Annual Financial Report

RNS Number : 6105J

VPC Specialty Lending Invest. PLC

28 April 2022

 

28 April 2022

VPC SPECIALTY LENDING INVESTMENTS PLC

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

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2021

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 2021 (the "Annual Report").

ABOUT

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

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

A summary of the principal terms of the Investment Manager's appointment and a statement relating to their continuing appointment can be found on page 122 within the full version Annual Report. The investment policy can be found beginning on page 134 of the full version Annual Report. 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.

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

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

The 2022 Annual General Meeting will be held on Monday, 13 June 2022.

Printed copies of the Annual Report and Notice of the Company's 2022 Annual General Meeting will be posted or made available to the Company's shareholders.

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

A copy of the Notice of the Company's 2022 Annual General Meeting will be published and made available in due course.

The following text is extracted from the Annual Report and Financial Statements of the Company for the year ended 31 December 2021. All page numbers below refer to the Annual Report on the Company's website.

SUMMARY AND HIGHLIGHTS FOR THE YEAR

The financial and business highlights for the year ended 31 December 2021 are as follows:

v January 2021: VPC Impact Acquisition Holdings (NASDAQ: "VIH") announced on 11 January 2021 that it had entered into a definitive agreement to combine with Bakkt Holdings, LLC.

v February 2021: The Company declared a dividend of 2.00 pence per share for the three-month period to 31 December 2020.

v March 2021: The Company fully exited its equity investment in Elevate Credit, Inc. (NYSE: ELVT) and the Company funded equity investments in VPC Impact Acquisition Holdings II (NASDAQ: VPCB) ("VPCB") and VPC Impact Acquisition Holdings III (NYSE: VPCC) ("VPCC") for USD$1.3 million each. Additionally, the Company closed on a USD$130 million gearing facility with Massachusetts Mutual Life Insurance Company, which was used to repay the Company's previous gearing facility with Pacific Western Bank and the first-out participation facility on Avant, held with Axos Bank.

v April 2021: The Company fully exited its asset backed investments in ATA KS Holdings, LLC and reinvested in three new asset backed and equity investments in Razor Group GmbH ("Razor"), Moonshot Holdings LLC ("Moonshot"), and CHEQ Limited CAN ("Beforepay").

v May 2021: The Company declared its 13th consecutive dividend of 2.00p per share for the three-month period to 31 March 2021.

v May 2021: The Company invested in three new asset backed investments in Pattern Brands, Inc ("Pattern"), Factory 14 S.a.r.l. ("Factory 14") and Holland Law Firm ("Holland").

v June 2021: VPCC entered into a definitive agreement to combine with Dave. The business combination, which remains subject to VPCC shareholder and customary regulatory approvals, is expected to close in the third or fourth quarter of 2021.

v July 2021: The Company invested in one new asset backed investment, TALA Mobile, S.A.P.I. DE C.V. ("Tala").

v August 2021: The Company declared its 14th consecutive dividend of 2.00p per share for the three-month period to 30 June 2021.

v August 2021: VPCB announced it had entered into a definitive agreement to combine with FinAccel Pte. Ltd. 

v August 2021: VPC announced it had become a signatory of the United Nations-supported Principles for Responsible Investment ("PRI"), demonstrating its commitment to integrating ESG considerations into investment decision making.

v October 2021: Bakkt Holdings, LLC, announced it had completed the previously announced business combination with VCP Impact Acquisition Holdings, a special acquisition company sponsored by VPC Impact Acquisition Holders Sponsor, LLC (VPC Sponsor"), an affiliate of VPC. The combined company now operates as Bakkt Holdings, Inc. ("Bakkt") (NTSE: BKKT).

v November 2021: The Company declared its 15th consecutive of 2.00p per share for the three-month period to 30 September 2021.

v November 2021: The Company receives Investment Week's Annual Investment Company of the Year Award (Debt Category).

v December 2021: L&F Acquisition Corp (NYSE: LNGA) ("LNFA") a special purpose acquisition company sponsored by JAR Sponsor, LLC ("VPC Sponsor"), an affiliate of VPC, announced it had entered into a definitive agreement to combine with ZeroFox, an enterprise software-as-a-service leader in external cybersecurity.

SUBSEQUENT EVENTS

Since the year ended 31 December 2021:

v January 2022: VPCC and Dave, Inc. announced that the business combination closed following approval by the VPCC stockholders.

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

v March 2022: The Company noted that on 14 March 2022, VPC Impact Acquisition Holdings II (NASDAQ: VPCB) ("VPCB"), a special purpose acquisition company sponsored by VPC Impact Acquisition Holdings Sponsor II, LLC ("VPC Sponsor"), an affiliate of Victory Park Capital ("VPC"), and FinAccel, the parent company of Kredivo, the leading AI-enabled digital consumer credit platform in Southeast Asia, announced the mutual termination of their previously announced business combination agreement. VPCB was to consider future options, including seeking an alternative business combination. The parties agreed that, in the event that VPCB was liquidated, Kredivo would issue a warrant with a nominal exercise price to VPCB, providing VPCB with the ability to acquire a stake equal to 3.5% of the fully diluted equity securities of Kredivo.

TOP TEN POSITIONS

The table below provides a summary of the top ten positions of the Group, net of gearing, as at 31 December 2021. The summary includes a look-through of the Group's investments in VPC Synthesis, L.P. and VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. to illustrate the exposure to underlying Portfolio Companies as it is a requirement of the investment policy (set out on pages 134 and 135) to consider the application of the restrictions in this policy on a look-through basis.

INVESTMENT		COUNTRY		INVESTMENT TYPE	PERCENTAGE OF NAV
Applied Data Finance, LLC	United States		Asset Backed Lending			12.14%
Applied Data Finance, LLC provides credit to non-prime and near-prime consumers in select states across the U.S. The company is headquartered in San Diego, with offices in New York, in addition to an IT and call center support in Chennai, India. Financings are in the form of instalment loans and range up to $10,000.
Caribbean Financial Group Holdings, L.P.	Latin America		Asset Backed Lending			10.74%
Caribbean Financial Group Holdings, L.P. is the largest non-bank provider of unsecured consumer instalment loans to the Caribbean market, operating primarily in the western and southern Caribbean. CFG was founded in 1979, operates over 70 store branches across seven Caribbean countries and has its largest operations in Panama and Trinidad & Tobago. CFG's product offering includes loan sizes ranging from $200 to $10,000, loan terms up to 79 months with no prepayment penalties and fully amortizing simple interest loans with equal monthly payments and rates based on underwriting customers' ability to pay.
Perch HQ, LLC	United States		Asset Backed Lending			9.84%
PerchHQ, LLC is a technology-enabled platform that seeks to acquire and operate a diverse portfolio of e-commerce assets on retail marketplaces. Perch primarily targets Amazon third-party sellers ("TPS") and e-commerce brands with: (i) leading market positions in respective product categories; (ii) a defensible "moat" from customer reviews and search engine optimisation; and (iii) $1-15M in sales and $200K-5M in contribution margin (or "Asset-Level EBITDA") (on average, ~$2M of Asset-Level EBITDA at ~25% operating margins). The company aims to acquire underlying brands at 2-5x Asset Level EBITDA, and drive value through post-acquisition brand initiatives including pricing strategy, advertising strategy, cost savings, supply chain efficiencies, and general Amazon account management optimization.
Elevate Credit, Inc.	United States		Asset Backed Lending			7.36%
Elevate Credit, Inc. ("Elevate") is a lender of unsecured short-term cash advances and instalment loans to individuals primarily through the internet. The company provides consumers with access to responsible and transparent credit options within the non-prime lending industry. Elevate currently offers and / or supports the following products: U.S. instalment loans (Rise), lines of credit (Elastic) and credit card (Today Card).
Deinde Group, LLC	United States		Asset Backed Lending			4.86%
Deinde Group, LLC ("Integra") is an early stage, online provider of unsecured consumer loans to borrowers. Integra was founded in March 2014 by Arthur Tretyak (CEO) and is led by a team of seasoned consumer finance and risk analytics executives, with prior experience including TitleMax, a $400.0 million nonprime consumer lender, and Enova, a $800.0 million nonprime consumer lender).
Heyday Technologies, Inc.	United States		Asset Backed Lending			4.40%
Heyday Technologies, Inc. ("Heyday") is a tech enabled platform that seeks to acquire and aggregate a diverse portfolio of retail assets which are sold primarily via e-commerce marketplaces. Heyday primarily targets Amazon Marketplace third-party sellers ("TPS"). The company aims to acquire underlying brands/seller at 2-5x earnings, and drive value through post-acquisition brand management initiatives and underlying multiple expansion. Heyday aims to differentiate itself from other TPS aggregators in the novel ecosystem by investing heavily and early in its technology and analytics capabilities thereby allowing the company to easily identify and optimize operating improvements within its portfolio at scale.
VPC Impact Acquisition Holdings Sponsor, LLC	United States		Equity Investment			4.01%
Bakkt Holdings, LLC, the digital asset marketplace founded in 2018, completed a business combination with VPC Impact Acquisition Holdings, a special purpose acquisition company sponsored by VPC Impact Acquisition Holdings Sponsor, LLC ("VPC Sponsor"), an affiliate of Victory Park Capital ("VPC"). The combined company operates as Bakkt Holdings, Inc. ("Bakkt"), and Bakkt's shares of Class A common stock trade on the New York Stock Exchange under the ticker symbol "BKKT". Bakkt is a trusted digital asset marketplace that enables consumers to buy, sell, store and spend digital assets. Bakkt's retail platform, now available through the recently released Bakkt App and to partners through the Bakkt platform, amplifies consumer spending and bolsters loyalty programmes, adding value for all key stakeholders within the Bakkt payments and digital assets ecosystem.
Razor Group GMBH	Germany		Asset Backed Lending			3.59%
Razor Group GmbH ("Razor") is a technology driven consumer goods platform that acquires and operates a diverse portfolio of branded Amazon third-party seller ("TPS") assets primarily in Europe. Razor targets brands with €100K - €3.5 million of seller's discretionary earnings ("Asset-Level EBITDA") to be acquired at purchase multiples of 1.5x - 5.0x TTM Asset-Level EBITDA.
West Creek Financial, Inc.	United States		Asset Backed Lending			2.56%
West Creek Financial, Inc. ("West Creek") provides a point-of-sale, lease-to-own solution for underserved customers enabling purchases of durable goods such as furniture, mattresses, appliances and tires. West Creek's proprietary underwriting model verifies FICO scores, a measure of consumer credit risk, and collects additional data from third-party providers such as Clarity, DataXRisk, and FactorTrust to analyse numerous variables to evaluate and approve users.
Dave, Inc.	United States		Asset Backed Lending			2.31%
Dave, Inc. ("Dave") is an emerging Neobank and mobile app-based service that links to consumers' external bank accounts, monitors spending behaviour, provides budgeting tools and issues warnings about upcoming bills that might push users towards an overdraft. Dave has over 5.0 million bank connected customers on its platform and recently launched "Dave Banking", its own branded, zero fee checking account (1 million+ accounts). On top of its banking services, Dave's core product allows users to budget for upcoming expenses before their next paycheck and offers interest-free advances of up to $200.

ENQUIRIES

For further information, please contact:

Victory Park Capital Brendan Carroll (Senior Partner and Co-Founder) Gordon Watson (Partner)	via Jefferies or Winterflood (below) [e-mail]
Jefferies International Limited	Tel: [phone]
Stuart Klein
Gaudi le Roux
Winterflood Securities Limited	Tel: [phone]
Neil Morgan
Chris Mills
Link Company Matters Limited (Company Secretary)	Tel: [phone] Email: [e-mail]

STRATEGIC REPORT

CHAIRMAN'S STATEMENT

In my first Chairman's Statement, I am pleased to report on a year in which the Company made excellent progress and delivered strong returns to shareholders. This against a backdrop which continues to this day of turbulent economic and geopolitical events. Throughout, our Investment Manager has remained focused on the successful management of risk, supporting Portfolio Companies and discovering new investment opportunities.

Whilst elements of our returns in the financial year may be particular to 2021, we believe that the investment case for the Company remains robust, not only due to the resilient nature of its asset backed investments, but also through its advantageous market positioning in the fintech universe.

HIGHLIGHTS IN 2021

v Total NAV return of 27.60% for the year, the Company's best ever, surpassing the 2019 and 2020 total NAV returns of 11.34% and 11.12%, respectively;

v Total shareholder return of 27.32% for the year;

v The Company paid its 16th consecutive quarterly dividend of 2.00p per share for the three-month period to December 2021;

v Resilient performance of the asset backed loan investments with the Company receiving all interest payments on time during the year; and

v The Company was named "Investment Company of the Year" (Debt Category) at Investment Week's annual investment awards in November 2021.

THE COMPANY'S BUSINESS

For the twelve months to the end of December 2021, the NAV per share of the Company increased by 27.60% (26..42p) on a total return basis, comprising a NAV per share increase from 95.72p to 114.14p, plus the 8.00p of dividends paid in 2021. During the year, the share price increased from 78.70p to 92.20p. The dividends paid are in line with the target dividend of 8.00p per year set out in the IPO Prospectus, were fully covered by the total returns during the year and continue to be the long-term dividend target of the Company.

The Company generated returns from three key sources: the core lending business, equity interests arising from the core lending business, and special purpose acquisition company ("SPAC") investments.

The core lending business, which represents 67% of the total portfolio at year-end, has over recent years benefitted from a secure lending position, ensuring minimal capital losses and a high level of income generation that supports the annual dividend payment of 8.00p per share. Most of the Company's asset backed investments are delayed draw, floating rate senior secured loans that have equity subordination. The asset backed investments are also backed by underlying collateral consisting of consumer loans, small business loans and other types of collateral.

The equity interests arising from the core lending business allow us to benefit from an element of equity participation without having to contribute equity risk capital. This has proven to be an extremely valuable aspect of the Company performance in 2021. Over the year to 31 December 2021, this has contributed 11.59p per share to overall returns.

Finally, VPC's strength in the market has allowed us to participate in the opportunities presented by SPAC sponsorship. VPC has successfully developed an extensive deal sourcing network in the fintech universe through its existing lending business, and throughout 2021 SPAC deals have provided a way to capitalise on this network for the benefit of our shareholders. The SPAC deals that VPC participates in are generally with counterparties it is already familiar with through its lending relationships, ensuring a greater element of confidence in the SPAC process. That said, the SPAC market as a whole has been particularly volatile of late, and our holdings have been no exception, with valuations of the Company's SPAC holdings over the year ranging from 27.95p to 4.82p per share. The value of the Company's SPAC holdings have contributed 10.64p per share to overall returns and had a total value of 12.43p per share at 31 December 2021.

As at 31 December 2021, the Group was fully invested in a diversified portfolio of asset backed and equity investments that continue to deliver strong risk-adjusted returns. While the macroeconomic backdrop for non-traditional credit has remained somewhat volatile, VPC's risk mitigation measures, the resilience of the portfolio and its performance have been encouraging.

THE COMPANY'S SHARES

The Board takes the view that the typical discount to NAV at which our Company's shares trade is too high and this has obvious disadvantages to the Company. Shareholders are unable to fully realise the underlying value of their holdings, while the Company is unable to raise additional equity capital to take advantage of attractive lending opportunities in the market.

As noted in last year's Annual Report, in 2020 as part of the Continuation vote, the Company will offer an exit opportunity where the Company will buy back up to 25% of the shares in the Company should they trade at an average discount greater than 5% over the first quarter of 2023. As things currently stand, that exit opportunity is likely to be offered and all shareholders will be notified in due course should this continue to be the case. In the meantime, taking action to reduce the discount to NAV is a priority for the Company, and various steps are being taken towards achieving that goal. In the meantime, the discount ought to be helped by our strong and consistent investment performance, backed by active risk management, by our ability to demonstrate that to existing and potential shareholders, and to market the shares actively.

INVESTMENT OPPORTUNITIES

As the Investment Manager details in their report, they are seeing a healthy supply of opportunities in the market. VPC's long-standing reputation and relationships with Portfolio Company management teams, industry professionals and experts have helped to create a differentiated deal pipeline.

Overall, we are very pleased with the Company's performance, which demonstrates the merit of VPC's approach to structured credit lending to technology-enabled businesses combined with a strong culture of risk management. It also demonstrates the value of acquiring equity stakes that benefit from the continued growth of the Portfolio Companies.

THE COMPANY'S IMPACT

As an investment trust, the Company does not itself have employees, property, factories, and the like, so our ability to positively impact what we do flows to the greatest extent from our Investment Manager and the opportunities we are invested in. The Investment Manager aims to operate and invest responsibly, ethically, and fairly and we continue to review our environmental, social and governance ("ESG") stance. Decisions taken are made with due consideration to long-term sustainability and impact on stakeholders. For example, the Directors and Investment Manager are mindful of their carbon footprints if they are required to travel on Company business.

In addition, the Board and the Investment Manager is committed to ensuring the Company's culture is in line with its stated purpose, values, and strategy. The Company has several policies and procedures in place to assist with maintaining a culture of good governance, including those relating to diversity. All aspects of diversity, including gender diversity, are acknowledged, and we believe the Company's activities benefit from a wide range of skills, knowledge, experience, backgrounds, and perspectives.

Through our lending to and investing in innovative and often technology-based businesses, we are able to have a particularly positive impact on the wider world in which we operate. For example, our lending has helped Sunbit, Inc. to grow its business helping people with everyday needs like car repairs and opticians. Our investment in Dave, Inc. supports the company's cash advance product which helps consumers avoid bank fees with little or no cost to the consumer. These are examples of the Investment Manager's commitment to leading by example, taking a progressive approach to responsible investment, and playing its part in building a more sustainable financial system.

OPERATIONAL RESILIENCE

As the world entered its second full year of the COVID-19 pandemic, its effects continue to impact global health, economies, and social behavior. Our Investment Manager's senior leadership has continued to follow guidance from the U.S. Centers for Disease Control and Prevention ("CDC"). VPC employees have more recently been able to make a successful return to working in the office, following the procedures outlined in VPC's Pandemic Response Plan. At the same time, VPC's technology and resources ensured that their employees could also work from home where necessary, without any operational disruption, as they largely did through 2021. As a result, the work of the Company has not been negatively impacted by those factors. The Investment Manager continues to monitor the latest health developments to determine the most appropriate working policies for employees. For example, the Pandemic Response Plan continues to be updated on a regular basis by a dedicated internal team who use government and CDC guidance to define safety policies and procedures, and whilst we hope that this year's Annual General Meeting will be able to be held in person, our ability to do so will depend on current conditions.

In terms of portfolio management, the Investment Manager continues to promote a culture of proactive risk management and controls across the portfolio. Most of the underlying investment exposure is to the U.S. consumer. As such, the impact on the US economy from the COVID-19 pandemic continues to present additional potential credit risk. The investment teams are in contact with the Portfolio Companies to ensure they are taking prudent steps to mitigate transmission risk. The Investment Manager monitors the cash balances of the Company daily and as of the writing of this report, the Company has received all contractual interest payments and will continue to monitor cash flow closely during the COVID-19 pandemic.

OUTLOOK

Finally, the Board hopes that you, your family, friends and colleagues are and remain healthy. At the time of writing this outlook, and as 2022 unfolds, there is much to feel apprehensive about. The COVID-19 pandemic is still with us, delaying hopes of a return to normality. Interest rates are rising sharply as governments withdraw pandemic support programmes and as central banks battle spiraling inflation. Of even greater concern, the ongoing conflict between Russia and Ukraine is an historic geopolitical event and a humanitarian tragedy that threatens to have long-term implications for the global economy. More details on the outlook of the Company can be found on pages 17 and 18 of the Investment Manager's Report.

At uncertain times like these, it is understandable to consider only the negatives. But there is also room for some optimism. As of the date of this report, the prospects for the Company remain attractive. Our Investment Manager has shown it can carry on its normal business and continue to deliver risk-adjusted returns through the pandemic to date. It has also demonstrated the level of its commitment to invest responsibly, both within the Company and as an exemplar to Portfolio Companies. That is something that the Board and all shareholders can feel justifiably positive about whilst the Investment Manager continues to work to generate returns on our behalf.

Graeme Proudfoot

Chair

27 April 2022

INVESTMENT MANAGER'S REPORT

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

VPC's senior secured credit strategy provides opportunistic financing across select investment verticals. Target investments are typically shorter in duration and aim to offer higher yields and greater structural protections than traditional lenders, with an emphasis on capital preservation and income generation across market cycles. VPC generates value through its core competency as a credit investor with direct origination and primarily acts as a sole lender. VPC believes its dedicated, seasoned and experienced investment team provides an advantage in sourcing, deal structuring and risk management. Together, this allows VPC to provide reliable capital solutions throughout the ecosystem. VPC offers an institutional-calibre partnership with a hands-on approach. As a result, companies and global partners continue to seek out VPC as a leading capital provider.

VPC believes it is uniquely positioned to unlock potential value given its background investing across multiple, complex and non-traditional assets as a financial services investor, together with its special situations and event-driven investing expertise.

ESTABLISHED CREDIT MANAGER

v Founded prior to the global financial crisis in 2007 by Richard Levy and Brendan Carroll

v VPC has long-standing experience investing opportunistically amidst volatility and market complexities

v Headquartered in Chicago with resources in New York, Los Angeles, Austin, and Miami

v Investment Manager of the Company since its IPO in 2015

v Company named "Best Performing Debt Fund" in Citywire's Fourth Annual Investment Trust Awards

PRIVATE CREDIT SOLUTIONS

v Private credit specialist with a focus on capital preservation across multiple market environments

v Lender to both established and emerging businesses across various industries in the U.S. and abroad

v Extensive experience lending to companies across the credit spectrum

DEVELOPED RISK MANAGEMENT CULTURE & PROCESS

v Deeply embedded risk culture permeates VPC

v VPC leverages proprietary risk tools and analytics to drive underwriting and portfolio management decisions

v Customised monitoring and reporting process allows for granular analysis across multiple dimensions

SEASONED INVESTMENT TEAM

v Senior investment team averages over 20 years of relevant experience

v Since inception, VPC has invested approximately USD$9.0 billion across 144+ investments

v History of generating strong returns throughout various market cycles

v Differentiated restructuring expertise complements strong risk management

STRATEGY AND BUSINESS MODEL

STRUCTURING APPROACH

The Company provides a floating rate Credit Facility with an interest rate floor to the Portfolio Company via a Special-Purpose Vehicle ("SPV"), which retains assets that are originated by the Portfolio Company. The financing is typically arranged in the form of a senior secured facility and the Portfolio Company injects junior capital into the SPV, along with the excess spread from the underlying assets providing significant first-loss protection to the Company. The Company's investments are typically structured with significant overcollateralisation and credit enhancement to minimise any loss given default in a scenario where the Company must foreclose on collateral to repay its investment. The overcollateralisation is sized to withstand significant stress to liquidation values without impacting the Company's investment outcome. As the Investment Manager of the Company, VPC targets collateral assets with stable and predictable liquidation value and a clear path to exit in the event of a default. Investments are secured via liens and equity pledges on the corporate entity or collateral which provide multiple avenues of structural protection.

One of the pioneers 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. The hunt for yield is extremely competitive in a low interest rate environment. This means VPC competes with some of the largest and most recognised firms in the world when sourcing new investments. However, VPC believes it has created a sustainable competitive advantage in its investment strategy. VPC's investment approach has consistently paid off, evident through the success in backing earlier-stage companies with excellent management and marquee venture capital backing, allowing for locked-up terms that would otherwise be difficult to negotiate at a later stage. Not only does this provide better economics, but VPC can also structure its investments more conservatively than in a more competitive process. VPC benefits from working with companies as they scale under a conservative structure. As investments approach maturity several years later, VPC has an informed opinion to approach an extension and/or upsize negotiations.

The Company, alongside VPC's private funds, also receives the benefit of scale from the arrangement. VPC is in a position to negotiate better terms and grow with the Portfolio Companies, ultimately resulting in the ability to provide larger facilities. All investors benefit, as the Company continues to have significant undrawn investment opportunities from longstanding investments, some of which were initiated a decade ago. The scale of the relationships also serves to minimise the cash drag within the Company. Investments are funded based on draw requests received on a weekly basis. As the Company receives a repayment on an investment, capital can be redeployed quickly, and in some cases even the same day.

PROPRIETARY SOURCING ADVANTAGE

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. This is due to VPC's long experience and reliable reputation in the sector as an early participant with an extensive sourcing network, having executed transactions partnering with several leading financial and venture capital sponsors in the financial services sector.

VPC also leverages its relationships with Portfolio Companies and financial sponsors to secure significant lending capacity and is able to 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.

RISK MANAGEMENT

With a strong focus on capital preservation, VPC 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. This risk management approach and focus are key to meeting the Company's investment objectives, particularly in a potentially more challenging future credit environment.

Stress Scenario Performance and Wind-down Analysis

The Company's Risk Management team performs regular analysis to stress test each Portfolio Company's lending performance to determine a portfolio level downside scenario. The largest risk mitigant in the downside scenarios is the first-loss protections that are structured into the Company's asset backed investments. This ensures that the Portfolio Companies and their equity investors' capital would have to be fully impaired before a asset backed facility loses any interest income or principal invested. In the Company's recourse investments, this means the Portfolio Companies would also lose the cash and other assets that are outside of the borrowing base to cover the first-loss protections. VPC prides itself on its structural protections, risk management and portfolio monitoring, as this is an important area of focus that is constantly evaluated.

Even as the risks brought about by the COVID-19 pandemic begin to recede, risk management, risk controls, and liquidity management remain key concerns. VPC's dedicated Risk Management team is committed to working collaboratively with investment teams to closely monitor the Company's investment portfolio. Teams have also continued to work proactively with the Portfolio Companies to ensure they are taking prudent steps to mitigate risk and throughout the pandemic.

REVIEW OF 2021 PERFORMANCE

The Company completed the year with a total NAV return of 27.60% and a gross revenue return of 13.03%. This was the Company's best year since inception in performance terms, and caps four years of very strong returns. Investors continue to benefit from the "best of both worlds", with consistent distributable income achieved through asset backed lending, combined with the positive performance of the Company's equity investments.

Credit investments are structured with first-loss protection as Portfolio Companies generally contribute the equity tranche, which aligns incentives with equity investors. Equity investments are made up of common stock, preferred stock, warrants and convertible debt, many of which were acquired in conjunction with making the Company's asset backed loan investments. While the world has not yet returned to "normal", the existing asset backed loan portfolio has continued to perform as expected, and collateral across asset classes has remained healthy and stable. The post-COVID investments made in 2021 offer attractive risk-adjusted returns and will continue to provide growth opportunities over the coming years.

VPC's long-standing reputation and relationships with Portfolio Company management teams, industry professionals and experts has facilitated a differentiated deal pipeline. Over the course of 2021, the Company had the opportunity to expand its exposure in special purpose acquisition companies ("SPACs"). SPACs have proven to be an extremely effective way for private companies to tap into public equity markets, and SPAC sponsors typically receive 20% of the common equity in the SPAC for an investment of approximately 3% to 4% of the IPO proceeds. VPC's expertise as an investment manager, and relationships in the financial technology sector, gave it the opportunity to supplement its core business model by identifying SPAC opportunities within the sector. As at 31 December 2021, VPC had sponsored attractive deals for four SPACs. The Company has invested 1.43p per share in SPACs, and as at 31 December 2021 the SPACs represented approximately 12.43p per share, of which 11.00p per share of the total was unrealised gain.

As the world entered its second full year of the COVID-19 pandemic, the VPC Senior Leadership team continued to follow the updates and guidance from the U.S. Centers for Disease Control and Prevention ("CDC"). VPC employees were able to continue to work in the office, utilise resources and meet with visitors at their comfort level, provided they followed the procedures outlined in the corporate Pandemic Response Plan. At the same time, VPC's robust technology systems and resources enabled VPC employees to continue to work remotely where necessary, without any operational disruption. In terms of portfolio management, VPC maintained a culture of proactive risk management and controls across the portfolio. The investment teams were in constant contact with the Portfolio Companies to proactively ensure prudent steps were being taken to mitigate transmission risk on a real-time basis.

Overall, VPC is very pleased with the Company's performance, which demonstrates the merit of VPC's approach to structured credit lending to technology-enabled businesses and strong culture of risk management. It also demonstrates the value of acquiring equity stakes that benefit from the continued growth of the Portfolio Companies, and the strong pipeline of investment opportunities that result from these relationships, which gives VPC a critical advantage in sourcing deals and securing preferential capacity in the development of Portfolio Companies. This approach has now attracted a significant following among retail investors and led to increased industry recognition, including receiving Investment Week's Annual Investment Company of the Year (Debt Category) Award in November 2021.

In February 2022, the Company declared its sixteenth consecutive quarterly dividend payment of 2.00p per share for the three-month period to 31 December 2021. In an era where high levels of income are increasingly hard to maintain, VPC is proud of the Company's proven track record of earning consistently high returns for investors, while protecting downside risk via credit enhancement and deep structuring expertise.

INVESTMENTS

In order to meet the Company's investment objectives within the pre-defined portfolio limits, capital was allocated across several Portfolio Companies with a focus on portfolio level diversification. As at 31 December 2021, the Company's investments were diversified across 48 different Portfolio Companies across the U.S., UK, Europe, Australia, Asia and Latin America. As at 31 December 2021, the Company had exposure to 24 Portfolio Companies through asset backed loans and 34 Portfolio Companies through equity securities or convertible notes.

During the year, the Company's portfolio of asset backed 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 portfolio's underlying loans continued to show strong performance with no signs of immediate macro weakness. Furthermore, the pipeline of available asset backed investment opportunities remained strong.

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 to ensure the gearing providers have no recourse to the Company. As the financial services industry continues to grow and become more established, VPC has been approached by multiple large global banks to offer the Company attractive gearing facilities. Given the breadth of VPC's portfolio, the Company has a distinct competitive advantage in securing these gearing facilities at attractive rates. During the year, the Look-Through Gearing Ratio remained relatively consistent. Having started the year at 0.32x it ended the year at 0.34x, as VPC continued to take a conservative approach to liquidity and risk management with the gearing facilities through the COVID-19 pandemic.

ESG INVESTMENT CONSIDERATIONS

VPC has a long history of commitment to ESG considerations as part of its investment process and firm-wide operations and has always aimed to invest in businesses that it can be proud to support. In 2018, VPC launched a partnership with the International Finance Corporation ("IFC"), the private sector arm of the World Bank, to provide credit to businesses in emerging markets. Since that initial policy in 2018, the policy and processes around how VPC integrates ESG into its investment strategies and firm operations have continued to expand in scope and sophistication.

Today, VPC's ESG policy is considered in the investment decisions made across its organisation. Part of the policy involves clearly defining what the Company will and will not invest in, as there are certain industries and business practices that are not supported. Another important piece of the ESG programme involves understanding the risks and potential risks related to ESG, and enacting processes to identify, mitigate and remediate any issues that do arise. Lastly, and perhaps most importantly, the ESG policy creates accountability throughout the organisation and across Portfolio Companies.

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

As VPC has expanded into new investment categories, this frequently means re-evaluating ESG factors and risks in those specific areas. The past 12 months saw tremendous growth in e-commerce-related businesses, and those investments face unique ESG questions around acceptable manufacturing practices and supply chains. It is VPC's responsibility to educate itself about the key issues relating to any potential investment, and it is important it sets appropriate standards in these areas and discusses those issues with all relevant partners.

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

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

OUTLOOK

In 2021, the Company completed its best-ever year in performance terms, and investors benefited from a fully covered annual dividend of 8.00p per share and double-digit total NAV returns. VPC found significant opportunity to earn attractive risk-adjusted returns through its extensive sourcing relationships around the globe, largely focusing on emerging sectors of the digital economy, where pricing margins were not yet compressed but risk could be properly underwritten. The Company will continue to cautiously deploy capital, and, at this point, the portfolio is well-positioned to withstand future challenges. In addition, the Investment Manager remains optimistic about future capital gains through the Company's equity portfolio, strong pipeline of potential new investments, and through SPAC sponsorship.

At the time of writing, the global economic outlook remains uncertain. The COVID-19 pandemic continues to present significant risks, and as government support and monetary stimulus begins to taper off, a period of extended volatility seems likely. High inflation and persistent supply shortages are also having a negative impact. In addition, the invasion of Ukraine by Russia has led to increased market volatility and widespread sanctions on Russian assets and individuals, contributing to a spiking oil price and concern over long-term energy valuations. In its role as Investment Manager, VPC continues to monitor all risks very closely, to ensure the portfolio can perform regardless of the economic environment, by offering capital protection and income generation throughout various market cycles.

As these uncertainties are navigated, the Investment Manager will continue to exercise caution. It structures and underwrites investments with a focus on downside protection, in addition to stress-testing collateral across various scenarios. For example, while the Company's investment portfolio primarily consists of floating-rate credit facilities with interest rate floors, a rising interest rate environment has the potential to affect the investments, the profitability of the Portfolio Companies (and that of underlying borrowers), potentially leading to lower returns or changes in repayments or default rates of the underlying borrowers.

From a purely macroeconomic standpoint, the Investment Manager believes the main advantages of the current portfolio includes the floating rate, shorter duration and fully amortised underlying collateral. Specifically, the weighted average duration of the Company's underlying collateral as at 31 December 2021 was less than one year. VPC believes duration is a misunderstood risk that could present significant challenges during a rising interest rate environment, particularly for those investors currently locked into long-duration fixed-rate credit.

While VPC often discusses the underlying credit performance of the Company's asset backed investments, it is also important to emphasise the additional layers of protection beyond direct asset security. Due to the structured nature of the Company's asset backed investments, including (in most cases) corporate guarantees and significant first-loss protection, the investments are generally not affected by changes in credit performance until a platform defaults and all corporate resources (separate from the borrowing base of loan collateral) are exhausted. In addition to monitoring the credit performance, VPC monitors the overall corporate performance of Portfolio Companies, including attending board meetings as an observer and having weekly update calls with Portfolio Company management.

VPC remains focused on providing capital to vital segments of the economy that are underserved by the traditional banking industry, including small businesses, working capital products, consumer finance and real estate, among others. It believes in the long-term value of providing capital to these sectors and will continue to look for and identify other trends that can create opportunities for additional investments in the future.

Victory Park Capital Advisors, LLC

Investment Manager

27 April 2022

BUSINESS MODEL

COMPANY STATUS

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

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

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

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

PURPOSE

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

INVESTMENT OBJECTIVE

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

INVESTMENT POLICY

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

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

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

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

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

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

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

Borrowing policy

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

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

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

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

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

Management Arrangements

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

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

Details of the Investment Management fee and performance fees payable to VPC during the period are set out in note 10 on pages 90 and 91.

PERFORMANCE MANAGEMENT

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

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, commencing on page 10.

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 March 2022, which related to the three-month period ended 31 December 2021, the Company has distributed 100% (2020: 97%) of its distributable income earned during the year ended 31 December 2021.

GEARING RATIO

As at 31 December 2021, the look-through gearing ratio was 0.34x (2020: 0.32x) for the Company. As disclosed in the investment policy, 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 (2020: 1.5x). The Board and Investment Manager monitor the look-through gearing ratio to ensure it is in line with the investment policy.

SHARE PRICE PREMIUM/DISCOUNT

As a closed-ended listed investment trust, the Company's share price can and does deviate from its NAV. This results in either a premium or a discount to NAV. This is another component of the long-term shareholder return. The Board continually monitors the Company's premium or discount to NAV and has the ability to issue or buy back shares to limit the volatility of the share price discount or premium. For more information on the Company's authorities in relation to its share capital, see page 106.

During the trading period, the Ordinary Shares moved in a discount range of 9.53% to 26.09%. The Company closed the year at a discount of 19.22% (2020: 17.77%) to NAV. During the year, the Company repurchased a total of 4,370,972 shares at an average price of 85.61 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 good service from its suppliers. The industry-wide measure for investment trusts is the ongoing charges ratio. This seeks to quantify the on-going costs of running the Company. The ongoing charges ratio for 2021 was 1.79%, compared to 1.86% for 2020. This measures the annual normal on-going costs of an investment trust, excluding performance fees, one-off expenses and dealing costs, as a percentage of the average shareholders' funds.

PRINCIPAL RISKS

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

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

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

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

This system assists the Board in determining the nature and extent of the risks it is willing to take in achieving its strategic objectives. Both the principal and emerging risks and the monitoring system are subject to a robust assessment at least annually. The last review by the Board took place in February 2022.

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

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

RISK	MITIGATION
LIQUIDITY RISK Liquidity risk is defined as the risk that the Group may not be able to settle or meet its obligations on time or at a reasonable price. The Group may invest in the listed or unlisted equity of any Portfolio Company. Investments in unlisted equity, by their nature, involve a higher degree of valuation and performance uncertainties and liquidity risks than investments in listed securities and therefore may be more difficult to realise. In the event of adverse economic conditions in which it would be preferable for the Group to sell certain of its assets, the Group may not be able to sell a sufficient proportion of its portfolio as a result of liquidity constraints. In such circumstances, the overall returns to the Group from its investments may be adversely affected. The Group is also exposed to liquidity risk with respect to the requirement to pay margin cash to collateralise forward foreign exchange contracts used for currency hedging purposes.	The Investment Manager manages the Group's liquidity risk by investing primarily in a diverse portfolio of assets. As at 31 December 2021, 10% of the loans had a stated maturity date of less than a year. In general, the weighted average maturity profile of the Group's assets was lower than or equal to the term of the Group's corresponding debt facilities which thereby reduced liquidity risk. Refer to Note 6 of the financial statements for the maturity profile of the Group's assets and liabilities. The Board and the Investment Manager review the investment portfolio to ensure it is in line with the investment policy, including restrictions, as outlined on pages 134 and 135. The Board reviews cash flow forecasts to ensure the group can meet its liabilities as they fall due. The Group continuously monitors fluctuations in currency rates. The Group performs stress tests and liquidity projections to determine how much cash should be held back to meet potential future obligations to settle margin calls arising from foreign exchange hedging. The gearing facility has helped the Group reduce cash drag associated with the currency hedging portfolio, while also allowing the Group to meet its liabilities as they fall due. The Investment Manager monitors the cash balances of the Group daily to ensure that all ongoing expenses can be paid as they come due. During 2021, the Group has received all contractual interest payments and continues to monitor cash flow closely during the COVID-19 pandemic.
CREDIT RISK Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Group's credit risks arise principally through exposures to loans acquired by the Group, which are subject to risk of borrower default. The ability of the Group to earn revenue is completely dependent upon payments being made by the borrower, such as adverse movements in financial markets.	There is inherent credit risk in the Group's investments in credit assets. However, this is typically mitigated by the significant first loss protection provided by the Portfolio Company under the Asset Backed Lending Model and the excess spread generated by the underlying assets. The Investment Manager performs a robust analysis during the underwriting process for all new investments of the Group and monitors the eligibility of the collateral at least monthly of the current assets in the Group's portfolio. This process also includes due diligence performed by a third-party reviewer during the underwriting process and subsequent reviews at least once per year for the Group's Portfolio Companies. The Group will invest across several Portfolio Companies, asset classes, geographies (primarily US, UK, Europe, Australia, Asia and Latin America) and credit bands to ensure diversification and to seek to mitigate concentration risks. The Investment Manager did not see new payment defaults during the year and the Group has received all contractual payments through the date of this report. The Board and the Investment Manager review the investment portfolio to ensure it is in line with the investment policy, including restrictions, as outlined on pages 134 and 135. The Investment Manager monitors performance and underwriting on an ongoing basis.
FINANCING RISK Financing risk is the risk that, whilst the use of borrowings by the Group should enhance the net asset value of an investment when the value of an investment's underlying assets is rising, it will, however, have the opposite effect when the underlying asset value is falling. In addition, if an investment's income falls for whatever reason, the use of borrowings will increase the impact of such a fall on the net revenue of the Group's investment and accordingly will have an adverse effect on the ability of the investment to make distributions to the Group. The Group uses gearing to enhance returns generated by the underlying credit assets and is exposed to the availability of financing at acceptable terms as well as interest rate expenses and other related costs.	This risk is mitigated by limiting borrowings to ring-fenced SPVs without recourse to the Group and employing gearing in a disciplined manner. The Group has maintained a level of gearing throughout the year significantly below the limit stipulated in the Prospectus as the Group is primarily invested in the Asset Backed Lending Model. During the year, the Group replaced the current gearing provider with a new provider. The current facility was negotiated at attractive terms including a three-year revolving period, an interest rate lower than that of the previous facility, and an option to upsize the facility from US$130 million to US$200 million and a six-year maturity. The Board and the Investment Manager review the investment portfolio to ensure it is in line with the investment policy, including investment restrictions, as outlined on pages 134 and 135.
MARKET RISK Marketriskistheriskoflossarisingfrommovementsin observable market variables such as foreign exchange rates, equity prices and interest rates. The Group is exposed to market risk primarily through its Financial Instruments. The Group is exposed to price risk arising from the investments held by the Group for which prices in the future are uncertain. The investments in funds are exposed to market price risk. Refer to Note 3 in the Financial Statements for further details on the sensitivity of the Group's Level 3 investments to price risk. Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. Currency risk is the risk that the value of net assets will fluctuate due to changes in foreign exchange rates. Relevant risk variables are generally movements in the exchange rates of non-functional currencies in which the Group holds financial assets and liabilities. The Group is exposed to risks related to the reference rate reform and replacement of benchmark interest rates such as GBP LIBOR and other interbank offered rates. There remains some uncertainty around the timing and precise nature of these changes.	The Group has a diversified investment portfolio which significantly reduces the exposure to individual asset price risk. Detailed portfolio valuations and exposure analysis are prepared monthly and form the basis for the on-going risk management and investment decisions. In addition, regular scenario analysis is undertaken to assess likely downside risks and sensitivity to broad market changes, as well as assessing the underlying correlations amongst the separate asset classes. Exposure to interest rate risk is limited as the underlying credit assets are typically fully amortising with a maximum maturity of five years. Furthermore, generally the Group's Credit Facilities include a floating interest rate component to the Portfolio Companies to account for an increase in interest rate risk and they also have a set floor in the instance that interest rates were to drop. The Group mitigates its exposure to currency risk by hedging exposure between Pound Sterling and any other currencies in which a significant portion of the Group's assets may be denominated. The Board reviews the price, interest rate and currency risk with the Investment Manager to ensure that exposure to these risks are appropriately mitigated. The Investment Manager continues to monitor the potential impact of a discontinuation of LIBOR rates on the Company's investments, based on the expectation that reference rates will be evaluated and replaced timely for investments with a variable rate component. Accordingly, it is difficult to predict the full impact of the transition until new reference rates and fallbacks are commercially accepted.
PORTFOLIO COMPANY RISK The current market in which the Group participates is competitive and rapidly changing. There is a risk that the Group will not be able to deploy its capital, re-invest capital and interest of the proceeds of any future capital raisings, in a timely or efficient manner given the increased demand for suitable investments. The Group may face increasing competition for access to investments as the alternative finance industry continues to evolve. The Group may face competition from other institutional lenders such as fund vehicles and commercial banks that are substantially larger and have considerably greater financial, technical and marketing resources than the Group. Other institutional sources of capital may enter the market in the UK, US and other geographies .	VPC has negotiated a significant number of proprietary capital deployment agreements with its existing asset backed lending partners each of which typically ensures the ability to deploy capital on attractive terms for several years. In addition, VPC is one of the largest investors in the specialty lending sector and therefore enjoys timely information and good access to emerging Portfolio Company opportunities. VPC has a team of investment and operational professionals which ensures that deployment opportunities with new and existing Portfolio Companies can be executed rapidly while minimising operational risk. VPC's pipeline of deployment opportunities remains strong with both existing and new asset backed lending Portfolio Companies.
REGULATORY RISK As an investment trust, the Company's operations are subject to wide ranging regulations. The financial services sector continues to experience significant regulatory change at national and international levels. Failure to act in accordance with these regulations could cause fines, censure or other losses including taxation or reputational loss. The Association of Investment Companies (AIC) is becoming increasingly focused on ensuring ESG measures are implemented within investment companies. In order to continue to qualify as an investment trust, the Company must comply with the requirements of Section 1158 of the Corporation Tax Act 2010.	The Company provides debt capital to Portfolio Companies, which typically must comply with various state and national level regulations. This includes some operating under interim permission and some now regulated from the FCA in the UK as well as consumer lending and collections licenses in some US states. This risk is limited via detailed upfront due diligence of Portfolio Companies' regulatory environments performed by the Investment Manager on behalf of the Board. All decisions taken are made with due consideration to the long-term sustainability and impact on stakeholders. The Company has procedures to monitor the status of its compliance with the relevant requirements to maintain its Investment Trust status, including receiving and reviewing information and reporting from the Company Secretary and other service providers as appropriate.
BUSINESS CONTINUITY RISK As a result of the COVID-19 pandemic, there has been increased focus from financial services regulators around the world on the contingency plans of regulated financial firms.	The Investment Manager reviews its business continuity plans and operational resilience strategies on an ongoing basis and will take all reasonable steps to continue meeting its regulatory obligations and to assess operational risks, the ability to continue operating and the steps it needs to take to serve and support its clients, including the Board. The Investment Manager has not seen any disruptions to business during 2021 and into the beginning of 2022.
CLIMATE RISK The world is facing unprecedented challenges in the face of climate change and growing inequality. The FSB Task Force on Climate-related Financial Disclosures (TCFD) has developed climate-related financial risk disclosures for companies to provide information to investors, lenders, insurers, and other stakeholders.	The Investment Manager has performed an initial high-level materiality assessment of climate risk across its investment portfolio and is developing a comprehensive action plan for both the Company and Group. No material impact on the financial statements has been identified from the risks arising from climate change through the work performed by the Investment Manager from this initial assessment. The Investment Manager is reviewing the core disclosure elements of the TCFD reporting framework. As an investment trust, the Company is not required to provide information in compliance with TCFD.
GEOPOLITICAL RISK The Group is subject to risks associated with unforeseen geopolitical events, including war, terrorist attacks, natural disasters, and ongoing pandemics, which could create economic, financial, and business disruptions.	The Investment Manager has a dedicated risk committee comprised of senior leadership and key principals. This committee works with each individual portfolio investment team to develop a coordinated risk response across the entire portfolio. The Investment Manager also increased the frequency of portfolio company data collection and reporting. Additional information on the Investment Manager's Pandemic Response plan can be found on pages 13 and 14.

Discussion on the Group's risk management and internal controls is on page 124.

As of the writing of this report, neither the Group nor Investment Manager have any direct exposure to Russia or Ukraine in the portfolio, and the Investment Manager has not seen any impact on the Group's collateral or investments. That being said, the Group and Investment Manager recognise that this conflict can lead to prolonged volatility in the global capital markets, other macro implications on the world economy, and heightened risks generally. The Investment Manager will continue to monitor all of our portfolio companies closely and consider these developments as we look to invest additional capital.

CULTURE

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

The Board strives to ensure that its culture is in line with the Company's purpose, values, and strategy. The Company has several policies and procedures in place to assist with maintaining a culture of good governance including those relating to diversity, Directors' conflicts of interest and Directors' dealings in the Company's shares. The Board assesses and monitors compliance with these policies as well as the general culture of the Board through Board meetings and during the annual evaluation process which is undertaken by each Director (for more information see the performance evaluation section on page 116).

The Board seeks to appoint the best possible service providers and evaluates their remit, performance, and cost effectiveness on a regular basis as described on page 115. The Board considers the culture of the Investment Manager and other service providers, including their policies, practices, and behaviour, through regular reporting from these stakeholders and during the annual review of the performance and continuing appointment of all service providers to ensure there is an alignment in the long-term objectives. The Investment Manager and other service providers appointment are reviewed annually to ensure these objectives are met.

EMPLOYEES, HUMAN RIGHTS, SOCIAL AND COMMUNITY ISSUES

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

BOARD DIVERSITY

As at 31 December 2021, following the retirement of Kevin Ingram, the Board of Directors of the Company comprised of four male Directors and one female Director. As at the date of this report the Board composition remains unchanged. The Board acknowledges the benefits of diversity, including gender diversity, and remains committed to ensuring that the Company's Directors bring a wide range of skills, knowledge, experience, backgrounds and perspectives. Further details of the Company's diversity policy are set out on page 119.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) ISSUES

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

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

The Company has no internal operations and therefore no greenhouse gas emissions to report, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013, including those within its underlying investment portfolio. However, the AIC is encouraging all member companies to demonstrate how they are factoring ESG issues into their business practices. The company continues to monitor the guidance published by the AIC and works towards the drafting of its ESG policy. The business remains conscious of its business decisions and the Board, supported by its service providers and Investment Manager consider the long-term impact of all decisions and challenge appropriately.

STREAMLINED ENERGY AND CARBON REPORTING (SECR)

The Company has no employees or property, and it does not combust any fuel or operate any facility thus is taking the exemption. It does not, therefore, have any greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013, including those within its underlying investment portfolio. Additionally, there are no annual emissions from the purchase of electricity, heat, steam or cooling by the Company for its own use.

APPROVAL

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

Graeme Proudfoot

Chair

27 April 2022

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the year ended 31 December 2021 but is derived from those accounts. Statutory accounts for the year ended 31 December 2021 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 2021
		31 DECEMBER 2021	31 DECEMBER 2020
	NOTES	£	£
Assets
Cash and cash equivalents	7	6,300,572	6 , 416 , 028
Cash posted as collateral	7	4,133,588	1 , 140 , 000
Derivative financial assets	3 , 4	2,069,698	5 , 758 , 880
Interest receivable		4,708,481	3 , 613 , 047
Dividend and distribution receivable		3,996	3 , 812
Other assets and prepaid expenses		2,877,815	889 , 148
Loans at amortised cost	3 , 9	279,339,002	293 , 123 , 379
Investment assets designated as held at fair value through profit or loss	3	141,797,222	51 , 417 , 983
Total assets		441,230,374	362 , 362 , 277
Liabilities
Management fee payable	10	155,399	92 , 241
Performance fee payable	10	12,913,280	4 , 040 , 085
Derivative financial liabilities	3,4	1,508,675	-
Deferred income		174,603	253 , 403
Other liabilities and accrued expenses		1,550,415	1 , 332 , 920
Notes payable	8	107,267,260	86 , 087 , 183
Total liabilities		123,569,632	91 , 805 , 832
Total assets less total liabilities		317,660,742	270 , 556 , 445
Capital and reserves
Called-up share capital		20,300,000	20 , 300 , 000
Share premium account		161,040,000	161 , 040 , 000
Other distributable reserve	14	112,779,146	116 , 520 , 960
Capital reserve		1,667,026	(50 , 393 , 578)
Revenue reserve		20,615,367	21 , 847 , 960
Currency translation reserve		1,213,245	1 , 221 , 766
Total equity attributable to shareholders of the Parent Company		317,614,784	270 , 537 , 108
Non-controlling interests	18	45,958	19 , 337
Total equity		317,660,742	270 , 556 , 445
Net Asset Value per Ordinary Share	12	114.14p	95.72p

The financial statements on pages 42 to 49 were approved by the Board of Directors on 27 April 2022 and signed on its behalf by:

Graeme Proudfoot

Chair

27 April 2022

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

The total column of this statement represents the Group's statement of comprehensive income, prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies ("AIC"). All items in the above Statement derive from continuing operations. Amounts in Other comprehensive income may be reclassified to profit or loss in future periods.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2020
		REVENUE	CAPITAL	TOTAL
	NOTES	£	£	£
Revenue
Net gain (loss) on investments	5	-	1,845,962	1,845,962
Foreign exchange gain (loss)		-	(2,970,304)	(2,970,304)
Interest income	5	35,454,974	524,984	35,979,958
Other income	5	5,799,767	-	5,799,767
Total return		41,254,741	(599,358)	40,655,383
Expenses
Management fee	10	3,394,740	-	3,394,740
Performance fee	10	4,040,085	-	4,040,085
Credit impairment losses	9	-	112,550	112,550
Other expenses	10	2,313,540	232,265	2,545,805
Total operating expenses		9,748,365	344,815	10,093,180
Finance costs		7,607,524	-	7,607,524
Net return on ordinary activities before taxation		23,898,852	(944,173)	22,954,679
Taxation on ordinary activities	11	-	-	-
Net return on ordinary activities after taxation		23,898,852	(944,173)	22,954,679
Attributable to:
Equity shareholders		23,898,852	(1,019,223)	22,879,629
Non-controlling interests	18	-	75,050	75,050
Return per Ordinary Share (basic and diluted)	13	8.08p	(0.34p)	7.74p
Other comprehensive income
Currency translation differences		-	21,443	21,443
Total comprehensive income		23,898,852	(922,730)	22,976,122
Attributable to:
Equity shareholders		23,898,852	(1,005,035)	22,893,817
Non-controlling interests	18	-	82,305	82,305

The total column of this statement represents the Group's statement of comprehensive income, prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies ("AIC"). All items in the above Statement derive from continuing operations. Amounts in Other comprehensive income may be reclassified to profit or loss in future periods.

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

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020
			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 2020			20,300,000		161,040,000		136,682,176	(49,374,355)	21,623,852	1,207,578	291,479,251	60,940	291,540,191
Amounts paid on buyback of Ordinary Shares			-		-		(20,161,216)	-	-	-	(20,161,216)	-	(20,161,216)
Contributions by non-controlling interests			-		-		-	-	-	-	-	-	-
Distributions to non-controlling interests			-		-		-	-	-	-	-	(123,908)	(123,908)
Return on ordinary activities after taxation			-		-		-	(1,019,223)	23,898,852	-	22,879,629	75,050	22,954,679
Dividends declared and paid			-		-		-	-	(23,674,744)	-	(23,674,744)	-	(23,674,744)
Other comprehensive income
Currency translation differences			-		-		-	-	-	14,188	14,188	7,255	21,443
Closing balance at 31 December 2020			20,300,000		161,040,000		116,520,960	(50,393,578)	21,847,960	1,221,766	270,537,108	19,337	270,556,445

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

CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
		31 DECEMBER 2021	31 DECEMBER 2020
	NOTES	£	£
Cash flows from operating activities:
Total comprehensive income		73,201,872	22 , 976 , 122
Adjustments for:
--   Interest income		(33,158,150)	(35 , 979 , 958)
--   Dividend and distribution income	5	(4,419,620)	(5 , 799 , 767)
--   Finance costs		5,706,429	7 , 607 , 524
--   Exchange losses		2,049,374	2 , 970 , 304
Total		43,379,905	(8,225,775)
Gain on investment assets designated as held at fair value through profit or loss		(67,354,436)	(1 , 845 , 962)
(Gain) loss on derivative financial instruments		(6,131,547)	(1 , 402 , 050)
Decrease (increase) in other assets and prepaid expenses		(1,988,667)	5 , 009
Increase (decrease) in management fee payable		8,873,195	(51 , 174)
Increase (decrease) in performance fee payable		63,158	(3 , 370 , 529)
Decrease in deferred income		(78,800)	(236 , 919)
Increase (decrease) in accrued expenses and other liabilities		250,148	(458 , 591)
Interest received		32,062,716	37 , 597 , 261
Purchase of loans		(129,180,445)	(105 , 292 , 885)
Redemption or sale of loans		145,742,133	160 , 405 , 704
Impairment of loans		3,636,142	112 , 550
Net cash (outflow) inflow from operating activities		29,273,502	77 , 236 , 639
Cash flows from investing activities:
Investment income received		4,419,436	5 , 815 , 327
Purchase of investment assets designated as held at fair value through profit or loss		(51,430,977)	(16 , 671 , 467)
Sale of investment assets designated as held at fair value through profit or loss		30,929,189	8 , 538 , 783
(Decrease) increase of cash posted as collateral		(2,993,588)	(160 , 000)
Net cash inflow (outflow) from investing activities		(19,075,940)	(2 , 477 , 357)
Cash flows from financing activities:
Dividends distributed		(22,355,761)	(23 , 674 , 744)
Treasury shares repurchased		(3,741,814)	(20 , 213 , 722)
Distributions to non-controlling interests		-	(123 , 908)
(Decrease) increase in note payable		21,180,077	(23 , 502 , 528)
Finance costs paid		(5,739,082)	(7 , 165 , 276)
Net cash outflow from financing activities		(10,656,580)	(74 , 680 , 178)
Net change in cash and cash equivalents		(459,018)	79 , 104
Exchange gains on cash and cash equivalents		343,562	205 , 802
Cash and cash equivalents at the beginning of the period		6,416,028	6 , 131 , 122
Cash and cash equivalents at the end of the period	7	6,300,572	6 , 416 , 028

PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
		31 DECEMBER 2021	RESTATED  31 DECEMBER 2020
	NOTES	£	£
Assets
Cash and cash equivalents	7	4,301,574	4,738,217
Cash posted as collateral	7	4,133,588	1,140,000
Derivative financial assets	3 , 4	2,069,698	5,758,880
Interest receivable		4,298,886	3,173,686
Other current assets and prepaid expenses		2,881,811	889,148
Investments in subsidiaries	17	303,174,979	257,491,532
Investment assets designated as held at fair value through profit or loss	3	12,531,090	2,522,366
Total assets		333,391,626	275,713,829
Liabilities
Management fee payable	10	155,399	92,241
Performance fee payable	10	12,913,280	4,040,085
Derivative financial liabilities	3,4	1,508,675	-
Deferred income		174,603	253,403
Other liabilities and accrued expenses		1,024,885	790,992
Total liabilities		15,776,842	5,176,721
Total assets less total liabilities		317,614,784	270,537,108
Equity attributable to Shareholders of the Company
Called-up share capital	14	20,300,000	20,300,000
Share premium account	14	161,040,000	161,040,000
Other distributable reserve	14	112,779,146	116,520,960
Capital reserve		2,880,271	(49,171,812)
Revenue reserve		20,615,367	21,847,960
Total equity		317,614,784	270,537,108
Net return on ordinary activities after taxation		73,175,251	22,893,817

The financial statements on pages 50 to 53 were approved by the Board of Directors on 27 April 2022 and signed on its behalf by:

Graeme Proudfoot

Chair

27 April 2022

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

PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2020 RESTATED
	Called Up		Other
	Share	Share	Distributable	Capital	Revenue
	Capital	Premium	Reserve	Reserve	Reserve	Total
	£	£	£	£	£	£
Opening balance at 1 January 2020	20,300,000	161,040,000	136,682,176	(48,166,777)	21,623,852	291,479,251
Amounts paid on repurchase of Ordinary Shares	-	-	(20,161,216)	-	-	(20,161,216)
Return on ordinary activities after taxation	-	-	-	(1,005,035)	23,898,852	22,893,817
Dividends declared and paid	-	-	-	-	(23,674,744)	(23,674,744)
Closing balance at 31 December 2020	20,300,000	161,040,000	116,520,960	(49,171,812)	21,847,960	270,537,108

PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
			RESTATED
		31 DECEMBER 2021	31 DECEMBER 2020
	NOTES	£	£
Cash flows from operating activities:
Net return on ordinary activities after taxation		73,175,251	22,893,817
Adjustments for:
--   Interest income		(31,871,341)	(35 , 842 , 688)
--   Exchange (gains) losses		2,049,374	(315 , 612)
Total		43,353,284	(13,264,483)
Unrealised loss on investment assets designated as held at fair value through profit or loss		(7,141,907)	563,327
Unrealised (gain) loss on investments in subsidiaries		(52,213,993)	1,018,002
(Gain) loss on derivative financial instruments		(6,131,547)	(1,773,515)
Increase in other assets and prepaid expenses		(1,992,663)	(221,594)
Decrease in management fee payable		63,158	(51,174)
(Decrease) increase in performance fee payable		8,873,195	(3,370,529)
Decrease in deferred income		(78,800)	(236,919)
Increase in accrued expenses and other liabilities		233,894	172,389
Net cash outflow from operating activities		(15,035,379)	(17,164,496)
Cash flows from investing activities:
Interest received		30,746,141	37 , 332 , 932
Purchase of investment assets designated as held at fair value through profit or loss		(19,086,855)	-
Sale of investment assets designated as held at fair value through profit or loss		16,220,038	1 , 376 , 253
Purchase of investments in subsidiaries		(29,910,829)	(80 , 568 , 889)
Sales of investment in subsidiaries		45,377,842	103 , 634 , 391
Cash posted as collateral		(2,993,588)	(160 , 000)
Net cash inflow from investing activities		40,352,749	61 , 614 , 687
Cash flows from financing activities:
Treasury Shares repurchased		(3,741,814)	(20 , 213 , 722)
Dividends paid		(22,355,761)	(23 , 674 , 744)
Net cash outflow from financing activities		(26,097,575)	(43 , 888 , 466)
Net change in cash and cash equivalents		(780,205)	561 , 725
Exchange gains on cash and cash equivalents		343,562	205 , 802
Cash and cash equivalents at the beginning of the period		4,738,217	3 , 970 , 690
Cash and cash equivalents at the end of the period	7	4,301,574	4 , 738 , 217

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2021

1.   GENERAL INFORMATION

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

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

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

As at 31 December 2021, the Parent Company had equity in the form of 382,615,665 Ordinary Shares, 278,276,392 Ordinary Shares in issue and 104,339,273 Ordinary Shares in Treasury (31 December 2020: 382,615,665 Ordinary Shares, 282,647,364 Ordinary Shares in issue and 99,968,301 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.

During the year, Citco Fund Administration (Cayman Islands) Limited (the "Administrator") was appointed as the administrator of the Group, replacing Northern Trust Hedge Fund Services LLC. The Administrator is responsible for the Group's general administrative functions, such as the calculation and publication of the Net Asset Value ("NAV") and maintenance of the Group's accounting records.

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

2.  SIGNIFICANT ACCOUNTING POLICIES

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

Basis of preparation

The consolidated financial statements present the financial performance of the Group and Company for the year ended 31 December 2021. The consolidated financial statements are prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies under those standards. They comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and International Financial Reporting Committee, including interpretations issued by the IFRS Interpretations Committee and interpretations issued by the International Accounting Standard Committee ("IASC") that remain in effect. The financial statements have been prepared on a going concern basis and under the historical cost convention modified by the revaluation to a fair value basis for certain financial instruments as specified in the accounting policies below.

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

Additionally, the Directors have considered the risks arising of reduced asset values and economic disruption caused by the COVID-19 pandemic. The Investment Manager has also performed a range of stress tests and demonstrated to the Directors that even in an adverse scenario of depressed markets that the Group could still generate sufficient funds to meet its liabilities over the next twelve months. The Directors believe that the Group has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future being a period of at least twelve months from the date of this report.

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

Where presentational guidance set out in the Statement of Recommended Practice ("SORP") for investment trusts issued by the Association of Investment Companies ("AIC") in November 2014 and updated in October 2019 with consequential amendments is consistent with the requirements of IFRS, the Directors have sought to prepare the consolidated financial statements on a basis compliant with the recommendations of the SORP.

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

Change in accounting policy with retrospective application

All accounting policies are consistent with prior year with the exception of a voluntary change in accounting policy with respect to investments in subsidiaries. Refer to Investment in subsidiaries section below for further information.

Basis of consolidation

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

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

Investments in subsidiaries

During the year, the Parent Company voluntarily changed its accounting policy for valuing its investments in subsidiaries. In previous years, the Parent Company's investments in its subsidiaries were measured at cost less impairment and costs of investments in currencies other than Pound Sterling were historically translated to at the rate of exchange ruling on the date the investment was made. This previously caused a difference in the total net asset value shown on the Parent Company Statement of Financial Position as compared to the Group.

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

The Investment Manager believes that the implemented change in accounting will provide the Shareholders of the Company with the best indication of value of the Parent Company and will align the accounting policies of the Parent Company reporting to be more in line with the accounting policies of the Group.

Below is the impact of this change in accounting policy on the Parent Company Statement of Financial Position:

	HISTORICAL COST	FAIR MARKET VALUE
Financial Assets	31 DECEMBER 2020	31 DECEMBER 2020	CHANGE
Investments in subsidiaries	250,042,768	257,491,532	7,448,764

Below is the impact of this change in accounting policy on the Parent Company Statement of Changes in Equity:

	HISTORICAL COST 2020	FAIR MARKET VALUE 2020	CHANGE
	£	£	£
Total equity at 1 January 2020	280,744,571	291,479,251	10,734,680
Return on ordinary activities after taxation	26,179,731	22,893,817	-3,285,914
Total equity at 31 December 2020	263,088,342	270,537,108	7,448,766

The impact of this change in the accounting policy on the Parent Company Statement of Cash flows is the decrease of the net return on ordinary activities after taxation noted above and an increase to the unrealised appreciation on investments in subsidiaries.

Below is the impact of this change in accounting policy on the Parent Company's basic earnings per share:

	2020 HISTORICAL COST	2020 FAIR MARKET VALUE
	£	£
Profit for the year	26,179,731	22,893,817
Average number of Ordinary Shares in issue during the year	295,430,078	295,430,078
Earnings per Share (basic and diluted)	8.86p	7.75p

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 £73,175,251 (31 December 2020: £22,893,817).

Income

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

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

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

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

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

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

Finance costs

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

Expenses

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

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

At 31 December 2021, no management fees (31 December 2020: £nil) have been charged to the capital return of the Group or the Parent Company. At 31 December 2021, performance fees of £9,179,370 (31 December 2020: £nil) have been charged to the capital return of the Group and Parent Company relating to the net return on ordinary activities after taxation allocated to the capital return. Refer to Note 10 for further details of the management and performance fees.

All expenses are accounted for on an accruals basis.

Dividends payable to Shareholders

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

Taxation

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

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

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

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

Financial assets and financial liabilities

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

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

v The entity's business model (i.e., how an entity manages its financial assets in order to generate cash flows by collecting contractual cash flows, selling financial assets or both); and

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

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

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

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

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

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

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

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

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

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

Business model assessment

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

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

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

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

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

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

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

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

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

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

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

v Prepayment and extension terms;

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

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

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

Expected credit loss allowance for financial assets measured at amortised cost

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

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

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

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

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

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

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

General expectations with regards to expected losses on loans at a given level of delinquency are assessed based on  an analysis of loan collateral and credit enhancement. Impairments are recognised once a loan is deemed to have a non-trivial likelihood of facing a material loss. The expected credit loss allowance reflects the increasing likelihood of loss as collateral and credit enhancement become diminished or impaired. As loans progress through the levels of delinquency, the Group applies a greater amount of expected credit loss allowance on the loan balance. 

Unless identified at an earlier stage, the credit risk of financial assets is deemed to have increased significantly when more than 30 days past due. The Group does not rebut the presumption in IFRS 9 that all financial assets that are more than 30 days past due have experienced a significant increase in credit risk. The assessment as to when a financial asset has experienced a significant increase in the probability of default requires the application of management judgement.

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

v Significant increase in credit spread;

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

v Actual or expected forbearance or restructuring;

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

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

v Early signs of cashflow or liquidity problems.

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

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

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

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

The measurement of expected credit losses for each stage and the assessment of significant increases in credit risk must consider information about past events and current conditions as well as reasonable and supportable forward-looking information, including a "base case" view of the future direction of relevant economic variables and a representative range of other possible forecasts scenarios. The process will involve developing two or more additional economic scenarios and considering the relative probabilities of each outcome. The base case will represent a most likely outcome and be aligned with information used for other purposes, such as strategic planning and budgeting. The number of scenarios used and their attributes are reassessed at each reporting date by investment. The scenario weightings are determined by a combination of statistical analysis and expert credit judgement, taking account of the range of possible outcomes each chosen scenario is representative of.

The estimation and application of forward-looking information requires significant judgement. PD, LGD and EAD inputs used to estimate Stage 1 and Stage 2 credit loss allowances, are modelled based on the macroeconomic variables (or changes in macroeconomic variables) that are most closely correlated with credit losses in the relevant portfolio. As with any economic forecasts, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty and therefore the actual outcomes may be significantly different to those projected. The Group considers these forecasts to represent its best estimate of the possible outcomes and has analysed the non-linearities and asymmetries within the Group's different portfolios to establish that the chosen scenarios are appropriately representative of the range of possible scenarios.

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

Collateral and other credit enhancements

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

Modification of financial assets

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

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

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

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

Modification of loans

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

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

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

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

v Significant change in the interest rate;

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

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

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

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

During the year, three investments were modified per the Group's policy (2020: two investments). The modification of the loans in both the current year and prior year did not result in any gains or losses recognised as a result of the modification of the loans as the carrying value of the loans was the same before and after the modification. The changes to the interest rates in the loans are reflected in the income earned by the Group.

Derecognition other than a modification

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

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

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

v Is prohibited from selling or pledging the assets; and

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

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

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

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

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

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

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

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

Loans at amortised cost

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

Purchases and sales of financial assets

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

Fair value estimation

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

Financial liabilities

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

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

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

Derivatives

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

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

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

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

Offsetting financial instruments

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

Investments in funds

Investments in funds are measured at fair value through profit or loss. The NAV of the fund is used as a best estimate of fair value through profit or loss. The NAV is the value of all the assets of the fund less its liabilities to creditors (including provisions for such liabilities) determined in accordance with applicable accounting standards, which represents fair value based on the Company's assessment. Refer to Note 3 and Note 19 for further information.

Equity securities

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

Other receivables

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

Cash and cash equivalents

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

Deferred income

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

Other liabilities

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

Share Capital

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

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

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

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

Foreign exchange

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

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

Capital reserves

Capital reserve - arising on investments sold includes:

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

v exchange differences on currency balances;

v cost of own shares bought back; and

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

Capital reserve - arising on investments held includes:

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

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

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

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

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

Revenue reserves

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

Segmental reporting

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

Critical accounting estimates

The preparation of financial statements in conformity with international accounting standards requires the Group to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Although these estimates are based on the Directors' best knowledge of the amount, actual results may differ ultimately from those estimates.

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

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

Measurement of the expected credit loss allowance

The calculation of the Group's ECL allowances and provisions against loan commitments and guarantees under IFRS 9 is highly complex and involves the use of significant judgement and estimation. This includes the formulation and incorporation of multiple forward-looking economic conditions into ECL to meet the measurement objective of IFRS 9. The most significant estimates that are discussed are what is considered to be a significant increase in credit risk to affect a movement between stages, and the effect of potential future economic scenarios.

Base case and stress case cash flow methodology under IFRS 9

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

Base case

To establish the base case model, a representative portfolio is established based on the average portfolio parameters from the actual collateral pool (based on the most recent available reporting date). The expected cash flows are assessed based on these parameters, such as interest rate, term to maturity, amortisation schedule, etc., as well as estimates of prepayments, losses and any other activity which would impact the expected cash flows. Cash flow assumptions, such as prepayment and loss curves are established using a combination of: (1) historical performance; (2) management forecasts; (3) proxy data from comparable assets or businesses; and (4) judgement from the Investment Manager's investment professionals based on general research and knowledge. Emphasis is given to the loss curves because, for most asset classes, they have a significantly larger impact on the liquidation outcomes compared to other assumptions such as prepayment rates.

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

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

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

For the Group's asset backed balance sheet investments, the Investment Manager performs a similar analysis as with our financial services asset backed balance sheet investments, though in those cases we are assessing the likely return on legal sector investments based on historical data and expert judgement and stressing the return and/or loss expectation on those platforms.  In general, those assets by their nature tend to be uncorrelated across both the macro economy as well as across the portfolio(s), which has an impact on the range of outcomes factored into the model. 

Stress case

For most of the investments being reviewed, the primary driver of collateral value is the loss rates on the underlying loans or leases, measured by cumulative net loss, which considers the total principal losses between a given point in time and the final repayment on the portfolio. While many of the companies and asset classes being reviewed do not have historical performance data going back to pre-2007, macro-economic data is available which can be used as a proxy for the specific asset classes being analysed. VPC commissioned a study of historical loss rates on various asset classes and segments in the US from 2006-2014 in order to understand the changes in loss rates by segment from the benign credit environment of 2006 through the worst parts of the recession.  The following table summarizes the loss stress observed by segment where 0% indicates no change and 100% indicates a doubling of the relevant loss rate.

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

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

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

IFRS 9 calls for an assessment of the probability of default over the upcoming 12 months, and thus the Investment Manager provides a view of the probability of such a severe scenario occurring in the next 12 months for each of the investments which are at risk of incurring a loss (as some of the variables will vary between investments). Typically, the Investment Manager reviews macroeconomic data to assess the probability of a recession or stress scenario over a 12 month horizon. Given the rapid progression of COVID-19 around the globe and the ensuing macroeconomic impacts of the crisis, relevant models have assumed a 100% probability of a stress scenario, which is a very conservative approach. This is consistent with the prior year. The severity of stress is based on data from the recession in 2008-2009 and continues to be refined with additional information based on the current economic circumstances. 

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

For asset backed investments, two of the primary drivers of the impairment analysis are the underlying collateral loss rates and the likelihood of an economic recession in the upcoming 12-month period.  Regarding the underlying collateral loss rates, these variables are stressed to 110%-210% as part of the impairment analysis and the impacts of those stresses are reflected in the impairment amounts.  Regarding the likelihood of an economic recession in the upcoming 12-month period, as at 31 December 2021 an increase in the likelihood of an economic recession would have no impact on the expected credit losses since the analysis already assumes a 100% likelihood of an economic recession.

Valuation of unquoted investments

The valuation of unquoted investments and investments for which there is an inactive market is a key area of judgement and may cause material adjustment to the carrying value of those assets and liabilities. The unquoted equity assets are valued on periodic basis using techniques including a market approach, costs approach and/or income approach. The valuation process is collaborative, involving the finance and investment functions within the Investment Manager with the final valuations being reviewed by the Board's Audit and Valuation Committee. The specific techniques used typically include earnings multiples, discounted cash flow analysis, the value of recent transactions, and, where appropriate, industry rules of thumb. The valuations often reflect a synthesis of a number of different approaches in determining the final fair value estimate. The individual approach for each investment will vary depending on relevant factors that a market participant would take into account in pricing the asset. Changes in fair value of all investments held at fair value are recognised in the Consolidated Statement of Comprehensive Income as a capital item. On disposal, realised gains and losses are also recognised in the Consolidated Statement of Comprehensive Income as a capital item. Transaction costs are included within gains or losses on investments held at fair value, although any related interest income, dividend income and finance costs are disclosed separately in the Consolidated Financial Statements. The ultimate sale price of investments may not be the same as fair value. Refer to Note 3.

Critical accounting judgments

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

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

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

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

Accounting standards issued but not yet effective

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

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

Accounting standards effective in the year

The IASB ' s Phase 2 amendments in response to issues arising from the replacement of interest rate benchmarks in a number of jurisdictions are effective for annual periods beginning on or after 1 January 2021. Under these amendments , an immediate gain or loss is not recognised in the income statement where the contractual cash flows of a financial asset or financial liability are amended as a direct consequence of the rate reform and the revised contractual terms are economically equivalent to the previous terms. In addition , hedge accounting is continued for relationships that are directly affected by the reform.

Refer to note 6 for further details on the Group's exposure to IBOR as at 31 December 2021.

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

3.  FAIR VALUE MEASUREMENT

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

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

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

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

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

Valuation of investments in funds

The Group's investments in funds are subject to the terms and conditions of the respective fund's offering documentation. The investments in funds are primarily valued based on the latest available financial information. The Investment Manager reviews the details of the reported information obtained from the funds and considers: (i) the valuation of the fund's underlying investments; (ii) the value date of the NAV provided; (iii) cash flows (calls/distributions) since the latest value date; and (iv) the basis of accounting and, in instances where the basis of accounting is other than fair value, fair valuation information provided by the funds. If necessary, adjustments to the NAV are made to the funds to obtain the best estimate of fair value. The funds in which the Group invests are close-ended and unquoted. No adjustments have been determined to be necessary to the NAV as provided as at 31 December 2021 as this reflects fair value under the relevant valuation methodology. The NAV is provided to investors only and is not made publicly available.

Valuation of equity securities

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

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

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

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

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

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

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

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

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

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 2021:

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

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

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

The following table analyses the fair value hierarchy of the Group's assets and liabilities measured at fair value at 31 December 2020:

INVESTMENT ASSETS DESIGNATED	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
AS HELD AT FAIR VALUE	£	£	£	£
Investments in funds	2 , 522 , 367	-	-	2 , 522 , 367
Equity securities	48 , 895 , 616	2 , 954 , 366	-	45 , 941 , 250
Total	51 , 417 , 983	2 , 954 , 366	-	48 , 463 , 617

	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
DERIVATIVE FINANCIAL ASSETS	£	£	£	£
Forward foreign exchange contracts	5 , 758 , 880	-	5 , 758 , 880	-
Total	5 , 758 , 880	-	5 , 758 , 880	-

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

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

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

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

The following table analyses the fair value hierarchy of the Parent Company's assets and liabilities measured at fair value at 31 December 2020:

INVESTMENT ASSETS DESIGNATED AS HELD AT FAIR VALUE	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Investments in funds	2 , 522 , 366	-	-	2 , 522 , 366
Total	2 , 522 , 366	-	-	2 , 522 , 366

DERIVATIVE FINANCIAL ASSETS	TOTAL	LEVEL 1	LEVEL 2	LEVEL 3
	£	£	£	£
Forward foreign exchange contracts	5 , 758 , 880	-	5 , 758 , 880	-
Total	5 , 758 , 880	-	5 , 758 , 880	-

There were no transfers into and out of Level 3 fair value measurements for either the Parent Company or the Group during the years ended 31 December 2021 and 31 December 2020.

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

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

The 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 2020 for the Group:

		INVESTMENTS IN	EQUITY
	TOTAL	FUNDS	SECURITIES
	£	£	£
Beginning balance , 1 January 2020	39,100,521	4,461,946	34,638,575
Purchases	16,671,467	-	16,671,467
Sales	(8,538,783)	(1,376,253)	(7,162,530)
Net change in unrealised foreign exchange gains (losses)	(1,635,542)	(624,808)	(1,010,734)
Net realised gains (losses)	(8,676,617)	-	(8,676,617)
Net change in unrealised gains (losses)	11,542,571	61,482	11,481,089
Ending balance , 31 December 2020	48,463,617	2,522,367	45,941,250

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

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

The following table presents the movement in Level 3 positions for the period ended 31 December 2020 for the Parent Company:

	INVESTMENTS IN
	FUNDS
	£
Beginning balance , 1 January 2020	4 , 461 , 946
Purchases	-
Sales	(1 , 376 , 253)
Net change in unrealised foreign exchange gains (losses)	(624 , 808)
Net change in unrealised gains (losses)	1 , 482
Ending balance , 31 December 2020	2 , 522 , 367

Quantitative information regarding the unobservable inputs for Level 3 positions as at 31 December 2021 is given below:

DESCRIPTION	FAIR VALUE AT 31 DECEMBER 2021 £	VALUATION TECHNIQUE	UNOBSERVABLE INPUT	RANGE
Common stock	4,819,588	Discounted Cash Flows	Discount Rate	10.0%
		Market Comparables	Price to Book	2.1x
			Price to Earnings	7.3x
	7,472,470	Transaction Price	Cost Basis of Investment	N/A
	1,710,424	Transaction Price/Recent Round Price	Recent Round Price per Share	$8.81
			Illiquidity Discount	20.0%
	2,306,004	Transaction Price	Illiquidity Discount	30.0%
Convertible debt	10,786,776	Discounted Cash Flows	Discount Rate	23.0%
			Annual Free Cash Flow Growth Rates	3.0%
	7,374,073	Transaction Price	Cost Basis of Investment	N/A
	2,528,302	Transaction Price/Recent Round Price	Recent Round Price per Share	$3.41 - €10,530.89
			Illiquidity Discount	20.0%
Preferred stock	38,090,065	Transaction Price/Recent Round Price	Rights and Preferences Discount	0.0% - 20.0%
			Recent Round Price per Share	$0.19 - €3,671.49
			Illiquidity Discount	0.0% - 20.0%
Investments in funds	12,531,090	Net Asset Value	N/A	N/A
Warrants	15,143,216	Black Scholes	Price Per Share	$0.36 - €10,530.89
			Rights & Preferences Discount	0.0% - 30.0%
			Risk Free Rate	0.7% - 1.3%
			Term	1.6 - 5.0 years
			Volatility	22.0% - 40.0%
	2,693,389	Transaction Price	Cost Basis of Investment	N/A
	2,028,004	Transaction Price/Recent Round Price	Deal Execution Risk Discount	20.0%
			Recent Round Price per Share	$0.92 - $43.21
			Rights & Preferences Discount	20.0% - 40.0%
			Risk Free Rate	0.73%
			Term	2.3 years
			Volatility	40.0%
Total	107,483,401

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

If the illiquidity discount of the convertible debt valued based on discounted cash flows increased / decreased by 10% it would have resulted in an increase / decrease to the total value of those securities of £7,852,065, which would affect the Net gain / (loss) on investments within the capital return column of the Consolidated Statement of Comprehensive Income.

If the illiquidity discount of the preferred stock valued based on discounted cash flows increased / decreased by 10% it would have resulted in an increase / decrease to the total value of those securities of £2,664,149, which would affect the Net gain / (loss) on investments within the capital return column of the Consolidated Statement of Comprehensive Income.

If the volatility rate used for the warrants valued based on a Black Scholes increased / decreased by 10% it would have resulted in an increase / decrease to the total value of those equity securities of £1,405,237, 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 10% it would have resulted in an increase / decrease in the total value the investments in funds and equity securities of £10,600,644 (31 December 2020: £4,846,362) 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 2021 but for which fair value is disclosed:

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

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

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 2020 but for which fair value is disclosed:

	CARRYING   VALUE	FAIR MARKET   VALUE
	£	£
Assets
Loans	293 , 123 , 379	293 , 123 , 379
Total	293 , 123 , 379	293 , 123 , 379

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

4.  DERIVATIVES

Typically, derivative contracts serve as components of the Group's investment strategy and are utilised primarily to structure and hedge investments to enhance performance and reduce risk to the Group. In 2021 and 2020, the Group did not designate any derivatives as hedges for hedge accounting purposes as described under IFRS 9. Derivative instruments are also used for trading purposes where the Investment Manager believes this would be more effective than investing directly in the underlying financial instruments. The only derivative contracts that the Group currently holds or issues are forward foreign exchange contracts.

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

Forward contracts

Forward contracts entered into represent a firm commitment to buy or sell an underlying asset, or currency at a specified value and point in time based upon an agreed or contracted quantity. The realised/unrealised gain or loss is equal to the difference between the value of the contract at the onset and the value of the contract at settlement date/year end date and is included in the Consolidated Statement of Comprehensive Income.

As at 31 December 2021, the following forward foreign exchange contracts were included in the Group's Consolidated Statement of Financial Position at fair value through profit or loss and the Parent Company's Statement of Financial Position at fair value through profit or loss:

SETTLEMENT DATE	PURCHASE   CURRENCY	PURCHASE                  AMOUNT	SALE   CURRENCY	SALE   AMOUNT	FAIR VALUE   £
28 January 2022	GBP	2,620,803	AUD	4,800,000	(18,152)
28 January 2022	GBP	6,683,400	EUR	7,900,000	57,080
28 January 2022	GBP	52,879,392	USD	73,000,000	(1,082,331)
28 January 2022	GBP	3,972,910	EUR	4,700,000	23,367
28 January 2022	GBP	74,903,643	USD	103,000,000	(1,532,042)
25 February 2022	GBP	74,593,466	USD	100,000,000	701,281
25 March 2022	GBP	118,508,454	USD	156,810,386	2,411,820
Unrealised gains on forward foreign exchange contracts					561,023

As at 31 December 2020, 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   £
22 January 2021	GBP	57 , 581 , 855	USD	78 , 700 , 000	1 , 832 , 031
10 February 2021	GBP	2 , 194 , 988	USD	3 , 000 , 000	29 , 483
10 February 2021	GBP	4 , 389 , 976	USD	6 , 000 , 000	11 , 655
10 February 2021	GBP	363 , 026	AUD	643 , 900	(9 , 702)
12 February 2021	GBP	54 , 874 , 703	USD	75 , 000 , 000	267 , 416
12 February 2021	GBP	1 , 083 , 960	EUR	1 , 200 , 000	11 , 208
12 February 2021	GBP	124 , 382 , 660	USD	170 , 000 , 000	3 , 616 , 789
Unrealised gains on forward foreign exchange contracts					5 , 758 , 880

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

	GROSS   AMOUNTS OF   RECOGNISED   FINANCIAL   ASSETS	GROSS   AMOUNTS   OF FINANCIAL LIABILITIES TO BE   SET-OFF IN THE   STATEMENT OF   FINANCIAL   POSITION	NET AMOUNTS   OF RECOGNISED   ASSETS   PRESENTED IN   THE STATEMENT   OF FINANCIAL   POSITION	RELATED AMOUNTS NOT  ELIGBIBLE TO BE SET-OFF IN THE STATEMENT OF FINANCIAL POSITION
				FINANCIAL   INSTRUMENTS	COLLATERAL   RECEIVED	NET   AMOUNT
As At 31 December 2021	£	£	£	£	£	£
Bannockburn Global	2,468,900	(1,100,483)	1,368,417			1,368,417
Goldman Sachs	23,367	(23,367)	-			-
Morgan Stanley	701,281	-	701,281			701,281
Total	3,193,548	(1,123,850)	2,069,698	-	-	2,069,698

	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 2021	£	£	£	£	£	£
Bannockburn Global	1,100,483	(1,100,483)	-			-
Goldman Sachs	1,532,042	(23,367)	1,508,675			1,508,675
Morgan Stanley	-	-	-			-
Total	2,632,525	(1,123,850)	1,508,675	-	-	1,508,675

The following tables provide information on the financial impact of netting for instruments subject to an enforceable master netting arrangement or similar agreement at 31 December 2020 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 2020	£	£	£	£	£	£
Bannockburn Global	3 , 657 , 926	(9 , 702)	3 , 648 , 224	-	-	3 , 648 , 224
Goldman Sachs	278 , 624	-	278 , 624	-	-	278 , 624
Morgan Stanley	1 , 832 , 032	-	1 , 832 , 032	-	-	1 , 832 , 032
Total	5 , 768 , 582	(9 , 702)	5 , 758 , 880	-	-	5 , 758 , 880

	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 2020	£	£	£	£	£	£
Bannockburn Global	9 , 702	(9 , 702)	-	-	-	-
Goldman Sachs	-	-	-	-	-	-
Morgan Stanley	-	-	-	-	-	-
Total	9 , 702	(9 , 702)	-	-	-	-

5.  INCOME AND GAINS ON INVESTMENTS AND LOANS

Interest income in the amount of £33,158,150 (31 December 2020: £35,454,974) has been allocated to revenue and £nil (31 December 2020: £524,984) has been allocated to capital in line with the Group's policy as set out in Note 2.

	31 DECEMBER   2021	31 DECEMBER   2020
	£	£
Other Income
Distributable income from investments in funds	1,265,158	609 , 083
Interest income from investment assets designated as held at fair value through profit or loss	2,088,723	4 , 791 , 537
Other income	1,065,739	399,147
Total	4,419,620	5 , 799 , 767

	31 DECEMBER   2021	31 DECEMBER   2020
	£	£
Net gains (losses) on investments
Realised (loss) gain on sale of investments	(239,441)	(9 , 159 , 855)
Unrealised gains on investment in funds	7,141,906	61 , 482
Unrealised gains on equity securities	60,212,530	10 , 944 , 335
Total	67,114,995	1 , 845 , 962

6.  FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS

Introduction

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

Risk management structure

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

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

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

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

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

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

Market price risk

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

Interest rate risk

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

The Group is exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Due to the nature of the investments at 31 December 2021, the Group has limited exposure to variations in interest rates as the key components of interest rates are fixed and determinable or variable based on the size of the loan.

While the Group is exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows, the downside exposure of the Group is limited at 31 December 2021 due to the fixed rate nature of the investments or interest rate floors that are in place on most of the Group's variable interest rate loans. The interest rate floors that are in place on most of the Group's variable interest rate loans reduces the potential impact that a decrease in rates would have on the Group's investments.

As at 31 December 2021, if interest rates had increased by 1%, with all other variables held constant, the change in 12  months of future cash flows on the current investment portfolio, including both interest income and expense, would have been £480,654 (31 December 2020: 461,430). As at 31 December 2021, if interest rates had decreased by 1%, with all other variables held constant, the change in 12 months of future cash flows on the current investment portfolio, including both interest income and expense, would be £nil (31 December 2020: £(224,586)) due to the floors in place on the Group's investments. 

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

  Effect of IBOR reform

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

The effect of a discontinuation of GBP LIBOR on the Company's investments has had little impact to the Group as the underlying investments have little to no exposure to GBP LIBOR at the portfolio company level. It is difficult to predict the full impact of the transition away from USD LIBOR until new reference rates and fallbacks are commercially accepted.

The following table contains details of all of the financial instruments that the Group holds at 31 December 2021 which reference LIBOR and have not yet transitioned to an alternative interest rate benchmark:

	ASSETS	LIABILITIES
Non-derivative assets and liabilities exposed to USD LIBOR	£	£
Credit assets at amortised cost	261,955,830	107,267,260
Total exposure	261,955,830	107,267,260

Currency risk

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

The assets of the Group as at 31 December 2021 were invested in assets which were denominated in US Dollar, Euro, Australian Dollar, Pound Sterling and other currencies. Accordingly, the value of such assets may be affected favourably or unfavourably by fluctuations in currency rates. The Group hedges currency exposure between Pound Sterling and any other currency in which the Group's assets may be denominated, in particular US Dollars, Australian Dollars, and Euros.

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

Micro and small cap company investing risk

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

Gearing and borrowing risk

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

Concentration of foreign currency exposure

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

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

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

If the GBP exchange rate simultaneously increased/decreased by 10% against the above currencies, the impact on profit would be an increase/decrease of £1,778,009. 10% is considered to be a reasonably possible movement in foreign exchange rates. The table above includes the exposure of the non-consolidated interest investment in the Group.

The below table presents the net exposure to foreign currency at 31 December 2020. 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	31 DECEMBER	31 DECEMBER	31 DECEMBER
	2020	2020	2020	2020
	£	£	£	£
Euro	1 , 302 , 950	-	1 , 083 , 960	218 , 990
US Dollar	331 , 021 , 454	(86 , 087 , 183)	243 , 424 , 181	1 , 510 , 090
Swiss Francs	4 , 899 , 168	-	-	4 , 899 , 168
Australian Dollars	543 , 622	-	363 , 026	180 , 596

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

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

If the GBP exchange rate simultaneously increased/decreased by 10% against the above currencies, the impact on profit would be an increase/decrease of £1,792,605 10% is considered to be a reasonably possible movement in foreign exchange rates.

The table below presents the net exposure to foreign currency at 31 December 2020. 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	31 DECEMBER	31 DECEMBER	31 DECEMBER
	2020	2020	2020	2020
	£	£	£	£
Euro	1 , 302 , 950	-	1 , 083 , 960	218 , 990
US Dollar	244 , 914 , 933	-	243 , 424 , 181	1 , 490 , 752
Swiss Francs	4 , 899 , 168	-	-	4 , 899 , 168
Australian Dollars	543 , 622	-	363 , 026	180 , 596

Liquidity risk

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

The maturities of the non-current financial liabilities are disclosed in Note 8. The following tables show the contractual maturity of the financial assets and financial liabilities of the Group as at 31 December 2021:

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

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

The following tables show the contractual maturity of the financial assets and financial liabilities of the Group as at 31 December 2020:

	WITHIN   ONE YEAR	ONE TO   FIVE YEARS	OVER FIVE     YEARS	TOTAL
	£	£	£	£
Assets
Loans	44 , 436 , 582	246 , 668 , 944	2 , 017 , 853	293 , 123 , 379
Cash and cash equivalents	6 , 416 , 028	-	-	6 , 416 , 028
Cash posted as collateral	1 , 140 , 000	-	-	1 , 140 , 000
Interest receivable	3 , 613 , 047	-	-	3 , 613 , 047
Dividend receivable	3 , 812	-	-	3 , 812
Other assets and prepaid expenses	889 , 148	-	-	889 , 148
Total	56 , 498 , 617	246 , 668 , 944	2 , 017 , 853	305 , 185 , 414

	WITHIN   ONE YEAR	ONE TO   FIVE YEARS	OVER FIVE      YEARS	TOTAL
	£	£	£	£
Liabilities
Notes payable	10 , 109 , 810	75 , 977 , 373	-	86 , 087 , 183
Management fee payable	92 , 241	-	-	92 , 241
Performance fee payable	4 , 040 , 085	-	-	4 , 040 , 085
Deferred income	253 , 403	-	-	253 , 403
Other liabilities and accrued expenses	1 , 332 , 920	-	-	1 , 332 , 920
Total	15 , 828 , 459	75 , 977 , 373	-	91 , 805 , 832

The Investment Manager manages the Group's liquidity risk by investing primarily in a diverse portfolio of assets. At 31 December 2021, the Group had investments in 48 Portfolio Companies (31 December 2020: 43 Portfolio Companies). At 31 December 2021, 10% of the loans had a stated maturity date of less than a year (31 December 2020: 15%).

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

As at 31 December 2021, £19.8 million (£48.6 million as at 31 December 2020) of the Group's liabilities relating to principal and interest payments are tied directly to the performance of investment assets that mature on or near the same date as the investment liability. The amounts above represent the values as at 31 December 2021 and do not project cash flows until maturity of the investment liabilities.

On 1 March 2021, the Company closed on a USD$130 million gearing facility with MassMutual. At the closing, the Company repaid its previous facility with Pacific Western Bank. The MassMutual gearing facility has a stated maturity date of 1 March 2027. In accordance with IFRS 7 paragraph 39, the Group has projected cash interest payments of £20,383,279 which is calculated using the amount outstanding and interest rate as at 31 December 2021 and does not factor in any future paydowns, draws or changes in interest and foreign exchange rates before the maturity date on 1 March 2027.

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Group's credit risks arise principally through exposures to loans acquired by the Group, which are subject to risk of borrower default. The ability of the Group to earn revenue is completely dependent upon payments being made by the borrower, such as adverse movements in investment markets.

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

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

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

Credit quality

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

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

INTERNAL GRADE		UNITED STATES £	LATIN AMERICA £		EUROPE £		ASIA £		TOTAL   31 DECEMBER   2021 £
Stage 1
A - 1		57,629,013	-		-		-		57,629,013
A - 2		123,954,264	48,352,882		13,417,801		12,778,994		198,503,941
B		18,100,596	-		3,470,478		-		21,571,074
C		-	-		-		-		-
Total		199,683,873	48,352,882		16,888,279		12,778,994		277,704,028
Stage 2
A - 1		-	-		-		-		-
A - 2		-	-		-		-		-
B		-	-		-		-		-
C		-	-		-		-		-
Total		-	-		-		-		-
Stage 3
A - 1		-	-		-		-		-
A - 2		-	-		-		-		-
B		-	-		-		-		-
C		-	-		14,098,947		-		14,098,947
Total		-	-		14,098,947		-		14,098,947
INTERNAL GRADE	FINTECH £			eSME £		LEGAL FINANCE £		MARKETPLACE LOANS £		TOTAL   31 DECEMBER     2020
Stage 1
A - 1	85,551,562			-		-		3,001		85,554,563
A - 2	139,465,092			12,296,728		41,934,631		39,332		193,735,783
B	6,351,153			-		-		117,400		6,468,553
C	-			-		-		8,325		8,325
Total	231,367,807			12,296,728		41,934,631		168,058		285,767,224
Stage 2
A - 1	-			-		-		-		-
A - 2	-			-		-		6,163		6,163
B	-			-		-		20,251		20,251
C	3,675,244			-		-		-		3,675,244
Total	3,675,244			-		-		26,414		3,701,658
Stage 3
A - 1	-			-		-		-		-
A - 2	-			-		-		11,537		11,537
B	-			-		-		170,395		170,395
C	11,952,754			-		-		11,970		11,964,724
Total	11,952,754			-		-		193,902		12,146,656

INTERNAL GRADE	UNITED   STATES	LATIN AMERICA £	EUROPE £	ASIA £	TOTAL   31 DECEMBER      2020
Stage 1
A - 1	80,371,977	-	-	5,182,586	85,554,563
A - 2	148,757,061	41,854,564	2,761,132	363,026	193,735,783
B	6,351,153	-	117,400	-	6,468,553
C	-	-	8,325	-	8,325
Total	235,480,191	41,854,564	2,886,857	5,545,612	285,767,224
Stage 2
A - 1	-	-	-	-	-
A - 2	-	-	6,163	-	6,163
B	-	-	20,251	-	20,251
C	-	-	3,675,244	-	3,675,244
Total	-	-	3,701,658	-	3,701,658
Stage 3
A - 1	-	-	-	-	-
A - 2	11,537	-	-	-	11,537
B	170,395	-	-	-	170,395
C	11,970	-	11,952,754	-	11,964,724
Total	193,902	-	11,952,754	-	12,146,656
INTERNAL GRADE	DEFINITION
A - 1	Asset backed loans structured with credit enhancement and strong operating liquidity positions
A - 2	High credit quality borrowers or asset backed loans structured with credit enhancement
B	High credit quality borrowers with some indicators of credit risk or asset backed loans with limited structural credit enhancement
C	Borrowers with elevated levels of credit risk

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

Portfolio Company restrictions

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

Asset class restrictions

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

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

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

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

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

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

Other restrictions

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

Maximum credit exposure

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

7.  CASH AND CASH EQUIVALENTS

	GROUP	GROUP	PARENT   COMPANY	PARENT   COMPANY
	31 DECEMBER	31 DECEMBER	31 DECEMBER	31 DECEMBER
	2021	2020	2021	2020
	£	£	£	£
Cash held at bank	6,300,572	6 , 416 , 028	4,301,574	4 , 738 , 217
Total	6,300,572	6 , 416 , 028	4,301,574	4 , 738 , 217

The Parent Company has posted cash collateral of £3,010,000 as at 31 December 2021 (31 December 2020: £1,140,000) with Goldman Sachs and cash of £1,123,927 (31 December 2020: £nil) with Morgan Stanley in relation to the outstanding derivatives.

Below are the credit ratings of the banks where the Parent Company and Group hold cash as at 31 December 2021 from Moody's:

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

8.  NOTES PAYABLE

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

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

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

The table below provides details of the outstanding debt of the Group at 31 December 2020:

	INTEREST RATE	OUTSTANDING  PRINCIPAL	MATURITY
31 DECEMBER 2020		£
Credit Facility 11-2018	4.25% + 1M LIBOR	37,534,297	30 November 2022
Total		37,534,297

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 2021:

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

The table below provides details of the outstanding first-out participation liabilities of the Group at 31 December 2020:

		OUTSTANDING
		PRINCIPAL	MATURITY
31 DECEMBER 2020		£
First-Out Participation 06-2015		10 , 109 , 810	13 June 2021
First-Out Participation 03-2017		20 , 446 , 931	1 January 2024
First-Out Participation 04-2019		17 , 996 , 145	1 January 2024
Total		48 , 552 , 886

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

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

The table below provides the movement of the notes payable and securities sold under agreements to repurchase for the year ended 31 December 2020 for the Group.

	NOTES
	PAYABLE
	£
Beginning balance , 1 January 2020	111 , 667 , 069
Purchases	40 , 758 , 337
Sales	(64 , 260 , 865)
Net change in unrealised foreign exchange gains (losses)	(2 , 077 , 358)
Ending balance , 31 December 2020	86 , 087 , 183

9.  IMPAIRMENT OF FINANCIAL ASSETS AT AMORTISED COST

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

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

The table below provides details of the investments at amortised cost held by the Group as at 31 December 2020 under IFRS 9:

	COST BEFORE ECL	ECL	LOANS  WRITTEN-OFF	CARRYING   VALUE
	£	£	£	£
Loans at amortised cost	303 , 128 , 410	8 , 489 , 159	1 , 515 , 872	293 , 123 , 379
Total	303 , 128 , 410	8 , 489 , 159	1 , 515 , 872	293 , 123 , 379

The Parent Company does not hold any loans.

Credit impairment losses

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

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

The impairment charge of the Group for the year ended 31 December 2020 comprises of the following under IFRS 9:

	CREDIT IMPAIRMENT LOSSES
	31 DECEMBER 2020
		£
Loans written off		1 , 515 , 872
Change in expected credit losses		(1 , 142 , 453)
Currency translation on expected credit losses		(260 , 869)
Credit impairment losses		112 , 550

Impairment of loans written off

Impairment charges of loans written off (recovered) of £(358,867) (31 December 2020: £1,515,872) have been recorded in the Group's Consolidated Statement of Financial Position and are included in Credit impairment losses on the Consolidated Statement of Comprehensive Income.

Provision for expected credit losses

As at 31 December 2021, the Group has created a reserve provision on the outstanding principal of the Group's loans of £12,463,973 (31 December 2020: £8,489,159), which have been recorded in the Group's Consolidated Statement of Financial Position and are included in Credit impairment losses on the Consolidated Statement of Comprehensive Income.

The expected credit losses comprised the following during 2021:

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

The expected credit losses comprised the following during 2020:

	31 DECEMBER   2020
	£
Beginning balance 1 January 2020	9 , 631 , 612
Change in expected credit losses or equivalent	(1 , 142 , 453)
Ending balance 31 December 2020	8 , 489 , 159

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

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

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

Below is a breakout of the provision for expected credit losses by stage of the ECL model as at 31 December 2020:

INTERNAL GRADE	FINTECH £	eSME £	LEGAL FINANCE £	MARKETPLACE LOANS £	31 DECEMBER      2020     £
Stage 1	-	-	-	61,040	61,040
Stage 2	500,000	-	-	24,804	524,804
Stage 3	7,793,186	-	-	110,129	7,903,315
Expected credit losses	8,293,186	-	-	195,973	8,489,159
INTERNAL GRADE	UNITED STATES £	LATIN AMERICA £	EUROPE £	ASIA £	31 DECEMBER           2020       £
Stage 1	-	-	61,040	-	61,040
Stage 2	-	-	524,804	-	524,804
Stage 3	110,129	-	7,793,186	-	7,903,315
Expected credit losses	110,129	-	8,379,030	-	8,489,159

The breakout of the gross value of loans by stage of the ECL model as at 31 December 2021 and 31 December 2020 can be found in footnote 6. One investment moved from Level 2 to Level 3 in 2021. All write-offs (recoveries) during the year were on assets that were considered Stage 3. There were no material movements between stages during 2020.

10.  FEES AND EXPENSES

Investment management fees

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

The management fee is payable in Pound Sterling monthly in arrears and is at the rate of 1/12 of 1.0% per month of NAV (the "Management Fee"). For the period from Admission until the date on which 90% of the net proceeds of the Issue have been invested or committed for investment (other than in Cash Instruments), the value attributable to any Cash Instruments of the Group held for investment purposes will be excluded from the calculation of NAV for the purposes of determining the Management Fee. The management fee expense for the year is £3,802,097 (31 December 2020: £3,394,740), of which £155,399 (31 December 2020: £92,241) was payable as at 31 December 2021.

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

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

Performance fees

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

The performance fee will be calculated in respect of each 12 month period starting on 1 January and ending on 31 December in each calendar year (a "Calculation Period") and provided further that if at the end of what would otherwise be a Calculation Period no performance fee has been earned in respect of that period, the Calculation Period shall carry on for the next 12 month period and shall be deemed to be the same Calculation Period and this process shall continue until a performance fee is next earned at the end of the relevant period. The performance fee expense for the year is £12,913,280 (31 December 2020: £4,040,085), of which £12,913,280 was payable as at 31 December 2021 (31 December 2020: £4,040,085).

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

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

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

Administration

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

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

Secretary

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

Registrar

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

Custodian

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

Auditors ' remuneration

For the year ended 31 December 2021, the remuneration for work carried out by PricewaterhouseCoopers LLP, the statutory auditors, was as follows:

	31 DECEMBER     2021	31 DECEMBER       2020
	£	£
Fees charged by PricewaterhouseCoopers LLP:
v the audit of the Parent Company and Consolidated Financial Statements ; and	317,000	245 , 000
v the audit of the Company's subsidiaries.	22,300	13 , 000

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

11.  TAXATION ON ORDINARY ACTIVITIES

Investment trust status

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

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

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

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

The following table presents the tax chargeable on the Group for the period ended 31 December 2020:

	REVENUE £	CAPITAL £	TOTAL £
Net return on ordinary activities before taxation	23 , 898 , 852	(944 , 173)	22 , 954 , 679
Tax at the standard UK corporation tax rate of 19.00%	4 , 540 , 782	(179 , 393)	4 , 361 , 389
Effects of:
Non-taxable income	(4 , 540 , 782)	-	(4 , 540 , 782)
Capital items exempt from corporation tax	-	179 , 393	179 , 393
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	31 DECEMBER
	2021	2020
	£	£
Net assets attributable to Shareholders of the Parent Company	317,614,784	270 , 537 , 108
Ordinary Shares in issue (excluding Treasury Shares)	278,276,392	282 , 647 , 364
Net asset value per Ordinary Share	114.14p	95.72p

13.  RETURN PER ORDINARY SHARE

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

	AS AT	AS AT
	31 DECEMBER	31 DECEMBER
	2021	2020
	£	£
Profit for the year	73,183,772	22 , 879 , 629
Average number of Ordinary Shares in issue during the year	279,617,119	295 , 430 , 078
Earnings per Share (basic and diluted)	26.17p	7.74p

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 2021. All shares issued are fully paid with none not fully paid:

	NOMINAL VALUE	NUMBER OF SHARES
	£
Ordinary Shares	0.01	278,276,392

Set out below is the issued share capital of the Company as at 31 December 2020. All shares issued are fully paid with none not fully paid:

	NOMINAL VALUE	NUMBER OF SHARES
	£
Ordinary Shares	0.01	282 , 647 , 364

Rights attaching to the Ordinary Shares

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

Voting rights

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

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

Variation of Rights & Distribution on Winding Up

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

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

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

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

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

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

The table below shows the movement in shares through 31 December 2020:

	SHARES IN		SHARES IN
	ISSUE AT THE		ISSUE AT THE
FOR THE YEAR FROM 1 JANUARY 2020	BEGINNING OF	SHARES	END OF
TO 31 DECEMBER 2020	THE PERIOD	REPURCHASED	THE PERIOD
Ordinary Shares	312 , 302 , 305	(29 , 654 , 941)	282 , 647 , 364

Share buyback programme

All Ordinary Shares bought back through the share buyback programme are held in treasury as at 31 December 2021. 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 2021	-	0.00p	0.00p	0.00p	99,968,301
February 2021	583,465	88.25p	86.65p	88.99p	100,551,766
March 2021	1,587,507	84.01p	82.61p	89.77p	102,139,273
April 2021	550,000	85.56p	85.39p	85.80p	102,689,273
May 2021	600,000	85.63p	85.00p	86.20p	103,289,273
June 2021	1,050,000	84.07p	83.48p	84.07p	104,339,273
July 2021	-	0.00p	0.00p	0.00p	104,339,273
August 2021	-	0.00p	0.00p	0.00p	104,339,273
September 2021	-	0.00p	0.00p	0.00p	104,339,273
October 2021	-	0.00p	0.00p	0.00p	104,339,273
November 2021	-	0.00p	0.00p	0.00p	104,339,273
December 2021	-	0.00p	0.00p	0.00p	104,339,273

Details of the share buyback program during the year ended 31 December 2020 as follows:

	ORDINARY	AVERAGE	LOWEST	HIGHEST	TOTAL
	SHARES	PRICE PER	PRICE PER	PRICE PER	TREASURY
DATE OF PURCHASE	PURCHASED	SHARE	SHARE	SHARE	SHARES
January 2020	1 , 824 , 187	80.52p	78.64p	81.00p	72 , 137 , 547
February 2020	1 , 153 , 000	81.30p	78.10p	82.29p	73 , 290 , 547
March 2020	3 , 513 , 837	62.26p	54.97p	80.00p	76 , 804 , 384
April 2020	-	0.00p	0.00p	0.00p	76 , 804 , 384
May 2020	4 , 259 , 700	61.57p	58.44p	62.83p	81 , 064 , 084
June 2020	11 , 515 , 569	69.18p	66.60p	71.50p	92 , 579 , 653
July 2020	3 , 636 , 867	65.19p	63.03p	67.00p	96 , 216 , 520
August 2020	1 , 000 , 000	64.60p	63.00p	65.00p	97 , 216 , 520
September 2020	1 , 547 , 589	64.02p	62.80p	65.38p	98 , 764 , 109
October 2020	-	0.00p	0.00p	0.00p	98 , 764 , 109
November 2020	725 , 000	65.98p	65.92p	66.00p	99 , 489 , 109
December 2020	479 , 192	73.26p	73.05p	73.55p	99 , 968 , 301

Other distributable reserve

During 2021, the Company declared and paid dividends of £Nil (2020: £Nil) from the other distributable reserve. Further, the cost of the buyback of Ordinary Shares as detailed above was funded by the other distributable reserve of £3,741,814 (2020: £20,161,216). The closing balance in the other distributable reserve has been reduced to £112,779,146 (31 December 2020: £116,520,960).

15.  DIVIDENDS PER SHARE

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

	31 DECEMBER	31 DECEMBER
	2021	2020
	£	£
2019 interim dividend of 2.00 pence per Ordinary Share paid on 2 April 2020	-	6 , 184 , 004
2020 interim dividend of 2.00 pence per Ordinary Share paid on 11 June 2020	-	6 , 116 , 226
2020 interim dividend of 2.00 pence per Ordinary Share paid on 17 September 2020	-	5 , 711 , 983
2020 interim dividend of 2.00 pence per Ordinary Share paid on 17 December 2020	-	5 , 662 , 531
2020 interim dividend of 2.00 pence per Ordinary Share paid on 1 April 2021	5,638,178	-
2021 interim dividend of 2.00 pence per Ordinary Share paid on 24 June 2021	5,586,527	-
2021 interim dividend of 2.00 pence per Ordinary Share paid on 23 September 2021	5,565,528	-
2021 interim dividend of 2.00 pence per Ordinary Share paid on 23 December 2021	5,565,528	-
Total	22,355,761	23 , 674 , 744

An interim dividend of 2.00 pence per Ordinary Share, equalling £5,565,528, was declared by the Board on 24 February 2022 in respect of the period to 31 December 2021, was paid to shareholders on 31 March 2022. The interim dividend has not been included as a liability in these financial statements in accordance with International Accounting Standard 10: Events After the Balance Sheet Date. The Parent Company allocated £88,856 of the 2021 interim dividend paid on 1 April 2021 to a 2020 final dividend.

16.  RELATED PARTY TRANSACTIONS

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

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

At 31 December 2021, £193,200 (31 December 2020: £179,563) was paid to the Directors and £nil (31 December 2020: £nil) was owed for services performed.

As at 31 December 2021 and 31 December 2020, the Directors' interests in the Parent Company's Shares were as follows:

		31 DECEMBER         2021	31 DECEMBER       2020
Oliver Grundy	Ordinary Shares	30,000	N/A
Kevin Ingram	Ordinary Shares	N/A	64 , 968
Mark Katzenellenbogen	Ordinary Shares	215,000	215 , 000
Elizabeth Passey	Ordinary Shares	10,000	10 , 000
Clive Peggram	Ordinary Shares	333,240	333 , 240
Graeme Proudfoot	Ordinary Shares	130,000	50 , 000

Investment management fees for the year ended 31 December 2021 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 2021, as part of an amendment to its management agreement, the Investment Manager continued to purchase Ordinary Shares of the Parent Company with 20% of its monthly management fee.  The Ordinary Shares were purchased at the prevailing market price. As at 31 December 2021, the Investment Manager has purchased 4,496,991 (31 December 2020: 3,705,991) Ordinary Shares.

As at 31 December 2021, Partners and Principals of the Investment Manager held 510,000 (31 December 2020: 510,000) Shares in the Parent Company.

The Group has invested in VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. The Investment Manager of the Parent Company also acts as manager to VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. The principal activity of VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. is to invest in alternative finance investments and related instruments with a view to achieving the Parent Company's investment objective. As at 31 December 2021 the Group owned 26% of VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. (31 December 2020: 26%) and the value of the Group's investment in VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. was £1,640,256 (31 December 2020: £2,454,004).

The Group has invested in VPC Synthesis, L.P. The Investment Manager of the Parent Company also acts as manager to VPC Synthesis, L.P. The principal activity of VPC Synthesis, L.P. is to invest in alternative finance investments and related instruments with a view to achieving the Parent Company's investment objective. As at 31 December 2021 the Group owned 4% of VPC Synthesis, L.P. (31 December 2020: £nil) and the value of the Group's investment in VPC Synthesis, L.P. was £10,890,834 (31 December 2020: £nil).

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 2021, £23,697 was due to the Investment Manager (31 December 2020: £44,240) 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  2021	PERCENTAGE   OWNERSHIP   AS AT 31 DECEMBER   2020
VPC Specialty Lending Investments Intermediate , L.P.	Investment vehicle	USA	Limited partner interest	Sole limited partner	Sole limited partner
VPC Specialty Lending Investments Intermediate Holdings , L.P.	Investment vehicle	USA	Limited partner interest	Sole limited partner	N/A
VPC Specialty Lending Investments Intermediate GP , LLC	General partner	USA	Membership interest	Sole member	Sole member
Fore London , L.P.	Investment vehicle	UK	Limited partner interest	Sole limited partner	Sole limited partner
Fore London GP , LLC	General partner	UK	Membership interest	Sole member	Sole member
Duxbury Court I , L.P.	Investment vehicle	USA	Limited partner interest	95%	95%
Duxbury Court I GP , LLC	General partner	USA	Membership interest	95%	95%
Drexel I , L.P.	Investment vehicle	USA	Limited partner interest	52%	52%
Drexel I GP , LLC	General partner	USA	Membership interest	52%	52%

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

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

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

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

The table below illustrates the movement of the investment in subsidiaries of the Parent Company in 2020:

	INVESTMENTS
	IN SUBSIDIARIES
	£
Beginning balance , 1 January 2020	281,465,228
Purchases	80,568,889
Sales	(103,634,392)
Appreciation of investments in subsidiaries	(908,193)
Ending balance , 31 December 2020	257,491,532

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 2021 represents the portion of the NAV of the controlled subsidiaries attributable to the other investors. As at 31 December 2021, the portion of the NAV attributable to non-controlling interests investments totaled £45,958 (31 December 2020: £19,337). In the Consolidated Statement of Comprehensive Income, the amount attributable to non-controlling interests represents the increase in the fair value of the investment in the period.

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

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

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

The following entities have been consolidated which have non-controlling interests during 2020:

	PRINCIPAL PLACE OF BUSINESS	PROPORTION   OF OWNERSHIP       INTERSTS   HELD BY    NON-   CONTROLLING   INTERESTS AS AT   31 DECEMBER 2020	PROFIT OR LOSS   OF SUBSIDIARY   ALLOCATED TO        NON-   CONTROLLING   INTERESTS   DURING THE   PERIOD ENDED   31 DECEMBER            2020	ACCUMULATED           NON-   CONTROLLING   INTERESTS IN   SUBSIDIARY AS   AT 31 DECEMBER          2020
NAME OF SUBSIDIARY			£	£
Drexel I , L.P.	USA	47%	51 , 213	5 , 699
Duxbury Court I , L.P.	USA	5%	3 , 321	13 , 638
Larkdale I , L.P.	USA	39%	20 , 554	-
SVTW , L.P.	USA	1%	(38)	-
Totals			75 , 050	19 , 337
	SUMMARISED FINANCIAL			31 DECEMBER 2020
NAME OF SUBSIDIARY	INFORMATION FOR SUBSIDIARY			£
Drexel I , L.P.	Distributions to non-controlling interests			49 , 333
	Profit/(loss) of subsidiary for period ended 31 December 2020			103 , 596
	Assets as at 31 December 2020			35 , 200
	Liabilities as at 31 December 2020			22 , 965
Duxbury Court I , L.P.	Distributions to non-controlling interests			-
	Profit/(loss) of subsidiary for period ended 31 December 2020			60 , 888
	Assets as at 31 December 2020			471 , 560
	Liabilities as at 31 December 2020			18 , 285
Larkdale I , L.P.	Distributions to non-controlling interests			72 , 605
	Profit/(loss) of subsidiary for period ended 31 December 2020			83 , 800
	Assets as at 31 December 2020			-
	Liabilities as at 31 December 2020			-
SVTW , L.P.	Distributions to non-controlling interests			1 , 970
	Profit/(loss) of subsidiary for period ended 31 December 2020			(11 , 191)
	Assets as at 31 December 2020			-
	Liabilities as at 31 December 2020			-

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                     2021	MAXIMUM   EXPOSURE TO   LOSS AS AT 31 DECEMBER       2021
VPC Offshore Unleveraged Private Debt Fund Feeder , L.P.	Cayman Islands	Investment fund	26%	Designated as held at fair value through profit or loss - using NAV	1,640,256	1,640,256
VPC Synthesis, L.P.	USA	Investment fund	4%	Designated as held at fair value through profit or loss - using NAV	10,890,834	10,890,834

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

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   2020   £		MAXIMUM   EXPOSURE TO   LOSS AS AT 31 DECEMBER                    2020   £
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	2 , 454 , 004		2 , 454 , 004
Larkdale III , L.P.	USA		Investment vehicle	52%*	Designated as held at fair value through profit or loss - using NAV	68 , 362		68 , 362
NAME OF ASSOCIATE		SUMMARISED FINANCIAL INFORMATION FOR ASSOCIATE					31 DECEMBER   2020   £
VPC Offshore Unleveraged		Profit/(loss) of associate for period ended 31 December 2020					345 , 196
Private Debt Fund Feeder , L.P.		Assets as at 31 December 2020					7 , 049 , 729
		Liabilities at 31 December 2020					1 , 356 , 552
Larkdale III , L.P.		Profit/(loss) of associate for period ended 31 December 2020					12 , 207
		Assets as at 31 December 2020					190 , 860
		Liabilities at 31 December 2020					58 , 441

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

*The Group holds 52% interest in Larkdale III, L.P. 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 an agent for a number of the Investment Manager's funds.

20.  SUBSEQUENT EVENTS AFTER THE REPORTING PERIOD

The Company declared a dividend of 2.00 pence per Ordinary Share, equalling £5,565,528 for the three-month period ended 31 December 2021 and paid the dividend on 31 March 2022.

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

APPROVAL OF CONSOLIDATED FINANCIAL STATEMENTS

The Annual report and Financial Statements were approved and authorised for issue by the Directors on 27 April 2022.

GOVERNANCE

Responsibility for Financial Statements and Going Concern Statement

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

Additionally, the Directors have considered the risks arising of reduced asset values and economic disruption caused by the COVID-19 pandemic. The Investment Manager has also performed a range of stress tests and demonstrated to the Directors that even in an adverse scenario of depressed markets that the Group could still generate sufficient funds to meet its liabilities over the next twelve months. The Directors believe that the Group has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future being a period of at least twelve months from the date of this report. 

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

Viability Statement

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

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

Furthermore, the three-year review period to 31 December 2024 was modelled under scenarios addressing the two conditions below:

v (i) The Board will offer shareholders an exit opportunity for up to 100% of the Ordinary Shares in issue immediately following the Company's AGM in 2023 if the Company's NAV (Cum Income) Return (calculated as set out in the Company's annual report and financial statements) for the period from 1 April 2020 to 31 March 2023 is less than 24%; and

v (ii) If the average discount to NAV at which the shares trade over the three-month period ending on 31 March 2023 is greater than 5%, the Board will offer shareholders an exit opportunity for up to 25% of the Ordinary Shares in issue immediately following the Company's AGM in 2023. For the avoidance of doubt, this exit opportunity will not be offered in the event the 100% exit opportunity in condition (ii) has been triggered.

As a part of this review, the Directors reviewed a series of stress test scenarios carried out by the Investment Manager which assumed a significant fall in income and asset levels, including the impacts to the Group's financing facilities and were satisfied with the result of this analysis. In making this assessment on the viability of the Group, the Directors have also taken into consideration each of the principal risks and uncertainties on pages 15 to 18, their mitigants and the impact these might have on the business model, future performance, solvency and liquidity. Both the principal risks and the monitoring system are subject to a robust assessment at least annually.

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

All the analysis above indicates that due to the stability and cash generating nature of the investment portfolio, specifically the asset backed investments, as well as the debt facility in place, the Group would be able to withstand the impacts outlined above. Based on the robust assessment of the principal risks, prospects and viability of the Group, the Board confirms that they have reasonable expectation that the Group will be able to continue operation and meet its liabilities as they fall due over the three-year period to 31 December 2024.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

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

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

Under company law, directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and company and of the profit or loss of the group for that period. In preparing the financial statements, the directors are required to:

v select suitable accounting policies and then apply them consistently;

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

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

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

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

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

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

DIRECTORS' CONFIRMATIONS

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

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

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

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

For and on behalf of the Board:

Graeme Proudfoot

Chair

27 April 2022

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

INVESTMENT POLICY

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

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

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

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

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

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

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

INVESTMENT RESTRICTIONS

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

PLATFORM RESTRICTIONS

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

ASSET CLASS RESTRICTIONS

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

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

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

The following restrictions apply, in each case at the time of investment by the Company, to both Debt Instruments acquired by the Company via wholly-owned SPVs or partially-owned SPVs on a proportionate basis under the Marketplace Model, on a look-through basis under the 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 UK consumers shall first obtain the appropriate authorisation from the FCA for consumer credit business.

BORROWING POLICY

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

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

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

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

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

SHARE REGISTER ENQUIRIES

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

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

SHARE CAPITAL AND NET ASSET VALUE INFORMATION

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

SHARE PRICES

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

ANNUAL AND HALF-YEARLY REPORTS

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

PROVISIONAL FINANCIAL CALENDAR

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

DIVIDENDS

The following table summarises the amounts recognised as distributions to equity shareholders relating to 2021:

	£
2021 interim dividend of 2.00 pence per Ordinary Share paid on 24 June 2021	5,586,528
2021 interim dividend of 2.00 pence per Ordinary Share paid on 23 September 2021	5,565,528
2021 interim dividend of 2.00 pence per Ordinary Share paid on 23 December 2021	5,565,528
2021 interim dividend of 2.00 pence per Ordinary Share paid on 31 March 2022	5,565,528
Total	22,283,112

DEFINITIONS OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES

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

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

Dividend Yield on Average NAV - Calculated as the dividends declared during 2021 divided by the average Net Asset Value (Cum Income) of the Company for the year

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

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

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

	2021 Calculation	2020 Calculation	Inception to Date Calculation
(A) Closing NAV (Cum Income) per share	114.14p	95.72p	114.14p
(B) Opening NAV (Cum Income) per share	95.72p	93.33p	98.00p
(C) Dividends declared and paid	8.00p	8.00p	47.59p
D = (A - B + C) / B	27.60%	11.12%	65.03%

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

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

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

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

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

Total Shareholder Return - Calculated as the change in the traded share price from 31 December 2021 to 31 December 2020 plus the dividends declared in 2021 divided by the traded share price as at 31 December 2020.

	2021 Calculation	2020 Calculation	Inception to Date Calculation
(A) Closing Ordinary Share price	92.20p	78.70p	92.20p
(B) Opening Ordinary Share price	78.70p	78.20p	100.00p
(C) Dividends declared and paid	8.00p	8.00p	47.59p
D = (A - B + C) / B	27.32%	10.87%	39.79%

Trailing Twelve Month Dividend Yield - Calculated as the total dividends declared over the last twelve months as at 31 December 2021 divided by the 31 December 2021 closing share price.

 

CONTACT DETAILS OF THE ADVISERS

Directors	Oliver Grundy Mark Katzenellenbogen Elizabeth Passey Clive Peggram Graeme Proudfoot all of the registered office below
Registered Office	6th Floor 65 Gresham Street London EC2V 7NQ United Kingdom
Company Number	9385218
Website Address	https://vpcspecialtylending.com
Corporate Brokers	Jefferies International Limited 100 Bishpsgate London EC2N 4JL United Kingdom Winterflood Securities Limited Cannon Bridge House 25 Dowgate Hill London EC4R 2GA
InvestmentManagerandAIFM	VictoryParkCapital Advisors, LLC 150 North Riverside Plaza, Suite 5200 Chicago IL 60606 United States
Company Secretary	Link Company Matters Limited Beaufort House 51 New North Road Exeter EX4 4EP United Kingdom
Administrator	Northern Trust Hedge Fund Services LLC 50 South LaSalle Street Chicago IL 60603 United States
Registrar	Link Group Central Square 29 Wellington Street Leeds LS1 4DL 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 60523 United States
English Legal Adviser to the Company	Stephenson Harwood LLP 1 Finsbury Circus London EC2M 7SH United Kingdom
Independent Auditors	PricewaterhouseCoopers LLP 7 More London Riverside London SE1 2RT United Kingdom

ENDS

LEI: 549300UPEXC5DQB81P34

 

END

 

 

FR BIGDSGUDDGDR