OFFICERS AND PROFESSIONAL ADVISORS

Directors                                 Roderick Lockhart

                                Ian Thomas

Secretary                                                Indigo Corporate Secretary Limited

Company number                   14068186

Registered office                    Two Fitzroy Place, 8 Mortimer Street, London, W1T 3JJ

Auditors                                  BDO LLP

                                55 Baker Street

                                London

                                W1U 7EU

Bankers                                   HSBC Bank PLC

                                8 Canada Square

                                London

                                E14 5HQ 

DIRECTORS' REPORT

Performance in the period

This unaudited interim condensed financial report for the half-year reporting period ended 30 September 2024 has been prepared in accordance with the UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

LendInvest Secured Income II plc's (the 'Company's') principal activity is to provide services related to property finance in the United Kingdom. During the period under review, the Company generated revenue of £5.2m (2023: £1.7m) and interest expense of £4.3m (2023: £1.4m), representing a net income margin of 17% (2023: 17%). Administrative expenses and impairment provisions amounted to £1.2m (2023: £0.3m), resulting in a loss before tax of £0.3m (2023: £nil).

The company was incorporated in England and Wales on 26 April 2022.

As at 30 September 2024, the Company has £87.6m (31 March 24: £80.2m) of issued bonds by principal value outstanding. The company had a gross loan book of £34.8m (31 March 24: £32.9m).

The Company has a number of covenants which it is required to comply with as outlined in the prospectus issued on 12 July 2022. These covenants principally include: notice of default, provision of financial statements within four months of period end and three months of half year, weighted average limits on loan portfolio, interest coverage ratio and analysis of loan portfolio within 30 days of quarter end via the London Stock Exchange's Regulatory News Service and on the LendInvest website. At the reporting date, the Company complied with all covenants.

Principal risks and uncertainty

The Board has the overall responsibility for the establishment and oversight of the Company's risk management framework. The risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and ensure any limits are adhered to. The Company's activities are reviewed regularly and potential risks are considered. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the competitiveness and flexibility of the business.

The Company has exposure to the following risks from its use of financial instruments: credit, market and liquidity risk.

Credit risk management

Credit risk is the risk that the Company's loans and advances and receivables are subject to borrower default. It arises principally from the Company's receivables from customers and cash and cash equivalents held at bank. Credit risk management lies at the core of the business and the Company has continued to develop its strong credit risk management framework which includes:

·      A clearly defined credit risk policy.

·      The continued recruitment of specialist skills in credit underwriting.

·      A Credit Committee which meets monthly.

·      An Impairment & Modelling Committee - specifically formed for the governance of IFRS 9 - which meets quarterly.

DIRECTORS' REPORT (continued)

Market risk management

The housing market continues to face challenges and opportunities, but its performance supports our view that the "green shoots" mentioned in our FY24 results are starting to flourish. Much of this optimism is driven by shifting expectations around interest rates, which are helping restore confidence in our key segments. However, this optimism is tempered by caution due to recent fiscal policy changes and geopolitical uncertainty, such as potential conflicts in oil-rich regions and increased tariffs on large manufacturing hubs.

In response to this risk, the entity only invests in assets which have an appropriate risk-adjusted return. All lending has been written within risk appetite, which generally reflects Loan-to-Value rates of under 70%.  Expected credit losses for the asset base remain in line with expectations. The Directors are therefore confident that the business will be able to absorb any losses from potential defaulting borrowers, even against the current market backdrop.

Liquidity risk management

There is a risk that the Company will not be able to meet its financial obligations as they fall due. The Company's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's position. The Company's liquidity position is monitored and reviewed on an ongoing basis by the directors and the Assets and Liabilities Committee. The Company's strategy is to grow the portfolio and then periodically securitise the assets.

Going Concern

LendInvest Secured Income II plc's business activities together with the factors likely to affect its future development are set out in in this report. The directors have considered these factors alongside the Group's financial plan, as guarantor, which assesses all entities and any associated risks as one.

The information included financial forecasts that have been prepared across a range of potential scenarios as well as detailed consideration of potential risks, including the impact of funding lines maturing in the next 12 months from the date of approval of these financial statements. The Directors believe that the Group will be able to refinance facilities falling due within the next 12 months either with the existing funding provider or with new third parties to continue its growth trajectory. If these facilities were not to be refinanced, the Group would be able to sell individual loans or portfolio of loans to facilitate the repayment of the outstanding amounts. This strategy is in line with the existing approach of the Group to both hold assets on its balance sheet and sell to the third parties. The Directors do not consider that this creates a material uncertainty in the going concern assessment of the Group.

The Directors have also considered the factors likely to affect its future development, as set out in the Operating Review, and any associated risks alongside the Group's financial plan. Having reviewed these plans and other relevant information, the Directors consider the Group to have sufficient resources to continue to operate for a period of at least 12 months from the signing of these accounts and it is on this basis that the Directors have continued to prepare the accounts on a going concern basis.

Alongside this, a comprehensive review of all covenants attached to the listed bonds, has been conducted to ensure ongoing compliance both under expected circumstances and potential stressed scenarios. The Directors have also considered the factors likely to affect its future development, including the risk factors set out above.

The bonds issued by the Company mature on 3 October 2026 and 8 August 2027.

DIRECTORS' REPORT (continued)

Key Performance Indicators (KPIs)

The Company uses key performance indicators to track progress against its plans. The performance of the main indicators in this period were:

Events after the period end date

There were no events to report after the period end date.

Responsibility statement of the directors in respect of the condensed interim financial statements for the 6 month period ended 30 September 2024

We confirm that to the best of our knowledge:

●      The condensed set of financial statements has been prepared in accordance with the UK-adopted international Accounting Standard 34, 'IAS Interim Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority, and give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company.

●      The interim management report includes a fair review of the information required by DTR 4.2.4 R, DTR 4.2.6 R, DTR 4.2.7 R and DTR 4.2.8 R.

●      The condensed set of financial statements contain a fair review of the principal risks and uncertainties.

Approved on behalf of the board:

Roderick Lockhart

Director

06 December 2024

INDEPENDENT REVIEW REPORT TO LENDINVEST SECURED INCOME II PLC

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2024 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2024 which comprises the directors' report, condensed interim statement of profit and loss, condensed interim statement of other comprehensive income, condensed interim statement of financial position, condensed interim statement of changes in equity, condensed interim statements of cash flows and notes to the condensed interim financial statements.

Basis for conclusion

We conducted our review in accordance with Revised International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410 (Revised)"). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 1.2 , the annual financial statements of the company are prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410 (Revised), however future events or conditions may cause the company to cease to continue as a going concern.

Responsibilities of directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statement in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

INDEPENDENT REVIEW REPORT TO LENDINVEST SECURED INCOME II PLC (continued)

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose.  No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent.  Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

     Chartered Accountants

     London, UK

     06 December 2024

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

CONDENSED INTERIM STATEMENT OF PROFIT AND LOSS

CONDENSED INTERIM STATEMENT OF OTHER COMPREHENSIVE INCOME

CONDENSED INTERIM STATEMENT OF FINANCIAL POSITION
                                               

These financial statements of LendInvest Secured Income II plc, with registered number 14068186, were approved by the Board of Directors and authorised for issue on 06 December 2024.

Signed on behalf of the Board of Directors by:

Roderick Lockhart

Director

CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY

CONDENSED INTERIM STATEMENT OF CASH FLOWS                        

Interest received was £4.9m (2023: £1.6m) and interest paid was £4.1m (2023: £1.3m)

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS

1. Basis of preparation

1.1 General information

LendInvest Secured Income II plc was incorporated on 26 April 2022 in the United Kingdom under the Companies Act. The address of its registered office is given on page 1.

The principal activity of the Company is to provide services related to property finance in the United Kingdom.

LendInvest Secured Income II plc is a 100% subsidiary of LendInvest Loan Holdings Limited (which is in turn a 100% subsidiary of LendInvest plc), and its results are included in the interim consolidated financial statements of LendInvest plc (the "Group").

1.2 Basis of accounting

These financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting" and have been prepared on a historical cost basis, except as required in the valuation of certain financial instruments which are carried at fair value. These financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published financial statements for the year ended 31 March 2024.

These financial statements are not statutory accounts. LendInvest Secured Income II plc statutory accounts for the year ended 31 March 2024 have been reported on by its auditor and delivered to the Registrar of Companies. The report of the auditor on those statutory accounts (i) was unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

All amounts are presented in pounds sterling, which is the functional currency of the Company and all its subsidiaries. Amounts are rounded to the nearest £'000, except where otherwise indicated.

1.3 Going Concern

LendInvest Secured Income II plc's business activities together with the factors likely to affect its future development are set out in in this report. The directors have considered these factors alongside the Group's financial plan, as guarantor, which assesses all entities and any associated risks as one.

The information included financial forecasts that have been prepared across a range of potential scenarios as well as detailed consideration of potential risks, including the impact of funding lines maturing in the next 12 months from the date of approval of these financial statements. The Directors believe that the Group will be able to refinance facilities falling due within the next 12 months either with the existing funding provider or with new third parties to continue its growth trajectory. If these facilities were not to be refinanced, the Group would be able to sell individual loans or portfolio of loans to facilitate the repayment of the outstanding amounts. This strategy is in line with the existing approach of the Group to both hold assets on its balance sheet and sell to the third parties. The Directors do not consider that this creates a material uncertainty in the going concern assessment of the Group.

Alongside this, a comprehensive review of all covenants attached to the listed bonds, has been conducted to ensure ongoing compliance both under expected circumstances and potential stressed scenarios. The Directors have also considered the factors likely to affect its future development, including the risk factors set out above.

Having reviewed these plans and other relevant information, the Directors consider the Company to have sufficient resources to continue to operate for a period of at least 12 months from the signing of these accounts and it is on this basis that the Directors have continued to prepare the accounts on a going concern basis.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

1. Basis of preparation (continued)

1.4 Accounting policies

The accounting policies and methods of computation are consistent with those set out in the Annual Report 2024.

2. Financial risk management

General objectives, policies and processes

The Board has the overall responsibility for the establishment and oversight of the Company's risk management framework. The risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls and to monitor risks and ensure any limits are adhered to. The Company's activities are reviewed regularly and potential risks are considered. The overall objective of the board is to set policies that seek to reduce risk as far as possible without unduly affecting the business's competitiveness and flexibility.

The tables below analyse the Company's contractual undiscounted cash flows of its financial assets and liabilities:

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

2. Financial risk management (continued)

3. Segmental analysis

The Company's operations are carried out solely in the UK and one business line. The results and net assets of the Company are derived from the provision of property related loans only.

4. Interest income calculated using the effective interest rate

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

5. Interest expense

6. Loss before tax

Audit fees and auditors' remuneration for other services are paid by the Company's ultimate parent company, LendInvest plc. The Company employed no employees in the 6 month period to 30 September 2024 (2023: none).

7. Taxation on profit on ordinary activities

The Company is subject to all taxes applicable to a commercial company in the United Kingdom. The UK business profits of the Company are subject to UK income tax at the prevailing basic rate of 25% (2023: 25%).

As of 30 September 2024, the Company had £12k in net deferred tax assets (DTAs) (31 March 2024: £25k net deferred tax liabilities (DTLs)).

8. Receivables from related parties and other receivables

9. Loans and advances

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

9. Loans and advances (continued)

(*) Fair value adjustment to gross loans and advances due to classification as fair value through other comprehensive income (FVTOCI). Fair value adjustments are a function of changes in interest rates and credit spreads on the Company's loan assets. The changes in these variables during the period and effect on fair value is discussed in Note 12.

ECL provision

ECL provision

¹The ECL provision of £3,136k (HY2023: £11k) is stated including the expected credit losses incurred on the interest income recognised on stage 3 loans and advances. The net ECL impact on the income statement for the period to 30 September 2024 is £1,077k (HY2023: £223k). This consists of a £110k write off in the period. This and the total impact of expected credit losses on income recognised on stage 3 loans and advances using the effective interest rate is £238k (HY2023: £nil).

Analysis of loans and advances by stage

The maximum LTV on stage 1 loans is 76%. The maximum LTV on stage 2 loans is 83%. The maximum LTV on stage 3 loans is 92%

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

9. Loans and advances (continued)

Analysis of loans and advances by stage (continued)

The maximum LTV on stage 1 loans is 81%. The maximum LTV on stage 2 loans is 76%. The maximum LTV on stage 3 loans is 85%.

The fair value adjustments on Stage 3 loans are not applied. Loans and Advances recognised as Stage 3 are credit impaired and their carrying value represents the discounted cashflows which could be recovered after assessing the likelihood of the borrower rehabilitating or the alternative outcome which involves reliance on the proceeds from the sale of security The discounted cash flows are arrived based on a proprietary model which considers macroeconomic as well as behavioural factors.

Credit risk on gross loans and advances

The table below provides information on the Company's loans and advances by stage and risk grade.

Risk grades detailed in the table range from 1 to 10 with a risk grade of 1 being assigned to cases with the lowest credit risk and 10 representing cases in default. Equifax Risk Navigator (RN) scores are used to assign the initial Risk Grade score with additional SICR rules used to generate the final Risk Grade.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

9. Loans and advances (continued)

Credit risk on gross loans and advances (continued)

The Company had no purchased or originated credit impaired (POCI) loans during the period.

Impairment provisions are calculated on an expected credit loss ('ECL') basis. Financial assets are classified individually into one of the categories below:

Stage 1 - assets are allocated to this stage on initial recognition and remain in this stage if there is no significant increase in credit risk since initial recognition. Impairment provisions are recognised to cover 12-month ECL, being the proportion of lifetime ECL arising from default events expected within 12 months of the reporting date.

Stage 2 - assets where it is determined that there has been a significant increase in credit risk since initial recognition, but where there is no objective evidence of impairment. Impairment provisions are recognised to cover lifetime probability of default. An asset is deemed to have a significant increase in credit risk where:

- The creditworthiness of the borrower deteriorates such that their risk grade increases by at least one grade compared with that at origination

- The borrower falls more than one month in arrears

- LTV exceeds 85% for Bridging

- For Development assets, where a development will not meet practical completion by the date anticipated at origination.

Stage 3 - assets where there is objective evidence of impairment, i.e. they are considered to be in default. Impairment provisions are recognised against lifetime ECL. For assets allocated to stage 3, interest income is recognised on the balance net of impairment provision.

- Purchased or originated credit impaired ('POCI') - POCI assets are financial assets that are credit impaired on initial recognition.

On initial recognition, they are recorded at fair value. ECLs are only recognised or released to the extent that there is a subsequent change in the ECLs. Their ECLs are always measured on a lifetime basis.

Where there is objective evidence that asset quality has improved, assets will be allocated to a lower risk category. For example, loans no longer in default (stage 3) will be allocated to either stage 2 or stage 1.

Evidence that asset quality has improved will include:

- repayment of arrears;

- improved credit worthiness; and

- term extensions and the ability to service outstanding debt.

If a loss is ultimately realised, it is written off against the provision previously provided for with any excess charged to the impairment provision in the statement of profit and loss.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

9. Loans and advances (continued)

Critical accounting estimates relating to the impairment of financial assets:

The calculation of ECLs requires the Company to make a number of assumptions and estimates. The accuracy of the ECL calculation would be impacted by movements in the forward-looking economic scenarios used, or the probability weightings applied to these scenarios and by unanticipated changes to model assumptions that differ from actual outcomes.

The key assumptions and estimates that, depending on a range of factors, could result in a material adjustment in the next financial year relate to the use of forward-looking information in the calculation of ECLs and the inputs and assumptions used in the ECL models.

Additional information about both of these areas is set out below.

Forward-looking information

The Company incorporates forward-looking information into the calculation of ECLs and the assessment of whether there has been a significant increase in credit risk ('SICR'). The use of forward-looking information represents a key source of estimation uncertainty.

The Company uses three forward-looking economic scenarios:

                - a central scenario aligned to the Company's business plan;

                - a downside scenario as modelled in the Company's risk management process; and

                - an upside scenario representing the impact of modest improvements to assumptions used in the central scenario.

The probability weightings applied to the above scenarios are another area of estimation uncertainty. They are generally set to ensure that there is an asymmetry in the ECL. The probability weightings applied to the three economic scenarios used are as follows:

The Company undertakes a review of its economic scenarios and the probability weightings applied at least quarterly, and more frequently if required.

The results of this review are recommended to the Audit & Risk Committee and the Group's Board prior to any changes being implemented.

Critical judgements relating to the impairment of financial assets

The Company reviews and updates the key judgements relating to impairment of financial assets bi-annually, in advance of the Interim Financial Report and the Annual Report and Accounts. All key judgements are reviewed and recommended to the Audit & Risk Committee for approval prior to implementation.

Assessing whether there has been a significant increase in credit risk ('SICR')

If a financial asset shows a SICR, it is transferred to Stage 2 and the ECL recognised changes from a 12-month ECL to a lifetime ECL. The assessment of whether there has been a SICR requires a high level of judgement as detailed below. The assessment of whether there has been a SICR also incorporates forward-looking information.

The Company considers that a SICR has occurred when any of the following have occurred:

1. The overall credit worthiness of the borrower has materially worsened to a level that the probability of default has at least doubled. This is indicated by a migration to a higher risk grade (see below for risk grades and probability of default ("PDs") by product).

2. Where a borrower is currently a month or more in arrears.

3. Where a borrower has sought some form of forbearance.

4. Where the overall leverage of the account has surpassed a predetermined level. 75% Loan to Gross Development Value for bridging loans and 85% for all other products.

5. Where a short-term bridging loan has less than one month before maturity.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

9. Loans and advances (continued)

Assessing whether there has been a significant increase in credit risk ('SICR') (continued)

The Company considers that a SICR has occurred when any of the following have occurred:

1. The overall credit worthiness of the borrower has materially worsened to a level that the probability of default has at least doubled. This is indicated by a migration to a higher risk grade (see below for risk grades and probability of default ("PDs") by product).

2. Where a borrower is currently a month or more in arrears.

3. Where a borrower has sought some form of forbearance.

4. Where the overall leverage of the account has surpassed a predetermined level. 75% Loan to Gross Development Value for bridging loans and 85% for all other products.

5. Where a short-term bridging loan has less than one month before maturity.

These factors reflect the credit lifecycle for each product and are based on prior experience as well as insight gained from the development of risk ratings models (probability of default).

Stage 2 criteria are designed to be effective indicators of a SICR. As part of the bi-annual review of key impairment judgements, the Company undertakes detailed analysis to confirm that the Stage 2 criteria remain effective. This includes (but is not limited to):

- Criteria effectiveness: this includes the emergence to default for each Stage 2 criterion when compared to Stage 1, Stage 2 outflow as a percentage of Stage 2, percentage of new defaults that were in Stage 2 in the months prior to default, time in Stage 2 prior to default and percentage of the book in Stage 2 that are not progressing to default or curing.

- Stage 2 stability: this includes stability of inflows and outflows from Stage 2 and 3.

- Portfolio analysis: this includes the percentage of the portfolio that is in Stage 2 and not defaulted, the percentage of the Stage 2 transfer driven by Stage 2 criterion other than the backstops and back-testing of the defaulted accounts.

For low credit risk exposures, the Company is permitted to assume, without further analysis, that the credit risk on a financial asset has not increased significantly since initial recognition if the financial asset is determined to have low credit risk at the reporting date. The Group has opted not to apply this low credit risk exemption.

A summary of the Risk grade distribution is provided in the table below. As the Company utilises three different risk rating models, three separate PDs have been provided for each portfolio.

Risk Grades 1-9 are for non-defaulted accounts with 10 indicating default. Therefore, all Stage 3 loans are assigned to this grade.

As stated previously, degradation in a borrower's creditworthiness is an indication of SICR. Therefore, as shown in the table below, Stage 2 loan distributions are in the main assigned to risk grades higher than Risk Grade 1.

When there is objective evidence of impairment and the financial asset is considered to be in default, or otherwise credit-impaired, it is transferred to Stage 3. The Company's definition of default follows product-specific characteristics allowing for the provision to reflect operational management of the portfolio. Below we set out a short description of each product type and the Company's definition of default as specific to each product.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

9. Loans and advances (continued)

Bridging Loans - Bridging loans are short-term loans designed for customers requiring timely access to funds to facilitate property purchases. Typically, loans involve residential securities, however, commercial, semi-commercial and land is also taken as security.

A bridging loan is considered to be in default if:

a) A borrower fails to repay their loan after 30 days and does not seek an authorised extension.

b) It is structured and the loan is two months in arrears.

Development Loans - Development loans support borrowers looking to undertake a significant property or site development. The resulting site should be for residential purposes only. Loan terms are typically for the short term (less than three years) with no structured repayments. A development loan is defined as being in default if it has not been redeemed 60 days after the maturity of the loan.

The Company does not apply the rebuttable presumption that default does not occur later when a financial asset is 90 days past due.

Improvement in credit risk or cure - There is no cure period assumed for loans showing improvement in credit risk. This means that any loan that does not meet the SICR criteria is assigned to Stage 1.

10. Other payables and payables to related parties

11. Interest bearing liabilities

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

11. Interest bearing liabilities (continued)

Interest bearing liabilities as at 30 September 2024 relate to Retail Bond 3 and 4. In August 2022, Lendinvest Secured Income II PLC exchanged £29,545,000 of Retail bond 3 with Lendinvest Secured Income PLC's Retail Bond 1 and Retail Bond 2 for £24,547,000 and £4,998,000 respectively. Payment for the exchange was received from Lendinvest Secured Income PLC for this transaction. The remaining £9,328,000 principal interest bearing liabilities was received from third parties. In October 2023 Lendinvest Secured Income II PLC exchanged £31,685,500 of Retail Bond 4 with Lendinvest Secured Income PLC's Retail Bond 2. The remaining £17,079,500 principal interest bearing liabilities was received from third parties.

Funding line costs are amortised on an effective interest rate basis.

12. Financial Instruments

Principal financial instruments

The principal financial instruments used by the Company, from which financial instrument risk arises, are: loans and advances, trade and other receivables, cash and cash equivalents, interest bearing liabilities and trade and other payables.

Categorisation of financial assets and financial liabilities
 

All financial assets of the Company are carried at amortised cost or fair value through other comprehensive income as at 31 March 2024 and 30 September 2024 due to the nature of the asset. All financial liabilities of the Company are carried at amortised cost as at 31 March 2024 and 30 September 2024 due to the nature of the liability.

Financial instruments measured at amortised cost

Financial instruments measured at amortised cost, rather than fair value, include cash and cash equivalents, other receivables, receivables from related parties, other payables, payables to related parties and interest-bearing liabilities. Due to their short-term nature, the carrying value of cash and cash equivalents, other receivables, payables to related parties and other payables approximates their fair value.

(a)  Carrying amount of financial instruments

A summary of the financial instruments held is provided below:

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

12. Financial Instruments (continued)

(b)  Carrying amount versus fair value

The following table compares the carrying amounts and fair values of the Company's financial assets and financial liabilities as at 30 September 2024:

The fair value of the Retail Bond 3 and 4 interest bearing liabilities are calculated based on the mid-market price of £89.35 and £100.73 on 30 September 2024 respectively (£86.3 and £100.1 31 March 2024).

Loans and advances are classified as fair value through other comprehensive income and any changes to fair value are calculated based on a fair value model and recognised through the interim statement of comprehensive income. Interest bearing liabilities and receivables from related parties are classified at amortised cost and the fair value in the table above is for disclosure purposes only.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

12. Financial Instruments (continued)

(c) Fair value hierarchy

The level in the fair value hierarchy within which the financial asset or financial liability is categorised is determined on the basis of the lowest level input that is significant to the fair value measurement. Financial assets and liabilities are classified in their entirety into only one of the three levels.  The fair value hierarchy has the following levels:  

●              Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.

●              Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability,  either directly (i.e. as prices) or indirectly (i.e. derived from prices).

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

The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.

Note the receivables from related parties line item has been reclassified as level 3 in the period due to it not meeting the criteria as per IFRS 13 to be classified as level 1 or 2. The balance wholly consists of intercompany loans of which there is not a quoted price or observable market available.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

12. Financial Instruments (continued)

(c) Fair value hierarchy (continued)

For all other financial instruments, the fair value is equal to the carrying value and has not been included in the table above.

The valuation techniques and significant unobservable inputs used in determining the fair value measurement of level 3 financial instruments are below.

Level 3 instruments include loans and advances. The valuation of the asset is not based on observable market data (unobservable inputs). Valuation techniques include net present value and discounted cash flow methods. The assumptions used in such models include benchmark interest rates and borrower risk profile. The objective of the valuation technique is to determine a fair value that reflects the price of the financial instrument that would have been used by two counterparties in an arm's length transaction.

(d) Fair value reserve (Unaudited)

Information about sensitivity to change in significant unobservable inputs

The significant input used in the fair value measurement of the reporting entity's loans and advances is discount rates. A significant increase / (decrease) in this input in isolation would result in a lower / (higher) fair value measurement.

Sensitivity Analysis

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

12. Financial Instruments (continued)

(e) Interest Rate Sensitivity

The sensitivity analysis below has been determined based on the exposure to interest rates as at the reporting date. A 100 basis points change represents the Board's assessment of a reasonably possible change in interest rates.

As at the reporting date, if interest rates increased 100 basis points and all other variables were held constant:

●      Loss before tax for the period to 30 September 2024 would be unchanged. Although the Company's interest rates on loans to borrowers is operated as a fixed rate, the Company has the legal right to vary the borrower interest rate if certain changes in interest rates occur. Implementing this provision would improve the impact of an interest rate increase. However, we have assumed in this sensitivity analysis that the Company has not implemented this provision. Loans from lenders are fixed rate denominated.

●      Movement in equity reserves as at 30 September 2024 refer to d) above.

As at the reporting date, if interest rates reduced 100 basis points and all other variables were held constant:

●      Loss before tax for the period to 30 September 2024 would be unchanged. As noted above, the Company's interest rates on loans to borrowers are fixed rate denominated, with certain provisions to vary them, while loans from lenders are also fixed rate denominated.

●      Movement in equity reserves as at 30 September 2024 refer to d above.

As loan assets are at FVOCI, a movement in interest rates would affect the fair value of loan assets and, therefore, equity reserves.

13. Share capital

14. Reserves

Reserves are comprised of retained earnings and the fair value reserve. Retained earnings represent all net gains and losses of the Company and the fair value reserve represents movements in the fair value of the financial assets classified as FVOCI.

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

15. Related party transactions

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

15. Related party transactions (continued)

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (continued)

15. Related party transactions (continued)

16. Ultimate controlling party

The controlling party is LendInvest Loan Holdings Limited, and the ultimate controlling party is LendInvest plc whose consolidated financial statements are available at the registered address.

17. Events after reporting date

There are no events after the reporting period that require disclosure.