The Board has considered the time commitment required for Andy to fulfil this role whilst continuing to drive forward Sancus, which has been a successful trading business for the Company. Sancus continues to trade ahead of plan and the Board does not wish to risk limiting its growth potential. The Board is convinced that the structural changes being put in place within the Company, together with an expanded management team within Sancus, mean that it will be possible for Andy to combine the roles without risking a loss of momentum within Sancus.

The Company's executive team now comprises Andy Whelan as Chief Executive Officer, Emma Stubbs as Chief Financial Officer, Marc Krombach as Managing Director, and Louise Beaumont as Head of Public Affairs & Marketing.

The board would like to thank the executive team for their commendable effort and commitment to the Company during this period of change.

Strategic review

At the end of last year, we announced that we were starting a strategic review. The objective of the review is to determine the best utilisation of the Company's human and capital resources to build shareholder value most effectively. The strategic review is substantive and thorough. We will continue to announce progress as it is made over the next 12 months.

Short-term goals

We have identified a need to achieve the following goals in the short term:

a. Clarify and restate the Company's strategic objective;
b. Remove the risks of conflicts of interest;
c. Initiate measures to strengthen the balance sheet;
d. Ensure that positive cash flows are accessible by GLI
e. Initiate measures to reduce the cost base;
f. Remove unnecessary complexity;
g. Rationalise and invest in the Company's core businesses;
h. Improve communication to aid stakeholders' understanding of operations;



a) The Company's Strategic Objective

The Company will invest and operate in niche or complementary small and medium-sized enterprises (SME) lending verticals where we can secure enduring competitive positions and take advantage of the disintermediation of lending by banks to SMEs.

b) Conflicts of Interest

Conflicts have primarily arisen because of two issues: inter-company loans and the relationship between GLI Alternative Finance PLC (the "Fund" or "GLIAF") and GLI.

We have already made significant progress rationalising intercompany loans. In the future, GLIAF will seek to lend through platforms, and GLI will only lend to platforms.

Following completion of the share purchase agreement entered into with Somerston (subject to approval at the forthcoming EGM on 25th February), the manager of the Fund, GLI Asset Management Limited (the "Manager" or "GLIAM") will rebrand. The Manager will have a distinct board of directors with an independent non-executive chairperson.

The Fund's objective is to earn attractive risk adjusted yields by lending directly to SMEs via lending platforms. The Manager has absolute discretion to assess the platforms and makes investments in accordance with the Investment Mandate as set out in the prospectus. Whether or not GLI is invested in a platform will have no bearing on whether or not the Manager makes loans through that platform.

GLI, on the other hand, will make debt and equity investments with the aim of achieving its strategic objective. In so doing, it will build on its competitive advantages in niche and complementary lending verticals.

GLI presently holds a book of loans made through platforms. These loans do not meet GLI's strategic objectives going forward. These loans will be run off and GLI will use the proceeds from maturity or realisation to support its investments.

c) Balance Sheet

Proceeds from the sale of £15 million of GLIAF shares as part of the Somerston transaction will be used to repay £15 million of the Sancus loan. The remaining balance of that loan will be £14.9 million, the terms of which GLI is in the process of renegotiating.

BMS has repaid £3m of a loan made by the Company to BMS and has agreed to pay interest on its remaining loan quarterly to better match the cash flow needs of the Company. At the same time, we have taken the opportunity to reset the loan maturity to a date which matches commitments made by BMS so that it can better demonstrate its access to capital.

Sancus holds 6.8m shares in GLIAF, acquired by Sancus in return for seeding loans in to GLIAF. Sancus will transfer these shares to the Company to repay £6.8 million of inter-company loans from GLI. This will ensure that all of the shares of GLIAF owned by the Group are retained at the Company level and the Company will benefit from the future dividend stream from this investment.

Going forward, Sancus will pay coupons on all remaining inter-company debt to better match the cash flow needs of the Company.

Post these events the Company's financial liabilities will comprise a loan of £15 million and ZDPs of £20.79 million. The Company's average weighted cost of debt and ZDPs is 7%.

d) Cash Flow

Historically the source of cash flow has been from income paid by the CLO portfolio. GLI is now a radically different company with investments in many early stage ventures. This portfolio of assets is young, and will take time to mature.

We will be disciplined about cash flows and their use. We want to ensure that GLI makes the capital allocation decision across the platform portfolio, and that GLI can properly fund the development of its growth potential.

GLI has two existing trading businesses in Sancus and BMS that are revenue generating and profitable. Both businesses operate in niche sectors/jurisdictions and have high sustainable margins and strong growth prospects. Sancus has loaned in excess of £150m in the last two years and has offices in four locations; Jersey, Guernsey, Gibraltar and Isle of Man. The Jersey and Guernsey corporate entities are owned 100% by GLI, with the Company having a minority shareholding in the other two entities. Jersey has been operational since inception in January 2014, and generated net profits of £750k in 2014 and £1.5 million in 2015. Guernsey has been slower to start due to the acquisition of Sancus by GLI in December 2014. However, with the appointment of a dedicated Managing Director in January 2016, we fully expect this business to replicate the success of the Jersey office. BMS has been in operation for 10 years and part of its strategy is to expand its business in new jurisdictions as well. BMS made net profit of £1 million in 2015 and is forecasting further growth.

The Company sees great potential for these businesses in terms of generating free cash flow to service future dividend payments to GLI's ordinary shareholders, with this free cash flow to be paid up to the Company.

Other measures for improving cash flow are ensuring the loans to the platforms are serviced at least quarterly to align with the Company's dividend policy.

Our intention is to pay a dividend of not less than 2.5p per annum paid quarterly. Following the initial findings of the strategic review, we can confirm that we expect this will be sustainable once we have executed and implemented our strategy during 2016.

e) Cost

From our initial findings, we believe there is opportunity to reduce costs in several areas such as closure of non-performing subsidiaries, advisory fees and travel.

It is estimated that approximately £1m can be saved from future operating expenditure and the Company is vigorously moving to implement these cost saving initiatives

f) Complexity

The company's growth to date has come despite increasing complexity. A large part of this complexity can be removed by the measures being taken above, unlocking future growth potential.

g) Invest and Rationalise to Strengthen Core Businesses

Over the last few years, GLI's growth has lacked a coherent strategy. Going forward we have a clear strategic goal and will invest with this in mind.

GLI management will assess all demands for capital and allocate where it has the highest opportunity for value creation.

We are only part way through our strategic review. However, we have identified certain platforms that have strong management coupled with scalable electronic platforms such as Finexkap, The Credit Junction, LiftForward and Funding Options, which we believe have the ability to grow significantly. Andy Whelan has joined the board of each of these businesses, which will be prioritised platforms going forward. We will be providing further detailed information on the remainder of the platform portfolio as we work our way through the strategic review during the first half of 2016.

Platform Black

In accordance with our approach of maximising value where possible within the platform portfolio, GLI, which previously held 43.9% of the ordinary share capital of Platform Black, increased its stake to 83.7% on 5 February 2016 at a reduced valuation. Platform Black has potential but material change has been required for some time. The recent appointment of Caroline Langron as Platform Black's Managing Director is a very positive step in the right direction. A plan to recapitalise and reformulate the business has been agreed and is in the process of being implemented by Caroline. There are some positive early signs of progress.

FundingKnight

It has not been possible to agree a way forward where the Company could feel confident in deploying further resources to FundingKnight. An amicable process for separation has been agreed where GLI will remain a passive investor whilst reducing overall financial exposure and seeking a long term exit.

h) Communications

Although the Board makes every effort that the Report and Accounts are set out clearly, the Company realises that greater detail is required to explain progress and the development of value creation.

The Company has appointed Instinctif Partners as PR Advisors. As a first step towards better communication the Company will issue more comprehensive quarterly reviews and will seek to meet with shareholders to provide detailed updates on a quarterly basis. Where GLI has a majority stake in a platform, we plan to provide regular updates on areas such as volume of loan origination, average size of loans, loan impairments, funding commitments and operating cash flow to show the progress being made.

NAV as at 31st December 2015

The Company will be realistic in its approach to the platform portfolio (including an early recognition of this in the net asset value) in deciding which business models it believes will be successful.

The Board has written down certain investments in the platform portfolio. However, the Company also accepts that the evolving nature of the alternative finance sector means that the other investors may take a different view and the Company may ultimately generate a recovery on these investments. GLI will become a passive holder seeking to protect such investments, but will not deploy human and financial capital as a priority.

The Company invested in loans to certain unrelated parties. As part of this review the Company has made a full provision of £5.47 million against certain of these loans, and is focusing on recovery. Going forward no such future lending will be made by the Company. As a result of these write downs, and the thorough review of the carrying value of platforms, the NAV as at 31st December 2015 has been reduced by 9.49p to 42.81p per share (30th September 52.30p per share).

Since 31st December 2015, we can report that Liftforward has completed a capital raise at a valuation of $41.2 million. Consequently, we will be revaluing our investment from £4.22million to £5.8 million.

Conclusion

There is still much to be done. We are working hard to put GLI on a firm footing for the future to harness the growth in the sector without compromising the sustainability of the business. Further updates will be provided as we push forward with our strategic review.