential regulatory or tax changes. The majority of the Group's portfolio is denominated in United States Dollar and the Company has entered into derivative contracts to manage the exposure to foreign currency on existing assets. Therefore, the Board has concluded that this event does not represent a principal risk to the Company or the Group.

Discussion on the Company's risk management and internal controls is set out in the full Annual Reports and Accounts.

ENVIRONMENT, HUMAN RIGHTS, EMPLOYEE, SOCIAL AND COMMUNITY ISSUES

The Board recognises the requirement of the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 to provide details about environmental matters, employees, human rights, social and community issues, including information about any policies it has in relation to these matters and the effectiveness of these polices. As an investment trust, the Company does not have any employees, and most of its activities are performed by other outside organisations. In light of this, the Board considers that the Company does not have a direct impact on the community or environment and, as a result, does not maintain specific policies in relation to these matters. However, in carrying out its investment activities and in relationships with suppliers, the Company aims to conduct itself responsibly, ethically and fairly.

GENDER DIVERSITY

The Board of Directors of the Company comprises four male Directors and one female Director. Further information in relation to the Board's policy on diversity can be found in the full Annual Report and Accounts.

The Strategic Report was approved by the Board of Directors on 27 April 2018 and signed on its behalf by:

Andrew Adcock

Chairman

27 April 2018

GOVERNANCE

RESPONSIBILITY FOR FINANCIAL STATEMENTS AND GOING CONCERN STATEMENT

As discussed in Note 2 to the financial statements, the Directors have reviewed the financial projections of the Group from the date of this report, which shows that the Group will be able to generate sufficient cash flows in order to meet its liabilities as they fall due. Accordingly, the Directors are satisfied that the going concern basis remains appropriate for the preparation of the financial statements. The Group also has detailed policies and processes for managing those risks as set out above and included in the Company's full Annual Report and Financial Statements.

VIABILITY STATEMENT

In accordance with provision C2.2.2 of the U.K. Corporate Governance Code, published by the Financial Reporting Council in April 2016, 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 the period up to and including the Company's Annual General Meeting in 2020. This period is appropriate since the Company's Articles of Association (the "Articles") require an ordinary resolution for continuation of the Company to be proposed at the Company's Annual General Meeting in 2020. In addition, as the Company is a long-term investor, the Directors have chosen the period up to and including the Company's Annual General Meeting in 2020 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.

The Directors confirm that they have a reasonable expectation that the Company will continue to operate and meet its liabilities as they fall due for the period up to and including the Company's Annual General Meeting in 2020. In making this assessment, the Directors have taken into consideration each of the principal risks and uncertainties, their mitigants and the impact these might have on the business model, future performance, solvency and liquidity. 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, reasonable sensitivities have been applied to the investment portfolio in stress situations.

The main risk to the Company's continuation is shareholder dissatisfaction through failure to meet the Company's investment objective, through poor investment performance or through the investment policy not being appropriate in prevailing market conditions.

The Board has given this particular consideration when assessing the longer-term viability of the Company. Performance and demand for the Company's shares are not things that can be forecast.

Based on the foregoing analysis, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group and Parent Company financial statements in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Parent Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:

v select suitable accounting policies and then apply them consistently;

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

v state whether applicable IFRSs as adopted by the European Union have been followed for the Group financial statements and IFRSs as adopted by the European Union have been followed for the Parent Company financial statements, subject to any material departures disclosed and explained in the financial statements; 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 keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Parent Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, about the group financial statements, Article 4 of the IAS Regulation.

The Directors are also responsible for safeguarding the assets of the Group and the Parent Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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

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

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

v the Parent Company financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the company; and

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

In the case of each Director in office at the date the Directors' Report is approved:

v so far as the director is aware, there is no relevant audit information of which the Group and Company's auditors are unaware; and

v they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Group and Company's auditors are aware of that information.

For and on behalf of the Board:

Andrew Adcock

Chairman

27 April 2018

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the year ended 31 December 2017 but is derived from those accounts. Statutory accounts for the year ended 31 December 2017 will be delivered to the Registrar of Companies in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (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 2017

		31 DECEMBER 2017	31 DECEMBER 2016
	NOTES	£	£
Non-current assets
Loans at amortised cost	3,9	306,446,357	469,956,519
Investment assets designated as held at fair value through profit or loss	3	59,583,265	61,637,121
Total non-current assets		366,029,622	531,593,640

Current assets
Cash and cash equivalents	7	18,353,574	56,302,627
Cash posted as collateral	7	4,427,301	10,706,410
Derivative financial assets	3,4	3,297,847	-
Interest receivable		3,576,027	5,340,216
Dividend and distribution receivable		530,826	807,329
Other assets and prepaid expenses		798,169	2,944,352
Total current assets		30,983,744	76,100,934
Total assets		397,013,366	607,694,574

Non-current liabilities
Notes payable	8	44,298,421	185,868,711
Total non-current liabilities		44,298,421	185,868,711

Current liabilities
Management fee payable	10	420,339	841,126
Performance fee payable	10	-	459,410
Securities sold under agreements to repurchase		8,941,557	9,811,072
Derivative financial liabilities	3,4	-	6,932,184
Unsettled share buyback payable		194,682	1,166,866
Dividend withholding tax payable		-	1,018,889
Deferred income		776,514	773,509
Other liabilities and accrued expenses		2,138,315	2,854,884
Total current liabilities		12,471,407	23,857,940
Total liabilities		56,769,828	209,726,651

Total assets less total liabilities		340,243,538	397,967,923

Capital and reserves
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	179,761,790	188,394,286
Capital reserve		(35,643,747)	(16,095,401)
Revenue reserve		12,661,243	8,340,831
Currency translation reserve		1,281,731	1,077,591

Total equity attributable to shareholders of the Parent Company		339,401,017	363,057,307

Non-controlling interests	18	842,521	34,910,616
Total equity		340,243,538	397,967,923

Net Asset Value per Ordinary Share	12	91.68p	95.26p

Signed on behalf of the Board of Directors by:

Andrew Adcock
Chairman
27 April 2018

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2017

		REVENUE	CAPITAL	TOTAL
	NOTES	£	£	£
Revenue
Net gain (loss) on investments	5	-	(18,623,131)	(18,623,131)
Foreign exchange gain (loss)		-	(2,201,214)	(2,201,214)
Income	5	37,924,841	23,695,267	61,620,108
Total return		37,924,841	2,870,922	40,795,763

Expenses
Management fee	10	3,445,583	1,122,733	4,568,316
Performance fee	10	844,773	-	844,773
Impairment charge	9	-	15,462,723	15,462,723
Other expenses	10	2,085,488	3,556,054	5,641,542
Total operating expenses		6,375,844	20,141,510	26,517,354

Finance costs		2,819,035	4,889,470	7,708,505

Net return on ordinary activities before taxation		28,729,962	(22,160,058)	6,569,904

Taxation on ordinary activities	11	-	-	-

Net return on ordinary activities after taxation		28,729,962	(22,160,058)	6,569,904

Attributable to:
Equity shareholders		28,729,962	(19,548,346)	9,181,616
Non-controlling interests	18	-	(2,611,712)	(2,611,712)

Return per Ordinary Share (basic and diluted)	13	7.76p	-5.28p	2.48p

Other comprehensive income
Currency translation differences		-	(2,852,356)	(2,852,356)

Total comprehensive income		28,729,962	(25,012,414)	3,717,548

Attributable to:
Equity shareholders		28,729,962	(19,344,206)	9,385,756
Non-controlling interests	18	-	(5,668,208)	(5,668,208)

The total column of this statement represents the Group's statement of comprehensive income, prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies ("AIC"). All items in the above Statement derive from continuing operations.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2016

		REVENUE	CAPITAL	TOTAL
	NOTES	£	£	£
Revenue
Net gain (loss) on investments	5	-	(12,767,502)	(12,767,502)
Foreign exchange gain (loss)		-	(1,303,726)	(1,303,726)
Income	5	63,921,990	25,128,692	89,050,682
Total return		63,921,990	11,057,464	74,979,454

Expenses
Management fee	10	5,026,537	1,059,942	6,086,479
Performance fee	10	459,410	-	459,410
Impairment charge	9	20,156,693	20,947,574	41,104,267
Other expenses	10	3,678,016	3,576,385	7,254,401
Total operating expenses		29,320,656	25,583,901	54,904,557

Finance costs		7,710,562	6,653,424	14,363,986

Net return on ordinary activities before taxation		26,890,772	(21,179,861)	5,710,911

Taxation on ordinary activities	11	-	-	-

Net return on ordinary activities after taxation		26,890,772	(21,179,861)	5,710,911

Attributable to:
Equity shareholders		22,902,318	(20,696,807)	2,205,511
Non-controlling interests	18	3,988,454	(483,054)	3,505,400

Return per Ordinary Share (basic and diluted)	13	6.01p	-5.43p	0.58p

Other comprehensive income
Currency translation differences		-	15,879,851	15,879,851

Total comprehensive income		26,890,772	(5,300,010)	21,590,762

Attributable to:
Equity shareholders		22,902,318	(19,822,220)	3,080,098
Non-controlling interests	18	3,988,454	14,522,210	18,510,664

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED TO 31 DECEMBER 2017

	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 2017	20,300,000	161,040,000	188,394,286	(16,095,401)	8,340,831	1,077,591	363,057,307	34,910,616	397,967,923
Amounts paid on buyback of Ordinary Shares	-	-	(8,632,496)	-	-	-	(8,632,496)	-	(8,632,496)
Contributions by non-controlling interests	-	-	-	-	-	-	-	-	-
Distributions to non-controlling interests	-	-	-	-	-	-	-	(28,399,887)	(28,399,887)
Return on ordinary activities after taxation	-	-	-	(19,548,346)	28,729,962	-	9,181,616	(2,611,712)	6,569,904
Dividends declared and paid	-	-	-	-	(24,409,550)	-	(24,409,550)	-	(24,409,550)

Other comprehensive income
Currency translation differences	-	-	-	-	-	204,140	204,140	(3,056,496)	(2,852,356)
Closing balance at 31 December 2017	20,300,000	161,040,000	179,761,790	(35,643,747)	12,661,243	1,281,731	339,401,017	842,521	40,243,538

The other distributable reserve and Revenue reserve represent the distributable reserves of the Group.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED TO 31 DECEMBER 2016

	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 2016	20,300,000	161,040,000	194,000,000	4,601,406	4,175,470	203,004	384,319,880	74,193,762	458,513,642
Amounts paid on buyback of Ordinary Shares	-	-	(1,166,866)	-	-	-	(1,166,866)	-	(1,166,866)
Contributions by non-controlling interests	-	-	-	-	-	-	-	8,388,713	8,388,713
Distributions to non-controlling interests	-	-	-	-	-	-	-	(66,182,523)	(66,182,523)
Return on ordinary activities after taxation	-	-	-	(20,696,807)	22,902,318	-	2,205,511	3,505,400	5,710,911
Dividends declared and paid	-	-	(4,438,848)	-	(18,736,957)	-	(23,175,805)	-	(23,175,805)

Other comprehensive income
Currency translation differences	-	-	-	-	-	874,587	874,587	15,005,264	15,879,851
Closing balance at 31 December 2016	20,300,000	161,040,000	188,394,286	(16,095,401)	8,340,831	1,077,591	363,057,307	34,910,616	397,967,923

The Other distributable reserve and Revenue reserve represent the distributable reserves of the Group.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2017

		31 DECEMBER 2017	31 DECEMBER 2016
	NOTES	£	£
Cash flows from operating activities:
Total comprehensive income		3,717,548	21,590,762
Adjustments for:
- Interest income		(58,070,136)	(86,118,449)
- Dividend and distribution income	5	(2,173,830)	(2,674,538)
- Finance costs		7,708,505	14,363,986
- Exchange (gains) losses		2,852,356	(15,879,851)
Total		(45,965,557)	(68,718,090)

Unrealised (appreciation) depreciation on investment assets designated as held at fair value through profit or loss		11,670,257	8,519,841
Unrealised appreciation on derivative financial assets		(3,297,847)	-
Unrealised depreciation on derivative financial liabilities		(6,932,184)	(2,948,703)
Decrease (increase) in other assets and prepaid expenses		2,146,183	(1,337,885)
Increase (decrease) in management fee payable		(420,787)	4,585
Increase (decrease) in performance fee payable		(459,410)	(842,494)
Increase (decrease) in dividend withholding tax payable		(1,018,889)	1,018,889
Increase in deferred income		3,005	773,509
Increase (decrease) in accrued expenses and other liabilities		(1,038,942)	(3,811,385)
Impairment of loans		15,462,723	41,104,267
Net cash inflow (outflow) from operating activities		(29,851,448)	(26,237,466)

Cash flows from investing activities:
Interest received		59,834,325	85,034,615
Dividends received		2,450,333	2,423,821
Purchase of investment assets designated as held at fair value through profit or loss		(22,767,340)	(28,897,345)
Sale of investment assets designated as held at fair value through profit or loss		13,150,939	-
Purchase of loans		(192,846,433)	(483,430,880)
Redemption or sale of loans		340,893,872	463,602,098
Cash posted as collateral		6,279,109	(2,226,410)
Net cash inflow (outflow) from investing activities		206,994,805	36,505,899

Cash flows from financing activities:
Dividends distributed		(24,409,550)	(23,175,805)
Treasury shares repurchased		(9,604,680)	-
Contributions by non-controlling interests		-	8,388,713
Distributions to non-controlling interests		(28,399,887)	(66,182,523)
Increase (decrease) in amounts payable under agreements to repurchase		(869,515)	9,811,072
Increase (decrease) in note payable		(141,570,290)	19,168,403
Finance costs paid		(7,386,132)	(13,757,259)
Net cash inflow (outflow) from financing activities		(212,240,054)	(65,747,399)

Net change in cash and cash equivalents		(35,096,697)	(55,478,966)
Exchange gains (losses) on cash and cash equivalents		(2,852,356)	15,879,851
Cash and cash equivalents at the beginning of the period		56,302,627	95,901,742
Cash and cash at the end of the period	7	18,353,574	56,302,627

PARENT COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2017

		31 DECEMBER 2017	31 DECEMBER 2016
	NOTES	£	£
Non-current assets
Investments in subsidiaries	17	286,614,455	258,763,168
Investment assets designated as held at fair value through profit or loss	3	26,962,134	31,298,331
Total non-current assets		313,576,589	290,061,499
Current assets
Cash and cash equivalents	7	16,137,420	38,153,271
Cash pledged as collateral	7	4,427,301	10,706,410
Derivative financial assets	3,4	3,297,847	-
Interest receivable		3,769,894	2,671,303
Other current assets and prepaid expenses		535,361	1,598,695
Total current assets		28,167,823	53,129,679
Total assets		341,744,412	343,191,178
Current liabilities
Derivative financial liabilities	3,4	-	6,932,184
Performance fee payable	10	-	459,410
Management fee payable	10	377,252	568,988
Unsettled share buyback payable		194,682	1,166,866
Dividend withholding tax payable		-	1,018,889
Deferred income		776,514	773,509
Other liabilities and accrued expenses		736,822	473,137
Total current liabilities		2,085,270	11,392,983
Total assets less total current liabilities		339,659,142	331,798,195
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	179,761,790	188,394,286
Capital reserve		(34,103,892)	(46,276,922)
Revenue reserve		12,661,244	8,340,831
Total equity		339,659,142	331,798,195
Net return on ordinary activities after taxation		40,902,993	(19,268,150)

Signed on behalf of the Board of Directors by:

Andrew Adcock

Chairman

27 April 2018

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2017

	CALLED-UP	SHARE	OTHER
	SHARE	PREMIUM	DISTRIBUTABLE	CAPITAL	REVENUE
	CAPITAL	ACCOUNT	RESERVE	RESERVE	RESERVE	TOTAL
	£	£	£	£	£	£
Opening balance at 1 January 2017	20,300,000	161,040,000	188,394,286	(46,276,922)	8,340,831	331,798,195
Amounts paid on repurchase of Ordinary Shares	-	-	(8,632,496)	-	-	(8,632,496)
Return on ordinary activities after taxation	-	-	-	12,173,030	28,729,963	40,902,993
Dividends declared and paid	-	-	-	-	(24,409,550)	(24,409,550)
Closing balance at 31 December 2017	20,300,000	161,040,000	179,761,790	(34,103,892)	12,661,244	339,659,142

The Other distributable reserve and Revenue reserve represent the distributable reserves of the Parent Company.

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2016

	CALLED-UP	SHARE	OTHER
	SHARE	PREMIUM	DISTRIBUTABLE	CAPITAL	REVENUE
	CAPITAL	ACCOUNT	RESERVE	RESERVE	RESERVE	TOTAL
	£	£	£	£	£	£
Opening balance at 1 January 2016	20,300,000	161,040,000	194,000,000	(4,106,454)	4,175,470	375,409,016
Amounts paid on repurchase of Ordinary Shares	-	-	(1,166,866)	-	-	(1,166,866)
Return on ordinary activities after taxation	-	-	-	(42,170,468)	22,902,318	(19,268,150)
Dividends declared and paid	-	-	(4,438,848)	-	(18,736,957)	(23,175,805)
Closing balance at 31 December 2016	20,300,000	161,040,000	188,394,286	(46,276,922)	8,340,831	331,798,195

The Other distributable reserve and Revenue reserve represent the distributable reserves of the Parent Company.

PARENT COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2017

		31 DECEMBER 2017	31 DECEMBER 2016
	NOTES	£	£
Cash flows from operating activities:
Net return on ordinary activities after taxation		40,902,993	(19,268,150)
Adjustments for:
-- Interest income		(32,861,333)	(24,732,692)
-- Exchange (gains) losses		(3,896,049)	(1,732,390)
Total		4,145,611	(45,733,232)
Unrealised depreciation on investment assets designated as held at fair value through profit or loss		4,535,009	454,616
Unrealised depreciation on investments in subsidiaries		1,989,449	9,796,525
Unrealised appreciation on derivative financial assets		(3,297,847)	-
Unrealised depreciation on derivative financial liabilities		(6,932,184)	(2,948,703)
Increase in other assets and prepaid expenses		1,063,334	(917,638)
Increase (decrease) in management fee payable		(191,736)	280,657
Increase (decrease) in performance fee payable		(459,410)	(842,494)
Increase (decrease) in dividend withholding tax payable		(1,018,889)	1,018,889
Increase in deferred income		3,005	773,509
Increase (decrease) in accrued expenses and other liabilities		263,685	(1,784,616)
Net cash inflow (outflow) from operating activities		100,027	(39,902,487)
Cash flows from investing activities:
Interest received		31,762,742	25,928,889
Purchase of investment assets designated as held at fair value through profit or loss		(3,871,909)	(156,443)
Sale of investment assets designated as held at fair value through profit or loss		3,673,097	-
Purchase of investments in subsidiaries		(196,067,355)	(236,892,075)
Sales of investment in subsidiaries		166,226,619	270,547,665
Cash posted as collateral		6,279,109	(2,226,410)
Net cash inflow (outflow) from investing activities		8,002,303	57,201,626
Cash flows from financing activities
Treasury Shares repurchased		(9,604,680)	-
Dividends paid		(24,409,550)	(23,175,805)
Net cash inflow (outflow) from financing activities		(34,014,230)	(23,175,805)
Net change in cash and cash equivalents		(25,911,900)	(5,876,666)
Exchange gains (losses) on cash and cash equivalents		3,896,049	1,732,390
Cash and cash equivalents as the beginning of the period		38,153,271	42,297,547
Cash and cash equivalents at the end of the period	7	16,137,420	38,153,271

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2017

1. GENERAL INFORMATION

The investment objective of VPC Specialty Lending Investments PLC (the "Parent Company") with its subsidiaries (together "the Group") is to generate an attractive total return for shareholders consisting of distributable income and capital growth through investments in specialty lending opportunities. The Parent Company was incorporated 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 2017, the Parent Company held equity in the form of 382,615,665 Ordinary Shares, 370,187,947 Ordinary Shares in issue and 12,427,718 Ordinary Shares in Treasury (31 December 2016: 382,615,665 Ordinary Shares, 381,115,665 Ordinary Shares in issue and 1,500,000 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.

Northern Trust Hedge Fund Services LLC (the "Administrator") has been appointed as 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, https://vpcspecialtylending.com

2. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies followed by the Group are set out below:

Basis of preparation

The consolidated financial statements present the financial performance of the Group for the year ended 31 December 2017. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). They comprise standards and interpretations approved by the International Accounting Standards Board and International Financial Reporting Committee, interpretations approved by the International Accounting Standard Committee that remain in effect, to the extent they have been adopted by the European Union. The financial statements are also in compliance with relevant provisions of the Companies Act 2006 as applicable to companies reporting under IFRS.

The financial statements have been prepared on a going concern basis under the historical cost convention, as modified by the valuation of investments and derivative financial instruments at fair value. Having assessed the principal risks, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements. The principal accounting policies adopted are set out below.

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 January 2017 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.

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 in 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 basis 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 of its investments on the fair value basis of accounting.

Investments in subsidiaries

Investments in subsidiaries are carried at cost less impairment. The Parent Company assesses at each balance sheet date whether, as a result of one or more events that occurred after initial recognition, there is objective evidence that investments in subsidiaries are impaired. Investments in subsidiaries are non-monetary items and therefore the costs of investment in currencies other than Pound Sterling are translated to at the rate of exchange ruling on the date the investment is made.

The total net asset value shown on the Parent Company Statement of Financial Position is therefore greater than the consolidated net asset value shown for the Group by £258,125 as at 31 December 2017 (31 December 2016: less than by £31,259,112).

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 return on ordinary activities after taxation of the Parent Company was £40,902,993 (31 December 2016: (£19,268,150)).

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 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.

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.

Expenses and finance costs

Expenses and finance costs 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 and finance costs, 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 prospective of the Parent Company. All operating expenses of the Parent Company are charged to revenue as the current expectation is that the majority of the Group and Parent Company's return will be generated through revenue rather than capital gains on investments.

At 31 December 2017, management fees of £1,122,733 (31 December 2016: 1,059,942) have been charged to the capital return of the Group. No management or performance fees were charged to capital at the Parent Company. 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 Taxes 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:

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, the Black Scholes Model and transaction prices.

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

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Group's loan assets are classified as loans and receivables.

Loans are recognised when the funds are advanced to borrowers. Loans and receivables are carried at amortised cost using the effective interest rate method less provisions for impairment.

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.

Impairment of financial assets

The Group assesses at each balance sheet date whether, as a result of one or more events that occurred after initial recognition, there is objective evidence that a financial asset or group of financial assets is impaired. Evidence of impairment may include:

❖ indications that the borrower or group of borrowers is experiencing significant financial difficulty;

❖ default or delinquency in interest or principal payments; or

❖ debt being restructured to reduce the burden on the borrower.

The Group assesses whether objective evidence of impairment exists either individually for assets that are separately significant or individually or collectively for assets that are not separately significant.

If there is no objective evidence of impairment for an individually assessed asset it is included in a group of assets with similar credit risk characteristics and collectively assessed for impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the asset's original effective interest rate. The resultant provisions are deducted from the appropriate asset values in the Consolidated Statement of Financial Position.

The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group to reduce any differences between loss estimates and actual loss experience.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the provision is adjusted and the amount of the reversal is recognised in the Consolidated Statement of Comprehensive Income.

Where a loan is not recoverable, it is written off against the related provision for loan impairment once all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off are reflected against the impairment losses recorded in the Consolidated Statement of Comprehensive Income.

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.

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 the derivative is classified as a net asset or liability, as appropriate.

Securities sold under agreement to repurchase

The Group entered into an agreement with a third party to sell its ownership of an equity security under an agreement to repurchase the equity security from the third party at a future date. The Group is entitled to receive an amount equal to all income paid or distributed in respect of the equity security to the full extent it would be so entitled if the equity security had not been sold to the third party. The Group is obligated to pay the third party monthly interest.

The underlying value of the repurchase agreement is valued under the sole discretion of the third party. Reductions in the value of the repurchase agreement could require the Group to make margin calls up to the value of the repurchase agreement purchase price. No margin was called during the year. The agreement matures on 30 June 2018 but can be extended for an additional three-month period under the discretion of the Group.

Securities sold under agreements to repurchase are valued based on the maximum of their purchase price or the current broker bid price on the sold security.

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. Refer to Note 19 for further information.

Equity securities

Equity securities are measured at fair value. These securities are considered either Level 1 or Level 3 investments. Further details of the valuation of equity securities are included in Footnote 3.

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 readily convertible to known amounts of cash.

Accrued 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.

Current liabilities

Current liabilities, other than derivatives, 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.

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

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

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

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

❖ exchange differences on currency balances;

❖ cost of own shares bought back; and

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

Capital reserve - arising on investments held includes:

❖ increases and decreases in the valuation of investments held at the period end; and

❖ 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 of 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.

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

Estimates and assumptions used in preparing the consolidated financial statements are reviewed on an ongoing basis and are based on historical experience and various other factors that are believed to be reasonable under the circumstances.

The results of these estimates and assumptions form the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources.

Estimates and assumptions made in the valuation of unquoted investments and investments for which there is no active market may cause material adjustment to the carrying value of those assets and liabilities. These are valued in accordance with the techniques set out above.

The assessment of impairment of the financial assets held at amortised cost requires the use of accounting estimates and assumptions that could cause material adjustment to the carrying value of those investments. The methodology and assumptions used for estimating future cash flows are reviewed regularly by the Group. The significant estimates and assumptions for the loan loss reserve are derived from the historical performance of the Group's loans. Information about significant areas of estimation uncertainty and critical judgments in relation to the impairment of investments are described in Note 9.

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 it consolidated. Further details of the Parent Company's subsidiaries are included in Note 17.

Accounting standards issued but not yet effective

The following new standards are not applicable to this financial information but may have an impact when they become effective:

IFRS 15, 'Revenue from Contracts with Customers', requires revenue to be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring services to a customer. This standard is effective from 1 January 2019. The adoption of this standard is not expected to have a significant impact on the Group's financial statements.

IFRS 9, 'Financial Instruments', introduces new requirements for classification and measurement, impairment and hedge accounting. This standard is effective from 1 January 2018. The adoption of IFRS 9 results in an impairment model that is more forward looking than that which is currently in place under IAS 39. In the longer term it is expected that the adoption of the standard will increase the total level of impairment allowance as financial assets will be assessed for impairment at least to the extent that an impairment is expected to arise within the following 12 month period and this impairment amount recognised within the financial statements. Further details on the implementation of IFRS 9 are below.

IFRS 9 financial instruments

IFRS 9 will be implemented in the financial statements for the year ending 31 December 2018 and will replace IAS 39 Financial Instruments: Recognition and Measurement. It includes requirements for the classification and measurement of financial instruments, impairment of financial assets and hedge accounting.

The principal requirements of IFRS 9 are as follows:

Classification and measurement

The classification and measurement of financial assets will depend on how these are managed (the entity's business model) and their contractual cash flow characteristics. These factors determine whether the financial assets are measured at amortised cost, fair value through other comprehensive income ('FVOCI') or fair value through profit or loss ('FVPL'). The combined effect of the application of the business model and the contractual cash flow characteristics tests may result in some differences in the population of financial assets measured at amortised cost or fair value compared with IAS 39. In addition, on transition to IFRS 9 entities are required to revoke previous designations of financial assets and financial liabilities measured at fair value through profit or loss where the accounting mismatch no longer exists and are permitted to revoke such designations where accounting mismatches continue to exist.

Impairment of financial assets

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

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

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

❖ A key feature of IFRS 9 compared with existing approaches under IAS 39 is that where a loan has experienced a significant increase in credit risk since initial recognition, even though this may not lead to a conclusion that the loan is credit impaired, provisions will be made based on the expected credit losses over the full life of the loan. This change to lifetime loss provisions for significantly credit deteriorated assets is expected to lead to increases in impairment provisions, and to increased volatility in provisions, although the size of the change will depend on a number of factors, including the composition of asset portfolios and the view of the economic outlook at the date of implementation.

❖ For assets where there is evidence of credit impairment, provisions will be made under IFRS 9 on the basis of lifetime expected credit losses, taking account of forward looking economic assumptions and a range of possible outcomes and these provisions will be re-assessed on an ongoing basis. Under IAS 39 provisions are based on the asset's carrying value and the present value of the estimated future cash flows.

Hedge accounting

The hedge accounting requirements of IFRS 9 are designed to create a stronger link with financial risk management. A separate financial reporting standard will be developed on accounting for dynamic risk management (macro hedge accounting) and IFRS 9 allows the option to continue to apply the existing hedge accounting requirements of IAS 39 until this is implemented. Therefore, no changes are currently being implemented to hedge accounting policies and methodologies.

Impact of IFRS 9

The requirements of IFRS 9 'Financial Instruments' will be adopted from 1 January 2018. The classification and measurement and impairment requirements are applied retrospectively by adjusting the opening balance sheet at the date of initial application, with no requirement to restate comparative periods. The Group does not intend to restate comparatives. For the consolidated financial statements of the Group, adoption is expected to reduce net assets at 1 January 2018 by 1.11% of the Group's 31 December 2017 NAV. The implementation is not expected to give change to the classification of the reserves.

Below is a breakdown of the reserves of the Group as at 31 December 2017 under the IFRS 9 reporting standard.

					IFRS 9 TOTAL	PERCENTAGE
					IMPAIRMENT	OF
	UNSECURED	SECURED			OF LOANS	OUTSTANDING
INTERNAL	UNITED	UNITED	UNSECURED	SECURD	RESERVED	LOAN
GRADE	STATES	STATES	OTHER	OTHER	AGAINST	BALANCE
A - 1	-	-	-	-	-	0.00%
A - 2	760,741	19,224	-	661,604	1,441,569	1.08%
B	179,272	977,688	-	3,083,442	4,240,402	11.55%
C	49,532	54,578	-	329,970	434,080	24.93%
Totals	989,545	1,051,490	-	4,075,016	6,116,051	1.96%

INTERNAL GRADE	DEFINITION
A - 1	Balance sheet loans structured with credit enhancement and strong operating liquidity positions
A - 2	High credit quality borrowers or balance sheet loans structured with credit enhancement
B	High credit quality borrowers with some indicators of credit risk or balance sheet loans with limited structural credit enhancement

C	Borrowers with elevated levels of credit risk

These estimates are based on accounting policies, assumptions, judgements and estimation techniques that remain subject to change until the Group finalises its financial statements for the year ending 31 December 2018.

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. 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, recent transactions or the Black Scholes pricing model.

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. The assumptions incorporated in the valuation methodologies used to estimate the enterprise value consists 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.

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.

Options and warrants to purchase or sell shares of privately held companies are valued based on the estimated market value of the underlying common shares using the Black Scholes pricing model, which may be adjusted to reflect the associated risks. Options and warrants to purchase or sell shares of privately held companies that are significantly out of the money may be valued at the fixed option or warrant price.

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 2017:

Investment assets designated as held at fair value	Total	Level 1	Level 2	Level 3
Investment assets designated as held at fair value	£	£	£	£
Investments in funds	26,962,134	-	-	26,962,134
Equity securities	32,621,131	6,648,612	-	25,972,519
Total	59,583,265	6,648,612	-	52,934,653

Derivative financial assets	Total	Level 1	Level 2	Level 3
Derivative financial assets	£	£	£	£
Forward foreign exchange contracts	3,297,847	-	3,297,847	-
Total	3,297,847	-	3,297,847	-

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

Investment assets designated as held at fair value	Total	Level 1	Level 2	Level 3
Investment assets designated as held at fair value	£	£	£	£
Investments in funds	31,298,331	-	-	31,298,331
Equity securities	30,338,790	-	2,022,284	28,316,506
Total	61,637,121	-	2,022,284	59,614,837

Derivative financial liabilities	Total	Level 1	Level 2	Level 3
Derivative financial liabilities	£	£	£	£
Forward foreign exchange contracts	6,932,184	-	6,932,184	-
Total	6,932,184	-	6,932,184	-

The following table analyses the fair value hierarchy of the Parent Company's assets and liabilities measured at fair value at 31 December 2017:

Investment assets designated as held at fair value	Total	Level 1	Level 2	Level 3
Investment assets designated as held at fair value	£	£	£	£
Investments in funds	26,962,134	-	-	26,962,134
Total	26,962,134	-	-	26,962,134

Derivative financial assets	Total	Level 1	Level 2	Level 3
Derivative financial assets	£	£	£	£
Forward foreign exchange contracts	3,297,847	-	3,297,847	-
Total	3,297,847	-	3,297,847	-

The following table analyses the fair value hierarchy of the Parent Company's assets and liabilities measured at fair value at 31 December 2016:

Investment assets designated as held at fair value	Total	Level 1	Level 2	Level 3
Investment assets designated as held at fair value	£	£	£	£
Investments in funds	31,298,331	-	-	31,298,331
Total	31,298,331	-	-	31,298,331

Derivative financial liabilities	Total	Level 1	Level 2	Level 3
Derivative financial liabilities	£	£	£	£
Forward foreign exchange contracts	6,932,184	-	6,932,184	-
Total	6,932,184	-	6,932,184	-

There was movement of one position between Level 2 and Level 1 fair value measurements during the year ended 31 December 2017. There were no transfers into and out of Level 3 fair value measurements for either the Parent Company or the Group during the year ended 31 December 2017.

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

	INVESTMENTS	EQUITY
	IN FUNDS	SECURITIES
	£	£
Beginning balance, 1 January 2017	31,298,331	28,316,506
Purchases	3,871,909	11,725,606
Sales	(3,673,097)	(7,109,220)
Net change in unrealised foreign exchange gains (losses)	(1,977,116)	(510,723)
Net change in unrealised gains (losses)	(2,557,893)	(6,449,650)
Ending balance, 31 December 2017	26,962,134	25,972,519

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 2016 for the Group:

	INVESTMENTS	EQUITY
	IN FUNDS	SECURITIES
	£	£
Beginning balance, 1 January 2016	31,596,504	8,803,184
Purchases	156,443	18,609,048
Net change in unrealised foreign exchange gains (losses)	5,643,757	4,256,348
Net change in unrealised gains (losses)	(6,098,373)	(3,352,074)
Ending balance, 31 December 2016	31,298,331	28,316,506

The following table presents the movement in Level 3 positions for the period ended 31 December 2017 for the Parent Company:

	INVESTMENTS
	IN FUNDS
	£
Beginning balance, 1 January 2017	31,298,331
Purchases	3,871,909
Sales	(3,673,097)
Net change in unrealised foreign exchange gains (losses)	(1,977,116)
Net change in unrealised gains (losses)	(2,557,893)
Ending balance, 31 December 2017	26,962,134

The following table presents the movement in Level 3 positions for the period ended 31 December 2016 for the Parent Company:

	INVESTMENTS
	IN FUNDS
	£
Beginning balance, 1 January 2016	31,596,504
Purchases	156,443
Net change in unrealised foreign exchange gains (losses)	5,643,757
Net change in unrealised gains (losses)	(6,098,373)
Ending balance, 31 December 2016	31,298,331

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

	FAIR VALUE AT
	31 DECEMBER
	2017
DESCRIPTION	£	VALUATION TECHNIQUE	UNOBSERVABLE INPUT	RANGE
Investments in funds	26,962,134	Net asset value	N/A	N/A
Equity securities	10,766,137	Market Comparables	Price Per Share from Recent Transactions	US$0.3 - CHF 333.1
Equity securities	7,867,065	Discounted Cash Flows	Discount Rate	13.0% - 40.0%
			Projected Cumulative Losses	21.9% - 29.5%
Equity securities	5,642,280	Yield Analysis	Market Yield	10.5% - 15.8%
Equity securities	983,888	Black Scholes Model	Risk Free Rate	0.0% - 2.3%
			Volatility	0.0% - 35.0%
			Strike Price	AU$0.20 - €1,275.82
			Current Price	AU$0.70 - €1,275.82
Equity securities	713,149	Transaction Price	N/A	N/A

The investments in funds consist of investments in Larkdale III, L.P. and VPC Offshore Unleveraged Private Debt Fund, 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 price per share from recent transactions of the equity securities valued based on market comparables increased / decreased by five per cent. it would have resulted in an increase / decrease to the total value of those equity securities of £522,405 which would affect the Net gain / (loss) on investments within the capital return column of the Consolidated Statement of Comprehensive Income.

If the discount rate of the equity securities valued based on discounted cash flows increased / decreased by two per cent. it would have resulted in an increase / decrease to the total value of those equity securities of £210,346 which would affect the Net gain / (loss) on investments within the capital return column of the Consolidated Statement of Comprehensive Income.

If the projected cumulative losses of the equity securities valued based on discounted cash flows increase / decreased by one per cent. it would have resulted in an decrease / increase to the total value of those equity securities of £849,160 which 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 five per cent. it would have resulted in an increase / decrease in the total value the investments in funds and equity securities of £2,611,075 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 2017 but for which fair value is disclosed. The carrying value has been used where it is a reasonable approximation of fair value:

	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Assets
Loans	306,307,203	-	-	306,307,203
Cash and cash equivalents	18,353,574	18,353,574	-	-
Cash posted as collateral	4,427,301	4,427,301	-	-
Interest receivable	3,576,027	-	3,576,027	-
Dividend receivable	530,826	-	530,826	-
Other assets and prepaid expenses	798,169	-	798,169	-
Total	333,993,100	22,780,875	4,905,022	306,307,203

	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Liabilities
Notes payable	44,298,421	-	-	44,298,421
Management fee payable	420,339	-	420,339	-
Performance fee payable	-	-	-	-
Unsettled share buyback payable	194,682	-	194,682	-
Dividend withholding tax payable	-	-	-	-
Deferred income	776,514	-	776,514	-
Other liabilities and accrued expenses	2,138,315	-	2,138,315	-
Total	47,828,271	-	3,529,850	44,298,421

The following table presents the fair value of the Parent Company's assets and liabilities not measured at fair value through profit and loss at 31 December 2017 but for which fair value is disclosed. The carrying value has been used where it is a reasonable approximation of fair value:

	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Assets
Investments in subsidiaries	286,482,672	-	-	286,482,672
Cash and cash equivalents	16,137,420	16,137,420	-	-
Cash pledged as collateral	4,427,301	4,427,301	-	-
Interest receivable	3,769,894	-	3,769,894	-
Other assets and prepaid expenses	535,361	-	535,361	-
Total	311,352,648	20,564,721	4,305,255	286,482,672

	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Liabilities
Management fee payable	377,252	-	377,252	-
Unsettled share repurchase	194,682	-	194,682	-
Deferred income	776,514	-	776,514	-
Accrued expenses and other liabilities	736,822	-	736,822	-
Total	2,085,270	-	2,085,270	-

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 (the Group currently does not designate any derivatives as hedges for hedge accounting purposes as described under IAS 39). 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.

As at 31 December 2017, 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:

SETTLEMENT DATE	PURCHASE CURRENCY	PURCHASE AMOUNT	SALE CURRENCY	SALE AMOUNT	FAIR VALUE £
19 January 2018	GBP	117,625,300	USD	159,000,000	2,936,398
9 February 2018	GBP	877,384	USD	12,000,000	54,448
9 February 2018	GBP	103,569,447	USD	140,000,000	557,818
Unrealised gains on forward foreign exchange contracts					3,548,664

SETTLEMENT DATE	PURCHASE CURRENCY	PURCHASE AMOUNT	SALE CURRENCY	SALE AMOUNT	FAIR VALUE £
9 February 2018	GBP	16,696,250	EUR	19,000,000	(201,590)
19 January 2019	USD	10,000,000	GBP	7,397,817	(49,227)
Unrealised losses on forward foreign exchange contracts					(250,817)

As at 31 December 2016, 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:

SETTLEMENT DATE	PURCHASE CURRENCY	PURCHASE AMOUNT	SALE CURRENCY	SALE AMOUNT	FAIR VALUE £
13 January 2017	GBP	16,522,620	EUR	19,150,000	145,540
Unrealised gain on forward foreign exchange contracts					145,540

SETTLEMENT DATE	PURCHASE CURRENCY	PURCHASE AMOUNT	SALE CURRENCY	SALE AMOUNT	FAIR VALUE £
13 January 2017	GBP	209,424,084	USD	258,000,000	(6,595,114)
13 January 2017	GBP	40,586,063	USD	50,000,000	(482,610)
Unrealised losses on forward foreign exchange contracts					(7,077,724)

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 2017 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 ELIGBIBLE TO BE SET-OFF IN THE STATEMENT OF FINANCIAL POSITION


				FINANCIAL INSTRUMENTS	COLLATERAL RECEIVED	NET AMOUNT
AS AT 31 DECEMBER 2017	£	£	£	£	£	£
Goldman Sachs	612,266	(201,590)	410,676	-	-	410,676
Morgan Stanley	2,936,398	(49,227)	2,887,171	-	-	2,887,171
Total	3,548,664	(250,817)	3,297,847	-	-	3,297,847

	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 ELIGBIBLE TO BE SET-OFF IN THE STATEMENT OF FINANCIAL POSITION


				FINANCIAL INSTRUMENTS	COLLATERAL RECEIVED	NET AMOUNT
AS AT 31 DECEMBER 2017	£	£	£	£	£	£
Goldman Sachs	201,590	(201,590)	-	-	-	-
Morgan Stanley	49,227	(49,227)	-	-	-	-
Total	250,817	(250,817)	-	-	-	-

	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 ELIGBIBLE TO BE SET-OFF IN THE STATEMENT OF FINANCIAL POSITION


				FINANCIAL INSTRUMENTS	COLLATERAL RECEIVED	NET AMOUNT
AS AT 31 DECEMBER 2016	£	£	£	£	£	£
Goldman Sachs	145,540	(145,540)	-	-	-	-
Total	145,540	(145,540)	-	-	-	-

	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 ELIGBIBLE TO BE SET-OFF IN THE STATEMENT OF FINANCIAL POSITION


				FINANCIAL INSTRUMENTS	COLLATERAL RECEIVED	NET AMOUNT
AS AT 31 DECEMBER 2016	£	£	£	£	£	£
Goldman Sachs	6,595,114	(145,540)	6,449,574	-	-	6,449,574
Morgan Stanley	482,610	-	482,610	-	-	482,610
Total	7,077,724	(145,540)	6,932,184	-	-	6,932,184

5. INCOME AND GAINS ON INVESTMENTS AND LOANS

	31 DECEMBER 2017	31 DECEMBER 2016
	£	£
Income
Interest income	58,070,136	86,118,449
Distributable income from investments in funds	2,030,615	2,445,312
Dividend income	143,215	229,226
Other income	1,376,142	257,695
Total	61,620,108	89,050,682

Interest income in the amount of £32,941,444 (31 December 2016: £62,423,182) has been allocated to revenue and £25,128,692 (31 December 2016: £23,695,267) has been allocated to capital in line with the Group's policy as set out in Note 2.

	31 DECEMBER 2017	31 DECEMBER 2016
	£	£
Net gains (losses) on investments
Realised loss on sale of investments	(11,992,291)	(4,247,661)
Realised gain on sale of investments	1,875,039	-
Unrealised gain on investment in funds	246,939	757,836
Unrealised gain (loss) on equity securities	(8,752,818)	(9,277,677)
Total	(18,623,131)	(12,767,502)

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 risk 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 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.

The principal risks and uncertainties that could have a material impact on the Group's performance have not changed from those set out on pages 14 - 24 of the Parent Company's IPO Prospectus.

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 risk and currency)

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 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 2017, the Group has limited exposure to variations in interest rates as all current 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 2017 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 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.

Currency risk

The assets of the Group as of 31 December 2017 are invested in assets which are denominated in US Dollars, Euros, 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.

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.

Leverage 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 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-GBP 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 2017. 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.

			FORWARD	NET
	ASSETS	LIABILITIES	CONTRACTS	EXPOSURE
	31 DECEMBER 2017	31 DECEMBER 2017	31 DECEMBER 2017	31 DECEMBER 2017
	£	£	£	£
Euro	22,853,330	(5,195,513)	16,852,617	805,200
US Dollar	290,521,048	(48,044,465)	240,856,038	1,620,545
Swiss Francs	825,455	-	-	825,455
Australian Dollar	1,769,337	-	-	1,769,337

If the GBP exchange rate simultaneously increased/decreased by ten per cent. against the above currencies, the impact on profit would be an increase/decrease of £502,054. Ten per cent. 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.

The below table presents the net exposure to foreign currency at 31 December 2016. 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.

			FORWARD	NET
	ASSETS	LIABILITIES	CONTRACTS	EXPOSURE
	31 DECEMBER 2016	31 DECEMBER 2016	31 DECEMBER 2016	31 DECEMBER 2016
	£	£	£	£
Euro	28,723,028	(13,078,047)	17,302,634	(1,657,653)
US Dollar	463,331,117	(182,601,736)	242,858,296	37,871,085
Swiss Francs	624,046	-	-	624,046
0Australian Dollar	26,330,359	-	-	26,330,359

The table below presents the net exposure to foreign currency at 31 December 2017. 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.

			FORWARD	NET
	ASSETS	LIABILITIES	CONTRACTS	EXPOSURE
	31 DECEMBER 2017	31 DECEMBER 2017	31 DECEMBER 2017	31 DECEMBER 2017
	£	£	£	£
Euro	17,657,817	-	16,852,617	805,200
US Dollar	241,634,063	-	240,856,038	778,025
Swiss Francs	825,455	-	-	825,455
Australian Dollar	1,769,337	-	-	1,769,337

If the GBP exchange rate simultaneously increased/decreased by ten per cent. against the above currencies, the impact on profit would be an increase/decrease of £417,802. Ten per cent. 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 2016. 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.

			FORWARD	NET
	ASSETS	LIABILITIES	CONTRACTS	EXPOSURE
	31 DECEMBER 2016	31 DECEMBER 2016	31 DECEMBER 2016	31 DECEMBER 2016
	£	£	£	£
Euro	15,644,980	-	17,302,634	(1,657,654)
US Dollar	245,818,765	-	242,858,296	2,960,469
Swiss Francs	624,046	-	-	624,046
Australian Dollar	26,330,359	-	-	26,330,359

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.

Current financial liabilities consisting of fees payable, accrued expenses and other liabilities are all due within three months.

The Investment Manager manages the Group's liquidity risk by investing primarily in a diverse portfolio of assets. At 31 December 2017, the Group has investments in 36 Portfolio Companies. At 31 December 2017, 1% of the loans have a stated maturity date of less than a year (31 December 2016: 2%). The Group has no loans with a maturity date of more than five years.

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 to obligations to settle margin calls arising from foreign exchange hedging.

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

Under the Balance Sheet Model, the Group provides a floating rate Credit Facility to the Portfolio Company via a Special-Purpose Vehicle ("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 Company and excess spread, which provides downside protection versus marketplace loans.

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 and geography:

	UNSECURED	SECURED			TOTAL
INTERNAL	UNITED	UNITED	UNSECURED	SECURED	31 DECEMBER
GRADE	STATES	STATES	OTHER	OTHER	2017
A - 1	93,408,787	38,938,341	5,619,967	-	137,967,095
A - 2	88,993,099	19,793,399	19,700,762	3,087,894	131,575,154
B	771,973	11,950,149	-	24,486,998	37,209,120
C	247,032	339,668	-	1,451,309	2,038,009
	183,420,891	71,021,557	25,320,729	29,026,201	308,789,378


	UNSECURED	SECURED			TOTAL
INTERNAL	UNITED	UNITED	UNSECURED	SECURED	31 DECEMBER
GRADE	STATES	STATES	OTHER	OTHER	2016
A - 1	66,668,633	9,703,400	7,386,170	-	83,758,203
A - 2	142,268,256	40,117,041	32,489,493	33,117,076	247,991,866
B	89,309,899	14,530,962	-	13,082,693	116,923,554
C	29,206,751	2,317,230	-	2,558,609	34,082,590
	327,453,539	66,668,633	39,875,663	48,758,378	482,756,213

INTERNAL
GRADE	DEFINITION
A - 1	Balance sheet loans structured with credit enhancement and strong operating liquidity positions
A - 2	High credit quality borrowers or balance sheet loans structured with credit enhancement
B	High credit quality borrowers with some indicators of credit risk or balance sheet 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 Balance Sheet Model and to any Debt Instruments held by another investment fund in which the Group invests:

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

❖ 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.

❖ 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.

7. CASH AND CASH EQUIVALENTS

			PARENT	PARENT
	GROUP	GROUP	COMPANY	COMPANY
	31 DECEMBER	31 DECEMBER	31 DECEMBER	31 DECEMBER
	2017	2016	2017	2016
	£	£	£	£
Cash held at bank	18,353,574	56,302,627	16,137,420	38,153,271
Total	18,353,574	56,302,627	16,137,420	38,153,271

The Parent Company has posted cash of £2,060,000 of collateral as at 31 December 2017 (31 December 2016: £9,570,000) with Goldman Sachs and cash of £2,367,301 (31 December 2016: £1,136,410) with Morgan Stanley in relation to the outstanding derivatives.

8. NOTES PAYABLE

The Group entered into contractual obligations with third parties 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.

The table below provides details of the outstanding debt of the Group at 31 December 2017:

		OUTSTANDING
	INTEREST	PRINCIPAL
31 DECEMBER 2017	RATE	£	MATURITY
Credit Facility 08-2016	3.00%	5,195,513	15 December 2025
Total		5,195,513

The table below provides details of the outstanding debt of the Group at 31 December 2016:

		OUTSTANDING
	INTEREST	PRINCIPAL
31 DECEMBER 2016	RATE	£	MATURITY
Credit Facility 07-2015	4.25%	35,795,822	23 January 2018
Credit Facility 08-2015	3.50%	68,932,231	14 December 2018
Credit Facility 03-2016	3.15%	35,571,696	23 September 2018
Credit Facility 08-2016	3.00%	13,078,047	15 December 2025
Total		153,377,796

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 2017:

	OUTSTANDING
	PRINCIPAL
31 DECEMBER 2017	£	MATURITY
First-Out Participation 06-2015	9,014,990	13 June 2021
First-Out Participation 03-2016	17,384,871	3 March 2019
First-Out Participation 12-2016	9,281,556	17 November 2021
First-Out Participation 03-2017	3,421,491	30 January 2021
Total	39,102,908

The table below provides details of the outstanding first-out participation liabilities of the Group at 31 December 2016:

	OUTSTANDING
	PRINCIPAL
31 DECEMBER 2016	£	MATURITY
First-Out Participation 06-2015	7,717,258	30 June 2018
First-Out Participation 03-2016	21,510,613	3 March 2019
First-Out Participation 12-2016	3,263,044	17 November 2021
Total	32,490,915

The table below provides the movement of the notes payable for the year ended 31 December 2017 for the Group.

			NOTES
			PAYABLE
			£
Beginning balance, 1 January 2017			185,868,711
Purchases			5,691,412
Sales			(150,632,807)
Net change in unrealised foreign exchange gains (losses)			3,371,105
Ending balance, 31 December 2017			44,298,421

9. IMPAIRMENT OF FINANCIAL ASSETS AT AMORTISED COST

The table below provides details of the investments at amortised cost held by the Group for the period ended 31 December 2017:

	COST BEFORE	LOAN LOSS	LOANS	CARRYING
	IMPAIRMENT	RESERVE	WRITTEN-OFF	VALUE
	£	£	£	£
Loans at amortised cost	335,077,673	2,343,021	26,288,295	306,446,357
Total	335,077,673	2,343,021	26,288,295	306,446,357

The table below provides details of the investments at amortised cost held by the Group for the period ended 31 December 2016:

	COST BEFORE	LOAN LOSS	LOANS	CARRYING
	IMPAIRMENT	RESERVE	WRITTEN-OFF	VALUE
	£	£	£	£
Loans at amortised cost	519,261,508	12,799,694	36,505,295	469,956,519
Total	519,261,508	12,799,694	36,505,295	469,956,519

The Parent Company does not hold any loans.

Impairment charge

The impairment charge of the Group as at 31 December 2017 comprises of the following:

	IMPAIRMENT CHARGE
	31 DECEMBER 2017
	£
Loans written off	26,288,295
Change in loan loss reserve	(10,456,673)
Currency translation	(368,899)
Impairment charge	15,462,723

The impairment charge of the Group as at 31 December 2016 comprises of the following:

	IMPAIRMENT CHARGE
	31 DECEMBER 2016
	£
Loans written off	36,505,295
Change in loan loss reserve	5,679,577
Currency translation	(1,080,605)
Impairment charge	41,104,267

Impairment of loans written off

A financial asset is past due when the counterparty has failed to make a payment when contractually due. The Group assesses at each reporting date whether there is objective evidence that a loan or group of loans, classified as loans at amortised cost, is impaired. In performing such analysis, the Group assesses the probability of default based 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 Group.

Impairment charges of loans written off £26,288,295 (31 December 2016: £36,505,295) are included in impairment charges on the Consolidated Statement of Comprehensive Income.

Impairment of loans reserved against

Loans are judged for impairment primarily based on payment delinquency. General expectations with regards to expected losses on loans at a given level of delinquency were assessed based on historical roll rates on the loans purchased by the Group. Impairments are recognised once a loan was deemed to have a non-trivial likelihood of facing a material loss. The reserve reflects the increasing likelihood of loss as loans progress to more advanced stages of delinquency as more payments are missed and are calculated based on historical performance of similar loans within the Group's investment portfolio. As loans progress through the levels of delinquency, the Group reserves a greater amount of the loan balance. If a loan is delinquent for more than 90 days or has four missed payments, the Group reserves at least 85% of the balance of the delinquent loan.

As at 31 December 2017, the Group has created a reserve provision on the outstanding principal of the Group's loans of £2,343,021 (31 December 2016: £12,799,694), which have been recorded in the Group's Consolidated Statement of Financial Position and are included in impairment charges on the Consolidated Statement of Comprehensive Income. The reserve provision is estimated using historical performance data about the Group's loans which is regularly updated and reviewed. A 5% increase in relation to the assumed delinquency and loss rates would increase the provision and the impairment charge shown in the Consolidated Statement of Comprehensive Income by £52,692. A decrease in these assumptions would have an opposite effect.

The impairment of loans reserved against comprises the following:

	31 DECEMBER 2017
	£
Beginning balance 1 January 2017	12,799,694
Change in loan loss reserve	(10,456,673)
Ending balance 31 December 2017	2,343,021

Below is a breakout of the impairment of loans reserved against by maturity:

	31 DECEMBER 2017
	£
Reserves on loans with payments less than 30 days past due	205,178
Reserves on loans with payments between 30 and 60 days past due	167,458
Reserves on loans with payments between 60 and 90 days past due	595,093
Reserves on loans with payments more than 90 days past due	1,375,292
Loan loss reserve	2,343,021

The majority of the loans reserved against by the Group would be classified as secured other when being assessed for the credit quality of the loans.

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 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. The management fee expense for the period is £4,568,316 (31 December 2016: £6,086,479), of which £420,339 (31 December 2016: £841,126) was payable as of 31 December 2017.

Notwithstanding the above, where such investment fund or special purpose vehicle employs leverage 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. With effect from 1 May 2017, 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.

A performance fee was calculated in respect of the period starting on 1 January 2017 to 30 April 2017. Going forward, the performance fee will be calculated starting from 1 May 2017 to 31 December 2017, and, thereafter, 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.

For the period from 1 January 2017 to 30 April 2017, the performance fee will be a sum equal to 15% of such amount (if positive) and will only be payable if the Adjusted Net Asset Value at the end of a Calculation Period exceeds the High Water Mark. The performance fee shall be payable to the Investment Manager in arrears within 30 calendar days of the end of the relevant Calculation Period.

For the period from 1 January to 30 April 2017, "Adjusted Net Asset Value" for this calculation means the NAV adjusted for: (i) any increases or decreases in NAV arising from issues or repurchases of Ordinary Shares during the relevant Calculation Period; (ii) adding back the aggregate amount of any dividends or distributions (for which no adjustment has already been made under (i)) made by the Parent Company at any time during the relevant Calculation Period; and (iii) before deduction for any accrued performance fees.

For the Calculation Period beginning 1 May 2017, 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 per cent. 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" for the Calculation Period beginning 1 May 2017 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).The performance fee expense for the period is £884,773 (31 December 2016: £459,410).

Administration

The Group has entered into an administration agreement with Northern Trust Hedge Fund Services LLC. 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 of 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 Company Matters Limited (formally known as Capita Registrars Limited) is entitled to an annual fee of £60,000 (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 2017, the remuneration for work carried out for the by PricewaterhouseCoopers LLP, the statutory auditors, was as follows:

	31 DECEMBER 2017	31 DECEMBER 2016
	£	£
Fees charged by PricewaterhouseCoopers LLP:
the audit of the Parent Company and Consolidated Financial Statements;	150,000	95,000
the audit of the Company's subsidiaries;	10,000	10,000
audit related assurance services; and	-	47,400
tax services; and	-	5,500
other assurance services	-	-

Amounts are included in other expenses on the Consolidated Statement of Comprehensive Income.

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 2017:

	REVENUE	CAPITAL	TOTAL
Net return on ordinary activities before taxation	28,729,962	(22,160,058)	6,569,904
Tax at the standard UK corporation tax rate of 20.00%	5,745,992	(4,432,012)	1,313,980
Effects of:
Non-taxable income	(5,745,992)	-	(5,745,992)
Capital items exempt from corporation tax	-	4,432,012	4,432,012
Total tax charge	-	-	-

The following table presents the tax chargeable on the Group for the period ended 31 December 2016:

	REVENUE	CAPITAL	TOTAL
Net return on ordinary activities before taxation	26,890,772	(21,179,861)	5,710,911
Tax at the standard UK corporation tax rate of 20.00%	5,378,154	(4,235,972)	1,142,182
Effects of:
Non-taxable income	(5,378,154)	-	(5,378,154)
Capital items exempt from corporation tax	-	4,235,972	4,235,972
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	AS AT
	31 DECEMBER 2017	31 DECEMBER 2016
	£	£
Net assets	339,401,017	363,057,307
Shares in issue	370,187,947	381,115,655
Net asset value per Ordinary Share	91.68p	95.26p

13. RETURN PER ORDINARY SHARE

Basic earnings per share is calculate using the number of Shares held at year end, excluding the number of Shares purchased by the Parent Company and held as Treasury Shares.

	31 DECEMBER 2017	31 DECEMBER 2016
	£	£
Profit for the year	9,181,616	2,205,511
Number of Shares held at year end	370,187,947	381,115,665
Earnings per Share (basic and diluted)	2.48p	0.58p

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 2017:

	NOMINAL VALUE	NUMBER
	£	OF SHARES
Ordinary Shares	0.01	370,187,947

Set out below is the issued share capital of the Company as at 31 December 2016:

	NOMINAL VALUE	NUMBER
	£	OF SHARES
Ordinary Shares	0.01	381,115,665

Rights attaching to the Shares

The holders of the Shares are entitled to receive, and to participate in, any dividends declared in relation to the Shares. The holders of Ordinary Shares and C Shares shall be entitled to all of 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 Shares. The net return per 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 2020 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 2017:

	SHARES IN		SHARES IN
	ISSUE AT THE		ISSUE AT THE
FOR THE PERIOD FROM 1 JANUARY 2017	BEGINNING OF	SHARES	END OF
TO 31 DECEMBER 2017	THE PERIOD	REPURCHASED	THE PERIOD
Ordinary Shares	381,115,665	(10,927,718)	370,187,947

There were no C Shares in issue during the year or as at 31 December 2017.

The table below shows the movement in shares through 31 December 2016:

	SHARES IN			SHARES IN
FOR THE PERIOD FROM	ISSUE AT THE			ISSUE AT THE
1 JANUARY 2016	BEGINNING OF	CONVERSION	SHARES	END OF
TO 31 DECEMBER 2016	THE PERIOD	OF C SHARES	REPURCHASED	THE PERIOD
Ordinary Shares	200,000,000	182,615,665	(1,500,000)	381,115,665
C Shares	183,000,000	(183,000,000)	-	-

Share buyback programme

All Shares bought back through the share buyback programme are held in treasury as at 31 December 2017. Details of the programme are as follows:

	ORDINARY	AVERAGE	LOWEST	HIGHEST	TOTAL
	SHARES	PRICE PER	PRICE PER	PRICE PER	TREASURY
DATE OF PURCHASE	PURCHASED	SHARE	SHARE	SHARE	SHARES
January 2017	1,071,462	78.43p	77.75p	79.00p	2,571,462
February 2017	466,206	76.96p	76.59p	77.75p	3,037,668
March 2017	1,138,738	76.28p	75.16p	77.50p	4,176,406
April 2017	142,643	75.82p	74.89p	77.50p	4,319,049
May 2017	464,480	81.07p	80.50p	81.97p	4,783,529
June 2017	322,765	81.91p	81.72p	82.00p	5,106,294
July 2017	1,600,000	81.47p	81.00p	82.00p	6,706,294
August 2017	1,333,000	80.36p	80.00p	81.00p	8,039,294
September 2017	825,000	78.00p	78.00p	78.00p	8,864,294
October 2017	1,219,767	78.00p	78.00p	78.00p	10,084,061
November 2017	1,539,540	76.55p	74.45p	78.00p	11,623,601
December 2017	804,117	75.51p	74.50p	77.25p	12,427,718

Other distributable reserve

During 2017, the Company declared and paid dividends of £Nil (2016: £4,438,848) from the other distributable reserve. Further, the cost of the buy back of Shares as detailed above was funded by the other distributable reserve of £8,632,496 (2016: £1,166,866). The closing balance in the other distributable reserve has been reduced to £179,761,790 (31 December 2017: £188,394,286).

15. DIVIDENDS PER SHARE

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

	31 DECEMBER 2017	31 DECEMBER 2016
	£	£
2015 interim dividend of 2.00 pence per Ordinary Share paid on 7 March 2016	-	4,000,000
2015 interim dividend of 1.07 pence per C Share paid on 7 March 2016	-	1,958,100
2016 interim dividend of 1.50 pence per Ordinary Share paid on 30 June 2016	-	5,739,235
2016 interim dividend of 1.50 pence per Ordinary Share paid on 20 September 2016	-	5,739,235
2016 interim dividend of 1.50 pence per Ordinary Share paid on 19 December 2016	-	5,739,235
2016 interim dividend of 1.50 pence per Ordinary Share paid on 7 April 2017	5,692,140	-
2017 interim dividend of 1.50 pence per Ordinary Share paid on 22 June 2017	5,667,482	-
2017 interim dividend of 1.70 pence per Ordinary Share paid on 21 September 2017	6,367,798	-
2017 interim dividend of 1.80 pence per Ordinary Share paid on 24 November 2017	6,682,130	-
Total	24,409,550	23,175,805

An interim dividend of 1.80 pence per Ordinary Share was declared by the Board on 1 March 2018 in respect of the period to 31 December 2017, was paid to shareholders on 5 April 2018. 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 Chairman of the Board, the fees are £30,000 for each Director per annum. The Chairman's fee is £50,000 per annum. The chairman 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 chairman of the Audit and Valuation Committee is £5,000 per annum. At 31 December 2017, £163,362 (31 December 2016: £161,064) was paid to the Directors and £0 (31 December 2016: £0) was owed for services performed.

All of 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.

As at 31 December 2017, the Directors' interests in the Parent Company's Shares were as follows:

		31 DECEMBER 2017	31 DECEMBER 2016
Andrew Adcock	Ordinary Shares	50,000	50,000
Kevin Ingram	Ordinary Shares	34,968	34,968
Richard Levy	Ordinary Shares	1,300,000	800,000
Elizabeth Passey	Ordinary Shares	10,000	10,000
Clive Peggram	Ordinary Shares	194,740	74,948

Investment management fees for the year ended 31 December 2017 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 2017, as part of an amendment to its management agreement, the Investment Manager purchased Shares of the Parent Company with 20% of the its monthly management fee. The Shares were purchased at the prevailing market price. As at 31 December 2017, the Investment Manager has purchased 1,364,896 (31 December 2016: 320,188) Shares.

As at 31 December 2017, Partners and Principals of the Investment Manager held 1,885,000 (31 December 2016: 1,385,000) 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 2017 the Group owned 26 per cent. of VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. (31 December 2016: 26 per cent) and the value of the Group's investment in VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. was £23,845,238 (31 December 2016: £25,775,540).

The Group has invested in Larkdale III, L.P. The Investment Manager of the Parent Company also acts as manager to Larkdale III, L.P. As at 31 December 2017, the Group owned 52 per cent. of Larkdale III, L.P. (31 December 2016: 52 per cent.) and the value of the Group's investment in Larkdale III, L.P. was £3,116,896 (31 December 2016: £5,522,791).

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 2017, £41,686 was due to the Investment Manager (31 December 2016: £32,750), 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 2017	PERCENTAGE OWNERSHIP AS AT 31 DECEMBER 2016
VPC Specialty Lending Investments Intermediate, 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
ODVM II, L.P.	Investment vehicle	USA	Limited partner interest	N/A	Sole limited partner
ODVM II GP, LLC	General partner	USA	Membership interest	N/A	Sole member
LIAB, L.P.	Investment vehicle	UK	Limited partner interest	Sole limited partner	Sole limited partner
LIAB GP, LLC	General partner	UK	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	UK	Membership interest	Sole member	Sole member
SVTW, L.P.	Investment vehicle	USA	Limited partner interest	99%	99%
SVTW GP, LLC	General partner	USA	Membership interest	99%	99%
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%
Larkdale I, L.P.	Investment vehicle	USA	Limited partner interest	61%	61%
Larkdale I GP, LLC	General partner	USA	Membership interest	61%	61%
Larkdale II, L.P.	Investment vehicle	USA	Limited partner interest	N/A	50%
Larkdale II GP, LLC	General partner	USA	Membership interest	N/A	50%
Larkdale IV, L.P.	Investment vehicle	USA	Limited partner interest	N/A	61%
Larkdale IV GP, LLC	General partner	USA	Membership interest	N/A	61%

The subsidiaries listed above as investment vehicles are consolidated by the Group.

NAME		REGISTERED ADDRESS
VPC Specialty Lending Investments Intermediate, 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
ODVM II, L.P.		150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
ODVM II GP, LLC		150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
LIAB, L.P.		150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
LIAB 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
SVTW, L.P.		150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
SVTW 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
Larkdale I, L.P.		150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
Larkdale I GP, LLC		150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
Larkdale II, L.P.		150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
Larkdale II GP, LLC		150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
Larkdale IV, L.P.		150 North Riverside Plaza, Suite 5200, Chicago, IL 60606
Larkdale IV 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:

	INVESTMENTS
	IN SUBSIDIARIES
	£
Beginning balance, 1 January 2017	258,763,168
Purchases	196,067,355
Sales	(166,226,619)
Impairment of investments in subsidiaries	(1,989,449)
Ending balance, 31 December 2017	286,614,455

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 at 31 December 2017 represents the portion of the NAV of the controlled subsidiaries attributable to the other investors. As at 31 December 2017, the portion of the NAV attributable to non-controlling interests investments totaled £842,521 (31 December 2016: £34,910,616). 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 material non-controlling interests as at 31 December 2017:

NAME OF SUBSIDIARY	PRINCIPAL PLACE OF BUSINESS	PROPORTION OF OWNERSHIP INTERSTS HELD BY NON-CONTROLLING INTERESTS AS AT 31 DECEMBER 2017	PROFIT OR LOSS OF SUBSIDIARY ALLOCATED TO NON-CONTROLLING INTERESTS DURING THE PERIOD ENDED 31 DECEMBER 2017	ACCUMULATED NON-CONTROLLING INTERESTS IN SUBSIDIARY AS AT 31 DECEMBER 2017
NAME OF SUBSIDIARY	PRINCIPAL PLACE OF BUSINESS		£	£
Drexel I, L.P.	USA	47%	(366,057)	312,414
Duxbury Court I, L.P.	USA	5%	18,231	52,514
Larkdale I, L.P.	USA	39%	(2,183,021)	475,684
Larkdale II, L.P.	USA	0%	(103,815)	-
Larkdale IV, L.P.	USA	0%	40,754	-
SVTW, L.P.	USA	1%	(17,804)	1,909
Totals			(2,611,712)	842,521

NAME OF SUBSIDIARY	SUMMARISED FINANCIAL INFORMATION FOR SUBSIDIARY 31 DECEMBER 2017
NAME OF SUBSIDIARY			£
Drexel I, L.P.		Distributions to non-controlling interests	9,041,140
		Profit/(loss) of subsidiary for period ended 31 December 2017	(886,586)
		Assets as at 31 December 2017	631,332
		Liabilities as at 31 December 2017	78,444
Duxbury Court I, L.P.		Distributions to non-controlling interests	1,034,165
		Profit/(loss) of subsidiary for period ended 31 December 2017	442,595
		Assets as at 31 December 2017	1,378,763
		Liabilities as at 31 December 2017	-
Larkdale I, L.P.		Distributions to non-controlling interests	16,278,719
		Profit/(loss) of subsidiary for period ended 31 December 2017	(5,348,609)
		Assets as at 31 December 2017	1,373,627
		Liabilities as at 31 December 2017	157,210
Larkdale II, L.P.		Distributions to non-controlling interests	1,892,250
		Profit/(loss) of subsidiary for period ended 31 December 2017	(214,993)
		Assets as at 31 December 2017	-
		Liabilities as at 31 December 2017	-
Larkdale IV, L.P.		Distributions to non-controlling interests	112,615
		Profit/(loss) of subsidiary for period ended 31 December 2017	115,891
		Assets as at 31 December 2017	-
		Liabilities as at 31 December 2017	-
SVTW, L.P.		Distributions to non-controlling interests	40,998
		Profit/(loss) of subsidiary for period ended 31 December 2017	(5,427,126)
		Assets as at 31 December 2017	925,171
		Liabilities as at 31 December 2017	758,477

The following entities have been consolidated which have material non-controlling interests as at 31 December 2016:

NAME OF SUBSIDIARY	PRINCIPAL PLACE OF BUSINESS	PROPORTION OF OWNERSHIP INTERSTS HELD BY NON-CONTROLLING INTERESTS AS AT 31 DECEMBER 2016	PROFIT OR LOSS OF SUBSIDIARY ALLOCATED TO NON-CONTROLLING INTERESTS DURING THE PERIOD ENDED 31 DECEMBER 2016	ACCUMULATED NON-CONTROLLING INTERESTS IN SUBSIDIARY AS AT 31 DECEMBER 2016
NAME OF SUBSIDIARY	PRINCIPAL PLACE OF BUSINESS		£	£
Drexel I, L.P.	USA	48%	233,692	10,716,608
Duxbury Court I, L.P.	USA	5%	(5,286)	1,170,735
Larkdale I, L.P.	USA	39%	3,295,789	20,694,097
Larkdale II, L.P.	USA	50%	33,690	2,189,608
Larkdale IV, L.P.	USA	39%	(35,398)	73,438
SVTW, L.P.	USA	1%	(17,087)	66,130
Totals			3,505,400	34,910,616

NAME OF SUBSIDIARY	SUMMARISED FINANCIAL INFORMATION FOR SUBSIDIARY 31 DECEMBER 2016
NAME OF SUBSIDIARY			£
Drexel I, L.P.		Distributions to non-controlling interests	11,397,091
		Profit/(loss) of subsidiary for period ended 31 December 2016	904,681
		Assets as at 31 December 2016	56,886,081
		Liabilities as at 31 December 2016	36,847,652
Duxbury Court I, L.P.		Distributions to non-controlling interests	1,493,363
		Profit/(loss) of subsidiary for period ended 31 December 2016	(748,478)
		Assets as at 31 December 2016	24,665,976
		Liabilities as at 31 December 2016	1,121,392
Larkdale I, L.P.		Distributions to non-controlling interests	50,410,609
		Profit/(loss) of subsidiary for period ended 31 December 2016	8,722,301
		Assets as at 31 December 2016	95,945,413
		Liabilities as at 31 December 2016	43,397,556
Larkdale II, L.P.		Distributions to non-controlling interests	2,881,459
		Profit/(loss) of subsidiary for period ended 31 December 2016	118,747
		Assets as at 31 December 2016	4,700,591
		Liabilities as at 31 December 2016	340,490
Larkdale IV, L.P.		Distributions to non-controlling interests	-
		Profit/(loss) of subsidiary for period ended 31 December 2016	(97,031)
		Assets as at 31 December 2016	236,190
		Liabilities as at 31 December 2016	49,896
SVTW, L.P.		Distributions to non-controlling interests	-
		Profit/(loss) of subsidiary for period ended 31 December 2016	(3,083,596)
		Assets as at 31 December 2016	94,552,403
		Liabilities as at 31 December 2016	72,917,802

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 2017 £	MAXIMUM EXPOSURE TO LOSS AS AT 31 DECEMBER 2017 £
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	23,845,238	23,845,238
Larkdale III, L.P.	USA	Investment vehicle	52%*	Designated as held at fair value through profit or loss - using NAV	3,116,896	3,116,896

*The Group holds 52% interest in Larkdale III while the Group's ultimate ownership of the investment held by Larkdale III, L.P. is 34%. The Group has determined it does not have accounting control as the General Partner has operating control over the vehicle and acts as agent for a number of the Investment Manager's funds.

NAME OF ASSOCIATE	SUMMARISED FINANCIAL INFORMATION FOR ASSOCIATE 31 DECEMBER 2017 £


VPC Offshore Unleveraged	Profit/(loss) of associate for period ended 31 December 2017	8,219,978
Private Debt Fund Feeder, L.P.	Assets as at 31 December 2017	90,245,911
	Liabilities at 31 December 2017	2,233,303
Larkdale III, L.P.	Profit/(loss) of associate for period ended 31 December 2017	(4,230,000)
	Assets as at 31 December 2017	6,053,052
	Liabilities at 31 December 2017	15,589

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 2016
£

MAXIMUM EXPOSURE TO LOSS AS AT

31 DECEMBER 2016
£

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

25,775,540

Larkdale III, L.P.

USA

Investment vehicle

52%*

Designated as held at fair value through profit or loss - using NAV

5,522,791

NAME OF ASSOCIATE	SUMMARISED FINANCIAL INFORMATION FOR ASSOCIATE 31 DECEMBER 2016 £


VPC Offshore Unleveraged	Profit/(loss) of associate for period ended 31 December 2016	12,249,103
Private Debt Fund Feeder, L.P.	Assets as at 31 December 2016	99,362,405
	Liabilities at 31 December 2016	2,502,387
Larkdale III, L.P.	Profit/(loss) of associate for period ended 31 December 2016	(14,583,848)
	Assets as at 31 December 2016	11,035,836
	Liabilities at 31 December 2016	338,127

The Group's investments in associates all consist of limited partner interests 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 1.80 pence per Ordinary Share for the three-month period ended 31 December 2017 and paid the dividend on 5 April 2018.

From 1 January 2018 to 27 April 2018, the Company had repurchased an additional 3,371,050 Ordinary Shares at an average price of 78.85 pence per Ordinary Share under the share buyback programme bringing the cumulative total to 15,798,768 Ordinary Shares (4.13% of gross share issuance).

The Group was refinanced from its balance sheet investment into Kreditech Holding SSL GmbH and repaid a majority of its balance sheet investment in The Credit Junction, Inc. The Group has made initial investments into Konfio Ltd. and follow on investments into existing deals.

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

SHAREHOLDER INFORMATION

INVESTMENT OBJECTIVE

The Company's investment objective is to generate an attractive total return for shareholders consisting of distributable income and capital growth through investments in specialty lending opportunities.

INVESTMENT POLICY

The Company seeks to achieve its investment objective by investing in opportunities in the specialty lending market through Platforms 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 Platforms ("Debt Instruments"). Such Debt Instruments may be subordinated in nature, or may be second lien, mezzanine or unsecured loans.

Indirect investments include investments in Platforms (or in structures set up by Platforms) 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 specialty lending 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 Platforms or specialty lending entities.

The Company invests across various Platforms, asset classes, geographies (primarily US, UK and Europe) 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.

PORTFOLIO COMPANY 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 Balance Sheet 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 U.K. 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 leverage against any of its assets).

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

The Company may establish SPVs in connection with obtaining leverage 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 levered 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.

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.

SECURITISATION

The Company may use securitisation typically only for loans purchased directly from portfolio companies through the Marketplace Model in order to improve overall profitability by: (i) lowering the cost of financing; (ii) further diversifying its portfolio using the same amount of equity capital; and (iii) to lowering the credit risk to the Company.

In order to securitise certain assets, a bankruptcy remote SPV would be established, solely for the purpose of holding the underlying assets and issuing asset-backed securities ("ABS") secured only on these assets within the SPV. Each SPV would be portfolio company specific and would be owned by the Company, in whole or in part alongside Other VPC Funds or investors. Each SPV used for securitisation will be ring-fenced from one another and will not involve cross-collateralisation. The SPV will then aim to raise debt financing in the capital markets by issuing ABS that are secured only on assets within the SPV. The SPV will also enter into service agreements with the relevant portfolio companies to ensure continued collection of payments, pursuance of delinquent borrowers (end consumers) and otherwise interaction with borrowers in much the same manner as if the securitisation had not occurred.

SHARE REGISTER ENQUIRIES

For shareholder enquiries, please contact +44 (0) 871 664 0300. If you are outside the United Kingdom, please call +44 371 664 0300.

Calls cost 12p per minute plus your phone company's access charge. Calls outside the United Kingdom will be charged at the applicable international rate. We are open between 09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales.

SHARE CAPITAL AND NET ASSET VALUE INFORMATION

0BOrdinary £0.01 Shares	1B370,187,947
2BSEDOL Number	3BBVG6X43
4BISIN Number	5BGB00BVG6X439

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 telephone +001 312 705 2789 and are available on the Company's website https://vpcspecialtylending.com

PROVISIONAL FINANCIAL CALENDAR

6B12 June 2018	7BAnnual General Meeting
8BJune 2018	9BPayment of interim dividend to 31 March 2017
10B30 June 2018	11BHalf-year End
12BSeptember 2018	13BAnnouncement of half-yearly results
14BSeptember 2018	15BPayment of interim dividend to 30 June 2017
16BDecember 2018	17BPayment of interim dividend to 30 September 2017
18B31 December 2018	19BYear End

DIVIDENDS

The following table summarises the amounts recognised as distributions to equity shareholders relating to 2017:

	£
2017 interim dividend of 1.50 pence per Ordinary Share paid on 22 June 2017	5,667,482
2017 interim dividend of 1.70 pence per Ordinary Share paid on 21 September 2017	6,367,798
2017 interim dividend of 1.80 pence per Ordinary Share paid on 24 November 2017	6,682,130
2017 interim dividend of 1.80 pence per Ordinary Share paid on 5 April 2018	6,627,384
Total	25,344,794

GLOSSARY OF TERMS

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

Look-Through Leverage Ratios - The aggregate leverage 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.

Market Capitalisation - Month-end closing share price multiplied by the number of shares outstanding at month end.

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.

NAV (Ex Income) - The NAV of the Company, including current year capital returns and excluding current year revenue returns and unadjusted for dividends relating to revenue returns.

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

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

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.

Revenue Return - Represents the difference between the NAV (Cum Income) Return and the NAV (Ex Income) Return as defined above.

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

THE USE OF ALTERNATIVE PERFORMANCE MEASURES ("APMS")

The Group uses the following APMs to present a measure of profitability which is aligned with the requirements of our 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 accounts in gauging the profit levels of the Group. All APMs relate to past performance:

v NAV (Cum Income) Return;

v Revenue Return;

v NAV (Ex Income) Return;

v Dividend yield on average Ordinary Share NAV;

v Total Shareholder Return (based on share price);

v Twelve month trailing current dividend yield;

v ROIC of balance sheet investments;

v Non-recurring Capital Return on portfolio sales;

v Unlevered weighted average yield on balance sheet investments; and

v Total Net Asset Value Return.

CONTACT DETAILS OF THE ADVISERS

Directors

Andrew Adcock

Clive Peggram

Elizabeth Passey

Kevin Ingram

Richard Levy

all of the registered office below

Registered Office

6^th Floor

65 Gresham Street

London EC2V 7NQ

United Kingdom

Company Number

9385218

Website Address

https://vpcspecialtylending.com

Corporate Broker

Jefferies International Limited

Vintners Place

68 Upper Thames Street

London EC4V 3BJ

United Kingdom

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 Devon EX4 4EP

United Kingdom

Administrator

Northern Trust Hedge Fund Services LLC

50 South LaSalle Street

Chicago

IL 60603

United States

Registrar

Link Market Services

The Registry

34 Beckenham Road

Beckenham, Kent, BR3 4TU

United Kingdom

Custodians

Merrill Lynch, Pierce, Fenner & Smith Incorporated

101 California Street

San Francisco

CA 94111

United States

Millennium Trust Company

2001 Spring Road

Oak Brook

IL 60723

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

APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS

The Annual report and Financial Statements were approved and authorised for issue by the Directors on 27 April 2018.

The 2018 Annual General Meeting will be held on Tuesday, 12 June 2018.

Printed copies of the Annual Report, Notice of the Company's 2018 Annual General Meeting together with the Form of Proxy will be posted or made available to the Company's shareholders.

Copies of these documents will also be submitted shortly to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/nsm and will also available on the Company's website at https://vpcspecialtylending.com/.

ENDS

LEI: 549300UPEXC5DQB81P34

This information is provided by RNS

The company news service from the London Stock Exchange

END

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Friday, 10th January 2025

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Annual Financial Report

Securitisation issuance for online lending continued to grow in 2017, indicating increasing institutional appetite for credit assets with first loss protection, backed by loans originated online.

DIFFERENTIATED PROPOSITION

EARLY ADOPTER ADVANTAGE

PORTFOLIO MANAGEMENT

GEARING AND CAPITAL MARKETS

NAV AND TOTAL RETURN

DIVIDEND YIELD

GEARING RATIO

SHARE PRICE PREMIUM/DISCOUNT

EXPENSES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2017

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2017

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2016

PARENT COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2017

INVESTMENT OBJECTIVE

INVESTMENT POLICY

INVESTMENT RESTRICTIONS

PORTFOLIO COMPANY RESTRICTIONS

BORROWING POLICY

SECURITISATION

SHARE REGISTER ENQUIRIES

SHARE CAPITAL AND NET ASSET VALUE INFORMATION

0BOrdinary £0.01 Shares

1B370,187,947

2BSEDOL Number

3BBVG6X43

4BISIN Number

5BGB00BVG6X439

ANNUAL AND HALF-YEARLY REPORTS

PROVISIONAL FINANCIAL CALENDAR

6B12 June 2018

7BAnnual General Meeting

8BJune 2018

9BPayment of interim dividend to 31 March 2017

10B30 June 2018

11BHalf-year End

12BSeptember 2018

13BAnnouncement of half-yearly results

14BSeptember 2018

15BPayment of interim dividend to 30 June 2017

16BDecember 2018

17BPayment of interim dividend to 30 September 2017

18B31 December 2018

19BYear End

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