Straightforward.

Experienced.

Reliable.

Annual Report 2021

About us

Sancus Lending Group Limited

isanAIM listed alternative finance

provider, offering Borrowers fast,

bespoke bridging and development

finance and Co-funders arange of

asset backed fundingopportunities.

Find out more

online

www.sancus.com

Contents

Strategic report

Highlights 1

Chairman’s statement 2

Chief Executive

Officer’s review 4

Principal risks, uncertainties

andrelated internal controls 10

Social responsibility 12

Corporate governance

Board of Directors

and Executive

Management Team 14

Governance framework 16

Audit and Risk

Committee report 20

Remuneration report 23

Directors’ report 26

Consolidated financial

statements

Independent auditor’s

report to the members

of Sancus Lending

GroupLimited 29

Consolidated statement

of comprehensive income 35

Consolidated statement

of financial position 36

Consolidated statement

of changes in

shareholders’ equity 38

Consolidated statement

of cash flows 39

Notes to the

financial statements 40

Officers and

professional advisers 72

Strategic and operational highlights

Change of name to Sancus

Lending Group Limited,

announced on 11 May 2021,

reflecting the Group’s continued

focus on property lending in

residential development and

bridge financing;

Appointment of Rory Mepham as

CEO and Steve Smith as Chairman;

Significant investment in the

sales and credit teams at the

endof 2021 and into 2022, to

support and drive growth

overthe coming years;

Focus on the maintenance of

robust institutional grade credit

processes, smooth loan execution,

active loan management, data

integrity and a proactive approach

to loans that become stressed

ordistressed;

Geographic focus remains

unchanged, with the UK and

Ireland the key areas of growth for

the business whilst the Offshore

markets currently remain the

Group’s largest market. Core

Sancus revenue growth was 6%

inFY21, with UK revenue up 131%;

Impressive growth of 60% on new

facilities written; from £50m to

£80m year on year, and a strong

pipeline in the Group’s key growth

markets for FY22 and beyond;

Loan book at year end £142m

(2020: £171m) as a result of large

Offshore loan repayments; and

Positive shift in the residential

property market presents the

Group with a favourable outlook

and an opportunity to focus on

the right strategic steps to

support growth in coming years.

Financial highlights

Group revenue for the year was

£9.0m (2020: £10.9m) with the

reduction in Sancus Loans Limited

representing a decrease of £2m;

Group loss for the year was

£10.3m (2020: loss £14.5m);

£6.4m of operating losses relates

to expected credit losses under

IFRS9 and represents a realistic

view on delinquent or defaulted

loans, virtually all of which were

written in or prior to 2018; and

Increase in operating expenses

to£6.2m (FY20: £5.6m)

reflectsinvestment in sales

andcredit teams.

Since my appointment as CEO in June 2021, I have prioritised the

turnaround of the Group’s financial performance. 2021 was the

startofa transitional period for the Company. We have rebranded,

strengthened the management team, invested in technology and

expanded our presence in the UK and Ireland. We have also

undertakena thorough review of the loan book and, where

required,provisioned accordingly.

Our plan is to return the Group to profitability by growing the

Group’sloans under management while ensuring that our credit

andother processes are best in class. We will also broaden our

funderbase and improve funding terms. The business will continue

tofocus on expanding the Group’s presence in the UK and Ireland

together with rebuilding its loan book in the Offshore markets

ofJersey, Guernsey andGibraltar.

We started 2022 with a clear strategy to return the business to

profitability, and a management team committed to achieving that.

Rory Mepham

Chief Executive Officer of Sancus Lending Group Limited

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Chairman’s statement

Positioning the business

for the future

Our target markets continue to present

compelling opportunities and coupled

with the reduced appetite amongst

traditional balance sheet lenders, we are

optimistic this will increase the potential

to write high quality new business.

2021 was a busy year. The Group was

rebranded as Sancus Lending Group

Limited (from GLI Finance Limited) on

11 May 2021, the change reflecting the

Group’s continued focus on lending

for residential property development

and bridge financing purposes.

There have also been a number of

changes to our senior executive team,

with new appointments expected to

drive Group development and growth,

which are outlined more fully below.

As part of a wider review of the

business and the expansion of the credit

and recoveries teams, we carried out a

detailed review of the Group’s loan book

in June 2021, resulting in impairments of

£3m. Whilst we have seen some

improvement in the quality of the loan

book as the worst effects of the

pandemic reduced, we have made

anadditional £3.4m provision in the

second half of the year which we

believedraws a line under recent losses.

Virtually all of the provisions relate to

loans written in or before 2018.

Finally, after a five-year tenure our

auditor, Deloitte LLP stood down

andhave been replaced by Moore

Stephens following a tender process.

I was delighted to take on the

roleof Chairman of the Group

on31August 2021, having joined

Sancus in May 2021, and am looking

forward to the challenge ahead.

Steve Smith

Chairman

A number of key events took place prior to my appointment.

Thesuccessful fund raise at the end of 2020 was the first

stepinwhat the Board believes will be a structured change

programmewhich will reposition the Group for growth.

2 Sancus Annual Report 2021

Our people

There were a number of personnel

changes during 2021. Following the

resignation of Andy Whelan, Rory

Mepham assumed the role of Interim

CEO on 30 June 2021 and was then

confirmed as CEO on 23 November

2021. Rory joined the business in

January 2021 with initial responsibility

for funding and origination and has

extensive experience in corporate

finance, capital raising, debt finance,

fund management and development.

During his transition, Rory was

supported by Dan Walker who

originally joined the Group in 2018,

and was appointed as Deputy CEO

inJune 2021. Dan subsequently left

the Group on 31 January 2022, and

wethank him for his contribution.

On8March 2022 James Waghorn

wasappointed as Chief Investment

Officer and together with Rory and

Emma Stubbs, our Chief Financial

Officer, completes our Executive

Management Team. James has over

14years’ experience in the UK and

European real estate market and has

extensive experience across the

corporate real estate, investment

andproperty development sectors.

On 31 August 2021, Patrick Firth

stepped down after sixteen years

withthe Group and I would like to

thank Patrick for his invaluable

contribution during this time.

As Rory sets out in more detail in his

report, the Group has invested in

rebuilding and reinforcing the team

and our headcount has increased from

25 at the end of 2021 to 36 at the date

of this report. The new resource will

largely be focussed on expansion in

our growth markets UK and Ireland

but will also reinforce our credit and

management focus as we deliver new

business in the coming years.

Dividend and Shareholders

As part of its wider strategic review of

the business, the Board has decided to

withdraw its previous dividend policy as

the business plan requires the

reinvestment of surplus resources in

order to deliver the planned growth

objectives. The Company last declared

a dividend in 2016 and thereafter

adopted a policy consistent with

prudent capital and liquidity

management, recognising the need

toprovide the time and funding

necessary for the various platforms in

which the Group was invested to reach

their potential. This followed the

transitioning of the business from an

investment company to a trading

company, when historically it was

earning positive cashflows from CLO

investments which enabled the business

to pay dividends. The Board’s decision

to formally withdraw its previous

dividend policy is therefore consistent

with the approach that has been

adopted over recent years, to reinvest

surplus resources for growth. As such,

the Group does not intend to declare a

dividend for the year. The Board intends

to revisit this policy at the appropriate

time, should the profitability and cash

flow profile of the business support the

reinstatement of a dividend.

On behalf of the Board, I would like to

thank shareholders for their continuing

support and patience. We certainly do

not underestimate the scale and

challenge ahead, but with the

continuing support of shareholders

and all of our stakeholders and in the

belief that we have the strategy, the

systems and the personnel to put the

business onto a firmer footing, I look

forward to reporting more positive

developments in the coming period.

Steve Smith

Chairman

30 March 2022

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Chief Executive Officer’s review

Building a stronger business

A return to Group profitability relies on successfully growing loans

under management whilst widening its range of funders, improving

funding terms and adopting institutional grade processes in all areas.

The business is focused on expanding

the Group’s presence in the UK and

Ireland, together with rebuilding its

loans under management in the

Offshore markets of Jersey, Guernsey

and Gibraltar.

The business has written in excess of

£1.2billion of loans since inception and

as at 31 December 2021 the Group loan

book stood at £142m. Sancus is targeting

significant growth of loans under

management over the coming years.

Assembling the team, having the right

structure, effective institutional

management systems and becoming

increasingly technology enabled is

necessary to achieve increased scale.

The investment in these areas is

underway and will continue in 2022.

The perennial imbalance between

supply and demand for housing

continues to offer a favourable

landscape for the Group’s anticipated

growth in its target markets. Banks

having retrenched from both SME and

development financing further provides

attractive opportunities for alternative

lenders. We continue to track the

geopolitical situation closely and note

the potential for further supply chain

disruption and inflationary risks in the

construction sector.

The successful delivery of Sancus’s

growth objectives will be driven by the

four key pillars of the Group’s business:

Origination, Loan Management, Funding

and Finance & Operations.

Origination

Originating sufficient lending volumes

across the target jurisdictions and

product types will provide the

business with the scale and

diversification it needs to deliver

sustainable profitable growth.

Significant investment has been made

in recruiting experienced business

development team members in each

of our markets during 2021, an

initiative which will continue in 2022.

In the 15 months to March 2022, we

took the total business development

heads from 8.5 to 15, with a particular

focus on our sales activity in the UK

with business development heads in

this region going from 2 to 8 over the

last 15 months. The new team

members come from experienced

backgrounds in the industry and bring

with them a large pool of potential

sources of new business. Team

members will be incentivised to deliver

quality new business with a focus on

the business earning an appropriate

return for where a given loan sits on

the risk / return spectrum.

Since my appointment as CEO

inJune 2021, I have prioritised

planning the turnaround of the

Group’s financial performance.

Rory Mepham

CEO

4 Sancus Annual Report 2021

Business Development Heads

1.5

Gibraltar

Guernsey

Jersey

Dublin

UK (North)

UK (South)

2021

2020

Whilst it is possible that further

hiringwillbe required in the future,

weconsider that this recruitment

driveprovides the team that can

substantially deliver against the

Group’s required targets. TheBoard

will remain alert to market dynamics

and future opportunities as they

present themselves and will look

toadd to the team in line with

business requirements.

As part of the risk management process,

no members of the credit committee

have an origination function. This ensures

an appropriate separation between the

origination and credit functions.

We have seen growth in new loan

facilities written during the year with

£80m written during FY21 against

£50m for FY20. Loan deployments

sawa 10% increase from £69m at

theend of 2020 to £76m for 2022.

Wehave a strong pipeline for 2022.

Arrangement fees and commitments

fees are received on the full value of

loan facility written and therefore a key

metric in monitoring the performance

of our sales team. We continue to see

significant demand for development

finance and are increasing our presence

in the bridging market with acouple of

key hires.

We envisage origination growth in the

UK and Ireland in 2022 and the years

beyond and is a key area of investment

for the Group. We further anticipate

that the Offshore business (including

the Channel Islands and Gibraltar) will

continue to offer lending opportunities

and we are confident that our

businesses in those jurisdictions are

well placed to execute against those

opportunities as they arise.

During the year, we have placed a

greater emphasis on diversifying and

growing our origination channels to

include a wider variety of brokers,

other introducers, and a greater range

of marketing tools utilised in a targeted

fashion. We have also established a

working group to explore the extent to

which technology may be able to

support our growth in origination.

New facilities written £m

Dec 2020Dec 2021

Offshore

Ireland

Loan Deployments £m

Dec 2020Dec 2021

Offshore

Ireland

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Loan management

Scaling the business successfully

necessitates a focus on the maintenance

of robust institutional grade credit

processes, smooth loan execution,

active loan management, data integrity

and a proactive approach to loans that

become stressed or distressed.

Loans Under Management £m

147

Dec 2020Dec 2021

147

Offshore

Ireland

Maintaining a high-quality credit

process whilst scaling the quantity of

new loans is a priority. During 2021

our experienced credit team has been

supplemented by new members with

a track record in the property sector

and qualifications as Chartered

Surveyors. We have standardised our

approach across all jurisdictions

including valuation, legal title,

borrower, market due diligence and

monitoring surveyor standards.

Standardisation of the loan

execution process has been

implemented across the Group,

including documentation, conditions

precedent, conditions subsequent

and closing checklists. We have also

implemented a new workflow

process to expedite the time

between the loan credit approval

and loan drawdown and exploring

how we can better utilise technology

to better manage certain elements.

The business is both actively

engaging with external suppliers of

software packages together with

continuing to invest our own loan

management system. The required

investment in terms of possible

subscription charges and additional

technology staff has been budgeted

in our forecasts.

Greater emphasis has been placed

on actively managing loans once

the initial drawdown has been

made. This has been particularly

important during a time when

various market related pressures

such as cost inflation, are impacting

our borrowers. Active management

is helping us to deal with issues

before they become problems.

Where loans unavoidably become

delinquent or defaulted Sancus is

adopting a proactive approach to

minimise the risk of loss. The period

of time during which loans become

stressed can lead to further strain

on loan covenants, so decisive

action is often required without

compromising on the integrity of

decision making.

Due consideration is always

afforded to the interests of all

stakeholders in a given loan.

Further investment has been made

in recruiting experienced loan

management team members in

each of our markets during 2021,

and this will continue in 2022.

The Sancus asset backed lending loan

book decreased by 17% since the end

of 2020 from £171m to £142m. This

decrease was driven by some large

Offshore loan repayments in the

period and the knock-on effect of

Covid-19 on loan closures, and masks

promising improvements in the UK

and Irish business, where we saw

newfacilities written in these two

businesses combined of £60m in 2021,

a 76% increase from £34m in 2020.

We have a strong pipeline and expect

to see an increase in the loan book by

the end of 2022. At the year end, the

asset backed loan book comprised

Offshore at £96m (Dec 2021: £147m)

UK at £29m (Dec 2021: £15m) and

Ireland at £17m (Dec 2021: £9m).

Under the leadership of the Senior

Management Team, a detailed

evaluation of the Group’s loan book has

been completed. Particular focus has

been on reviewing historic loans that are

either delinquent or defaulted. As a

result of this exercise, the Group is

reporting an increase in expected credit

loss provisions of £6.4m for the financial

year (FY20: £4.7m). Virtually all of the

provisions made relate to legacy loans

written in 2018 or before. For all of these

positions, the new senior management

team have put together deliverable

workout strategies, and these are now

underway. These strategies have been

shared in a transparent manner with our

funding sources and feedback has been

incorporated into our plans. The

seasoned property professionals within

the new Sancus team have proven track

records in the Groups markets and will

continue to be involved in working hard

to recover value for all participants in

these positions.

Funding

We continue to focus on growing the

funding capacity of the business on

improved terms. Additionally, we are

seeking to work with a diversified mix of

funders, both private and institutional, to

match funders with the loans meeting

their varied risk and rewards criteria.

Currently, the Group continues to be

supported by four sources of funding:

Co-Funders

Loan Note program

Institutional funders

Proprietary Capital

Co-Funders remain our largest funding

channel, with the majority of the loan

book in the Channel Islands and Gibraltar

being co-funded, though its share

reduced in the year from 64% of the total

to 50% as a result of large loan

repayments. We continue to nurture

relationships with the Co-Funder base,

typically being Offshore private

individuals and family offices. In addition

to the large pool of Co-Funders that

have been working with Sancus for a

number of years, the business is actively

seeking to widen its net and has

recruited team members in its Offshore

team to be exclusively focused on

targeting and building relationships

withpotential new Co-Funders.

Chief Executive Officer’s review continued

6 Sancus Annual Report 2021

During the year we have continued

tolaunch further loan notes through

Amberton Asset Management with the

successful launch of Loan Note 7, raising

£16.7 million. Loan Note 7 matures on

10May 2024 and has a coupon of 7%

p.a. (payable quarterly), with Sancus

providing a 10% first loss guarantee.

On31 January 2022 Sancus Loan Note 8

launched with £2.0m of assets and a

target of £20 million. Loan Note 8 has

aterm of five years and a coupon of 5%

p.a. (payable quarterly), with Sancus

providing a 20% first loss guarantee.

Asthe business matures it is planned

toincrease the regularity and widen

thevariety of Loan Note products.

Sancus has a secured institutional

funding line from the Honeycomb

Investment Trust (“HIT”), which is

managed by Pollen Street Capital and is

designed to be complementary to our

Co-Funder base and Loan Notes. As

announced on 4 December 2020 the

HIT credit facility was increased to £75m

from £45m and the term was extended

to 28 January 2024. At 31 December

2021 the total drawn was £49.9m

(31December 2020: £45.0m). The HIT

facility continues to be strategic for the

business and is generally utilized in

relation to funding development loans.

Sancus has additionally secured

aforward flow bridge funding

arrangement with a global private

equity backed debt acquisition

business and continues to explore

additional long term financing lines

that could sit alongside our

syndicatedlending approach.

The availability, cost and flexibility of

funding is key to achieving our growth

ambitions and we are reviewing the

capital position of the business with a

view to ensuring it is best placed to

grow funding capacity on improved

terms. Over the course of 2021 the loan

book funded by institutional funding

increased by 22% with the majority of

the UK and Irish loan book funded by

this channel. We will seek to increase

this along with the loan notes over time.

Own capital has fluctuated around

£7m/£8m over the course of the year

inline with our strategy to increase our

Return on Tangible Assets (“ROTA”).

Finance & Operations

A focus on operational efficiencies

within Finance and Operations to be

driven by technology wherever

possible is underway, linking into the

technology strategy noted above.

Continued focus and improvement on

Corporate Governance, Compliance

and Risk via way of policy and

procedures to ensure the business

iswell set for future growth plans.

Effective compliance and corporate

governance remains a priority for the

Board. This is critical to ensuring that

only well-considered risks are taken, and

expected returns emerge as planned.

Sancus has developed, and continues

to evolve, its own proprietary loan

managements system (“LMS”) for

theadministration of loans. A

comprehensive review of the LMS

system and our wider Technology

strategy has been carried out during

the year and further steps will be

undertaken in 2022.

As highlighted above, we have made

anumber of recent hires across the

business, in particular to bolster our

Funding and Origination capabilities in

the markets in which we are active. At

the end of December 2021, the Group

headcount was 35 (31 December 2020:

25) with the largest increase in the Sales

and Credit teams and as we build our

presence across the UK and Ireland, we

expect this to increase over time.

A key milestone at the end of 2020

was the successful new equity raise as

well as restructuring our debt (Bonds

and ZDPs) and increasing and

extending the term of our facility with

HIT. This transaction had the full

support of our largest shareholder

Somerston Group who participated in

both the equity raise and new bond

issue. With the ZDP’s intended to play

a long-term part the Group’s finance

strategy, given the current maturity

date of 5 December 2022, we intend

to engage with the ZDP holders in due

course in order to seek their support

at this critical time in the Group’s

turnaround and as it embarks on a

redefined growth strategy.

Realising value from the legacy

FinTech Ventures Investments remains

a target for the management team.

Monitoring and governance of FinTech

Ventures is ongoing and we continue

to assist our investee platforms with

their strategy. Unfortunately, the

profitability of many of these

companies have failed to meet

expectations within an acceptable

timeframe and their ability to raise

additional capital without proving

concept is severely constrained. It

remains a challenging market for

manyof the FinTech platforms.

Loan Book Funding Allocation £m

Dec 2020Dec 2021

108

Own Capital

Co-Funders

Loan Notes

Institutional

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Strategic KPIs

The Board have agreed the following

KPI’s with the senior management

team. These have been selected based

on their link to the successful delivery

of our strategy and the executive

management team will be monitored

against these throughout the year.

Thecomposition of KPI’s are further

monitored by the Board on a regular

basis and upon their successful

delivery are designed to create

shareholder value.

Revenue growth.

Growing loans under management.

Reducing cost of funding.

Become a capital efficient business.

Increasing operating profits –

byincreasing gross margin and

reducing costs.

Return on Equity.

Ensuring a risk based approach

istaken on all decision making.

Summary of Financial Performance

Our full year 2021 financial results

havebeen overshadowed by the

ongoing impact of Covid-19 as we

sawa reduction in our loan book and

revenue as delays to loan completions

impacted the results. This resulted in

revenue of £9.0m for the year

compared to £10.9m last year.

2021 was the start of what we expect

will be a transitional period for the

Group, where we saw the Group

rebrand, a number of changes to

senior management and continued

expansion of our presence in the UK

and Ireland. From the delays we saw

over the last few years on development

sites and following a full review of our

loan books, we have seen an increase

in IFRS 9 provisions in the year of

£6.4m. Coupled with an increase in

operating costs as we have started

tobuild out the team for our growth

plans, this has resulted in an overall

loss for the year of £10.3m for the

year(2020: loss of £14.5m).

Although headline revenue showed a

decrease, Note 3 Segmental Reporting

sets out the results by Offshore, UK

and Ireland and we can start to see

revenue growth in our growth target

markets, with the UK revenue up by

132% over the course of 2021.

Ireland results are relatively flat

(revenue up 6%) against last year

however strict Covid-19 restrictions

inIreland during 2021 did cause some

delays to loan closures. However, we

have seen a good start to 2022 and

with most restrictions now largely

lifted and further resources allocated

to Ireland we expect 2022 to show a

good growth story.

We have seen Offshore revenue

decrease by 12% in the year, partly due

to some large exit fees which were

received in 2020 but also a reduction

in administration fees as we saw the

loan book in this region decrease over

the last few years. The Offshore team

has been rebuilt over the course of

2021 and into 2022 following some

changes in senior management and

they are focussed on building the loan

book over the next few years.

Operating costs in the year were

£6.2m (2020: £5.6m) with a breakdown

shown in Note 7. The increase we have

seen this year is largely around

employment costs where we have

started to build out the UK and Irish

operations as well as building up the

credit team in particular. We have also

been through a period of change in

senior management during the year

which has contributed to the increase

in these costs.

Following a thorough review of the

loan book we have seen an increase

inthe expected credit loss provisions

(IFRS 9) of £6.4m in the year (2020:

£4.7m). This brings the total loan and

debtor provision balance to £13.5m.

The majority of this provision figure

relates to loans written in or before

2018. As disclosed in Note 22 the total

loan and debtor provision balance is

£13.5m at 31 December 2021 (2020:

£7.9m). On a total loan and debtor

exposure including first loss positions

within HIT and the loan notes this

represents 15.7% (2020: 7.0%).

The Group’s net assets have

reducedin the year from £29.5m

at31December 2020 to £19.1m as

aresult of the operating loss in the

year which includes an increase in

theexpected credit loss provision

of£6.4m.

Goodwill remains at £22.9m, which

relates to the carrying amount of

goodwill arising on the acquisition of

Sancus Jersey and Sancus Gibraltar.

This is assessed by the Board for

impairment on an annual basis or

sooner if there has been any indication

of impairment. A full impairment review

of the carrying amount of goodwill was

reported in the June 2021 interim

accounts. The resultant value in use

calculation indicated that no impairment

of goodwill was required in either

Sancus Jersey or Sancus Gibraltar.

Following on from this review the Board

have considered whether there have

been any further indicative events of

impairment since June 2021, and they

have concluded there have not. The

next full impairment review will take

place in the 2022 Interim Report.

Group cash remains healthy. Within the

£12.4m of cash and cash equivalents

balance at 31 December 2021, £4.9m

relates to Group operational cash with

£7.5m within Sancus Loans Limited.

On balance sheet loans (excluding

those loans in Sancus Loans Limited)

were £11.6m before IFRS 9 provisions

at 31 December 2021 compared to

£11.8m at 31 December 2020. During

the year a provision of £6.4m has been

made against loans and loan debtors.

Sancus Loans Limited had loans of

£49.9m at 31 December 2021

(31December 2021: £45.0m).

The Group’s liabilities consist of the

Bond of £12.5m which has a quarterly

coupon of 7% p.a. and matures on 31

December 2025; and ZDPs of £10.6m

with a coupon of 8% and payable on 5

December 2022. The HIT credit facility

was increased to £75m from £45m on

4 December 2020 and at 31 December

2021 was £49.9m (£52.5m including

IOM loans) ((31 December 2020:

£45.0m (£45.6m including IOM loans)).

The Directors are considering their

options regarding the ZDPs inline with

the growth strategy of the business as

noted above.

Chief Executive Officer’s review continued

8 Sancus Annual Report 2021

Going Concern

The Directors have considered the going

concern basis in the preparation of the

financial statements as supported by the

Director’s assessment of the Company’s

and Group’s ability to pay its debts as

they fall due and have assessed the

current position and the principal risks

facing the business with a view to

assessing the prospects of the Company.

Liabilities which fall due in the next

12months include the final capital

entitlement of the Company’s ZDP

shares, which are repayable on

5December 2022 at £11.3m.

As part of the Group’s growth plan

theCompany is considering its options

regarding this liability which may

include re-financing, part repayment

and/or extension of the ZDPs and an

equity raise. This will require consultation

with the relevant stakeholders, including

ordinary shareholders and ZDP

shareholders and regulatory approvals

and consents. Accordingly, there can

be no certainty that the proposals will

proceed. These factors and assumptions

constitute a material uncertainty that

may cast significant doubt over the

Company’s ability to continue as a

going concern, such that it may be

unable to realise its assets and

discharge its liabilities in the normal

course of business. The Directors

expect that if they are able to action

the mitigations in accordance with the

plan outlined above, the material

uncertainty will be extinguished. The

Directors are therefore of the opinion

that the Company will have adequate

financial resources to continue in

operation and meet its liabilities as

they fall due for the foreseeable future

and continue to adopt the going

concern basis in preparing the

financial statements.

Outlook

The Group has been through a

substantial period of change with a new

chief executive and other new members

of the senior executive team now in

place. This new senior executive team

have a clearly defined strategy to return

the business to profitability. The road

map to achieving this goal has been

clearly communicated to the whole

team and all members of the Sancus

team are clear on the vision for the

business together with understanding

the role that they have to play in

delivering this target. While a great deal

of hard work lies ahead, I am certain the

team are up to the challenge and are

excited about the future.

I want to thank all shareholders for

their support during this period of

change and over the preceding year.

We are enthusiastic about the

opportunities that lie ahead of us and

look forward to delivering profitability.

Rory Mepham

Chief Executive Officer

30 March 2022

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Principal risks, uncertainties and related internal controls

The principal risks which the Group

has consciously accepted in the

pursuit of value creation are liquidity

risk, regulatory and compliance risk,

market risk, credit risk, strategic risk,

and investment risk. With regard to

the FinTech activities, exposure to

investment risk is a factor of the

strategic, liquidity, credit and operational

risks assumed by the platforms in

which the Group is invested.

This section on the Group’s Principal

Risks should be read together with the

sections on the Group’s Governance

Framework, the operation of the Audit

and Risk Committee, as well as Note 22

which describes the sensitivity of the

Group’s financial results to its Financial

Risk exposures. These sections explain

how these risks are being managed,

monitored and governed.

The table below describes the Group’s

assessment of the principal risks being

those which have the potential to have

a significant impact on the Group’s

business model, future performance,

solvency or liquidity.

Principal risks Internal controls mitigating risks Current rating of risks

Group

1. Capital and liquidity risk

Sancus’s own funding is sourced primarily

from the ZDP shares and theCorporate

Bond (as detailed in Note 17).

Expansion of lending and investment

activities will be constrained to the extent

of retained profits unless further sources

of funding are secured.

Sancus has a Treasury Committee which

meets once a month to manage its capital

andliquidity position, and forecasts over

several years to predict longer term

fundingrequirements.

Management of each of the operating

companies balance their lending and funding

and proposals to advance lending are typically

contingent on sufficient funding having been

secured in advance.

The business seeks to maintain a material

liquidity buffer at all times.

Medium

Completion of the fundraising and liability

management exercise in December 2021 has

significantly improved the Group’s capital

and liquidity position.

Management at Group and subsidiary level

are focussed on raising additional on and off

balance sheet funding in order to grow

lending activities and support funding

commitments.

2. Regulatory and Compliance Risk

As a Financial Services business,

compliance with regulation is considered

paramount within the Group, particularly

with regard to Anti Money Laundering

(AML) regulations which are critically

important.

The Company has chosen to comply

withthe provisions of the QCA Corporate

Governance Code. Refer to page 16

forfurther detail.

All entities have developed and implemented

appropriate policies and procedures relating

to regulatory compliance and Anti Money

Laundering.

The Group Compliance Committee monitors

these risks, and forthcoming regulations, with

appropriate reporting from the various Heads

of Compliance and Money Laundering

Reporting Officers. Further reviews of AML

compliance are carried out by independent

third parties where appropriate.

The Company has an appointed NOMAD,

Liberum, with whom it liaises regularly, to

ensure compliance with the AIM rules,

including the Market Abuse Regulations.

Boards receive quarterly reports from

Compliance Officers and where appropriate,

Money Laundering Reporting Officers on

compliance monitoring plans and any

breaches identified.

Low

The compliance framework as described

isconsidered to be operating effectively.

The Group is mindful of the conflicts in

Russiaand Ukraine and have carried out

acheck of our clients against various

sanctionlists in relation to Russia and

havenot identified any individual or entity

ofany concern. Additionally, we subscribe

toWorldCheck for standard AML checking

purposes with all clients set up for ongoing

monitoring, which provides any real-time

negative information, that include

updatedsanctions.

The Group aims to carefully manage the risks which are inherent

across its business activities in order to deliver an appropriate

riskadjusted commercial return.

Risk management is key

to achieving objectives

10 Sancus Annual Report 2021

Principal risks Internal controls mitigating risks Current rating of risks

Group

3. Market risk

The primary market risks are considered

to be interest rate and foreign exchange

risk. Given the nature of the business

operations, with relatively short term

lending and currencies on lending

opportunities being matched (or hedged)

the exposure is considered to have limited

impact on its position as a Going Concern.

Foreign exchange risk primarily arises

from the USD and Euro investments in

the FinTech portfolio and Euro loans held

in the Irish lending book.

Exposures to these risks are monitored regularly

by the Sancus Treasury Committee and reported

to the Board on a quarterly basis.

These risks are identified and assessed at the

time of entering into new transactions.

Low

More information on the sensitivity to these

risks is contained in Note 22.

Covid-19 could cause interest rate and foreign

exchange fluctuations although the impact of

this we believe is likely to be minimal as loans

have fixed rates and are short term. Co-

Funders might look elsewhere to investment;

however, we believe this to be a minimal risk as

our lending model enables investors to receive

attractive risk adjusted returns on asset

backed lending.

4. Credit Risk

The Group has direct credit exposures

through its on balance sheet lending and

credit support. Indirect credit risk

(potential losses to Co-Funders) could

impact further business development.

Each operational entity has its own credit

policies and procedures which are the

subjectof at least annual review by

operatingentity Boards.

The respective Credit Committees take all

credit decisions, monitor credit exposures

onan ongoing basis and manage recoveries

situations. Following Covid-19 tighter lending

criteria has been implemented.

Medium

The IFRS 9 provision increased substantially

during the year. However, the credit

performance across the Group remains

resilient with actual losses incurred being

less than 1% of loans advanced.

See Note 22(5) for further details.

Covid-19 created downside risk through

potential delays in loan repayments and

reduced recoveries. We believe the risk

ofthis going forward has reduced.

Sancus

5. Operational Risk – Execution of the

Sancus strategy

Approximately 80% of Sancus’s capital

has been deployed into the Sancus Group.

There is a risk that the planned growth of

these businesses will not be realised

primarily as a result of sub optimal levels

of loan origination and funding.

The Board and Executive Committee of Sancus

Group recognise the challenge of building the

business to meet the financial targets and

actively manage all aspects of the business on

an ongoing basis. Plans and budgets are in place

and performance against these is monitored

regularly by the management team and the

Executive Committee.

There continues to be strong demand from

both Borrowers and Co-Funders for the

lending products offered across the business,

and the risk adjusted returns available to

Co-Funders.

Medium

By its nature, this risk remains an on-going

area of focus for the Board, particularly with

respect to business development in the UK

and Ireland.

The emergence of Covid-19 created downside

risk on new loan origination levels although

we believe this risk has now reduced.

IT capabilities for Sancus were further

enhanced during 2021, providing Co-

Funders with online interactive services

andcreating operational efficiencies.

FinTech Ventures

6. Investment risk – platformvaluations

Across the majority of the FinTech

portfolio, the growth rates historically

have been slower than originally

anticipated and the business models have

proved more capital intensive.

Many of the FinTech platforms require

additional capital to fund their ongoing

growth to enable them to reach profitability.

There remains a risk that some platforms

may not be successful in the longer term,

either as a result of lack of loan funding, lack

of working capital funding or difficulties in

establishing a competitive position in their

chosen markets.

The Group has board seats or board observer

rights on most investee company boards and thus

is able to participate in the strategic discussions

and monitor the progress on each platform.

The Group regularly monitors the progress of

each business, with regular review of financial

and KPI reporting.

Period end valuations are conducted for all

investments in platforms. These are based on

avariety of factors including the pricing for

anyrecent relevant capital transactions by the

respective platform or using an appropriate

valuation methodology such as a discounted

cash flow model. The forecasts provided by

management of the platforms are often

challenged, and where considered appropriate,

adjustments are made and sensitivity analysis

is included as part of the valuation work.

Low

As a result of the platforms taking longer to

reach profitability, and given that several are

seeking additional capital, the Board has

valued our holding of the FinTech portfolio

at £0.5m at the end of 2021.

The valuations are also subject to a number

of material estimation uncertainties, refer to

Note 22(4).

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Social responsibility

Our ESG journey at Sancus

We recognise our responsibility to

incorporate sustainability throughout

the operations of our business, be

custodians of the environment and

practice good stewardship of our

stakeholders’ interests. We are now

taking steps to improve our approach

to managing these factors.

Q1 2022 has been focused on starting

to define our ESG strategy. Having

now established an internal ESG focus

group we will also draw on external

industry experts as required.

It is essential that we understand what

ESG factors are most important to our

stakeholders, such that we can focus

our strategy around improving our

approach to these material issues.

Weare well on our way to completing

a materiality assessment and intend

toengage with stakeholders in the

coming period.

Our approach to ESG will be to

breakdown the topics into People,

Planet and Prosperity. Starting by

ascertaining which factors are material

to our business, establish our baseline,

set objectives & goals, assess the gap

between goals and baseline, establish

a roadmap, set KPIs and report on

progress (see infographic opposite).

We are committed to providing an

ESG report, focusing on our progress

in the 2022 Annual Report.

At Sancus, we are committed to taking environmental,

socialandgovernance (“ESG”) factors seriously.

12 Sancus Annual Report 2021

Materiality

assessment

Current state

(baseline)

Objectives

and goals

Future

stategap

Strategic

roadmap

Our approach

to ESG

Report

progress

KPIs

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Board of Directors and Executive Management Team

Strong leadership

and governance

B B B B

Steve Smith

Independent Non-Executive Director

John Whittle

Independent Non-Executive Director

Tracy Clarke

Non-Executive Director

Rory Mepham

Executive Director, CEO

Emma Stubbs

Executive Director, CFO

James Waghorn*

Chief Investment Officer

Mr Smith was formerly an Executive

Director and the Chief Investment

Officer of The British Land Company

plc, the FTSE 100 real estate

investment trust, with responsibility

for the group’s property and

investment strategy, standing down in

2013. Prior to this, Mr Smith was Global

Head of Asset Management and

Transactions at AXA Real Estate

Investment Managers, where he was

responsible for the asset management

of a portfolio of assets valued at more

than €40 billion on behalf of life funds,

listed property vehicles, unit linked

and closed end funds. Prior to joining

AXA in 1999, Mr Smith was Managing

Director at Sun Life Properties for over

five years. Over the last decade, Mr

Smith has worked extensively in

governance related roles for a number

of real estate focused organisations.

Mr Smith is Chairman of the Board and

is a member of the Audit and Risk

Committee and Remuneration and

Nomination Committee. Mr Smith was

appointed to the Board on 11 May 2021.

He is resident in the UK.

Mr Whittle has a background in large

third party Fund Administration. He has

worked extensively in high tech service

industries and has in-depth experience

of strategic development and mergers/

acquisitions. He has experience of listed

company boards as well as the private

equity, property and fund of funds

sectors. He is currently a director of

Starwood European Real Estate Finance

Limited and TRIG (both listed on the

main market of the London Stock

Exchange) and Chenavari Toro Income

Fund Limited (admitted to trading on the

Specialist Fund Segment of the London

Stock Exchange). Mr Whittle, a

Chartered Accountant, has also served

as Finance Director of Close Fund

Services Limited (responsible for internal

finance and client financial reporting),

Managing Director of Hugh Symons

Group PLC and Finance Director and

Deputy MD of Talkland International

Limited (now Vodafone Retail).

Mr Whittle was appointed to the

Board, the Audit and Risk Committee

and the Remuneration and Nomination

Committee on 23 September 2016,

after having served as an Alternate

Director since December 2015. He is

resident in Guernsey. Mr Whittle is

Chairman of the Audit and Risk

Committee, and of the Remuneration

and Nomination Committee.

Ms Clarke is a representative of the

Somerston group of companies

(“Somerston”), the Company’s

largestshareholder which has the

right to nominate one individual for

appointment to the Board. Ms Clarke

joined Somerston in 2016 and acts as

the group’s Chief Operating Officer.

Ms Clarke is also Managing Director

ofCarlton Management Services

Limited, a licensed Jersey trust

company business. Prior to joining

Somerston, Ms Clarke worked for

Deutsche Bank in Jersey and Zurich

for over 10 years, specialising in

financial Intermediary and external

asset manager business. Ms Clarke is

aFellow of the Institute of Chartered

Accountants in England and Wales

and holds the CISI Investment Advice

Diploma. Ms Clarke was appointed to

the Board on 8 March 2022 and is a

member of the Company’s Audit and

Risk Committee and Remuneration

and Nomination Committee.

Rory joined Sancus in January 2021,

assuming the role of Interim CEO on

1July 2021 and was then confirmed

asCEO and board member on

23November 2021. Joining Sancus

from The Somerston Group where he

managed their European real estate

platform which includes business in

the hotel, retail, land development,

student housing and PRS sectors.

Rory has over 20 years experience

inthe UK and European property

market. He has spent his career

working with institutional capital and

has an extensive track record in M&A,

corporate finance, capital raising, debt

finance, investment management and

property development. Rory Holds an

MBA from the Cranfield School of

Management, a BSc(Hons) in Land

Management from the University of

Reading and qualified as a member

ofthe Royal Institute of Chartered

Surveyors (MRICS).

Emma joined the Group in

November2013 as Chief Financial

Officer and was appointed to the

Board on 16 September 2014. Emma

isalso a Board member of Sancus

Group Holdings Limited and a number

of the subsidiary entities. Emma

wasappointed as a Non Executive

Director on Funding Options Limited

on 24March 2020. Emma is also a

Non-Executive Director of Amberton

Limited. Emma is a Fellow member of

the Association of Chartered Certified

Accountants and qualified with Deloitte

in 2004. She graduated from the

University of the West of England with

a BA Hons degree in Accounting and

Finance. Emma is resident in Guernsey.

James was appointed to the Executive

Management Team on 8 March 2022.

James has over 14 years experience

inthe UK and European real estate

market. James has extensive

experience across the corporate real

estate, investment and property

development sectors. For the past

6years James’ has led Somerston’s

land development business, a strategic

land and development focused

business with capacity for in excess

of2,350 units within its strategic

portfolio. James holds a BSc in

Investment and Finance in Property

from the University of Reading and

isMRICS accredited. James joined

Sancus in January 2021.

* Joined Executive Management Team

on 8March 2022)

The Board recognises the importance

ofastrong corporate governance culture.

The composition of the Board is the

subject of ongoing review. Somerston

Group had the right to nominate a

candidate for appointment to the Board

and took up this right in 2019 with the

appointment of Nick Wakefield. On the

8 March 2022 it was announced that

Nick Wakefield has been replaced by

Tracy Clarke (bio noted below).

14 Sancus Annual Report 2021

B B B B

Steve Smith

Independent Non-Executive Director

John Whittle

Independent Non-Executive Director

Tracy Clarke

Non-Executive Director

Rory Mepham

Executive Director, CEO

Emma Stubbs

Executive Director, CFO

James Waghorn*

Chief Investment Officer

Mr Smith was formerly an Executive

Director and the Chief Investment

Officer of The British Land Company

plc, the FTSE 100 real estate

investment trust, with responsibility

for the group’s property and

investment strategy, standing down in

2013. Prior to this, Mr Smith was Global

Head of Asset Management and

Transactions at AXA Real Estate

Investment Managers, where he was

responsible for the asset management

of a portfolio of assets valued at more

than €40 billion on behalf of life funds,

listed property vehicles, unit linked

and closed end funds. Prior to joining

AXA in 1999, Mr Smith was Managing

Director at Sun Life Properties for over

five years. Over the last decade, Mr

Smith has worked extensively in

governance related roles for a number

of real estate focused organisations.

Mr Smith is Chairman of the Board and

is a member of the Audit and Risk

Committee and Remuneration and

Nomination Committee. Mr Smith was

appointed to the Board on 11 May 2021.

He is resident in the UK.

Mr Whittle has a background in large

third party Fund Administration. He has

worked extensively in high tech service

industries and has in-depth experience

of strategic development and mergers/

acquisitions. He has experience of listed

company boards as well as the private

equity, property and fund of funds

sectors. He is currently a director of

Starwood European Real Estate Finance

Limited and TRIG (both listed on the

main market of the London Stock

Exchange) and Chenavari Toro Income

Fund Limited (admitted to trading on the

Specialist Fund Segment of the London

Stock Exchange). Mr Whittle, a

Chartered Accountant, has also served

as Finance Director of Close Fund

Services Limited (responsible for internal

finance and client financial reporting),

Managing Director of Hugh Symons

Group PLC and Finance Director and

Deputy MD of Talkland International

Limited (now Vodafone Retail).

Mr Whittle was appointed to the

Board, the Audit and Risk Committee

and the Remuneration and Nomination

Committee on 23 September 2016,

after having served as an Alternate

Director since December 2015. He is

resident in Guernsey. Mr Whittle is

Chairman of the Audit and Risk

Committee, and of the Remuneration

and Nomination Committee.

Ms Clarke is a representative of the

Somerston group of companies

(“Somerston”), the Company’s

largestshareholder which has the

right to nominate one individual for

appointment to the Board. Ms Clarke

joined Somerston in 2016 and acts as

the group’s Chief Operating Officer.

Ms Clarke is also Managing Director

ofCarlton Management Services

Limited, a licensed Jersey trust

company business. Prior to joining

Somerston, Ms Clarke worked for

Deutsche Bank in Jersey and Zurich

for over 10 years, specialising in

financial Intermediary and external

asset manager business. Ms Clarke is

aFellow of the Institute of Chartered

Accountants in England and Wales

and holds the CISI Investment Advice

Diploma. Ms Clarke was appointed to

the Board on 8 March 2022 and is a

member of the Company’s Audit and

Risk Committee and Remuneration

and Nomination Committee.

Rory joined Sancus in January 2021,

assuming the role of Interim CEO on

1July 2021 and was then confirmed

asCEO and board member on

23November 2021. Joining Sancus

from The Somerston Group where he

managed their European real estate

platform which includes business in

the hotel, retail, land development,

student housing and PRS sectors.

Rory has over 20 years experience

inthe UK and European property

market. He has spent his career

working with institutional capital and

has an extensive track record in M&A,

corporate finance, capital raising, debt

finance, investment management and

property development. Rory Holds an

MBA from the Cranfield School of

Management, a BSc(Hons) in Land

Management from the University of

Reading and qualified as a member

ofthe Royal Institute of Chartered

Surveyors (MRICS).

Emma joined the Group in

November2013 as Chief Financial

Officer and was appointed to the

Board on 16 September 2014. Emma

isalso a Board member of Sancus

Group Holdings Limited and a number

of the subsidiary entities. Emma

wasappointed as a Non Executive

Director on Funding Options Limited

on 24March 2020. Emma is also a

Non-Executive Director of Amberton

Limited. Emma is a Fellow member of

the Association of Chartered Certified

Accountants and qualified with Deloitte

in 2004. She graduated from the

University of the West of England with

a BA Hons degree in Accounting and

Finance. Emma is resident in Guernsey.

James was appointed to the Executive

Management Team on 8 March 2022.

James has over 14 years experience

inthe UK and European real estate

market. James has extensive

experience across the corporate real

estate, investment and property

development sectors. For the past

6years James’ has led Somerston’s

land development business, a strategic

land and development focused

business with capacity for in excess

of2,350 units within its strategic

portfolio. James holds a BSc in

Investment and Finance in Property

from the University of Reading and

isMRICS accredited. James joined

Sancus in January 2021.

* Joined Executive Management Team

on 8March 2022)

Board of Directors

Executive Team

Board of Directors

The Company operates a unitary

Board Structure, comprised of both

Executive and Non-Executive

Directors. Biographical details of the

Directors can be found below. The

terms of Directors’ appointments are

available from the Company Secretary.

On joining the Board, any new director

will have received an induction

through face to face meetings with

existing directors, senior management

and the Company Secretary.

The Chairman leads the Board and is

responsible for its overall effectiveness

in directing the Company, its corporate

governance responsibilities, and

addressing any training or development

needs of the directors.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Governance framework

Committed to strengthening

corporate governance

The Board believes that scrutinising all

aspects of the Company’s business

and reflecting, analysing and

improving its procedures will minimise

the potential for downside risk and will

preserve shareholder value. In

compliance with the AIM Rules for

Companies, published March 2018, the

Company has chosen to comply with

the provisions of the QCA Corporate

Governance Code (the “QCA Code”).

The Company is also mindful of the

provisions of the Finance Sector Code

of Corporate Governance, as amended

by the Guernsey Financial Services

Commission in November 2021.

The Board believes that applying the

principles and reporting against the

provisions of the QCA Code accurately

reflects the nature, scale and

complexity of the business and

enables the Board to provide

information to shareholders on its

activities in accordance with the

principles set out in a recognised

governance framework. Furthermore,

through applying the relevant

provisions the Company is better

positioned to mitigate downside risk

and in doing so, preserve long-term

shareholder value.

The Company’s corporate governance

framework has been based on these

principles and is designed to deliver

the Group’s strategy, and the application

of such principles to the operation of

the Board ensures that its decision-

making processes remain focussed

onthe long-term sustainable success

of the Company.

The Board is committed to maintaining high standards

ofcorporategovernance throughout the Company’s

operationsand to ensuring that all of its practices are

conductedtransparently, ethically and efficiently.

16 Sancus Annual Report 2021

As at 31 December 2021, the Company

complied substantially with the

relevant provisions of the QCA Code

and it is the intention of the Board that

the Company will comply with these

provisions throughout the year ending

31 December 2022, save with regard

to the following:

The appointment of a Senior

Independent Director: Given the size

and composition of the Board, the

Board does not consider it is

necessary to appoint a Senior

Independent Director. The Board

considers that all the independent

Directors have different qualities and

areas of expertise on which they may

lead where issues arise and to whom

concerns can be referred.

Internal audit function: The Board has

considered the need for an internal

audit function and is satisfied that the

compliance policies, procedures and

reporting mechanisms in place

throughout the group are sufficient,

and that implementing a separate

internal audit function would be

unnecessary. This requirement is

assessed annually by the Audit and

Risk Committee.

How we apply the QCA Code

The Company has established specific

formally constituted committees and

implemented certain policies, to

ensure that:

It is led by an effective Board which

is collectively responsible for the

long-term sustainable success of

the Company and establishes a

culture whereby the tone is set from

the top which is consistent with the

objectives, strategy and business

model of the Group;

the Board and its committees have

the appropriate balance of skills,

experience, independence, and

knowledge of the Company to

enable them to discharge their

respective duties and

responsibilities effectively;

the Board establishes a formal and

transparent arrangement for

considering how it applies the

corporate reporting, risk

management, and internal control

principles and for maintaining an

appropriate relationship with the

Company’s auditors; and

there is a dialogue with shareholders

based on the mutual understanding

and alignment of objectives,

conducted primarily through the CEO

and the Corporate Broker.

Risk management remains a key area

of focus during Board meetings.

Details of the Company’s risk

management and internal control

framework is set out on page 10.

Composition and Independence

oftheBoard of Directors

The Board of Directors is responsible

for ensuring the affairs of the

Company are properly managed

through formulating, reviewing and

approving the Company’s strategy,

budgets, and corporate actions and

that oversight, scrutiny and challenge

is applied to Executives responsible

for the day-to-day activities of the

Group. The Company seeks to deliver

long-term growth for shareholders

and maintain a flexible, efficient and

effective management framework

within an entrepreneurial environment.

It is important that the Board itself

contains the right mix of skills and

experience in order to deliver the

strategy of the Company. As such,

theBoard is comprised of:

Two Independent Non-Executive

Directors, one of which serves as

the Chairman, who is responsible

for leadership of the Board and

ensuring its effectiveness on all

aspects of its role;

One Non-Executive Director who,

whilst sharing the fiduciary and

statutory duties of the independent

directors, is also an executive

director of the Somerston Group,

asignificant shareholder of the

Company, and therefore not

considered independent under the

QCA Code; and

Two Executive Directors, who are

also members of the Group’s

Executive Committee and are

therefore not considered

independent under the QCA Code.

The Board is comprised of individuals

holding professional qualifications and

experience relevant to the activities

ofthe Company. A biography of each

of the Directors is included on pages

14 and 15. The time requirement

expected from each of the Directors

isset out in writing in their respective

appointment letters.

Liberum Capital has been appointed as

the Company’s Corporate Broker and

Nominated Adviser under the AIM Rules

and advises on compliance with the AIM

Rules, corporate communications and

acts as financial adviser to corporate

actions. Additionally, the Company has

appointed a professional Company

Secretary who assists the Board of

Directors in preparing for and running

effective board meetings, including the

timely dissemination of appropriate

information. The Company Secretary

provides guidance to the extent required

by the Board on certain aspects of the

legal and regulatory environment, within

which the Company operates.

The Board believes that long serving

Directors should not be prevented from

forming part of the Board or from acting

as Chairman and no limit has been

imposed on the overall length of service

of the Directors. EachDirector will retire

and seek reappointment at every third

annual general meeting, with those

serving for nine years or more subject to

reappointment annually. The Board

meets on at least a quarterly basis during

the financial year.

The Board has appointed several

committees to support it in different

areas of the business; each with formal

terms of reference, with specific roles

as set out below.

The Board undertakes an annual

evaluation of its own performance,

theperformance of its formally

constituted committees and that of

individual Directors. This includes a

formal process of self-appraisal

reviewing the balance of skills,

experience, independence and

diversity present on the Board, and

individual director performance,

contribution and commitment to the

Group to ensure that the Board and its

committees continue to operate

effectively, or to identify areas where

action is required. The remainder of

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

the Board is responsible for evaluating

the performance of the Chairman. The

Chairman also has responsibility for

assessing the individual Board members’

training requirements. No significant

findings were identified in the 2021

evaluation which required further action.

The Directors remain mindful of the

benefits which can flow from

increasing the level of diversity

represented on the Board including,

but not limited to, cultural, gender,

experience and background. Such

factors will be taken into consideration

by the Nomination Committee during

any selection process.

Executive Management Team

As at the year end, the Company’s

Executive Management Team

comprised Rory Mepham (Chief

Executive Officer), Emma Stubbs

(Chief Financial Officer) and Dan

Walker (Chief Operating Officer and

UK Managing Director) (together the

“Executive Management Team” or

“Management”). Management are

responsible for the day-to-day

management of the Company’s

operations. The non-executive

independent Directors monitor and

evaluate the performance of the

Management Team on an ongoing

basis. Dan Walker left the Company on

31 January 2022 and on 8 March 2022

James Waghorn was appointed to the

Executive Management Team as Chief

Investment Officer.

Audit and Risk Committee

The Audit and Risk Committee

conducts formal meetings at least

twice a year. The Audit and Risk

Committee’s key duties include:

monitoring the integrity of the

financial statements of the Group,

including its annual and half-yearly

reports and any other formal

announcement relating to its

financial performance, reviewing,

challenging (where necessary) and

reporting to the Board on significant

financial reporting issues and

judgements which they contain

having regard to matters

communicated to it by the auditor,

and how they were addressed;

reviewing the Group’s internal

financial controls and the Group’s

internal control and risk

management systems;

making recommendations to the

Board for it to put to the

shareholders for their approval in

general meeting in relation to the

appointment, re-appointment or

removal of the external auditor and

to recommend the remuneration

and terms of engagement of the

external auditor;

monitoring the external auditor’s

independence and objectivity and

the effectiveness of the audit

process, taking into account

relevant professional and regulatory

requirements;

in conjunction with executive

management, advise the Board on

the overall risk appetite, tolerance

and strategy of the Group, current

risk exposures and future risk

strategy; and

keep under review the Group’s

overall risk assessment processes

that inform the Board’s decision

making, ensuring both qualitative

and quantitative metrics are used.

The Audit and Risk Committee has

three members, two of whom are

independent, non-executive directors

and one of whom is a non-executive

director, and at least one member has

recent and relevant financial experience.

The current members of the Committee

are John Whittle as the Chairman,

Steve Smith and Tracy Clarke.

The Audit and Risk Committee is

supported by a risk management and

oversight process employed by the

Executive Management Team and

receives reports twice a year on key

risks and developments during the

period, or as otherwise required in

thecase of a material development.

The terms of reference of the Audit

and Risk Committee are available

fromthe Company Secretary.

Remuneration and Nomination

Committee

The purpose of the Remuneration and

Nomination Committee is to determine

and agree with the Board the

framework or broad policy for the

remuneration of the Company’s

Directors, senior executives, and any

bonus-related arrangements in place

by the Company as well as to consider

the structure, size and composition of

the Board. The key duties of the

Remuneration and Nomination

Committee include:

determining and agreeing with

theBoard the framework or broad

policy for the remuneration of the

Company’s Chairman, executive and

non-executive directors and such

other members of the management

as it is designated to consider;

reviewing the ongoing

appropriateness and relevance

ofthe remuneration policy;

reviewing the structure, size and

composition of the Board;

considering the succession planning

for Directors and the Executive

Management Team;

reviewing the leadership needs

ofthe organisation; and

identifying candidates for

appointment to the Board.

The Remuneration and Nomination

Committee has three members, all

ofwhom are non-executive directors

and two are independent. The current

members of the committee are

JohnWhittle as the Chairman,

SteveSmith and Tracy Clarke.

The terms of reference of the

Remuneration and Nomination

Committee are available from the

Company Secretary.

Please refer to the Remuneration

Report on page 23 for details of fees

paid to the Directors during the year.

Governance framework continued

18 Sancus Annual Report 2021

Board

Quarterly Other

Remuneration &

Nomination

Committee

Audit and Risk

Committee

Total number of meetings held during the year 4 19 6 4

Stephen Smith (Chairman)

3 of 3 7 of 7 3 of 3 3 of 3

Patrick Firth

3 of 3 16 of 16 6 of 6 2 of 2

John Whittle 4 of 4 18 of 19 6 of 6 4 of 4

Nicholas Wakefield 4 of 4 18 of 19 6 of 6 4 of 4

Andrew Whelan

2 of 2 12 of 16 n/a n/a

Emma Stubbs 4 of 4 19 of 19 n/a n/a

Rory Mepham

1 of 1 1 of 1 n/a n/a

Stephen Smith was appointed to the Board on 11 May 2021 and appointed as Chairman of the Board on 1 September 2022.

Patrick Firth resigned as Chairman of the Board on 31 August 2021.

Andrew Whelan resigned from the Board on 30 June 2021.

Rory Mepham was appointed to the Board on 23 November 2021.

Meetings and attendance

The Directors meet on a quarterly

basis (‘Quarterly’ meetings per the

table below) and at other unscheduled

times (‘Other’ meetings per the

tablebelow) when necessary to

assessGroup operations and the

setting and monitoring of strategy

andperformance.

The table below, details the

attendance of the Board at eligible

Board and Committee meetings

during the year, noting that certain

Directors retired or were appointed

during the course of the year.

Relations with Stakeholders

The Board’s advisers and the Executive

Management Team maintain regular

dialogue with key shareholders, the

feedback from which is reported to the

Board and the Chairman. Shareholders

who wish to communicate with the

Board should contact the Company

Secretary in the first instance, whose

contact details can be found on page 72.

The Board also regularly monitors the

shareholder profile of the Company.

All shareholders have the opportunity

to and are encouraged to attend the

Company’s annual general meeting at

which members of the Board are

available in person to meet shareholders

and answer questions.

Whilst the primary duty of the Directors

is owed to the Company as a whole, the

Board takes into consideration the

interests of all key stakeholder groups

as part of its decision-making process

and particular consideration is given to

the impact of any decision on holders of

its securities, the Co-Funders to the

underlying loan businesses, and

providers of the Group’s long-term debt

capital. The Board also recognises the

crucial roles played by those involved

throughout the Group’s operations who

contribute to delivering strategy,

including staff and key service

providers, to ensure a continued

alignment of interests between their

activities and those of the Company.

Terms of Reference

ofCommittees

Committee Terms of Reference are

available from the Company Secretary.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Audit and Risk Committee report

Ensuring the highest business

standards and integrity

Chairman and membership

The Audit and Risk Committee

comprises of John Whittle as

Chairman, Steve Smith and Tracy

Clarke. Only Non-Executive Directors

serve on the Audit and Risk

Committee and members of the Audit

and Risk Committee have no links with

the Company’s external auditor and

are independent of the Executive

Management Team. The Audit and

Risk Committee meets not less than

three times a year in Guernsey and

meets the external auditor at least

twice a year in Guernsey. The identity

of the Chairman of the Audit and Risk

Committee is reviewed on an annual

basis and the membership of the Audit

and Risk Committee, and its terms of

reference are kept under review.

Regular attendees at the Audit and

Risk Committee include the CEO,

CFOand CIO.

Duties

The Audit and Risk Committee is

responsible for monitoring the financial

reporting process, including the

appropriateness of the Company’s

accounting policies and the effectiveness

of the Company’s risk management and

internal control systems.

The Committee continues to spend a

considerable amount of time reviewing

significant risks and areas of judgement.

In particular, the Committee conducts

detailed reviews and analysis of the

valuations prepared by the Executive

Management Team of the FinTech

Ventures investments, the Subsidiary

Goodwill value in use models to assess if

any impairment might be required and

the Expected Credit Loss model. These

valuations are key elements in the

Group’s financial statements and the

Audit and Risk Committee questions

these carefully.

External Audit

The Audit and Risk Committee is

responsible for overseeing the

relationship with the external auditor,

including the ongoing assessment of the

auditor’s independence. The Committee

makes recommendations to the Board

with regard to the appointment of the

external auditor and approves their

terms of engagement and fees. The

Committee discusses and agrees the

nature and scope of the audit as set out

in the audit engagement letter, reviews

the results of the audit as described in

the auditors’ management letter and the

ongoing independence and objectivity

of the external auditor. Following a

tender process, Moore Stephens were

appointed as the Company’s auditor in

2021, taking over from Deloitte who

held this position since 2016.

The Audit and Risk Committee has a formal terms of reference

mandate documenting the duties and responsibilities which it

hasbeen delegated by the Board. These are available from the

Company Secretary.

The Audit and Risk Committee has been in operation throughout the year under review.

During 2021, management

continued to enhance its reporting

on risk management to the Board

and the Audit and Risk Committee.

John Whittle

Chairman

Audit and Risk Committee

20 Sancus Annual Report 2021

Processes are in place to safeguard

the independence of the external

auditor, including controls around the

use of the external auditor for non-

audit services. The external auditor

also provides the Audit and Risk

Committee with further assurance as

to the procedures that it maintains to

preserve objectivity and confirmation

that it remains independent. All

non-audit services are pre-approved

by the Audit and Risk Committee.

Effectiveness of External Auditor

The Committee assessed the

effectiveness of the external auditor

and the external audit process for 2021

through a number of steps, including:

agreement of their engagement

letter and fees;

review of the external audit plan;

meetings with the external auditors;

considering the extent of any

non-audit services provided by the

external auditors;

considering the external auditors’

fulfilment of the agreed audit plan

and variations from it;

considering the report from the

auditor highlighting any major

issues that arose during the course

of the audit; and

conducting interviews to obtain

feedback from the Executive

Management Team to evaluate the

performance of the audit team.

For the audit for the year ended

31December 2021, the Audit and Risk

Committee was satisfied that the audit

was effective and that there were no

factors which had any bearing on the

independence or effectiveness of the

external auditor.

Financial reporting

The Audit and Risk Committee

reviews, considers and, if thought

appropriate, recommends to the

Board the approval of the contents of

the half yearly report and annual

report and audited financial statements

together with the external auditor’s

report thereon. It focuses particularly

on compliance with legal requirements,

accounting standards and the relevant

Listing Rules.

The ultimate responsibility for reviewing

and approving the half year report and

annual report and audited financial

statements remains with the Board.

The Audit and Risk Committee provides

a forum through which the external

auditor reports to the Board and the

external auditor is invited to attend

Audit and Risk Committee meetings at

which annual and half yearly financial

statements are considered. After

discussions with the Executive

Management Team and external auditor,

the Audit and Risk Committee

determined that the key risks of

misstatement of the Group’s financial

statements relate to the valuation of

financial assets at fair value through

profit or loss, the valuation and

recoverability of goodwill, loan

impairments and revenue.

Freely tradeable market prices are not

available for the majority of the Group’s

financial assets, including the carrying

value of goodwill arising on

consolidation, which are therefore

based on a discounted cash flow basis.

Goodwill impairment reviews are

carried out annually or sooner where

an indicative event of impairment has

been identified. The next annual review

will coincide with the preparation of the

2022 interim accounts, there having

been no indicative event of impairment

since the last annual review which

coincided with the preparation of the

2021 interim accounts. Full details can

be found in Note 2(h), Note 3 and

Note12 to the financial statements.

For the valuations of the FinTech

Ventures portfolio, the Executive

Management Team provides a detailed

valuation report on a quarterly basis.

The Executive Management Team has

confirmed to the Audit and Risk

Committee that the valuation

methodology has been applied

consistently during the year. The

accounting policies are described

indetail in Note 2(f) to the financial

statements.

The Audit and Risk Committee has

assessed the processes around the

expected credit loss provisions recorded

in respect of the Group’s loan assets and

reviewed the IFRS 9 model adopted at

year-end which had also gone through

the credit committee for approval.

The accounting policies for revenue

recognition are described in detail in

Note 2(o) to the financial statements.

The Audit and Risk Committee has

reviewed the revenue recognition

policies of the Group and has

determined that they are in accordance

with the accounting standards and

have been applied consistently.

After due consideration, the Audit and

Risk Committee recommends to the

Board that the Annual Report and

Financial Statements, taken as a whole,

is fair, balanced and understandable

and provides the information necessary

for shareholders to assess the Group

and Company’s performance, business

model and strategy.

Non-Audit and audit related fees

paid to the External Auditors

During 2021 no non-audit fees were paid

to Moore Stephens, the external auditors.

£15,000 was paid to Moore Stephens for

audit related services, being the half year

review. There is no perceived threat to

auditor independence given the nature

of the services provided and the

safeguards in place.

Risk Management and Internal

Control Systems

During 2021, management continued

to enhance its reporting on risk

management to the Board and the

Audit and Risk Committee, which

cover the operation of the Company

and its wholly owned subsidiaries.

TheAudit and Risk Committee has

received and considered these reports

on three occasions, which has been

the basis for its conclusion below.

In addition to the review of risk

management reports, and in

accordance with the guidance

published in the Guidance on Risk

Management, Internal Control and

Related Financial and Business

Reporting by the Financial Reporting

Council (the “FRC”), the Audit and Risk

Committee has reviewed the Company’s

internal control procedures and

concluded that these are adequate to

manage the current risk profile.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

A robust, ongoing process ofRisk

Management and InternalControl

The Board and Executive Management

Team are responsible for safeguarding

the assets of the Group through

establishing effective systems of risk

management and internal control. This

responsibility is shared by the Directors

of subsidiary companies, who are

similarly responsible for safeguarding

the assets of these companies.

The Board is also responsible for

deciding on whether the nature and

extent of risks taken within the Group

are within its risk appetite. Such risks

have been formally defined (refer

page10), setting the basis for the

design and implementation of the

Group’s internal control framework.

On behalf of the Board, the Audit and

Risk Committee oversees the Group’s

risk management and internal control

systems. These systems are designed

to ensure proper accounting records

are maintained and that internal and

published financial information is

reliable, and that the assets of the

Group are safeguarded. Such a system

of internal controls can only provide

reasonable and not absolute assurance

against misstatement or loss.

Critical components of the Group’s

internal control framework include the

documented policies which describe

how each risk is to be managed and

governed and the governance

committees established in terms of

such policies, which have mandates

describing how they should operate,

what reports they should receive and

how they should govern the

management of principal risks. Such

policies have been implemented at

Company as well as subsidiary levels.

On a semi-annual basis, the Executive

Management Team review the key risks

across the Group to ensure they are

being managed within the Company’s

risk appetite. Action plans are drawn up

if any risks are considered to be outside

of the Company’s risk appetite and these

are monitored on a regular basis until

they return to levels back within the

riskappetite.

On a semi-annual basis, the Board and/

or Audit and Risk Committee receive

reports on risk management, the key

risks and the exposures outstanding.

Also included in these reports are the

results of Executive Management Team’s

risk and issue identification discussions

noted above. These meetings also

provide the Directors with the

opportunity to consider any other

issues which management may not

have identified and give direction on

any additional risk management

actions which might be required.

Insurance

The Sancus and subsidiaries insurance

programme is subject to annual review

each year, with cover generally

renewed in April of the following year.

A significant amount of Insurance

cover is held for Public Indemnity,

Directors’ and Officers’ liability, Cyber,

and Crime. Appropriate office and

travel insurance is also in place.

During 2021, the Committee did

notreceive any reports relating to

whistleblowing across the Group.

On behalf of the Audit and Risk

Committee

John Whittle

Chairman Audit and Risk Committee

30 March 2022

Audit and Risk Committee report continued

22 Sancus Annual Report 2021

The Company is committed to the

objective of maximising shareholder

return in the longer term.

John Whittle

Chairman

Remuneration and Nomination Committee

Remuneration and Nomination

Committee

The Remuneration and Nomination

Committee comprises of John Whittle

as Chairman, Steve Smith and Tracy

Clarke. The key duties include, but are

not limited to, agreeing a framework

for Director remuneration, ensuring

management staff are appropriately

incentivised to enhance performance,

and reviewing the effectiveness of the

remuneration policy on an on-going

basis. No Director is involved in

determining their own remuneration.

Remuneration Policy

In February 2020 the Remuneration

Policy was last approved and adopted.

The Company is committed to the

objective of maximising shareholder

return in the longer term. The

remuneration policy aims to be

competitive, aligned with shareholder

interests and relatively simple and

transparent. The Board takes into

consideration the views of significant

shareholders when determining the

remuneration of directors.

The objective is to put in place a

remuneration package that, as a whole:

aligns the interests of employees

with that of shareholders and the

success of the Company;

is appropriately benchmarked,

suchthat it aids retention and

recruitment; and

meets applicable legal or regulatory

requirements, is tax efficient and

simple to implement and administer.

The Board is reviewing the Remuneration

Policy against these objectives.

The Policy is divided into two parts;

the first part in relation to the

remuneration of the Non-Executive

directors of the Company, and the

second part in relation to the

remuneration of the Executive

Directors of the Company.

Maximising shareholder returns

Remuneration report

An ordinary resolution for the approval of the annual remuneration

report will be put to the shareholders at the annual general meeting

to be held in 2022.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Director

Role

Base

for 2021

Additional

feesfor 2021

Total fees

for 2021

Base

for2020

Additional

fees for 2020

Total fees

for 2020

Patrick Firth*

Non-Executive Director and

Chairman of the Board

£23,333 £10,000

forChairman

of the Board

£33,333 £34,125 £14,625

for Chairman

of the Board

£48,750

Steve Smith**

Non-Executive Director and

Chairman of the Board

£22,446 £5,000

forChairman

of the Board

£27,4 46 - - -

John Whittle

Non-Executive Director,

Chairman of the Audit and Risk

Committee and Chairman of the

Remuneration Committee

£35,000 £5,000

forChairman of

the ARC and

£2,500 for

Chairman of

Rem & Nom Co

£42,500 £34,125 £4,875

for Chairman

of the ARC

and £2,438

for Chairman

of Rem Co

£41,438

Nicholas Wakefield***

Non-Executive Director

£35,000 Nil £35,000 £34,125 Nil £34,125

Total £115,779 £22,500 £138,279 £102,375 £21,938 £124,313

*Pro rata for 2021 as Mr Firth resigned as a Non-Executive Director and Chairman of the Board on 31 August 2021.

**Pro rata for 2021 as Mr Smith was appointed to the Board on 11 May 2021 and succeeded Mr Firth as Board Chairman following his resignation.

***Pro rata for 2022 as Mr Wakefield was succeeded by Ms Clark on 8 March 2022.

Remuneration report continued

Each Non-Executive Director receives

aﬁxed fee per annum based on their

role and responsibility within the

Company and the time commitment

required. It is not considered

appropriate that Non-Executive

Directors’ remuneration should be

performance related and none of the

Non-Executive Directors are eligible

for pension beneﬁts, share options,

long-term incentive schemes or other

beneﬁts in respect of their services as

Non-Executive directors of the

Company. Shares held by the Non-

Executive Directors are disclosed

inthe Annual Report.

Pursuant to Article 30.3 of the

Company’s Articles of Incorporation

(the “Articles”) the Board may award

additional remuneration to any

Director engaged in exceptional work

at the request of the Board on a time

spent basis to compensate for the

additional time spent over their

expected time commitment.

The total remuneration of the Non

Executive Directors has not exceeded

the £300,000 per annum limit

(excluding amounts payable in respect

of any out-of-pocket expenses

pursuant to Article 30.2 or any

additional remuneration awarded

pursuant to Article 30.3) pursuant to

an ordinary resolution passed at the

Annual General Meeting of the

Company held on 19 May 2016.

The Articles provide that Non-Executive

Directors retire and offer themselves for

re election at the ﬁrst annual general

meeting after their appointment and at

least every three years thereafter. A

Non-Executive Director’s appointment

may at any time be terminated by and at

the discretion of either party upon three

months’ written notice. A Non-Executive

Director’s appointment will terminate

immediately without notice (or payment

in lieu of notice) if such director is not

re-appointed at a General Meeting of the

Company (if required under the Articles),

if such director is removed as a director

at a General Meeting of the Company, or

if such director resigns or ceases to be

adirector in accordance with the

provisions of the Articles.

The terms and conditions of

appointment of each Non-Executive

Director are available for inspection

atthe Company’s registered ofﬁce.

The last independent remuneration

review was carried out in July 2014.

The Directors intend to put in place

aLong-Term Incentive Plan for Senior

Management and an external advisor

will be engaged to assist with this

during the course of 2022 which will

also include a remuneration review.

For comparative purposes the

tablebelow sets out the Non-

Executive Directors’ remuneration

approved and actually paid for the

year to 31 December 2020 as well

asproposed for the year ending

31December 2021 (to be approved at

the 2022 AGM). There has been no

change to the base fee, other than the

fees noted below were reduced by 10%

in the third quarter of 2020 as part of

the Covid-19 cost saving initiative.

Part

Remuneration Policy of Non-Executive Directors

24 Sancus Annual Report 2021

Base Remuneration 31 December 2021 31 December 2020

Andrew Whelan* £260,981 £260,981

Rory Mepham** £220,000 -

Emma Stubbs £170,000 £163,113

Dan Walker £200,000 £175,960

* Mr Whelan resigned on 30 June 2021, and his contract ended on 28 February 2022.

** Mr Mepham was appointed Interim CEO on 30 June 2021 and permanent CEO on 23 November 2022.

Base Remuneration

For the year ended 31 December 2021,

the Executive Directors’ base salary

from the Company, excluding all

reasonable expenses incurred in the

course of their duties which were

reimbursed by the Company, were as

detailed in the table below:

In addition to fixed salary payments,

in2021 the Executive Management

Team members received pension

contributions of £3,278 (Andrew

Whelan), £7,045, Rory Mepham,

£6,299, (Emma Stubbs) and £7,581

(Dan Walker). (2020: £19,478

(AndrewWhelan), £12,174 (Emma

Stubbs), £6,932 (Aaron Le Cornu)

and£9,240 (Dan Walker)).

Long Term Incentives

The Board intends to introduce a

LongTerm Incentive Plan for Senior

Management during 2022 and an

external advisor will be engaged

toassist with this.

Discretionary Executive Bonus

In the year to 31 December 2021

discretionary bonuses in cash of

£125,000, £50,000, £75,000 and

£75,000 were paid to Andrew Whelan,

Rory Mepham, Emma Stubbs and

DanWalker respectively (Year to

31December 2020: discretionary

bonuses of £125,000, £25,000

and£60,000 were paid to

AndrewWhelan, Emma Stubbs

andDan Walker respectively).

On behalf of the Remuneration

Committee

John Whittle

Remuneration Committee Chairman

30 March 2022

Part

Remuneration Policy of Executive Directors

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

The Directors submit their Report

together with the Consolidated

Statement of Comprehensive Income,

the Consolidated Statement of Financial

Position, the Consolidated Statement of

Changes in Shareholders’ Equity, the

Consolidated Statement of Cash Flows

and the related Notes for the year

ended 31 December 2021, which have

been prepared in accordance with

International Financial Reporting

Standards as adopted by the UK,

inaccordance with any relevant

enactment for the time being in force,

and are in agreement with the

accounting records, which comply

withSection 238 of The Companies

(Guernsey) Law, 2008.

Principal activities

The Company was incorporated and

domiciled in Guernsey, Channel Islands,

as a company limited by shares and with

limited liability on 9 June 2005 in

accordance with The Companies

(Guernsey) Law, 1994 (since superseded

by The Companies (Guernsey) Law,

2008). Until 25 March 2015, the

Company was Authorised as a Closed-

ended Investment Scheme and was

subject to the Authorised Closed-ended

Investment Scheme Rules 2008 issued

by the Guernsey Financial Services

Commission (“GFSC”). On 25 March

2015, the Company was registered with

the GFSC as a Non-Regulated Financial

Services Business, at which point the

Company’s authorised fund status was

revoked. The Company’s Ordinary

Shares were admitted to the AIM market

of the London Stock Exchange on

5August 2005. The ZDPs were listed

and traded on the main market of the

London Stock Exchange with effect

from5 October 2015 and following

shareholder approval now have a

maturity date of 5 December 2022.

The Company’s 2021 bonds were repaid

on 21 December 2021 and a total of

£12.575m principal of new bonds

(the“New Bonds”) were issued on

22December 2021. The New Bonds are

not listed and have an interest rate of 7%.

The Company does not have a fixed

life and the Articles do not contain

anytrigger events for a voluntary

liquidation of the Company.

Following the approval by Shareholders

at the Company AGM on 19 May 2016,

the Company changed its status from

being an investing company for the

purpose of the AIM rules to a trading

Company.

The Executive Management Team

isresponsible for the day-to-day

management of the Company.

The Group

As at 31 December 2021, the Group

comprises the Company and the

entities disclosed in Note 20 to the

financial statements.

Directors and Executive

Management Team of

theCompany

A list of the Directors and the

Executive Management Team who

served the Company during the year

and as at the date of this report is

shown on page 14.

Results and Dividends

The Group results for the year are set out

on page 35. No Dividends were paid

during the year (31 December 2020: Nil).

Substantial shareholdings

As at 31 December 2021, the Company

was aware of the following substantial

shareholders who held 3% or more of

issued share capital of the Company:

Substantial Shareholdings

Number of ordinary

shares held

Percentage of total

ordinary shares

issued held

Somerston Group 200,349,684 40.90%

Philip J Milton & Company plc 86,793,928 17.72 %

Investec Wealth and Investment 16,590,873 3.39%

DBH Global Holdings 15,603,285 3.19%

Chelverton Asset Management 14,700,000 3.00%

Directors’ interests

As at 31 December 2021, the Directors

had the following beneficial interests in

the Ordinary Shares of the Company:

31 December 2021 31 December 2020

Directors’ Interests

No. of

Ordinary

Shares Held

% of Ordinary

No. of

Ordinary

Shares Held

% of Ordinary

John Whittle 138,052 0.03 138,052 0.03

Nick Wakefield - - - -

Emma Stubbs 1,380,940 0.28 1,380,940 0.28

Steve Smith (Chairman) - -

Rory Mepham - - - -

Statement of Directors’

Responsibilities

The Directors are responsible for

preparing the financial statements in

accordance with International Financial

Reporting Standards (IFRS) as adopted

by the United Kingdom (UK), and The

Companies (Guernsey) Law, 2008 for

each financial period to give a true and

fair view of the state of affairs of the

Group as at the end of the financial year

and of the profit or loss for that period.

International Accounting Standard 1

requires that financial statements

present fairly for each financial period

the Group’s financial position, financial

performance and cash flows. This

requires faithful representation of the

effects of transactions, other events and

conditions in accordance with the

definitions and recognition criteria for

assets, liabilities, income and expenses

set out in the International Accounting

Standards Board’s “Framework for the

preparation and presentation of

financial statements”. In virtually all

circumstances a fair presentation will be

achieved by compliance with all IFRSs

as adopted by the UK.

Directors’ report

26 Sancus Annual Report 2021

In preparing these financial statements,

the Directors are required to:

Ensure that the financial statements

comply with the Memorandum and

Articles of Incorporation and IFRSs,

as adopted by the United Kingdom;

Select suitable accounting policies

and apply them consistently;

Present information including

accounting policies, in a manner

that provides relevant, reliable,

comparable and understandable

information;

Make judgements and estimates that

are reasonable and prudent; and

Prepare the financial statements on

the going concern basis unless it is

inappropriate to presume that the

Company and the Group will

continue in business.

The Directors confirm that they have

complied with the above requirements

in preparing the financial statements.

The Directors are responsible for

keeping proper accounting records

which disclose with reasonable

accuracy at any time the financial

position of the Company and the

Group and enable them to ensure that

the financial statements have been

properly prepared in accordance with

The Companies (Guernsey) Law, 2008.

They are also responsible for

safeguarding the assets of the

Company and the Group and hence

for taking reasonable steps for the

prevention and detection of fraud

andother irregularities.

The Directors also confirm that

theannual report and financial

statements, taken as a whole, is fair,

balanced and understandable and

provides the information necessary

forshareholders to assess the Group

and Company’s performance,

businessmodel and strategy.

Internal controls review

Taking into account the ongoing work

of the Audit and Risk Committee in

monitoring the risk management and

internal control systems on behalf of

the Board the Directors have

conducted a robust assessment of the

principal risks and uncertainties faced

by the Group as set out on page 10

and is satisfied that each of these has

been properly identified and is being

effectively managed through the

operation of appropriate internal

controls and risk management

systems, within the constraints

oftheresources of the Group.

Statement as to Disclosure

ofInformation to Auditor

The Directors who held office at the

date of approval of this Directors’

Report confirm that:

There is no relevant audit information

of which the Company’s auditors is

unaware; and

The Directors have taken all steps

that they ought to have taken to

make themselves aware of any

relevant audit information and to

establish that the auditors are

aware of that information.

Auditor

Moore Stephens have indicated their

willingness to continue in office and a

resolution to re-appoint Moore Stephens

will be tabled at the forthcoming AGM.

Going Concern

The Directors have considered the going

concern basis in the preparation of the

financial statements as supported by the

Director’s assessment of the Company’s

and Group’s ability to pay its debts as

they fall due and have assessed the

current position and the principal risks

facing the business with a view to

assessing the prospects of the Company.

Liabilities which fall due in the next

12months include the final capital

entitlement of the Company’s ZDP

shares which are repayable on

5December 2022 at £11.3m.

As part of the Group’s growth plan

theCompany is considering its options

regarding this liability which may include

re-financing, part repayment and/or

extension of the ZDPs and an equity

raise. This will require consultation

with the relevant stakeholders,

including ordinary shareholders and

ZDP shareholders and regulatory

approvals and consents. Accordingly,

there can be no certainty that the

proposals will proceed.

These factors and assumptions

constitute a material uncertainty that

may cast significant doubt over the

Company’s ability to continue as a

going concern, such that it may be

unable to realise its assets and

discharge its liabilities in the normal

course of business. The Directors

expect that if they are able to action

the mitigations in accordance with the

plan outlined above, the material

uncertainty will be extinguished. The

Directors are therefore of the opinion

that the Company will have adequate

financial resources to continue in

operation and meet its liabilities as

they fall due for the foreseeable future

and continue to adopt the going

concern basis in preparing the

financial statements.

Board succession

The Board notes the resignation of

Patrick Firth in August 2021 and the

appointment of Steve Smith who

succeeded Mr Firth as Chairman of the

Board on his resignation. The Directors

remain focussed on ensuring the

Board is comprised of individuals with

the requisite skills, knowledge,

experience and diversity to operate

effectively and to meet the future

leadership needs of the Company.

TheBoard welcomes the appointment

of Ms Tracy Clarke who succeeded

MrNick Wakefield in March 2022 as

the Somerston appointed Board

representative.

Approved and signed on behalf of the

Board of Directors on 30 March 2022.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Consolidated

financialstatements

Contents

Consolidated financial

statements

Independent auditor’s report

to the members of Sancus

Lending Group Limited 29

Consolidated statement

of comprehensive income 35

Consolidated statement

of financial position 36

Consolidated statement

of changes in

shareholders’ equity 38

Consolidated statement

of cash flows 39

Notes to the

financial statements 40

Officers and

professional advisers 72

For the year ended 31 December 2021

28 Sancus Annual Report 2021

Opinion

We have audited the financial statements

of Sancus Lending Group Limited (the

‘company’ or the ‘parent company and

its subsidiaries together as the ‘group’)

for the year ended 31December 2021

which comprise ofthe Consolidated

Statement of Comprehensive Income,

Consolidated Statement of Financial

Position, Consolidated Statement of

Cash Flows, the Consolidated

Statements ofChanges in Equity and

notes to thefinancial statements,

including asummary of significant

accounting policies. The financial

reporting framework that has been

applied in their preparation is

applicable law andInternational

Financial Reporting Standards (IFRSs)

as adopted by the United Kingdom

and, as regards the Group’s consolidated

financial statements, as applied in

accordance with the provisions of

theCompanies Act 2006.

In our opinion:

the financial statements give a true

and fair view of the state of the

group’s affairs as at 31 December

2021 and of the group’s loss for the

year then ended;

the group financial statements

havebeen properly prepared in

accordance with IFRSs as adopted

by the United Kingdom; and

the Group’s financial statements

have been prepared in accordance

with the requirements of the

Companies (Guernsey) Law, 2008.

Basis for opinion

We conducted our audit in accordance

with International Standards on

Auditing (UK) (ISAs (UK)) and

applicable law. Our responsibilities

under those standards are further

described in the Auditor’s

Responsibilities for the audit of the

financial statements section of our

report. We are independent of the

Group, in accordance with the ethical

requirements that are relevant to our

audit of the financial statements in

Guernsey, including the FRC’s Ethical

Standard as applied to listed entities,

and we have fulfilled our other ethical

responsibilities in accordance with

these requirements. We believe that

the audit evidence we have obtained

issufficient and appropriate to provide

a basis for our opinion.

Material uncertainty related

togoing concern

We draw attention to Note 2(a) in the

financial statements, which sets out

that the company’s ZDP shares are

repayable on 5 December 2022 at

£11.3 million and that the company is

considering its options regarding this

liability. As stated in Note 2(a), this

indicates that a material uncertainty

exists that may cast significant doubt

on the company’s ability to continue

as a going concern. Our opinion is not

modified in respect of this matter.

In auditing the financial statements,

we have concluded that the directors’

use of the going concern basis of

accounting in the preparation of the

Group’s consolidated financial

statements is appropriate. Our

evaluation of the directors’ assessment

of the entity’s ability to continue to

adopt the going concern basis of

accounting included Review of board

and treasury minutes, subsequent year

financial forecasts and management’s

going concern assessment.

Our responsibilities and the

responsibilities of the directors with

respect to going concern are described

in the relevant sections of this report.

Key audit matters

Key audit matters are those matters

that, in our professional judgement,

were of most significance in our audit of

the financial statements of the current

period and include the most significant

assessed risks of material misstatement

(whether or not due to fraud) we

identified, including those which had the

greatest effect on: the overall audit

strategy, the allocation of resources in

the audit; and directing the efforts of

the engagement team. These matters

were addressed in the context of our

audit of the financial statements as a

whole, and in forming our opinion

thereon, and we do not provide a

separate opinion on these matters.

Independent auditor’s report to the members of Sancus Lending Group Limited

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Audit Matter Procedures

Impairment of Goodwill

As at 31 December 2021, the Group has

recorded goodwill of £22.9m (2020:

£22.9m) representing 23.1% (2020: 22%)

ofgroup total assets at year end. Discounted

cash flow models are prepared by

management to assist the Board and the

Audit and Risk Committee in determining

whether indicators of impairment exist and

estimating the recoverable amount of

goodwill, based on information available

at30 June 2021. The management

believesthat there is no further change till

31December 2021.

The risk is explained further in the Strategic

report where this is included as a key risk of

misstatement. Note 2(h) and Note 3 set out

the associated accounting policy and disclosure

in respect of critical judgements and key

sources of estimation uncertainty, with

Note12 setting out details of the impairment

tests and goodwill valuation sensitivities.

We obtained our understanding of how the discounted cash flow forecasts are modelled

aspart of the Board’s processes to identify and recognise impairment. With regards to

valuation, we performed the following procedures:

We obtained an understanding of the relevant controls over the impairment assessment process;

We have reviewed and checked the key assumptions to the cash flows including revenue

growth rates, discount rates, the potential impacts of Covid-19 and future income and

expenditure cash flows, and tested for any inconsistencies with our understanding of the

group’s business model;

We internally performed stress testing on the key assumptions to determine the impact

onthe recoverable amount of goodwill and whether this would lead to any impairment;

We checked the critical model assumptions related to the cash flow and growth rate

assumptions, which were used in the forecast to model the recovery to pre-Covid-19 levels

of loan origination, by assessing trends in external sector reports, evaluating the expected

cash flows from the loan pipeline and loans originated post impairment test date;

We agreed inputs to supporting evidence where appropriate;

We reviewed the models prepared by management for consistency with the requirements

of IAS 36;

We challenged management’s assertion that no further impairment triggers exist at the

balance sheet date, considering the sources of information to identify such indicators as

listed in IAS 36 Impairment of Assets; and

We reviewed the disclosures made per requirements of IAS 36.

Based on our audit work, we concur with management that the goodwill balance was not

impaired as at 31 December 2021.

As described in Note 3 to the financial statements, we noted that management have

assumed a recovery to pre-Covid-19 levels of loan issuance in 2021 in their forecasts and

should this not occur, this could lead to future impairment.

Note 12 to the financial statements describes the underlying sensitivity of the key inputs used.

Independent auditor’s report to the members of Sancus Lending Group Limited continued

30 Sancus Annual Report 2021

Audit Matter Procedures

Impairment and recoverability of loans receivable

As at 31 December 2021, the aggregate value

of Sancus loans amounted to £53.24m

(2020: £53.22m) representing 54.89% of

total assets (2020: 51.7%). The loan portfolio

comprises property-backed (Sancus) and

Small and Medium-sized Enterprises (“SME”)

loans (via BMS Finance (UK) Sarl). Through

Sancus, the group has direct exposure to

loans through co-investment alongside

third-party lenders.

The group has also provided a first loss

guarantee as part of the Sancus Loan Note

structures and has direct investment into

loan SPVs including BMS Finance (UK) Sarl.

The value of these assets are also supported

by the underlying loan book. Management is

required to assess loans for impairment,

including the application of the expected

credit loss (‘ECL’) model under IFRS 9.

In making this assessment, management

makes several significant judgements.

Theseinclude determining appropriate

assumptions for calculating the loss

allowance under IFRS9 (including probability

of default and loss given default), as well as

loan-specific matters including cash flow

forecasts and covenant compliance,

specifically related to loan to value (LTV)

ratio. As a result, errors or deliberate

manipulation of these determining factors

could result in material misstatement of the

financial statements, as such it is considered

as a fraud key audit matter.

The risk is explained further in the strategic

report where this is included as a key risk of

misstatement. Note 2(f) and Note 3 set out

the associated accounting policy and

disclosure in respect of critical judgements

and key sources of estimation uncertainty,

with Note 22 setting out details of the

associated risk factors, including credit risk.

We have performed the following procedures:

We have obtained an understanding of significant controls over the loan’s impairment process;

Performed a walk-through of relevant controls in the valuation process to confirm they

were appropriately designed and implemented;

We have tested, on a sample basis, inputs used in the ‘Loans Monitoring Report’, including

the accuracy of covenant calculations, such as loan to value ratios, collateral values, and

other financial and non-financial information;

We have checked the reasonableness of management’s significant judgments relating to

the categorisation of loans into the various credit stages required under IFRS 9. We have

considered this in relevance to management’s definition of a significant increase in credit

risk (‘SICR’) and the definition of default and performed a review of the Loan Monitoring

Report to assess evidence of changes in credit risk resulting from factors such as:

exceedances in LTV;

covenant breaches;

delinquencies in payments; or

other signs of financial stress.

We also checked the reasonableness of management’s assumptions related to the

recoverable value of any non-performing loans in light of available evidence and the

underlying collateral;

We have checked the reasonableness of management’s assumptions relating to their

capital market expectations, such as Covid-19, including any overlays required to

compensate for the change in the market environment not reflected in the ECL model;

We have evaluated the reasonableness of management’s judgements and estimates in

deriving the probability of default (PD), determining the loss given default (LGD) and

exposure at default (EAD) for each stage within which loans are classified and their

compliance with IFRS 9 requirements;

We tested the numerical accuracy of the ECL calculation based on the above inputs; and

We evaluated the adequacy of disclosures made in the financial statements in light of the

requirements of IFRS 7 and IFRS 9.

We have concluded that the overall carrying value of loans is reasonable.

As described in Note 3 to the financial statements, IFRS 9 requires the application of

aprobability-weighted unbiased estimate in determining the ECL on loans; there are

therefore certain loans where the amounts recovered could be materially different to

theestimate at 31 December 2021.

Note 22 to the financial statements describes the underlying sensitivity of the key inputs used.

Revenue recognition

The Group’s revenue for the year ended 31

December 2021 was £9m (2020: £10.86m) of

which £5.39m (2020: £5.53m) sourced from

interest income and fees enforced as per

lending agreements and £3.62m (2020:

£5.33m) was from interest on loans.

We consider revenue as a presumed

fraudrisk and have directed our tests

towards this risk

We have performed the following procedures:

We have obtained reports from the Loan Management System (“LMS”), related to interest

income and tested on sample basis by recalculating interest income and comparing it with

the amounts accounted in the general ledger.

We also performed analytical review to test the reasonableness of interest income.

For fee income, we have verified on sample basis, fee from various contracts and tested

foraccuracy.

We have concluded that the reported revenue is presented fairly.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Our application of materiality

We define materiality as the

magnitude of misstatement in the

financial statements that makes it

probable that the economic decisions

of a reasonably knowledgeable person

would be changed or influenced. We

use materiality both in planning the

scope of our audit work and in

evaluating the results of our work.

Based on our professional judgement,

we determined materiality for the

financial statements as a whole as

shown in the table to the right:

We have also adopted a lower level

ofmateriality for revenue balances

consistent with the prior year audit.

Weconsider revenue to be a critical

performance measure for the group

asit is expected to be a key driver for

future distributions from profits now the

group has further developed its SME

and property backed lending business.

The lower level materiality applied

was£180k (2020: £177k), being

approximately 2% (2020: 1.7%) of total

revenue. We agreed with the Audit

and Risk Committee that this was

appropriate as revenue balances are

relatively low compared to our overall

group materiality set out above, yet

there is an increasing focus on these

as performance measures.

Performance materiality

We set performance materiality at a

level lower than materiality to reduce

the probability that, in aggregate,

uncorrected and undetected

misstatements exceed the materiality

for the financial statements as a whole.

Group performance materiality was

set at 60% of group materiality for the

2021 audit (2020: 60%). In determining

performance materiality, we

considered the following factors:

Our risk assessment, including our

assessment of the group’s overall

control environment and that we

consider it appropriate to rely on

controls on a key business process;

Our past experience of the audit,

which has indicated a low number

of uncorrected misstatements

identified in prior periods; and

The potential impact of Covid-19 on

the application of control procedures

which might increase the possibility

of having undetected misstatements.

Error reporting threshold

We agreed with the Audit and Risk

Committee that we would report to

theCommittee all audit differences in

excess of £23k (2020: £33k), as well as

differences below that threshold that,

inour view, warranted reporting on

qualitative grounds. We also report

tothe Audit and Risk Committee on

disclosure matters that we identified

when assessing the overall presentation

of the financial statements.

An overview of the scope

ofouraudit

Our audit was scoped by obtaining an

understanding of the group and its

environment, including internal control,

and assessing the risks of material

misstatement for the parent company

and its subsidiaries. Audit work to

respond to the risks of material

misstatement was performed directly

by the group audit team for both the

parent entity and its subsidiaries. All

subsidiaries in the group were subject

to full scope audits.

Audit work performed for the

subsidiaries was executed by the

group audit team at levels of

materiality applicable to each

subsidiary, which in all instances was

lower than group materiality and

ranged between £4.4k and £1,006k

(2020: between £9.7k and £557k).

Other information

The directors are responsible for

theother information. The other

information comprises the information

included in the annual report, other

than the financial statements and our

auditor’s report thereon. Our opinion

on the financial statements does not

cover the other information and,

except to the extent otherwise

explicitly stated in our report, we do

not express any form of assurance

conclusion thereon.

In connection with our audit of the

financial statements, our responsibility

is to read the other information and, in

doing so, consider whether the other

information is materially inconsistent

with the financial statements or our

knowledge obtained in the audit or

otherwise appears to be materially

misstated. If we identify such material

inconsistencies or apparent material

misstatements, we are required to

determine whether there is a material

misstatement in the financial

statements or a material misstatement

of the other information. If, based on

the work we have performed, we

conclude that there is a material

misstatement of this other information,

we are required to report that fact.

We have nothing to report in this regard.

Group Materiality

£450k

Basis

2% of net assets

Rationale

Considered as most appropriate based on the significance of the on balance

sheet lending and goodwill balances. In determining performance materiality,

weconsidered the following significant judgements:

Our risk assessment, including our assessment of the Group’s overall

control environment; and

No past audit experience with the Group.

Independent auditor’s report to the members of Sancus Lending Group Limited continued

32 Sancus Annual Report 2021

Matters on which we are

required to report by exception

In the light of the knowledge and

understanding of the Group and the

parent company and its environment

obtained in the course of the audit,

wehave not identified material

misstatements in the strategic report

or the directors’ report.

We have nothing to report in respect

of the following matters where the

Companies (Guernsey) Law, 2008

requires us to report to you if, in

ouropinion:

adequate accounting records have

not been kept by the parent

company, or returns adequate for

our audit have not been received

from branches not visited by us; or

the consolidated financial

statements are not in agreement

with the accounting records and

returns; or

certain disclosures of directors’

remuneration specified by law

arenot made; or

we have not received all the

information and explanations

werequire for our audit.

Responsibilities of directors

As explained more fully in the directors’

responsibilities statement set out on

page 26, the directors are responsible

for the preparation of the financial

statements and for being satisfied that

they give a true and fair view, and for

such internal control as the directors

determine is necessary to enable the

preparation of financial statements that

are free from material misstatement,

whether due to fraud or error.

In preparing the financial statements,

the directors are responsible for

assessing the group’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 group or to cease

operations, or have no realistic

alternative but to do so.

Auditor’s responsibilities for the

audit of the financial statements

Our objectives are to obtain reasonable

assurance about whether the financial

statements as a whole are free from

material misstatement, whether due to

fraud or error, and to issue an auditor’s

report that includes our opinion.

Reasonable assurance is a high level of

assurance, but is not a guarantee that

an audit conducted in accordance with

ISAs (UK) will always detect a material

misstatement when it exists.

Misstatements can arise from fraud or

error and are considered material if,

individually or in aggregate, they could

reasonably be expected to influence the

economic decisions of users taken on

the basis of these financial statements.

A further description of our

responsibilities for the audit of the

financial statements is located on the

Financial Reporting Council’s website at:

www.frc.org.uk/auditorsresponsibilities.

This description forms part of our

auditor’s report.

Irregularities, including fraud, are

instances of non-compliance with laws

and regulations. We design procedures

in line with our responsibilities,

outlined above, to detect material

misstatements in respect of

irregularities, including fraud. The

extent to which our procedures are

capable of detecting irregularities,

including fraud is detailed below.

Explanation as to what extent

the audit was considered

capable of detecting

irregularities, including fraud

The objectives of our audit in respect

of fraud, are; to identify and assess the

risks of material misstatement of the

financial statements due to fraud; to

obtain sufficient appropriate audit

evidence regarding the assessed risks

of material misstatement due to fraud,

through designing and implementing

appropriate responses to those

assessed risks; and to respond

appropriately to instances of fraud or

suspected fraud identified during the

audit. However, the primary

responsibility for the prevention and

detection of fraud rests with both

management and those charged with

governance of the company.

Our approach was as follows:

We obtained an understanding of the

legal and regulatory requirements

applicable to the company and

considered that the most significant

are the Companies (Guernsey) Law,

2008, International Financial

Reporting Standards as adopted by

the UK, and taxation legislation.

We obtained an understanding of

how the company complies with

these requirements by discussions

with management and those

charged with governance.

We assessed the risk of material

misstatement of the financial

statements, including the risk of

material misstatement due to fraud

and how it might occur, by holding

discussions with management and

those charged with governance.

We inquired of management and

those charged with governance

asto any known instances of

non-compliance or suspected

non-compliance with laws and

regulations.

Based on this understanding, we

designed specific appropriate audit

procedures to identify instances of

non-compliance with laws and

regulations. This included making

enquiries of management and those

charged with governance and

obtaining additional corroborative

evidence as required.

As part of an audit in accordance with

ISAs (UK) we exercise professional

judgement and maintain professional

scepticism throughout the audit.

Wealso:

Identify and assess the risks of

material misstatement of the

financial statements, whether due to

fraud or error, design and perform

audit procedures responsive to

those risks, and obtain audit

evidence that is sufficient and

appropriate to provide a basis for

our opinion. The risk of not detecting

a material misstatement resulting

from fraud is higher than for one

resulting from error, as fraud may

involve collusion, forgery, intentional

omissions, misrepresentations, or

the override of internal control.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Obtain an understanding of internal

control relevant to the audit in order

to design audit procedures that are

appropriate in the circumstances, but

not for the purposes of expressing an

opinion on the effectiveness of the

group’s internal control.

Evaluate the appropriateness of

accounting policies used and the

reasonableness of accounting

estimates and related disclosures

made by the directors.

Conclude on the appropriateness

ofthe directors’ use of the going

concern basis of accounting and,

based on the audit evidence

obtained, whether a material

uncertainty exists related to events

or conditions that may cast

significant doubt on the group’s

ability to continue as a going

concern. If we conclude that a

material uncertainty exists, we are

required to draw attention in our

auditor’s report to the related

disclosures in the financial

statements or, if such disclosures

are inadequate, to modify our

opinion. Our conclusions are based

on the audit evidence obtained up

to the date of our auditor’s report.

However, future events or conditions

may cause the group to cease to

continue as a going concern.

Evaluate the overall presentation,

structure and content of the financial

statements, including the disclosures,

and whether the financial statements

represent the underlying transactions

and events in a manner that achieves

fair presentation.

Obtain sufficient appropriate audit

evidence regarding the financial

information of the entities or business

activities within the group to express

an opinion on the consolidated

financial statements. We are

responsible for the direction,

supervision and performance of the

group audit. We remain solely

responsible for our audit opinion.

We communicate with those charged

with governance regarding, among

other matters, the planned scope and

timing of the audit and significant

audit findings, including any significant

deficiencies in internal control that we

identify during our audit.

We also provide those charged with

governance with a statement that we

have complied with relevant ethical

requirements regarding independence,

and to communicate with them all

relationships and other matters that

may reasonably be thought to bear on

our independence, and where

applicable, related safeguards.

From the matters communicated with

those charged with governance, we

determine those matters that were of

most significance in the audit of the

consolidated financial statements of

thecurrent period and are therefore the

key audit matters. We describe these

matters in our auditor’s report unless law

or regulation precludes public disclosure

about the matter or when, in extremely

rare circumstances, we determine that

amatter should not be communicated

inour report because the adverse

consequences of doing so would

reasonably be expected to outweigh

thepublic interest benefits of such

communication.

Use of our report

This report is made solely to the

company’s members, as a body, in

accordance with Section 262 of the

Companies (Guernsey) Law, 2008. Our

audit work has been undertaken so that

we might state to the company’s

members those matters we are required

to state to them in an auditor’s report

and for no other purpose. To the fullest

extent permitted by law, we do not

accept or assume responsibility to

anyone other than the company and the

company’s members as a body, for our

audit work, for this report, or for the

opinions we have formed.

Jeff Vincent (Senior Statutory Auditor)

for and on behalf of Moore Stephens

Audit and Assurance (Guernsey)

Limited

Level 2 Park Place

Park Street

St Peter Port

Guernsey

GY1 3HZ

Independent auditor’s report to the members of Sancus Lending Group Limited continued

34 Sancus Annual Report 2021

Notes

2021

£’000

2020

£’000

Revenue 5 9,022 10,861

Cost of sales 6 (6,537) (6,118)

Gross profit 2,485 4,743

Operating expenses 7 (6,231) (5,582)

Operating loss before credit losses (3,746) (839)

Changes in expected credit losses 22 (6,399) (4,665)

Incurred losses on financial assets (90) -

Operating Loss (10,235) (5,504)

FinTech Ventures fair value movement 22 434 (5,996)

Other net losses 8 (557) (3,032)

Loss for the year before tax (10,358) (14,532)

Income tax 18 19 15

Loss for the year after tax (10,339) (14,517)

Items that may be reclassified subsequently to profit and loss

Foreign exchange gain/(loss) arising on consolidation 12 (23)

Other comprehensive income/(loss) for the year after tax 12 (23)

Total comprehensive loss for the year (10,327) (14,540)

Loss for the year after tax attributable to equity holders of the company (10,339) (14,517)

Total comprehensive loss attributable to equity holders of the company (10,327) (14,540)

Basic Loss per Ordinary Share 10 (2.16)p (4.60)p

Diluted Loss per Ordinary Share 10 (2.09)p (4.19)p

The accompanying Notes on pages 40 to 71 form an integral part of these financial statements.

Consolidated statement of comprehensive income

For the year ended 31 December 2021

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Notes

31 December

2021

£’000

31 December

2020

£’000

ASSETS

Non-current assets

Fixed assets 11 660 774

Goodwill 12 22,894 22,894

Other intangible assets 13 53 168

Sancus loans and loan equivalents 22 6,643 3,863

FinTech Ventures investments 22 500 -

Other investments 100 -

Investments in joint ventures and associates 9 500 866

Total non-current assets 31,350 28,565

Current assets

Other assets 14 496 1,015

Sancus loans and loan equivalents 22 46,602 49,369

Trade and other receivables 15 6,075 8,204

Cash and cash equivalents 12,436 15,786

Total current assets 65,609 74,374

Total assets 96,959 102,939

Consolidated statement of financial position

For the year ended 31 December 2021

36 Sancus Annual Report 2021

Notes

31 December

2021

£’000

31 December

2020

£’000

EQUITY

Share premium 16 116,218 116,218

Treasury shares 16 (1,172) (1,099)

Other reserves (95,952) (85,625)

Capital and reserves attributable to equity holders of the Group 19,094 29,494

Total equity 19,094 29,494

LIABILITIES

Non-current liabilities

Borrowings 64,677 69,450

Lease liabilities 364 469

Total non-current liabilities 17 65,041 69,919

Current liabilities

Borrowings 10,532 -

Trade and other payables 1,628 1,638

Tax liabilities 86 118

Provisions - 1,542

Lease liabilities 212 188

Interest payable 366 -

Other liabilities - 40

Total current liabilities 17 12,824 3,526

Total liabilities 77,865 73,445

Total equity and liabilities 96,959 102,939

The financial statements were approved by the Board of Directors on 30 March 2022 and were signed on its behalf by:

Director: Stephen Smith Director: John Whittle

The accompanying Notes on pages 40 to 71 form an integral part of these financial statements.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Note

Premium

£’000

Treasury

£’000

Warrants

Outstanding

£’000

Foreign

Exchange

Reserve

£’000

Retained

Earnings/

(Losses)

£’000

Capital and

reserves

attributable

to equity

holders

ofthe

Company

£’000

Balance at 1 January 2021 116,218 (1,099) 847 (1) (86,471) 29,494

Acquired on sale of BMS 16 - (73) - - - (73)

Movement in fair value

ofwarrants

16 - - (462) - 462 -

Transactions with owners - (73) (462) - 462 (73)

Total comprehensive income/

loss for the year

- - - 12 (10,339) (10,327)

Balance at 31 December 2021 116,218 (1,172) 385 11 (96,348) 19,094

Balance at 1 January 2020 112,557 (1,099) - 22 (71,107) 40,373

Warrants issued during theyear 16 - - 847 - (847) -

Equity raised (net of costs) 16 3,661 - - - - 3,661

Transactions with owners 3,661 - 847 - (847) 3,661

Total comprehensive loss

forthe year

- - - (23) (14,517) (14,540)

Balance at 31 December 2020 116,218 (1,099) 847 (1) (86,471) 29,494

Consolidated statement of changes in shareholders’ equity

For the year ended 31 December 2021

38 Sancus Annual Report 2021

Notes

31 December

2021

£’000

31 December

2020

£’000

Cash flow from operations, excluding loan movements 19 (4,121) (3,837)

(Increase)/Decrease in Sancus loans (1,340) 5,060

Decrease in loans through platforms 8 18

(Increase)/Decrease in Sancus Loans Limited loans (4,564) 472

Decrease in loans re: UK SARL 1,808 3,581

Investment in Sancus Loan Notes (100) -

Net Cash flows (used in) / from operating activities (8,309) 5,294

Investing activities

Net investments in FinTech Ventures (66) 277

Investment in Sancus (IOM) Holdings Limited (16) -

Investment in joint venture (91) (100)

Cash outflow on disposal of BMS Finance AB Limited - (215)

Expenditure on SPL Properties (157) (229)

Sale of SPL Properties 743 1,597

Property, equipment and other intangibles acquired (14) (29)

Net cash inflow from investing activities 399 1,301

Financing activities

Drawdown of HIT facility 19 7,500 4,187

Repayment of HIT facility 19 - (3,500)

Capital element of lease payments 19 (193) (216)

Proceeds from equity issued - 3,681

Repayment of bonds 19 - (6,125)

Issue of bonds 19 - 8,700

Debt issue costs 19 (3) (314)

Repayment of ZDPs 19 (2,756) (4,443)

Net cash generated by financing activities 4,548 1,970

Effects of foreign exchange 12 (23)

Net (decrease)/increase in cash and cash equivalents (3,350) 8,542

Cash and cash equivalents at beginning of year 15,786 7,244

Cash and cash equivalents at end of year 12,436 15,786

The accompanying Notes on pages 40 to 71 form an integral part of these financial statements.

Consolidated statement of cash flows

For the year ended 31 December 2021

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

1. GENERAL INFORMATION

Sancus Lending Group Limited (formerly GLI Finance Limited), (the “Company”), and together with its subsidiaries,

(“theGroup”) was incorporated, and domiciled in Guernsey, Channel Islands, as a company limited by shares and with

limited liability, on 9 June 2005 in accordance with The Companies (Guernsey) Law, 1994 (since superseded by The

Companies (Guernsey) Law, 2008). Until 25 March 2015, the Company was an Authorised Closed-ended Investment

Scheme and was subject to the Authorised Closed-ended Investment Scheme Rules 2008 issued by the Guernsey

Financial Services Commission (“GFSC”). On 25 March 2015, the Company was registered with the GFSC as a Non-

Regulated Financial Services Business, at which point the Company’s authorised fund status was revoked. The Company’s

Ordinary Shares were admitted to trading on the AIM market of the London Stock Exchange on 5 August 2005 and its

issued ZDPs were listed and traded on the Standard listing Segment of the main market of the London Stock Exchange

with effect from 5 October 2015.

The Company does not have a fixed life and the Articles do not contain any trigger events for a voluntary liquidation of

the Company. The Company is an operating company for the purpose of the AIM rules. The Executive Management Team

is responsible for the management of the Company.

As at 31 December 2021, the Group comprises the Company and its subsidiaries (Note 20). During 2021 as part of the

Group’s rebranding the Company and a number of its subsidiaries have been renamed:

Previous name New name Date of name change

Sancus BMS Group Limited Sancus Group Holdings Limited 17 March 2021

Sancus BMS (Ireland) Limited Sancus Lending (Ireland) Limited 29 March 2021

GLI Finance Limited Sancus Lending Group Limited 11 May 2021

Sancus (Guernsey) Limited Sancus Lending (Guernsey) Limited 12 July 2021

Sancus Funding Limited Sancus Lending (UK) Limited 13 July 2021

Sancus Finance Limited Sancus Holdings (UK) Limited 13 July 2021

Sancus (Jersey) Limited Sancus Lending (Jersey) Limited 6 October 2021

Sancus (Gibraltar) Limited Sancus Lending (Gibraltar) Limited 6 October 2021

The Company has taken advantage of the exemption conferred by the Companies (Guernsey) Law, 2008, Section 244,

not to prepare company only financial statements.

2. ACCOUNTING POLICIES

(a) Basis of preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards

(“IFRS”), as adopted by the UK, and all applicable requirements of Guernsey Company Law. The financial statements have

been prepared under the historical cost convention, as modified for the measurement of investment at fair value through

profit or loss. With the exception of any new and amended accounting standards which require policy changes, detailed

in Note 2(v), the principal accounting policies of the Group have remained unchanged from the previous year and are set

out below. Comparative information in the primary statements is given for the year ended 31 December 2020.

The Group does not operate in an industry where significant or cyclical variations, as a result of seasonal activity,

areexperienced during any particular financial period.

Going Concern

The Directors have considered the going concern basis in the preparation of the financial statements as supported by the

Director’s assessment of the Company’s and Group’s ability to pay its debts as they fall due and have assessed the current

position and the principal risks facing the business with a view to assessing the prospects of the Company.

Liabilities which fall due in the next 12 months include the final capital entitlement of the Company’s ZDP shares which are

repayable on 5 December 2022 at £11.3m.

As part of the Group’s growth plan the Company is considering its options regarding this liability which may include

re-financing, part repayment and/or extension of the ZDPs and an equity raise. This will require consultation with the

relevant stakeholders, including ordinary shareholders and ZDP shareholders and regulatory approvals and consents.

Accordingly, there can be no certainty that the proposals will proceed.

Notes to the financial statements

For the year ended 31 December 2021

40 Sancus Annual Report 2021

These factors and assumptions constitute a material uncertainty that may cast significant doubt over the Company’s

ability to continue as a going concern, such that it may be unable to realise its assets and discharge its liabilities in the

normal course of business. The Directors expect that if they are able to action the mitigations in accordance with the plan

outlined above, the material uncertainty will be extinguished. The Directors are therefore of the opinion that the Company

will have adequate financial resources to continue in operation and meet its liabilities as they fall due for the foreseeable

future and continue to adopt the going concern basis in preparing the financial statements.

(b) Basis of consolidation

The financial statements comprise the results of Sancus Lending Group and its subsidiaries for the year ended

31December 2021. The subsidiaries are all entities where the Company has the power to control the investee, is exposed,

or has rights to variable returns and has the ability to use its power to affect these returns. Subsidiaries are fully consolidated

from the date on which control is transferred to the Company. They are deconsolidated from the date that control ceases.

Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year is recognised from

the effective date of acquisition, or up to the effective date of disposal, as applicable. Intercompany transactions, balances

and unrealised gains on transactions between Group companies are eliminated in full on consolidation.

Cash and cash equivalents include cash on hand, deposits held on call with banks and other short term highly liquid

investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of

changes in value.

(d) Dividends

Dividend distributions are made at the discretion of the Company. A dividend distribution to shareholders is accounted

for as a reduction in retained earnings. A proposed dividend is recognised as a liability in the period in which it has been

approved and declared by the Directors.

(e) Expenditure

All expenses are accounted for on an accrual basis. Management fees, administration fees, finance costs and all other

expenses (excluding share issue expenses which are offset against share premium) are charged through the Consolidated

Statement of Comprehensive Income.

(f) Financial assets and liabilities

Classification, recognition and initial measurement

Classification and measurement of debt assets is driven by the business model for managing the financial assets and

thecontractual cash flow characteristics of those financial assets. There are three principal classification categories for

financial assets that are debt instruments: (i) amortised cost, (ii) fair value through other comprehensive income and

(iii)fair value through profit and loss. Equity investments in the scope of IFRS 9 are measured at fair value with gains

andlosses recognised in profit and loss unless an irrevocable election is made to recognise gains or losses in other

comprehensive income.

We are a lending business, which participates in financing to borrowers, Sancus loans, HIT loans, loan equivalents and loans

through platforms. As a result all of these loans/loan equivalents are held solely for the collection of contractual cash flows, being

interest, fees and payment of principal. These assets are held at amortised cost using the effective interest rate method, adjusted

for any credit loss allowance.

FinTech Ventures investments relate to equity, preference shares and some working capital loans. Whilst some of these

investments attract interest, the assets are held primarily to assist the development of the entities involved. These

investments are held at fair value with charges recognised in profit and loss.

Trade payables, financial liabilities and trade receivables are held solely for the collection and payment of contractual cash

flows, being payments of principal and interest where applicable. Trade receivables are held at amortised cost using the

effective interest rate method, adjusted for any credit loss allowance. Trade payables and financial liabilities are held at

amortised cost with any interest cost calculated in accordance with the effective interest rate.

Financial assets and financial liabilities are initially recognised on the trade date, which is the date on which the Group

becomes party to the contractual provisions of the instrument.

Financial assets and financial liabilities at fair value through profit or loss are initially recognised at fair value, with

transaction costs recognised in the Consolidated Statement of Comprehensive Income. Financial assets and financial

liabilities not at fair value through profit or loss are initially recognised at fair value plus transaction costs that are directly

attributable to their acquisition or issue.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

2.ACCOUNTING POLICIES continued

(f) Financial assets and liabilities continued

Classification, recognition and initial measurement continued

Subsequent to initial recognition, financial assets are either measured at fair value or amortised cost as noted above.

Realised gains and losses arising on the derecognition of financial assets and liabilities are recognised in the period

inwhich they arise. The effect of discounting on trade and other receivables is not considered to be material.

Fair value measurement

“Fair value” is the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction

between market participants at the measurement date in the principal or, in its absence, the most advantageous market

to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Group measures the fair value of an instrument using quoted price in an active market for that

instrument. A market is regarded as “active” if transactions of the asset or liability take place with sufficient frequency

andvolume to provide pricing information on an on-going basis. The Group measures financial instruments quoted in

anactive market at a mid price.

If there is no quoted price in an active market, the Group uses valuation techniques that maximise the use of relevant

observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the

factors that market participants would take into account in pricing a transaction. Please refer to Note 22.

The Group recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during

which the change has occurred. If in the case of any investment the Directors at any time consider that the above basis

ofvaluation is inappropriate or that the value determined in accordance with the foregoing principles is unfair, they are

entitled to substitute what in their opinion, is a fair value. Gains and losses arising from changes in the fair value of the

financial assets and liabilities at fair value through profit or loss are included in the Consolidated Statement of

Comprehensive Income in the period in which they arise.

Debt and Equity Instruments

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with

the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. An equity

instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.

Equity instruments are recorded at the proceeds received less any direct costs of issue.

Derecognition

Sales of all financial assets are recognised on trade date – the date on which the Group disposes of the economic benefits

of the asset. Financial assets are derecognised when the rights to receive cash flows from the asset have expired or the

Group has transferred substantially all risks and rewards of ownership.

On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount

allocated to the portion of the asset derecognised) and the consideration received (including any new asset obtained less

any new liability assumed) is recognised in the Consolidated Statement of Comprehensive Income. Any interest in such

transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

Derivative financial instruments

The Group enters into foreign exchange forward contracts in order to manage its exposure to foreign exchange rate

movements. Further details can be found in Note 22.

Forward contracts are initially recognised at fair value at the date the contract is entered into and are subsequently

remeasured to their fair value at each balance sheet date. Resulting gains/losses are recognised in profit or loss

immediately. Forward contracts with positive fair value are recognised as financial assets whereas forward contracts with

negative fair value are recognised as financial liabilities. Contracts are presented as non-current assets or liabilities if the

remaining maturity of the instrument is more than 12 months and is not expected to be settled within 12 months. Other

contracts are presented as current assets.

Notes to the financial statements continued

For the year ended 31 December 2021

42 Sancus Annual Report 2021

Expected credit losses

Credit risk is assessed at initial recognition of each financial asset and subsequently re-assessed at each reporting

period-end. For each category of Credit risk loans have been categorized into Stage 1, Stage 2 and Stage 3 with Stage 1

being to recognise 12 month Expected Credit Losses (ECL), Stage 2 being to recognise Lifetime ECL not credit impaired

and Stage 3 being to recognise Lifetime ECL credit impaired. When for example LTV exceeds 65% or amounts become

30days past due judgement will be used to reassess whether Credit risk has increased significantly enough to move the

loan from one stage to another. A loan is considered to be in default when there is a failure to meet the legal obligation

ofthe loan agreement. This would include provisions against loans that are considered by management as unlikely to pay

their obligations in full without realisation of collateral. Refer to Note 22 for further details.

Sancus loans and loan equivalents are assessed for credit risk based on information available at initial recognition,

predominantly (but not solely) using Loan to Value (LTV). For trade and other receivables, the Group has applied the

simplified approach to recognise lifetime expected credit losses although loan interest receivable is included in the gross

carrying value when determining ECL.

Provision for ECL is calculated using the credit risk, the probability of default and the probability of loss given default,

allunderpinned by the LTV, historical position, forward looking considerations and on occasion subsequent events,

andthe subjective judgement of the Board. ECL assumes the life of the loan is consistent with contractual term.

Financial guarantee contracts

Financial guarantee contracts are only recognised as a financial liability when it becomes probable that the guarantee will

be called upon in the future. The liability is measured at fair value and subsequently in accordance with the expected credit

loss model under IFRS 9. The fair value of financial guarantees is determined based on the present value of the difference in

cash flows between contracted payments required under the debt instrument and the payments that would be required

without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations.

(g) Foreign currency translation

Functional and presentation currency

The financial statements of the Group are presented in the currency of the primary economic environment in which

theCompany operates (its functional currency). The Directors have considered the primary economic currency of the

Company and considered the currency in which finance is raised, distributions made, and ultimately what currency would

be returned if the Company was wound up. The Directors have also considered the currency to which the underlying

investments are exposed. On balance, the Directors believe Sterling best represents the functional currency of the

Company. Therefore, the books and records are maintained in Sterling and for the purpose of the financial statements, the

results and financial position of the Group are presented in Sterling, which is also the presentation currency of the Group.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates

of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the

translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised

in the Consolidated Statement of Comprehensive Income. Non-monetary items measured at historical cost are translated

using the exchange rates at the date of the transaction (not retranslated). Non-monetary items measured at fair value are

translated using the exchange rates at the date when fair value was determined.

All subsidiaries are presented in Sterling, which is the primary currency in which they operate with the exception of

Sancus Lending (Ireland) Limited whose primary currency is the Euro. Translation differences on non-monetary items are

reported as part of the fair value gain or loss reported in the Consolidated Statement of Comprehensive Income.

Foreign exchange differences arising on consolidation of the Group’s foreign operations are taken direct to reserves.

Therates of exchange as at the year-end are £1: USD1.3527 (31 December 2020 USD1.3664) and £1: EUR1.1898

(31December 2020 EUR1.1202)

(h) Goodwill

Goodwill represents the future economic benefits arising from a business combination that are not individually identified

and separately recognised. Goodwill is measured as the excess of (a) the aggregate of: (i) the consideration transferred

measured in accordance with IFRS 3, which generally requires acquisition-date fair value; (ii) the amount of any non-

controlling interest in the acquiree measured in accordance with IFRS 3; and (iii) in a business combination achieved in

stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree; over (b) the net of

the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed measured in accordance with

IFRS 3. Goodwill is carried at cost less accumulated impairment losses. Refer to Note 2(k) for a description of impairment

testing procedures and Note 12 for details on impairment testing.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

2.ACCOUNTING POLICIES continued

(i) Interest costs

Interest costs are recognised when economic benefits are due to debt holders. Interest costs are accrued on a time basis,

by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly

discounts estimated future cash payments through the expected life of the financial liability to the liability’s net carrying

amount on initial recognition.

(j) Other intangible assets

Intangible assets with finite useful lives are amortised to profit or loss on a straight-line basis over their estimated useful

lives. Useful lives and amortisation methods are reviewed at the end of each annual reporting period, or more frequently

when there is an indication that the intangible asset may be impaired, with the effect of any changes accounted for on a

prospective basis. Amortisation commences when the intangible asset is available for use. The residual value of intangible

assets is assumed to be zero.

Computer software

Costs associated with maintaining computer software programmes are recognised as an expense as incurred.

Development costs that are directly attributable to the design and testing of identifiable and unique software products

controlled by the Group are recognised as intangible assets when the following criteria are met:

it is technically feasible to complete the software product so that it will be available of use;

management intends to complete the software product and use or sell it;

there is an ability to use or sell the software product;

it can be demonstrated how the software product will generate probable future economic benefits;

adequate technical, financial and other resources to complete the development and to use or sell the software product

are available; and

the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the software product include the software development

employee costs and third party contractor costs. Other development expenditures that do not meet these criteria are

recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an

asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the

point at which the asset is ready for use over their estimated useful lives, which does not exceed four years.

(k) Impairment testing of goodwill, intangible assets and property and equipment

An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount

exceedsits recoverable amount, which is the higher of fair value less costs of disposal and value-in-use. To determine

thevalue-in-use, management estimates expected future cash flows from each cash-generating unit and determines a

suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment testing

procedures are directly linked to the Group’s latest approved budget, adjusted as necessary to exclude the effects of

future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating

unit and reflect management’s assessment of respective risk profiles, such as market and asset-specific risk factors.

Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating

unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of

goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer

exist. An impairment loss is reversed if the asset’s or cash-generating unit’s recoverable amount exceeds its carrying amount.

All impairments or subsequent reversals of impairments are recognised in the Consolidated Statement of Comprehensive

Income.

(l) Investment in Joint Venture and associates

A joint venture is a joint arrangement over which the Group has joint control. An associate is an entity over which the

Group has significant influence but is not a subsidiary.

An investment in a joint venture or associate is accounted for by the Group using the equity method except for certain

FinTech Ventures associates as described in Note 3. These are measured at fair value through profit or loss in accordance

with policy Note 2(f).

Any goodwill or fair value adjustment attributable to the Group’s share in the joint venture or associate is not recognised

separately and is included in the amount recognised as an investment.

Notes to the financial statements continued

For the year ended 31 December 2021

44 Sancus Annual Report 2021

The carrying amount of the investment in a joint venture or associate is increased or decreased to recognise the Group’s

share of the profit or loss and other comprehensive income of the joint venture or associate and adjusted where

necessary to ensure consistency with the accounting policies of the Group.

Unrealised gains and losses on transactions between the Group and its joint venture or associate are eliminated to the extent

of the Group’s interest in the entity. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.

(m) Non-Current Liabilities

Loans payable are recognised initially at fair value less directly attributable transaction costs. Subsequent to initial

recognition, loans payable are stated at amortised cost using the effective interest rate method.

The ZDPs are contractually required to be redeemed on their maturity date and they will be settled in cash, thus, ZDP

shares are classified as liabilities (refer to Note 17) in accordance with IAS 32 Financial Instruments: Presentation. After

initial recognition, these liabilities are measured at amortised cost, which represents the initial proceeds of the issuance

plus the accrued entitlement to the reporting date. Any ZDPs acquired by the group, as noted in Note 17, are held in

Treasury and shown as a reduction in carrying value.

(n) Property and equipment

Tangible fixed assets include computer equipment, furniture and fittings stated at cost less accumulated depreciation.

Depreciation is provided at rates calculated to write off the cost of tangible property and computer equipment on

astraight-line basis over its expected useful economic life as follows:

Furniture and fittings 3 to 5 years

Computer equipment 2 to 4 years

(o) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for

services provided in the normal course of business, net of discounts, VAT and other sales-related taxes where applicable

in the Group. Revenue is reduced for estimated rebates and other similar allowances. The Group has five principal sources

of revenue and related accounting policies are outlined below:

Interest on loans

Interest income is recognised in accordance with IFRS 9. Interest income is accrued over the contractual life of the loan,

by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly

discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying

amount on initial recognition.

Dividend income

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established

(provided that it is probable that the economic benefits will flow to the Group and the amount of revenue can be

measured reliably).

Fee income on syndicated and non-syndicated loans

In accordance with the guidance in IFRS 15 Revenue, the Group distinguishes between fees that are an integral part of the

effective interest rate of a financial instrument, fees that are earned as services are provided, and fees that are earned on

the execution of a significant act.

Commitment and arrangement fees

Commitment and arrangement fees earned for syndicated loans are recognised on origination of the loan as

compensation for the service of syndication. This is a reflection of the commercial reality of the operations of the business

to arrange and administer loans for other parties i.e. the execution of a significant act and satisfying the Group’s

performance obligation at the point of arranging the loan.

Consistent with the policy outlined above, commitment and arrangement fees earned on loans originated for the sole

benefit of the Group are also recorded in revenue on completion of the service of analysing or originating the loan. Whilst

this is not in accordance with the requirements of the effective interest rate method outlined in IFRS 9 Financial Instruments,

this is not considered to have a material impact on the financial performance or financial position of the Group.

Exit fees

Where a loan is syndicated and has standard terms the exit fee is recognised as part of the arrangement fee, reflecting

the costs of syndication at the start of the loan. Where a loan is syndicated and has milestones or conditions which

determine if the fee becomes payable and/or the magnitude of the fee the exit fee is treated as variable consideration in

line with IFRS 15 and is only recognised when the relevant milestones/conditions are met. Where loans are not syndicated

the exit fee is deemed to be part of the effective interest rate and recognised over the term of the loan.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

2.ACCOUNTING POLICIES continued

(o) Revenue recognition continued

Fee income earned by peer-to-peer subsidiary platforms

Fee income earned by subsidiaries whose principal business is to operate online lending platforms that arrange financing

between Co-Funders and Borrowers includes arrangement fees, trading transaction fees, repayment fees and other lender

related fees. Revenue earned from the arrangement of financing is classified as a transaction fee and is recognised

immediately upon acceptance of the arrangement by borrowers. Other transaction fees, including revenue from Co-Funders

in relation to the sale of their loan participations in platform secondary markets is also recognised immediately. Loan

repayment fees are charged on a straight-line basis over the repayments of the borrower’s financing arrangement.

Advisory fees

Advisory fee income is invoiced and recognised on an accruals basis in accordance with the relevant investment

advisoryagreement.

(p) Share based payments

As explained in the Remuneration Report, the Company provides a discretionary bonus, part of which is satisfied through the

issuance of the Company’s own shares, to certain senior management. The cost of such bonuses is taken to the Consolidated

Statement of Comprehensive Income with a corresponding credit to Shareholders’ Equity. The fair value of any share options

granted is determined at the grant date and the expense is spread over the vesting period in accordance with IFRS 2.

(q) Taxation

Current tax, including corporation tax in relevant jurisdictions that the Group operates in, is provided at amounts expected to be

paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet

date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the

future have occurred at the balance sheet date. Timing differences are differences between the Group’s taxable profits,

and its results as stated in the financial statements, that arise from the inclusion of gains and losses in tax assessments in

periods different from those in which they are recognised in the financial statements.

(r) Treasury shares

Where the Company purchases its own Share Capital, the consideration paid, which includes any directly attributable

costs, is recognised as a deduction from Share Premium.

When such shares are subsequently sold or reissued to the market, any consideration received, net of any directly

attributable incremental transaction costs, is recognised as an increase in Share Premium. Where the Company cancels

treasury shares, no further action is required to the Share Premium account at the time of cancellation.

(s) Warrants

Warrants are accounted for as either equity or liabilities based upon the characteristics and provisions of each instrument

and are recorded at fair value as of the date of issuance. In subsequent periods an amount representing the difference

between the warrant exercise price and the prevailing market price of the company’s shares is transferred from/to

retained earnings to/from warrants outstanding.

(t) Inventories – Development properties

Inventories are stated at the lower of cost and net realisable value. Cost comprises initial outlay and, where applicable,

additional costs that have been incurred in bringing the inventories to their present location and condition. Net realisable

value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing

and selling. Repossessed assets are accounted for under IAS 2: Inventories because the Group will either immediately

seek to dispose of those assets which are readily marketable or pursue the original development plans to sell for those

that are not readily marketable. Such assets are classed as “Other Assets” within current assets on the balance sheet.

(u) Leases

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a

right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee,

except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets. For

these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of

the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the

leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement

date, discounted by using the incremental borrowing rate.

Notes to the financial statements continued

For the year ended 31 December 2021

46 Sancus Annual Report 2021

Lease payments included in the measurement of the lease liability comprise fixed lease payments (including in-substance fixed

payments) less any lease incentives receivable, variable lease payments that depend on an index or rate (initially measured using

the index or rate at the commencement date), the amount expected to be payable by the lessee under residual value guarantees,

the exercise price of purchase options (if the lessee is reasonably certain to exercise the options) and payments of penalties for

terminating the lease if the lease term reflects the exercise of an option to terminate the lease.

The lease liability is presented within current and non-current liabilities in the consolidated statement of financial position.

It is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective

interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures this

liability (and makes a corresponding adjustment to the related right-of-use asset) whenever the lease term has changed

or there is a change in the lease payments used on inception to measure the liability as described above.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at

orbefore the commencement day, less any lease incentives received and any initial direct costs. They are subsequently

measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If

aleasetransfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects

toexercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.

Thedepreciation starts at the commencement date of the lease.

The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified

impairment loss as described in the ‘Property, Plant and Equipment’ policy.

Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the

right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that

triggers those payments occurs and are included in ‘Operating expenses’ in profit or loss.

(v) Adoption of new and revised Standards

Amendments to IFRSs and IASs that are mandatorily effective for the current year

In the current year, the Group has applied a number of amendments to IFRSs and IASs issued by the International

Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after

1January 2021. These have been listed below. Their adoption has not had any material impact on the disclosures or

ontheamounts reported in these financial statements.

Amendments to IFRS 4, 7, 9, 16 and IAS 39: Amendments regarding replacement issues in the context of the IBOR reform

IFRSs, IASs and amendments that are in issue but not yet effective

At the date of approval of these Consolidated Financial Statements, the following IFRSs, IASs and amendments, which

have not been applied in these Consolidated Financial Statements and are not envisaged to have a material impact on

thefinancial statements when they are applied, were in issue but not yet effective:

Amendments to IFRS 1: Amendments resulting from ‘Annual Improvements to IFRS Standards 2018-2020’

Amendments to IFRS 3: Amendments updating a reference to the Conceptual Framework

Amendments to IFRS 4: Amendments regarding the expiry date of the deferral approach

Amendments to IFRS 9: Amendments resulting from ‘Annual Improvements to IFRS Standards 2018-2020’

Amendments to IFRS 16: Amendments to extend the exemption from assessing whether a Covid-19-related rent

concession is a lease modification

IFRS 17: Insurance Contracts

Amendments to IFRS 17: Amendments to address concerns and implementation challenges that were identified

afterIFRS 17 was published

Amendments to IFRS 17: Amendments regarding the initial application of IFRS 17 and IFRS 9

Amendments to IAS 1: Amendments regarding the classification of liabilities

Amendments to IAS 1: Amendments to defer the effective date of the January 2020 amendments

Amendments to IAS 1: Amendments regarding the disclosure of Accounting Policies

Amendments to IAS 8: Amendments regarding the definition of accounting estimates

Amendments to IAS 12: Amendments regarding deferred tax on leases and decommissioning obligations

Amendments to IAS 16: Amendments prohibiting a company from deducting from the cost of property, plant and

equipment amounts received from selling items produced while the company is preparing the asset for its intended use

Amendments to IAS 37: Amendments regarding the costs to include when assessing whether a contract is onerous

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

In the application of the Group’s accounting policies, which are described in Note 2, the directors are required to make

judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to

make estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from

other sources.

The estimates and associated assumptions are based on historical experience and other factors that are considered to

berelevant. Actual results may differ from these estimates. There is no change in applying accounting policies for critical

accounting estimates and judgments from the prior year. The estimates and underlying assumptions are reviewed on

anongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the

revision affects only that period, or in the period of the revision and future periods if the revision affects both current

andfuture periods.

Critical judgements in applying the group’s accounting policies

The following are the critical judgements, apart from those involving estimations (which are dealt with separately below),

that the directors have made in the process of applying the Group’s accounting policies and that have the most significant

effect on the amounts recognised in the financial statements.

Fair value accounting for FinTech Ventures investments

Some of the Group’s FinTech Ventures investments meet the definition of an associate. However, the Group has applied

the exemption available under IAS 28.18 which states that when an investment in an associate is held by, or is held

indirectly through, an entity that is a venture capital organisation, the entity may elect to measure investments in those

associates at fair value through profit or loss in accordance with IAS 39 – Financial Instruments.

The Directors consider that the Group is of a nature similar to a venture capital organisation on the basis that FinTech

Ventures investments form part of a portfolio which is monitored and managed without distinguishing between

investments that qualify as associate undertakings. Furthermore, the most appropriate point in time for exit from such

investments is being actively monitored as part of the Group’s investment strategy.

The Group therefore designates those investments in associates which qualify for this exemption as fair value through

profit or loss. Refer to Note 22 for fair value techniques used. If the Group had not applied this exemption the investments

would be accounted for using the equity method of accounting. This would have the impact of taking a share of each

investment’s profit or loss for the year and would also affect the carrying value of the investments.

The Directors consider that equity and loan stock share the same investment characteristics and risks and they are

therefore treated as a single unit of account for valuation purposes and a single class for disclosure purposes.

Exit fees

The Directors consider that the economic measurement of fee revenues that arise and become due on the completion

ofa loan (exit fees and warrants) should be accounted for as variable consideration and the exit fee constrained to the

extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur.

Variable consideration is included based on the expected value or most likely amount, with the estimated transaction

price associated with syndication services (being the performance obligation to which these fees are attributable) due

oncollection of the loan, updated at the end of each reporting period to represent the circumstances present and any

changes in circumstances during the reporting period. This includes factors such as timing risk, liquidity risk, quantum

uncertainty and conditions precedent in the syndicated finance contract. The Directors consider that this treatment best

reflects the commercial operations of the Group as an administrator of loan arrangements.

IFRS 10 Control Judgements

Judgement is sometimes required to determine whether after considering all relevant factors, the Group has control,

jointcontrol or significant influence over an entity or arrangement. Other companies may make different judgements

regarding the same entity or arrangement. The Directors have assessed whether or not the Group has control over

Sancus Loan Note 7 based on whether the Group has the practical ability to direct the relevant activities unilaterally.

Inmaking their judgement, the directors considered the rights associated with its investment in preference shares.

Afterassessment, the directors concluded that the Group does not have the ability to affect returns through voting

rights(the preference shares do not have voting rights) or other arrangements such as direct management of these

entities (the Group does not have control over the investment manager). If the Directors had concluded that the

ownership of preference shares was sufficient to give the Group control, these entities would instead have been

consolidated with the results of the Group.

IFRS 9 Credit Risk

Credit risk and determining when a significant increase in credit risk has occurred are critical accounting judgements and

are assessed at each reporting period end. Credit risk is used to calculate estimated credit losses (ECL). Further details on

credit risk can be found in Note 22.

Notes to the financial statements continued

For the year ended 31 December 2021

48 Sancus Annual Report 2021

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period, that

may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the

next financial year, are discussed below.

Impairment of goodwill

As detailed in Note 12, the Directors carry out an impairment review annually to assess whether goodwill is impaired.

Indoing so, the Directors assess the value in use of each cash generating unit through an internal discounted cash flow

analysis. The last impairment review was carried out for the June 2021 interim reporting.

Given the nature of the Group’s operations, the calculation of value in use is sensitive to the estimation of future cash

flows and the discount rates applied, the impact of which is also disclosed in Note 12. Refer Notes 2(h) and 2(k) for

accounting policies relating to the valuation and impairment of goodwill.

IFRS 9 ECL

Key areas of estimation and uncertainty are the probabilities of default (PD) and the probabilities of loss given default

(PL) which are used along with the credit risk in the calculation of ECL. Further details on ECLs, PD and PL can be found

in Note 22. Should the estimates of PD or PL prove to be different from what actually happens in the future, then the

recoverability of loans could be higher or lower than the accounts currently suggest, although this should be mitigated

bythe levels of LTV which are, in the main, less than 70%. Where loans are in default and classified within stage 3, the

Directors estimate of the present value of amounts recoverable through enforcement or other repayment plans could be

materially different to the actual proceeds received to settle the balances due. In respect of certain loans held by the

Group, the range of outcomes is significant and has a material impact on the calculation of ECL.

Fair Value of the FinTech Ventures investments

The Group invests in financial instruments which are not quoted in active markets and measures their fair values as

detailed in Note 22.

All of the FinTech Ventures investments are categorised as Level 3 in the fair value hierarchy. In the past the Directors

have estimated the fair value of financial instruments using discounted cash flow methodology, comparable market

transactions, recent capital raises and other transactional data including the performance of the respective businesses.

Having considered the terms, rights and characteristics of the equity and loan stock held by the Group in the FinTech

Ventures investments, as well as the challenges that have faced the platforms during the pandemic, the Board’s estimate

of liquidation value of these assets is £0.5m at 31 December 2021 (31 December 2020: £Nil) following £0.5m deployed

into an existing investment in March 2021. Changes in the performance of these businesses and access to future returns

via its current holdings could affect the amounts ultimately realised on the disposal of these investments, which may be

greater or less than £0.5m. There have been no transfers between levels in the period (2020: None).

4. SEGMENTAL REPORTING

Operating segments are reported in a manner consistent with the manner in which the Executive Management Team

reports to the Board, which is regarded to be the Chief Operating Decision Maker (CODM) as defined under IFRS 8.

Themain focus of the Group is Sancus. Bearing this in mind the Executive Management Team have identified 4 segments

based on operations and geography.

Finance costs and Head Office costs are not allocated to segments as such costs are driven by central teams who

provide, amongst other services, finance, treasury, secretarial and other administrative functions based on need. The

Group’s borrowings are not allocated to segments as these are managed by the Central team. Segment assets and

liabilities are measured in the same way as in these financial statements and are allocated to segments based on the

operations of the segment and the physical location of those assets and liabilities.

The four segments based on geography, whose operations are identical (within reason), are listed below. Note that

Sancus Loans Limited, although based in the UK, is reported separately as a stand-alone entity to the Board and as

suchis considered to be a segment in its own right.

1. Offshore

Contains the operations of Sancus Lending (Jersey) Limited, Sancus Lending (Guernsey) Limited, Sancus Lending

(Gibraltar) Limited, Sancus Properties Limited and Sancus Group Holdings Limited.

2. United Kingdom (UK)

Contains the operations of Sancus Lending (UK) Limited and Sancus Holdings (UK) Limited.

3. Ireland

Contains the operations of Sancus Lending (Ireland) Limited.

4. Sancus Loans Limited

Contains the operations of Sancus Loans Limited.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

Notes to the financial statements continued

For the year ended 31 December 2021

4. SEGMENTAL REPORTING continued

Reconciliation to FinancialStatements

Year to 31 December

2021

Offshore

£’000

Ireland

£’000

Sancus

Loans

Limited

(SLL)

£’000

Sancus

Debt

Costs

£’000

Total

Sancus

£’000

Head

Office

£’000

SLL Debt

Costs

£’000

Fintech

Ventures

Fair Value

& Forex

£’000

Other

£’000

Financial

Statements

£’000

Revenue 3,810 1,480 667 (1,149) - 4,808 - 4,137 - 77 9,022

Operating Profit/(loss)* 1,207 (462) 88 (1,170) - (337) (1,601) - - 67 (1,871)

Credit Losses (3,892) - - (2,579) - (6,471) - - - (18) (6,489)

Debt Costs - - - - (1,875) (1,875) - - - - (1,875)

Other Gains/(losses) 56 2 (38) (100) - (80) - - 420 10 350

Loss on JVs and

associates

- - - - - - - - - (473) (473)

Taxation 19 - - - - 19 - - - - 19

(Loss)/Profit After Tax (2,610) (460) 50 (3,849) (1,875) (8,744) (1,601) - 420 (414) (10,339)

Year to 31 December

2020

Revenue 4,338 638 628 876 - 6,480 - 3,785 - 596 10,861

Operating Profit/(loss)* 1,916 (672) 201 859 - 2,304 (890) - - (302) 1,112

Credit Losses (3,923) - - (965) - (4,888) - - - 223 (4,665)

Debt Costs - - - - (1,952) (1,952) - - - - (1,952)

Other Gains/(losses) 4 - - - - 4 - - (6,022) (1,072) (7,090)

Loss on JVs and

associates

- - - - - - - - - (1,937) (1,937)

Taxation 15 - - - - 15 - - - - 15

(Loss)/Profit After Tax (1,988) (672) 201 (106) (1,952) (4,517) (890) - (6,022) (3,088) (14,517)

*Operating Profit/(loss) before credit losses and debt costs

Sancus Loans Limited is consolidated into the Group’s results as it is 100% owned by Sancus Group. However, the reality

isthat Sancus Loans Limited is a Co-Funder the same as any other Co-Funder. As a result the Board reviews the

economic performance of Sancus Loans Limited in the same way as any other Co-Funder, with revenue being stated

netof debt costs. Operating expenses include recharges from UK to Offshore £635,000, Offshore to Ireland £114,000,

HeadOffice to Offshore £130,000 and Offshore to Head Office £55,000. “Other” includes Fintech (excluding fair

valueand forex) and Sancus Group Holdings operations.

50 Sancus Annual Report 2021

Reconciliation to Financial Statements

At 31 December

2021

Offshore

£’000

Ireland

£’000

Sancus

Loans

Limited

(SLL)

£’000

Total

Sancus

£’000

Head

Office

£’000

Investment

in IOM

£’000

Fintech

Portfolio

£’000

Other

£’000

Inter

Company

Balances

£’000

Financial

Statements

£’000

Total Assets 45,397 11,127 586 60,504 117,614 43,129 500 500 793 (65,577) 96,959

Total Liabilities (40,503) (12,599) (714) (64,355) (118,171) (23,978) - - (1,293) 65,577 (77,865)

Net Assets/

(liabilities)

4,894 (1,472) (128) (3,851) (557) 19,151 500 500 (500) - 19,094

At 31 December

2020

Total Assets 44,486 7,203 488 54,131 106,308 47,137 866 - 4,177 (55,549) 102,939

Total Liabilities (38,720) (8,214) (679) (53,255) (100,868) (27,774) - - (352) 55,549 (73,445)

Net Assets/

(liabilities)

5,766 (1,011) (191) 876 5,440 19,363 866 - 3,825 - 29,494

Head Office liabilities include borrowings £23,007,000 (2020: £24,897,000). Other Fintech assets and liabilities,

andSancus Group Holdings assets and liabilities are included within “Other”.

5. REVENUE

2021

£’000

2020

£’000

Co-Funder fees 1,574 1,836

Earn out (exit) fees 962 1,863

Advisory fees - 399

Transaction fees 2,862 1,434

Total revenue from contracts with customers 5,398 5,532

Interest on loans 168 456

HIT Interest income 2,989 4,660

Sundry income 467 213

Total Revenue 9,022 10,861

The disaggregation of revenue reflects the different performance obligations in contracts with customers as described in

the accounting policy Note 2(o) and the typical timing of payment for those relevant revenue streams.

6. COST OF SALES

2021

£’000

2020

£’000

Interest costs 1,911 2,016

HIT interest costs 4,137 3,785

Other cost of sales 489 317

Total cost of sales 6,537 6,118

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

7. OPERATING EXPENSES

2021

£’000

2020

£’000

Amortisation and depreciation 356 428

Audit fees 155 231

Company secretarial 124 78

Corporate insurance 96 72

Employment costs 4,363 3,573

Investor relations expenses 81 67

Legal & professional 251 222

Marketing expenses 93 38

NOMAD fees 76 75

Other office and administration costs 514 620

Pension costs 87 145

Registrar fees 31 23

Sundry 4 10

Total operating expenses 6,231 5,582

8. OTHER NET LOSSES

The £557,000 Other net losses is predominantly made up of losses on Foreign exchange £143,000 and loss on joint

ventures and associates of £473,000 offset by the profit on the sale of Sancus Property Limited properties of £59,000.

(2020 £3,032,000: predominantly made up of the write down of other assets of £892,000 (Note 14) and loss on joint

ventures and associates of £1,937,000 (Note 9).

9. INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

31 December

2021

£’000

31 December

2020

£’000

At beginning of year 866 2,703

Additions 107 100

Share of profit/(loss) of associate 161 (574)

Share of loss in joint venture (91) (100)

Write down joint venture/associate (543) (1,263)

At end of year 500 866

The investment in joint venture relates to a 50% share in Amberton Limited (31 December 2020: 50% share in Amberton

Asset Management Limited). Both investments were held at £Nil. Amberton Asset Management Limited was liquidated on

13 December 2021. Amberton Limited, which is Jersey a registered entity, was incorporated in January 2021 and has been

established as a joint venture to manage the loan note programme going forward (duties previously performed by

Amberton Asset Management Limited).

Notes to the financial statements continued

For the year ended 31 December 2021

52 Sancus Annual Report 2021

Details of material associates

Proportion of ownership

interest/voting rights held

bythe group

Principal Activity

Place of

Incorporation

31 December

2021

31 December

2020

Sancus (Isle of Man) Holdings Limited Holding Company for Sancus (IOM) Limited Guernsey 29.32% 29.32%

The above associate is accounted for using the equity method in these consolidated financial statements as set out in the

Group’s accounting policies in Note 2.

Summarised financial information in respect of Sancus (Isle of Man) Holdings is set out below. The summarised financial

information represents amounts in associates’ financial statements prepared in accordance with IFRSs.

31 December

2021

£’000

31 December

2020

£’000

Non-current assets 1 2

Current assets 5,309 4,821

Current liabilities (49) (164)

Equity attributable to owners of the company 5,261 4,659

Revenue 173 278

Profit from continuing operations 133 250

Reconciliation of the above summarised financial information to the carrying amount of the interest in Sancus (Isle of Man)

Holdings Limited recognised in the consolidated financial statements:

31 December

2021

£’000

31 December

2020

£’000

Net assets of associate 5,261 4,659

Proportion of the Group’s ownership interest in the associate 1,543 1,366

Goodwill arising on acquisition 763 763

Write down of carrying value (1,806) (1,263)

Carrying amount of the Group’s interest in the associate 500 866

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

10. LOSS PER ORDINARY SHARE

Consolidated loss per Ordinary Share has been calculated by dividing the consolidated loss for the year after tax

attributable to Ordinary Shareholders of £10,339,000 (31 December 2020: loss of £14,517,000) by the weighted

averagenumber of Ordinary Shares (excluding treasury shares) outstanding during the period of 478,141,413

(31December 2020: 315,797,259).

Note 16 describes the warrants in issue. Taking these warrants into account the weighted average number of Ordinary

Shares used in calculating the diluted loss per share was 493,540,868 (31 December 2020: 346,046,187).

31 December

2021

31 December

2020

Number of shares 489,843,477 489,843,477

Weighted average no. of shares in issue throughout the year 478,141,413 315,797,259

Basic Loss per share (2.16)p (4.60)p

Diluted Loss per share (2.09)p (4.19)p

11. FIXED ASSETS

Cost

Right-of-use

assets

£’000

Property &

Equipment

£’000

Total

£’000

At 31 December 2019 1,089 433 1,522

Additions in the year - 29 29

Leases expired (75) - (75)

Lease variations 253 - 253

At 31 December 2020 1,267 462 1,729

Additions in the year 128 15 143

Disposals - (14) (14)

Leases expired (132) - (132)

Lease variations (16) - (16)

At 31 December 2021 1,247 463 1,710

Accumulated depreciation

Right-of-use

assets

£’000

Property &

Equipment

£’000

Total

£’000

At 31 December 2019 231 273 504

Charge in the year 208 54 262

Leases expired (75) - (75)

Lease variations 264 - 264

At 31 December 2020 628 327 955

Charge for the year 190 51 241

Disposals - (14) (14)

Leases expired (132) - (132)

At 31 December 2021 686 364 1,050

Net book value 31 December 2021 561 99 660

Net book value 31 December 2020 639 135 774

Notes to the financial statements continued

For the year ended 31 December 2021

54 Sancus Annual Report 2021

12. GOODWILL

At 31 December 2021 and 31 December 2020 goodwill comprises: £’000

Sancus Lending Jersey 14,255

Sancus Lending Gibraltar 8,639

22,894

Impairment tests

The carrying amount of goodwill arising on the acquisition of certain subsidiaries is assessed by the Board for impairment

on an annual basis or sooner if there has been any indication of impairment. The Board last assessed the Goodwill for

impairment on the preparation of the 2021 interim accounts, with the next assessment due on the preparation of the 2022

interim accounts, assuming that there having been no indicators of impairment in the interim period.

The value in use of Sancus Jersey and Sancus Gibraltar was based on an internal Discounted Cash Flow (“DCF”) value-in-

use analysis using cash flow forecasts for the years 2021/22 to 2025/26. The starting point for each of the cash flows was

the revised forecast for 2021 produced by Sancus Lending Jersey and Gibraltar management. Management’s revenue

forecasts applied a compound annual growth rate (CAGR) to revenue of 16.1% and 19.6% for Jersey and Gibraltar

respectively. A cost of equity discount rate of 11.5% was employed in the valuation model for Sancus Jersey and 12.0% for

Sancus Gibraltar. The resultant valuation indicated that no impairment of goodwill was required in either Sancus Lending

Jersey or Sancus Lending Gibraltar, with significant headroom.

Goodwill valuation sensitivities

When the discounted cash flow valuation methodology is utilised as the primary goodwill impairment test, the variables

which influence the results most significantly are the discount rates applied to the future cash flows and the revenue

forecasts. The table below shows the impact on the Consolidated Statement of Comprehensive Income of stress testing

the period end goodwill valuation with a decrease in revenues of 10% and an increase in cost of equity discount rate of

3%. These potential changes in key assumptions fall within historic variations experienced by the business (taking other

factors into account) and are therefore deemed reasonable. The current model reveals that a sustained decrease in

revenue of circa 20% for Jersey and circa 28% for Gibraltar or a sustained increase of circa 11% in the cost of Equity

discount rate for Jersey and circa 14% for Gibraltar would remove the headroom.

Reduction in headroom implied

bysensitivity

Sensitivity applied

Sancus

Jersey

£’000

Sancus

Gibraltar

£’000

Total

£’000

10% decrease in revenue per annum 5,650 3,063 8,713

3% increase in cost of equity discount rate 4,040 2,679 6,719

Neither a 10% decrease in revenue nor a 3% increase in the cost of Equity discount rate implies a reduction of Goodwill

inJersey or Gibraltar.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

13. OTHER INTANGIBLE ASSETS

Cost £’000

At 31 December 2021, 31 December 2020 and 31 December 2019 1,584

Amortisation £’000

At 31 December 2019 1,250

Charge for the year 166

At 31 December 2020 1,416

Charge for the year 115

At 31 December 2021 1,531

Net book value 31 December 2021 53

Net book value 31 December 2020 168

Other Intangible assets comprise capitalised contractors’ costs and other costs related to core systems development.

Noimpairment provision has been recorded. The amortisation charge has been recorded in Operating expenses.

14. OTHER ASSETS

Development

properties

£’000

At 31 December 2019 3,336

Additions 236

Disposals (1,665)

Write downs (892)

At 31 December 2020 1,015

Additions 157

Disposals (676)

At 31 December 2021 496

Other assets comprise of a number of repossessed properties and developments which were previously held as security

against certain loans which have defaulted. The write down in the prior year is that necessary to bring the assets to the

lower of cost and net realisable value. The remaining £0.5m comprises of one development property which is held at cost.

Notes to the financial statements continued

For the year ended 31 December 2021

56 Sancus Annual Report 2021

15. TRADE AND OTHER RECEIVABLES

31 December

2021

£’000

31 December

2020

£’000

Loan fees, interest and similar receivable 4,146 7,438

Receivable from associated companies 10 49

Taxation 40 -

Derivative contracts (Note 22) 759 94

Other trade receivables and prepaid expenses 1,120 623

Total trade and other receivables 6,075 8,204

Loan fees, interest and similar receivables amounted to £11,201,000 at 31 December 2021 (31 December 2020: £9,628,000)

before provisions against receivables of £7,055,000 (31 December 2020: £2,190,000).

16. SHARE CAPITAL, SHARE PREMIUM & DISTRIBUTABLE RESERVE

Sancus has the power under its articles of association to issue an unlimited number of Ordinary Shares of no par value.

No Ordinary shares were issued during the year. (2020: 177,777,778 Ordinary shares for a consideration of £4,000,000).

Share Capital

Number of shares

Ordinary shares of nil par value

31 December

2021

31 December

2020

At beginning of the year 489,843,477 312,065,699

Issued during the year - 177,777,778

At end of the year 489,843,477 489,843,477

Share Premium

Ordinary shares of nil par value

31 December

2021

£’000

31 December

2020

£’000

At beginning of the year 116,218 112,557

Issued during the year - 4,000

Costs of issue - (339)

At end of the year 116,218 116,218

Ordinary shareholders have the right to attend and vote at Annual General Meetings and the right to any dividends

orother distributions which the company may make in relation to that class of share.

Treasury Shares

Number of shares

31 December

2021

31 December

2020

At beginning of the year 7,925,999 7,925,999

Sancus shares acquired on sale of BMS Finance AB Limited 3,926,677 -

At end of the year 11,852,676 7,925,999

31 December

2021

£’000

31 December

2020

£’000

At beginning of the year 1,099 1,099

Sancus shares acquired on sale of BMS Finance AB Limited 73 -

At end of the year 1,172 1,099

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

16. SHARE CAPITAL, SHARE PREMIUM & DISTRIBUTABLE RESERVE continued

Warrants in Issue

On 22 December 2020, in connection with the issue of the New Bonds, the Company issued 153,994,543 Warrants to

subscribe in cash for new Ordinary Shares at a subscription price of2.25 penceper Ordinary Share. The Warrants will

beexercisable on at least 30 days notice in the period to 31 December 2025.As at 31 December 2021 and up to the

dateof signing these accounts none of these warrants have been exercised. The warrants in issue are classified as

equityinstruments because a fixed amount of cash is exchangeable for a fixed amount of equity, there being no

otherfeatureswhich could justify a financial liability classification. The fair value of the warrants at 31 December 2021

is£385,000 (31 December 2020: £847,000).

17. LIABILITIES

Non-current liabilities

31 December

2021

£’000

31 December

2020

£’000

ZDP shares (1) - 12,424

Corporate Bond (2) 12,474 12,473

HIT Facility (3) 52,203 44,553

Lease creditors (Notes 2(u), 2(v) & 24) 364 469

Total non-current liabilities 65,041 69,919

Current liabilities

31 December

2021

£’000

31 December

2020

£’000

ZDP shares (1) 10,532 -

Accounts payable 93 436

Payable to associated companies 16 -

Interest payable 366 -

Accruals and other payables 1,519 1,202

Taxation 86 118

Deferred income - 40

Provisions for financial guarantees - 1,542

Lease creditors (Notes 2(u), 2(v) & 24) 212 188

Total current liabilities 12,824 3,526

Provisions for financial guarantees were recognised in the prior year in relation to ECLs on off-balance sheet loans and

debtors where the company has provided a subordinated position or other guarantee (Note 25). No such provision was

required in the current year. The fair value is determined using the exact same methodology as that used in determining

ECLs (Note 2(f) and Note 22). The amount credited to operating profit in the year was £1,542,000 (2020: £1,542,000

charged to operating profit), there being no other movements.

Notes to the financial statements continued

For the year ended 31 December 2021

58 Sancus Annual Report 2021

Interest costs on debt facilities

31 December

2021

£’000

31 December

2020

£’000

ZDP shares (1) 969 1,246

Corporate Bond (2) 906 706

HIT Facility (3) 4,137 3,785

Lease Interest 36 64

Total interest costs on debt facilities 6,048 5,801

1. ZDP shares

The ZDP Shares have a maturity date of 5 December 2022 with a final capital entitlement of £1.6464 per ZDP Share.

Under the Companies (Guernsey) Law, 2008 shares in the Company can only be redeemed if the Company can

satisfythe solvency test prescribed under that law. Refer to the Company’s Memorandum and Articles of

Incorporationfor full detail of the rights attached to the ZDP Shares. This document can be accessed via the Company’s

website www.sancus.com.

The ZDP shares bear interest at an average rate of 8% (2020: 8%). In accordance with article 7.5.5 of the Company’s

Memorandum and Articles of Incorporation, the Company may not incur more than £30m of long term debt without the

prior approval from the ZDP shareholders. The Memorandum and Articles also specify that two debt cover tests must be

met in relation to the ZDPs. At 31 December 2021 the Company was in compliance with these covenants as Cover Test A

was 3.07 (minimum of 1.7) and Cover Test B was 5.38 (minimum of 3.25). At 31 December 2021 senior debt borrowing

capacity amounted to £17.4m. The HIT facility does not impact on this capacity as it is non-recourse to Sancus.

In addition to a tender offer in April 2021, whereby the company acquired, and subsequently cancelled 1,690,034 ZDP

shares, the company purchased a further 226,718 ZDP shares throughout the year. At 31 December 2021 the Company

held 12,235,748 shares (31 December 2020: 12,009,030) with an aggregate value of £18,810,266 (31 December 2020:

£17,051,409).

2. Corporate Bond

£6,125,000 of the existing £10m bonds were repaid early on 21 December 2020 (maturity was 30 June 2021). The

remaining £3,875,000 were rolled into new bonds which were issued on 22 December 2020. In addition to these a further

£8,700,000 new bonds were issued for cash on 22 December 2020 giving a total amount of new bonds issued

£12,575,000 (£15m may be issued over the life of the bonds). The bonds bear interest at 7% (2020: 7%). The new bonds

have a maturity date of 31 December 2025.

3. HIT Facility

On 28 January 2018, Sancus signed a funding facility with Honeycomb Investment Trust plc (HIT). The funding line initially

had a term of 3 years and comprised of a £45m accordion and revolving credit facility. On 3 December 2020 this facility

was extended to a 6 year term to end on 28 January 2024. In addition to the extension the facility was increased to £75m.

The facility bears interest at 7.25%.

The HIT facility has portfolio performance covenants including that actual loss rates are not to exceed 4% in any twelve

month period and underperforming loans are not to exceed 10% of the portfolio. Sancus Group has a £5.8m first loss

position on the HIT facility. Sancus has also provided HIT with a guarantee, capped at £2m that will continue to ensure

theorderly wind down of the loan book, in the event of the insolvency of Sancus Group, given its position as facility and

security agent. Refer to Note 25 Commitments and Guarantees.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

18. TAXATION

The Company is exempt from Guernsey taxation under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989.

Afixed annual fee of £1,200 (31 December 2020: £1,200) is payable to the States of Guernsey in respect of this exemption.

Reconciliation of tax charge

2021

£’000

2020

£’000

Accounting loss before tax (10,358) (14,532)

Gibraltar Corporation Tax at 10% (2020: 10%) - -

Jersey Corporation Tax at 10% (2020: 10%) - -

Adjustment in respect of prior years (19) (15)

Tax credit (19) (15)

Certain of the Group’s subsidiaries have an estimated £16.0m of losses between them available to carry forward to offset

against qualifying future trading profits. The Group does not recognise deferred tax assets in respect of losses arising because

in the opinion of the directors the quantum and timing of any suitable profits which can utilise these losses is unknown.

19. NOTES TO THE CASH FLOW STATEMENT

Cash generated from operations (excluding loan movements)

2021

£’000

2020

£’000

Loss for the year (10,339) (14,517)

Adjustments for:

Net losses on FinTech Ventures - 5,936

Other net losses/(gains) 9 (221)

ZDP finance costs 874 1,039

Fair Value joint ventures and associates 473 1,937

Changes in expected credit losses 6,489 4,665

Amortisation/depreciation of fixed assets 356 428

Amortisation of debt issue costs 202 201

SPL Properties (59) 960

Changes in working capital:

Trade and other receivables (1,995) (4,303)

Trade and other payables (131) 38

Cash outflow from operations (excluding loan movements) (4,121) (3,837)

Notes to the financial statements continued

For the year ended 31 December 2021

60 Sancus Annual Report 2021

Changes in liabilities arising from financing activities

The tables below detail changes in the Group’s liabilities arising from financing activities, including both cash and non-

cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will

beclassified in the Group’s consolidated cash flow statement as cash flows from financing activities.

1 January

2021

£’000

Payments

£’000

Receipts

£’000

Debt

issue

costs

£’000

Additions

Non-cash

£’000

Amortisation

of debt issue

costs

Non-cash

£’000

Other

Non-

cash

£’000

31 December

2021

£’000

ZDP Shares 12,424 (2,756)

- - - 24 840

10,532

Corporate Bond 12,473 (24)

- - - 25 - 12,474

HIT Facility 44,553 - 7,500 (3) - 153 - 52,203

Lease Liability 657 (193)

- - 128 - (16)

576

Total liabilities 70,107 (2,973) 7,500 (3) 128 202 824 75,785

1 January

2020

£’000

Payments

£’000

Receipts

£’000

Debt

issue

costs

£’000

Additions

Non-cash

£’000

Amortisation

of debt issue

costs

Non-cash

£’000

Other

Non-

cash

£’000

31 December

2020

£’000

ZDP Shares 16,825 (4,443) - (44) (829)

76 839

12,424

Corporate Bond 10,000 (6,125) 8,700 (111) - 1 8

12,473

HIT Facility 44,191 (3,500) 4,187 (159) - 124 (290)

44,553

Lease Liability 890 (216) - - - - (17)

657

Total liabilities 71,906 (14,284) 12,887 (314) (829) 201 540 70,107

These amounts can be found under financing cash flows in the cash flow statement.

A loan to the value of £829,000 which sat within Sancus loans and loan equivalents was swapped for 621,586 ZDP shares.

Comprises interest accruals and unpaid debt issue costs.

Lease variations.

Interest within operating cash flows.

20. CONSOLIDATED SUBSIDIARIES

The Directors consider the following entities as wholly owned subsidiaries of the Group as at 31 December 2021.

Theirresults and financial positions are included within its consolidated results.

Subsidiary entity

Date of

Incorporation

Country of

Incorporation Nature of Holding % held

Sancus Group Holdings Limited 27 December 2013 Guernsey Directly held – Equity Shares 100%

Sancus Lending (Jersey) Limited 1 July 2013 Jersey Indirectly held – Equity Shares 100%

Sancus Lending (Guernsey) Limited 18 June 2014 Guernsey Indirectly held – Equity Shares 100%

Sancus Lending (Gibraltar) Limited 10 March 2015 Gibraltar Indirectly held – Equity Shares 100%

Sancus Lending (Ireland) Limited 10 April 2017 Ireland Indirectly held – Equity Shares 100%

Sancus Lending (UK) Limited 17 February 2011 UK Indirectly held – Equity Shares 100%

Sancus Holdings (UK) Limited 7 January 2011 UK Indirectly held – Equity Shares 100%

FinTech Ventures Limited 9 December 2015 Guernsey Directly held – Equity Shares 100%

Sancus Properties Limited 21 August 2018 Guernsey Indirectly held – Equity Shares 100%

Sancus Loans Limited 3 July 2017 UK Indirectly held – Equity Shares 100%

Sancus Group Holdings Limited and Sancus Holdings (UK) Limited act as holding companies. Sancus Properties Limited

engages in property development. Fintech Ventures Limited is an investment company, investing in Fintech companies.

The activities of the remaining companies named above relate to the core business of lending.

Sancus BMS Holdings Limited was voluntarily struck off on 13 September 2021 following the sale of the BMS Fund.

Strategic Report Corporate Governance Financial Statements Additional Information

Sancus Annual Report 2021

21. FINTECH VENTURES AND OTHER INVESTMENTS

The Directors consider the following entities as associated undertakings of the Group as at 31 December 2021.

Name of Investment: Nature of holding

Country of

incorporation

Percentage

holding Measurement

FinTech Ventures:

LiftForward Inc Indirectly held – Equity USA 18.81% Fair Value

Finexkap Indirectly held – Equity France 10.76% Fair Value

Ovamba Solutions Inc Indirectly held – Equity USA 20.18% Fair Value

Funding Options Limited Indirectly held – Equity and Preference Shares UK 22.78% Fair Value

Open Energy Group Inc Indirectly held – Equity USA 22.71% Fair Value

Finpoint Limited Indirectly held – Equity UK 12.95% Fair Value

The percentage holdings in the above table are on a fully diluted basis, assuming any warrants and management

optionsall vest.

22. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT

Sancus loans and loan equivalents

31 December

2021

£’000

31 December

2020

£’000

Non-current

Sancus loans 447 442

Sancus Loans Limited loans 6,196 3,421

Total non-current Sancus loans and loan equivalents 6,643 3,863

Current

Sancus loans 4,269 7,873

Loan equivalents - 117

Sancus Loans Limited loans 42,333 41,379

Total current Sancus loans and loan equivalents 46,602 49,369

Total Sancus loans and loan equivalents 53,245 53,232

Fair Value Estimation

The financial assets and liabilities measured at fair value in the Consolidated Statement of Financial Position are grouped

into the fair value hierarchy as follows:

31 December 2021 31 December 2020

Level 2

£’000

Level 3

£’000

Level 2

£’000

Level 3

£’000

Assets

FinTech Ventures investments - 500 - -

Derivative contracts 759 - 94 -

Total assets at Fair Value 759 500 94 -

Notes to the financial statements continued

For the year ended 31 December 2021

62 Sancus Annual Report 2021